Challenges to financing health: what are the options? Sarah Thomson Research Fellow in Health Policy 27 November 2008 Total expenditure on health as a % of GDP, 1996 and 2005 16 14 12 10 8 6 4 2 0 RO EE CY LT PL CZ SK LV IE FI EL HU ES LU EU UK BG DK SI IT NL SE MT BE AT PT FR DE US Source: WHO 2007 1996 new member states 2005 old member states 2005 new member states 2005 old member states 1
Challenges? Change in health expenditure by different factors, France 1992-2000 % change from 1992 change in population age structure increase in population size changes in morbidity changes in practice for a given illness other changes total -10 0 10 20 30 40 50 Source: Dormont et al 2006 2
Which way for policy? spend less? spend more? spend wisely? Lower spending by government means higher spending by patients: user charges, private health insurance or medical savings accounts (MSAs) 3
Lowering public cover to encourage private health insurance (PHI) Market role Market driver PHI covers Examples Substitutive Complementary (services) System inclusiveness Scope of benefits Groups excluded or allowed to opt out Excluded services US, Germany, Chile Canada Complementary (user charges) Depth of coverage Statutory user charges France, Slovenia Supplementary Consumer satisfaction Faster access and consumer choice Ireland, UK Source: Foubister et al 2006 PHI as a % of total health spending in the European Union 20 1996 2005 15 10 5 0 SK BG EE CZ SE LT PL LV HU IT UK DK LU EL MT FI BE PT CY RO ES IE NL AT DE SI FR Source: WHO 2007 4
Substitutive PHI: expected outcome Population / universal coverage Insurers have incentives to select risks and/or self selection Public coverage poorer ill / disabled non-working older large families Private coverage richer healthy working younger small families Substitutive PHI vs public coverage: Germany Prevalence of: People aged 65+ Chronic disease* Self-reported poor health* GP contact* Specialist contact (outpatient) Difficulty paying for outpatient Rx* Waiting time for gastroscopy Public 22% 23% 21% 81% 47% 26% 36 days Private 11% 11% 9% 55% 45% 7% 12 days *Statistically significant after controlling for differences in age, gender and income (sources: Mielck and Helmert 2006, Schneider 2003, Lungen et al 2008) 5
Complementary PHI (services) how do we define basic benefits? adverse selection problems? requires high up-take Complementary PHI (user charges): lowers public cover in Slovenia Services Cover 1993 1995 1996 Normal care 100% 100% 100% 100% Transplants, dialysis At least 95% 99% 96% 95% Fertility, orthopaedics At least 85% 95% 88% 85% Drugs on positive list, non-work injuries At least 75% 80% 75% 75% Non-emergency ambulance transport Max 60% 60% 60% 40% Lenses, adult orthodontics Max 50% 45% 38% 25% Source: Milenkovic Kramer 2006 6
Supplementary PHI in Ireland: public subsidies, two-tier access covers 47% of population 6% of total health expenditure tax relief pays for 20% of PHI premiums provides faster access, private care 50% of PHI care is in public hospitals public subsidy of PHI care = > 60% Difference in waiting times by coverage status: Ireland 40 % waiting < 1 month % waiting > 1 year 30 20 10 0 PHI Free care Neither PHI nor free care Source: Tussing and Wren 2006 7
MSAs: international experience to control moral hazard and foster individual responsibility use it or lose it spend it or save it shifts risk to individuals no evidence of long-term cost control consumers are reluctant and poorlyinformed purchasers MSAs: what relevance for EU health systems? different political values: equitable access, value for money impact on financial protection? impact on national risk pooling? impact on needs-based allocation? impact on strategic purchasing (eg HTA)? 8
Distribution of US health expenditure, 1997 0% 1% 5% 10% 27% 50% 50% 55% 69% 97% 100% US population Total health expenditure Source: Monheit 2003 and Berk and Monheit 2001 Will increasing private finance relieve pressure on public budgets? wishful thinking? concerns for financial protection and equity careful design and regulation clear boundaries between public and private health care good governance 9
Higher government spending on health may mean higher or spending less on other sectors Welfare gain from better health Country Life expectancy at birth (years) 1970 2003 Real GDP per capita (PPP$) 1970 2003 Monetary value as % of 2003 GDP per capita BG 71.5 72.4 4,700 7,731 27 CZ 71.5 75.4 11,531 16,357 30 EE 69.9 71.8 6,438 13,539 31 LV 69.5 70.9 6,457 10,270 30 LT 71.5 72.2 4,913 11,702 29 PL 71.0 74.7 4,900 11,379 28 RO 69.8 71.3 2,800 7,277 27 Source: Suhrcke et al 2008 10
How do countries ensure value for money? Purchasing & organisation evidence-based (HTA) needs-based (resource allocation) tools/incentives for better purchasing less direct access to specialist care How do countries ensure value for money? Provider payment strong government role in setting prices payment for results (mainly processes rather than outcomes) financial incentives for chronic disease management (eg France, Germany) next step: linking payment to outcomes 11
Key messages Spending less: lowering coverage undermines policy goals and is unlikely to relieve pressure on public budgets in the long term Spending more: investment in health brings economic benefits too Spending wisely: an essential strategy to improve performance and secure value for money without jeopardising equity 12