2. Examining the latest trends in health spending: Are we heading back to a time of austerity?

Michael Mueller
Caroline Penn
David Morgan

The last four years have seen OECD countries face a succession of crises. In early 2020, the pandemic presented an unprecedented challenge to the resilience of health systems, economies, and societies worldwide. Globally, nearly 7 million COVID-19 deaths were officially reported by September 2022, while the actual death toll is much higher.1 The virus also had a deep indirect impact: primary care visits were cancelled, elective surgeries postponed, and cancer screening appointments delayed. Longer term, mental health care needs increased, and a significant number of people experienced and continue to suffer from long-COVID. All these developments have financial implications for health systems.

At the same time, the pandemic had significant economic implications, leading to one of the most severe economic downturns since the mid-20th century. And as countries transitioned out of the acute phase of the pandemic and towards economic recovery, Russia’s war on Ukraine presented a new shock to the world economy. Inflation rates climbed to levels not seen in decades as prices for energy and commodities soared. Increasingly, public spending on healthcare has had to compete with new priorities such as support for households and business, the green transition, and defence spending. This comes at a time when health systems require further investment to improve resilience in the face of future crises.

Timely and comprehensive health financing and expenditure data has been crucial to evaluate the full impact of the pandemic and allows decision-makers to recalibrate priorities to better meet population needs. The latest figures provide an opportunity to build a comprehensive picture on how health spending developed over the pandemic period in OECD countries. The additional detail on COVID-19 specific health spending also allows to isolate the direct effect of COVID-19 on financial resource use in the health sector and understand the underlying trends in health spending.

The remainder of this chapter is structured as follows. Section 2.2 analyses how health spending developed through the pandemic. It also gives an indication of how spending is expected to have evolved in 2022 as countries started to emerge from the crisis. Section 2.3 discusses to what extent OECD countries are on the path to making health systems more resilient in the context of the ongoing macroeconomic challenges. Finally, Section 2.4 provides on overview of the actions being taken by governments across the OECD to address these challenges and explains how the current crisis – and its implication for health spending in the coming years – may differ from the global financial crisis of 2007-08.

The COVID-19 pandemic saw unprecedented growth in health spending across OECD countries as governments dedicated significant resources to address the virus outbreak. Resources were made available to track the virus, increase capacity in health systems, develop treatment options, and eventually roll out vaccines to the population. At the same time, health service utilisation was frequently disrupted during the various COVID-19 waves with patients often delaying or forgoing healthcare.

Most OECD countries transitioned out of the acute phase of the pandemic during 2022. However, the worsening macroeconomic climate, with a slowdown in economic growth and high inflation – amplified by Russia’s war on Ukraine – dealt a blow to the global recovery and led to a change in priorities in public budgets. Trade flows, already under pressure from the pandemic, were further disrupted resulting in higher prices for essential commodities, such as food and energy, and exacerbated the inflationary pressures in many countries. These developments had an impact on health spending levels in 2022 with the effects continuing into 2023 and beyond. The most recent health spending data provides a first opportunity for a full assessment of the impact of the pandemic on health spending and an early indication of where countries are on the longer-term health spending.

In the five years preceding the pandemic, annual spending on healthcare grew by an average of 3.2%, in real terms, across OECD countries. The outbreak of COVID-19 in 2020 prompted a substantial increase in health spending, notably from governments as they mobilised resources to mitigate and address the impacts of the crisis. The call on public budgets intensified into 2021, as testing programmes increased, and population-wide vaccination campaigns were rolled-out. As a result, annual health spending grew by 5%, on average, across OECD countries in 2020 and accelerated in 2021 with 8.5% growth, in real terms. This was followed by a 1.5% contraction in health spending in 2022 (Figure 2.1).

Many European countries reported high health spending growth in both 2020 and 2021, reflecting successive waves of infection across the continent. The Czech Republic (hereafter Czechia), Hungary, Estonia, and Ireland all reported double-digit health spending growth in 2020. Slovak Republic, Austria and Portugal, on the other hand, recorded their highest growth in 2021. In Latvia, exceptional growth of 33% in 2021 was primarily a result of raising wages of healthcare workers as well as pandemic-induced expenses associated with higher volumes of care (Ministry of Finance -Republic of Latvia, 2022[1]).

For Japan and Korea, where COVID-19 cases remained relatively low in 2020 (OECD/WHO, 2022[2]), health spending growth in 2020 was below the OECD average, and negative in the case of Japan, due in part to a reduction in activity in the health sector.2 While health spending in 2021 sharply accelerated by 17% in Korea, growth in Japan remained moderate, at half the OECD average. At the same time, health spending growth in Australia and New Zealand averaged between 7% and 9% in both 2020 and 2021.

Chile, Colombia and Costa Rica experienced below-average health spending growth in 2020. However, spending in Chile and Colombia in 2021 surged, reaching 12% and 16% respectively as the year proved the deadliest year of the pandemic in Latin America (OECD/The World Bank, 2023[3]). In contrast, health spending growth in Canada and the United States peaked in 2020, growing by around 10%. Unlike many OECD countries, health spending growth in both countries fell in 2021.3 Part of this slower growth in the United States can be attributed to a decline in pandemic-related government spending, which more than offset the increased utilisation of healthcare services that rebounded due to delayed care and pent-up demand from 2020 (Centers for Medicare & Medicaid Services, 2023[4]).

