1. Some Observations on Recent Developments in Health Financing
Peter Berman
The World Bank
November 9, 2010
Stockholm, Sweden
This presentation represents the personal views of the author and are not an official representation of the World Bank group or its affiliates.

2. Despite efforts to control health spending, it continues to rise
Average spending as %GDP in OECD steadily rising
Cost containment efforts of 1990s slowed but didn’t stop the trend
Increases attributed largely to technology and aging – both pressures likely to continue
Sweden not an outlier – effects relatively moderate – but still there
Health financing becoming more pluralistic: mainly public systems increasing incorporating private option; mainly private systems incorporating public options – “converging” in this sense
Projections suggest increase likely to continue. United States experience says this is possible
Borrowing liberally from OECD (2010) “Value for Money in Health Spendng”

7. Two key questions (OECD 2010)
Is increased spending economically justified?
Is increased spending financially and fiscally feasible?

8. Economic justification?
Benefits > Cost?, B/C > alternative uses? Difficult to answer in economic terms
System performance still improving – access, quality, outcomes
Reports from Sweden suggest that further reductions in disparities and improvements in performance still possible
Some recent work in US (e.g. Cutler) and others suggests we may underestimate benefits because of difficulties in measuring quality of life improvements and expansions in eligibility for new treatments
“Revealed preference” suggests continued economic justification
(FN: should the state try to change preferences?)

9. Financial and fiscal feasibility?
Financial – can the money be found? Fiscal – are citizens willing to pay for it?
Economic crisis raises doubts about social ability to pay – need to balance increased financing with growth or other trade-offs?
Fiscal strategies?
Administrative cost controls work in shorter term, but often not optimal
Efficiency strategies offer some promise
Priority setting
P4P, Incentives
Information technology
Service delivery reforms – coordination and integration
Pharmaceutical management
Likely futures – use all of these strategies: diversify financing, cut something else, cost controls to slow growth, efficiency gains
Consequences? Maintain the base, trade-offs with increases at the margin – how to maintain values of solidarity and equity?

10. For Sweden
Reasonable to expect significant upward pressure on expenditures
Can afford to spend more – but can more be financed through the state and general taxation? How much more given high tax levels, concerns about competitiveness, other economic pressures?
Efficiency gains can offset some of the pressure but likely not all
Some of pressure for increased spending may not be priority for collective health goals, but some may be
How to:
Figure out which is which?
Prioritize the increases which offer real health and welfare gains?
Finance them balancing growth concerns and equity concerns?