Health care systems: efficiency and policies

Isabelle Joumard, OECD, Economics Department

“New Directions in Welfare”OECD Universities’ Joint Congress, 6-8 July 2011

Weak link between health care spendingand outcomes

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72

74

76

78

80

82

84

0 1000 2000 3000 4000 5000 6000 7000 8000

Total expenditure on health per capita, US $ PPP

Life expectancy at birth, years

Source: OECD Health Data 2010.

Presentation outline

1. Measuring health care spending efficiency

2. Reaping efficiency gains: why (effect on public spending) and how

1. Measuring health care efficiency: difficulties

No obvious definition of health care outcomes and inputs; cross-country data on outcomes are imperfect

A large variety of actors (hospitals, outpatient physicians, drug companies, etc.) and co-ordination matters a great deal

Mix of public and private spending

1. Measuring health care efficiency:OECD approach

Choose an outcome indicator

… and an input indicator

Identify the other determinants

Implement various approaches (panel regressions and DEA) and robustness checks

Complement/compare the overall efficiency index with other performance indicators

Life expectancy at birthTotal population, 1960 and 2007

JapanSwitzerlandAustraliaItalyIcelandSpainFranceSwedenCanadaNorwayNew ZealandNetherlandsAustriaGermanyBelgiumIrelandFinlandUnited KingdomGreeceLuxembourgKoreaPortugalOECDDenmarkUnited StatesCzech RepublicPolandMexicoSlovak RepublicHungaryTurkey

82.681.981.481.481.281.081.081.080.780.680.280.280.180.079.879.779.579.579.579.479.479.179.178.478.177.0

75.475.074.373.373.2

405060708090

2007 1960

YearsSource: Health at a Glance 2009, OECD Indicators.

Amenable mortalityAll causes, 2007 or latest year available

0 50 100 150 200 250

EstoniaHungary

Slovak RepublicPolandMexico

Czech RepublicPortugal

United StatesChile

OECDSloveniaDenmark

KoreaUnited Kingdom

New ZealandIreland

GermanyIsrael*

GreeceFinland

LuxembourgCanada

SpainNorwayAustria

AustraliaNetherlands

SwedenJapan

ItalyIcelandFrance

Age-standardised rates per 100 000 population

Source: Gay et al. (2011), "Mortality Amenable to Health Care in 31 OECD Countries: Estimates and Methodological Issues", OECD Health Working Paper, No. 55.

No trade-off between raising equity and the average health status

Source: OECD Health Data.

Life expectancy at birth (years), 2007

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gbr usa

y = -1.84x + 104.6(t= -3.2) (t=13.4)

R² = 0.30

72

74

76

78

80

82

84

12.0 12.5 13.0 13.5 14.0 14.5 15.0 15.5

Health inequality

Life expectancy at 65, womenWomen, 1970 and 2007

JapanFrance

SwitzerlandSpainItaly

AustraliaCanadaFinlandBelgiumNorwayAustria

GermanyNew Zealand

SwedenIcelandKorea

NetherlandsUnited StatesLuxembourg

OECDPortugal

United KingdomIrelandGreece

DenmarkPoland

Czech RepublicMexico

HungarySlovak Republic

Turkey

23.622.322.222.021.821.621.421.321.020.820.820.720.720.720.620.520.520.320.320.220.220.120.1

19.619.218.918.518.2

17.317.1

15.8

510152025

2007 1970

Years

Source: Health at a Glance 2009, OECD Indicators.

Correlations between outcome measures(level and rank)

LE at birth LE at 65Total Female

Life expectancy at birth, total 1.00 0.94 ** -0.93 ** 0.96 ** -0.96 **Life expectancy at 65, female 0.89 ** 1.00 -0.77 ** 0.91 ** -0.86 **Adjusted PYLL, total -0.82 ** -0.64 ** 1.00 -0.90 ** 0.91 **Health-adjusted life expectancy at birth 0.95 ** 0.85 ** -0.84 ** 1.00 -0.89 **Amenable mortality -0.92 ** -0.82 ** 0.85 ** -0.93 ** 1.00

Amenable mortality

Health-adjusted LE

Adjusted PYLL

Source: Joumard , André and Nicq (2010), "Health Care Systems: Efficiency and Institutions", OECD Economics Department Working Papers, No. 769.

