Global Economy
OECD health spending falls in some countries; Ireland in low usage of generic drugs
By Michael Hennigan, Finfacts founder and editor
Nov 21, 2013 - 7:49 AM

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Total health spending has fallen in one of three OECD countries between 2009 and 2011, with those hardest hit by the crisis most affected. This is a sharp reversal from the strong growth in the years prior to the crisis, according to a new OECD (Organisation for Economic Cooperation and Development) report. Ireland is among countries with a low usage of generic drugs.

The United States spends almost 18% of GDP (gross domestic product), with per capita spending of $8,500 in 2011, two-and-a-half times greater than the OECD average ($3,322) and 50% higher than Norway and Switzerland (the next biggest spending countries). Higher health spending per capita tends to be associated with lower mortality rates and higher life expectancy, but this is not the case for the United States. The relatively low life expectancy of Americans is particularly striking given how much they spend on their health care

Health at a Glance 2013 [pdf] says that this makes it all the more important that countries make their healthcare systems more productive, efficient and affordable.

Spending per capita fell in 11 of 33 OECD countries between 2009 and 2011, notably by 11.1% in Greece and 6.6% in Ireland. Growth also slowed significantly in others, including Canada (0.8%) and the United States (1.3%).

Only Israel and Japan saw the rate of health spending growth accelerate since 2009 compared with the previous decade. Health spending in Korea has continued to grow at more than 6% per year since 2009 but more slowly than in previous years.

Governments have worked to lower spending through cutting prices of medical goods, especially pharmaceuticals, and by budget restrictions and wage cuts in hospitals.

More than three-quarters of OECD countries reported a cut in real-term spending on prevention programmes in 2011 over 2010, and half spent less than in 2008. Cuts to spending on cost-effective prevention programmes on obesity, harmful use of alcohol and smoking are a cause for concern, says the report. Any short-term benefits to budgets are likely to be greatly outweighed by the long-term impact on health and spending.

Reductions in the supply of health services and changes in their financing through increases in direct out-of-pocket payments for patients are also affecting access to care. After years of improvement, waiting times for some operations in Portugal, Spain, England and Ireland show some increase.

Across the OECD, low-income groups are worst affected and may be foregoing needed care such as medicines or check-ups for chronic conditions, says the OECD. This may have long-term health and economic consequences on the most vulnerable in society.

On other measures, the impact of the crisis on health has been mixed: while suicide rates rose at the start of the crisis, they have stabilised since. Mortality from traffic accidents has declined, most likely because the crisis has led to fewer cars on the roads so fewer accidents. Alcohol and tobacco consumption has fallen in many countries too.

Among Health at a Glance 2013’s other findings are that:

  • For the first time, average life expectancy exceeded 80 years across OECD countries in 2011, an increase of ten years since 1970. This trend shows no sign of slowing down. Those born in Switzerland, Japan and Italy can expect to live the longest among OECD countries.
  • Chronic diseases such as diabetes and dementia are increasingly prevalent. In 2011, close to 7% of 20-79 year-olds in OECD countries, or over 85m people, had diabetes. This number is likely to increase in the years ahead, given the high and often growing rates of obesity across the developed world.
  • The market share of generic drugs has increased significantly over the past decade in many countries. However, generics still represent less than 25% of the market in Luxembourg, Italy, Ireland, Switzerland, Japan and France, compared with about 75% in Germany and the United Kingdom.
  • The burden of out-of-pocket spending creates barriers to health care access in some countries. On average in the OECD, 20% of health spending is paid directly by patients; this ranges from less than 10% in the Netherlands and France to over 35% in Chile, Korea and Mexico.
  • Across OECD countries, more than 15% of people aged 50 and older provide care for a dependent relative or friend, and most informal carers are women.

Ireland

Health at a Glance 2013 says that mortality due to cancer fell by 21%, ischemic heart disease by 59% and cerebrovascular disease by 54% between 1990 and 2011 in Ireland. In all three instances, the rate of decline was greater than the OECD average. Life expectancy in Ireland has increased by a full four years since 2000 to reach 80.6 today, over the OECD average of 80.1.

Despite these improvements, the mortality burden from cardiovascular disease and cancer remains high and further gains can be made.

Some 29% of the Irish population aged over 15 smoke, with only Greece, Chile and the Russian Federation with worse figures. By comparison, in the UK only 19.6% of its adults smoke. The average for the OECD 34 nations is 20.9%.

Ireland comes sixth in the list of 34 countries for litres of alcohol consumed each year - - at 11.6 litres per person for everyone over 15 years of age -- a rise of 4% since 1990. The data shows that Ireland's alcohol consumption peaked in the early 2000s at close to 15% before falling in recent years.

Generic drugs in Ireland cost a multiple of the prices of the same products in the UK and the OECD says:

Despite recent cuts, Irish expenditure on pharmaceuticals remains high and well above the OECD average on a per capita basis. In part, this can be explained by the low use of generic medications, which in 2011 accounted for only 18% of the total volume of pharmaceuticals prescribed in Ireland. In Germany, the United Kingdom, New Zealand and Denmark, generics represent more than 70% of the market. Further initiatives to encourage prescribing and consumption of generics have the capacity to reduce expenditure without the loss of health outcomes."
In 2011, the United States continued to outspend all other OECD countries by a wide margin, with the equivalent of $8,508 for each person. This level of health spending is two-and-a-half times the average of all OECD countries and 50% higher than Norway and Switzerland, which were the next biggest spending countries.

Compared with large European economies such as France and Germany, the United States spends around twice as much on health care per person. Around half of OECD countries fall within a per capita spending of between  $3,000 and  $4,500 (adjusted for countries’ different purchasing powers. Countries spending below  $3,000 include most of the southern and central European members of the OECD, together with Korea and Chile. The lowest per capita spenders on health in the OECD were Mexico and Turkey with levels of less than a third of the OECD average. Outside of the OECD, among the key emerging economies, China and India spent 13% and 4% of the OECD average on health per capita in 2011.

Spending as ratio of GDP

Health spending accounted for 9.3% of GDP (gross domestic product) on average across OECD countries in 2011, compared with 9.4% in 2010.

Excluding capital spending, current expenditure on health as a share of GDP dropped from 9.1% on average in 2010 to 8.9% in 2011. The health spending to GDP ratio reached a peak in 2009 (9.6% total expenditure and 9.2% current expenditure) as overall economic conditions rapidly deteriorated but health spending continued to grow or was maintained in many countries. In the subsequent context of reducing public deficits and falling incomes, the reductions in (public) spending on health have resulted in the share of GDP falling since 2009.

In 2011, the United States spent 17.7% (17.0% for current expenditure on health) of GDP on health, remaining well above the OECD average and around six percentage points above the next group of countries, which include the Netherlands, France, Germany, Canada and Switzerland. The health spending to GDP ratio in the United States has remained at the same level since 2009, after years of continuous increases. The OECD says that it is not clear yet whether this levelling off reflects cyclical factors and may start to grow again once the economy picks up, or whether it reflects more structural changes such as a slower diffusion of new technologies and pharmaceuticals, and changes in provider payments resulting in greater efficiency. Of the OECD countries, Mexico, Turkey and Estonia devoted only around 6% of GDP to health - - around two-thirds of the OECD average. Outside of the OECD, China and India spent 5.2% and 3.9% of GDP respectively in 2011, while Brazil devoted 8.9% of GDP to health - - close to the OECD average.  

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