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This volume is part of an annual series entitled Advances in Health Economics and Health Services Research. We express our gratitude to the series editors Björn Lindgren and Michael Grossman for inviting us to edit this volume.

This book marks the resumption of an annual series of research in health economics previously published by JAI Press Inc. and entitled Advances in Health Economics and Health Services Research. Fifteen volumes in that series appeared in the years from 1979 through 1995. The continuation of the series bears the title Advances in Health Economics and Health Policy and is being published by JAI, an imprint of Elsevier Ltd.

The Swedish health care system is commonly characterized as a national health-service (or Beveridge) model (Freeman, 2000; Blank and Burau, 2004). It is certainly both financed by taxes and organized as a government responsibility, but it has developed over time as a decentralized rather than a national system (Lindgren, 1995). In Europe, only Finland seems to have a more decentralized system (Häkkinen, 2005). Most political decisions on health and health care in Sweden are made at the level of its presently 20 county councils and 290 local municipalities, which are empowered to put proportional income taxes on their citizens in order to finance their activities. Central government has a more passive role. Apart from supervising the fulfilment of the overall objectives of the health care legislation, which has a strong emphasis on equity,¹ its influence is primarily manifested through indirect measures such as general and targeted subsidies. It can also impose ceilings on county council and municipality taxes.

The challenge of an ageing population is a major concern to policymakers and researchers all over the world. As evident in Figure 1, the percentage of people aged 60 and above will increase substantially between 2000 and 2050 in all parts of the world. Europe has the highest proportion; only Japan has a similar age structure. The already high proportion of older people in Europe is expected to rise to an even higher level by 2050, from currently 19 percent to an estimated 34 percent.

There are many factors that may explain the number of spells and the number of days of absence from work reported as due to sickness. Health problems seem to be the most natural candidate to include among the explanatory factors, but individual health behavior could enter the scene in several ways. A day of reported sickness might primarily be due to the fact that a person's capacity to produce market goods and household commodities is so heavily reduced so the day is just spent at home with very little or no household commodities produced. It might also be a day when the person actively produces a restoration of his or her health, combining own time and healthcare of some kind. It might be a day when the person waits for a hospital treatment, for instance, a hip replacement, but his or her condition is an obstacle for taking part in market production (very much depending on the kind of job, in which the person would normally be involved).

As summarized in our introductory Chapter 1, the trend toward ever-healthier elderly seems to have been broken (Figures 8 and 9). The share of young and middle-aged Swedish men and women, reporting very good or good health status to the Survey of Living Conditions, started to decline already in the 1980s. As a consequence, as the cohorts are graying, the share of elderly people, reporting very good or good health status, has also begun to decline. Increasing health problems among Swedish oldest old have also been reported from the SWEOLD (SWEdish panel of living conditions of oldest OLD) study (Parker et al., 2004). Similar trends have been reported for the United States and for the entire EU-15. Part of the explanation appears to be the growth at young ages in allergy, asthma, diabetes, other long-standing illness, and health problems associated with obesity. In the time perspective of our simulations, these trends in long-standing health problems might have less impact on the health of the elderly (and their demand for healthcare and old-age care or their life expectancy) than on the health of people in their middle ages but still be important. In this section, we will present some additional information on the development of health status during the last 20 years or so for the Swedish population.

In the 1990s, individuals aged 18–64 were eligible for disability insurance, if their work capacity was reduced by at least 25 percent (50 percent before 1993). In the beginning of the period, before 1991, disability insurance could also be granted for labor market reasons (i.e., if unemployed had been compensated long enough to exhaust their benefits – obtained benefits for 300 days). This possibility was gradually phased out after 1991. In 1995, the enforcement of the rules was tightened. When evaluating applications for disability pensions, local insurance offices now had to request a medical certificate and a work-related test of the applicant's degree of work capacity. Local offices also had to consult the applicant's employer, physician, or other qualified personnel, and even pay personal visits to the applicant. The possibilities for rehabilitating the applicant should also be investigated. From 1997, work incapacity should be evaluated in relation to all possible employment opportunities. Potential income changes resulting from changes in employment should not affect the evaluation⁴ (National Social Insurance Board, 2005).

Thus, this volume reports on our empirical studies, our model development, and the results of our scenario simulations. It further presents our experience from the micro-simulation approach and discusses the results of our simulations.