Healing Public Health Care Finances: Budget Reforms That Work
IMF Blog, February 8, 2011
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Bibliographic details
- Authors: Benedict Clements
- Published: February 8, 2011
Summary and scope
- IMF Fiscal Affairs Department paper presents public health spending projections for fifty advanced and emerging countries and offers reform options.
- Central question: how can governments maintain access to affordable health care without unsustainable pressure on public finances?
Advanced economies: findings
- Health care spending accounted for about half of the rise in government budgets in the past 40 years.
- Public health spending is projected to climb by 3 percentage points of GDP over the next 20 years in the advanced economies.
- Drivers of rising health spending: population aging, technical progress, and availability of better and more expensive technologies.
- Historical observation: countries with lower increases in public spending (examples cited: Italy, Japan, and Sweden) have a greater reliance on budget caps and central oversight.
Advanced economies: recommended reform strategies
- Combine top-down budget control with bottom-up efficiency reforms.
- Top-down: budget systems that cap total health expenditures and impose a high degree of central oversight to provide incentives for expenditure restraint.
- Bottom-up: reforms to enhance efficiency and deliver more and better services for a given amount of resources.
- Specific bottom-up measures (examples cited):
- Strengthening market mechanisms: increase patient choice of insurers, allow greater competition between insurers and providers, rely more on private sector provision (examples: Germany and Japan).
- Change provider payment methods: move away from fee for service toward sophisticated management and contracting systems with incentives to minimize waste and improve services (examples: Germany and Italy).
- Greater reliance on private insurance can help slow growth of public health spending (examples: Australia, Canada, and France).
- Equity constraint: reforms must protect universal access to basic health services and minimize adverse effects on the poor.
- Contingency: if reforms are insufficient to prevent public health spending rising as a share of GDP in some countries, additional fiscal measures—deeper cuts in other spending areas or additional revenue increases—may be needed.
Emerging economies: findings
- Public health spending is expected to increase by about 1 percentage point of GDP over the next 20 years.
- Health indicators (life expectancy and infant mortality) are substantially lower than in advanced economies in many emerging markets.
- Two distinct challenges:
- For many countries (especially in Asia and Latin America): expand basic health care and the health safety net; scope exists to boost spending to cover more people at an affordable cost.
- For countries with already extensive access (notably in Eastern Europe): focus on making public spending more efficient to prevent future budget pressure.
Emerging economies: recommended reform strategies
- Prioritize preventive and primary care, fight infectious diseases, and enhance care in poorer rural areas.
- Change financial incentives facing health care providers to emphasize primary and preventive services.
- Focus public resources on providing the most essential health services first to maximize coverage at low fiscal cost (examples of success: Thailand and Chile).
- Where access is already broad, prioritize efficiency improvements to avoid future fiscal strain.
Cross-cutting conclusion
- Both advanced and emerging economies need to get "more bang for their buck" from public health care spending by combining expenditure control with efficiency and equity-preserving reforms.
Source: Healing Public Health Care Finances: Budget Reforms That Work — Benedict Clements, February 8, 2011.
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