tamás evetovits senior health financing specialist who regional office for europe financial...

Tamás Evetovits

Senior Health Financing Specialist

WHO Regional Office for Europe

Financial sustainability in the context of economic crisis:

sustaining equity and solidarity

Financial sustainability in the context of

economic crisis28 June, 2012. Tallinn, Estonia

Outline

Dealing with the downturn

Why protect public spending on health?

Balancing the budget

Sustainability. Let’s clarify



OBS/HEN Policy summary on the response to the financial crisis1. Protect health budgets and consider health sector as a

component to economic recovery

2. Adjust revenue collection

3. Consider re-allocation within the exisiting government budget and within the health budget

4. Careful with coverage decisions and shifting to private expenditure

5. Improve efficiency

6. Improve preparedness for dealing with downturns



Financial sustainability in the context of economic crisis

28 June, 2012. Tallinn, Estonia

Coverage decisions

Improving efficiency reduces adverse effects of the crisis and help secure popular and political support for more spending in the future...

eliminate ineffective and inappropriate services

improve rational drug use (including volume control)

allocate more to primary and outpatient specialist care at the expense of

hospitals

invest in infrastructure that is less costly to run

cut the volume of least cost-effective services



Short-term solutions are important to keep the system running, but proceed with care when looking for savings

Aim for sustainable efficiency gains

Avoid losing human resources

Careful with shifting from public to private spending especially out-of-pocket expenditure

Cost containment ≠ efficiency



Crisis presents opportunities not to be missed and potential

failures to avoid



Why protect public spending for health?

There is strong correlation between public spending on

health and the level of out-of-pocket expenditure

“Today, it is unacceptable that

people become poor as a result of ill health”

Tallinn Charter

Catastrophic spending is highest among poorer

people

Medicines are the main cause of spending for

poorer people

Patients forego seeking care or do not buy

prescribed medicine



Catastrophic spending is highest among poorer people

Source: Võrk A et al. Income-related inequality in health care financing and utilization in Estonia 2000–2007. Copenhagen, WHO Regional Office for Europe, 2009.

Medicines are the main cause of spending for poorer people

Sou

rce:

Võr

k et

al 2

009

Patients forego seeking care or do not buy prescribed medicine

Source: EU-SILC 2006

The unmet need for health services was already high before the crisis. (Latvia)



Health impact of social welfare spending and GDP growth

•Each additional 100USD per capita spending on social welfare (including health) is associated with 1,19% reduction in mortality

Social welfare

spending

•Each additional 100USD per capita increase of GDP is associated with only 0,11% reduction in mortality

GDP

Source: Stuckler D et al. BMJ 2010;340:bmj.c3311



The rationale for counter-cyclic fiscal policies for social and health expenditure

• Need for health care during the crisis increases• Drop in public expenditure leads to an increase in

private spending which in turn reduces financial protection for the poor who may forgo seeking care

• Utilization of services and quality of care during a crisis decrease despite increased needs

• Utilization decreases less where the cost of seeking care is low



Balancing the budget

An accounting exercise or a matter of choice in public policy priorities



What determines level of public spending on health?

• Context– Size of the economy – economic context– Size of the government: taxation policy – fiscal context

• Priorities– Government decision on allocation to health

Size of the economy (2010 GDP/capita) CRO and RUS have same size of GDP/capita

Tajikis

tan

Repub

lic o

f Mold

ova

Georg

ia

Ukrain

e

Albania

TFYR Mac

edon

ia

Kazak

hsta

n

Bulgar

ia

Roman

ia

Latv

ia

Croat

ia

Poland

Eston

ia

Portu

gal

Malt

a

Greec

e

Cypru

sSpa

in

Icela

nd

Finlan

d

Belgium

Denm

ark

Irelan

d

Switzer

land

Luxe

mbo

urg

0.00

10000.00

20000.00

30000.00

40000.00

50000.00

60000.00

Fiscal context: relative size of the government (2010) CRO and RUS have similar size of government as a share of GDP

