A sustainable health system II

A sustainable health system (II)

Madrid
17 July 2012

Círculo de Empresarios

Index

1. Executive summary 5
2. Key structural factors 9
2.1 The architecture of national health care systems 9
2.2 The National Health System (NHS) 12
Coverage of the system 15
Architecture of the NHS 19
Provision of services 24
3. Key financial factors of the NHS 31
3.1 The level of health care expenditure 31
3.2 The evolution of health care expenditure 32
Outlook and determining factors for growth of health care spending 33
Growth in health care spending in Spain 38
3.3 Decentralization 42
4. Key impact factors 45
4.1 Restrictions on resources and services of the system 45
4.2 Reforms on supply side 51
Decentralization 51
Incentives 52
Market mechanisms 53
4.3 Reforms on demand side 56
Co-payment or ticket moderator 56
Other co-responsibility formulae 59
4.4 The impact of reforms on the growth of health care spending 59
5. Proposals by Círculo de Empresarios 63
Governance of the NHS 63
Supply 66
Demand 68
6. Appendices 71
7. Bibliography 73
8. Recent publications by Círculo de Empresarios 77


1. Executive summary

The provision of health coverage under universal conditions has been one of the great
achievements of the National Health System (NHS) and has been a determining factor in the
favorable evolution of Spain in recent decades. Círculo de Empresarios believes it is essential
to guarantee the existence of an NHS which has enabled access by the population to a wide
range of health services under fair conditions. To do so, its sustainability must be ensured,
which involves considering certain structural, financial and impact key factors of health
policies on the budget.

In regard to structural key factors, Spain has an integrated public model: the funding,
purchase and provision of health care are essentially public. The public insurance and universal
coverage models are not always in line with this integrated scheme. The NHS reaches a degree
of universality similar to that of other OECD countries with different models. The NHS is
perceived as a cornerstone of the welfare state and is positively valued, although the need for
change has become evident. The system is valued more for medical care than in terms of user
participation.

Círculo de Empresarios believes that one must emphasize that other public and
universal systems within the OECD include mechanisms of co-responsibility of demand
(users) and of supply (professionals and businesses), enable the user to choose (occasionally, at
a price) and resort to formulae of involving competition and risk transfer to the private sector.
These formulae are perfectly compatible with a public and universal model. In addition,
despite the existence of a universal NHS, about 20% of the total Spanish cost on health care is
directly assumed by the citizens, aside from insurance policies (public and private) and
copayment schemes.

Universal coverage is linked to a benefits portfolio. In Spain there are geographical
differences between the benefits resulting from the various interpretations of the items in the
common services portfolio and the creation of complementary portfolios. Criteria of necessity
or utility have not always prevailed in the introduction of treatments, nor has there been a
systematic and transparent policy of underfunding thereof based on cost-effectiveness.

Once the transfer of health services to the Autonomous Communities was completed in
2002, the coordination has been articulated by way of the Inter-territorial Council for the
National Health System, where decisions are taken by consensus, resulting in a governance of
the system with ample room for improvement and economic effects which, in the opinion of
Círculo de Empresarios, are undesirable.

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Key structural factors

HNS services are free of charge at the point of provision, and are provided at two care
levels (primary and hospital & specialized). This is a model geared for the treatment of acute
cases, when a system geared for chronic cases is required as, very gradually, some
Autonomous Communities are beginning to consider.

Most of the NHS service suppliers belong to the public sector and the prevalent
governance model is that of direct management or similar. Indirect management forms are
also used by way of agreements. The Autonomous Communities have been gradually
introducing new health care formulae which, whilst maintaining the public nature of the
system, are seeking new levels of efficiency, funding or risk transfer to the private sector. But
the “new forms of management”, still a minority, are not articulated on the basis of a national
policy of analysis and comparison of results and encouragement of new formulae, over and
above the legal framework allowing for their development.

The sustainability of the NHS requires certain financial key factors to be considered.
The NHS makes the financial effort which pertains to Spain in terms of GDP per inhabitant, but
between 2000 and 2009 the real public health expenditure per inhabitant experience a
cumulative increase of 42%. Additionally, according to the IMF, in 2030 the health expenditure
in terms of percentage of GDP in Spain will be 1.6pp above that of 2010 (this would mean that
the net present value of the increase in health care expenditure would account for over 50% of
the current GDP). On its part, the Spanish government expects an increase between 2010 and
2050 of 1.2 points, taking into account the impact of the recent reform contained in RDL 6/2012.
In light of such data, the health care system will present in the future a more important
budgetary challenge than that, for instance, presented by pension. All the foregoing, without
taking into account the budgetary restrictions to which Spain is currently subject.

The determining factors on the growth in the cost of health care are associated with all
system participants. Aging is not the only or the most important, determining factor in health
care cost, so that the health care policy must ensure, in the opinion of Círculo de Empresarios,
that every participant therein contributes towards its cost containment: 44% of public health
care expenditure goes towards personnel costs and 25.5% towards pharmaceutical products via
prescriptions (19%) or hospital dispensation (6.5%). Between 2002 and 2009 hospital and
specialized services have gone from 53.4% to 55.9% of total cost. Primary health services
accounted in 2009 for 14.9% of expenditure, having slightly reduced their share of the overall
cost. Prevention and public health activities merely account for 1.5% of the public health
expenditure and their weight has hardly changed in the last decade. This evolution is not, in
the opinion of Círculo de Empresarios consistent with the factors which determine health
care cost.

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Additionally, there are substantial differences in expenditure by inhabitant among
Autonomous Communities due to disparities in public funding, different preferences among
users between public and private services, and various options of the governments in regard to
public, agreed or private provision of services. Attention must also be paid to the different
speeds at which this expenditure is adjusted among Autonomous Communities. The impact of
the budgetary adjustment on equal access to health services must be watched over from a
geographical perspective.

As for the health care key factors which have an impact on the sustainability of NHS
expenditure, available evidence suggests that measures design to introduce competition and
user choice (supply measures) are the ones which have the most impact on containment of
health care cost, ahead of budget ceilings and the improvement in public management and
coordination and demand rationalization measures. But, in particular, the evidence indicates
that the most effective reforms are those which combine all instruments (budgetary,
coordination and management, and supply and demand).

Círculo de Empresarios proposes a number of initiatives designed to improve the system.
As for the public management, it suggests an improvement in NHS governance by means of
centralized accountability of a decentralized system, the improvement of availability of public
information on the NHS and the inter-operability of regional information systems. Moreover, it
advises the encouragement of assessment mechanisms and the integration into one single
independent body of the central government network of institutions and the Autonomous
Communities, currently devoted to the assessment of health care technologies.

As for supply, greater autonomy and accountability for the managers, the flexibilization
of the statutory condition of health care personnel and the encouragement of integration
between health care levels and hospitals are all advocated. The importance of the introduction
of competition and guaranteed user choice are also emphasized, so that patients are treated
more like customers than as users.

Lastly, in terms of demand, the use of the system must be rationalized by means of user
co-responsibility for health care costs. This can be achieved by implementing joint payment
systems (co-payment) or via the promotion of preventive health campaigns. Finally, Círculo de
Empresarios estimates that the generation of revenues not strictly associated with basic health
care should be encouraged.

Some of the foregoing considerations are shared by a large part of NHS experts and
analysts. The recent health care reform has made inroads, within the competency limits of the
government and financial conditioning, in some of these.

7

Key structural factors

In any event, Círculo de Empresarios believes that the problem is not just one of diagnosis
but of governance of the NHS. The aim is therefore not whether competencies pertain to one or
another agent, but that decisions affecting the whole can be taken by a majority. In order to
reform, indeed, a diagnosis is required. But in order to implement, an improvement in the rules
of governance becomes necessary. In this regard, Círculo de Empresarios believes that the
governance of the system should be examined closely, not in terms of centralization of
competencies but in terms of the enforceability of the decisions made by a majority of its
participants.

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2. Structural key factors

2.1. The architecture of the national health systems

Health systems in the OECD exhibit different kinds of architecture, but in most cases
they have a common foundation: universal and equal access to health care benefits. This is
also the model of the General Health Care Law of 1986.

