Www.observatory.dk Utrecht, 25 th September 2007 Josep Figueras Re-examining health systems financial sustainability in Europe

www.observatory.dkwww.observatory.dk

Utrecht, 25Utrecht, 25thth September 2007 September 2007

Josep FiguerasJosep Figueras

Re-examining health systems Re-examining health systems financial sustainability in Europefinancial sustainability in Europe


Health Expenditure as % of GDP Health Expenditure as % of GDP EU 15 plus selected countries (2004)EU 15 plus selected countries (2004)

9,4

7,1

7,5

8

8,1

8,3

8,8

8,9

8,9

9,1

9,2

9,6

9,8

9,9

10

10,5

10,9

11,6

15

0 2 4 6 8 10 12 14 16

EU 15 average

Ireland

Finland

Luxembourg

Spain

United Kingdom

Italy

Denmark

Netherlands

Sweden

Norway

Austria

Greece

Belgium

Portugal

France

Germany

Switzerland

US

Source:OECD Health Data (2006)


Health Expenditure % GDP

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Belgium

Canada

France

Germany

Ireland

Italy

Netherlands

Norway

Spain

Switzerland

United Kingdom

United States

Health Expenditure % GDP

Source: OECD Health Data (2005)


Sustainability against solidarity?Sustainability against solidarity?


Addressing financial sustainability Addressing financial sustainability

• Reforming the funding of health care

• Reforming the supply (payment & provision)

• Strengthening public health (reducing demand)


Reforming the funding of health care Reforming the funding of health care

• Reform statutory (insurance or tax) funding

– Stability of main systems: Bismark & Beveridge

– Increase in tax component in SHI countries

• Shift costs to patients: privatisation of funding

• Introducing insurance competition


“In the longer term, America, like this adamantly pro-market newspaper, may have no choice other than to accept a more overtly European-style system. In such a scheme, the government would pay for a mandate insurance system, but leave the provision of care to a mix of public and private providers.”

The Economist, January 28th 2006


“Rather than copying Europe’s distorting payroll taxes, the basic insurance package would be paid for directly by government, though that cash might be raised by a “hypothecated” tax which would make the cost of health care more evident”

The Economist, January 28th 2006


7551

62687071

747576777878

838385

90

0 25 50 75 100

EU 15 averageGreece

NetherlandsAustria

PortugalSpain

BelgiumItaly

FranceFinlandIreland

GermanyUK

DenamarkSweden

Luxembourg

Public expenditure as a % of totalPublic expenditure as a % of total EU 15 (2003)EU 15 (2003)

OECD Health Data, 2005


Concentration of total health expenditures, France 2001

Source : CNAMTS/EPAS

5%

51%

64%

10%

78%

20%

98%

70%

100%

90%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% of people % of expenses



Insurance competitionInsurance competitionIn Theory:In Theory: it ought to work it ought to work

• Consumer freedom of choice

• Market competition incentives: efficiency & quality– Insurers as ‘prudent buyers’– Cost-effective purchasing – Selective contracting

• Without negative impact on equity & quality– Risk adjustment formula, open enrolment,…


• Equity: risk selection

• Efficiency; consider transaction costs

• Efficiency; linked to active (strategic) purchasing

• Implementation ability (regulatory, information,..)?

Insurance competitionInsurance competitionIn Practice: the evidenceIn Practice: the evidence


“Although elegant in theory, the implementation of the managed competition model in practice appears to be complex because it is hard to fulfill the necessary preconditions”

W Van de Ven (December 2006)



• Reforming sources of funding

– Reform main (SHI or tax) source of funding

– Shift costs to patients: privatisation of funding

– Introducing insurance competition




Reforming the supply (payment)Reforming the supply (payment)

• From passive to active (strategic) purchasing?

• Selective contracting / provider competition

• Towards performance based payment systems

– Case mix measures, DRGs


Paying doctorsPaying doctors

“The only way to communicate with a doctor is to write it in the back of a cheque”

Bob Evans


Paying doctorsPaying doctors

“The only way to pay doctors is to change the system every three years, because by then they will have found ways to get round it to their own advantage”

Bob Evans


Reforming the supply (provision)Reforming the supply (provision)

• Health care substitution

• Cost effective capital investment

• Increasing consumer choice

• Primary care at the driving seat

• Setting priorities / limiting package of care

• Evidence base medicine / HTA agencies



• Reforming sources of funding




Strengthening public healthStrengthening public health The ultimate demand reduction strategy The ultimate demand reduction strategy

• Prevention is (often) better than cure

– Cost effectiveness of public health interventions

• Stepping up public health policies in the EU– Health in All Policies: Finland presidency (2006)

– Wanless reports (2002, 2004) in the UK

– Public health bills: France (2003), Sweden (2002) Netherlands (2007?)

– Smoking bans: Ireland, Spain, UK, Belgium…


Re-examining financial sustainabilityRe-examining financial sustainability

1. Sustainability as willingness to pay

2. Consider financial versus social sustainability

3. An ageing crisis?

4. “It’s the economy stupid”

5. The contribution of health to the economy

6. Investing in health: health systems and public health


• Solidarity: key in European policy• WHO, EU, Council of Europe• Health as a human right

Solidarity vs sustainability


1. Sustainability as willingness to pay

• Citizens may be willing to pay more through statutory sources particularly when earmarked for health?

• Health expenditure as a luxury good?

• Solidarity a central goal in European systems

• Disconnect between population views & politicians?


2.2. Financial (vs Social) sustainabilityFinancial (vs Social) sustainability

• Health and social cohesion

• Coverage of minority groups

• Economic impact of reduced solidarity


3.3. An ageing crisis?An ageing crisis?

• Health expenditure incurred at the end of life

• Longer (and healthier?) life expectancy– Compression of morbidity

• Late retirement– Increasing labour market participation– Drawing less from the health services


4.4. ““It’s the economy stupid !!”It’s the economy stupid !!”

• Health expenditure as percentage of GDP

• Addressing sluggish economic (GDP) growth

• The Lisbon agenda: global competitiveness

• Emphasis on measures to increase productivity

www.observatory.dkwww.observatory.dkSource: The Contribution of Health to the Economy Surke, Mckee et al 2005

5.5. The contribution of health to the economyThe contribution of health to the economy “Health is Wealth”“Health is Wealth”


The contribution of health to the economy:The contribution of health to the economy:The evidenceThe evidence

• Cost of illness• Wages and earnings• Hours worked• Labour force participation• Early retirement• Labour supply by relatives of those in poor

health• Personal investment in education• Propensity to save


WealthWealthHealthHealth

Health SystemsHealth Systems

6. Investing in health systems6. Investing in health systemsA conducting framework A conducting framework

Impact on the Impact on the economy economy

Impact on HealthImpact on Health

Economic Economic growth growth

WHO EURO Ministerial Conference Tallinn Summer 2008


“However beautiful the strategy, you should occasionally look at the results”

Winston Churchill


WealthWealthHealthHealth

Health SystemsHealth Systems

WHO EURO Ministerial Conference Tallinn Summer 2008

Performance Performance •TransparencyTransparency •Accountability Accountability

6. Investing in health systems6. Investing in health systemsA conducting framework A conducting framework


In sum….In sum….

• Limited scope of funding reforms

• Increased emphasis on reform of supply

– Cost effectiveness rather than cost containment

• Strengthen public health measures

• Increased willingness to pay

• Investing in health systems (productive sector) leading to economic growth

• But…. demonstrating performance


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Www.observatory.dk Utrecht, 25 th September 2007 Josep Figueras Re-examining health systems financial sustainability in Europe