Utrecht, 25 th September 2007 Josep Figueras Re-examining health systems financial sustainability in Europe

Health Expenditure as % of GDP EU 15 plus selected countries (2004) Source:OECD Health Data (2006)

Health Expenditure % GDP Source: OECD Health Data (2005)

Sustainability against solidarity?

Addressing financial sustainability Reforming the funding of health care Reforming the supply (payment & provision) Strengthening public health (reducing demand)

Reforming the funding of health care Reform statutory (insurance or tax) funding –Stability of main systems: Bismark & Beveridge –Increase in tax component in SHI countries Shift costs to patients: privatisation of funding Introducing insurance competition

“In the longer term, America, like this adamantly pro-market newspaper, may have no choice other than to accept a more overtly European-style system. In such a scheme, the government would pay for a mandate insurance system, but leave the provision of care to a mix of public and private providers.” The Economist, January 28 th 2006

“Rather than copying Europe’s distorting payroll taxes, the basic insurance package would be paid for directly by government, though that cash might be raised by a “hypothecated” tax which would make the cost of health care more evident” The Economist, January 28 th 2006

Public expenditure as a % of total EU 15 (2003) OECD Health Data, 2005

Concentration of total health expenditures, France 2001 Source : CNAMTS/EPAS

Insurance competition In Theory: it ought to work Consumer freedom of choice Market competition incentives: efficiency & quality –Insurers as ‘prudent buyers’ –Cost-effective purchasing –Selective contracting Without negative impact on equity & quality –Risk adjustment formula, open enrolment,…

Equity: risk selection Efficiency; consider transaction costs Efficiency; linked to active (strategic) purchasing Implementation ability (regulatory, information,..)? Insurance competition In Practice: the evidence

“Although elegant in theory, the implementation of the managed competition model in practice appears to be complex because it is hard to fulfill the necessary preconditions” W Van de Ven (December 2006)

Addressing financial sustainability Reforming sources of funding –Reform main (SHI or tax) source of funding –Shift costs to patients: privatisation of funding –Introducing insurance competition Reforming the supply (payment & provision) Strengthening public health (reducing demand)

Reforming the supply (payment) From passive to active (strategic) purchasing? Selective contracting / provider competition Towards performance based payment systems –Case mix measures, DRGs

Paying doctors “The only way to communicate with a doctor is to write it in the back of a cheque” Bob Evans

Paying doctors “The only way to pay doctors is to change the system every three years, because by then they will have found ways to get round it to their own advantage” Bob Evans

Reforming the supply (provision) Health care substitution Cost effective capital investment Increasing consumer choice Primary care at the driving seat Setting priorities / limiting package of care Evidence base medicine / HTA agencies

Addressing financial sustainability Reforming sources of funding Reforming the supply (payment & provision) Strengthening public health (reducing demand)

Strengthening public health The ultimate demand reduction strategy Prevention is (often) better than cure –Cost effectiveness of public health interventions Stepping up public health policies in the EU –Health in All Policies: Finland presidency (2006) –Wanless reports (2002, 2004) in the UK –Public health bills: France (2003), Sweden (2002) Netherlands (2007?) –Smoking bans: Ireland, Spain, UK, Belgium…

Re-examining financial sustainability 1.Sustainability as willingness to pay 2.Consider financial versus social sustainability 3.An ageing crisis? 4.“It’s the economy stupid” 5.The contribution of health to the economy 6.Investing in health: health systems and public health

Solidarity: key in European policy WHO, EU, Council of Europe Health as a human right Solidarity vs sustainability

1.Sustainability as willingness to pay Citizens may be willing to pay more through statutory sources particularly when earmarked for health? Health expenditure as a luxury good? Solidarity a central goal in European systems Disconnect between population views & politicians?

2.Financial (vs Social) sustainability Health and social cohesion Coverage of minority groups Economic impact of reduced solidarity

3.An ageing crisis? Health expenditure incurred at the end of life Longer (and healthier?) life expectancy –Compression of morbidity Late retirement –Increasing labour market participation –Drawing less from the health services

4.“It’s the economy stupid !!” Health expenditure as percentage of GDP Addressing sluggish economic (GDP) growth The Lisbon agenda: global competitiveness Emphasis on measures to increase productivity

Source: The Contribution of Health to the Economy Surke, Mckee et al The contribution of health to the economy “Health is Wealth”

The contribution of health to the economy: The evidence Cost of illness Wages and earnings Hours worked Labour force participation Early retirement Labour supply by relatives of those in poor health Personal investment in education Propensity to save

WealthHealth Health Systems 6. Investing in health systems A conducting framework Impact on the economy Impact on Health Economic growth WHO EURO Ministerial Conference Tallinn Summer 2008

“However beautiful the strategy, you should occasionally look at the results” Winston Churchill

WealthHealth Health Systems WHO EURO Ministerial Conference Tallinn Summer 2008 Performance TransparencyTransparency AccountabilityAccountability 6. Investing in health systems A conducting framework

In sum…. Limited scope of funding reforms Increased emphasis on reform of supply –Cost effectiveness rather than cost containment Strengthen public health measures Increased willingness to pay Investing in health systems (productive sector) leading to economic growth But…. demonstrating performance