New Approaches to Economic Thinking
Seminar on Project C3, 31 January 2014
CAN HEALTH BECOME AN
EVEN BIGGER PART OF THE
E...
Key points
• Health spending is likely to continue to
grow as a share of the economy
• This will put great pressure on pu...
HEALTH AND THE
ECONOMY
3
Health spending outpaced economic growth
in the pre-crisis period
Annual growth rate of health spending per capita
and rea...
-11.1
-10
-15
-6.6
1. CPI used as deflator.
Source: OECD Health Statistics 2013
-1.8
Denmark
0.6
0.7
0.7
0.8
0.8
1.0
...
But even still, health has been a major
contributor to growth over the last decade
Contribution of health to growth in GDP...
Health and social care is a fast growing
source of employment in many countries
Change in employment between 2000 and 2011...
Poor physical and mental health hits the labour market
Employment
Obesity
Wages
Absenteeism
Lower probability of
emplo...
Productivity losses through mental-ill health are
large
Sickness absence (% and duration) and productivity losses at work ...
HEALTH AND PUBLIC
FINANCES
10
Health care is predominately publicly funded
General Government
100
2
6
0
3
13
15
6
80
12
10
12
5
11
2
15
1
17...
This will make health a major pressure on public budgets
across all OECD countries
Average public spending 2006-2010
Incr...
Ageing is not the key driver of health spending
growth
Drivers of healthcare expenditure growth between 1995 and 2009
in O...
What do we mean by fiscal
sustainability?
IMF: The capacity of a
government, at least in the
future, to finance its desire...
OPTIONS
1. EFFICIENCY
15
Improving health sector productivity can
dramatically change the fiscal outlook
Sensitivity of public sector net debt
proj...
The target areas for expenditure control are
well known among Finance Ministries
Self-reported priorities for expenditure ...
The crisis has been used to slow growth in desirable
areas, but we have fallen short on prevention
Average annual growth r...
There are pervasive under-treatment issues in
mental health
Treatment rate (in %)
Proportion of people being treated by a ...
Worthwhile processes are not being
undertaken with consistency
Distribution of French GPs: % of diabetic patients having 3...
Considerable medical practice variations
within and between countries
Rates of PTCA (standardised for age and sex)
per 100...
OPTIONS:
2. REALLOCATE PUBLIC
SPENDING TOWARDS HEALTH
22
Countries have allowed health to become a
bigger share of their budget
Change in the structure of general government expen...
OPTIONS:
3. GET A MORE SUSTAINABLE
WAY OF FINANCING PUBLIC
EXPENDITURE ON HEALTH
24
Our models incorporate estimates of how an ageing
population will increase utilisation of health services…
Old age (+65) d...
… but they do not account for shortfalls in revenues
for countries that rely heavily on payroll taxes
Average share of dif...
Some new taxes could be effective in improving
health, but will not be major sources of revenue
• ‘Sin taxes’ are increasi...
OPTIONS:
4. LET PRIVATE SPENDING RISE
28
Boundaries between public and private
need to be debated
Source: Paris et al.,
Measuring coverage
(Forthcoming)
29
It is unlikely that countries will want to step back from
covering 100% of their population
Total public coverage
Australi...
Some shift to private financing
2007/08
2008/09
2009/10
2010/11
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
0.5%
0...
Private health insurance markets are not
necessarily cost reducing
• The ‘theoretical’ advantages of private health insura...
A better way to cost share…
• Be more specific and selective in defining the
range of services covered
• Health systems ha...
Key points
• Health spending is likely to continue to
grow as a share of the economy
• This will put great pressure on pu...
CAN HEALTH BECOME AN EVEN
BIGGER PART OF THE ECONOMY
WITHOUT UNDERMINING FISCAL
SUSTAINABILITY?
31st January 2014
Mark Pea...
of 35

Can we still spend more on health without breaking the budget?

OECD Mark Pearson - Can health become an even bigger part of the economy without undermining fiscal sustainability? 31 January 2014.
Published on: Mar 3, 2016
Published in: Health & Medicine      News & Politics      
Source: www.slideshare.net


Transcripts - Can we still spend more on health without breaking the budget?

