Fiscal Sustainability of Health Systems

Fiscal Sustainability of Health Systems

Bridging Health and Finance Perspectives You do not have access to this content

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24 Sep 2015
9789264240353 (EPUB) ; 9789264233386 (PDF) ;9789264233379(print)

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The health systems we enjoy today, and expected medical advances in the future, will be difficult to finance from public resources without major reforms. Public health spending in OECD countries has grown rapidly over most of the last half century. These spending increases have contributed to important progress in population health: for example, life expectancy at birth has increased, rising on average by ten years since 1970. The challenge now is to sustain and enhance these achievements in a context of tight fiscal constraints in many countries combined with upward pressure on health spending from factors such as new technological advances and demographic changes. Finding policies that can make health spending more sustainable without compromising important achievements in access and quality requires effective co-operation between health and finance ministries. Sound governance and co-ordination mechanisms are therefore essential to ensure effective policy choices. Prepared by both public finance and health experts, this report provides a unique detailed overview of institutional frameworks for financing health care in OECD countries. One of the main features of this book is a comprehensive mapping of budgeting practices and governance structure in health across OECD countries.

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  • Foreword and Acknowledgements

    The health systems we enjoy today and expected medical advances in the future will be difficult to finance from public resources without major reform. Such reforms require effective co-operation between Health and Finance Ministries. Public health spending in OECD countries has grown rapidly over most of the last half century. It represents on average about 6% of gross domestic product (GDP) in OECD countries, and is projected to consume an additional 2 percentage points of GDP over the next 20 years. These spending increases have contributed to important progress in population health: life expectancy at birth has increased, rising on average by ten years since 1970. The challenge is to sustain and enhance these achievements in a context of tight fiscal constraints in many countries, upward pressures on health spending from factors such as new technological advances and demographic change.

  • Acronyms and abbreviations
  • Preface

    Spending on health has outpaced economic growth in most OECD countries for many decades. The question of the fiscal sustainability of health systems has been brought to the top of many political agendas. Government bureaucracies are struggling with how to meet such large fiscal challenges. Both Ministries of Health and Finance are at the forefront of these challenges. Ministries of Finance strive to create effective budgetary discipline and manage budgetary envelopes. Ministries of Health face the huge task of keeping their ageing populations healthy whilst improving the efficiency of their healthcare delivery systems.

  • Executive summary

    Over the last 20 years, the average annual growth rate of public health spending exceeded GDP growth in all OECD countries. While such spending has improved health outcomes, there are concerns on the fiscal sustainability of this upward trend. Indeed, in the absence of effective cost-containment policies, OECD projections show public spending on health and long-term care is on course to reach almost 9% of GDP by 2030, and as much as 14% by 2060. Pressures on health expenditure are mainly due to new technologies, which extend the scope, range and quality of medical services; rising incomes, which engender higher expectations on the quality and scope of care; and population ageing.

  • Fiscal sustainability of health systems – Why is it an issue, what can be done?

    This chapter describes the fiscal sustainability challenge faced by OECD country health systems, and how it can be addressed. It analyses trends in health expenditure, showing that health spending has typically outpaced economic growth in the past. Although the global financial crisis of 2008 moderated health spending growth, projections forecast health spending to continue to rise as a share of GDP. Evidence on the key drivers of health spending are then presented, showing that it has been largely driven by new technologies and rising incomes, with demographic change (ageing) and institutional characteristics of health systems also important in some countries. Three general policy options for ensuring the fiscal sustainability of health systems are then discussed: raising more money for health, improving the efficiency of government health spending, and reassessing the boundaries between public and private spending.

  • The challenge of budgeting for health care programmes

    This chapter provides a more political economy perspective on budgeting practices, questioning conventional views in some ways. It challenges the usual understanding of how health care programmes can be "unsustainable", making the point that sustainability ultimately depends on the tolerance of political systems for redistribution. The chapter also revisits common explanations of spending growth, stressing the importance of social processes that define and expand notions of "necessary" care. It shows how budget making is made more difficult by a uniquely confusing proliferation of ideas about how to control spending. The impact of two structural features is then considered: whether services are delivered by a bureau or as an entitlement, and whether they are funded by dedicated revenues.