Indeed, health care systems fulfill, at least, three basic functions:

• That of financier, assuming the costs of coverage of the health care benefits in
exchange for tax revenue, social security contributions or premiums, depending on
the model.

• That of purchasing entities, which acquire medical and hospital services on behalf
of their users1, to provide the agreed health care benefits.

• That of the health care providers, with contracts with the purchasing entities that
pay them for the services offered to the users.

In OECD health care systems in general, the funding function is public, whereas others
have different configurations. In Spain, there is an integrated public model where both the
funding for the provision of health care and the purchase and provision of health care services
are of an essentially public nature.

Public insurance and universal coverage models are always based on this integrated
scheme. There are models which, on the basis of public funding, rely more on competition and
the users’ choice and others which rely on public control and management (table 1).

1 The nature of health care prevents the patient from evaluating the care received. Health care meets the characteristics of what are known as
“credence goods” whose quality is difficult to determine with any accuracy. These are goods where the offerors are, in turn, experts which
determine the needs of the consumers. Despite the fact that the performance of the service is observable, users are not always able to establish the
need for the service, nor reliably assess performance and cost thereof. This circumstance can give rise to opportunist behaviors by the suppliers.

9

Key Financial Factors of the NHS

Table 1
Health care models
They rely on market mechanisms for service provision
Private insurance for basic coverage
Public insurance for basic coverage
Private insurance beyond basic coverage and some restrictions
Little private insurance beyond basic coverage with no restrictions
Germany The Netherlands Slovakia Switzerland
Australia Belgium Canada France
Austria Czech Republic Greece Japan Korea Luxembourg

Rely on mainly public services and insurance
Broad range of suppliers and no access filters
With access filters
Limited choice of suppliers and relaxed budgetary restriction
Broad range of choice of suppliers and strict budgetary restriction
Iceland Sweden Turkey
Denmark Finland Mexico Portugal Spain
Hungry Ireland Italy New Zeeland Norway Poland United Kingdom

Among the first, there are countries such as the Netherlands, where private insurers
perform the purchase function (box 1). In other cases, private insurers are the ones who provide
benefits above and beyond the basic package. Among those which resort to public insurance for
purchase duties, and rely on market mechanisms for provision of services, some have access
filters2 (France or Canada) and some have not (Austria or Japan).

Box 1: The Dutch system and user choice

Following the reforms of 2006, the Netherlands combine an obligatory insurance system with a
patient-based insurance market. The government defines a minimum health care package and a standard

2 The role of the filter for access to health care benefits refers to the primary care physician having to refer the patient to the hospital or specialist.
In other cases, this obligation does not exist but is carries financial preference. For example, if a specialist is consulted without having been
referred by the primary care physician, the co-payment is higher.

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insurance premium. In order to guarantee universality, all individuals are obliged to be insured by the
basic package. They pay a lump sum premium to their insurance company of choice and their employer
withholds social security contributions from the salary. Lower income insured parties receive government
subsidies.

The insurance companies are private and the insured party has freedom of choice (a change after
one year is allowed). These must accept all residents in their coverage area. In order to compensate
insurance companies for not being able to select the risk to be covered, compensations are established by
means of the Health Care Insurance Fund. The insurance companies send the premiums charged to this
Fund, which also receives salary contributions. Then the premiums (and contributions) are redistributed
among the insurance companies according to the original decisions made by the consumers, adjusted by
criteria of joint and several liability, risk, etc.

Insurance companies compete on nominal premiums for the basic package (this cannot be altered),
volume discounts (10% maximum) for groups of insured individuals, or lower premiums if the insured
party becomes co-responsible for the costs generated over and above a given amount.

The basic health care package is covered by the private insurer. Additional public funding
guarantees universality and a safety net for illegal immigrants. Complementary health care by means of
private insurance, is voluntary, with no public support and risk is freely covered or not by the insurance
company. Most of the population purchases complementary insurance policies from the insurers,
providing the minimum legal coverage.

Registration with a primary health care physician is obligatory, who controls the costs by limiting
referrals to specialists. A medical referral must be obtained before consulting a specialist, except in acute
conditions such as trauma or myocardial infarction.

Over 90% of the hospitals are privately owned and managed, but not for profit. The Treatment-
Diagnosis Combination payment system is used, which links prices to real costs and enables the insurance
companies to negotiate the prices of hospital services.

The models which have been articulated on the basis of public control span from those
without access filters and broad user choice mechanisms (Sweden) to those which do use filters
to access health care services. Among the latter, some countries are subject to a lax budgetary
restriction and offer a limited choice of suppliers (Denmark or, to date, Spain) and others
maintain the ability to choose among suppliers, but with strict budgetary restriction (United
Kingdom).

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The OECD points out that there is no evidence of superiority of any of these systems in
terms of cost and health care results, since there is remarkable diversity in each of the groups
(see other models in Appendix). The National Health System compares satisfactorily with these
systems as is shown in Table 2.

It is important to underline that universality, equal access and public nature are only one
part of the system configuration. The Co-responsibility of users (and their ability to choose), of
the supply industry and health care professionals, or the introduction of competition, among
other formulae, are perfectly compatible with a universal and public model, as can be seen in
other countries.

Table 2
Comparison of National Health Systems
Spain France The Japan United Sweden
Netherlands Kingdom
Funding
Total health care expenditure (% GDP) 9.5% 11.0% 12% 8.5% (2008) 9.80% 10%
Total public health care expenditure (% total health care expenditure) 73.6% 77.9% 84.7% 80.8% (2008) 84.1% 81.50%
Total private health care expenditure (% total health care expenditure) 20.1% 7.30% 6% (2007) 15.8% (2008) 10.50% 16.70%
$ per person (US $ PPP) 3,067 3,978 4,914 2,878 (2008) 3,487 3,722
Process results
Practicing physicians (per 1000 inhabitants) 3.5 3.3 2.9 (2008) 2.2 (2008) 2.7 (2010) 3.7 (2008)
Nurses (per 1000 inhabitants) 4.9 8.2 8.4 (2008) 9.5 (2008) 9.5 (2010) 11 (2008)
MRI scans (per million inhabitants) 10 7 (2010) 11 43.1 (2008) 5.9 (2010) ---
CT scans (per million inhabitants) 15.1 11.8 (2010) 11.3 97.3 (2008) 8.3 (2010) ---
Health results
Life expectancy
Men 78.6 78 (2010) 78.5 79.6 78.3 79.5 (2010)
Women 84.9 85 (2010) 82.7 86.4 82.5 83.5 (2010)
Child mortality rates (per 1,000 live newborns) 3.3 3.3 (2010) 3.8 2.4 4.6 2.5
Maternal mortality rates (per 100,000 live newborns) 3.4 10(2005- 8.5 (2005) 5 8 5.4
Note: Figures for 2009 unless otherwise indicated
* MRI scans in hospitals only included and does not take into account those carried out in private clinics
Source: CIVITAS, OMS and OCDE

2.2 The National Health System (SNS)

The SNS3 offers universal coverage funded by taxes since 1999, with mostly public health care.
Services are free of charge at the point of provision, although certain formulae of co-payment have
been introduced in the pharmaceutical area. Of the 9.5 percentage points of the GDP which accounts
for the Spanish health care spending in 2009, 7 (73.6%) pertain to public spending, almost entirely
funded by taxes (graph 1).

3 Its basic legal framework is set forth in General Health Care Law 14/1986 of 25 April, and Law 16/2003 of 28 of May, on the coherence and

quality of the NHS, and subsequent reforms, such as Royal Decree Law 6/2012, of 20 April, on urgent measures to guarantee the sustainability of
the National Health System and improve the quality and safety of the benefits provided (RDL 6/2012).

