fiscal sustainability of health systems - chris james & camila vammalle, oecd

FISCAL SUSTAINABILITY OF HEALTH SYSTEMS Bridging Health and Finance Perspectives

4th Meeting of the Joint Network 16-17 February 2015, Paris Chris James (Health Division), Camila Vammalle (Budget Division)

Fiscal Sustainability of Health Systems: Bridging Health and Finance Perspectives

Country case studies

Analytical work

Discussions during

meetings

2

The OECD Joint Network on Fiscal Sustainability of Health Systems

Health budgeting

survey

Presenter

Presentation Notes

Over last twenty years, average growth rate of public health spending > GDP growth => concerns of the fiscal sustainability of health systems. => Creation of the Joint Network 3 years of work, 3 meetings, 1 survey on budgeting practices for health, 3 case studies, analytical work => Publication that we are presenting today.

SYNTHESIS

3

Healthcare considered by most budget officials as one of the most complex expenditure areas and one of the hardest areas to control costs

• Very high priority for citizens

• Many stakeholders involved

• Great institutional variation across countries

4

1- Why is controlling expenditure on health care such a challenge?

Presenter

Presentation Notes

High priority for citizens => closely watched Many stakeholders between the beneficiary of care (citizen/patient) and the public resources to finance it Purchasers (MoH, SS, Social insurance funds, SNGs) Service providers (clinicians, hospitals, clinics) Providers of medecines, tests and equipment (pharma companies) Great institutional variation Financial resources (taxes vs. social security contributions) Management (by government or independent SS institution or SNG) Service provision (public or private)

5

2- Fiscal sustainability of health framework (1/4)

Public management, coordination and financing •Direct controls on pharmaceutical prices / profits •Health technology assessment •Monitoring and evaluation

Demand-side •Gatekeeping •Preferred drug lists •Cost sharing?

Diagnosis: Information needs

•Political agreement on targets •Coordination mechanisms amongst key stakeholders •Degree of decentralisation of health services •Boundaries between public and private spending on health

Treatments: Policy levers

•Long-term forecasts •Medium-term spending requirements •Timely information on spending •Linking spending projections to estimated revenues

Risk factors: Political and Institutional context

Supply-side •Provider payment methods •Provider competition •Generic substitution •Joint purchasing •Budget caps

Presenter

Presentation Notes

Today, budget and health officials face the shared challenge of ensuring that any increase in health spending respect fiscal sustainability constraints, while delivering the best value for money. To achieve this, countries need to create or strengthen appropriate governance frameworks and policy tools to: “Diagnose” fiscal sustainability challenges 2. Identify the “risk factors” to the fiscal sustainability of health systems 3. Develop “treatments” to ensure greater sustainability of health spending

6


1- Diagnosis: Information needs


Presenter

Presentation Notes

1. Tools needed to “Diagnose” fiscal sustainability challenges Governments need information about healthcare spending and funding sources. This includes: long-term forecasts, taking into account demographic and economic factors; short-term spending requirements that governments can use to set/shape/establish their budgets; timely information on actual spending; and an evaluation of the evolution of possible revenue sources (taxes and/or contributions). For example: Population ageing will affect how governments finance health services, particularly in countries that are more reliant on social security contributions, as population ageing will reduce the revenue-raising potential of social security contributions over time. => tendency of these countries to diversify revenue sources, e.g. France “Early warning systems” have proven effective in several countries to allow corrective measures. However, such systems need timely information, and, in some countries, information on actual spending can take up to two years to be reported to the Ministry of Finance. Some countries have also used spending reviews to identify potential savings in health expenditure.

7


•Political agreement on targets • Coordination mechanisms amongst key stakeholders

•Degree of decentralisation of health services • Boundaries between public and private spending on health

2- Risk factors: Political and Institutional context

Presenter

Presentation Notes

2. Identify the “risk factors” to the fiscal sustainability of health systems Political and institutional factors can play a major role in promoting the intrinsic sustainability of health systems. These factors include: political agreement on the need to control health expenditure growth and on specific targets; effective coordination mechanisms among the different stakeholders; the degree of decentralisation of health services (in terms of functions and revenues); and the boundaries between public and private spending on health. While these supportive factors can be influenced in the medium to long term, they are more difficult to change in the short term, and their absence can be interpreted as risks to the fiscal sustainability of health systems. For example: The survey of budget practices in health shows that most countries have targets or ceilings for health spending over several years. Nonetheless, over-spending in health (i.e. spending more than the budgeted amount) remains endemic in many OECD countries.