  • Budgeting practices for health in OECD countries

    This chapter presents the results of an OECD survey of budget officials on budgeting practices for health, which aims at shedding light on the different institutional frameworks, and the instruments available to control health care expenditure in OECD countries. Health represents an important share of public spending, and one that has consistently increased faster than other areas of spending, and faster than GDP. However, controlling public health expenditure growth is particularly difficult for budget officials. A number of factors and institutions are necessary to allow governments to control health expenditure and ensure their fiscal sustainability: long-term forecasts, medium-term projections, timely information on expenditure, adequate revenues, expenditure management tools, monitoring and evaluation procedures, political agreement on targets and co-ordination mechanisms.

  • Decentralisation of health financing and expenditure

    In a majority of OECD countries, sub-national governments (SNGs) play some role in health-care spending. The allocation of health care expenditure between central, state and local levels has significant repercussions over the design, financing and sustainability of health care systems. This chapter gives an overview of health care decentralisation in OECD countries, and analyses the main differences in spending allocations between levels of government, as well as revenue distribution (taxes, transfers, etc.). It also focuses on recent reforms in OECD countries devolving further responsibilities for health expenditure to sub-national governments.

  • The impact of cost-containment policies on health expenditure

    Many governments have enacted health cost-containment policies in recent years, and many are currently considering further reform alternatives to tackle growing health spending and promote efficiency in the health system, particularly in light of projections regarding future cost pressures in this sector. This chapter assesses the most robust empirical evidence on the public spending effects of health policy alternatives to contain excess cost growth in the system. A stylised theoretical framework for the relationships between potential cost-containment measures, economic incentives and quantities, and health expenditure is suggested. The framework provides structural guidance for reviewing the evidence on the cost-containment impacts of various reforms implemented in OECD countries in the last decades.

  • Country experiences in dealing with fiscal constraint following the 2008 crisis

    This chapter presents a synthesis of OECD and non-OECD countries’ experiences in responding to the global financial crisis, on what concerns the health sector. Many countries initially followed counter-cyclical fiscal policies and tried to sustain social sector expenditure, in particular in health. However, many countries were also soon forced to develop and implement strategies to control or reduce spending, and the health sector was often a target. The country responses to the crisis presented in this chapter provide important examples to other countries facing similar challenges, as well as interesting insights into how longer-term fiscal sustainability of the health sector might be enhanced.

  • The effects of ageing on the financing of social health provision

    This chapter discusses how population ageing might affect the way that social health provision is financed, and the importance of favouring taxes that minimise their adverse impact on economic performance, both out of concern for general well-being, and in order to maintain popular support for social health provision.

  • Health care budgeting in France

    This chapter presents the evolution of the institutions and policies developed in France to ensure the fiscal sustainability of the French health care system. Particularly notable was the introduction of the National Objective for Healthcare Spending (ONDAM) targets in 1996. This was later improved with the introduction of an early warning system, which allows payments to be withheld from health providers, and the official validation of targets by the Parliament. On the revenue side, this chapter examines how the introduction of the Contribution Sociale Généralisée (CSG) has successfully reduced reliance on wage-based contributions for health insurance.

  • Health care budgeting in the United Kingdom

    In this chapter, budgeting challenges in the United Kingdom health system are discussed. Health spending trends are presented, followed by a summary of the relevant institutional frameworks for budgeting. Government measures to reduce cost pressures are then assessed, in terms of their ability to make cost savings, their effect on the government’s overall structural budget position and their impact on service standards. Evidence on the extent of future funding pressures are then discussed.

  • Health care budgeting in the Netherlands

    This chapter describes how the Netherlands implemented a unique system of regulated competition within health care in 2006. It analyses to what extent this system has managed to contain costs, and explores whether three preconditions and two budgeting principles for cost containment in a system of regulated competition are met in the Netherlands. It presents the effects of the 2006 reform on the instruments available to the government to contain costs, and in particular, the effects of the important time-lag between overspending and possible corrective measures. It gives a preliminary assessment of the results of the reform.

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