## 2. P ## Source details **Canonical URL:** [2. P](https://www.imf.org/-/media/files/publications/selected-issues-papers/2026/english/sipea2026064.pdf) ## Other formats - [Markdown version](/-/media/files/publications/selected-issues-papers/2026/english/sipea2026064.pdf.md) - [Structured JSON version](/-/media/files/publications/selected-issues-papers/2026/english/sipea2026064.pdf.json) --- ### Introduction and key context - Portugal’s health system faces rising spending pressures from population aging, workforce constraints, and rising input costs, while access bottlenecks persist. - Portugal has 24 percent of the population aged 65 or over. - Total current health expenditure (CHE) has fluctuated around 12-14 percent of total government spending. - Total (private and public) CHE has been close to 10 percent of GDP. - Per-capita CHE growth since 2000 has been broadly in line with the EU-27. - Projections: population aging and excess cost growth are projected to increase public health spending by around 2 percentage points of GDP by 2050 under baseline policies. - Efficiency frontier analysis indicates potential savings in the order of ¼ of current spending if Portugal were to operate at the frontier (estimates are indicative and sensitive to methodology). ### Healthcare model and spending composition - System structure and financing - Portugal relies on a public universal National Health Service (Serviço Nacional de Saúde, SNS), mostly tax-financed. - Ministry of Health centralizes resources and contracts annual budgets of around €14 billion (4.8 percent of GDP) with local health entities. - Since 2024, most public hospitals and primary care centers have been integrated into 39 Local Health Units (Unidades Locais de Saúde, ULS). - Financing shares and implications - Government financing accounts for around 59 percent of CHE. - Social health insurance represents about 3 percent of CHE. - Out-of-pocket spending amounts to around 30 percent of CHE. - High out-of-pocket spending implies household burden and potential equity/financial protection concerns, and complicates system performance measurement. - Service composition and delivery patterns - Since 2000, curative care has shifted from inpatient to outpatient and day care; outpatient curative care absorbs a comparatively high share of CHE relative to the EU. - Preventive and long-term care spending remain limited compared to peers, with continued reliance on family-based long-term care. - Gatekeeping is weak: around 1.6 million SNS users do not have a family doctor, increasing reliance on emergency departments and hospital outpatient departments. ### Hospital spending and access constraints - Post-2021 activity increase partly reflects pandemic catch-up and backlog reduction; authorities reported 5 percent increases in consultations and in surgeries between 2023 and 2024. - Despite higher hospital output and spending, long waits for elective surgery remain elevated. - Contributing factors include capacity constraints, higher cost per patient, higher inpatient length of stay, and hospital beds occupied by patients needing long-term or home care. ### Input-related cost drivers and recent spending growth - SNS CHE increased by 20 percent in real terms during 2019-24. - Major contributors to SNS CHE growth (2019-24): - Personnel spending: almost half of the growth. - Purchase of medical goods: around one third of the growth, with pharmaceuticals explaining 20 percent of the total SNS CHE growth. - External provision and services (including externally procured pharmaceuticals and outsourced services): the remaining ~20 percent of growth. - Personnel dynamics - Rising personnel costs reflect hiring more than wage increases, but shortages persist in family medicine, obstetrics, and nursing. - Heavy reliance on overtime and temporary work has increased costs and may undermine motivation and productivity. - Use of personnel outside the payroll through acquisition of services (tarefeiros) is a structural workaround that can raise costs and weaken accountability. - Evidence suggests productivity in the SNS has been declining since 2015 despite rising spending. - Compensation pressures and labor market - Benchmarking indicates salaries (especially for nurses) may be less competitive than in peers. - Workforce aging and emigration of young health professionals create mid-career gaps that hinder replacement and knowledge transfer. - Recent multi-year wage-increase agreements: on average, around 24 percent for nurses and 10 percent for doctors by 2027. - Anticipated future pressures will increasingly come from compensation in addition to employment. ### Pharmaceuticals: drivers and features of recent spending growth - Recent growth in pharmaceutical spending appears to be driven primarily by volumes rather than prices, except in 2020. - Authorities identified hospital drugs (including oncology, diabetes, and rare