This presentation by Tamas EVETOVITS was made at the 3rd Joint DELSA/GOV Health Meeting, Paris 24-25 April 2014. Find out more at www.oecd.org/gov/budgeting/3rdmeetingdelsagovnetworkfiscalsustainabilityofhealthsystems2014.htm

1. Division of Health Systems & Public Health
Fiscal sustainability and
sustainable public financing
for health
Dr Tamás Evetovits
Sr Health Financing Specialist & Head of Office a.i.
WHO Barcelona Office
OECD meeting of the Joint Network on Fiscal
Sustainability of Health Systems, 24-25 April 2014

2. Let’s get the concept and the objectives
right
Reality check on health spending and its fiscal
impact
Sustainable public financing for health
Outline

3. An accounting exercise
or
a matter of choice in
public policy priorities
and finding the right
instruments to minimize
adverse effects on
health, equity and
financial protection?
Fiscal sustainability of health systems

4. Fiscal sustainability is meaningless if not
linked to public policy objectives
• Fiscal sustainability should
not be seen as a policy
objective worth pursuing
for its own sake…
• …if it was an objective,
then a simple cost cutting
exercise would do the
job…
• … and both equity and
efficiency would suffer
• Fiscal sustainability should
be treated as a constraint
that has to be respected by
all sectors of public financing
• Continual increase of
government debt is bad
policy and not in the interest
of future generations…
• …because both equity and
efficiency would suffer

5. Fiscal sustainability: a slippery concept
• It applies at the level of overall public spending
(overall fiscal balance)
• At a sectoral (e.g. health) level, the concept is
less clear
– How much gets spent depends on a country’s overall
fiscal context and the priority that government gives to
each sector in its budget
– So the impact of the health sector on “fiscal
sustainability” depends in part on choice

6. There is nothing wrong with health
expenditure growing faster than GDP
As long as…
• other sectors are not growing that fast
(no fiscal imbalance)
• spending is efficient (welfare enhancing)
• people prefer to spend the additional
wealth on health (THEY DO!)

7. Health is the top priority for more public spending
across Europe
0
204060
Health Education Pensions Assisting poor Housing Infrastructure Environment
First priority Second priority
Source: Life in transition survey 2010, EBRD

8. Reality check on health
spending and its fiscal impact

9. Health spending increased, but did not carve out an unfair
share of growing public spending in the previous decade
Source: WHO NHA database, 2012
12.9%12.1%

10. And this relative increase has faded
away in the past 10 years (2003-2012)
12.5% 12.7%12.5% 12.7%
12.5% 12.7%
12.5% 12.7%
Source: WHO, 2014

11. While health has been taking a greater share of public
spending in high income countries pre-crisis, it is not the case
in less developed countries of the WHO European Region
Source: WHO NHA database, 2012
14.4%13.7%

12. The health sector is certainly not a threat to
fiscal sustainability in Hungary…

13. …or in Malta where health just started
to catch up

14. ...widening gap between health and non-
health public spending in Luxembourg

15. ...in some countries it is clearly not health
but other sectors that grow faster than GDP

16. France cannot decide between health and
non-health spending: clearly not sustainable

17. The Irish decision is pretty clear

18. Sustainable public financing for
health: why and how?

19. Insurance function and public financing
• Let’s not forget the primary reason why health
is a big ticket item on the public budget
• Public financing achieves better financial
protection and equity in access to care i.e.
health insurance according to need and not
according to ability to pay
• User charges do not provide financial risk
protection…or equity… and not even
efficiency or cost control

20. Public spending is growing only in high income
countries: closing the gap in a generation?

21. 0
2
4
6
8
10
12
14
Healthexpenditure%GDP
public private
Private (mostly out-of-pocket) spending is high and
growing: bad for health, inefficient and inequitable
0 2 4 6 8 10 12
Low & Lower-Middle
income
Upper-Middle income
High income
Source: WHO NHA database, 2010

22. Unmet need in the poorest quintile
Source: EU SILC
0
5
10
15
20
25
30
2007 2008 2009 2010 2011
%ofpopulationin(poorestquintile)
Latvia
Romania
Italy
Greece
Iceland
EU (27
countries)
Hungary
Belgium
Spain
How much inequity is “sustainable” in Latvia?

23. In contrast, counter-cyclical public spending at
work in Lithuania
23
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
planas
2013 m.
projektas
Total amount of contributions of economically active population, million LTL
Total amount of contributions and aditional allocations of national budget, million LTL
mln.Lt
Source: G. Kacevicius

24. Avoiding unproductive cost escalation is our joint
responsibility: some good options
Reduce variation, inappropriate utilization of
services through supply side measures
Improve rational drug use and price control.
Careful with new drugs of marginal benefits
Allocate more to primary and outpatient
specialist care at the expense of hospitals
Invest in infrastructure (including IT) that is
less costly to operate

25. Avoiding unproductive cost escalation is our joint
responsibility: some bad options
Shifting costs to patients
Under-providing health services
Spending less on cost-effective services by
cutting across the board
Leaving it to the doctors to decide and pay
them fee-for-service

26. In summary
Health is highly valued
by population:
spending above GDP
growth can be justified
Public spending on
health needs to grow
in low and middle
income countries
Unproductive cost
escalation should be
avoided, but cutting
spending ≠ efficiency
Shifting the burden to
patients is a poor
alternative to many
other options