Preliminary results for 2022 point to a contraction in health spending across OECD countries from its peak in 2021. As the pandemic moved towards the end of the acute phase in many countries, governments eased emergency health measures. In addition, emerging geo-political and economic conditions meant that other emergencies – such as the energy and cost-of-living crisis – weakened the position of health within government priorities. This resulted in OECD countries experiencing negative health spending growth of -1.5%, in real terms, on average in 2022. Denmark saw a drop of 8% in health spending compared to 2021, but Korea continued to see health spending grow by almost 7%.

The spending trajectory of government and compulsory health insurance schemes was disrupted following the emergence of the COVID-19 pandemic. While spending by these financing schemes grew by an average of 3.5% per year between 2015 and 2019 across OECD countries, this jumped to around 8% in 2020 and 2021 as significant resources were made available to track the virus, increase health system capacity, provide subsidies to health providers, and eventually roll out COVID-19 vaccination campaigns. This was followed by an average real term drop of 1.8% in 2022 (Figure 2.2).

Spending by government and compulsory schemes increased by 15% or more in 2020 in Canada, Czechia, Hungary and Ireland, while Colombia, Korea, Latvia and Türkiye saw growth of a similar magnitude in 2021. In Ireland, the COVID-19 pandemic resulted in an increased share of public spending in 2020, with high government spending on personal protective equipment, swab kits and ventilators, and with significant expenditure on treatment costs and testing costs (Central Statistics Office, 2021[5]).

Preliminary data indicates a decrease in spending by government and compulsory schemes by almost 2% in 2022 as governments returned to previous spending patterns after the historically high levels.

Private spending on health (household out-of-pocket and voluntary health insurance) showed the opposite trend (Figure 2.2). An overall decline of around 2.5% in 2020 was the consequence of postponed and reduced use of healthcare services and the partial non-availability of services. Out-of-pocket spending decreased by more than 10% in Belgium, Chile and the United Kingdom. Chile and the United Kingdom along with Ireland and Sweden also saw a similar drop in voluntary health insurance spending.

Private spending rebounded strongly in 2021. There were significant increases of 8% in household spending in Belgium and the United Kingdom, and 16% in Chile. Growth of out-of-pocket spending was even more pronounced with increases of 17-18% in Czechia, Lithuania, Korea and the Slovak Republic. This resurgence can be attributed to a ‘catch up’ effect in demand for healthcare services that were deferred during the peak of the pandemic.

Voluntary health insurance saw a similar rebound. Notably, Chile witnessed a huge 40% surge in voluntary health insurance spending in 2021. In Ireland, COVID-19 restrictions caused a 27% drop in claims to private insurance companies between April 2020 and March 2021. Demand for health insurance rebounded strongly by 12% in 2021, with an increased share of the population enrolled in private health insurance compared to 2020 (The Health Insurance Authority, 2021[6]).

Patterns diverged in 2022, as household spending on health fell while voluntary health insurance expenditure continued to grow albeit at a much slower rate. Estimates suggest that out-of-pocket payments are expected to have fallen by more than 2%, on average. Spending by voluntary health insurance schemes is expected to have increased in 2022, albeit below pre-pandemic rates.

In countries with social or compulsory private health insurance the pandemic response led to a notable (albeit temporary) shift in the health financing architecture. In 24 OECD countries where social or compulsory insurance is the key purchaser of health services, the substantial increase in public spending can be explained by a hike in spending by general government (i.e. not insurance-based). In those countries, the share of current health expenditure financed by government schemes increased from 12% to 16% on average between 2019 and 2021, with the average share of compulsory insurance dropping over the same time period (from 61% to 59%). Average growth in government spending over the two years was 90% while compulsory insurance spending increased by a moderate 9%. In many insurance-based systems, COVID-19 related preventive activities were directly financed by central, regional or local authorities. Additionally, financial support to health providers tended to come from central or regional budgets and not directly from compulsory health insurers. Spending by government dropped by 10% on average in 2022, while compulsory insurance spending was flat.

Governments not only increased their role in directly purchasing health services during the pandemic, but often provided additional funding for social and compulsory insurers. When analysing revenues for social health insurance or compulsory private insurance, the share from government transfers increased markedly in several countries between 2019 and 2021, either to provide financial support to balance operating losses of insurers or to cover social insurance contributions for specific groups of the population. In Belgium, Chile and Czechia the share of government transfers in compulsory insurance revenues increased by around 10 percentage points between 2019 and 2021. In Estonia, the proportion jumped by more than 15 percentage points.

