BRIDGING HEALTH AND FINANCE PERSPECTIVES

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1 Fiscal Sustainability of Health Systems BRIDGING HEALTH AND FINANCE BETTER POLICIES FOR BETTER LIVES

2 Table of Contents Acronyms and abbreviations 15 Preface 17 Executive summaiy 19 Chapter 1. Fiscal sustainability of health systems - Why is it an issue, what can be donep Introduction and main messages How can fiscal sustainability be defined in relation to health systems? Health care spending: Fast, present and future Why is spending on health increasing in OECD countries? Ensuring the fiscal sustainability of health systems: what are the main policy options? Conclusion 41 Notes 42 References 42 Chapter 2. The challenge of budgeting for health care programmes Introduction Health care spending and fiscal sustainability What is the effect of health care spending on a national economy? Demand for public spending on health care The challenge of efficiency Effects of programme structure: Beyond "Bismarck" vs. "Beveridge" Conclusion 68 Notes 68 References 74 Chapter 3. Budgeting practices for health in OECD countries Introduction Approaches in budgeting for health care Expenditure control tools Decision making and assessment Decentralisation of health financing and expenditure Conclusion 101 Notes 101 References 101 Annex 3.AI. Survey answers by country 102 FISCAL SUSTAINABILITY OF HEALTH SYSTEMS: BRIDGING HEALTH AND FINANCE PERSPECTIVES OECD

3 Chapter 4. Decentralisation of health financing and expenditure Introduction Role of sub-national governments in health care provision and financing Overview of sub-national revenues for funding health care expenditures Policy setting and control over sub-national health care expenditures Specific challenges in Controlling health expenditure in decentralised settings 4.6. Conclusion 127 References 128 Chapter 5. The impact of cost-containment policies on health expenditure Introduction Background and chapter objectives A stylised economic framework for cost-containment reforms Cost-containment policy reforms in OECD countries: Reviewing the evidence Conclusion 152 Notes 152 References 154 Chapter 6. Country experiences in dealing with fiscal constraint following the 2008 crisis Introduction Results Discussion Conclusion 175 Notes 176 References 176 Annex 6.A1. Menu of policy options 178 Chapter 7. The effects of ageing on the financing of social health provision Introduction 7.2. The choice between different types of tax The political economy of support for social health care The sustainability of social security revenues Sin taxes 7.6. The experience of OECD countries 191 Notes References 195 Chapter 8. Health care budgeting in France Introduction 19g 8.2. Health and the public budget Institutional framework and budgeting practices Controlling key elements of health expenditures Financing health care Deficit management in France Conclusion 8 FISCAL SUSTAINABILITY- OF HEALTH SYSTEMS: BRIDGING HEALTH AND FINANCE PERSPECTIVES O OECD 2015

4 Note 223 References 223 Chapter 9. Health care budgeting in the United Kingdom Overview of health in govemment expenditure Institutional framework and budgeting practices Controlling key elements of health expenditures The impact of health on the govemment's structural budget position Conclusion 240 Notes 241 References 241 Chapter 10. Health care budgeting in the Netherlands 245 Tables Introduction Reforming towards regulated competition Evolution of health spending under regulated competition Fiscal challenges for regulated competition Role of govemment in cost Containment underregulated competition Conclusion 258 Notes 259 Bibliography Fiscal sustainability definitions from the European Commission and the International Monetary Fund Health spending projections by national fiscal authorities and the OECD Is health care expenditure part of central govemment budget? 83 3.A1.1. Perception of difficulty in reducing health care expenditure A1.2. Success of the central budget authority (CBA) in keeping health care spending within desired parameters in the last four years A1.3. Types of budget allocation A1.4. Categories included in projections A1.5. Existence of specific ceilings for health expenditures A1.6. Entity primarily responsible for setting the health expenditure ceiling(s) A1.7. Most important factors when establishing ceilings or targets for health A1.8. Existence of an early warning system to alert that health expenditures may exceed targets or legally binding levels A1.9. Use of automatic reducüons in health expenditure A1.10. Functions undertaken by the CBA A1.11. Extent to which the CBA can influence health care policies A1.12. Areas which have been key priorities for expenditure control in health in recent years A1.13. Existence of a "desirable" level of spending for health care set by the CBA AI.14. Countries in which the CBA receives economic evaluations of expected health benefits from new policy proposals suggested by the Health Ministry HO FISCAL SUSTAINABILITY OF HEALTH SYSTEMS: BRIDGING HEALTH AND FINANCE PERSPECTIVES O OECD

