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New MSAH analysis model eases social policy planning

14.9.2009 9.01
News item N5-50665

Social expenditure forecasts are one of the features of long-term planning by the MSAH. They help estimate how expenditure will develop and what aspects of the social protection system need to be changed. Trends concerning the use of services, the numbers of benefit recipients and demographic change are also among the issues examined. The MSAH has developed a new analysis model for social expenditure, known as the SOME model.

The aim of using long-term social expenditure calculations is to facilitate social policy planning and preparation for impending challenges. What will happen to pension expenditure and the funding of social protection, if the unemployment rate increases or decreases permanently from its current level? How should health service costs be altered, if the age-specific need for services changes?

The analysis model is used to examine these and other crucial questions to do with social policy. Calculations using it enable variables concerning social protection and health with those describing the economy and labour market. In this way the link between social policy and economic planning can be strengthened.

Current data and forecasts

The MSAH will soon have been drawing up long-term social expenditure calculations for 30 years. The new analytical model was constructed for use in this the year before last. Its starting point is the data depicting the current situation of social protection and several hypotheses on the direction of future trends. The results are therefore not predictions, but assessments of future developments anchored in current data. The main thing is to examine how altering the hypotheses that affect the calculations influences the results attained.

Prognostic calculation takes into account the key factors that affect social expenditure at the level of the national economy, and on which meaningful hypotheses can be made. These include population forecasts, the indexing of benefits, changes in employment and unemployment and the presumed development of the health and functional capacity of the population.

The analysis model and the calculations made using it are presented in more detail in the MSAH publication Social expenditure scenarios - effects of health promotion and a presentation of the analysis model (2009). Long-term calculations are also made by bodies such as the Social Insurance Institution and the Finnish Centre for Pensions.

Service needs of older people can be forecast

The social expenditure model can be used for such things as examining how the growth in the number of the population of retirement age will affect the need for health care and long-term care services. People who are retired on average need more treatment and care services than people of working age and youth, and in the coming decades the proportion of the population of people over 65 years of age will grow of the large age groups reaching retirement age. In addition, in population forecasting it is assumed that the life expectancy of Finns will continue to grow, which will also increase the number of older people.

One way to examine the change in the expenditure on treatment and care services is to assume that the age-specific need for services will in the future remain at the same level as now. In this case, the need for services will increase in proportion to the numbers of older people. The other approach is to assume that with the increase in life expectancy, at least a part of that increase will comprise years of good health. In that case the need for treatment and care services will shift to later years than is the case now.

This diagram presents an assessment of the development of health care and long-term treatment expenditure in relation to GDP. It features three different scenarios of changes in age-specific service needs. According to population forecasting, the number of older people will grow. This will increase the overall expenditure of treatment and care services.

The results nevertheless show that the need for services and their costs depend greatly on how the age-specific need for services turns out in the conditions of increased life expectancy. If the health and functional capacity of older people can be improved by preventing health problems and using rehabilitation, the increase in expenditure can be restrained.

Antti Alila

Translated Mark Waller

Read more

Social expenditure scenarios - effects of health promotion and a presentation of the analysis model  (Reports 2009:7, in Finnish, the summary in English)