While OECD countries saw significant growth in health spending during the pandemic (Figure 2.1), this is only marginally reflected in the share of health spending in total government spending. Indeed, while the pandemic exerted major upward pressure on health budgets during 2020, similar pressures were felt in other areas of public spending, as governments provided substantial support to firms and households. In 2021, health spending accounted for an average of 15% of total government spending (Figure 2.3), less than half a percentage point higher compared to 2019. Nevertheless, in Latvia and Australia, the share of health spending in total government expenditure climbed more than 2 percentage points between 2019 and 2021. Preliminary data based on two-thirds of OECD countries suggest that the average share will remain at the same level through 2022.

The pandemic triggered exceptional spending growth across all healthcare functions (Figure 2.4). Spending on preventive care increased by an average of 50% each year between 2019 and 2021 (up from a pre-pandemic 3% annual increase) as countries allocated significant resources to testing, tracing, surveillance, and public information campaigns. With the roll-out of vaccination campaigns, spending growth was concentrated in 2021, reaching 76% across OECD countries. For example, with the launch of the COVID-19 vaccination campaign in Korea in February 2021, prevention spending grew 140% in 2021 (compared to 24% in 2020). For a selection of OECD countries with preliminary data, prevention spending in 2022 dropped by nearly one-fifth on average from the 2021 high.

Between 2019 and 2021, there was a two-fold increase in the average annual spending growth on inpatient care (5.2%) across OECD countries compared to the pre-pandemic era (2.6%). A notable surge occurred in 2020, reaching 6.5% growth on average and more than 15% in the United Kingdom, Estonia and Hungary. This increase was mainly driven by additional staff and input costs (e.g. personal protective equipment) and substantial subsidies for hospitals in exchange for reserving capacity for COVID-19 patients or to cover operating losses. In the case of Hungary, where spending on inpatient care increased by more than 20% in 2020, this can be linked to the rise in volume of patients in intensive care. Hungary also awarded a one-off bonus to healthcare workers including those working in hospitals (OECD/European Observatory on Health Systems and Policies, 2021[7]).

Spending on health system administration grew by 8% per year over the same period between, more than double the pre-pandemic growth rate. Some of this increase can be explained by the additional resources required to manage national response strategies.

From 2019 to 2021, spending on outpatient care grew by 4.8% on average (up from 3.5% pre-pandemic), but concentrated in the second year. In 2020, spending only increased by an average of 1%, to be followed by 9.7% growth in 2021. Some of the low growth in 2020 can be attributed to a significant contraction in spending on dental care. Overall spending on outpatient care in Canada dropped 6.4% in 2020 as physicians provided in-person urgent care only and offered virtual care appointments where possible. Most services resumed in 2021, which contributed to a rebound in outpatient care spending of 11.3% (Canadian Institute for Health Information, 2023[8]).

Spending on pharmaceutical and medical non-durables also saw higher growth but less than for healthcare services. Average spending growth reached 4.1% in 2020 but slowed to 1.6% in 2021. High growth in 2020 can at least partially be explained by extra spending on facemasks and personal protective equipment. In the United States, the trend was reversed as pharmaceutical spending grew 2.7% in 2020, and 4.6% in 2021. The acceleration in 2021 was a result of a record level of prescription drug use as new prescription starts for both chronic and acute care rebounded (Centers for Medicare & Medicaid Services, 2023[4]).

Finally, long-term care spending was the least impacted. From 2015 to 2019, average annual spending on long-term care had grown nearly 4% across OECD countries. This increased slightly to 4.6% with the outbreak of the pandemic. Measures were introduced within the long-term care sector, emphasising infection prevention and control, as well as the testing and tracing of cases within these facilities. In some countries, including Poland, Hungary and Slovenia, spending on long-term care did see a substantial increase in 2020, by around 15% or more. Significant state budget resources were directed towards funding bonuses for long-term care workers and procuring tests, personal protective equipment (PPE), and disinfectants for use in long-term care facilities (Rocard, Sillitti and Llena-Nozal, 2021[9]).

Preliminary data for 2022 suggest that as countries transition out of the acute phase there was a sharp reversal of spending in many areas. For a subset of seven OECD countries, spending on prevention dropped by nearly 18%, albeit remaining well above pre-pandemic spending as spending on vaccination and testing persisted. Spending on inpatient care declined by 2%, on average, and by 5% in Iceland and the Netherlands. Average spending on inpatient care in 2022 was only 5% higher in real terms compared to 2019. Spending on long-term care, pharmaceuticals, and administration all contracted in 2022. Only outpatient care spending showed a small increase in 2022, albeit at a modest rate (0.3%).

The pandemic resulted in increased levels of public spending on health, but the greatest impact was in 2021. Direct COVID-19 spending reached an average of 9% of total public health spending in 2021 across OECD countries with available data, compared to 5% in 2020 (Figure 2.5). In Korea the share of health expenditure directly linked to COVID-19 reached 11% in 2021 (up from 2% in 2020), in Austria it was 13% (up from 5% in 2020), and in Latvia more than a fifth of all health spending (22% up from 5% in 2020). For a subset of countries with preliminary estimates, COVID-19 spending in 2022 is likely to have still accounted for more than 6% of overall spending.