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Graph 1
Unit cost by type of funding in 2009
6.2 5.5 84.7 The Netherlands
10.5 1.1 84.1 United Kingdom
16.7 81.5 Sweden
15.8 2.4 80.8 Japan
7.3 13.3 77.8 France
19.7 1.0 77.9 Italy
13.1 9.3 76.9 Germany
12.3 11.0 75.0 Ireland
19.0 2.1 74.7 Finland
20.1 5.4 73.6 Spain
27.7 72.1 OECD
27.2 4.9 65.1 Portugal
30.5 8.8 59.7 Switzerland
47.8 4.0 48.3 Mexico
12.3 32.8 47.7 USA
34.0 18.6 47.4 Chile
Public Administrations Private Sector Private Insurance Private Other
Source: OECD

The percentage of expenditure pertaining to private insurance is on the increase and is
currently slightly above 5%. Expenses met directly by citizens aside from public or private schemes
account for one fifth of the total amount of health care expenditure, above that in other European
countries, despite co-payment being used to a lesser extent in Spain than in such countries (of the 20.1
points of direct payments made by households in Spain, only 1pp pertains to co-payment in 2009).

In those countries in which households pay for a larger share of overall health care costs by
direct payment aside from public or private insurance schemes, health care cost per inhabitant tends
to be lower (graph 2). Indeed, the users, once insured, are able to modify their behavior patterns.
That is, they are able to consume more health care services than those which they would consume if
they had to pay directly for them4.

4 This is the problem known as moral risk, common to other sectors of insurance.

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Graph 2
Private health care ex penses (pay ments from households in addition to insurance) a nd hea lth care per inhabitant in 2009 .
% of private hea lth care cost over private overall total health care cost
Health care c ost per inhabitant (PPP USD)
60.0 50 .0 40 .0 30 .0 20 .0 10 .0 0 .0
MEX = MEX
CHI = CHI
GRE =GRE
COR = KOR
ISR = ISR
POR = POR
ELVQ = SLO
POL = POL
TUR = TUR
HUN = HUN
EST = EST
CHE = CZC
ELVN = SLO
ITA = ITA
ESP = SPA
AUS = AUS
JAP = JAP
FIN = FIN
NZL = NZL
SUE = SWE
BEL = BEL
SUI = SWI
RU = RU
ISL = ICE
IRL = IR E
FRA = FRA
CAN = CAN
LUX = LUX
ALE = GER
HOL = N ET
DIN = D EN
NOR = NOR
EEUU = USA
AUT = AUT
Source: O ECD

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In Spain, the perception of the NHS as a basic component of the welfare state is deep-rooted
among the citizens. The general view held by users on the health care system is that it works
although, as the Economic and Social Council points out, there is an awareness of the need to address
changes5 (box 2).

Box 2: Perception of the National Health System

The data from the Ministry of Health indicate that user perception of the NHS remains at high levels of satisfaction,

especially in matters of medical care.
User perception of health care system
% of satisfied persons (unless otherwise indicated)
2005 2006 2007 2008 2009 2010
Health care received in medical practice: family practice 83.6 84.0 84.9 86.1 86.4
Health care received in medical practice: specialist physician 71.2 81.6 81.2 81.8 82.1 81.5
Health care received in medical practice: specialist physician (men) 73.3 83.8 81.5 81.7 83.4 79.9
Health care receiving in E.R. 77.8 77.0 79.4 75.2 77.7 77.8
Health care received in hospital admission 85.8 83.4 84.6 85.6 87.5 85.7
Satisfaction* with awareness of medical history and follow-up of health 7.1 7.0 7.0 7.0 7.1 7.3
problems in Primary Care center (women)
Satisfaction* with information received on health condition in specialist 6.9 6.9 6.9 6.9 7.0 7.1
consultation
*(1-10)
Source: Ministry of Health

The Swedish consulting group Health Consumer Powerhouse has prepared an Index of European
Health Care Consumers, which examines the rights, participation and access by users to the health care system.

Spain’s position in the European Health Care Consumer Index, 2012
On 34 countries
Position
Index 2012
Global 24
Subcategories:
1. Patient rights and participation 28
2. Accessibility 33
3. Results 11
4. Prevention 16
5. Access to medication and technology 13
Source: Health Consumer Powerhouse

In 2012, according to this source, the Spanish system ranked 24th among the 34 European countries
analyzed (22nd position in 2009). Spanish health care falls behind in terms of transparency and patient
participation. In terms of waiting lists, Spain is the second before last, only preceded by Norway and on a par
with Sweden. As for patient rights, the results are likewise not positive: Spain is the fifth from the last. Spain fares
better in the three more medical categories: 11th in results, 16th in prevention and 13th in access to medication and
technology.

System coverage

General Health Care Law 14/1986 establishes the right to health care for all Spanish citizens and
non-Spanish citizens residing in the national territory. It also sets forth that access and health care

5 See CES, 2010 or Health Care Barometer CIS-Ministry of Health

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services shall be provided under equal conditions. However, system coverage presented a few
omissions6, which have been addressed in the recent reform.

Universal coverage health care models aim to prevent the potential exclusion of high risk and
low income groups, which might have problems when accessing health care. The insurer is unaware
of the health risk of the insured party and, without public intervention, may elect to penalize or to
exclude such groups by allocating a high risk to them and considering that their coverage is not
profitable7.

Almost all countries within the OECD offer universal coverage of the cost of a basic package of
health care services (consultation to primary care physicians and specialists, tests and examinations,
and therapeutic and surgical procedures). Generally, dental care and the supply of medications are
covered in part, although these must be acquired separately in some countries. There are four
countries which have no universal coverage: Chile, Mexico, Turkey and the US (graph 3).

Graph 3
Degree of universa lity of medical insuranc e in main OECD countr ies
% of populat ion covered
Denmark 100.0 Finland 100.0 Greece 100 .0 Ireland 100.0 Israe l 100.0 Italy 100 .0 Japan 100.0 Norway 100.0 Portu gal 100 .0 Swe den 100.0 Sw itzerland 100 .0 United
Kingdom 100 .0 Ge rmany 89.2 10.8 Fra nce 9 9.9 Belgium 99.5 Austria 99.0 The Netherla nds 98.8 Pola nd 97 .6 U SA 26.4 54 .9 Turkey 80.8 Mex i co 74.0 Chile 73 .5
Public coverage
Primary c overage by private medical insura n ce
Source: O ECD

The trend towards universality of most OECD countries, which determines its largely public
funding, is based on reasons of equality, but also of efficiency: that is to say, the recognition that the
cost for a society of a lack of health care go well beyond the cost of health care (box 3).

6 According to the General Provisions of RDL 16/2012, the flawed transposition of Directive 2004/38/EC on the right of European citizens to freely

circulate and reside within the EU, which in section 7 sets forth the conditions which must be met for a citizen to reside in a country other than his
own for more than three months, has prevented the billing to the source country for health care provided for some 700,000 foreigners per year.
7 This is the problem known as adverse selection, common to other areas of insurance.

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Box 3: The cost of a lack of health care

The lack of health care carries both an individual and a social cost. Health care, as education, forms part
of human capital which, in turn, determines an economy’s capacity for growth. In this regard, health care
expenditure is, to a large extent, an investment which generates significant returns, as shown herebelow by the
estimates of the Milken Institute referring to the US. Health care cost is not the main cost arising from lack of
health.

Total c ost of chronic diseases , US 2003
Total cost of treatments: 277,000 Total economic losses: 1,047,000
Heart attack 13,000 22,000
Diabetes 27,000 105,000
Lung diseases 45,000 94,000
Heart diseases 65,000 105,000
Mental conditions 46,000 171,000
High blood pressure 33,000 280,000
Cancer 48,000 271,000
Billions of dollars
Source: Milken Institute

The conclusions reached in a study carried out by researchers at Oxford University 8 indicate that
cardiovascular diseases accounted in 2003 for a cost in Spain of almost 7 billion, and 169 billion in the whole
of the EU, of which only 62% pertains to health care. Of the 7 billion of estimated cost in Spain, 4 billion pertain
to health care costs incurred in the treatment of diseases, whereas the remaining 3 billion are distributed between
productivity losses due to disease or early mortality and care provided to cardiovascular patients by relatives and
friends.

