Can Primary Care Soften the Fiscal Impact of Population Ageing? Evidence From Brazil's Hospital System

Population ageing is widely expected to place severe pressure on public hospital systems, yet causal evidence from developing countries remains scarce. We estimate the effect of demographic ageing on hospital spending under Brazil's Sistema Único de Saúde (SUS) using a balanced panel of 2798 municipalities over 2008-2021, combining administrative expenditure records with municipality-specific ageing trajectories constructed from the 2010 and 2022 Censuses and, as an independent alternative, from annual Ministry of Health population estimates. Instrumenting current age structure with pre-sample historical mortality, we find that a one-percentage-point increase in the elderly dependency ratio raises hospital spending per capita by approximately 7%; the effect is driven by admission volumes rather than by the cost of the average admission, and it is robust to controls for differential development trends, to alternative measures of age structure, and to an instrument based solely on historical mortality. We then ask whether primary care mitigates this pressure, using newly assembled municipal coverage histories of the Estratégia Saúde da Família (ESF). The ageing-spending gradient falls significantly with ESF coverage in both least-squares and instrumental-variable specifications: moving from no coverage to full coverage offsets between one-third and four-fifths of the marginal fiscal impact of ageing, with the moderation concentrated in avoided admissions. Fiscal projections that extrapolate ageing mechanically into hospital costs therefore overstate the burden for municipalities that have invested in community-based primary care, although even full coverage does not eliminate the pressure entirely.