How can healthcare be funded in this time of crisis

How can healthcare be funded in this time of crisis? The OECD recipe: “Spending review, review of the public ‘basket’ and, in the long term, a new balance between public and private” Quotidiano Sanità

by Cesare Fassari

With Covid, healthcare spending across OECD countries has increased by an average of 1% of pre-pandemic GDP. Keeping health systems resilient to new health shocks and responding to growing health needs would require further and constant massive increases in public funding. However, the uncertainties in the geopolitical framework make this path very difficult, especially for countries with high inflation and high levels of debt. But something can and must be done. THE OECD DOCUMENT.

How can healthcare be funded in this time of crisis

19 FEB –

After the Covid pandemic, health spending in OECD countries increased on average by almost 1% of pre-epidemic GDP.

The data is included in an OECD draft that questions how to ensure adequate levels of health resources are maintained in the face of possible new health emergencies, but also how to manage the waiting lists that have accumulated for non-Covid health services current situation of economic uncertainty, characterized by high inflation and the uncertainties arising from the continuation of the war in Ukraine.

The OECD underlines how the health crisis caused by Covid has highlighted the need for further investments to strengthen the health system to deal with possible new shocks with investments of at least 1.4% of pre-pandemic GDP.

However, according to the OECD, the economic outlook limits opportunities to increase overall spending on health, which today averages 15% of total public spending and which the OECD says should increase by at least 5% by 2040 to meet new health needs.

Healthcare systems are experiencing significant increases in the cost of providing servicesThe increase in the cost of gas, fuel and electricity is among the first causes of cost increases, considering that the healthcare sector is already characterized by high energy consumption.

Rising wages and labor costs in many countries are having knock-on effects across a wide range of goods and services.

Rising inflation and the economic slowdown will affect resources to fund healthcare
First, however, the OECD notes that increases in prices and wages will lead to an increase in total and income-related tax revenues, potentially increasing public health spending (at least in nominal terms). For example, nominal wage growth in the OECD across all sectors was around 6-7% in 2021 and is expected to reach a similar level in 2022-23.

On the other hand, according to the OECD, a sustained economic slowdown could be accompanied by rising unemployment and falling profits, with falling tax revenues and social security contributions.

This, together with high inflation, reduces household disposable income (and hence households’ ability to purchase health care).

On the other hand, it should also be emphasized that the expected unemployment rate in 2022 and 2023 will be 5%, the lowest in the last decade, confirming, among other things, the persistent shortage of qualified workers in many countries.

Maintaining the priority of health in public budgets will be a challenge
Russia’s war against Ukraine, the energy crisis and inflationary pressures, stressed the OECD, have pushed healthcare to a lower priority in the public debate.

Indeed, health is competing with a host of new, even higher spending priorities, such as defence, rising direct energy costs, investing in the green transition and, most importantly, helping households and businesses to (partially) protect themselves from rising costs .

What options are left for governments to fund future healthcare spending?
As the population ages, income increases, technological advances, and other factors, healthcare spending will increase.

Even without considering the need for further investments in health systems resilience to deal with future crises, the OECD predicts that an increasing share of revenues would still need to go to health care. However, with health spending already accounting for an average of 15% of public spending today, the question of how to fund such increases is becoming ever more pressing.

So far, the OECD summarizes, various solution hypotheses have been put forward in the public debate, not always alternatives:

  • increase health spending without affecting other spending purchases, increasing the overall burden of public spending;
  • keep total public expenditure constant, but only increase the budget for health;
  • reassess the boundaries between public and private spending;
  • Adopt spending review policies by cutting unnecessary spending.

A general increase in public spending is a difficult option for many countries
The hypothesis of an increase in healthcare spending without affecting other sectors of public spending with increases in taxes or debt is seen by the OECE as an unattainable path for many countries with already high levels of debt and public spending.

More investment in healthcare, but fewer unnecessary costs and inefficiencies
According to the OECD, this is one of the ways, in times of political and economic turbulence, to engage public opinion and policymakers in a strategy that links investment projects in the areas that are essential for greater health systems resilience and strategies that help in cutting unnecessary or inappropriate ones health spending is effective.