On the other hand, universal coverage is related to the definition of the services portfolio.
The regulation of the catalog of NHS services 9, until the recent reform, has been based on the
establishment of a broad common portfolio of services, with equal access to all, irrespective of the

8 See “Economic burden of cardiovascular diseases in the enlarged European Union” José Leal, Ramon Luengo-Fernández, Alastair Gray, Sophie

Petersen, and Mike Rayner. European Heart Journal (2006) 27, 1610-1619.
9 Royal Decree 63/1995, of 20 January, on Regulation of Health Care Benefits in the National Health System, which establishes the health care
services provided by the NHS with public funding, health care for which payment is to be claimed to third parties obliged to assume payment
and health care services which are not funded with public funds, and Royal Decree 1030/2006, of 15 September, which reviews the portfolio of
common services of the NHS and additionally considers a portfolio of complementary services established by the Autonomous Communities.

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place of residence, including public health. In Spain there has been no active and systematic
underfunding policy for treatments or technologies based on cost-effectiveness thereof10.

Autonomous Communities may establish their portfolios of additional services, which have led
to a proliferation of rules to extend the common NHS portfolio. After a few years, differences
between benefits provided by the Autonomous Communities have become evident, resulting from:

• The interpretations made of the items contained in the common services portfolio
which are often not precisely defined. Therefore, significant differences are arising
between diagnosis/treatment procedures of conditions and use of new technologies,
both between Autonomous Communities and between the various health areas within
one same Community.

• The creation of additional portfolios by the Autonomous Communities: as the CES
points out11, “the absence of basic and clear rules established from the start in regard to
approval and funding of services, added to their high political value, has encouraged
emulation between autonomous health care services when defining their offering. As a
result thereof, not always have criteria of need or therapeutic utility prevailed when
introducing some treatments which, subsequently, have been assumed by other
autonomous communities”.

The recent reform establishes a common portfolio which includes the free basic services of the
NHS throughout the national territory, the additional portfolio subject to co-payment, the additional
portfolio of the Autonomous Communities to be covered by their own budgets (for which they must
prove financial coverage capacity), and the complementary set of services which includes those which
are not NHS services and must be paid directly by the users. Likewise, it establishes general
guidelines for listing and delisting of services and benefits, and the criteria to be applied, as well as
the institutions taking part in the procedure, all outstanding subsequent regulatory development.

Architecture of the NHS
The transfer of health care competencies to the Autonomous Communities was
completed in 2002. The Autonomous Communities administer 91% of the public consolidated

10 The recent announcement of discontinued funding of 456 pharmaceutical products as of 1 August which will mean, according to the Ministry of
Health, a savings of 456 million euros, was preceded by two other underfunding initiatives between 1993 and 1995. According to the Ministry,
these medications belong to therapeutic groups which at least three Autonomous Communities, in the working groups created for this purpose,
considered eligible for “discontinued funding”. Physicians may continue to prescribe such medications, but the patient must assume the full cost
thereof. Likewise, it was pointed out that the PDR has not been updated for years.
11 See CES 2010

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health care cost which, on average, accounts for one third of the total budget. Health Care
abroad, the general bases and coordination of health care and legislation of pharmaceutical
products12 remain the exclusive competencies of the State. Thus, the Ministry of Health has
competencies in the regulation of pharmaceutical products and the guarantee of equal access to
health care se4rvices throughout the national territory.

The NHS coordination is articulated by the Inter-territorial Council for the National
Health System (CISNS)13, chaired by the Health Minister and made up of 17 health secretaries
of the Autonomous Communities. The decisions of the CISNS are arrived at by consensus and
summarized in series of recommendations, as they affect competencies transferred to the
Autonomous Communities.

One of the most common criticisms made to the system is, precisely, its improbable
governance and the economic cost14 involved. Thus, the distribution of competencies between
central and autonomous administration and the use of consensus as a decision-making
procedure, hinder the evolution of the system 15. The difficulty in reaching agreements by
consensus generates three problems: slowness, lack of specificity of measures agreed and, very
often, lack of compliance follow-up. The difficulties in reaching agreements in the methods of
calculating waiting lists, vaccination schedules, co-payment or many other areas, are well
known, as is their lack of efficacy in preventing the deficit in the health care system.

As the Social and Economic Council pointed out in 2010; ”The organization of the public
health system on the basis of the so-called National Health System did not, however, imply the
creation of an institutional architecture in accordance with the governance needs of the new
model (…) It lacks a proprietary legal personality on which to base the system, beyond a series
of initiatives undertaken by the different health services and agreements reached in the Inter-

12 The General Health Care Law also created, as a technical-scientific body to support to System, the “Carlos III” Health Institute, which performs

its duties along with the CISNS, and in collaboration with other Public Administrations.
13 The CISNS, according to the definition contained in section 69 of the Law on NHS coherence and quality is the "permanent body for

coordination, cooperation, communication and information on the health services, with each other and the State Administration, aiming to
promote the coherence of the National Health System via the effective guarantee of the rights of the citizens throughout the entire State Territory”.
14 Freire & Repullo state: "An example of the cost of non-coordination is the cost of purchase of goods and services. Back in the 2003 report, the

Court of Auditors made a highly critical reference to such problems in regard to the purchase of medications and pharmaceutical products in 15
NHS hospitals. A recent study analyzed 70 tenders sent out over 3 years for the purchase of “skin staplers” in public hospitals, where prices
ranged between 4 and 10 euros, and what is most surprising is the lack of a relationship between the sales volume for each tender and the unit
price. The same degree of variability was found in regard to the purchase of a particular medication (ribavirin). Given that chapter II (on current
costs of goods and services) accounts for 25% of the hospital budget, the authors of the report believe that by improving and coordinating
purchasing systems, savings of 5% (400 million euros) could be achieved. Other works have also commented on this variability in prices
(pacemakers between 1,682 and 3,209 euros), and propose efficiency gains by improving public information and purchasing mechanisms”. The
centralization of hospital purchase is established in Royal Decree Law 6/2012.
15 This issue, for instance, has been one of the keys in the process of construction of the European Union, applying formulae such as majorities

adapted to the type of decision made and others designed to prevent institutional paralysis.

19


territorial Council of the NHS. The latter is, in essence, its only visible body, although it lacks its
own organization which is permanent and separate from the Ministry of Health"16.

In general, the Autonomous Communities have elected to create a health authority (the
regional department/office of health, which regulates and plans) and a regional health service
which provides health care and is responsible for the operational management of the network
of services and the coordination of health benefits, in accordance with the structure defined by
the Department.

The Department of each Community defines the territorial organization of its health care
services: the basic areas of health care and the competencies of each.

• Health Care Areas. The most commonly found configuration is one management for
primary health care and another for specialist care (outpatient and hospital), in each
health care area, although Autonomous Communities are increasingly resorting to
single area management units for both primary and specialist health care. Each health
care catchment area includes a population of between 200,000 and 250,000 inhabitants.

• The basic health care units are the smallest units within the organizational structure of
health care. They are usually organized around a single Primary Health Care team
which is the entry level into the system.

The system offers two health care levels:

• Primary health care, geared towards a generalist or global view of health, acting as a
filter for user access, other than the emergency departments, to other health care levels.
Spain is one of the few countries in the zone where primary health care professionals,
with some exceptions, are salaried employees of the Administration. The primary
health care network is entirely public.

Most of the private health care17 in Spain is of an outpatient nature. In the public
sector, hospital expenditure is 2.5 times more than that of outpatient care providers,
according to the Annual Report of the SNS 2010, whereas in the private sector hospital
expenditure is only one fifth of that spent on outpatient services.

16 As for the dynamics of the Inter-territorial Council of the NHS, Repullo & Freire (2008) state that, following the attempt of the Law of
Coherence and Quality to improve the governance of the system, “serious dysfunctions began to become evident: thus, on 3 December 2003 the
first resistance took place within the inter-territorial Council (socialist members against PP minister), followed by other stands of resistance in
2004 (on 16 June and 22 September by PP members against minister from PSOE), which mark a period of structural conflict of this NHS
governance body; in the 20 meetings held from January 2002 to March 2007,and following the repercussion thereof in the media, 7 of these took
place normally, 3 were blocked and the 10 remaining exhibited evident political differences, with separate press conferences and a tendency to
exhibit party confrontation, which led to an exaggerated public display of divergences which were not as marked in the meeting itself.
17 See “Do we spend too much … or do we spend poorly?” by Juan Simó Miñana or “Primary health care expense in Spain: insufficient to offer
attractive services for patients and professionals”. Report SESPAS 2012, Juan Simó & Juan Gérvas.