diseases) as the main source of pressure, where both volume growth and the diffusion of expensive therapies matter. - A volume-driven profile may reflect appropriate expansion of access and treatment intensity (including catch-up after the pandemic) or clinical practice variation and new therapies expanding beyond initial indications. - Authorities highlighted cost implications with the observation: “health budget is ultimately determined at doctor’s pen”. - Source data noted: IMF staff elaboration based on WHO and SNS Transparency Portal; see INFARMED data. ### System-level reforms, contracting changes, and implementation constraints - Key reforms initiated to integrate care and strengthen accountability: - Generalization of the ULS, integrating hospitals and primary care centers within single administrative and financial structures nationwide. - From 2024, hospital contracting shifted from a volume-based approach (compromisso assistencial) to a capitation-based model. - Capitation definition: Capitation allocates funding largely based on the covered population (with risk adjustment), rather than hospital activity volumes, to strengthen incentives for prevention and integrated care with each ULS. - Implementation and monitoring constraints - Analytical cost accounting is being designed and tested, aiming to produce comparable data across hospitals and ULS starting in 2026. - Frequent institutional changes have been identified as a cause of delay in implementation. - Early evidence on the impact of ULS integration and capitation contracting on efficiency will likely remain partial in the near term; careful monitoring needed. ### Budgeting behavior, underbudgeting, and the impact on incentives - Recurrent patterns weakening efficiency incentives: - Underbudgeting, bailouts, and arrears regularly cover overspending through end-year support, reducing incentives for entities to internalize cost control. - Under “contratos-programa,” ULSs often know at the start of the year that targets and budgets are not feasible, leading to spending that then “explodes” and triggers government bailouts. - The shift to capitation-based contracting in 2024 is unlikely to deliver intended efficiency effects if deficits and arrears are later socialized. - Health investment pipeline and execution: - Portugal has an ambitious pipeline of health investments under the PRR and national plans, but chronic under-execution of health infrastructure projects masks inefficiencies and offsets overruns in current health spending. ### Portugal’s health spending review: scope, timeline, and implementation constraints - 2024 cycle was the first under a new methodology with a dedicated manual standardizing analytical steps and governance. - A decree adopted in July 2025 clarified roles, reporting obligations, and intended integration of spending review outputs into annual budgets and MTEF. - Under the July 2025 framework, spending review reports are meant to be approved before the start of the budget year and factored into the draft budget and MTEF update. - Topics are selected about two years ahead, based on fiscal relevance and government priorities. - The 2024 health spending review focused on: (i) contracted care in dialysis and physical therapy/rehabilitation services; and (ii) medicines, with emphasis on generics and biosimilars. - The scope of the review of pharmaceutical spending will be expanded in 2026, and human resources in health is already being considered for the 2027 cycle. - Initial savings estimates and implementation constraints: - Spending reviews produce estimates of savings (e.g., about €70 million in the 2024 health spending review) but achieving them has proved difficult. - Recurring constraints: limited data access, limited comparable cost and activity data across providers, and frequent institutional/political changes interrupting implementation. ### System performance, bottlenecks, and spending composition - Activity has recovered since the pandemic, but wait times remain high and hospitals report persistent congestion. - Pressures are concentrated in personnel, pharmaceuticals, and outsourced services, indicating challenges in resource deployment rather than overall spending levels. - Short-term efficiency challenge emphasized as throughput and patient flow rather than service volumes alone. - Drivers of spending increases cited: - Personnel costs, medical goods (notably pharmaceuticals), and external provision account for most of the increase in SNS spending. - Reliance on costly workarounds (e.g., overtime and outsourcing) and volume-driven growth in high-cost therapies. - Gaps in primary care gatekeeping and limited long-term and home-care capacity shift demand toward hospitals and emergency departments. ### Policy options and recommended actions to enhance health spending efficiency - Complete ongoing reforms and operationalize enablers: - Sustain rollout of the