Source: WHO, 2011

Kazak

hsta

n

Armen

ia

Albania

Kyrgy

zsta

n

Georg

ia

Croat

ia

Russia

n Fed

erat

ion

Slovak

ia

Eston

ia

Lithu

ania

Luxe

mbo

urg

Belaru

sIs

rael

Mon

tene

gro

Serbia

Spain

Ukrain

e

Hunga

ry

Greec

e

United

King

dom

Portu

gal

Austri

a

Belgium

Franc

e

Irelan

d0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

Source: WHO, 2011

The real measure of “priority”: government spending on health as a % of total government spending (2010)CRO and SVK give high priority to health, LVA and RUS below 10%

Azerb

aijan

Tajikis

tan

Georg

ia

Albania

Latv

ia

Irelan

d

Belaru

sIs

rael

Roman

ia

Eston

ia

Greec

e

Lithu

ania

TFYR Mac

edon

iaM

alta

Sloven

ia

Slovak

iaIta

ly

Sweden

Belgium

Luxe

mbo

urg

Austri

a

Bosnia

and

Her

zego

vina

Norway

Nethe

rland

s

Switzer

land

0.00

5.00

10.00

15.00

20.00

25.00

Public sector expenditure on health as a % of GDP (2010)

Source: WHO, 2011

Azerb

aijan

Armen

ia

Cypru

s

Albania

Russia

n Fed

erat

ion

Bulgar

ia

Belaru

s

Ukrain

eIs

rael

Turke

y

Lithu

ania

Poland

Slovak

ia

Mon

tene

gro

Serbia

Croat

ia

Finlan

d

Bosnia

and

Her

zego

vina

Spain

Portu

gal

Sweden

Belgium

Austri

a

Franc

e

Denm

ark

0.00

2.00

4.00

6.00

8.00

10.00

12.00



Priorities matter: what if Latvia gave the priority to health that its neighbours do?

GDP per capita

(int US$)

Public spending as

% GDP

Health as % of total

public spending

Government health spending

as % GDP

Latvia (2010) 16,344 44.37 9.21 4.09

LTU priority 16,344 44.37 12.64 5.61

EST priority 16,344 44.37 11.68 5.18

Instead, Latvia has further reduced its public spending on health to 3.21% of the GDP in 2012



Priority to health. Is it that simple?

What if political commitment is short lived?

How can health financing policy help with securing stable, predictable revenue for health?

Why do we see low priority given to health in some countries but not others?



Beveridge and Bismarck are not helpful here

Latvia (tax financed) and Hungary (SHI) both gave low priority to health long before the crisis and in their responses as well. Their health systems were in bad shape already

UK (tax financed), Czech Republic, Croatia and Slovenia (SHI) maintained high priotity

Institutional arrangements helped Lithuania and Estonia (at least in the short run) except for public health programmes



Sustainability. Let’s clarify

Economic sustainability: is there a cause for corncern? What do we spend our GDP on?

Source: WHO NHA database, 2012

2000 20100

5000

10000

15000

20000

25000

EST health spending EST non-health spending

PP

P a

dju

sted

in

tern

atio

nal

US

$



Fiscal sustainability: is the health sector a threat to fiscal sustainability?

Source: WHO NHA database, 2012

Government health spending less than 12% of total in 2000...

and in 2010 as well



The real challenge in many CEE and SEE countries

•SHI: exclusive reliance on earmarked payroll tax is unsustainable in the long run

•Tax-financed: unpredictable annual allocation decisions make stakeholders argue for earmarking

•Mixed systems are evolving, but that does not solve the fundamental question of priority to health

Sustaining stable,

predictable revenues for

health seems to be a challenge in both SHI and

tax-financed systems



Sustainability and health policy objectives• Sustainability is meaningless if

not linked to health system objectives

• Financial sustainability should not be seen as a policy objective worth pursuing for its own sake

• If it was an objective, then a simple cost cutting exercise would do the job…

• …and both equity and efficiency would suffer.

tamás evetovits senior health financing specialist who regional office for europe financial...

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