OECD experience on fiscal sustainability Joint OECD/WHO Meeting on Financial Sustainability of Health Systems Edwin Lau Deputy Head, Budgeting & Public Expenditures Division, OECD 28 June 2012

Health is 2 nd largest public expenditure area in OECD

And health expenditures are rising Annual average growth in real per capita expenditure on health and GDP, (or nearest year) New challenges: Ageing populations : ex. Korean population aged over 65 years will represent 37% of total Korean population in 2050 Uptake of new technology : more costly and requires more skills and training Increase in multi-morbidity : continuing care, complications & acute care have considerable bearing on health spending

Is health crowding out other expenditure areas?

Health measures frequently proposed in fiscal consolidation plans

And proposed reductions are significant

 Achieving all of these goals:  Delivering healthcare efficiently  Maximizing health outcomes  Increasing the distribution of health (equity)  Maintaining fiscal stability  Achieving all of these goals:  Delivering healthcare efficiently  Maximizing health outcomes  Increasing the distribution of health (equity)  Maintaining fiscal stability OBJECTIVES  Requires these challenges to be tackled:  Both technical & allocative efficiency  Maximizing outcomes for a given level of inputs (programme effectiveness )  A financing system that reflects society’s consensus on risk pooling & cross subsidies  A revenue stream that is both stable (broad- based) and predictable (counter-cyclical, stability for planning & pricing)  Fiscal sustainability (willingness to pay for a level of demand)  Requires these challenges to be tackled:  Both technical & allocative efficiency  Maximizing outcomes for a given level of inputs (programme effectiveness )  A financing system that reflects society’s consensus on risk pooling & cross subsidies  A revenue stream that is both stable (broad- based) and predictable (counter-cyclical, stability for planning & pricing)  Fiscal sustainability (willingness to pay for a level of demand) 7 CHALLENGES Short-term cuts ≠ effectiveness or fiscal sustainability

Purpose of SBO Health Sustainability Network Financial situation calls on for new forms of co-operation to achieve fiscal sustainability, but also value for money, and access and equality of health care. Main objectives: Establish institutional dialogue, clarity of roles, and common objectives and vocabulary Find and disseminate appropriate good practice Better share existing work (analysis and data) Assist countries moving towards universal access to health insurance OECD organised a first meeting in Nov 2011: o Successfully brought together Health Budget officials from Ministries of Health and Ministries of Finance, as well as Social Security Institutions/Health Insurance Funds o Strong interest by both countries and other international organisations (WHO, World Bank andADB)

 Setting healthcare expenditure levels  Design of health financing system  Revenue Generation 9  Co-ordination function  Estimating future & current health spending needs  Expenditure management Balancing demand for care with ability to pay Session 6 Sessions 3&4 Session 6 Sessions 3&4Sessions 5