ULS. - Consolidate the shift to capitation-based contracting. - Develop and deploy analytical cost accounting and interoperable information systems. - Address incentive and capacity gaps: - Strengthen primary care gatekeeping. - Expand long-term and home-care capacity to reduce hospital pressure. - Reinforce clinical protocols and prescribing controls to limit volume-driven pharmaceutical spending growth. - Consider a carefully designed and targeted reintroduction of moderating fees over the medium term as a demand-management tool for non-urgent or avoidable use of hospital and emergency services. - Strengthen budgeting and spending review governance: - Set health budgets using more transparent and objective criteria, with clearer expectations on expenditure paths. - Give a more prominent role to the Ministry of Finance and senior government coordination in monitoring implementation of spending review measures. - Improve reporting on realized savings and link them more clearly to budget decisions. *Source: HEALTH SPENDING EFFICIENCY IN PORTUGAL: DRIVERS, CHALLENGES AND REFORM PRIORITIES (sipea2026064 - 2. P).* ### 2. P ### 2. P ### Introduction and key context - Portugal’s health system faces rising spending pressures from population aging, workforce constraints, and rising input costs, while access bottlenecks persist. - Nearly a quarter of the population is aged 65 or older (Portugal has 24 percent of the population aged 65 or over). - Total current health expenditure (CHE) has fluctuated around 12-14 percent of total government spending. - Total (private and public) CHE has been close to 10 percent of GDP, above the EU average. - Per-capita CHE growth since 2000 has been broadly in line with the EU-27. - Projections: population aging and excess cost growth are projected to increase public health spending by around 2 percentage points of GDP by 2050 under baseline policies. - Efficiency frontier analysis indicates potential savings in the order of ¼ of current spending if Portugal were to operate at the frontier (estimates are indicative and sensitive to methodology). ### Healthcare model and spending composition - System structure and financing - Portugal relies on a public universal National Health Service (Serviço Nacional de Saúde, SNS), mostly tax-financed. - Ministry of Health centralizes resources and contracts annual budgets of around €14 billion (4.8 percent of GDP) with local health entities. - Since 2024, most public hospitals and primary care centers have been integrated into 39 Local Health Units (Unidades Locais de Saúde, ULS). - Financing shares and implications - Government financing accounts for around 59 percent of CHE (higher than the EU average). - Social health insurance represents about 3 percent of CHE (vs. over 40 percent in EU). - Out-of-pocket spending amounts to around 30 percent of CHE, about 10 percentage points higher than the EU average. - High out-of-pocket spending implies household burden and potential equity/financial protection concerns, and complicates system performance measurement. - Service composition and delivery patterns - Since 2000, curative care has shifted from inpatient to outpatient and day care; outpatient curative care absorbs a comparatively high share of CHE relative to the EU. - Preventive and long-term care spending remain limited compared to peers, with continued reliance on family-based long-term care. - Gatekeeping is weak: around 1.6 million SNS users do not have a family doctor, increasing reliance on emergency departments and hospital outpatient departments for care that could be provided in community settings. ### Hospital spending and access constraints - Post-2021 activity increase partly reflects pandemic catch-up and backlog reduction (authorities reported 5 percent increases in consultations and in surgeries between 2023 and 2024). - Despite higher hospital output and spending, long waits for elective surgery remain elevated. - Contributing factors include capacity constraints, higher cost per patient, higher inpatient length of stay, and hospital beds occupied by patients needing long-term or home care. ### Input-related cost drivers and recent spending growth - SNS CHE increased by 20 percent in real terms during 2019-24. - Major contributors to SNS CHE growth (2019-24): - Personnel spending: almost half of the growth. - Purchase of medical goods: around one third of the growth, with pharmaceuticals explaining 20 percent of the total SNS CHE growth. - External provision and services (including externally procured pharmaceuticals and outsourced services): the remaining ~20 percent of growth. - Personnel dynamics - Rising personnel costs reflect hiring more than wage increases, but shortages persist in family medicine, obstetrics, and nursing. - Heavy reliance on overtime and temporary work has increased costs and may undermine motivation and productivity. - Use of personnel outside the