The Impact of the Elderly Population, Life Expectancy and Economic Growth towards Health Spending in Malaysia

Abstract

World Health Organization has been categorized the old population is divided into four stages of middle age (45-59 years old), old age (60-74 years old), oldest age (75-90 years old) and very oldest age (90 years old above). Therefore, the elderly are to indicate individuals aged 60 years and above. There are several factors that cause the increase in the elderly such as decreased fertility and mortality, the improvement of technology towards medicine and the level of education. Elderly rates showed an increase from 1990 to 2010 of 5.7 percent to 7.5 percent. For the year 2020 the number of elderly is estimated to reach 3 million, up to 10 percent of the estimated 32 million population. The purpose of this research is to study the relationship between the old population, life expectancy and economic growth on health spending in Malaysia. This study is used annual time series data from 1985 to 2015 with four variables; health spending as dependent variable; old populations, life expectancy and economic growth as independent variables. To investigate the relationship between these variables, the Autoregressive Distribution Lag Model (ARDL) is used consisting of co-integration tests and other statistical tests such as Unit Root test, CUSUM and CUSUM Square tests. This study found that there have long-run and short-run relationship between old population, life expectancy and economic growth on health spending in Malaysia. The CUSUM and CUSUM Square tests are show a stable model. In conclusion, when the elderly are still healthy, they can actually become a state asset and can contribute to national income.