20


In this regard, as the report points out, it must be considered that whilst primary health
care in the public system is mainly provided in the health centers of the National Health
System, in the private sector it is the dentists and specialized medicine clinics the ones that
generate 80.3% of the overall expenditure of providers of outpatient services.

• Specialist and hospital health care absorb 55.9% of public health care expenditure, and is
focused on health recovery. The patient receives care during the acute phases of a disease, and
exhibits a tendency towards technification by means of using increasingly complex and
sophisticated therapies.

Approximately 40% of hospitals belong to the NHS. The rest are privately owned,
although several of them make up a network of hospitals for public use and hospitals with
replacement agreements and receive public funding for this activity, so that around 40% of
Spanish private hospital admissions are charged to the NHS.

70% of beds functionally depend on the public sector. 40% of total beds available are
concentrated in high technology hospitals with more than 500 beds. All Autonomous
Communities have at least one of these centers.

The growing technological sophistication of hospital health care requires the benefit of
economies of scale to achieve high levels of efficiency (as well as quality and safety).
According to various experts18, the establishment of reference centers for more complex
specialties which provide service to other hospitals that do not have such specialties, should
be the norm, but is not always the case.

In addition, the management of Centers overall is highly centralized in the health
Departments and Autonomous health services, with a significant restriction on the powers
of the managers who are unable to decide on matters such as human resources management.
Health care management jobs are not always separate from the political cycle.

This structure has led to a lack of coordination and to a distance between the two health care
levels, as well as an absence of co-responsibility in the management of resources between primary
and hospital care.

18 The volume of activity, both by unit and by professional, increases the efficacy and safety of results in certain units. For example, it is estimated

that for health care provided in cardiac units to be of quality, safe and efficient, cardiovascular surgery units must be available only in those
hospitals which carry out at least 400 annual percutaneous coronary interventions. In addition, at least 600 major cardiac surgery operations
should be carried out in each year each year. Report from the Spanish Cardiology Society (SEC), the Spanish Thoracic-Cardiovascular Surgery
Society (SECTCV) and the Spanish Association of Cardiology Nursing (AEEC).

21


Finally, the model of health care management, focused on acute patients, is not developing in
line with a population with increasingly chronic conditions. The aging population (16.5% are over 65
in Spain, INE Base 2010) means greater dependency and an increase in chronic pathologies, also
affected by the addition of new diagnostic and therapeutic techniques which render chronic hitherto
mortal conditions.

Box 4: The strategy of chronic patients in the Basque Country

The number of chronic patients over the age of 65 will grow from 344,000 in 2011 to 602,000 in 2040 in
the Basque Country. As chronic conditions increase, so does the cost thereof increase for the health care
system.

Average estimated cost of chronic patients for the Basque health care system
Average yearly cost
25,000 20,000 15,000 10,000 5,000
1,426 2,538 4,181 6,586 9,485 12,621 15,261 17,496 22,605
■ No. Chronic conditions
Source: Osakeditza

Chronic patients account for 70% of Basque health care expenditure. Specifically, they account for 84%
of total revenues recorded in Osakidetza, 75% of primary care prescriptions, 63% of specialist consultations and
58% of primary health care consultations.

The chronic patient strategy (EC) of the Basque Health Service addresses 14 strategic projects:
stratification of the population (according to health care required in the coming year); prevention and
promotion actions; patient self-care and education; the creation of a Network of Activated and Connected
Patients via new Web 2.0 technologies and Associations of Chronic Patients; unified medical histories;
integrated clinical care; development of hospitals for sub-acute patients; development of advanced nursing
competencies, for chronic patient care; overall patient assessment (health and social issues); renewal of the
health care service purchasing process, based on population logic, to share responsibility on results and identify
efficiencies; distance service provision (e.g., encouragement of telephone health care provision, with some 6000
consultations per month and a 90% rate of resolution, among other initiatives); development of the electronic
pharmacy and prescription; creation of the Research Center for Chronic Conditions and, finally, innovation

22


from clinical professionals (encouraging innovative ideas from professionals in order to improve the quality of
primary health care, health care processes and daily practice).

Provision of services

Most of NHS service providers belong to the public sector and the predominant governance
model is that of direct management or similar. The main tool used in this model is that of the
program-contract. There are no penalties established for non-compliance of targets, and risk is not
usually transferred to suppliers.

There are other forms of health care provision management, which may also be considered to
be direct management, using independent legal entities separate from the regional health department:
the foundations in Galicia or, to a lesser extent, in Madrid; or the public corporations in Andalusia or,
to a lesser extent, in Catalonia. Such formulae operate under private law and have their own equity
(and possibility of acquiring debt) and greater management autonomy 19.

Other forms of indirect management or subcontracting are also used, such as the provision of
additional diagnostic tests and outpatient procedures, by third party agreement. The public system
subcontracts to private hospitals the provision of specialist health care services: for instance, high
resolution diagnosis or outpatient surgical procedures as part of managing waiting lists; home
provision of respiratory therapies, dialysis or rehabilitation; or one-off third party agreements to
provide health care to a population sector by means of private hospitals (Madrid – Fundación Jiménez
Díaz –, Vigo – Povisa – or several hospitals in Catalonia). Third party agreements account for 10.5%
of public health care expenditure and are being affected by the current budgetary adjustment
situation.

But the landscape in matters of health care management is not a static scenario. The
Autonomous Communities have gradually introduced new health care management formulae
which, while maintaining the public nature of the system, offer greater levels of efficiency, funding or
even transfer of risk from autonomous health care systems to the private sector. The risk transferred is
quite varied: it can be that inherent to health insurance activity, technological risk or that pertaining to
the design, construction or maintenance of hospitals, for example20.

Some Autonomous Communities have resorted to administrative concessions for the provision
of health care to an entire basic health area (Catalonia, Valencia or Madrid).

19 This is an issue addressed prior to the completion of the health care transfers to the Autonomous Communities in 2002, as proven by the fact
that the last strategic plan of the Insalud considered the transformation of hospitals into Public Health Care Foundations to provide them with
greater autonomy.
20 In addition, in line with the precedents applied in European countries such as Italy or the United Kingdom on shared risk in the acquisition of
medication (payment is subject to clinical results or cost effectiveness), there have been some recent initiatives in Autonomous Communities such
as Andalusia or Catalonia which have sought to transfer the risk to suppliers.

23


• In Catalonia, the new formulae of health care management, for instance, include associative
based entities (or EBAS, as of the Spanish). These are comprised of health care professionals
hired by the Catalan Health Care Service to provide health care services in Exchange for
capitated financing. They purchase the Specialist Health Care services and can share in a part
of the savings obtained in accordance with agreed standards.

• In Valencia21 or Madrid22 the health care within a catchment area was decided to be entrusted
to a Temporary Union of Companies. Similar to the EBAS, this entails the private
management of health care in exchange for capitated payment, but is attached to an
investment made in infrastructures by the concession holder.

Box 5: the Alzira Model

The Valencian government opened the Hospital de La Ribera in 1999. This is the first Spanish public
hospital built and managed under the administrative concession modality. In 2003 the concession went on to
include, in addition to provision of specialist care in the hospital, the primary health care services for the
municipality of La Ribera. This is the first time that the concession of the entire management of the public health
care service has been done in Europe. The four main characteristics of the Alzira model are:

1. Public funding via capitated payment. The Administration pays the concession holding company a
fixed and predefined annual amount per inhabitant. The concession holder assumes the specialist health care of
the health care department for a yearly amount, but the citizens have the change to choose the health center: the
concession holder must pay for health care services provided to the citizens assigned to its catchment area at
other centers at 100% of the average cost in the Valencian Community, but if a citizen from another catchment
area should decide to go to the hospital built and managed by the concession holder, the hospital shall only be
paid 80% of the average cost. In this way, the citizen has the freedom of choice of hospital, and the money
follows the patient.

2. Public Ownership: the center subject to concession is a public hospital, belonging to the network of
public hospitals. The initial investment for construction and equipment pertains to the concession holder. The
hospital shall be owned by the Generalitat (Valencian Autonomous Community Government) at the end of the
concession. The concession holder undertakes to deliver, at the end of the concession period, all assets in perfect
condition. Throughout the concession, the concession holder undertakes to make certain investments, by
presenting five year plans.