Health care spending2008

0

1000

2000

3000

4000

5000

6000

7000

8000

Public expenditure Private expenditureSpending per capita, US $

Source: OECD Health Data 2010.

Practising physiciansper 1000 population, 2007

GreeceBelgiumNetherlandsNorwaySwitzerlandAustriaIcelandItalySpain2SwedenCzech RepublicPortugalGermanyFranceDenmarkOECDSlovak RepublicIrelandFinlandLuxembourgAustraliaHungaryUnited KingdomUnited StatesNew ZealandPolandCanadaJapanMexicoKoreaTurkey

5.44.03.93.93.93.83.73.73.73.63.63.53.53.4

3.23.13.13.03.02.92.82.8

2.52.42.32.22.22.12.0

1.71.5

0246

Source: Health at a Glance 2009, OECD Indicators.

Remuneration of specialists Self-employed Salaried

Remuneration of general practitioners

0

50

100

150

200

250

300

350US $ PPP, thousands

Source: OECD Health Data 2010.

Remuneration of general practitioners (GPs) Self-employed Salaried

0

20

40

60

80

100

120

140

160

180US $ PPP, thousands

Source: OECD Health Data 2010.

Health care resources

Lifestyle factors: diet, alcohol and tobbaco consumption

Socioeconomic environment: income and education

Pollution

Health status determinants

DEA – defining the efficiency frontier and potential efficiency gains

70

72

74

76

78

80

82

84

0 1000 2000 3000 4000 5000 6000

Efficiency frontier

Life expectancy at birth (years)

Total health care spending per capitaOu

tput

inef

ficie

ncy

Input inefficiency

Australi

a

Switzerl

andKorea

Icelan

dJa

pan

Mexico

France

Turkey

Portugal

Italy

Poland

Sweden

Spain

Canad

a

Norway

New Zea

land

Netherl

ands

Austria

Czech

Rep

ublic

German

y

Belgium

Irelan

d

Luxembourg

United K

ingdom

Finland

Greece

Denmark

Slovak R

epublic

Hungary

United Stat

es0

1

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0

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20

30

40

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60Life expectancy at birth Life expectancy at 65 Amenable mortality (right scale)

DEA – results and sensitivity analysis(for different outcome indicators)

Source: Joumard , André and Nicq (2010), "Health Care Systems: Efficiency and Institutions", OECD Economics Department Working Papers, No. 769.

Potential gains in life expectancy, years Potential gains in amenable mortality, %

DEA – results and sensitivity analysis(for different input indicators)

Australi

a

Switzerl

andKorea

Icelan

dJa

pan

Mexico

France

Turkey

Portugal

Italy

Poland

Sweden

Spain

Canad

a

Norway

New Zea

land

Netherl

ands

Austria

Czech

Republic

German

y

Belgium

Irelan

d

Luxembourg

United K

ingdom

Finland

Greece

Denmark

Slovak R

epublic

Hungary

United Stat

es0

1

2

3

4

5

6

7

Expenditure, ENV Health professionals, ENV Expenditure, ESCS, Nox Expenditure, ESCS, Smoking

Expenditure, ESCS, Alcohol

Potential gains in life expectancy, years

Source: Joumard , André and Nicq (2010), "Health Care Systems: Efficiency and Institutions", OECD Economics Department Working Papers, No. 769.

