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Healthcare in Europe –
a macroeconomic viewpoint
           Peter C. Smith
  Imperial College Business School
    and Centre for Health Policy
        peter.smith@imperial.ac.uk
Investing in Health Systems
            A Conceptual Framework

                          Health
                         Systems


                             Societal
                            Well-being




 Health                                                Wealth
Source: McKee, M. and Figueras, J. (2011), Health systems, health,
wealth and societal well-being: assessing the case for investing in
health systems, Maidenhead: Open University Press.
How do health systems contribute
         to wellbeing?
• Through their impact on wealth
  – Health services as a core part of the economy
  – Helping improve productivity
• Through their impact on health
  – Increasingly recognized as an important
    determinant of health
  – Many health technologies are very good value for
    money
• Directly through their impact on social
  protection
Health
           Systems



             Societal
            Well-being




 Health                  Wealth

1. HEALTH SYSTEMS AND THE
ECONOMY
Total spending on healthcare
                  % of GDP
18                                                       Australia
                                                         Austria
                                                         Belgium
16                                                       Canada
                                                         Chile
                                                         Czech Republic
14                                                       Denmark
                                                         Finland
                                                         France
12                                                       Germany
                                                         Greece

10                                                       Hungary
                                                         Iceland
                                                         Italy

8                                                        Japan
                                                         Korea
                                                         Luxembourg

6                                                        Mexico
                                                         Netherlands
                                                         New Zealand
4                                                        Norway
                                                         Poland
                                                         Portugal
2                                                        Slovak Republic
                                                         Spain
                                                         Sweden
0                                                        Switzerland
                                                         Turkey

     1960 1965 1970 1975 1980 1985 1990 1995 2000 2005   United Kingdom
                                                         United States
                                                         Ireland
Future healthcare spending
• The US Congressional Budget Office (2007)
  estimates that – with no policy change – total
  spending on health care will rise from 16
  percent of the US economy in 2007 to
     – 25 percent in 2025
     – 37 percent in 2050
     – 49 percent in 2082.

•   Congressional Budget Office. 2007. The Long-Term Outlook for Health
    Care Spending. Washington DC: Congress of the United States.
Public spending on healthcare
                % of total
120                                                                       Australia
                                                                          Austria
                                                                          Belgium
                                                                          Canada
100                                                                       Chile
                                                                          Czech Republic
                                                                          Denmark
                                                                          Finland
                                                                          France
 80                                                                       Germany
                                                                          Greece
                                                                          Hungary
                                                                          Iceland
 60                                                                       Italy
                                                                          Japan
                                                                          Korea
                                                                          Luxembourg
                                                                          Mexico
 40                                                                       Netherlands
                                                                          New Zealand
                                                                          Norway
                                                                          Poland
 20                                                                       Portugal
                                                                          Slovak Republic
                                                                          Spain
                                                                          Sweden
                                                                          Switzerland
  0                                                                       Turkey
      0   3   6   9   2   5   8   1   4   7   0   3   6   9   2   5   8   United Kingdom
      6   6   6   6   7   7   7   8   8   8   9   9   9   9   0   0   0   United States
      9   9   9   9   9   9   9   9   9   9   9   9   9   9   0   0   0
      1   1   1   1   1   1   1   1   1   1   1   1   1   1   2   2   2   Ireland
RAND projections for US (2005)
•   Reductions in spending resulting
    from better health will be
    outweighed by the costs of new
    technologies, and by additional
    health expenditure during the
    additional years of life that the
    technologies make possible.
•   Although highly socially desirable,
    tackling chronic diseases will not
    in general save money.
•   The one exception may be
    obesity.
•   RAND Health. 2005. Future Health and Medical Care
    Spending of the Elderly. Santa Monica: RAND.
Estimates of NHS expenditure growth drivers,
        2002-2022 , optimistic scenario
Wanless, D., Appleby, J., Harrison, A., Patel, D. (2007), Our Future Health Secured? A review of
                    NHS funding and performance, London: King’s Fund
 250

 200

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l
i
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£100

