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Spend less, stay healthy

3 December 2010
by Brian Keeley

Fans of TV medical shows know the procedure: In a chaotic emergency room, Dr. McDreamy examines a feverish patient, furrows his brow, shouts out a diagnosis and – before you know it – a dozen or so suspiciously attractive doctors and nurses are running around, subjecting the poor patient to a bamboozling array of medical tests and scans. All very impressive.

But, in the real world, it’s also all rather expensive – and getting more so by the year. In OECD countries, for instance, the amount governments spend per person on healthcare has risen by more than 70% in real terms since the early 1990s. That spending has brought big benefits, not the least of which is that people are living longer: Over the past two decades, life expectancy – a widely used indicator for national health levels – has been rising by about a year every four years.

Increased healthcare spending isn’t the only reason for that – factors like diet and poverty also play a big role in determining life expectancy. For example, Japan spends less than the OECD average on healthcare and has just 2.2 practising physicians for every 1,000 people – well below the OECD average of 3.2 per 1,000. Nevertheless, it has the highest life expectancy in the OECD area – just under 83 years – and very low rates of infant mortality, due in part to the fact that it’s a wealthy country with a relatively healthy diet.

Still, the increased spending on healthcare since the 1990s has undoubtedly helped to improve health standards in OECD countries. But there’s a downside: spending probably can’t go on rising at its current rate. In 1995, it accounted for $12 out of every $100 spent by OECD governments. Twelve years later, that had risen to $15 out of every $100. In the wake of the financial crisis, when many governments are tightening their budgets, health spending may well come under the scalpel.

But that might hurt less than you’d expect. Why? Simply because governments don’t always get great value for money in healthcare – many could spend less and still get the same results. A report released by the OECD this week suggests that efficiencies could lead to substantial savings in health spending: Without reducing health outcomes, Ireland could make savings on healthcare equivalent to almost 5% of GDP by 2017, the OECD calculates, with Greece and the United Kingdom not far behind on almost 4%.

But even if countries don’t reduce spending, they could still gain substantial health benefits from spending more efficiently, says the OECD. For example, if all countries equalled the performance of the most efficient spenders, life expectancy at birth could be increased by another two years across the OECD area.

Staying with health, the OECD has also been looking recently at sickness and disability benefits, which is another major budget area for governments – it accounts for about 10% of public social spending in OECD countries. Before the recession struck, more people in OECD countries were receiving disability benefits than unemployment benefits – just over 30 million compared with just under 28 million.

A disproportionate number of people with disabilities in OECD countries live in poverty – around 22% compared with about 14% of non-disabled people. Helping them to go out to work could lower that number, but in many cases there are real obstacles to doing that: people with disabilities may have relatively lower levels of education and may face prejudice when applying for jobs. The OECD report suggests addressing these barriers by a partial shift from “passive” to  “active” spending. That means that, instead of simply making payments to people with disabilities, more should be spent on things like providing them with training and offering subsidies to employers to hire  them.

Useful links

Health Care Systems: Efficiency and Policy Settings at OECD iLibrary

Find out more and briefing note on this report

Sickness, Disability and Work: Breaking the Barriers at OECD iLibrary

OECD work on health

Data and statistics on health from the OECD

OECD work on sickness and disability

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