Forecast of total health expenditure on China's ageing population: a system dynamics model

China is currently at a turning point as its total population has started to decline, and therefore faces issues related to caring for an ageing population, which will require an increase in Total Health Expenditure (THE). Therefore, the ability to forecast China's future THE is essential.

We developed two THE System Dynamics (SD) models using Stella Architect 3.4 to simulate China's THE from 2000 to 2060. The constant prices THE SD model estimates THE under low, medium, and high Total Fertility Rate (TFR) scenarios. The current prices THE SD model serves as a robust calibration check. In addition, we developed a new total Gross Domestic Production (GDP) forecast model to estimate THE/GDP over the same period.

Our simulation results reveal a significant upward trend in China's THE from 2000 to 2060. Specifically, under the low TFR scenario, THE is projected to reach approximately $33.4 trillion in 2015 constant USD by 2060. However, with the introduction of efficiency impact factors, THE is expected to fall to around $8.6 trillion by 2060. Additionally, the per capita Health Expenditure is anticipated to rise from $102 in 2000 to roughly $30,800 by 2060, though it could see a decrease to nearly $7,900 with efficiency improvements. Our GDP forecast for 2060 is nearly $87 trillion, with THE to GDP ratio expected to be about 9.7%. In our scenario analysis, as TFR increases, the growing new births and decreased ageing rate are expected to lead to a rise in THE and a decrease in per capita Health Expenditure.

The efficiency of THE utilization needs to be improved. Increasing TFR can help alleviate population decline and ageing to some extent. Enhancing workforce productivity and sustained economic growth is needed to counteract the challenges posed by an ageing population.