   50

    0
Health
           Systems



             Societal
            Well-being




  Health                 Wealth

2. HEALTH SYSTEMS AND HEALTH
Life expectancy at birth
90                                                                       Australia
                                                                         Austria
85                                                                       Belgium
                                                                         Canada
                                                                         Chile
80                                                                       Czech Republic
                                                                         Denmark
                                                                         Finland
75                                                                       France
                                                                         Germany
                                                                         Greece
70                                                                       Hungary
                                                                         Iceland
65                                                                       Italy
                                                                         Japan
                                                                         Korea
60                                                                       Luxembourg
                                                                         Mexico
                                                                         Netherlands
55                                                                       New Zealand
                                                                         Norway
50                                                                       Poland
                                                                         Portugal
                                                                         Slovak Republic
45                                                                       Spain
                                                                         Sweden
                                                                         Switzerland
40                                                                       Turkey
     0   3   6   9   2   5   8   1   4   7   0   3   6   9   2   5   8   United Kingdom
     6   6   6   6   7   7   7   8   8   8   9   9   9   9   0   0   0   United States
     9   9   9   9   9   9   9   9   9   9   9   9   9   9   0   0   0   Ireland
     1   1   1   1   1   1   1   1   1   1   1   1   1   1   2   2   2
OECD Rankings
• Determinants of life expectancy
   –   Health care spending
   –   Education
   –   GDP
   –   Pollution
   –   Alcohol
   –   Tobacco
   –   Diet
• Residual is health system efficiency

  Joumard, I., C. Andre, C. Nicq and O. Chatal (2008) Health status determinants: lifestyle,
  environment, health care resources and efficiency. Economics Department Working Paper 627.
  Paris: OECD.
Joumard et al (2008): Country-specific
       effects (life years) relative to OECD
                      average
                                          Iceland
                                          Australia
                                          New Zealand
                                          Korea
                                          Greece
                                          Canada
                                          Finland
                                          Poland
                                          Sweden
                                          France
                                          Belgium
                                          Ireland
                                          United Kingdom
                                          Czech Republic
                                          Netherlands
                                          Switzerland
                                          Austria
                                          Germany
                                          Turkey
                                          Denmark
                                          Norway
                                          Hungary
                                           United States
-5    -4   -3   -2   -1   0   1   2   3
Programme budgeting expenditure
   England 2010/11 £per capita




http://www.dh.gov.uk/en/Managingyourorganisation/Financeandplanning/Programmebudgeting/index.htm
Estimates of marginal costs of saving a life year,
        by disease programme, England 2005/6


   •   Cancer                                             £13,900
   •   Circulatory disease                                £12,600
   •   Respiratory problems                               £7,400
   •   Gastro-intestinal                                  £19,000
   •   Diabetes                                           £26,500


Martin, S., Rice, N. and Smith, P. (2012), “Comparing costs and outcomes across programmes of health
care”, Health Economics, 21(3), 316-337.
The Effects of Health Coverage on Population Outcomes:
                A Country-Level Panel Data Analysis
        by Rodrigo Moreno-Serra and Peter C. Smith (2011)
•   Examines the link between health spending and health outcomes in 153
    countries over a 14 year period
•   Results strongly indicate that higher government health spending per
    capita reduces both child and adult mortality rates.
•   The estimated gains are larger for low and middle income countries than
    in the full sample.
•   The implied marginal cost of saving a year of life is around US$1,000 in the
    full sample of countries.
•   Public spending seems more effective in reducing mortality than prepaid
    private insurance
•   Investing in broader health coverage can generate significant gains in
    terms of population health.



    http://resultsfordevelopment.org/projects/transitions-health-financing
Health
           Systems



             Societal
            Well-being




  Health                 Wealth

3. HEALTH SYSTEMS AND SOCIAL
PROTECTION
5 July 1948
 th


      • “...there are no charges,
        except for a few special
        items. There are no
        insurance qualifications.
        But it is not a ‘charity’.
        You are all paying for
        [the NHS], mainly as
        taxpayers, and it will
        relieve your money
        worries in times of
        illness.”
Out-of-pocket spending on
           healthcare: % of total
80                                                                       Australia
                                                                         Austria
                                                                         Belgium
70                                                                       Canada
                                                                         Chile
                                                                         Czech Republic
60                                                                       Denmark
                                                                         Finland
                                                                         France
                                                                         Germany
50                                                                       Greece
                                                                         Hungary
                                                                         Iceland
40                                                                       Italy
                                                                         Japan
                                                                         Korea
                                                                         Luxembourg
30                                                                       Mexico
                                                                         Netherlands
                                                                         New Zealand
20                                                                       Norway
                                                                         Poland
                                                                         Portugal
10                                                                       Slovak Republic
                                                                         Spain
                                                                         Sweden
                                                                         Switzerland
 0                                                                       Turkey
     0   3   6   9   2   5   8   1   4   7   0   3   6   9   2   5   8   United Kingdom
     6   6   6   6   7   7   7   8   8   8   9   9   9   9   0   0   0   United States
     9   9   9   9   9   9   9   9   9   9   9   9   9   9   0   0   0   Ireland
     1   1   1   1   1   1   1   1   1   1   1   1   1   1   2   2   2
20
                               Cost-Related Access Problems
                                      in the Past Year
       Percent             AUS      CAN        FR      GER     NETH       NZ      NOR    SWE   SWIZ   UK        US

