OECD experience on fiscal sustainability

Joint OECD/WHO Meeting on Financial Sustainability of Health Systems

Edwin Lau

Deputy Head, Budgeting & Public Expenditures Division, OECD

28 June 2012

0

4

8

12

16

20

24

28

32

36

2007 2010

Structure of general government expenditures, 2007 & 2010 (% of total expenditures)

Source: OECD Fiscal Consolidation Survey 2012.

Health is 2nd largest public expenditure area in OECD

And health expenditures are rising

Source: OECD Health Data 2011.

Source: OECD Health Data 2011.

SVK

KOR

ESTPOL

GRC

TURIRE

CZE

CHL

NZLGBR

NLDBEL FINESP

OECDSVN

CANSWE

DNK

USAMEX

AUS HUN

JPNNOR

AUTFRA

DEU CHE ISLITA

ISRPRTLUX

-1

1

3

5

7

9

11

-1 1 3 5

Annual average growth rate in real GDP per capita (%)

Annual average growth rate in real health expenditure per capita (%)

Annual average growth in real per capita expenditure on health and GDP, 2000-2009 (or

nearest year) New challenges:

• Ageing populations : ex. Korean population aged over 65 years will represent 37% of total Korean population in 2050

• Uptake of new technology : more costly and requires more skills and training

• Increase in multi-morbidity : continuing care, complications & acute care have considerable bearing on health spending

Is health crowding out other expenditure areas?

Social pro-tection

Health Education Economic affairs

General public

services (excluding interest)

Interest Public order and safety

Defence Recreation; culture and

religion

Housing and community amenities

Environment protection

0

2

4

6

8

10

12

14

16

18

2007 2010

Change in structure of spending between 2007 & 2010 (% of GDP)

Source: OECD Fiscal Consolidation Survey 2012.

Health measures frequently proposed in fiscal consolidation plans

WelfareHealth

Pensions

Infrastructure

Lower levels of government

Education

State-owned enterprises/subsidies

Development aid

Energy subsidies/Environment

Agriculture

Withdrawal of fiscal stimulus

Justice/PoliceCulture

0

15

30

45

60

75

%

Ou

t of 3

0 r

esp

on

din

g c

ou

ntr

ies

Source: OECD Fiscal Consolidation Survey 2012.

IRL

PR

T

BE

L

GR

C

ES

P

HU

N

AU

T

NLD

SV

K

PO

L

AU

S

ES

T

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Plan 2012 Plan 2011

% of GDP

Impact of programme measures on the health sector, 2009-16

Source: OECD Fiscal Consolidation Survey 2012.

And proposed reductions are significant

7

Achieving all of these goals:

Delivering healthcare efficiently Maximizing health outcomes Increasing the distribution of health (equity) Maintaining fiscal stability

OBJECTIVES

Requires these challenges to be tackled:

Both technical & allocative efficiency Maximizing outcomes for a given level of

inputs (programme effectiveness ) A financing system that reflects society’s

consensus on risk pooling & cross subsidies

A revenue stream that is both stable (broad-based) and predictable (counter-cyclical, stability for planning & pricing)

Fiscal sustainability (willingness to pay for a level of demand)

CHALLENGES

Short-term cuts ≠ effectiveness or fiscal sustainability

Purpose of SBO Health Sustainability Network

• Financial situation calls on for new forms of co-operation to achieve fiscal sustainability, but also value for money, and access and equality of health care.

• Main objectives:• Establish institutional dialogue, clarity of roles, and common

objectives and vocabulary• Find and disseminate appropriate good practice• Better share existing work (analysis and data)

• Assist countries moving towards universal access to health insurance

• OECD organised a first meeting in Nov 2011: o Successfully brought together Health Budget officials from Ministries

of Health and Ministries of Finance, as well as Social Security Institutions/Health Insurance Funds

o Strong interest by both countries and other international organisations (WHO, World Bank andADB)

9

Setting healthcare

expenditure levels

Design of health financing system

Revenue Generation

Co-ordination function

Estimating future & current health spending needs

Expenditure management

Balancing demand for care with ability to pay

Session 6

Sessions 3&4

Session 6

Sessions 3&4Sessions 5