Economics and Health – A Macro View
Tasmanian Health Conference 2014
Martin HensherDirector Strategic Planning – DHHSAdjunct Associate Professor – UTAS School of Medicine
AGEING POPULATION
CHRONIC DISEASESOBESITY
POVERTY UNEMPLOYMENT
LITERACY RATES
HIGH BURDEN OF DISEASE
HEALTH CARE COST INFLATION
Gross Domestic Product
Source: Australian Government, Department of Health 2014 (OECD data)
…and Total Health Expenditure consistently grows faster than GDP
What factors drive that increasing spend?
Canada
Source: Grattan Institute
USA
Australia
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Canada - cost driver shares of average annual growth in public health spending, 1998 - 2008
OtherGeneral InflationAgeingPopulation Growth
Source: Canadian Institute for Health Information
Source: King’s Fund 2014 A new settlement for heath and social care (p33)
Is this sustainable?
Unsustainable and unaffordable?• In the long run, rising expenditure on health care is not
in itself a problem• A growing economy will sustain health care’s growing
share as long as additional health care is adding value to society
• And the key driver of increasing health expenditure and costs – technology and innovation – is itself a critical driver of economic growth
• Indeed, health care is arguably the very essence of the service economy of the future that nations like Australia must embrace (c.f. Stiglitz)
John Maynard Keynes1883 - 1946
“The long run is a misleading guide to current affairs. In the long run we are all dead.”
What might get in the way?
• Future economic growth prospects• Short to medium term fiscal challenges• Health sector efficiency
Growth Prospects?
• But if the economy is not growing (or growing slowly), then the growth in health expenditure we are accustomed to will be much harder to finance…
• And that is when things start to feel uncomfortable right now, not in 30 years’ time…
Post-GFC Emergency Braking: From >4% Growth to Zero
Average health expenditure growth rates across OECD countries, 2000-2010Source: Morgan and Astolfi, OECD 2013
Emerging Macroeconomic Concerns
• Recognition of rising income inequality over the last 30 years (made worse by the GFC) – and that income inequality retards overall growth
• Evidence beginning to show “austerity” makes things worse• Fears that the causes of the GFC are far from played out (e.g. China’s shadow
banking sector)• Fears that the ending of stimulus and quantitative easing could take the
steam out of the world economy very quickly• Concerns from serious economists that we are now in a new era of long-run
growth at rates well below the (recent) historical trend– Stiglitz – long-term adjustment– Summers – “secular stagnation”– Gordon – “six headwinds”
• So, economic growth may not go back to “normal”, which would mean health expenditure growth could not go back to “normal” either
Fiscal and Policy Challenges
• Federal Budget 2014 poses significant challenges for health system especially:– Changes to funding agreements with states and
territories– GP Co-payment
• And policy uncertainty while negotiation around the Federal Budget continues
• Potential changes to Federation and taxation arrangements in coming years?
Source: ABC FactCheck http://www.abc.net.au/news/2014-06-23/has-hospital-funding-been-cut-by-50-billion-fact-check/5486988
Where does this leave Tasmania?
Australia Tasmania0
1000
2000
3000
4000
5000
6000 5881 5823
Recurrent Health Expenditure Per Capita (Public and Private), 2011-12
$ pe
r cpa
ita
• We spent (for the latest year figures are available) very close to the national average on health care (public and private)
But that equivalent spend represents a far bigger share of our State’s economy
Australia Tasmania0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
9.0%
12.2%
Recurrent Health Expenditureas % GDP / GSP, 2011-12
% G
DP
Australia Tasmania0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
11.9%
13.2%
Persons Employed in Health and Social Care as % all Persons Employed, May
2014
Implications
• So the feedback from health spending to the wider Tasmanian economy is proportionately more important
• And more sensitive to significant funding shocks
• And more reliant on federal funding, with a weaker state revenue base
What is our current trajectory?
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
AIHW
130108 141630 143848 141700 147064 NaN
FYI
NaN 141916 143824 141518 147065 148407
122,500
127,500
132,500
137,500
142,500
147,500
Emergency Department Presentations, 2008-09 to 2013-14Nu
mbe
r of p
rese
ntati
ons
What is our current trajectory?
2008–09 2009–10 2010–11 2011–12 2012–13 2013-14 2008–09 2009–10 2010–11 2011–12 2012–13 2013-14
AIHW
94892 101673 99333 99632 106358 NaN
FYI
NaN 100798 100435 99807 106865 115654
10,000
30,000
50,000
70,000
90,000
110,000
130,000
Tasmanian Public Hospitals: Inpatient Activity, 2008–09 to 2013–14 Nu
mbe
r of S
epar
ation
s
What is our current trajectory?
2010-11 2011-12 2012-13 2010-11 2011-12 2012-13
Non-admitted 388657 349321 322545
Admitted 99333 99632 106358
25,00075,000
125,000175,000225,000275,000325,000375,000425,000
Tasmanian Public Hospitals: Admitted and non-admitted activity, 2010-11 to 2012-13
Num
ber o
f sep
arati
ons/o
ccas
sions
of se
rvice
What can we do about this?
• Make sure we do the right things
• Stop doing the wrong things
• So that resources are used to maximise benefit
• Not wasted on care that brings minimal benefit
• Or even on care that actively causes harm
Improving what we do• Focus on cost-effective care across the whole system:
– Are our interventions and procedures the right ones, given the available evidence on costs and effectiveness?
• Reduce overdiagnosis and overtreatment: – Do we use only the right technologies (those with proven benefits) on
the right patients (only in those populations for whom the benefits are proven)
• Improve outcomes and reduce waste by minimising avoidable patient harms
ButAnd improving how we do it…
• Deliver care in the most cost-effective place (both its setting and its geographical location):– Alternatives to hospital for high volume / low complexity cases – Appropriate centralisation of low volume / high complexity services (if
necessary interstate or in partnership with private sector)
• Manage the patient’s journey effectively – active management of patient flow (referral pathways, admission and discharge planning, scheduling, theatre and resource utilisation etc.)
• Which both require better integration of care and services, and systematic clinical and process redesign
• Use information resources more effectively to shape and deliver care – both strategically and day-to-day
Do we have the courage to:
• Start with the evidence, rather than our history and past disappointments?
• Use the data effectively instead of disputing it?• Collaborate and share risks (and benefits)?• Individually and corporately engage to make evidence-based
change real – through Clinical Advisory Groups?