Reassessing the lines between public and private spending, but in the long run there is too much risk of inequality today
In the case of unavailability of additional public funds to cover future health expenditure needs, the OECD also points to the alternative possibility of covering part of the services through private expenditure.

In almost all countries, the OECD emphasizes, the share of public health expenditure increased with the beginning of the pandemic. Many countries have expanded publicly funded services, such as providing universal access, free masks, or testing for patients with COVID-19 symptoms.

However, the OECD notes that the question of “what to fund with public funds” is not limited to the context of the pandemic.

Indeed, for the OECD, it is “a broader issue” that should consider redefining the “basket” of benefits and services “by removing those that are no longer appropriate or no longer add value”.

The OECD also points out that in many countries there is now a debate about introducing or increasing cost-sharing for certain health activities and that there are increasing cases where patients choose to self-finance their treatments instead of to stay long waiting lists due to COVID-19.

However, the OECD notes that any cut in the basket of benefits and services would be politically challenging in the current climate, also because it might hit those population groups hardest who are already struggling with high energy bills and are more affected by the rising cost of living.

Any additional direct co-payments may also impose an excessive financial burden, leading to further impoverishment or an increase in unmet health care needs, which could further exacerbate inequalities.

But in the longer term, according to the OECD, “a debate about reassessing the boundaries between public and private health care will inevitably be sparked in many countries” because, given budget constraints, not all interventions will continue to be funded from public spending and a “strategic Discussion” about what needs to be guaranteed in any case, compared to the non-essentials, will sooner or later be inevitable.

Identifying and cutting unnecessary spending should again be a priority
Rather than increasing investment, current trends appear to be toward “doing more or less the same thing with less,” but according to the OECD, that would be nothing more than a statement that policy no longer has the right to leverage to influence healthcare spending appropriate efficiency and selection policies.

Instead, according to the OECD, “there should still be scope to cut expenditure that “does not deliver better results or is too costly”.

The possibility to do so has already been highlighted in a 2017 OECD report, which highlights the benefits for the entire healthcare system and for all stakeholders: patients, physicians, managers and regulators, who have an important role to play.

Reducing waste should be a priority: dealing with largely avoidable medical errors, the inappropriate use of antibiotics and non-compliance with guidelines in medical practice are just a few examples.

The OECD also recalls proven approaches to increasing productivity, including policies for health workers, the pharmaceutical sector and new technologies.

For example, through the implementation of laws and regulations that expand the area of ​​competence for “non-physicians” and can bring about cost savings without impairing the quality of care. Or by interfering with the price of medicines and the rules governing entry and prescription, which, where implemented, have helped increase generic penetration and save costs.

And again, through the implementation of Health Technology Assessments (HTAs), which have the potential to ensure that ineffective technologies are not introduced and that existing but now obsolete and no longer effective technologies are eliminated.

And then the development of digitization, which, in addition to the introduction of robotic tools, can support new ways of care, especially in the form of telemedicine (which, by the way, according to the OECD, has increased sharply in many countries due to the pandemic). to improve some procedures; and of course the implementation of quality and health data management.

In addition, it is imperative to implement the necessary organizational changes in the management of critical care resources and the protocols developed during the pandemic, leading to more efficient use of hospital resources.

Not forgetting the promotion of healthier lifestyles, which requires action both inside and outside the health sector.

Finally, the OECD notes that although the urgency of the crisis has presented significant challenges for governments to keep a good to ensure “value for money”.

In the current economic climate, policy options remain limited
In conclusion, however, the OECD emphasizes that the current economic situation poses a challenge for health policy.

Public resources are scarce and the healthcare system needs more and more resources.

The opportunities to combine both realities are limited, as mobilizing additional government resources for health could become increasingly difficult, but investment in health, the OECD has no doubt, must remain a high priority even in other emergencies.

The main path is to restore efficiency and optimize spending in all areas of the healthcare system, also because given the current cost-of-living crisis, a complete shift of certain services to the private sector is not desirable, even if the boundaries between them are reassessed and remains private and public in some countries a long-term option that should be considered.

“One of the lessons to be learned from the response to the pandemic should be to get value for every euro invested in health and this should continue to be a top priority for health ministers. And that is all the more true in the current economic climate,” concludes the OECD.

Caesar Fasari

February 19, 2023
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