Is Health Care a Luxury? What Drives Health Expenditure Growth?

Transcription

1 CBEH Centre for the Business and Economics of Health (CBEH) Is Health Care a Luxury? What Drives Health Expenditure Growth? Professor Luke Connelly, PhD Director (Acting) Centre for the Business and Economics of Health Professor of Health Economics

2 Is Health Care a Luxury? CBEH Much evidence that health expenditure grows faster than GDP in developed countries But some evidence to the contrary (see Nghiem and Connelly 2017)

3 What Causes Health Expenditure Growth? CBEH Income growth Ageing of the population Widespread insurance moral hazard (see Rowell and Connelly 2012) Technological change Market or Public (i.e. government?) failure?

4 Health Expenditure (%GDP): Selected Countries Australia Canada New Zealand United Kingdom United States Singapore (4.9%) Source: World Health Organization (2017)

5 Life Expectancy T10 OECD + Singapore Singapore 83 years Source: Derived from OECD 2013 in (AIHW 2016, Figure 3.2, p.69) and AIHW (2016, p.82).

6 World Health Organization (2017) In 2014 per capita expenditure on health care In the United States? US$9,403 In Australia? US$6,031 In Singapore? US$2,752 Source: World Health Organization (2017)

7 Health Expenditure Per Person , Constant Prices, $A % +26% Source: AIHW (2016, Table 2.15, p.33)

8 CBEH Ageing

9 Source: Kohsla (2014)

10 Japan: Age Pyramid of ERP (1965) Source: NIPSSR (2017, link).

11 Japan: Age Pyramid of Projected ERP (2005) Source: NIPSSR (2017, link).

12 Japan: Age Pyramid of Projected ERP (2040) Source: NIPSSR (2017, link).

13 Japan: Age Pyramids 1950, 2005, 2055 Source: The Economist (2010, link)

14 Ageing (Japan) CBEH 2012 Census to 2015 Census? about 1.69 million people live in welfare facilities for the elderly, representing a 40 percent surge from the previous census in Source: Yohshida (2016, link).

15 Singapore: Age Distribution of ERP*: (Selected Years) Source: Singapore Department of Statistics (2017, Figure 1.1, p.4). *Estimated Resident Population (ERP)

16 Singapore: Age Pyramid of ERP 2006; 2016 CBEH Source: Singapore Department of Statistics (2017, Figure 1.2, p.4). Median age = 40.0 years

17 Australia: Age Pyramid of ERP 2006 Source: Australian Bureau of Statistics (2017).

18 Australia: Age Pyramid of ERP (2016) Source: Australian Bureau of Statistics (2017) Australia s median age: 37.3 years Singapore s median age: 40.0 years

19 Australia: Age Pyramid of Projected ERP (2037) Source: Australian Bureau of Statistics (2017). Median age: 40.2 years

20 Japan: Age Pyramids 1950, 2005, 2055 Source: The Economist (2010)

21 CBEH Widespread Insurance

22 Insurance and Moral Hazard CBEH Insurance markets: improve social welfare But problems of market failure (e.g., due to asymmetric information)

23 Insurance and Moral Hazard CBEH Who cares about resource use (Practitioners? Patients?) Public sector agencies (governments)/voters? The trick is to get somebody to care in each transaction. And to do so efficiently.

24 Insurance and Moral Hazard CBEH Subsidies on consumption are wrong and ruinous for however wealthy a nation, it cannot carry health, unemployment and pension benefits without massive taxation and overloading the system, reducing the incentives to work and to save and care for one s family when all can look to the state for welfare Social and health welfare are like opium or heroin. People get addicted and withdrawal of welfare benefits is very painful. Source: Lee 1981, p.8 (in Barr 2005)

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26 Insurance and Moral Hazard CBEH Co-payments limit the losses, especially for noncatastrophic and discretionary expenditures. Co-payments do not need to be large (cf Rand Health Insurance Experiment)

27 CBEH Technological Change

28 Technological Change CBEH Note: Health expenditure growth to due to technological change. Source: Productivity Commission (2005, Table 3.2, p.53).