  • 1. New Approaches to Economic Thinking Seminar on Project C3, 31 January 2014 CAN HEALTH BECOME AN EVEN BIGGER PART OF THE ECONOMY WITHOUT UNDERMINING FISCAL SUSTAINABILITY? Mark Pearson Deputy Director Employment, Labour and Social Affairs
  • 2. Key points • Health spending is likely to continue to grow as a share of the economy • This will put great pressure on public budgets unless: – We improve value for money – We reallocate public funds from other areas – We raise the efficiency of public funding for health – We get more private finance into the system 2
  • 3. HEALTH AND THE ECONOMY 3
  • 4. Health spending outpaced economic growth in the pre-crisis period Annual growth rate of health spending per capita and real GDP per capita, 2000-2009 12% Average annual growth rate in real health expenditure per capita SVK 10% KOR 8% CZE NLD 6% PRT GRC GBR NZL ESP FIN BEL CAN 4% USA SWE DENMEX NOR JPN ITA2% EST POL IRL FRA DEU AUT CHE ISR CHI SVN HUN AUS ISL LUX 0% -1% 0% 1% 2% 3% 4% 5% 6% Average annual growth rate in real GDP per capita Source: OECD Health Statistics 2013 4
  • 5. -11.1 -10 -15 -6.6 1. CPI used as deflator. Source: OECD Health Statistics 2013 -1.8 Denmark 0.6 0.7 0.7 0.8 0.8 1.0 1.2 Belgium Mexico France Canada New Zealand Netherlands Poland 1.3 3.4 2.8 2.8 6.3 5.5 4.9 7.5 7.1 9.3 10 Korea Chile ¹ Japan Israel 3.9 3.4 1.8 2.1 2.1 3.1 2.6 1.6 3.4 5.5 4.5 3.5 10.9 2009-2011 Slovak Republic Hungary Germany Sweden Finland Switzerland 1.3 1.9 1.4 2.1 3.1 3.7 2.8 7.2 7.0 5.9 5.3 5.3 2000-2009 United States 0.5 Norway 4.1 3.0 4.1 3.8 3.3 2.2 0.2 Austria 1.6 0.2 -0.4 Italy OECD32 -0.5 Spain 0 Australia -0.8 Czech Republic -1.2 -1.8 United Kingdom 1.8 1.6 5 Slovenia -2.2 -3.0 Portugal Estonia -3.8 -5 Iceland Ireland 0.0 Greece Annual average growth rate (%) The crisis has moderated rapid growth in health spending Annual average growth rate in per capita health expenditure, real terms, 2000 to 2011 (or nearest year) 15 5
  • 6. But even still, health has been a major contributor to growth over the last decade Contribution of health to growth in GDP per capita (%), 2000 to 2011 6
  • 7. Health and social care is a fast growing source of employment in many countries Change in employment between 2000 and 2011, various industries All activities Agriculture Industry Services Canada United Kingdom Human health and social work activities 100% 80% 60% 40% 20% 0% -20% -40% -60% Ireland Spain Australia Austria France Source: OECD Database on Labour Force Statistics, countries selected reflect the availability of data Finland Czech Republic 7
  • 8. Poor physical and mental health hits the labour market Employment Obesity Wages Absenteeism Lower probability of employment (causal) Larger wage penalties (causal) More sickness absences, especially for women (causal) (Lundborg et al. 2010, Sweden) Moderate drinking positively associated with wages (Jarl et al 2012, Sweden) Alcohol Use Long-term light drinkers have better employment opportunities (Hamilton and Hamilton 1997, Canada) Heavy smokers more likely to be unemployed Smoking (Jusot et al. 2008, France) (possible causality) Smokers earn 4-8% less than non-smokers (causal) (Levine et al. 1997, USA) Absences 20% higher among abstainers, former and heavy drinkers (causal) (Vahtera et al 2002, Finland) Smokers 33% more likely to be absent from work than non-smokers (causal) (Weng et al. 2012, meta-analysis) 8
  • 9. Productivity losses through mental-ill health are large Sickness absence (% and duration) and productivity losses at work (%) Sickness absence incidence Presenteeism incidence 8 42 35 90 7 45 40 Average absence duration 80 7.3 70 6 5.2 30 5 21 69 60 5.6 28 25 88 4.8 4 50 40 20 19 15 3 35 30 2 20 5 1 10 0 0 0 10 Severe disorder Moderate disorder No disorder Severe disorder Moderate No disorder disorder Source: OECD (Sick on the Job:? Myths and Realities about Mental Health and Work). 26 Severe disorder Moderate disorder No disorder
  • 10. HEALTH AND PUBLIC FINANCES 10
  • 11. Health care is predominately publicly funded General Government 100 2 6 0 3 13 15 6 80 12 10 12 5 11 2 15 1 17 4 5 14 18 18 18 10 17 3 6 2 Private insurance 6 1 13 12 20 24 21 19 20 20 5 9 12 24 12 31 29 18 26 Other 4 6 3 10 17 35 27 25 37 49 5 1 15 30 8 16 14 20 8 8 Private out-of-pocket 70 1 38 60 45 12 37 50 46 74 73 83 69 82 78 75 73 73 70 42 65 46 67 65 71 69 68 30 7 45 56 68 67 43 51 20 38 35 27 24 19 1. Data refer to total health expenditure. Source: OECD Health Statistics 2013 Switzerland Portugal Greece Ireland ¹ Australia Canada OECD34 Turkey Spain Slovenia Slovak Republic Finland 11 8 6 2 22 17 Hungary 7 Poland 7 10 Belgium France Austria Italy ¹ Estonia Iceland Sweden Japan New Zealand 4 Germany 9 9 United Kingdom ¹ Denmark Norway Czech Republic 5 Luxembourg 8 11 6 Korea 10 Israel 32 0 25 46 64 60 Chile 79 Mexico ¹ 85 40 United States 77 Netherlands % of current expenditure 90 15 Social Security 11
