The challenge of aging population

January 23, 2019 17:09
An aging population means more spending requirement on healthcare-related infrastructure. Photo: Bloomberg

Hong Kong authorities decided to offer a new monthly cash handout to senior citizens, launching a fresh policy measure after facing flak for raising the age threshold, from 60 to 65, for payment of elderly benefits under the Comprehensive Social Security Assistance (CSSA) program.

Hong Kong is a well-off society, and the government has reported fiscal surplus for 16 years in a roll. The government surplus crossed the HK$130 billion mark last year.

Many have argued that the territory may not need massive infrastructure projects, like the mega Hong Kong-Zhuhai-Macau bridge and big-scale land reclamation project, in the future.

Instead, the city should set aside more money for healthcare-related spending, which is far from adequate at the moment, and provide better support to the elderly, it has been pointed out.

Hong Kong ranks top globally in terms of life expectancy in the world, with the figures standing at 87.3 for women and 81.2 for men.

But the Health Adjusted Life Expectancy (HALE), which refers to the average number of years that a person can expect to live in good health is a far more important concept.

Unfortunately, depending on the how good the healthcare system is, HALE, could be 8 to 10 years shorter than Life Expectancy (LE) .

Also, LE usually outpaces the growth of HALE. For example, LE in Japan increased by over 4 years over last two decades or so, while the HALE only increased by 3 years.

Several societies, including most OECD countries and China, face the aging-population issue. So there is the need to raise the retirement age and threshold for various social welfare benefits.

Faster LE growth than HALE growth means heavy burden for the medical system. For example, in the US, up to 20 percent of overall medical costs are spent in the last year of patients. The medical expenditure is set to increase year after year after people reach the end of HALE.

Money is not the only problem, aging population will also stretch the human resources in medical systems. For example, Japan needs to import a large number of workers to take care of the elderly.

This article appeared in the Hong Kong Economic Journal on Jan 22

Translation by Julie Zhu

[Chinese version 中文版]

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Eddie Tam is the founder and CEO of Central Asset Investments.