payroll through acquisition of services (tarefeiros) is a structural workaround that can raise costs and weaken accountability. - Evidence suggests productivity in the SNS has been declining since 2015 despite rising spending. - Compensation pressures and labor market - Benchmarking indicates salaries (especially for nurses) may be less competitive than in peers, affecting attraction and retention. - Workforce aging and emigration of young health professionals create mid-career gaps that hinder replacement and knowledge transfer. - Recent multi-year wage-increase agreements: on average, around 24 percent for nurses and 10 percent for doctors by 2027. - Anticipated future pressures will increasingly come from compensation in addition to employment. ### Analytical focus and policy orientation - The analysis separates activity/volume effects from cost-related drivers to identify whether spending growth reflects higher activity or higher unit costs (e.g., hospital spending from more patients vs. higher unit costs; pharmaceutical outlays from volume vs. price). - Key inefficiency sources explored: - Spending composition: concentration of growth in personnel, pharmaceuticals, and outsourced services. - Input cost drivers: wage dynamics, temporary staff, overtime, pharmaceutical volumes/prices, fragmented procurement and clinical decisions. - System-level constraints: weak gatekeeping, limited long-term and preventive care, and fragmentation of procurement/clinical protocols. - Policy implications (framed by the analysis): - Reforms should target allocation and management of resources (not just higher spending) to contain fiscal pressures while preserving access and quality. - Potential policy levers include improving workforce management (reduce temporary staff reliance, address dual practice/exclusivity issues, task shifting), strengthening primary care gatekeeping, expanding long-term and preventive care capacity, and consolidating procurement and clinical protocols to contain external services and pharmaceutical cost growth. *Source: HEALTH SPENDING EFFICIENCY IN PORTUGAL: DRIVERS, CHALLENGES AND REFORM PRIORITIES (sipea2026064 - 2. P).* ### 12. Pharmaceuticals are a growing source of pressure, despite increased use of generics. ### 12. Pharmaceuticals are a growing source of pressure, despite increased use of generics. ### Pharmaceuticals: drivers and features of recent spending growth - Recent growth in pharmaceutical spending appears to be driven primarily by volumes rather than prices, except in 2020 (Figure 7). - Authorities identified hospital drugs (including oncology, diabetes, and rare diseases) as the main source of pressure, where both volume growth and the diffusion of expensive therapies matter. - From an efficiency perspective, a volume-driven profile may reflect appropriate expansion of access and treatment intensity (including catch-up in activity after the pandemic). - Volume growth could also stem from clinical practice variation and new therapies expanding beyond initial indications; authorities highlighted this as having important cost implications: “health budget is ultimately determined at doctor’s pen”. - Source data noted: IMF staff elaboration based on WHO and SNS Transparency Portal; see INFARMED data (Figure 7 referenced in source). ### System-level reforms, contracting changes, and early implementation constraints - Key reforms initiated to integrate care and strengthen accountability: - Generalization of the ULS, integrating hospitals and primary care centers within single administrative and financial structures nationwide (Goiana-da-Silva et al, 2024). - From 2024, hospital contracting shifted from a volume-based approach (compromisso assistencial) to a capitation-based model. - Capitation definition provided in source: - Capitation allocates funding largely based on the covered population (with risk adjustment), rather than hospital activity volumes, to strengthen incentives for prevention and integrated care with each ULS. - Implementation and monitoring constraints: - Analytical cost accounting is being designed and tested, aiming to produce comparable data across hospitals and ULS starting in 2026. - Frequent institutional changes have been identified as a cause of delay in implementation (Conselho das Finanças Públicas, 2025). - Early evidence on the impact of ULS integration and capitation contracting on efficiency will likely remain partial in the near term; careful monitoring needed to distinguish reform implementation gaps from reform design limitations. ### Budgeting behavior, underbudgeting, and the impact on incentives - Recurrent patterns weakening efficiency incentives: - Underbudgeting, bailouts, and arrears regularly cover overspending through end-year support, reducing incentives for entities to internalize cost control. - Under “contratos-programa,” ULSs often know at the start of the year that targets and budgets