The increase in 2021 was triggered by several key items. Spending on COVID-19 related treatment costs and testing and contact tracing both jumped in 2021 compared to 2020. However, COVID-19 vaccination costs increased significantly to alone account for an average of 2% of public spending on health in 2021. In most OECD countries, COVID-19 vaccination campaigns only kicked off in December 2020 or January 2021 before gaining full momentum later that year.

Preliminary results suggest that COVID-19 spending remained a significant draw on healthcare resources in 2022 but down from the levels of 2021. For example, in Denmark and Luxembourg, spending on test and tracing dropped sharply in 2022. On the other hand, COVID-19 costs continued to increase in Germany and Korea in 2022, reaching 8% and 12% of public spending on health, respectively. In Korea, costs for COVID-19 treatment as well as for testing and tracing increased in 2022 as cases and mortality soared.

Recent health spending trends need to be seen in a broader context of increased investment needs in health – to address the lack of resilience and preparedness of health systems revealed during COVID-19 and megatrends such as population ageing and the associated increase in healthcare needs. As OECD countries started to transition out of the pandemic in 2022, a preliminary assessment can be made to see to what extent countries have embarked on a pathway to mobilise the additional financial resources needed to strengthen their health systems. Yet, improving the resilience of health systems, for example by increasing the number of available health workers, requires a medium to long-term financial commitment. However, in the current economic and geopolitical climate it seems to be challenging for many OECD countries to substantially increase public spending on health.

The pandemic revealed that health systems were not resilient enough to cope with health emergencies of this magnitude. Health systems were under-prepared, under-staffed and faced under-investment (OECD, 2023[10]). There is a need for smart investments to strengthen health system resilience – to protect underlying population health, fortify the foundations of health systems, and bolster health workers on the frontline – providing countries with the agility to respond not only to evolving pandemics but also to other shocks. The return from such investments extends far beyond direct health benefits. More resilient health systems are at the core of stronger, more resilient economies – enabling substantial economic and societal benefits by avoiding the need for stringent and costly containment measures in future crises with healthier and better prepared societies (Morgan and James, 2022[11]).

Data for 2022 provides a first opportunity to evaluate where countries stand on the health expenditure trajectory after the pandemic-induced spending in 2020 and 2021. On average across the OECD, the proportion of the economy dedicated to health stood 0.4 percentage points higher in 2022 compared with the pre-pandemic level in 2019 (Figure 2.6). Compared with 2019, the health-to-GDP ratio increased by more than 1 percentage point in Portugal, Spain, Czechia, the United Kingdom and Korea while OECD estimates suggest a more than 2 percentage point jump in New Zealand and Latvia (Figure 2.7).4 On the other hand, in 11 countries the proportion of the GDP allocated to health in 2022 was below 2019 levels, with the drop most pronounced in Norway (-2.5 percentage points). However, short-term economic volatility determines the development of this ratio, and the trend needs to be monitored over a longer time period.

On a per capita level, the spending increase between 2019 and 2022 appears strong. On average across the OECD, per capita health spending in 2022 was estimated at around USD 350 (or 9%) above that in 2019 (in real terms). However, when excluding the pandemic emergency spending that occurred in 2020 and 2021 (and continued to an extent in 2022), the health spending growth rate is likely below the pre-pandemic trend (Figure 2.8). This suggests that countries have yet to make substantial progress in increasing investment to strengthen the resilience of their health systems. A similar conclusion can be drawn when examining preventive spending, which increased substantially during the pandemic: after excluding COVID-19 vaccination costs and spending on testing and tracing, the underlying trend remains unchanged.

Increased health spending does not automatically translate into improved health system resilience. In addition to targeting investment into the three key pillars, money needs to be spent wisely in line with best practices. Furthermore, returns from additional investment will take time to materialise. For example, increasing training capacity for nurses now would only have a material impact on the number of practicing nurses in 3 years. Thus a (much) longer time period needs to be analysed to see whether countries’ investment in health systems strengthening go beyond the emergency measures needed in times of crises. Yet the current economic and geo-political environment limits the room for countries to increase their spending to address the identified needs.

The drop in health spending in 2022 must be seen against the backdrop of a fragile economic and geopolitical climate. Russia’s war on Ukraine, wide-spread disruptions in supply chains as well as the lingering impact of COVID-19 in some parts of the world impacted the path towards economic recovery. This has placed additional upward pressure on prices, above all for energy and food, leading to inflation running at levels not previously seen for decades in many OECD counties (OECD, 2022[12]). Moreover, healthcare has had to increasingly compete with new public spending priorities including social support to households facing cost-of-living crises, energy purchases, green transformation, defence spending and others. In the short to medium-term, these developments provide a challenge for countries that wish to allocate more public spending to health and are likely to impact the trajectory of health spending.

As a result of these challenges, real GDP growth across the OECD dropped to 3% in 2022, only half the growth rate in 2021. For 2023 and 2024, latest forecasts suggest only modest growth of 1.7% (2023) and 1.4% (2024) in the OECD (Figure 2.9), around half the global growth (OECD, 2023[13]). This is generally below the growth rates in the years preceding the pandemic. For a number of countries, the economic outlook is particularly dire. For 2023, economic stagnation or recession is predicted in a dozen OECD countries including Estonia, Sweden, Chile, Hungary, Finland and Germany (OECD, 2023[13]).