21 The model began with the concession of the construction and specialist health care in the Hospital de la Ribera in 1999 which, as of 2003 began
to also offer primary health care to a population of some 260,000 inhabitants. In 2006 the model spread to Torrevieja, in 2008 to Denia, in 2009 to
Manises and in 2010 to Vinalopó.
22 In Madrid the concessional model for health care services has been applied to the Hospital Infanta Elena (2007), Hospital de Torrejón (2011) and
to the Hospitals underway in Móstoles and Collado Villalba.

24


3. Public Control: the concession holder is subject to the clauses set forth in the specifications. The
Administration has the power to control and inspect, as well as regulatory and disciplinary powers. The
Administration has permanent control over the concession holder via the commissioner of the Health Care
Department, with a statutory or civil servant status, appointed by the Department he represents.

4. Private Service Provision: The awardee of the concession is a Temporary Union of Companies (UTE)
of which Adeslas (Grupo Agbar) is the majority shareholder, with 51% of shares. The concession holder cannot
obtain a return over and above 7.5%. In the event this percentage is exceeded, the surplus is used towards
making investments in the Department. The concession holder assumes the cost of statutory personnel dependent
on the Administration, which is billed at total cost plus Social Security. The towns of Alzira and Sueca has a
medical specialty center which was taken over by the hospital, including its personnel. Most of the physicians
decided to form part of the company structure and entered into employment contracts. By contrast, a high
percentage of nursing professionals decided to keep their status as statutory, albeit forming part of the hospital
staff.

This public-private collaboration helps to boost choice and competition. For instance, under
the abovementioned Alzira model, over 2000 beds are currently managed.

Furthermore, this is not limited to hospital centers, but can be applied to other areas such as the
Central Clinical Laboratory of Madrid23 or the project of the Radiotherapeutic Oncology of Gran
Canaria.

Table 3
With clinical management
Building+Equipment+Maintenance
+ Non-medical services
+ High technology
+ Specialist health care
+ Primary health care
+ Social and health care

23 This is located within the Hospital Infanta Sofía in San Sebastián de los Reyes and also provides service to five other Public hospitals and their

primary care catchment areas. It provides coverage (along with its six peripheral laboratories) to over 1,100,000 citizens in areas of clinical
analysis, biochemical analysis, hematology, genetics, microbiology, etc.

25


Table 3
Some Administrative concessions in Spain

No clinical mgmt.

Baix Valde moro, Alzira, Torrev ie ja,
Majadahonda Burgos Manises
LLobregat Torrejón, Denia, Manises,
Móstoles , Elche
Source: Ribera Salud Collado-Villalba

In Autonomous Communities such as Madrid, 7 hospitals have also elected to resort to private
funding of public infrastructures (PFI)24, frequently used in transport infrastructures, with no
provision of health care by the concession holder. The concession holder designs, builds, funds and
operates the hospital in all aspects other than the health care services provided therein. The
autonomous region health care department leases the hospital from the concession holding company
for a prolonged period, after which the hospital can become owned by the regional health care
system. The provision of health care continues to be the responsibility of the public health service
personnel, and the concession holder, in addition to building and maintaining the hospital, is the
holder of the concessions of the non-health care activities carried out therein: car park management,
security services, cleaning, food and beverage or waste disposal, among others.

In Murcia or the Canary Islands? (Balearic Islands?? Según la table debería ser las islas Baleares
no Canarias), the public-private collaboration takes place in the technological field. Siemens was
awarded in 2010 the concession for the provision, renovation and maintenance of clinical equipment
of the hospitals of Cartagena and Mar Menor for a 15 year period for 132 million. In the Balearics, the

24 This model, frequently used in the United Kingdom, enables politicians to implement new infrastructures without incurring in direct

expenditure and without acquiring debt, at least at the start, as is also the case with other transport infrastructures funde d via PFI. See Pablo
Vázquez, 2006.

26


Son Espases Hospital awarded in 2010 the respiratory care equipment (3.8 million) and image
diagnosis and treatment equipment (26 million) to General Electric Healthcare España for 7 years.

In summary, the “new management methods”, although still a minority, are being tried out
in many Autonomous Communities, but are mostly due to autonomous community initiatives,
which are not articulated by a national policy of analysis and comparison of results and
encouragement of the best formulae, beyond the establishment of the legal framework 25 to develop
them.

On their part, voluntary private insurance policies play a relatively lesser, albeit increasingly
relevant, part in the Spanish health care system. They are independent from the public system and
of an additional nature.

The non-profit private sector is present in the health care provision for occupational accidents
and professional diseases. Such contingencies are covered by a series of mutual insurance companies,
funded by the National Social Security Treasury, mostly by means of company contributions.

There is one notable exception: the three mutual insurance companies MUFACE (Mutualidad
General de Funcionarios Civiles del Estado), MUGEJU (Mutualidad General Judicial) and ISFAS
(Instituto Social de las Fuerzas Armadas) exclusively provide insurance coverage to civil servants
and their beneficiaries (4.8% of the population). They are financed by a mixed system of salary
contributions and taxes. Civil servants are the only group which can waive coverage of the National
Health System, electing fully private health care services, which is an option chosen, for instance, by
85% of the MUFACE mutualists. MUFACE, with 1,083 million euros, accounts for 67% of these
mutual insurance premiums in 2011 and the amount of claims paid to the insurance companies was of
1,042 million26.

25 Law 15/1997 of 25 April, on establishment of new forms of management of the National Health Care System, allowing health care services to be
provided by legal entities other than the State.
26 The MUFACE premium in 2008 was of 657 euros per annum compared to an expenditure of 1,189 euros of the SNS, excluding medications.

27


3. Key financial factors of the NHS

The forecast increases in health care expenditure pose a significant challenge to economies like
the Spanish one, subject to tight budgetary restrictions and highly leveraged. For this reason, health
care reforms are a very significant part of the fiscal consolidation process, and that UE regulations
require Stability Programs – to be presented by countries subject to excessive deficit procedures – to
explicitly spell out the health care expenditure expected in the long term.

3.1 The level of health care expenditure

The overall health care expenditure, public and private, in percentage of GDP in Spain is similar
to that of Italy (9.5%), the United Kingdom (9.6%), and the OECD (9.6%). On its part, Spanish public
health care expenditure in 2009 was of 7% of GDP, compared to the average of 6.9% of the OECD
(graph 4).

Graph 4
Public and health care expenditure % of GDP per inhabitant Public health care expenditure per inhab.
Private health care expenditure % of GDP per inhabitant Private health care expenditure per inhab.

EN ESTA TABLA, EN LOS NÚMEROS, HAY QUE CAMBIAR LAS “,” POR PUNTOS “.” Y LOS PUNTOS “.” POR COMAS “,”

28


Overall health care expenditure per inhabitant in Spain in 2009 ((3,067 US dollars in PPP)
is lower than the OECD average (3,233). Public health care expenditure per inhabitant in
Spain is of 2,260 US$/PPP compared to 2,354 of the OECD average.

Nevertheless, one of the main determining factors of the health care expenditure is
citizen income: health care consumption grows with user income. Therefore, Spain’s position
can be more clearly perceived if the GDP levels per inhabitant are considered (graph 5).

Graph 5
Health care ex penditure and GD P per inhabitant

Health care expenditure per inhabitant ($ PPP)
EEUU = USA
NOR = NOR
LUX = LUX
SUI = SWI
HOL = N ET
DIN = D EN
CAN = CAN
AUSTRI = AUS
ALEM = G ER
BEL = BEL
IRL = IR E
AUSTRA = AUS
FRA = FRA
SUE = SWE
RU = UK
ISL = ICE
ESP = SPA
ITA = ITA
FIN = FIN
NZL = NZL
JPN = JAP
GRE =GRE
ESLN = SLO

29


POR = POR
ISR = ISR
ESLQ = SLO V
COR = KOR
CHE = CZC
POL = POL
HUN = HUN
CHL = CHI
EST = EST
RU = RU
MEX = MEX
TUR = TUR
SA = SA
BRA = BRA
CHIN = CHI
INDI = IND
INDO = INDO

15,000 30,000 45,000 60,000 75,000 90,000

GDP per inhabitant ($ PPP)
Source: OECD

Consequently, it cannot be concluded that the NHS is making a substantially different
effort to that pertaining to Spain in terms of GDP per inhabitant, irrespective of the fact that
public health consumes many more resources.

