Spending Efficiency -Productive Spending-How Much is Too Much? Value for Money in Health Spending

Spend efficiency is a methodology that ensures organizations make the most of their money when acquiring goods and services. Companies achieve efficient spend through data-driven strategies like cost optimization, spend visibility, supplier management, and competitive bidding.

country's growth rate and its general economic performance. But this so-called productive government expenditure can take many forms. Broadly speaking, it can be devoted to improving the physical resources of the economy such as its roads, airports, etc.

1. Introduction

OECD countries have made tremendous strides in improving population health over recent decades. Life expectancy at birth has increased, rising on average by ten years between 1960 and 2008. Gains at older ages have been even more dramatic. Today, a woman aged 65 can expect to live a further 20 years, and a man an additional 17 years. Although socio-economic inequalities in health status and access to care remain, reductions in child mortality and gains in population health have continued to improve at a steady pace over the past few decades (OECD, 2009a). Levels of morbidity have fallen and infant mortality is now five times lower today than it was in 1960. Part of these achievements can be put down to increased incomes and higher levels of education. But a good portion has originated in the improvements in health care itself. Technological change has brought better treatments and benefitted a wider section of the population. For example, improvements in anaesthesia combined with non-invasive surgery have meant that a greater number of older patients can be operated with less pain and faster recovery than before. Even in the past few years, huge improvements have been made in the treatment of stroke and other heart diseases, reducing mortality rates from these diseases dramatically. Public health has also improved with higher levels of immunisation which has limited the spread of communicable disease. Health systems have also evolved such that almost all countries have some form of public or private insurance covering the risk of ill health and high medical costs and access to quality health care has also improved. Less developed OECD countries have progressed in this area: Mexico and Turkey have increased insurance cover for the poorest groups of the population. The historic health reforms in the United States pave the way towards mandated health insurance for a wider share of the population. Improvements in medicalpractice standards have been accompanied by efforts to reduce the provision of inappropriate services and address shortcomings in the quality of care.

Spending by type of health care services The allocation of health spending across the different types of health services and goods can be influenced by a wide range of factors, from the supply of resources and access to new or high-cost technology, to the financial and institutional arrangements for health care delivery, as well as clinical guidelines and the disease burden within a country. OECD data are able to break down spending into components of individual health care (inpatient, out-patient, pharmaceuticals, etc.) as well as those services benefiting the all or parts of the community, such as public health and administration of health care.

How can we ensure economic sustainability of health systems? As noted in the introductory paragraphs, the system sustainability and efficiency objectives are closely linked: making health system more efficient and effective is likely to be one of the few ways of reconciling rising demand for health care and the public financing constraints just mentioned. Recent OECD research (Joumard et al., 2008 and 2010) has examined the degree of inefficiency in OECD health systems and the scope for productivity gains. Estimates of the degree of health care spending efficiency are based on health care outcomes defined as those gains in health status that can be attributed to health care spending. A country is judged to be more efficient than another if it achieves higher life expectancy for a given level of health care spending, once confounding variables have been allowed for

Conclusions

Health systems are economically sustainable when the benefits of health spending exceed their costs. But this is not necessarily enough to ensure the overall sustainability of the system, as sometimes fiscal constraints can be binding. This chapter has shown that health spending has gone up rapidly in many (but not all) OECD countries in recent years. Does this mean that they have become economically unsustainable? Although the chapter makes no attempt to assess the question in any systematic way, “probably not”, is the most likely answer. Health systems are delivering real improvements in health, in many of the main dimensions in which we judge health spending – access, quality, responsiveness, and so on. As long as they continue to deliver such improvements, it will be economically desirable to meet the future demand for more spending. But in the short term, the sharp deterioration in the public finances means that fiscal sustainability is a problem in some countries. Chapter 2 assesses the policy options available to countries to achieve value for money in health systems in the future, but also what options are open to those countries that need to control spending for fiscal reasons in the short term.