Moreover, inflationary pressures remain elevated in the OECD. Headline inflation rose gradually since the first quarter 2021 with a marked acceleration in early 2022, as a consequence of Russia’s war on Ukraine and the subsequent rise in energy prices. It peaked in the third quarter of 2022 at 10% on average in the OECD, before slowing to 6.5% in the third quarter 2023. While headline inflation has declined substantially again in 2023, core inflation5 remained sticky, standing at 6.9% in the third quarter 2023 (Figure 2.10) (OECD, 2023[13]). Across the OECD, core inflation is projected to remain at 7% on average in 2023 before slowing down to 5.3% in 2024. In 2023, core inflation is expected to be around 10% or higher in Colombia, Poland, Hungary and Lithuania, and above 50% in Türkiye.

Wages did not keep up with inflation in 2022. Consequently, the combination of high inflation and limited salary increases led to wages falling in real terms in 2022 across the OECD (Figure 2.11). On average across 29 OECD countries, the reduction in real wages was nearly 4% over this period. Over the course of 2023, real wages are expected to stop declining in most OECD countries. Recent developments in real wages are a key determinant in ongoing wage negotiations, including in the health sector.

Government support measures to tackle the health and economic consequences of the pandemic but also the more recent initiatives to (partially) shield households from the full weight of the cost-of-living crisis have had consequences for the fiscal position of governments and the room for manoeuvre. After jumping from 108% in 2019 to 128% of GDP in 2020, the average debt-to-GDP ratio reduced in 2022 but at 113% it remained much above pre-pandemic levels (Figure 2.12). The short-term outlook does not predict significant improvement, tightening the fiscal space for governments which makes finding additional public spending for health or other purposes more challenging. Moreover, the economic climate and the war in Ukraine has seen a de-prioritisation of health issues in the public debate. In setting health budgets and other health policy decisions, countries have to take this new reality into account.

The current economic outlook limits countries’ room for manoeuvre. Yet, countries have been here before. The economic situation in the aftermath of the global financial crisis of 2007-08 left many countries taking difficult policy decisions in an attempt to balance public budgets which impacted health spending, leading in some cases to years of austerity. The first part of this Section 2.4 provides a preliminary overview of some of the ongoing discussions and actions taken by OECD government to address and factor in the current challenges, which will affect the health spending trajectory. The second part compares and contrasts the current situation with the global financial crisis and questions whether we can expect years of stagnating health spending growth or the increased investments needed to make OECD health systems more resilient.

As countries strive to improve health system resilience, they face a number of challenges, related to the lingering impact of the pandemic and the unfavourable economic situation. While the magnitude of the challenges varies across countries, they include a shift in budget priorities away from health, as well as the financial sustainability of health providers due to high input costs including energy and salary increases for health workers. In several countries, the budget outlook does not suggest any significant increase in health spending in the short-term. While planned spending is set to increase in nominal terms, there is a likelihood that they could fall in real terms, at least in some years (Box 2.1).

At the same time, many OECD countries are still grappling with legacy issues from the pandemic. During the various infection peaks in 2020 and 2021, elective interventions such as hip and knee replacements were frequently postponed to reserve capacity for COVID-19 patients. In some countries which already had noticeable waiting times for interventions or specialist appointments before the pandemic, this has created an ongoing backlog of patients seeking care that needs to be addressed (Box 2.2).

In addition to improve (or restore) access to service provision, some countries also decided to reduce or forgo co-payments in an attempt to ease the financial burden for households in a high inflation environment (Box 2.3).

As in 2022, high energy and other input costs remain an issue for health providers in many countries. Yet, energy and other inputs are not the only cost factors that have increased; higher construction costs have made hospital planning much more expensive than anticipated and budgeted (Box 2.4).

The key cost factor in healthcare provision are salaries. On average, staff costs account for 60-70% of overall health spending but there has been long-term pressure to increase salaries. On the one hand, making the careers in the field of medical, nursing or long-term care more attractive is a key lesson of the pandemic to build more resilient health systems (OECD, 2023[10]), but the problems preceded the health emergency (OECD, 2020[34]). In many countries, this clearly entails an increase in salaries and remuneration for health workers. Moreover, given high inflation, increases in health workers’ pay has frequently been considered necessary (at a minimum) to avoid a deterioration in their relative standing in real terms.

During the pandemic, many countries provided one-off financial bonuses to frontline workers following the first wave of the pandemic, in recognition of their elevated health risks, additional workload and commitment (OECD, 2023[10]). Rewards were especially common for health workers and long-term care workers. The magnitude of the rewards and the coverage of health and long-term care workers varied across countries. Beyond one-off bonuses, there had been few government-led initiatives up until November 2021 to permanently increase pay levels. Such initiatives existed, for example in Belgium, Chile, Czechia, Hungary, Latvia, Slovenia, Switzerland for health and/or long-term care workers. However, in some countries where pay raises were offered, these were below-inflation increases or perceived as ‘disappointing’ by health professionals (e.g. United Kingdom and Denmark) (OECD, 2023[10]).

