1 HEALTH EXPENDITURE TRENDS: WHAT ARE THE KEY ISSUES FOR POLICY- MAKERS? Eva Orosz and David Morgan Organisation for Economic Co-operation and Development 7 th European Health Forum Gastein 6 – 9 October, 2004

2 Main purposes of work related to the System of Health Accounts at OECD To provide / facilitate policy-relevant, comparative data and analysis on health expenditure harmonisation across national health accounting practice methodological development in health accounting data sources for research

3 Recent analytical work concerning health expenditure Health at a Glance. OECD 2003 Bains, M. and Oxley, H.: Aging-related Spending Projections on Health and Long-term Care. In: Towards High-Performing Health Systems. Policy Studies, OECD, 2004 Orosz, E and Morgan, D: SHA-based Health Accounts in Thirteen OECD Countries: A Comparative Analysis. OECD Working Papers, No.16. SHA-based Health Accounts in Thirteen OECD Countries. Country Studies. OECD Health Technical Papers 1 to 13

4 Key questions proposed for discussion 1) How can the excess growth of health expenditure be interpreted? 2) Is it possible to move towards a smoother (longer- term) adjustment of public spending to economic circumstances? 3) To what extent can policy influence the key determinants of health expenditure growth? 4) Do we have a reliable picture of the structure of public spending on health? 5) Do we have a reliable picture of the role of private spending on health care?

5 Figure 1. Health expenditure as percentage of GDP, 2002

6 Figure 1b. Public expenditure on health as percentage of GDP, 2002

7 Different interpretations of excess growth of public (and total) expenditure on health Poses a greater burden on the public budget – thus should be avoided. Reflects structural changes in national economies: greater spending on health services reflects the growing role of the whole service sector. It is an investment in long-term economic development. Advances in health care and the increased demand is inherent as increasingly wealthy and ageing populations require continuous increase.

8 Figure 2. Real annual growth rates, Public Expenditure on Health and GDP, EU15 Source: OECD Health Data 2004, 2 nd edition.

9 How to adjust public spending to economic circumstances? Have countries tended to over-react to economic ups-and-downs in respect of managing their public spending on health? Is this short-term attachment of public spending to GDP-growth unavoidable? Would it be possible to shift toward a smoother long- term adjustment of public expenditure on health to economic growth?

10 Figure 3. Public expenditure on Pharmaceuticals

11 To what extent can policy influence the key determinants of health expenditure growth? Public pharmaceutical expenditure has been increasing faster than other components of publicly financed health care However, figures shows that countries with very similar situations (i.e. similar per capita expenditure and similar growth rate in total expenditure) experienced very different trends.

12 Do we have reliable figures on spending structure? SHA-based Health Accounts in Thirteen OECD Countries. OECD Working Papers, No.16 System of Health Accounts allows for a more reliable analysis of how financial resources are allocated among functions and service providers In-patient curative-rehabilitative care occupies a far smaller share of health expenditure than hospitals

13 Figure 4. Hospital and In-patient Curative-rehabilitative Expenditure

14 Figure 5. Public share of health expenditure, 1980 and 2002 Source: OECD Health Data 2004, 2 nd edition.

15 Do we have a reliable picture of the role of private spending on health care? Private sector may play a very different role in financing a particular type of service. The fact that the whole health care system is primarily publicly financed does not entail that public financing plays the dominant role in every area.

16 Figure 6. The financing of in-patient, out-patient care and pharmaceuticals

17 Additional Figures if Questions

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