3.2 Evolution of health care expenditure

In Spain, between 2000 and 2009, the cumulative growth of real public health care per
inhabitant was of 42%. In terms of average annual growth, Spain has experienced a trend in its
health care expenditure per inhabitant similar to that of the OECD average. However, its GDP
per inhabitant grew by considerably less that the OECD average (graph 6).

30


Graph 6
Evolution of the real health care per inhabitant
Cumulative growth (Base 2000 PPP $) Average annual growth 2000-2009 in %
170.0% 160.0% 150.0% 140.0% 130.0% 120.0% 110.0% 100.0% Portugal 1.5 0.5
France Japan The Netherlands Italy 1.6 -0.2
Spain Sweden United Kingdom Switzerland 2.0 0.7
(Base 2000 PPP $) Germany 2.0 0.6
Source: OECD and own preparation France 2.2 0.5
Japan 1.1 2.8
Hungary 2.8 2.2
USA 3.3 0.6
Denmark 3.3 0.1
Sweden 3.4 1.1
OECD 4.0 1.6
Spain 4.0 0.8
Belgium 4.0 0.7
The Netherlands 4.4 1.6
United Kingdom 4.8 1.0
Ireland 6.1 1.1
Greece 6.9 3.9
Poland 7.3 3.9
Average rate of real growth in health care
expenditure per inhabitant
Average real growth rate of GDP per inhabitant

Outlook and determining factors for growth in health care expenditure

There are various projections on the future of health care expenditure (table 4).

Table 4
Projections on the increase of health care expenditure as % of GDP
Body EC OECD IMF Scenario
Period 2007-2060 2005-2050 2010-2050 Stability Program
Countries European Union OECD Advanced 2012
Central scenario 1.5pp - 3.0pp -
Confidence interva l 0.7-2.4pp 2.0-3.9pp 2.1-4.1pp -
Central scenario (Spa in) 1.6 pp - 1.6pp 1.2pp
Confidence interva l(Spa in) 1.0-2.6pp 2.3-4.1pp 0.8-2.4pp -

Source: Hernández de Cos & Moral-Benito and update of the Stability Program 2012

IMF forecasts, for instance, show more budgetary impact on national health systems than
on pension systems in the coming decades (table 5). In 2030 the cost health care as a percentage
of GDP in Spain will be 1.6pp higher than in 2010. The growth is much lower than that expected
in the United Kingdom, Portugal and, above all, the US (5.1pp, which is three times the growth
of the share of the GDP in Spain represented by health care cost).

The net present value of this variation in the period 2010-2050 is equal to half the current
GDP in Spain, a significant amount which in the US accounts for no less than 164% of the GDP,
or 113% of GDP in the United Kingdom.

Table 5
Structural fisca l indicators
% GD P, unless othe rwise indicated
Variat ion in cost of Net present value of the Variat ion in the c ost Net present value of the Gross funding
pensions 2010-2030 variation in c ost of of health care variation in the cost of needs
pensions 2010-2050 2010-2030* health care 2012
2010-2050*
France 0.1 -0.7 1.5 43.8 18.2
Germany 1.1 30.4 0.9 28.1 8.9
Greece 0.3 21.0 3.2 106.9
Italy -1.6 -33.7 0.6 18.8 28.7
The Netherla nds 2.4 58.5 2.6 79.3 14.9
Portuga l 0.7 21.4 3.5 116.5 26.7
Spain 0.5 33.6 1.6 51.5 20.9
United Kingdom 0.4 12.7 3.3 113.3 14.8
United States 1.7 37.9 5.1 164.5 25.8

31


* The forecast health care expenditure does not include the recent reforms (or reform plans)
Source: IMF

On its part, in the update of 2012 National Stability Program, the Spanish government’s
forecast growth in public health care cost expressed as a percentage of GDP between 2010 and
2050 is of 1.2 points, below that of 1.6pp of the IMF. The forecasts made by the Spanish
Government take into account the impact of the recent reform contained in RDL 6/2012 (box 6).

Box 6: The Health Care reform (RDL 6/2012) in the Update of the Stability Program 2012

The Central Government has taken a number of steps affecting the sustainability of public health
care managed by the Autonomous Communities, with savings which could amount to 7,267 million euros
per annum.

Among these are the rationalization in the demand for medications, with an overall increase in the
percentage of co-payment in the purchase of pharmaceutical products according to income level, the
control of the number of prescriptions per patient, and the introduction of co-payment for the first time
among pensioners, likewise according to income levels and with a fixed monthly limit, excluding the long
term unemployed and those receiving non-contributory pensions.

In addition, a centralized purchase platform is created (the State will purchase directly from
Autonomous Communities suppliers), with the ensuing savings for prompt payment. Of note are also the
energy efficiency plans and application of new information technology and communications applications;
the restrictions on the access to certain services by non-residents and the prevention of the fraudulent
obtention of the health card to prevent “health care tourism”; and the implementation of a new single
health card for the whole of the country. Finally, the portfolio of services will be organized, establishing
one which is basic, common and free of charge, and one of additional services where users will pay for a
share of the cost, and another portfolio of additional services to be decided by the Communities, which
will assume the cost of the latter.

Estimate hea lth care savings
on an annua l basis in mill ions of euros
Estimated
savings
Measures

Reform of NHS insura nce, cit izens from other countries 917

Organization of NHS serv ice portfolio 700

Improvement in the effic iency of the heal th care offering 1,500

Rationalization of the de mand for pharmaceutical products:

Prescript ion of generic drugs , modification of reference prices 3,550

Organization of Health Care human resourc es 500

Rest of measures 100

Total 7,267

Source: Hea lth Ministry

32


In addition, the Health Care Guarantee Fund is created as a compensation fund for the
Autonomous Communities spending more than the amount estimated in provision of health care for
foreigners in the country entitled to health care in their countries of origin, patients referred between
Autonomous Communities and care provided to patients when moving within the NHS territory. Other
measures include the rationalization of the pharmaceutical supplies (the application of reference prices to
equivalent therapeutic groups, the additional encouragement of use of generic drugs, or the withdrawal of
funding from drugs with low therapeutic value or very low market prices, except for those in the lowest
income brackets; and the organization of human resources in the health care area, improving mobility and
establishing a catalog of conversion levels in professional categories.

According to available literature, the factors which determine the growth in health care
expenditure have to do with new health care technologies, new health care usage habits,
population aging, level of income and growing expectations regarding health care.

• Technological innovation is the most important factor determining health care
cost. It accounts for between half and three quarters of all the growth in health
care expenditure, although its effect is not always the same: it can also contribute
to the reduction in cost by introducing efficiency gains in the system or the
improvement in the state of health of patients which avoids the need for a longer
and more costly health care process.