Adjustments for salaries and remuneration continue to be on the agenda in many OECD countries but negotiations can be difficult and agreed pay increases may be negative in real terms if inflation exceeds forecasts (Box 2.5)

On the other hand, upward salary adjustments can weigh heavily on operating costs of health facilities, that need to finance them, either by reducing their profit margins (if they are allowed to generate any in health system), passing cost increases on to payers and/or patients (if they can), improve efficiency in service provision, or face solvency problems (Box 2.6).

Policy makers are walking a delicate tightrope. One the one hand, better pay and conditions are crucial to attract and retain healthcare professionals, even more so in ageing populations where demand for healthcare can outstrip supply. On the other hand, high salary increases may compromise the solvency of health providers or the financial sustainability of the health system as a whole, if the fiscal space does not allow for substantial increases in health budgets. With limited additional public funding, the only two other options would be to shift more to private funding and find efficiency gains in the system. Indeed, it can be expected that a renewed focus will soon be on the latter, by making the most of digital health solutions, by moving care to the most appropriate setting and reducing and cutting low value care.

In the aftermath of COVID-19 and the current economic climate, some comparisons might be drawn with the global financial crisis of 2007-08 and the resulting debt crisis, which had important economic implications in many OECD countries characterised by high unemployment and years of austerity. To balance budgets, many governments reined in public spending, including on health. In the health sector, a range of different measures were adopted by countries including increases in patient co-payments, delisting of publicly financed services and goods, postponement of capital spending, freezes in recruitment and salary cuts for public sector staff, negotiated price reductions for pharmaceuticals, alongside other initiatives to enhance efficiency (Morgan and Astolfi, 2014[44]). As the result, health spending growth in real terms slowed notably to around 1% or lower between 2010 and 2012, compared with annual increases of 4-5% pre-crisis (Figure 2.13). A number of countries were hit hard by the economic crisis, such as Greece, Italy, Portugal and Spain and saw consecutive years of declining health spending as a result.

The pandemic and the subsequent cost-of-living crisis have some similarities with the 2007-08 financial crisis in terms of a global shock but also differ in important aspects. In both cases, the economic downturn was of a similar magnitude and the fiscal position worsened considerably in a number of OECD countries limiting the fiscal space for large public investments. On the other hand, the jump in unemployment was more of a temporary feature during the pandemic and while there remain uncertainties about the speed of economic recovery, the global outlook is generally more positive. One notable difference this time round is that monetary policy during the global financial crisis kept inflation low, while inflationary pressures became acute in the post-pandemic era.

That said, the impact of the speed of economic recovery and reduction in inflation rates on the short-term trajectory of health spending is difficult to forecast. Naturally, the situation will differ widely across countries. Yet, countries still have a way to go to make health systems more resilient. In many countries, there are few signs of a significant uplift in current and expected investment levels. On the other hand, there are no current indications that governments are ready to engage in a round of policy changes to reduce coverage or increase co-payments to bring down health spending in an attempt to balance public budgets. While annual health spending increases may be negative in real terms beyond 2022, this will be more likely linked to stubbornly high inflation rates and sluggish economic growth, and less to an era of new austerity measures.


[40] American Hospital Association (2023), The Financial Stability of America’s Hospitals and Health Systems Is at Risk as the Costs of Caring Continue to Rise, https://www.aha.org/system/files/media/file/2023/04/Cost-of-Caring-2023-The-Financial-Stability-of-Americas-Hospitals-and-Health-Systems-Is-at-Risk.pdf (accessed on 28 September  2023).

[38] Bureau fédéral du Plan (2023), Indice des prix à la consommation - Prévisions d’inflation, https://www.plan.be/databases/17-fr-indice_des_prix_a_la_consommation_previsions_d_inflation (accessed on 29 September 2023).

[8] Canadian Institute for Health Information (2023), National Health Expenditure Trends, 2021 — Snapshot.

[37] CCOO (2022), Subida salarial para los empleados públicos, https://feccoo-madrid.org/7644d9458a19a7a064b9819ed2144e63000063.pdf (accessed on 29 Septemeber  2023).

[4] Centers for Medicare & Medicaid Services (2023), National Health Expenditures 2021 Highlights.

[5] Central Statistics Office (2021), System of Health Accounts 2019.

[21] Department of Health (2023), Health budget 2023, https://www.gov.ie/pdf/?file=https://assets.gov.ie/243516/d2a4fe23-b7bf-4421-9706-952825c33049.pdf#page=null (accessed on 27 September  2023).

[28] Deutsche Krankenhausgesellschaft (2023), P r e s s e m i t t e i l u n g - DKG zu Milliardenhilfen für die Krankenhäuser, https://www.dkgev.de/fileadmin/default/Mediapool/1_DKG/1.7_Presse/1.7.1_Pressemitteilungen/2023/2023-05-26_PM_DKG_zu_Defizit_aller_Krankenhaeuser.pdf (accessed on 30 September 2023).

