Adapting revenue policies to health needs and expenditure projections - Tamas Evetovits and Sarah Thomson, WHO
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This document summarizes key points from a WHO meeting on adapting revenue policies for health needs. It finds that while health spending increased in many high-income countries pre-crisis, it did not in less developed WHO European countries. During economic crises, health spending should increase as public funding replaces private spending. The document examines options like deficit financing, tax increases and efficiency gains. It also discusses the importance of counter-cyclical revenue mechanisms to maintain funding levels during downturns and contain growth during prosperity. Broadening revenue sources beyond payroll taxes and increasing public rather than private spending were seen as important for fiscal sustainability and reducing out-of-pocket costs.
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Adapting revenue policies to health needs and expenditure projections - Tamas Evetovits and Sarah Thomson, WHO
- 1. Division of Health Systems & Public Health Adapting revenue policies to health needs and expenditure projections Tamás Evetovits & Sarah Thomson WHO Barcelona Office for Health Systems Strengthening OECD meeting of the Joint Network on Fiscal Sustainability of Health Systems, 16-17 February 2015
- 2. Stable and predicatble revenues for health – growing or not Sustainable public financing for health The dialogue needs to continue Outline
- 3. While health has taken an increasing 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%
- 4. WHO and European Observatory joint study on the crisis http://www.hfcm.eu Policy summary
- 5. The financial crisis reminded us of the importance of counter-cyclical spending on health • Health systems always need stable revenues • In an economic crisis public funding levels should increase as household incomes fall: – means-tested entitlement to public services – greater need for health services – people substitute public services for private
- 6. Policy options for health when government revenues fall Cut spending to match revenue • Doing nothing as government revenues fall • Targeting the health budget for cuts to achieve fiscal consolidation objectives Find additional revenue • Deficit financing • Countercyclical mechanisms • Reallocation across government • New earmarking • New taxes Get more out of available revenue sources • Enforce collection • Lift contribution ceilings • Abolish pro-rich tax subsidies • Broaden public revenue base
- 7. Public spending on health fell disproportionately in many countries Source: WHO NHA database, 2013 -30 -20 -10 0 10 20 30 40 50 Armenia Latvia Ireland Azerbaijan Montenegro Kyrgyzstan Turkmenistan Luxembourg Iceland Croatia Portugal Greece Ukraine Slovenia Spain fYRMacedonia Denmark Slovakia Norway Lithuania Finland Malta RussianFederation France SanMarino Andorra Romania Hungary Serbia Netherlands UnitedKingdom Italy Belgium Germany Israel Poland Turkey Austria Sweden Estonia CzechRepublic Cyprus Albania Bulgaria Switzerland RepublicofMoldova Uzbekistan BosniaHerzegovina Monaco Georgia Kazakhstan Belarus Tajikistan Pro-cyclical public spending on health Change in the health share (%) of total government spending, 2007-2011
- 8. Not about tax-financed NHS vs earmarked SHI Source: WHO NHA database, 2013 -30 -20 -10 0 10 20 30 40 50 Armenia Latvia Ireland Azerbaijan Montenegro Kyrgyzstan Turkmenistan Luxembourg Iceland Croatia Portugal Greece Ukraine Slovenia Spain fYRMacedonia Denmark Slovakia Norway Lithuania Finland Malta RussianFederation France SanMarino Andorra Romania Hungary Serbia Netherlands UnitedKingdom Italy Belgium Germany Israel Poland Turkey Austria Sweden Estonia CzechRepublic Cyprus Albania Bulgaria Switzerland RepublicofMoldova Uzbekistan BosniaHerzegovina Monaco Georgia Kazakhstan Belarus Tajikistan Pro-cyclical public spending on health Change in the health share (%) of total government spending, 2007-2011
- 9. Level of public spending on health is highly dependent on governments’ priority to health Publicspendingonhealthas%allpublicspending Source: WHO 2014
- 10. Lessons from the Baltics: counter-cyclical mechanisms are critical Latvia • Tax funded health system was cut more than other sectors under fiscal pressure of similar mag- nitude to LTU and EST Estonia • HIF reserves could have covered decline in payroll tax revenue: use of reserves was modest as fiscal balance got priority Lithuania • Highly effective formula-based budget transfers to compensate for lower payroll tax revenue secured stable revenue for health
