This presentation was made by Chris James and Camila Vammalle, OECD, at the 4th meeting of the Joint DELSA/GOV-SBO Network on Fiscal Sustainability of Health Systems held in Paris, on 16-17 February 2015.

1. 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)

2. 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

3. SYNTHESIS
3

4. 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?

5. 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

6. 6
2- Fiscal sustainability of health framework (2/4)
1- Diagnosis:
Information needs
•Long-term forecasts
•Medium-term spending requirements
•Timely information on spending
•Linking spending projections to estimated
revenues

7. 7
2- Fiscal sustainability of health framework (3/4)
•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

8. 8
2- Fiscal sustainability of health framework (4/4)
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?
3- Treatments: Policy levers
Supply-side
•Provider payment
methods
•Provider
competition
•Generic substitution
•Joint purchasing
•Budget caps

9. MAIN MESSAGES BY
CHAPTER
9

10. 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

11. 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%
Growthinrealhealthspendingpercapita
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
11.80.8
1.6
2.1
0
2
4
6
8
10
12
14
16
OECD
% Health care
Long 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, 2013Source: OECD Statistics

12. • 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

13. • 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

14. 14
Achieving fiscal sustainability is easy…
…it’s how you achieve it that matters

15. 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 motion
required action for future years
There is an EWS and sets in motion
required action for the current year
There is an EWS, but an alert does not
legally require action
No EWS
0 1 2 3 4 5 6
Netherlands
Switzerland
Finland
Austria
Czech Rep.
France
Germany
Mexico
Norway
UK
Australia
Chile
Denmark
Estonia
Hungary
New Zealand
Poland
Slovak Rep.
Slovenia
Korea
(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

16. • 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. 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

18. • 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

19. • 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

20. • 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

21. 21
Fiscal sustainability of health framework
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

22. THANK YOU
Chris.James@oecd.org and Camila.Vammalle@oecd.org
22