Did not fill
prescription or             12       10        7        6         3        7       6     7      4     2        21
skipped doses
Had a medical
problem but
did not visit
                            13        4        6       16         2        9       6     5      6     2        22
doctor
Skipped test,
treatment, or               14        5        6       10         3        8       5     4      4     3        22
follow-up
Yes to at least
one of the                  22       15       13       25         6       14 11          10    10     5        33
above

                                                                                                       THE COMMONWEALTH
                                                                                                              FUND

     20
Source: 2010 Commonwealth Fund International Health Policy Survey in Eleven Countries.
21

                  Overall Views of Health Care
                          System, 2010
       Percent                 AUS       CAN        FR      GER       NETH       NZ      NOR   SWE   SWIZ   UK        US

Only minor
changes                        24        38        42        38        51        37      40    44    46     62 29
needed
Fundamental
changes                        55        51        47        48        41        51      46    45    44     34 41
needed
Rebuild
completely
                               20        10        11        14         7        11      12    8      8     3        27


                                                                                                             THE COMMONWEALTH
                                                                                                                    FUND


Source: 2010 Commonwealth Fund International Health Policy Survey in Eleven Countries.
Very strong link between % reporting cost
        problems and opinions of health system

                               UK

                                         NLSWIZ
                                                FR
                                           SWE    NOR
                                             NZ CAN
                                                                           GER

                                                                                         USA
                                                               AUS




Source: 2010 Commonwealth Fund International Health Policy Survey in Eleven Countries.
Health
         Systems



           Societal
          Well-being




Health                 Wealth
Concluding comments
• Growth of publicly funded health services one
  of the major social policy successes on
  twentieth century
• Expenditure on health services yields many
  gains in social welfare in terms of health,
  wealth and social protection
• Many reasons for seeking to protect publicly
  funded health services as a priority
... but if expenditure control
         becomes an imperative:
• Supply side
   – Little evidence globally that there is scope for step changes in
     productivity
   – But potential for gains from (eg) better information, carefully
     regulated competition etc
   – Care with incentive effects of provider payment mechanisms
• Demand side
   – Ageing population not intrinsically problematic, but it is if citizens live
     longer sicker lives
   – Some scope for public health interventions, especially on obesity, but
     lack of evidence on effectiveness
• Limiting the scope of the publicly funded ‘health basket’
   – Careful exclusion of treatments with low cost-effectiveness
   – More targeted patient charges for treatments of intermediate value
Further reading
• McKee, M. and
  Figueras, J. (2011),
  Health systems, health,
  wealth and societal
  well-being: assessing
  the case for investing in
  health systems,
  Maidenhead: Open
  University Press.

