Dealing with expanding health sector

The OECD Health Data 2012 report, released this summer, serves as a good background to have a sense of latest trends in healthcare sector across a variety of countries (members and partners of OECD). And a first impression is that this sector is gradually expanding, even in the United States, where per capita expenditure is more than twice as high to compare to a OECD average.

The rising levels of equipment purchases, of physicians or nurses employed together with increasing remuneration which is faster that an average GDP growth show a global largesse of health care sector as such. The released data also reveals a rising trend of our consumption in pharmaceuticals, which is becoming a part of a habit to choose antidepressants against a healthy way of life, not to speak about expanding marketing in non-prescription drugs.

Overall across OECD countries, health expenditure has grown by 4% annually over the past decade, compared with 1.6% for GDP growth where the public sector is the main source of financing. And this trend will continue. For example, the share of population aged over 65 and 80 in OECD countries will increase sharply (nearly twice) in the coming decades.

This is not helping public finances. In return it poses a legitimate question – what is an adequate level of expenditure and whether it is spent in a right way. It becomes even more acute in countries where growth in healthcare expenditure is twice as high than a OECD average, as it could be a case in Poland, Estonia, Slovakia or Lithuania. In Lithuania alone a total expenditure in health care sector has risen on average more than 14% over the period of 2004-2010. In relative terms this makes an increase from 5.7% in 2004 to 7% in 2010 measured as a share of GDP.

So it goes without saying that this trend is even more pressing than the cuts in the total range of 10% made during 2009-2010 due to safeguarding public finances in the midst of financial crisis. The only option or choice left to the policy makers is to look not at drastic cuts but at fundamental and systemic policy changes in the health sector itself.

European Union this summer has adopted a “Compact for Growth and Jobs” and has endorsed the country-specific recommendations in the context of 2012 European Semester which its Member States will translate into national decisions on structural reforms.

  1. spending on health is an investment and should be oriented into economy’s growth potential. The European Commission will report on the quality of public spending within the boundaries of the EU and national fiscal frameworks,
  2. actions by member states should address deep-rooted imbalances and go further in structural reforms through opening up competition in network industries and removing unjustified restrictions on services which is important for the health sector as well,
  3. health care has a strong social policy component and thus is important to long-term sustainability of public finances. Member States should balance the need for universal health care and long-term care with an increasing demand related to ageing population, technological development and growing patient expectations in all age categories. Sound reforms are thus needed to achieve both a more efficient use of limited public resources and the provision of high quality health care,
  4. the EU services directive in the health sector is working in two directions – recognition of professional qualifications (doctors, nurses, pharmacists) and equal application of patients’ rights in cross-border healthcare which entitles to be reimbursed by home health system for any treatment received abroad to which a patient would have been entitled at home, and finally
  5. the supervision of healthcare sector at the national level should be a part of an independent peer-review process involving autonomous agencies working with the Member States – good examples could be EHMA and EuroHealthNet.

Thus the EU actions and recommendations should be well placed in the EU level playing field, therefore they must be well accompanied by domestic policies.

In order to meet this demand, national administrations should work on (1) clear and recognisable accountancy rules for structural costs incurred and (2) on a transparent list of quality indicators for supervision of health care services. A good example could be a performance assessment tool kit for quality improvement in hospitals (PATH) developed in collaboration with WHO.

From the perspective of public resources (3) all efforts should be made to increase private savings next to public programmes. This could be done by using voluntary private insurance accounts.

And finally to conclude, a governance of the sector can be further improved by integrating all three objectives into a single budget planning process, which should possess a necessary administrative back-up and which in its turm can be delegated to public semiautonomous agencies.

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