[43] Deutsches Ärzteblatt (2023), Pflege im Heim immer teurer, Zuzahlungen nochmals gestiegen, https://www.aerzteblatt.de/nachrichten/144692/Pflege-im-Heim-immer-teurer-Zuzahlungen-nochmals-gestiegen (accessed on 30 September 2023).

[27] Deutsches Ärzteblatt (2022), Energiekosten: Bund legt fest, wie Krankenhäuser Hilfszahlungen erhalten, https://www.aerzteblatt.de/nachrichten/138889/Energiekosten-Bund-legt-fest-wie-Krankenhaeuser-Hilfszahlungen-erhalten (accessed on 30 September  2023).

[25] Goverment of Canada (2023), Working together to improve health care for Canadians, https://www.pm.gc.ca/en/news/news-releases/2023/02/07/working-together-improve-health-care-canadians#:~:text=An%20immediate%2C%20unconditional%20%242%20billion,long%20wait%20times%20for%20surgeries. (accessed on 28 September 2023).

[42] H Plus (2023), Une hausse des tarifs pour préserver la sécurité des soins et la paix du travail, https://www.hplus.ch/fr/publications/h-palaisfederal/no-1/2023-fevrier (accessed on 28 September 2023).

[18] HM Treasury (2023), Public Expenditure Statistical Analyses 2023, https://www.gov.uk/government/statistics/public-expenditure-statistical-analyses-2023 (accessed on 17 September 2023).

[36] infirmiers.com (2023), Une revalorisation du point d’indice prévue en juillet 2023, https://www.infirmiers.com/profession-ide/actualite-sociale/une-revalorisation-du-point-dindice-prevue-en-juillet-2023 (accessed on 29 September 2023).

[32] Irish Examiner (2023), Children’s hospital cost likely to pass €2bn amid tensions with contractor, https://www.irishexaminer.com/news/arid-41182273.html (accessed on 17 September  2023).

[33] Irish Independent (2023), Rising cost of new National Children’s Hospital may derail part of wider health service building this year, https://www.independent.ie/irish-news/rising-cost-of-new-national-childrens-hospital-may-derail-part-of-wider-health-service-building-this-year/a836597466.html (accessed on 17 September 2023).

[30] Latvian Public Broadcasting (2023), Latvia’s hospitals ask for substantial funding increase, https://eng.lsm.lv/article/society/health/latvias-hospitals-ask-for-substantial-funding-increase.a493249/ (accessed on 17 Septemeber  2023).

[35] Les Echos (2023), Le prix de la consultation chez le médecin généraliste va passer à 26,50 euros, https://www.lesechos.fr/economie-france/social/la-consultation-chez-le-medecin-generaliste-bientot-revalorisee-a-2650-euros-1937457 (accessed on 17 September  2023).

[17] Ministère de l’Economie (2023), Projet de loi de financement de la sécurité sociale pour 2024, https://presse.economie.gouv.fr/27092023-dp-projet-de-loi-de-financement-de-la-securite-sociale-pour-2024/ (accessed on 29 Septemeber 2023).

[16] Ministerio dell’Economia e delle Finanze (2023), Documento di Economia e Finanza 2023 - Nota di Aggiornamento, https://www.dt.mef.gov.it/export/sites/sitodt/modules/documenti_it/analisi_progammazione/documenti_programmatici/nadef_2023/NADEF-2023.pdf (accessed on 8 December 2023).

[15] Ministero dell’Economia e delle Finanze (2023), Documento di Economia e Finanza 2023 - Sezione II Analisi e tendenze della finanza pubblica, https://www.rgs.mef.gov.it/_Documenti/VERSIONE-I/Attivit--i/Contabilit_e_finanza_pubblica/DEF/2023/DEF2023-Sez-II-AnalisiETendenzeDellaFinanzaPubblica.pdf (accessed on 17 September 2023).

[1] Ministry of Finance -Republic of Latvia (2022), Implementation of the 2021 state budget, https://www.fm.gov.lv/lv/media/11285/download?attachment.

[26] Ministry of Health (2023), Vote Health, https://www.health.govt.nz/about-ministry/what-we-do/vote-health#:~:text=Budget%202022%20has%20provided%20a,toward%20funding%20the%20health%20system. (accessed on 30 Septemeber 2023).

[44] Morgan, D. and R. Astolfi (2014), “Health Spending Continues to Stagnate in Many OECD Countries”, OECD Health Working Papers, No. 68, OECD Publishing, Paris, https://doi.org/10.1787/5jz5sq5qnwf5-en.

[11] Morgan, D. and C. James (2022), “Investing in health systems to protect society and boost the economy: Priority investments and order-of-magnitude cost estimates”, OECD Health Working Papers, No. 144, OECD Publishing, Paris, https://doi.org/10.1787/d0aa9188-en.

