The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Santiago Acosta Ormaechea, Marco Espinosa-Vega, and Diego Wachs
INTERNATIONAL MONETARY FUND
The paper develops a simple, integrated methodology to project public pension cash flows and healthcare
spending over the long term. We illustrate its features by applying it to the LAC5 (Argentina, Brazil, Chile,
Colombia and Mexico), where public spending pressures are expected to increase significantly over 2015-50
due to demographic trends and rising healthcare costs. We simulate alternative pension reforms, including the
transition from a defined benefit to a defined contribution pension system and the fiscal burden of a minimum
guaranteed pension under the latter. We also analyze public healthcare outlays in the LAC5, which is likewise
expected to increase significantly over 2015-50 due to aging and the so-called excess cost growth factor of
healthcare services, showing that curbing the evolution of the latter (e.g., through enhanced competition in the
healthcare sector) could aid in containing spending pressures. Despite its simplicity, the methodology yields
projections that compare well with other approaches. It therefore provides a good benchmark for assessing
alternative reform scenarios, particularly in data-constrained countries.