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Professor Peter smith

  • 1. Healthcare in Europe – a macroeconomic viewpoint Peter C. Smith Imperial College Business School and Centre for Health Policy peter.smith@imperial.ac.uk
  • 2. Investing in Health Systems A Conceptual Framework Health Systems Societal Well-being Health Wealth Source: McKee, M. and Figueras, J. (2011), Health systems, health, wealth and societal well-being: assessing the case for investing in health systems, Maidenhead: Open University Press.
  • 3. How do health systems contribute to wellbeing? • Through their impact on wealth – Health services as a core part of the economy – Helping improve productivity • Through their impact on health – Increasingly recognized as an important determinant of health – Many health technologies are very good value for money • Directly through their impact on social protection
  • 4. Health Systems Societal Well-being Health Wealth 1. HEALTH SYSTEMS AND THE ECONOMY
  • 5. Total spending on healthcare % of GDP 18 Australia Austria Belgium 16 Canada Chile Czech Republic 14 Denmark Finland France 12 Germany Greece 10 Hungary Iceland Italy 8 Japan Korea Luxembourg 6 Mexico Netherlands New Zealand 4 Norway Poland Portugal 2 Slovak Republic Spain Sweden 0 Switzerland Turkey 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 United Kingdom United States Ireland
  • 6. Future healthcare spending • The US Congressional Budget Office (2007) estimates that – with no policy change – total spending on health care will rise from 16 percent of the US economy in 2007 to – 25 percent in 2025 – 37 percent in 2050 – 49 percent in 2082. • Congressional Budget Office. 2007. The Long-Term Outlook for Health Care Spending. Washington DC: Congress of the United States.
  • 7. Public spending on healthcare % of total 120 Australia Austria Belgium Canada 100 Chile Czech Republic Denmark Finland France 80 Germany Greece Hungary Iceland 60 Italy Japan Korea Luxembourg Mexico 40 Netherlands New Zealand Norway Poland 20 Portugal Slovak Republic Spain Sweden Switzerland 0 Turkey 0 3 6 9 2 5 8 1 4 7 0 3 6 9 2 5 8 United Kingdom 6 6 6 6 7 7 7 8 8 8 9 9 9 9 0 0 0 United States 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 Ireland
  • 8. RAND projections for US (2005) • Reductions in spending resulting from better health will be outweighed by the costs of new technologies, and by additional health expenditure during the additional years of life that the technologies make possible. • Although highly socially desirable, tackling chronic diseases will not in general save money. • The one exception may be obesity. • RAND Health. 2005. Future Health and Medical Care Spending of the Elderly. Santa Monica: RAND.
  • 9. Estimates of NHS expenditure growth drivers, 2002-2022 , optimistic scenario Wanless, D., Appleby, J., Harrison, A., Patel, D. (2007), Our Future Health Secured? A review of NHS funding and performance, London: King’s Fund 250 200 n150 o i l l i b £100 50 0
  • 10. Health Systems Societal Well-being Health Wealth 2. HEALTH SYSTEMS AND HEALTH
  • 11. Life expectancy at birth 90 Australia Austria 85 Belgium Canada Chile 80 Czech Republic Denmark Finland 75 France Germany Greece 70 Hungary Iceland 65 Italy Japan Korea 60 Luxembourg Mexico Netherlands 55 New Zealand Norway 50 Poland Portugal Slovak Republic 45 Spain Sweden Switzerland 40 Turkey 0 3 6 9 2 5 8 1 4 7 0 3 6 9 2 5 8 United Kingdom 6 6 6 6 7 7 7 8 8 8 9 9 9 9 0 0 0 United States 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 Ireland 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2
  • 12. OECD Rankings • Determinants of life expectancy – Health care spending – Education – GDP – Pollution – Alcohol – Tobacco – Diet • Residual is health system efficiency Joumard, I., C. Andre, C. Nicq and O. Chatal (2008) Health status determinants: lifestyle, environment, health care resources and efficiency. Economics Department Working Paper 627. Paris: OECD.
  • 13. Joumard et al (2008): Country-specific effects (life years) relative to OECD average Iceland Australia New Zealand Korea Greece Canada Finland Poland Sweden France Belgium Ireland United Kingdom Czech Republic Netherlands Switzerland Austria Germany Turkey Denmark Norway Hungary United States -5 -4 -3 -2 -1 0 1 2 3
  • 14. Programme budgeting expenditure England 2010/11 £per capita http://www.dh.gov.uk/en/Managingyourorganisation/Financeandplanning/Programmebudgeting/index.htm
  • 15. Estimates of marginal costs of saving a life year, by disease programme, England 2005/6 • Cancer £13,900 • Circulatory disease £12,600 • Respiratory problems £7,400 • Gastro-intestinal £19,000 • Diabetes £26,500 Martin, S., Rice, N. and Smith, P. (2012), “Comparing costs and outcomes across programmes of health care”, Health Economics, 21(3), 316-337.
  • 16. The Effects of Health Coverage on Population Outcomes: A Country-Level Panel Data Analysis by Rodrigo Moreno-Serra and Peter C. Smith (2011) • Examines the link between health spending and health outcomes in 153 countries over a 14 year period • Results strongly indicate that higher government health spending per capita reduces both child and adult mortality rates. • The estimated gains are larger for low and middle income countries than in the full sample. • The implied marginal cost of saving a year of life is around US$1,000 in the full sample of countries. • Public spending seems more effective in reducing mortality than prepaid private insurance • Investing in broader health coverage can generate significant gains in terms of population health. http://resultsfordevelopment.org/projects/transitions-health-financing
  • 17. Health Systems Societal Well-being Health Wealth 3. HEALTH SYSTEMS AND SOCIAL PROTECTION
  • 18. 5 July 1948 th • “...there are no charges, except for a few special items. There are no insurance qualifications. But it is not a ‘charity’. You are all paying for [the NHS], mainly as taxpayers, and it will relieve your money worries in times of illness.”
  • 19. Out-of-pocket spending on healthcare: % of total 80 Australia Austria Belgium 70 Canada Chile Czech Republic 60 Denmark Finland France Germany 50 Greece Hungary Iceland 40 Italy Japan Korea Luxembourg 30 Mexico Netherlands New Zealand 20 Norway Poland Portugal 10 Slovak Republic Spain Sweden Switzerland 0 Turkey 0 3 6 9 2 5 8 1 4 7 0 3 6 9 2 5 8 United Kingdom 6 6 6 6 7 7 7 8 8 8 9 9 9 9 0 0 0 United States 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 Ireland 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2
  • 20. 20 Cost-Related Access Problems in the Past Year Percent AUS CAN FR GER NETH NZ NOR SWE SWIZ UK US Did not fill prescription or 12 10 7 6 3 7 6 7 4 2 21 skipped doses Had a medical problem but did not visit 13 4 6 16 2 9 6 5 6 2 22 doctor Skipped test, treatment, or 14 5 6 10 3 8 5 4 4 3 22 follow-up Yes to at least one of the 22 15 13 25 6 14 11 10 10 5 33 above THE COMMONWEALTH FUND 20 Source: 2010 Commonwealth Fund International Health Policy Survey in Eleven Countries.
  • 21. 21 Overall Views of Health Care System, 2010 Percent AUS CAN FR GER NETH NZ NOR SWE SWIZ UK US Only minor changes 24 38 42 38 51 37 40 44 46 62 29 needed Fundamental changes 55 51 47 48 41 51 46 45 44 34 41 needed Rebuild completely 20 10 11 14 7 11 12 8 8 3 27 THE COMMONWEALTH FUND Source: 2010 Commonwealth Fund International Health Policy Survey in Eleven Countries.
  • 22. Very strong link between % reporting cost problems and opinions of health system UK NLSWIZ FR SWE NOR NZ CAN GER USA AUS Source: 2010 Commonwealth Fund International Health Policy Survey in Eleven Countries.
  • 23. Health Systems Societal Well-being Health Wealth
  • 24. Concluding comments • Growth of publicly funded health services one of the major social policy successes on twentieth century • Expenditure on health services yields many gains in social welfare in terms of health, wealth and social protection • Many reasons for seeking to protect publicly funded health services as a priority
  • 25. ... but if expenditure control becomes an imperative: • Supply side – Little evidence globally that there is scope for step changes in productivity – But potential for gains from (eg) better information, carefully regulated competition etc – Care with incentive effects of provider payment mechanisms • Demand side – Ageing population not intrinsically problematic, but it is if citizens live longer sicker lives – Some scope for public health interventions, especially on obesity, but lack of evidence on effectiveness • Limiting the scope of the publicly funded ‘health basket’ – Careful exclusion of treatments with low cost-effectiveness – More targeted patient charges for treatments of intermediate value
  • 26. Further reading • McKee, M. and Figueras, J. (2011), Health systems, health, wealth and societal well-being: assessing the case for investing in health systems, Maidenhead: Open University Press.

