Options to finance health spending

0
23
Dr. Chris James
Dr. Chris James

Future projections showed that health spending was likely to continue to grow as a share of the economy and would pose major fiscal sustainability challenges to governments unless action was taken, Dr. Chris James, Health Policy Analyst OECD, told the Conference.

Dr. Chris James
Dr. Chris James

Dr. James said we needed to see if we could reallocate public funds from other areas, we needed to consider reassessing the boundaries between public and private expenditure and we needed to look at the multitude of reforms that would deliver better value for money.

We had to maintain high quality while controlling costs and continuing to make gains in health outcomes in the future.

Dr. James said that without effective cost containment, public health spending as a percentage of GDP would increase from 6% today to 9% in 2030 and 14% in 2060

Health spending in Ireland and many other countries had typically outpaced economic growth and if this continued to happen we had to ask if we could continue to afford it.

The recent economic crisis which had hit many countries including Ireland had really affected health spending. There had been reductions in real health spending per capita in 13 of 34 OECD countries. Ireland was one of the 13 countries which had been hit, wages had been cut and staff numbers reduced.   However, despite this recent slowdown, major increases in health spending were expected across the OECD in the medium to long term. Its rapid growth was a fiscal concern for governments as, with a few exceptions, healthcare in Europe was predominantly publicly funded, which was a better way to ensure health services remained accessible to all people.

Dr. James said that without effective cost containment, public health spending as a percentage of GDP would increase from 6% today to 9% in 2030 and 14% in 2060.

“The key point here is that these are projections in the absence of cost containment policies, information on how technology will be taken up and different assumptions around ageing.

“The broad drivers of this projected increase in spending are new technology in medical services, rising incomes driving higher expectations and the growing needs of the ageing population.

Blanket increases in private health spending is not the solution and the political economy aspect is also crucial

“However, I see these three drivers also as opportunities. New technology can improve health outcomes but it can also be very expensive and we need to systematically assess the value of new technology. While older people are more likely to have multiple chronic conditions this is offset to a large extent by the fact that a 70 year old today is likely to be far healthier than a 70 year old 20 years ago so that area is not as pessimistic as some people think.”

Dr. James said controlling expenditure on healthcare was so difficult because healthcare was considered by most finance/budget officials as one of the most complex expenditure areas and one of the hardest areas in which to control costs. Also it had a very high priority for citizens which made it difficult for governments to make big changes in the health systems. Many stakeholders were involved between the beneficiary of care and the resources used so achieving fiscal sustainability of health systems was therefore a major challenge.

“In one way you could argue that achieving fiscal sustainability is easy, you could just increase the responsibility of patients in paying for the cost of services which would reduce the cost pressure to the state but that is a terrible solution.”

He looked at the three broad policy options to try and make sure growth in health spending was manageable.

  1. Reallocate public funds from other areas to raise more revenues for health. This had currently limited feasibility in many OECD countries.
  2. Deliver better value for money and eliminate waste. There was the potential to get the same quality of care for less money. Policy levers on the supply side were provider payment methods, provider competition, generic substitution, joint purchasing and budget caps. On the demand side they were gatekeeping, preferred drug lists and cost sharing.
  3. Reassess the boundaries between public and private spending. We needed to be more selective about the new technologies we embraced, which ones could make major differences and the ones which were marginal in benefit. In this consideration should be given to the critical role of Health Technology Assessment and the universality and risks of private financing solutions.

Dr. James said information needs for a fiscal sustainability of health framework included long-term forecasts, medium-term spending requirements, timely information on spending and linking spending projections to estimated revenues.

There was an Early Warning System on budget over-runs. However its implementation was variable in different countries. Some set in motion actions required for future years or for the current year or which just generated an alert which did not legally require action.

“Health spending is likely to continue to grow as a share of the economy. Without major reform, this will put great pressure on public budgets. Options are to implement reforms that will improve value-for-money and reassess boundaries between public and private spending, Blanket increases in private health spending is not the solution and the political economy aspect is also crucial,” he concluded.