Table 6
Main applications of the Technological Innovations in health care
Enables the personalized and individualized tracking of each patient according to genetic
Personalized medicine
profile, identifying conditions prior to onset, and providing early treatment
Improves diagnosis of diseases . Main development: integration of PET and CT systems to
Imaging Diagnostics
provide more accurate methods of identifying and classifying tumors
Enables development of more effective materials to prevent, predict, diagnose and treat
Nanomedicine prevalent and very costly diseases: cancer, myocardial infarction, diabetes, Parkinson or
Alzheimer
Priority area in the European Union, Japan and the US.
Main lines of research:
• “Third generation” biomaterials: the body’s own genes control tissue repair
• Implants which can cope with mechanical functions immediately after having been
implanted
Biomaterials • Intelligent materials for controlled release of dr ugs, able to react to metabolic
changes and adapt dosage in real time to condition of patient
• Heart prostheses manufactured from stem cells
• Biocompatible microelectrical systems enabling the application of implantable
sensors/activators (diabetes, Parkinson or epilepsy)
• Biocompatible artificial blood of a transgenic or chemical origin as a temporary
resource in the event of large blood loss
Program for Overall
New models of care based on a system of continued and coordinated services,
Chronic Disease
encouraging patient involvement in disease management
Management
Enables interconnection with professionals with different centers, provision of better
Telemedicine diagnoses and treatments and patient follow -up without requiring such frequent physical
presence in health care centers
Shortens post-surgical period and hospital stay, reducing health care costs and waiting
Minimally invasive
lists
surgery (MIS)
• USA: 10% of 15 million surgical procedures each year are performed using these

33


techniques and the use thereof is widespread in general surgery, gynecology, plastic
surgery, chest surgery and vascular surgery
• Europe: less widespread, but it is estimated than in 5 years’ time 25% of procedures
will be performed with MIS. Important inroads are being made in brain, heart and
abdominal surgery.
These allow the proper use of information within the health care environment. They help
information exchange among professionals. They speed up medical practice. They help to
Information systems
improve the quality of diagnoses and enable better treatment of diseases, which provides
equal treatment of patients and improved efficiency in the use of resources.
Source: PwC, 2010

• The contribution of the aging of the population to the growth in health care
costs, according to the various analyses and projections27, is relatively small in
comparison with the costs derived from technological progress: between 10 and
30% of the expected increase in such costs. Estimates made in this area are being
adjusted in light of new evidence such as that of “compression of morbidity”,
that is, greater life expectancy but shorter life periods with poor health 28; “health
care usage rate”, which are lower among the very elderly, and the possibility of
healthier aging as certain lifestyles change.

That is to say, an increase in the cost used to promote interventions in the health
care system such as the control of chronic diseases or early prevention may have
a significant effect on the reduction of future health care costs, thus contributing
towards the sustainability of the system. Investments made in these health care
means are financially necessary in order to achieve the viability of the system in
the long term. The fact that health care costs increase with age does not mean
that, inevitable, aging populations should generate unfeasible costs.

• Citizen expectations are based to a large extent on better access to information.
Their expectations exert a pressure on health care managers and professionals to
open up the access to the latest technologies even if, on occasions, these do not
provide benefits which justify the incremental cost.

• Income in absolute terms or by inhabitant is associated to growth in health care
expenditure. As such, the OECD estimated that 2.3pp of the growth of 3.6% of
the public health care expenditure per inhabitant in OECD countries between
1984 and 2001 was due to the income factor. There is currently no unanimity with

27 Health systems, health and wealth: Assessing the case for investing in health systems (Josep Figueras, Martin McKee, Suszy Lessof, Antonio

Duran, Nata Menabde, 2008).
28 The evidence suggests that the health care cost depends to a larger extent on proximity to death that on age. The evidence from

several countries is that there may be a process of compression of morbidity as a result of healthier lifestyles and more accessible and
effective medical treatments.

34


regard to the consideration of health care as “normal goods” (its demand grows
at the same rate as income) o as “luxury goods” (its demand grows
proportionally more than income). In any event, in Spain the cost of health care
per inhabitant has been increasingly proportionally more than the GDP per
inhabitant.

• Finally, the prices of health care supplies also tend to be associated with the
upward trend in expenditure in this area: pharmaceutical products, capital
investments or, specifically, employee remuneration. Salaries are particularly
important is a sector which largely continues to rely on human resources.
Productivity growth in the health care sector is lower than in other sectors and
salaries tend to increase more than productivity, leading to an increase in its
weight in the GDP29.

In summary, irrespective of the greater or lesser relative impact of such factors, it is
important to underline that, to a certain extent, these are not exogenous. In other words, the
factors determining the growth in health care cost are associated with all participants in the
system (citizens, industry, health care professionals and managers), and therefore health care
policy must ensure that every one of them contributes to its containment.

The growth of health care expenditure in Spain

The items which explain the development in health care cost are, according to the
economic breakdown of cost, personnel costs and, according to functional classification,
hospital and specialist care and pharmaceutical care.

44% of public health care expenditure is used to meet personnel costs and 25.5% to
pharmaceutical products via medical prescriptions (19%) or hospital dispensation (6.5%). Both
expenditure items accounted in 2009 for 69.5% of health care cost (graph 7).

29 This circumstance is usually explained by resorting to models such as that of the “imbalanced growth” of Baumol, thus known as the

“Baumol disease”.

35


Graph 7
Components of Spanish health care expenditure as % of total

Personnel remuneration

Hospital and specialist services

Primary health services

Prevention and public health

Pharmacy

The dotted line represents an expenditure item in economic breakdown and the continuous lines the breakdown by function

This is why the sum of both percentages exceeds 100%

Source: Public Health Care Statistics of Ministry of Health and own preparation

ES NECESARIO MODIFICAR LAS COMAS “,” DE LAS CIFRAS POR PUNTOS “.” EN LOS NÚMEROS DE ESTA
TABLA.

• Personnel costs: in 2010 583,000 employees worked in the NHS (graph 8): 58% as
health care personnel in hospitals and 11% as health care workers in primary
health care centers. The remaining 30% was non- health care personnel.

Graph 8
Number of NHS employees and % variation rates in NHS employment and personnel cost

Year on year variation in total wages bill

Year on year variation in NHS employment

36


Total employed EPA (Active Population Poll)

Source: INE

ES NECESARIO MODIFICAR LAS COMAS “,” DE LAS CIFRAS POR PUNTOS “.” EN LOS NÚMEROS DE ESTA
TABLA.
TAMBIÉN HAY QUE MODIFICAR LOS “.” POR “,”

Between 2000 and 2010 the total wages bill of the NHS has grown by an average
of 8.9% compared to the average staff growth of 3.3%.

This increase in personnel has not gone hand in hand with a more flexible
public employee legislation, which impairs effective management of human
resources. This impairment is due to the allocation of permanent positions, the
rigidity of working schedules and the lack of alignment between incentives for
health care personnel and the health care objectives of the system, as well as the
vulnerability of health care managers to the political cycle.

Thus, for example, PWC30 quotes the case of Catalonia where, since 1981, the
construction of hospitals under the traditional system had not been encouraged
in order to promote independent management and labor personnel in the new
institutions.

• Pharmaceutical expense: During the period 2005-2009 the pharmaceutical
expense has dropped by two points, reaching 19.2% of overall cost. In 2011 the
public expenditure on prescriptions amounted to 11,136.4 million euros, of
which 80% pertains to pensioners.

The pharmaceutical expenditure control policies, directed specifically to the
drugs provided via medical prescription, have meant a significant reduction in
the growth rates of pharmacy costs (graph 9).

30 Ten hot topics in Spanish Health Care for 2012. Two simultaneous agendas: cuts and reforms (PwC, 2012).

37


Graph 9

Annual average growth in pharmaceut ical c ost per inha bitant 2000-2009

Ireland O ECD Japan Spain Portugal Switzerland Italy

-0.5 0.0 5 .0 10 .0 15 .0

Year on year variat ion rate in pharmaceutic al cost in NHS

Source: Ministry of Health

The application of measures since 2010 to reduce pharmaceutical
expenditure has led to a drop in prescription cost of 10.9% in 2011 over that
of 2009. In spite of the increase in the number of prescriptions, the reduction
in the average cost per prescription has led to an overall drop in the cost
(table 6).

Table 6
Evolut ion of public pharmaceutica l cost (pharmacy outlets)
Cumulat ive Cumulat ive % var iation
December 2011 December 2009 2011/09
Expenditure ( millions of 11,136.4 12,505.7 -10.9
euros)
Prescript ions (millions) 973.2 934.0 4.2
Average cost per 11.4 13.4 -14.6
prescript ion
Source: Ministry of Health, Social Services and Equality

Spain is approximately 50% below the Eurozone average in terms of co-
payment per inhabitant and percentage of pharmaceutical public
expenditure. The average co-payment per prescription billed (57.7 million)
was of 83 cents of a euro in 2010, the lowest amount in the last decade.

In 2010, the total revenue collection of Spain by way of beneficiary
contributions through purchase of medications in pharmacy outlets
amounted to 790.9 million euros, which is 6.48% of the public
pharmaceutical cost of that year.

38

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