Panel regressions – model specification (log form)

itHCRiit

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Panel regressions: contribution of main explanatory variables

to cross-country differences in life expectancy

Determinants

Spending Education Tobacco Alcohol Diet Pollution GDPCountry-specific effect

United States -0.5 2.9 0.5 0.0 0.0 0.0 -0.6 0.6 -4.0 Germany 0.6 0.8 0.4 -0.1 -0.1 0.0 0.5 0.1 -1.0 France 1.3 0.9 -0.2 0.0 -0.3 0.0 0.4 0.2 0.4 United Kingdom 0.5 -0.1 0.4 0.1 -0.2 0.0 0.1 0.2 0.0 Canada 1.8 0.9 0.4 0.1 0.1 0.0 -0.8 0.3 0.9 Czech Republic -2.7 -1.8 0.5 -0.1 -0.3 -0.1 0.0 -0.6 -0.3 Korea -0.6 -2.4 0.1 0.0 0.0 0.1 0.3 -0.4 1.7

Life expectancy

at birth

Source: Joumard , André, Nicq and Chatal (2008), "Health Status Determinants: Lifestyle, Environment, Health Care Resources and Efficiency ", OECD Economics Department Working Papers, No. 627.

Panel regressions:years of life not explained by the model

With health care resources measured in monetary terms

-5

-4

-3

-2

-1

0

1

2

3

Source: Joumard , André, Nicq and Chatal (2008), "Health Status Determinants: Lifestyle, Environment, Health Care Resources and Efficiency ", OECD Economics Department Working Paper, No. 627.

Comparing efficiency indicators derived from panel regressions and DEA

Panel regression (years)

DEA (years)

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0 1 2 3 4 5 6 7DEA (years)

Panel regression (years)

Complementing overall efficiency score by other performance measures -- France

France OECD average

-2

-1

0

1

2Overall efficiency

EquityALL, in-patient care

Colorectal cancer

Lung cancer

Breast cancer

AMI

Fracture of femur

OccupancyTurnover

CataractConsultations/doctor

Adm. costs

DTP

Measles

Influenza

Asthma

Bronchitis

Heart failureAmenable mortality

Vacc

inati

ons

Average length of stay

Avoi

dabl

e ad

miss

ions

Source: OECD Health Data 2010.

Source: OECD Health Data 2009; OECD calculations.

% 2017 GDP

2. Reaping efficiency gains –Large potential savings in public spending

Level of basic insurance coverage

Market mechanisms and regulations to steer demand and supply of care affecting users, providers and insurers

Budget and management approaches

Characterising health care systems: a new set of OECD indicators

Characterising health care systems:country groups

Source: Joumard, André and Nicq (2010), "Health Care Systems: Efficiency and Institutions " , OECD Economics Department Working Papers. No. 769.

No health care system clearly outperforms the others No big-bang reform is warranted

Source: Joumard, André and Nicq (2010), "Health Care Systems: Efficiency and Institutions", OECD Economics Department Working Papers, No. 769.

Population coveredScope of basic coverage

Depth of coverage

Choice of insurer, basic coverage

Insurer levers, basic coverage

Over-the-basic coverage

Patient choice among providers

Gate-keeping

Price signals on users

Degree of decentralisationDelegation to insurers

Consistency

Priority setting

Stringency of the budget constraint

Degree of private provision

Volume incentives embedded in provider payment schemes

Regulation of prices paid by third-party payers

Regulation of prices billed by providers

Regulation of workforce & equipement

User information on quality and prices

-5

0

5

France OECD average Group 2

How to reap efficiency gains?The new set of policy indicators provides guidance

Indicators of health care spending efficiency at the system level can be built and are relatively robust

They can be complemented by indicators of the quality of care and other performance indicators

Exploiting potential efficiency gains would help contain public spending and result in large savings for some countries (on average 2% of GDP by 2017)

No health care model clearly outperforms others. Best practices among pair countries should be identified

To conclude

OECD (2010), Health Care Systems: Efficiency and Policy Settings.

Joumard, André, Nicq and Chatal (2008), "Health Status Determinants: Lifestyle, Environment, Health Care Resources and Efficiency", OECD Economics Department Working Papers, No. 627.

OECD, Health at a Glance (bi-annual publication).

For more information