are not feasible, leading to spending that then “explodes” and triggers government bailouts. - The shift to capitation-based contracting in 2024 is unlikely to deliver intended efficiency effects if deficits and arrears are later socialized (and if providers price these risks into contracts). - Health investment pipeline and execution: - Portugal has an ambitious pipeline of health investments under the PRR and national plans, but chronic under-execution of health infrastructure projects masks inefficiencies and offsets overruns in current health spending, adding to budgeting challenges (Barros and Santos, 2025; 2025 PIMA). ### Portugal’s health spending review: scope, timeline, and implementation constraints (Box 2) - Reform of spending review framework: - The 2024 cycle was the first under a new methodology with a dedicated manual standardizing analytical steps and governance. - A decree adopted in July 2025 clarified roles, reporting obligations, and intended integration of spending review outputs into annual budgets and MTEF. - Under the July 2025 framework, spending review reports (diagnosis and policy options) are meant to be approved before the start of the budget year and factored into the draft budget and MTEF update. - Topics are selected about two years ahead, based on fiscal relevance and government priorities. - Health as a priority area: - The 2024 health spending review focused on: (i) contracted care in dialysis and physical therapy/rehabilitation services; and (ii) medicines, with an emphasis on generics and biosimilars. - The scope of the review of pharmaceutical spending will be expanded in 2026, and human resources in health is already being considered for the 2027 cycle. - Initial savings estimates and implementation constraints: - Spending reviews produce estimates of savings (e.g., about €70 million in the 2024 health spending review) but achieving them has proved difficult. - Recurring constraints identified by stakeholders: - Baseline construction remains difficult because of data access limits and reliance on historical extrapolation. - Limited comparable cost and activity data across providers weakens ex post verification and attribution. - Frequent institutional/political changes can interrupt implementation momentum when sustained follow-through is needed to convert “identified measures” into realized savings and service improvements. ### System performance, bottlenecks, and spending composition - Recent system performance and pressures: - Activity has recovered since the pandemic, but wait times remain high and hospitals report persistent congestion. - Pressures are concentrated in personnel, pharmaceuticals, and outsourced services, indicating challenges in resource deployment rather than overall spending levels. - Short-term efficiency challenge emphasized as throughput and patient flow rather than service volumes alone. - Drivers of spending increases cited: - Personnel costs, medical goods (notably pharmaceuticals), and external provision account for most of the increase in SNS spending. - System reliance on costly workarounds (e.g., overtime and outsourcing) and volume-driven growth in high-cost therapies. - Gaps in primary care gatekeeping and limited long-term and home-care capacity shift demand toward hospitals and emergency departments, reducing effective elective care capacity. ### Policy options and recommended actions to enhance health spending efficiency - Complete ongoing reforms and operationalize enablers: - Sustain rollout of the ULS. - Consolidate the shift to capitation-based contracting. - Develop and deploy analytical cost accounting and interoperable information systems (notably to improve comparability of costs and activity across providers). - Address incentive and capacity gaps: - Strengthen primary care gatekeeping. - Expand long-term and home-care capacity to reduce hospital pressure. - Reinforce clinical protocols and prescribing controls to limit volume-driven pharmaceutical spending growth. - Consider a carefully designed and targeted reintroduction of moderating fees over the medium term to complement gatekeeping reforms as a demand-management tool, particularly for non-urgent or avoidable use of hospital and emergency services. - Strengthen budgeting and spending review governance: - Set health budgets using more transparent and objective criteria, with clearer expectations on expenditure paths. - Give a more prominent role to the Ministry of Finance and senior government coordination in monitoring implementation of spending review measures. - Improve reporting on realized savings and link them more clearly to budget decisions to ensure identified measures translate into demonstrated results. *Source: sipea2026064 - 12. Pharmaceuticals are a growing source of pressure, despite increased use of generics.* --- _Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2026/english/sipea2026064.pdf_