Notas do Editor

  1. This conceptual framework provides the conceptual backbone for this presentation. The case for health systems investment rests on the understanding that health systems are intricately linked to health, wealth and well being , with the causal, direct and indirect relationships between the key elements captured by the ‘conceptual triangle’ . Importantly, it positions health system investment in a direct relationship with the ultimate goal of all social systems: societal well-being. Health systems contribute to societal well-being in three main ways : First, and above all health systems produce health which is both a major and inherent component of well-being and through its impact on wealth creation, and indirect (yet key) contributor to well-being. Second, although to a much lesser extent, health systems have a direct impact on wealth as they are a significant component of the economy which again impacts on societal well-being. Third, health systems contribute directly to societal well-being because societies draw satisfaction from the existence of health services and the ability of people to access them. Note that there is much debate about the boundaries of the health system with Member States taking different definitional approaches. This presentation takes a pragmatic approach and adopts the definition of health systems as all the activities whose primary purpose is to promote, restore or maintain health including i) the delivery of (personal and population based) health services; ii) those activities (within the functions of finance, stewardship and resource generation) to enable the delivery of services and iii) stewardship activities aimed at influencing the health impact of activities in other sectors such as education or environment. Therefore, the presentation takes a broad approach including all public health interventions those provided by the health services (secondary and tertiary prevention) as well as those aimed at addressing health determinants outside the health sector i.e. Health in All Policies. Ultimately, the aim is not to assess investment on health service interventions in isolation but to set them against interventions in other sectors and compare them in light of their health and cost effectiveness impact.
  2. Gives public spending by ICD chapter per capita. Excludes ‘other’, mainly GP services, £495.50 per capita. Total spending is £2,043.23 pc
  3. Calculated using econometric analysis of link between disease programme spending and mortality data in 152 English primary care trusts