Health Spending Update: Into the 21st Century

The OECD released its Health Data 2012 statistics several months ago and they are certainly worth a glance given that rising health spending is still a big international policy issue, and the capacity to pay has taken a recessionary hit during the first decade of the 21^st century.

Plotting the total health spending to GDP ratios between 2000 and 2010, it would appear that almost all of the 34 OECD countries have seen an increase in the H/GDP ratio – the exception being Iceland (Figure 1) which saw a slight decrease from 9.5 to 9.3 percent. The smallest percentage increases in the H/GDP ratio belong to Iceland, Israel, Luxembourg, Hungary and Slovenia.  The largest increases are for the UK, the Netherlands, Ireland, Korea and the Slovak Republic.

 

Of course, the largest share of GDP devoted to health spending remains with the United States at 17.6 percent (Figure 2).  Next is The Netherlands at 12 percent, followed by Germany and France at 11.6 percent, then Switzerland and Canada each at 11.4 percent.  The smallest share belongs to Turkey (6.1 percent) with the next largest shares belonging to Mexico (6.2), Estonia (6.3), Poland (7.0) and Korea (7.1).

Of course, the health to GDP ratio may be somewhat misleading given that health spending is less variable than GDP and some of the increases in the health spending to GDP ratio over the period 2000 to 2010 are simply due to poor economic performance in the wake of the financial and economic crisis, which started in 2008. This could particularly be the case for some hard hit European countries such as Greece or Ireland

Figure 3 provides the ranked average annual growth rate of real total health spending in each of the OECD countries for the period 2000 to 2009.  The average annual growth rates range from a low of 1.9 percent for Italy to a high of 10.9 percent for the Slovak republic.  The countries with the most growth in real total health spending are Poland(7 percent), Turkey(7.1), Ireland(8.4), Chile(8.7), Korea(9.1) and the Slovak Republic.  The lowest average annual growth was in Italy followed by next highest Germany (2 percent), Portugal (2.3), Austria, France and Japan all at 2.7 percent.  On this range, Canada and the United States come in around the middle of the pack at 4.6 percent and 4.3 percent respectively.

Based on all of these figures, it would appear that the health spending growth issue is still on the radar (pun intended). However, what is also interesting is if one plots the average annual growth rate in real total health spending for the 2000-2009 period against the value of H/GDP in 2000, there is a definite negative relationship. (Figure 4). Countries with lower H/GDP ratios in 2000 have seen higher growth rates of real health spending in the early 21^st century.  Those with higher values in 2000 of H/GDP have seen somewhat slower growth.  Perhaps, there may begin to be some convergence in H/GDP ratios as we move into the second decade of the 21^st century. More on OECD health spending to come in future posts.

Comments

[Kathleen]

The relative position of Japan is a puzzle in this data - both in terms of H/GDP and the growth rate of H. I would have thought that the demographics of Japan would be triggering an increase in health care spending.

Perhaps an aging population does not automatically mean unsustainable health care spending? Or perhaps I am not properly understanding Japan's relative age profile.

[Robillard]

@ Kathleen
This information is mostly from Wikipedia: The health care industry in Japan is highly reglulated. Hospitals and clinics are required to operate on a not-for-profit basis, and must be managed by doctors. Like in Canada, the Japanese government negotiates prices with service providers, and restricts the growth rate of procedures. Japan has a health insurance mandate, which requires that everyone either have insurance through a employer, or through the national health insurance system, which is administered by local or regional-level goverments. Co-payments are typically up to 30% of the cost of procedures, which gives patients an interest in keeping costs down.

Taken together, with the exception of employer-based health insurance, it seems that the government regulates much of the profit-seeking activity out of the Japanese health care market.

[Jacques René Giguère]

Health care systems don't have much relationship with health outcomes.
As they say in the U.S.: The american health system has only two defects: it is not a system and it is not about health.

[Frances Woolley]

Kathleen - Many of the hospital/attendant-type services that are provided commercially in Canada are provided by family in Canada. This is a US blogger writing about a trip to Japanese hospital: http://www.biz2web.com/grant/c6.htm

The biggest difference we found in patient care was the role of the patient's family. When Tom was being admitted, Marie was given a list of things she should bring for him. This included towel and washcloth, slippers, personal care items, a basin for washing, chopsticks, teacup, and some other basic items. Hospital pajamas were provided. Throughout this experience, Marie learned many more kanji, as it was quite a challenge to read all the signs in the hospital, and it helped to relieve stress to have something difficult to study.