  • 12. This will make health a major pressure on public budgets across all OECD countries Average public spending 2006-2010 Increase of public spending 2010-2030 Increase of public spending 2030-2060 12% % GDP 10% 8% 6% 4% 2% 0% Source: OECD Economic Policy Paper n°06, 2013 12
  • 13. Ageing is not the key driver of health spending growth Drivers of healthcare expenditure growth between 1995 and 2009 in OECD countries Healthcare expenditure growth (100%) Demography (12%) Income (42%) Age structure Health by age Source: OECD Economic Policy Paper n°06, 2013 Residual (46%) Relative prices Technology Institutions and policies 13
  • 14. What do we mean by fiscal sustainability? IMF: The capacity of a government, at least in the future, to finance its desired expenditure programs, to service any debt obligations […] and to ensure its solvency. EU: This considers the ability of the government to meet the costs of its current and future debt through future revenues (Indicator S1). The finite version of the budget constraint is assessed with reference to a target date of 2030 and a target level of debt of 60 % of GDP (Indicator S2) • Implications: – Intergenerational transfer – As ageing is not the driver we cannot ‘ride out’ health spending by letting budgets run into deficit – The policy challenges are productivity, relative budget priority and the boundaries of financing 14
  • 15. OPTIONS 1. EFFICIENCY 15
  • 16. Improving health sector productivity can dramatically change the fiscal outlook Sensitivity of public sector net debt projections to interest rates Sensitivity of public sector net debt projections to health productivity Source: Fiscal Sustainability Report, UK Office for Budget Responsibility, July 2013 16
  • 17. The target areas for expenditure control are well known among Finance Ministries Self-reported priorities for expenditure control, 22 OECD countries Hospital expenditure Pharmaceutical costs Long term care spending Spending on prevention programs Primary health care services Outpatient care spending 0 5 10 15 20 Number of countries Source: OECD Survey on Budget Practices and Procedures, 2013 17
  • 18. The crisis has been used to slow growth in desirable areas, but we have fallen short on prevention Average annual growth rates of spending for selected functions, OECD average, in real terms 2007/08 2008/09 2009/10 2010/11 8% 6.9% 6.4% 7% 6.2% 5.9% 6% 5.3% 5% 4.8% 4.8% 4.6% 4% 3.5% 3.2% 2.9% 2.8% 3% 1.7% 2% 1% 1.0% 0.7% 2.5% 1.7% 1.6% 0.9% 0.2% 0% -1% -0.9% -2% -1.7% -1.5% -1.7% -3% Inpatient care Outpatient care Long-term care Pharmaceuticals Prevention Administration Source: OECD Health Statistics 2013 18
  • 19. There are pervasive under-treatment issues in mental health Treatment rate (in %) Proportion of people being treated by a specialist or non-specialist, by severity of their mental disorder 80 Non-specialist Specialist 70 60 50 40 30 20 Austria Belgium Denmark Netherlands Sweden Source: OECD (Sick on the Job:? Myths and Realities about Mental Health and Work). United Kingdom OECD-21 None Moderate Severe None Moderate Severe None Moderate Severe None Moderate Severe None Moderate Severe None Moderate Severe None Moderate 0 Severe 10
  • 20. Worthwhile processes are not being undertaken with consistency Distribution of French GPs: % of diabetic patients having 3 or more HBA1C tests during the year in the last 12 months (2009) Average=40% Target=65% 10 20 30 40 50 60 70 80 90
  • 21. Considerable medical practice variations within and between countries Rates of PTCA (standardised for age and sex) per 100,000 population, 2011 (or earliest available) Rates of Coronary Artery Bypass Grafting (standardised for age and sex) per 100,000 population, 2011 (or earliest available) Note: Rates are standardised using OECD’s population structure. Missing country data will be added once available. Source: National reports submitted for the OECD project on Medical Practice Variations. 21
  • 22. OPTIONS: 2. REALLOCATE PUBLIC SPENDING TOWARDS HEALTH 22