[20] National Treatment Purchase Fund (2023), National Waiting List Data, https://www.ntpf.ie/home/nwld.htm (accessed on 26 September 2023).

[31] NZ Herald (2023), Construction inflation, insufficient planning add to hospital project cost blow-outs, https://www.nzherald.co.nz/nz/construction-inflation-insufficient-planning-add-to-hospital-project-cost-blow-outs/E7DXNJBSUBFMNCTQRMNZZPFS3U/ (accessed on 17 September  2023).

[10] OECD (2023), Ready for the Next Crisis? Investing in Health System Resilience,, OECD Publishing, https://doi.org/10.1787/1e53cf80-en.

[13] OECD (2023), OECD Economic Outlook, Volume 2023 Issue 2: Preliminary version, OECD Publishing, Paris, https://doi.org/10.1787/7a5f73ce-en.

[14] OECD (2023), OECD Economic Outlook, Volume 2023 Issue 2: Preliminary version, OECD Publishing, Paris, https://doi.org/10.1787/7a5f73ce-en.

[12] OECD (2022), OECD Economic Outlook, Interim Report September 2022: Paying the Price of War, OECD Publishing, Paris, https://doi.org/10.1787/ae8c39ec-en.

[34] OECD (2020), Who Cares? Attracting and Retaining Care Workers for the Elderly, OECD Publishing, https://doi.org/10.1787/92c0ef68-en.

[22] OECD/European Observatory on Health and Health Systems (2023), Denmark: Country Health Profile 2023, State of Health in the EU, OECD Publishing, Paris, https://doi.org/10.1787/e4f0bee3-en.

[24] OECD/European Observatory on Health Systems and Policies (2023), Finland: Country Health Profile 2023, State of Health in the EU, OECD Publishing, Paris, https://doi.org/10.1787/e7af1b4d-en.

[7] OECD/European Observatory on Health Systems and Policies (2021), Hungary: Country Health Profile 2021, State of Health in the EU, OECD Publishing, Paris, https://doi.org/10.1787/482f3633-en.

[3] OECD/The World Bank (2023), Health at a Glance: Latin America and the Caribbean 2023, OECD Publishing, Paris, https://doi.org/10.1787/532b0e2d-en.

[2] OECD/WHO (2022), Health at a Glance: Asia/Pacific 2022: Measuring Progress Towards Universal Health Coverage, OECD Publishing, Paris, https://doi.org/10.1787/c7467f62-en.

[45] Our World in Data (2023), Explore the global data on confirmed COVID-19 deaths, https://ourworldindata.org/covid-deaths.

[41] Regjeringa.no (2023), Hospitals will receive larger budgets, https://www.regjeringen.no/en/aktuelt/hospitals-will-receive-larger-budgets/id2975963/ (accessed on 28 September  2023).

[9] Rocard, E., P. Sillitti and A. Llena-Nozal (2021), COVID-19 in long-term care: Impact, policy reponses and challenges.

[29] The BMJ (2022), Exclusive: Hospitals will be hit with “eye watering” energy bills this winter, https://doi.org/10.1136/bmj.o2088 (accessed on 17 September 2023).

[6] The Health Insurance Authority (2021), Covid sees Drop in Health Insurance Claims but Percentage of the Population with Insurance Continues to Rise according to the HIA.

[23] THL (2023), “Hoitoonpääsy erikoissairaanhoidossa 31.12.2022”, TILASTORAPORTTI 14/2023, https://www.julkari.fi/bitstream/handle/10024/146430/TR_14_2023_Esh%20hoitoonp%c3%a4%c3%a4sy.pdf?sequence=1&isAllowed=y.

[19] Treasury of New Zealand (2023), Data - Core Crown Expense Tables - Pre-election Economic and Fiscal Update 2023, https://www.budget.govt.nz/budget/forecasts/prefu2023.htm (accessed on 17 September 2023).

[39] Wallonie Santé (2022), Un budget de 207 millions d’Euroe de plus pour les soins de santé, https://www.walloniesante.be/fr/news/225_un-budget-de-207-millions-deuros-de-plus-pour-les-soins-de-sante (accessed on 30 September 2023).


← 1. Central estimate of global excess deaths between 1 March 2020 and 10 October 2022 was 23.5 million (Our World in Data, 2023[45])

← 2. The growth in Japan, however, is underestimated as medical expenditure in Japan largely exclude almost all COVID-19 related spending.

← 3. In both countries, some of this development is related to data issues. Most of their vaccination costs were recorded in the year that vaccines were procured (2020) rather than when they were administered (2021), which clearly leads to an overestimation in the 2020 growth rate (and an underestimation of 2021 growth rate).

← 4. In both New Zealand and Korea, 2022 saw the peak of COVID-19 deaths.

← 5. Headline inflation concerns all commodities, services, and goods. Core inflation excludes food and energy.

Legal and rights

This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Extracts from publications may be subject to additional disclaimers, which are set out in the complete version of the publication, available at the link provided.

© OECD 2024

The use of this work, whether digital or print, is governed by the Terms and Conditions to be found at https://www.oecd.org/termsandconditions.