29 Technological Change CBEH Is (generally) responsible for the bulk of health expenditure growth. At least, this is the received wisdom supported by strong empirical evidence But

30 CBEH Monopoly and Monopsony

31 Monopoly and Monopsony CBEH Monopoly: single seller; Monopsony: single buyer Regulation and public practice can radically affect prices of health care Governments are major purchasers of health care services Some use their monopsony power effectively, while others do not (some cannot, by law).

32 CBEH Systemic Inefficiency

33 Systemic Inefficiency CBEH Cutler and Ly (2011, p.8): Data from the Luxembourg Income Study indicate that the United States has 25 per cent more healthcare administrators than the United Kingdom, 165 per cent more than the Netherlands, and 215 per cent more than Germany.

34 CBEH Does Health Expenditure Growth Converge?

35 Systemic Inefficiency CBEH Macroeconomic growth literature: Evidence that economic growth tends to converge. Low-growth economies tend to catch-up What if health expenditure growth also converges? High-health expenditure growth economies might not need to do all that much. But: what if health expenditure growth does not converge?

36 link

37 σσ convergence CBEH Variations in health expenditure growth between countries tend to decline over time

38 ββ convergence CBEH (With some noteworthy exceptions) lower-income countries tend to have higher growth rates

39 Other Findings CBEH Bulk of growth: technological change. Health care not a luxury (income elasticity=0.90) Caloric intake: substantial (+ve) health expenditure growth (obesity/lifestyle?)

40 Other Findings CBEH Ageing: effect is significant (+ve), not very large Unemployment associated with a small, but significant (+ve) effect on health expenditure growth Public share of expenditure +ve + sig + substantial.

41 Meaning? CBEH Evidence of convergence of health expenditure growth is not strong. Economies with low expenditure growth do not need to worry about convergence frustrating local efforts to contain growth. Economies with high expenditure growth cannot rely on natural convergence to limit growth. National solutions are required.

42 CBEH Centre for the Business and Economics of Health (CBEH) Discussion/Questions

43 References Australian Bureau of Statistics (2017) Australia: Age Structure in Australia (Various Years) (Accessed 2 September 2017). AIHW (2014), Australia s Health 2014, AIHW: Canberra. AIHW (2015), Australia s Health Expenditure , AIHW: Canberra. APRA (2016), Private Health Insurance: Statistical Trends, APRA: Sydney; Accessed 2 Septmeber Barr M (2005) Singapore, in Gauld R (2005) (ed.) Comparative Health Policy in the Asia-Pacific, Open University Press: Berkshire, Cutler DM and Ly DP (2011) The (Paper)Work of Medicine: Understanding International Medical Costs, Journal of Economic Perspectives, 25: Kohsla S (2014) These 8 Maps Show the Median Age of Every Country on Earth, The Week, (Accessed 2 August 2017). National Institute of Social Security and Population Research (2017) Population Pyramid for Japan , (Accessed 2 September 2017).

44 References (cont d) Nghiem HS and Connelly LB (2017) Convergence and Determinants of Health Expenditures in OECD Countries, Health Economics Review, 7: Productivity Commission (2005) Impacts of Advances in Medical Technology in Australia, Productivity Commission: Canberra. Rowell D and Connelly LB (2012) History of Moral Hazard, Journal of Risk and Insurance, Singapore Department of Statistics (2016) Population Trends: 2016, Singapore Department of Statistics: Singapore. The Economist (2010) Japan s Population: The Old and the Older, The Economist, (Accessed 2 September 2017). World Health Organization (2017) National Health Expenditure Database, (Accessed 2 September 2017). Yew LK (1981) Full Steam Ahead Each Citizen its Own Home, Petir, 11: Yohshida R (2016) Japan Census Report Shows Surge in Elderly Population, Many Living Alone, Japan Times, 29 June, (Accessed 2 September 2017).