8




3- Treatments: Policy levers


Presenter

Presentation Notes

3. Develop “treatments” to ensure greater sustainability of health spending There are a number of policy levers and tools which can be put in place to promote greater sustainability of healthcare spending without compromising important achievements in access and quality of healthcare. These include: Supply-side policies, such as provider payment methods, provider competition, generic substitution and joint purchasing; Demand-side tools, such as gatekeeping or preferred drug list; Public management, coordination and financing policies, such as direct controls on pharmaceutical prices/profits, health technology assessment or monitoring and evaluation; and Revenue policy. For example: On the supply side, for example, pharmaceutical generic and purchasing policies have helped contain costs across a range of countries. On the demand side, expanded cost-sharing has helped contain costs but with adverse impacts on access to care. There is some evidence that physician gatekeeping and preferred drug lists have contained costs without adverse effects on patients; encouraging private health insurance, however, has not been effective in relieving public budgeting pressures. Public management, coordination and financing reforms have had varying degrees of success. Direct control of pharmaceutical prices and profits has proved effective in containing costs, but the long-term effects remain controversial. Health Technology Assessments that include cost-effectiveness analysis can promote more informed, realistic decisions on public healthcare provision, but there are few studies of their impact on public health expenditure to date. On the revenue side, care needs to be exercised in advocating ever-increasing revenues as a response to rising expenditure pressures – not least given the distortionary economic effects of high marginal tax rates. Where additional revenues are required, a move towards broader-based models would appear appropriate, especially in countries with health insurance systems that are more reliant on payroll taxes. I will stop here as my colleague Chris will get a little deeper into these issues when he presents the main results by chapter.

MAIN MESSAGES BY CHAPTER

9

Chapters

1. Fiscal sustainability of health systems – why is it an issue, what can be done?

2. The challenge of budgeting for healthcare programmes

3. Budgeting practices for health in OECD countries

4. Decentralisation of health financing and expenditure

5. The impact of cost containment policies on health expenditure

6. Country experiences in dealing with fiscal constraints following the 2008 crisis

7. The effects of ageing on the financing of social health provision

8. Healthcare budgeting in France

9. Healthcare budgeting in the United Kingdom

10. Healthcare budgeting in the Netherlands

10

Fiscal Sustainability of Health Systems: Bridging Health and Finance Perspectives

Presenter

Presentation Notes

Following slides provide some of the key points from each chapter, though note inter-linkages between chapters

11

Health spending is likely to continue to grow as a share of the economy

AUS

AUT BEL

CAN

CHL

CZE

DNK

EST

FIN

FRA

DEU

GRC HUN

ISL

IRL

ISR

ITA

JPN

KOR

LUX

MEX

NLD NZL

NOR

POL

PRT

SVK

SVN

ESP

SWE CHE

TUR

GBR

USA

0%

2%

4%

6%

8%

0% 2% 4% 6% 8%

Gro

wth

in r

eal h

ealt

h s

pen

din

g p

er c

apit

a

Growth in real GDP per capita

Average annual growth rate of real total health spending and GDP per capita, 1990-2012 (or nearest year)

5.5

7.9

11.8 0.8

1.6

2.1

0

2

4

6

8

10

12

14

16

OECD

% Health careLong term care

Average (2006-2010)

Cost-containment scenario: 2060

Cost-pressure scenario: 2060

Projected public health and long-term care expenditure as % of GDP in 2060

Chapter 1 Source: De La Maisonneuve and Oliveira Martins, 2013 Source: OECD Statistics

Presenter

Presentation Notes

*despite a temporary slowdown following the economic crisis

• We reallocate public funds from other areas or raise new funds (but is this efficient, feasible?)

• We improve value for money and the efficiency of public funding for health (but is this equitable, feasible?)

• We reassess the boundaries between public and private spending (but is this efficient, equitable, feasible?)

12

This will put great pressure on public budgets unless…

Chapter 1

• Political demand for good quality health services makes public spending on health harder to control

• Future support for government spending on health will be shaped by views on redistribution as much as economic drivers of future revenues

13

Fiscal sustainability of health systems is also a question of political economy

Chapter 2

Presenter

Presentation Notes

Publicly financed health systems entail high degree of redistribution from healthy to sick and from wealthier to the less affluent.