5 3.A1.15. Assessment of health policy proposals (on the basis of economic assessments of their expected benefits) by the CBA HO 3.A1.16. Assessment of the impact of health policies on equity by the CBA A1.17. Major challenges encountered in the co-operation between the CBA and the Ministry of Health m 3.A1.18. Existence of a formal co-ordination body between the CBA and Ministry of Health, and other institutions for co-ordination A1.19. Ability of the central government (or social security) to vary total resources transferred to sub-national governments for health from one year to the next H2 3.A1.20. Procedure for central government (or social security) to vary total resources transferred to sub-national governments from one year to the next A1.21. Influence of the central government (CG) on overall health spending by sub-national governments AI.22. Institution primarily responsible for Controlling health spending by sub-national governments Central governments set targets for health spending by SNGs Summary of the reviewed empirical evidence on cost-containment policies in OECD countries Pay for Performance programme in several OECD countries A1.1. Menu of policy options Total expenditure on health Public expenditure on health Revenue shares of the main tax categories in the OECD area Trends in the tax wedge Use of social security contributions to finance health care ONDAM sub-categories actuals, predictions and targets for the years 2010, 2011, 2012 and Evolution of CSG rates since its creation Presentation of all earmarked taxes related to health in Changes in public spending as a share of GDP and tax receipts Government spending on health in the United Kingdom The 2002 Wanless Review projections of English NHS funding pressures NHS England funding pressures facing the NHS by the end of the decade Health Foundation projected funding gap for English NHS in under three assumptions for productivity Nominal hospital price developments Time lags between realisation of spending and Implementation ofmeasures 256 Figures 1.1. Average annual growth rate of real health spending and GDP per capita, (or dosest years) Average annual growth rates in real health spending per capita, from 2000 to the latest year Growth in health spending as compared with GDP Health spending as a share of GDP, 2012 or latest year FISCAL SUSTAINABILITY OF HEALTH SYSTEMS: BRIDGING HEALTH AND FINANCE PERSPECTIVES OECD 2015

TABLE OF 1.5. Projected public health and long-term care expenditure as a percentage of GDP in 2060 29 1.6. Health spending as a share of total government spending, 2012 34 1.7.

6 TABLE OF 1.5. Projected public health and long-term care expenditure as a percentage of GDP in Health spending as a share of total government spending, Revenue sources for funding government health expenditures, 2010 or latest year Health expenditure by function of health care Hospital medical admission rates across and within selected OECD countries, 2011 or latest year Relative share of public and private spending, 2012 (or nearest year) Number of countries using HTA to make coverage decisions or set reimbursements Fiscal sustainability framework Coverage of long-term health expenditure projections Years of estimates for health spending in the budget Factors influencing ceilings for health Size of budget overruns and underspending in percentage of budgeted spending, Early-waming systems (EWS) Voted ONDAM vs. achieved health expenditures Delay in reporting health expenditure to central budget authority (CBA) Share of discretionary vs. mandatory health spending, average Main healthcare-related functions undertaken by the central budget authority Influence of the central budget authority (CBA) over healthcare-related policies Top priority areas for health expenditure control for budget officials Perceived co-ordination challenges between the Ministry of Health and the central budget authority Sources of revenues financing SNG health expenditure Composition of transfers from central authorities as a share of total SNG health care spending What is the procedure for central government (CG) or social security (SS) to vary total resources transferred? Division of public health care spending between levels of government, SNG health care expenditure as a share of total SNG expenditure, Sources of revenues financing SNG health expenditure Composition of transfers from central authorities as a share of total SNG health care spending To what extent can the central government or social security authority vary total resources transferred to SNGs for health from one year to the next? What is the procedure for the central government or social security authority to vary total resources transferred? Central government monitoring of sub-national government Performance for health expenditure Institutions in Charge of Controlling SNG health care spending Health care resources for county councils, Sweden, Evolution of social and health care services in Finnish municipalities Public expenditure on health as a share of total health expenditure, OECD countries 2012 or nearest year 135 FISCAL SUSTAINABILITY OF HEALTH SYSTEMS: BRIDGING HEALTH AND FINANCE PERSPECTIVES O OECD 2015

