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?