Some Observations on Recent Developments in Health Financing Peter Berman The World Bank November 9, 2010 Stockholm, Sweden This presentation represents the personal views of the author and are not an official representation of the World Bank group or its affiliates.

Despite efforts to control health spending, it continues to rise Average spending as %GDP in OECD steadily rising Cost containment efforts of 1990s slowed but didn’t stop the trend Increases attributed largely to technology and aging – both pressures likely to continue Sweden not an outlier – effects relatively moderate – but still there Health financing becoming more pluralistic: mainly public systems increasing incorporating private option; mainly private systems incorporating public options – “converging” in this sense Projections suggest increase likely to continue. United States experience says this is possible Borrowing liberally from OECD (2010) “Value for Money in Health Spendng”

Two key questions (OECD 2010) Is increased spending economically justified? Is increased spending financially and fiscally feasible?

Economic justification? Benefits > Cost?, B/C > alternative uses? Difficult to answer in economic terms System performance still improving – access, quality, outcomes Reports from Sweden suggest that further reductions in disparities and improvements in performance still possible Some recent work in US (e.g. Cutler) and others suggests we may underestimate benefits because of difficulties in measuring quality of life improvements and expansions in eligibility for new treatments “Revealed preference” suggests continued economic justification (FN: should the state try to change preferences?)

Financial and fiscal feasibility? Financial – can the money be found? Fiscal – are citizens willing to pay for it? Economic crisis raises doubts about social ability to pay – need to balance increased financing with growth or other trade-offs? Fiscal strategies? Administrative cost controls work in shorter term, but often not optimal Efficiency strategies offer some promise Priority setting P4P, Incentives Information technology Service delivery reforms – coordination and integration Pharmaceutical management Likely futures – use all of these strategies: diversify financing, cut something else, cost controls to slow growth, efficiency gains Consequences? Maintain the base, trade-offs with increases at the margin – how to maintain values of solidarity and equity?

For Sweden Reasonable to expect significant upward pressure on expenditures Can afford to spend more – but can more be financed through the state and general taxation? How much more given high tax levels, concerns about competitiveness, other economic pressures? Efficiency gains can offset some of the pressure but likely not all Some of pressure for increased spending may not be priority for collective health goals, but some may be How to: Figure out which is which? Prioritize the increases which offer real health and welfare gains? Finance them balancing growth concerns and equity concerns?