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

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia Outline

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia OBS/HEN Policy summary on the response to the financial crisis 1.Protect health budgets and consider health sector as a component to economic recovery 2.Adjust revenue collection 3.Consider re-allocation within the exisiting government budget and within the health budget 4.Careful with coverage decisions and shifting to private expenditure 5.Improve efficiency 6.Improve preparedness for dealing with downturns

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia Coverage decisions

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

Financial sustainability in the context of economic crisis 29 June, Tallinn, Estonia Short-term solutions are important to keep the system running, but proceed with care when looking for savings

Financial sustainability in the context of economic crisis 29 June, Tallinn, Estonia Crisis presents opportunities not to be missed and potential failures to avoid

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia Why protect public spending for health?

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia Catastrophic spending is highest among poorer people Source: Võrk A et al. Income-related inequality in health care financing and utilization in Estonia 2000– Copenhagen, WHO Regional Office for Europe, 2009.

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

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

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia Health impact of social welfare spending and GDP growth Source: Stuckler D et al. BMJ 2010;340:bmj.c3311

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia 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

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia Balancing the budget An accounting exercise or a matter of choice in public policy priorities

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia 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

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

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%

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

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia 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

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia Priority to health. Is it that simple?

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia Beveridge and Bismarck are not helpful here

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia Sustainability. Let’s clarify

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

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia Fiscal sustainability: is the health sector a threat to fiscal sustainability? Source: WHO NHA database, 2012 Government health spending less than 12% of total in and in 2010 as well

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia The real challenge in many CEE and SEE countries

Financial sustainability in the context of economic crisis 28 June, Tallinn, Estonia 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.