14

Achieving fiscal sustainability is easy…

…it’s how you achieve it that matters

15

Survey of budget officials illustrates range of policy levers to control costs & their limitations

8%

35%

19%

38%

There is an EWS and sets in motionrequired action for future yearsThere is an EWS and sets in motionrequired action for the current yearThere is an EWS, but an alert does notlegally require actionNo EWS

0 1 2 3 4 5 6

NetherlandsSwitzerland

FinlandAustria

Czech Rep.France

GermanyMexico

NorwayUK

AustraliaChile

DenmarkEstonia

HungaryNew Zealand

PolandSlovak Rep.

SloveniaKorea

(months) None 1 to 2 3 to 6 6 to 12 12 to 24

Early warning systems (EWS) Delay in reporting health expenditure to central budget agency

Chapter 3

Presenter

Presentation Notes

Many countries have developed early warning systems but delays in reporting expenditure information may reduce their ability to take corrective measures

• SNGs responsible for 30% of health expenditures on average; share reaches over 90% in some federal, quasi-federal and north European countries

• Soft budget constraints and geographical inequalities key challenges for decentralised systems

16

Sub-national governments are responsible for an important share of health spending

Chapter 4

17

Some policies have contained costs without adverse effects on access to services and quality

Evidence of cost containment More mixed or adverse impacts

Supply-side

•Provider payment reform •Provider monitoring and competition •Pharmaceutical generic and purchasing policies

•Automatic cuts in health budgets •Insurer competition •Workforce legislation

Demand-side

•Physician gatekeeping •Preferred drug lists

•Expanded cost-sharing •Private health insurance

Public management, coordination and financing reforms

•Direct control of pharmaceutical prices and profits •M&E, HTA?

•Decentralisation of health system functions

Chapter 5

Presenter

Presentation Notes

Note on HTA promoting more informed, realistic decisions on public healthcare provision, but few studies of their impact on public health expenditures (and methodologically difficult to do)

• Some strategies appeared useful in enhancing value-for-money, e.g. pharmaceutical reforms

• Other interventions risk worsening access or even increasing costs in the long term, e.g. cost-sharing, reduced spending on prevention

18

Country responses to global financial crisis were necessarily short-term

Chapter 6

• Reduces revenue-raising potential of social security contributions – Some OECD countries have broadened their revenue base,

and moved to less distortionary taxes

• Sin taxes can only have a modest role in financing health services (though have important public health effects)

19

Population ageing will affect how governments finance health services

Chapter 7

Presenter

Presentation Notes

Particularly countries with SHI systems that are more reliant on payroll taxes

• France: spending targets (ONDAM) since 1996; broadening of revenue base since intro of CSR

• UK: budget caps met largely through pay freezes / growth limits & abolishing tier of NHS management

• Netherlands: assessment of regulated competition for health insurance introduced in 2006

20

Country experiences show reform initiatives require buy-in from key stakeholders

Chapters 8, 9, 10

Presenter

Presentation Notes

France: ONDAM, introduced in 1996, became more effective when EWS was introduced and was linked to payments being withheld from health providers. UK: 9 regional strategic HAs removed. Netherlands: early evidence suggests that it has led to better quality care, with positive and negative effects on costs. But has also reduced government’s ability to contain costs.

21

Fiscal sustainability of health framework



Diagnosis: Information needs

•Political agreement on targets •Coordination mechanisms amongst key stakeholders •Degree of decentralisation of health services •Boundaries between public and private spending on health

Treatments: Policy levers


Risk factors: Political and Institutional context


Presenter

Presentation Notes

To achieve this, countries need to create or strengthen appropriate governance frameworks and policy tools to: “Diagnose” fiscal sustainability challenges 2. Identify the “risk factors” to the fiscal sustainability of health systems 3. Develop “treatments” to ensure greater sustainability of health spending

THANK YOU

[email protected] and [email protected]

22

fiscal sustainability of health systems - chris james & camila vammalle, oecd

Government & Nonprofit

health expenditure

health treatments

health care

health services boundaries

fiscal constraints

healthcare budgeting

private spending

spending projections