- 11. Unmet need due to cost among the poorest quintile: countries with > 1 percentage point increase, 2008-2013 (and LTU) Source: EU-SILC The “successful” fiscal adjustment program in Latvia: how much inequity is “sustainable”? % 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 2008 2009 2010 2011 2012 2013 Latvia Greece Italy Cyprus Poland Iceland France Belgium Portugal Luxembourg Ireland Lithuania Spain
- 12. Estonia was well prepared but prudence in the health sector was used to balance the government budget Source: T. Habicht, EHIF, www.haigekassa.ee
- 13. Lithuania’s formula for budget transfers ensured public funding levels were stable Source: Jowett et al in Thomson et al 2014
- 14. Beveridge vs Bismarck? Lithuania is setting a new standard in the Baltics and beyond Tax-financed (Latvia): unpredictable annual allocation decisions make stakeholders argue for earmarking SHI: exclusive reliance on earmarked payroll tax is unsustainable in the long run (message for Estonia) Lithuania: balanced revenue mix of payroll tax and budget transfers with counter-cyclical mechanisms
- 15. Counter-cyclical revenue for health is good for sustainability It helps maintain spending levels when it is most needed i.e. during a downturn It helps contain growth in health spending during economic prosperity
- 16. Sustainable public financing for health Broadening the revenue base Reducing reliance on social insurance contribution by using general tax Sin taxes may have an increasing but modest role Increasing efficiency of spending and improving targeting for equity
- 17. Income tax is usually more progressive than social contributions Source: Verbist and Figari 2014
- 18. Source:Võrk(2009),Income-relatedinequalityinhealthcarefinancingandhealth careutilisationinEstonia2000-200,Tallinn:PraxisCenterforPolicyStudies -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 Payroll tax Income tax VAT Tobacco tax Alcohol tax OOPs Distributional effect of different revenue collection mechanisms Progressive Regressive Indirect taxesDirect taxes
- 19. Is more private financing the answer to fiscal sustainability concerns? Is it feasible? Will VHI markets develop to address gaps in coverage and minimise OOPs? Is it desirable?
- 20. 0 10 20 30 40 50 60 70 80 90 100 CzechRep UK Denmark Japan Austria Luxembourg NewZealand Netherlands Germany Slovenia France Slovakia Estonia Sweden Turkey Finland Belgium Spain Australia Ireland Canada Hungary Greece Portugal Switzerland Israel Chile Mexico RepofKorea PHI Other private PHI generally accounts for a small share of private spending on health Source: WHO GHO 2015 %privatespendingonhealth OOPs <15% TEH 15-24% 25-34% 35%+
- 21. More PHI does not mean less OOP Source: WHO GHO 2015 AUT BEL BUL CYP CZE DEN EST FIN FRA GER GRE HUN IRE ITA LAT LIT LUX MTA NET POL POR ROM SLO SPA SWE UK 0 10 20 30 40 50 60 0 2 4 6 8 10 12 14 16 OOPs%totalhealthspending PHI % total health spending
- 22. But less public spending does mean more OOPs Source: WHO GHO 2015 R² = 0.5815 0 10 20 30 40 50 60 70 80 0 1 2 3 4 5 6 7 8 9 OOPs%oftotalspendingonhealth Public spending on health as % GDP
- 23. Lowering public spending on health is a poor solution to fiscal sustainability When OOPs are more than 15% of TEH, we begin to see catastrophic spending by poorer households
- 24. „Improving efficiency is a far better option than cutting back on services or imposing fees that punish the poor” (Margaret Chan, WHO DG) Efficiency gains are part of the solution… …but efficiency gains alone are NOT the solution
- 25. The dialogue needs to continue Health: Give us more money, we know how to spend it well. Finance: Improve efficiency first and then we may give you more Focus on spending more efficiently Acknowledge fiscal constraints Growth in health spending is to stay and it is not a bad thing Acknowledge equity implications of OOPs Fiscal sustainability is meaningless if not linked to public policy objectives
- 26. WHO Barcelona Office for Health Systems Strengthening Established in 1999 Supported by the Government of the Autonomous Community of Catalonia, Spain Focuses on health systems financing: analytical work and capacity building Staff work directly with Member States across the European Region Part of the Division of Health Systems & Public Health of the WHO Regional Office for Europe www.euro.who.int Contact us: Sant Pau Art Nouveau Site Nostra Senyora de La Mercè pavilion Sant Antoni Maria Claret 167 08025 Barcelona, Spain Email: whobar@euro.who.int