Financial sustainability in the context of economic crisis: sustaining equity and solidarity

1. Financial sustainability in the context of economic crisis:sustaining equity and solidarity Tamás Evetovits Senior Health Financing Specialist WHO Regional Office for Europe

2. Outline

3. OBS/HEN Policy summary on the response to the financial crisis • Protect health budgets and consider health sector as a component to economic recovery • Adjust revenue collection • Consider re-allocation within the exisiting government budget and within the health budget • Careful with coverage decisions and shifting to private expenditure • Improve efficiency • Improve preparedness for dealing with downturns

4. Coverage decisions

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

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

7. Crisis presents opportunities not to be missed and potential failures to avoid

8. Why protect public spending for health?

9. 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.

10. Medicines are the main cause of spending for poorer people Source: Võrk et al 2009

11. Patients forego seeking care or do not buy prescribed medicine The unmet need for health services was already high before the crisis. (Latvia) Source: EU-SILC 2006

12. Health impact of social welfare spending and GDP growth Source: StucklerD et al. BMJ 2010;340:bmj.c3311

13. 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

14. Balancing the budgetAn accounting exercise or a matter of choice in public policy priorities

15. 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

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

17. Fiscal context: relative size of the government (2010)CRO and RUS have similar sizeof government as a share of GDP Source: WHO, 2011

18. 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% Source: WHO, 2011

19. Public sector expenditure on health as a % of GDP (2010) Source: WHO, 2011

20. Priorities matter: what if Latvia gave the priority to health that its neighbours do? Instead, Latvia has further reduced its public spending on health to 3.21% of the GDP in 2012

21. Priority to health. Is it that simple?

22. Beveridge and Bismarck are not helpful here

23. Sustainability. Let’s clarify

24. Economic sustainability: is there a cause for corncern? What do we spend our GDP on? Source: WHO NHA database, 2012

25. Fiscal sustainability: is the health sector a threat to fiscal sustainability? Government health spending less than 12% of total in 2000... and in 2010 as well Source: WHO NHA database, 2012

26. The real challenge in many CEE and SEE countries

27. 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.