Health expenditure in relation to GDP

The resources that a country allocates to healthcare compared to the size of the overall economy vary over time due to differences in both the growth of health spending and overall economic growth. During the 1990s and 2000s, OECD countries generally saw health spending outpace the rest of the economy, leading to an almost continual rise in the health expenditure to GDP ratio. After the volatility of the 2008 economic and financial crisis, the share remained relatively stable, as growth in health spending broadly matched overall economic performance across the OECD. The arrival of the COVID-19 pandemic in 2020 with a severe slowdown in economic activity and rapidly increasing health spending led to a significant adjustment in the health expenditure to GDP ratio.

In 2019, prior to the pandemic, OECD countries were spending, on average, around 8.8% of their GDP on healthcare, a figure relatively unchanged since 2013. By 2021, this proportion had jumped to 9.7%. However, preliminary estimates for 2022 point to a significant fall in the ratio to 9.2%, reflecting both a reduced need for spending to tackle the pandemic as well as the impact of inflation reducing the value of health spending (OECD, 2023[1]). The United States still spent by far the most, equivalent to 16.6% of its GDP – well above Germany, the next highest spending country, at 12.7% (Figure 7.1). After the United States and Germany, a group of 15 high-income countries, including Canada, France and Japan, all spent more than 10% of their GDP on healthcare. In many of the Central and Eastern European OECD countries, as well as in the newer OECD member countries from Latin America, spending on health accounted for between 6-9% of their GDP. Finally, Luxembourg and Türkiye spent less than 6% of their GDP on healthcare.

An analysis of the trends in per capita health spending and GDP over the last 15 years shows two shocks: the economic and financial crisis in 2008 and the recent impact of COVID-19 in 2020 (Figure 7.2). While OECD economies sharply contracted in 2008 and 2009, health spending growth was maintained in the short term before hovering just above zero as a range of different policy measures to rein in public spending on health were put in place between 2010 and 2012. This was followed by a return to somewhat stronger growth, both in health spending and GDP up until the pandemic. In 2020, widespread lockdowns and other public health measures severely restricting economic activity and consumer spending sent many OECD economies into freefall. There was a rebound in 2021 with per capita GDP increasing by 5.8% on average. At the same time, real per capita spending on health accelerated from just over 4% in 2020 to 8% in 2021 as countries allocated additional funding to tackle the pandemic. With countries emerging from the acute stage of the pandemic, health spending per capita is likely to have fallen on average by close to 1.5% in real terms in 2022.

Trends in the health-to-GDP ratio over this period translate into a distinct pattern with significant step increases in 2009 and 2020, and a period of stability in between (Figure 7.3). Italy and the United Kingdom, for example, have closely followed this trend, with the latter showing an even more pronounced jump in 2021. Germany has seen a rather continual increase in the share of GDP over time. Despite the shocks, health spending as a share of GDP in Korea has seen a continual and steady increase throughout the last 15 years, from 4.8% in 2006 and reaching 9.7% in 2022.

References

[1] OECD (2023), “Health care financing in times of high inflation”, OECD, Paris, https://www.oecd.org/health/Health-care-financing-in-times-of-high-inflation.pdf.

[2] OECD/Eurostat/WHO (2017), A System of Health Accounts 2011: Revised edition, OECD Publishing, Paris, https://doi.org/10.1787/9789264270985-en.

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Photo credits: Cover © Medical-R/Shutterstock.com; Images - Health status: © Thitiporn taingpan/Shutterstock.com; Risk factors for health: © CandyRetriever/Shutterstock.com; Access: Affordability, availability and use of services © LightField Studios/Shutterstock.com; Quality and outcomes of care: © YAKOBCHUK VIACHESLAV/Shutterstock.com; Health expenditure: © Doubletree Studio/Shutterstock.com; Health workforce: © wavebreakmedia/Shutterstock.com; Pharmaceutical sector: © Fahroni/Shutterstock.com; Ageing and long-term care: © Inside Creative House/Shutterstock.com.

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