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Economics and Health – A Macro View Tasmanian Health Conference 2014 Martin Hensher Director Strategic Planning – DHHS Adjunct Associate Professor – UTAS.

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Presentation on theme: "Economics and Health – A Macro View Tasmanian Health Conference 2014 Martin Hensher Director Strategic Planning – DHHS Adjunct Associate Professor – UTAS."— Presentation transcript:

1 Economics and Health – A Macro View Tasmanian Health Conference 2014 Martin Hensher Director Strategic Planning – DHHS Adjunct Associate Professor – UTAS School of Medicine


3 Gross Domestic Product Source: Australian Government, Department of Health 2014 (OECD data)

4 …and Total Health Expenditure consistently grows faster than GDP

5 What factors drive that increasing spend? Canada Source: Grattan Institute USA Australia Source: Canadian Institute for Health Information

6 Source: King’s Fund 2014 A new settlement for heath and social care (p33) Is this sustainable?

7 Unsustainable and unaffordable? In the long run, rising expenditure on health care is not in itself a problem A growing economy will sustain health care’s growing share as long as additional health care is adding value to society And the key driver of increasing health expenditure and costs – technology and innovation – is itself a critical driver of economic growth Indeed, health care is arguably the very essence of the service economy of the future that nations like Australia must embrace (c.f. Stiglitz)

8 John Maynard Keynes 1883 - 1946 “The long run is a misleading guide to current affairs. In the long run we are all dead.”

9 What might get in the way? Future economic growth prospects Short to medium term fiscal challenges Health sector efficiency

10 Growth Prospects? But if the economy is not growing (or growing slowly), then the growth in health expenditure we are accustomed to will be much harder to finance… And that is when things start to feel uncomfortable right now, not in 30 years’ time…

11 Post-GFC Emergency Braking: From >4% Growth to Zero Average health expenditure growth rates across OECD countries, 2000-2010 Source: Morgan and Astolfi, OECD 2013

12 Emerging Macroeconomic Concerns Recognition of rising income inequality over the last 30 years (made worse by the GFC) – and that income inequality retards overall growth Evidence beginning to show “austerity” makes things worse Fears that the causes of the GFC are far from played out (e.g. China’s shadow banking sector) Fears that the ending of stimulus and quantitative easing could take the steam out of the world economy very quickly Concerns from serious economists that we are now in a new era of long- run growth at rates well below the (recent) historical trend – Stiglitz – long-term adjustment – Summers – “secular stagnation” – Gordon – “six headwinds” So, economic growth may not go back to “normal”, which would mean health expenditure growth could not go back to “normal” either

13 Fiscal and Policy Challenges Federal Budget 2014 poses significant challenges for health system especially: – Changes to funding agreements with states and territories – GP Co-payment And policy uncertainty while negotiation around the Federal Budget continues Potential changes to Federation and taxation arrangements in coming years?

14 Source: ABC FactCheck

15 Where does this leave Tasmania? We spent (for the latest year figures are available) very close to the national average on health care (public and private)

16 But that equivalent spend represents a far bigger share of our State’s economy

17 Implications So the feedback from health spending to the wider Tasmanian economy is proportionately more important And more sensitive to significant funding shocks And more reliant on federal funding, with a weaker state revenue base

18 What is our current trajectory?



21 What can we do about this? Make sure we do the right things Stop doing the wrong things So that resources are used to maximise benefit Not wasted on care that brings minimal benefit Or even on care that actively causes harm

22 Improving what we do Focus on cost-effective care across the whole system: – Are our interventions and procedures the right ones, given the available evidence on costs and effectiveness? Reduce overdiagnosis and overtreatment: – Do we use only the right technologies (those with proven benefits) on the right patients (only in those populations for whom the benefits are proven) Improve outcomes and reduce waste by minimising avoidable patient harms

23 But And improving how we do it… Deliver care in the most cost-effective place (both its setting and its geographical location): – Alternatives to hospital for high volume / low complexity cases – Appropriate centralisation of low volume / high complexity services (if necessary interstate or in partnership with private sector) Manage the patient’s journey effectively – active management of patient flow (referral pathways, admission and discharge planning, scheduling, theatre and resource utilisation etc.) Which both require better integration of care and services, and systematic clinical and process redesign Use information resources more effectively to shape and deliver care – both strategically and day-to-day

24 Do we have the courage to: Start with the evidence, rather than our history and past disappointments? Use the data effectively instead of disputing it? Collaborate and share risks (and benefits)? Individually and corporately engage to make evidence-based change real – through Clinical Advisory Groups?

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