Fiscal Challenges of Health Care

9th Annual Meeting of OECD-Asian Senior Budget Officials

Bangkok, 14 December 2012

Geert van Maanen

Secretary-General, Ministry of Health, Welfare and Sport

The Netherlands

Agenda

• Development of Health Care Expenditures

• Myths About Health Care Expenditures

• Future OECD Work on Health Care Expenditures

Steady growth of public Health + LTC spending

Public Health and LTC expenditure as a % of GDP, OECD countries

3 Source: OECD Health database (2011).

What drives health care expenditure?

Health care expenditure

Demography Income Residual

Relative prices

Technology Institutions and policies

An income elasticity of 1.8

could explain most of the

expenditure growth

If price elasticity is low then price effect

on expenditures could be important

4

Agenda

• Development of Health Care Expenditures

• Myths About Health Care Expenditures

• Future OECD Work on Health Care Expenditures

More competition will

improve value for money

More patient choice will

transform health care

More co-payments

will reduce waste

Spending more on

prevention will save

us money in the long

run

Regulating technology is a means

of reducing spending

Five common myths about health policies

Myth 1: More competition will

decrease health costs

More co-payments

will reduce waste

Spending more on

prevention will save

us money in the long

run

Regulating technology

is a means of reducing

spending

More patient choice will

transform health care

Competition in which market?

Evidence from competition in insurance

• No evidence that insurance competition drives down costs:

– Why would it? Risk adjustment, set benefits, group contracting… What scope is there?

– Market concentration

Competition in provision

Conditions for market incentives to work for core services:

1. Financial support rewards more efficiency

2. Selective contracting possible

3. Feasible alternative suppliers with capacity

4. Information available, especially quality

• MYTH: More competition will decrease health costs

• REALITY: Competition in provision might increase efficiency; competition in insurance won’t.

Myth 2: More patient choice will

make providers compete on quality

More co-payments

will reduce waste

Spending more on

prevention will save

us money in the long

run

Regulating technology

is a means of reducing

spending

Competition in provision might

increase efficiency;

competition in insurance won’t.

Apparently great interest in

rankings…

Conditions for patient choice to

make a difference

patients act as informed

consumers

GPs act as agents of choice

providers respond to

market signals

Convergence towards ‘managed

choice’

• COUNTRIES WITH NO CHOICE EXPANDING IT

– Finland

– Sweden

– UK.

• COUNTRIES WITH CHOICE INTRODUCING GATEKEEPING

– France

– Germany

– US (HMOs/Medical Homes)

Myth 3: More co-payments will

reduce waste

Spending more on

prevention will save

us money in the long

run

Competition in provision might

increase efficiency;

competition in insurance won’t.

Patient choice is

valued, but does not

promote efficiency

Regulating technology is a means of

reducing spending

Out-of-pocket payments account for nearly 20% of total

health spending (2008)

49.3

35

30.8

29

.7

25.2

23.9

22.9

22.4

21.8

20.7

20.5

19.7

19.5

19.4

18.8

18

16.6

15.7

15.6

15.1

15.1

14.7

14.6

14.4

13

.9

13.8

13

12.8

12.1

11.6

11.1

7.4

5.7

0

10

20

30

40

50

60

Mexiq

ue

Coré

e

Suis

se

Isra

ël*

Rép. slo

vaque

Hongri

e

Port

ugal

Polo

gne

Turq

uie

Espagne

Belg

ique

Esto

nie

Italie

Fin

lande

OC

DE

Austr

alie

Isla

nde

Rép. tc

hèque

Suède

Norv

ège

Autr

iche

Canada

Japon

Irla

nde

Nouv.-

Zéla

nde

Danem

ark

Alle

magne

Slo

vénie

Eta

ts-U

nis

Luxem

bourg

Royaum

e-U

ni

Fra

nce

Pays

-Bas

Myth 4: ‘more co-payments will reduce

waste’

• More than 130 studies of the impact of copayments on drug consumption:

– Reduce consumption of non-essential medicines

– But also reduces consumption of essential medicines

– No convincing evidence on long-term health effects

– Effects on spending are at best temporary

• Studies on other types of care (consultations, use of emergency services…)

– Reduction in usage, but often only temporarily

– Substitution towards other type of care – but often not evaluated

– No convincing evidence of effects on spending

• MYTH: More co-payments will reduce waste

• REALITY: Co-payments shift spending, but probably don’t reduce it

Myth 4: Regulating technology is a

means of reducing spending

Spending more on

prevention will save

us money in the long

run

Competition in provision might

increase efficiency;

competition in insurance won’t.

Patient choice is

valued, but does not

promote efficiency

Co-payments shift spending, but probably

don’t reduce it

EBM HTA

CLINICAL

GUIDELINES

PATIENT

LEVEL

DECISION

MAKING

COVERAGE

DECISION

MAKING

DOES IT WORK ? IS IT WORTH IT ?

Rational decision making about

technologies and practices

Consumption of anticholestorols (daily doses per 1000 people)

0

50

100

150

200

250

Germany Australia

2000

2007

• MYTH: Regulating technology is a means of reducing spending

• REALITY: HTAs have increased health, increased value for money, but also increased spending

Myth 5: Spending more on

prevention will save us money in

the long run

Co-payments shift

spending, but

probably don’t

reduce it

HTAs have increased

health, increased value

for money, but also

increased spending

Competition in provision might

increase efficiency;

competition in insurance won’t.

Patient choice is

valued, but does not

promote efficiency

Overweight and obese: a Growing

Problem

20%

30%

40%

50%

60%

70%

80%

1970 1980 1990 2000 2010 2020

Pro

po

rtio

n o

verw

eigh

t (a

du

lt p

op

ula

tio

n)

Year

USA England

Spain

Austria

France

Australia

Canada

Korea

Italy

Financial Impact -15000-10000-5000500010000

Intervention costs and savings

-50

50

150

250

350

450

550

Co

st

(bil

lio

n $

PP

P)

intervention costs

health expenditure

• MYTH: Spending more on prevention will save us money in the long run

• REALITY: Prevention spending is cost-effective, not cost reducing.

The 5 realities: Health is

complicated…

Co-payments shift

spending, but

probably don’t

reduce it

HTAs have increased

health, increased value

for money, but also

increased spending

Competition in provision might

increase efficiency;

competition in insurance won’t.

Patient choice is

valued, but does not

promote efficiency

Prevention spending is cost-

effective, not cost reducing.

Agenda

• Development of Health Care Expenditures

• Myths About Health Care Expenditures

• Future OECD Work on Health Care Expenditures

Joint OECD Health Sustainability Network

• The OECD has recently launched a Joint Network

bringing together finance officials from health ministries

and budget examiners responsible for health care

expenditure.

• This Joint Network responds to the growing recognition

that improved dialogue and concerted action is needed

among these communities in order to better understand

and manage rapidly growing health expenditures.

• Interest in launching such a Joint Network in the Asian

region as part of Asian SBO.

Benefits for SBO

• A new approach to addressing ‘intractable’ fiscal sustainability challenges, e.g. improving expenditure management, aligning cost control incentives

• Practical (rather than academic) focus: case studies, what has worked and why?

• Institutional perspective: inter-ministerial dialogue & co-operation; health systems characteristics survey

• Better use of data & analysis: health accounts, value for money evaluations, public expenditure reviews, fiscal projections, health expenditures drivers

Thank you.