  • 23. Countries have allowed health to become a bigger share of their budget Change in the structure of general government expenditures on average in OECD countries by function (2001 to 2011) 2% 2% 1% 1% 0% -1% -1% -2% Social protection Health Recreation, culture and religion Environmental Public order and protection safety Education Housing and community amenities Source: OECD National Accounts Statistics (database). Data for Australia are based on Government Finance Statistics provided by the Australian Bureau of Statistics. Defence Economic affairs General public services 23
  • 24. OPTIONS: 3. GET A MORE SUSTAINABLE WAY OF FINANCING PUBLIC EXPENDITURE ON HEALTH 24
  • 25. Our models incorporate estimates of how an ageing population will increase utilisation of health services… Old age (+65) dependency ratio (20-64), OECD 50% 45% 40% 35% 30% 32% 32% 30% 31% 29% 29% 28% 28% 26% 27% 33% 34% 35% 35% 36% 37% 38% 45% 44% 44% 43% 43% 41% 42% 40% 41% 39% 39% 25% 20% 15% 10% 5% 0% 2040 2039 2038 2037 2036 2035 2034 2033 2032 2031 2030 2029 2028 2027 2026 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 25
  • 26. … but they do not account for shortfalls in revenues for countries that rely heavily on payroll taxes Average share of different sources of revenues for funding health care expenditure, selected OECD countries 100% 90% Other 80% 70% 60% Sin taxes Taxes on (company) profits 50% 40% Taxes on goods and services 30% 20% 10% 0% Income taxes Mandatory health insurance premium Payroll contributions Other general taxation
  • 27. Some new taxes could be effective in improving health, but will not be major sources of revenue • ‘Sin taxes’ are increasingly being used by OECD countries – These taxes target lifestyle choices that can affect productivity and employment outcomes. – The arguments for using taxes to attain public health objectives are strong for tobacco products and alcohol. – The poor are likely to pay more but have greater health benefits. 27
  • 28. OPTIONS: 4. LET PRIVATE SPENDING RISE 28
  • 29. Boundaries between public and private need to be debated Source: Paris et al., Measuring coverage (Forthcoming) 29
  • 30. It is unlikely that countries will want to step back from covering 100% of their population Total public coverage Australia Canada Czech Rep. Denmark Finland Greece Hungary Iceland Ireland Israel Italy Japan Korea New Zealand Norway Portugal Slovenia Sweden Switzerland United Kingdom Austria France Germany Netherlands Spain Turkey Belgium Luxembourg Chile Poland Slovak Rep. Estonia Mexico United States Primary private health coverage 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.8 0.2 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.9 99.9 88.9 11.0 99.9 0.9 99.0 99.5 98.8 97.2 79.8 17.0 96.6 95.2 92.9 86.7 31.8 0 53.1 20 40 60 80 100 Percentage of total population Source: OECD health data, 2013 30
  • 31. Some shift to private financing 2007/08 2008/09 2009/10 2010/11 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 0.5% 0.1% 0.0% -0.4% General Govt./SHI Source: OECD Health Statistics 2013 Private Health Ins. Out-of-Pocket Total Health Exp.
  • 32. Private health insurance markets are not necessarily cost reducing • The ‘theoretical’ advantages of private health insurance: – Expanding individual choice – Spur innovation and flexibility – Reduce public cost pressure • The practical risks associated with private health insurance: – higher administrative costs – less bargaining power for insurers – risk selection – Pressure for tax incentives 32
  • 33. A better way to cost share… • Be more specific and selective in defining the range of services covered • Health systems have become better at assessing new activities, but this misses most spending: – Cost effectiveness analysis studies are used to assess whether a new service or drug should be funded – A more systematic assessment of therapeutic strategies by disease should be conducted 33
  • 34. Key points • Health spending is likely to continue to grow as a share of the economy • This will put great pressure on public budgets unless: – We improve value for money – We reallocate public funds from other areas – We raise the efficiency of public funding for health – We get more private finance into the system 34
  • 35. CAN HEALTH BECOME AN EVEN BIGGER PART OF THE ECONOMY WITHOUT UNDERMINING FISCAL SUSTAINABILITY? 31st January 2014 Mark Pearson Deputy Director Employment, Labour and Social Affairs

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