7 5.2. Total expenditure on health as a share of GDP, OECD countries 2012 or nearest year A stylised economic framework for cost-containment reforms Evolution of pharmaceutical expenditure as a share of total health expenditure 6.1. Key policy responses in Europe l 6i 6.2. Budget tools available if health spending exceeds targets, by option Contribution to the evolution of health care expenditure by funcöon of care Estimated savings from hospital consolidation: Greece Gross pay in the Irish health sector Actual and projected UK NHS spending as a percentage of GDP Savings in the United Kingdom under the Quality, Innovation, Produetivity and Prevention programme (Q.IPP) South Africa fiscal position: Consolidated revenue and expenditure as a percentage of GDP Variability in hospital beds by country in OECD Variation in hospital discharges by country in OECD Total expenditure on health Public expenditure on health Compensation of employees Reliance on social security contributions and the tax wedge Reliance on social security contributions and the increase in the govemment share of health care expenditure since Total health expenditure as share of GDP, 2011 (or nearest year) Expenditure on health by type of financing, 2011 (or nearest year) General govemment health spending compared to general govemment overall spending as a share of GDP, 2009 (or nearest year) Social security/health deficits (salaried workers regime/cnamts) since Health branch of total social security revenues and expenditures since Total social security deficits projections up to Evolution of gross public debt to GDP ratio (Maastricht definition) in France Total public and primary private health insurance Calendar of the Social Security Act Main savings included in the ONDAM between 2010 and Voted ONDAM vs. achieved health expenditures The year-long process of the Alert Committee Key factors behind actual health spending below the ONDAM, 2010 to Distribution of CNAMTS resources Origins and allocation of CSG revenues in Destinaüons of earmarked taxes for social security in Evolution of household income distribution between 1970 and Share of CNAMTS revenues by source in Evolution of the CADES net liability position Evolution of the CADES recourses ooo 12 FISCAL SUSTAINABILITY OF HEALTH SYSTEMS: BRIDGING HEALTH AND FINANCE PERSPECTIVES OECD 2015

8 9.1. NHS spending in the United Kingdom, as a proportion of total public spending Percentage of public spending in and The Variation in public health spending per person in the four countries of the United Kingdom English health budget to Purchase of NHS-funded health care from non-nhs bodies from to NHS primary care trust expenditures GBP 97.5 billion Percentage change from previous year in English NHS spending by Service area Health care Output, inputs and productivity estimates (nominal terms), , United Kingdom NHS Staff annual average eamings per person to DEL and AME components The financial gap by , assuming English NHS funding rises as set out in the 2010 Spending Review to and is frozen in real terms Funding pressures on acute services in England attributable to population change and to the rising probability of admission for chronic conditions Funding pressures on English NHS in Change in sectoral job share and level of productivity A Century of health spending: Protections of UK health care expenditure, Evolution of total health expenditure in percentage of GDP and per capita Annual increase in expenditures by cost deciles funded by the Health Insurance Act, Evolution of real hospital care expenditures Risk bearing by insurers went up over time Market shares and real monthly premium prices of the four largest health insurers 254 Follow OECD Publications on: k k Q J J K y j Q A fsi Aeervlce thatdelivera Excel* fflee from the pilntedpage! Look for the StatLinks^um at the bottom of the tables or graphs in this book. To download the matching Excel spreadsheet, just type the link into your Internet browser, starting with the prefix, or click on the link from the e-book edition. FISCAL SUSTAINABILITY OF HEALTH SYSTEMS: BRIDGING HEALTH AND FINANCE PERSPECTIVES O OECD

NHS Finances The challenge all political parties need to face. Charts and tables. Chart update, May Chart update, May 2015

NHS Finances The challenge all political parties need to face Charts and tables NHS Finances briefing May 2015 update In January 2015, we published a series of briefings on NHS finances. These included