Wives, family members, and "less-sick" patients do much of the basic nursing care, as well as general maintenance. For instance, when the meals are brought to the rooms, the more able patients serve the less able ones. When patients are finished eating, the more able patients return their plates to the cart. Patients, or their families, are expected to do their own personal laundry and hang it on the roof of the hospital to dry. The sheets in Tom's room were only changed once while he was in the hospital. We figured out much later that Marie was probably supposed to wash the linen and change the bed. One day a very sick man was put in Tom's room. The first thing his wife did was scrub the floor, bed, table, and other surfaces in his area of the room. There were hospital housekeepers, but they did minimal cleaning.

Another difference - family doctors seem to play a much smaller role - if you're sick you either go to a clinic or a hospital, and that's it.

That link is from 1995, so things may have changed somewhat, but I don't think they've changed hugely.

[ekonomist]

dificult to believe. this statistic may not be true. my opinion!

[Kathleen]

Thanks to all for the very interesting information about Japan and its health system.

The question I am left with is: has there been a change in culture or government regulation that would have tightened up the Japanese spending on health care? If nothing changed in the cultural arena nor the government regulations then I would expect to see spending on H in Japan to increase between 2000 and 2009 as the population ages. This does not seem to have happened over the past 10 years. Has the family been the cost absorber?

[Peter N]

Considering the current rate of progress in medical research, there is no way to know how much health care will cost 20 years from now. Obviously utilization will be up, but not necessarily utilized hours since treatments will be shorter and more effective. The big savings, however would come from cures to the most common chronic diseases or those which have high end of life cost Alzheimers, Parkinsons, rheumatoid arthritis, COPD, congestive heart failure, schizophrenia, kidney disease, diabetes. There's been recent progress in all of these after decades or even centuries of standstill. I'd say that the revolution in medicine is around the point the automobile revolution was in 1900. These things take around forty years to get going. Serious interest in designing automobiles started in the 1870s. The model T was introduced in 1908.

Consider the computer. It's design reached roughly its current form around 1947. It was only in the 1950s that it had any real visibility. The minicomputer revolution came in the 1960s, and with it the idea that you could have a personal computer (at least if you were an engineer and could talk your company into it). Then came microcomputers, which were cheap enough for individuals to have their own. The population of computers became large enough to support a vastly expanded software industry. Eventually this industry produced products that were good enough and widely adopted enough to change the way business was done - Oracle, Office, Salesforce.com, Amazon, Google, Apple...

If you put the start of the medical revolution at the start of the Human genome project in 1990, it's taken 20 years to be able to exploit it. A great deal of what we thought we knew about how the genome functions turned out to be wrong, and sequencing wasn't cheap enough for their to be a library of sequenced people and organisms to study and compare (You need sequences for mice, rats, fruit flies, and a bunch of other experimental subjects).

Now interesting results are pouring out, and the bottleneck will be the approval process. If you want to see the rate at which change is occurring, I recommend science daily -

http://www.sciencedaily.com/

[The Keystone Garter]

Here is what I suggest: Boy you guys have an canaconomonopoly. Measure the Provincial and Federal and infrastructure (mostly cities which are politically under-represented) ROIs. For provincial, that is health and education spending. And why are the ads for short-duration computer science in both countries? Human psychology changes more slowly even if earns less. Measure job satisfaction? Retraining isn't most people's cup of tea...
I like locating cities where rain is good for wheat/oats. Ports and rails are nice. And Federally, we are petro and finance. That is federal tax revenue. So, fine for now, but need to diversify. So odds of sustainable and new industry federal budgets bring higher ROIs (say in 3 yrs or so or PC PM or a S.H. Revelation). Whichever are higher ROI should get more revenue in budgets/tax-codes. The fed debt suggests addressing the debt may require income while we have revenues assured, but don't want to trigger the very recession trying to avoid.

[Atteltyicex]

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