Cross-country comparison of health care system efficiency

Cross-country comparison of health care system efficiency Isabelle Joumard, OECD, Economics Department IMF conference, June 21, 2011 Public Health Care Reforms: Challenges and Lessons for Advanced and Emerging Europe

Weak link between health care spending and outcomes Life expectancy at birth, years 84 jpn che 82 ita aus isl fra esp can aut nzl swe fin deu lux nor 80 kor grc bel irl nld prt gbr dnk 78 cze usa 76 mex pol svk 74 tur hun 72 0 1000 2000 3000 4000 5000 6000 7000 8000 Total expenditure on health per capita, US $ PPP 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 birth 90 Total population, 1960 and 2007 82.6 81.9 81.4 81.4 81.2 81.0 81.0 81.0 80.7 80.6 80.2 80.2 80.1 80.0 79.8 79.7 79.5 79.5 79.5 79.4 79.4 79.1 79.1 78.4 78.1 77.0 75.4 75.0 74.3 73.3 73.2 80 2007 1960 70 Years Source: Health at a Glance 2009, OECD Indicators. 60 50 40 Japan Switzerland Australia Italy Iceland Spain France Sweden Canada Norway New Zealand Netherlands Austria Germany Belgium Ireland Finland United Kingdom Greece Luxembourg Korea Portugal OECD Denmark United States Czech Republic Poland Mexico Slovak Republic Hungary Turkey

Life expectancy at 65, women Women, 1970 and 2007 23.6 22.3 22.2 22.0 21.8 21.6 21.4 21.3 21.0 20.8 20.8 20.7 20.7 20.7 20.6 20.5 20.5 20.3 20.3 20.2 20.2 20.1 20.1 19.6 19.2 18.9 18.5 18.2 17.3 17.1 15.8 25 20 2007 1970 15 Years 10 5 Japan France Switzerland Spain Italy Australia Canada Finland Belgium Norway Austria Germany New Zealand Sweden Iceland Korea Netherlands United States Luxembourg OECD Portugal United Kingdom Ireland Greece Denmark Poland Czech Republic Mexico Hungary Slovak Republic Turkey Source: Health at a Glance 2009, OECD Indicators.

Amenable mortality All causes, 2007 or latest year available France Iceland Italy Japan Sweden Netherlands Australia Austria Norway Spain Canada Luxembourg Finland Greece Israel* Germany Ireland New Zealand United Kingdom Korea Denmark Slovenia OECD Chile United States Portugal Czech Republic Mexico Poland Slovak Republic Hungary Estonia 0 50 100 150 200 250 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.

Correlations between outcome measures (level and rank) LE at birth LE at 65 Total Female Adjusted PYLL Healthadjusted LE Amenable mortality 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 Source: Joumard, André & Nicq (2010), "Health Care Systems: Efficiency and Institutions", OECD Economics Department Working Paper, No. 769.

Health care spending 2008 8000 Spending per capita, US $ Public expenditure Private expenditure 7000 6000 5000 4000 3000 2000 1000 0 Source: OECD Health Data 2010.

Practising physicians per 1000 population, 2007 5.4 4.0 3.9 3.9 3.9 3.8 3.7 3.7 3.7 3.6 3.6 3.5 3.5 3.4 3.2 3.1 3.1 3.0 3.0 2.9 2.8 2.8 2.5 2.4 2.3 2.2 2.2 2.1 2.0 1.7 1.5 Greece Belgium Netherlands Norway Switzerland Austria Iceland Italy Spain2 Sweden Czech Republic Portugal Germany France Denmark OECD Slovak Republic Ireland Finland Luxembourg Australia Hungary United Kingdom United States New Zealand Poland Canada Japan Mexico Korea Turkey 6 4 2 0 Source: Health at a Glance 2009, OECD Indicators.

Remuneration of specialists Self-employed Salaried 350 US $ PPP, thousands 300 250 200 150 100 50 0 Source: OECD Health Data 2010.

Remuneration of general practitioners (GPs) Self-employed Salaried 180 US $ PPP, thousands 160 140 120 100 80 60 40 20 0 Source: OECD Health Data 2010.

Health care status determinants Health care resources Lifestyle factors: diet, alcohol & tobbaco consumption Socioeconomic environment: income and education Pollution

DEA defining the efficiency frontier and potential efficiency gains

DEA results and sensitivity analysis (for different outcome indicators) Potential gains in life expectancy, years Potential gains in amenable mortality, % 6 5 Life expectancy at birth Life expectancy at 65 Amenable mortality (right scale) 60 50 4 40 3 30 2 20 1 10 0 0 Source: Joumard, André & Nicq (2010), "Health Care Systems: Efficiency and Institutions", OECD Economics Department Working Paper, No. 769.

DEA results and sensitivity analysis (for different input indicators) 7 Potential gains in life expectancy, years Expenditure, ENV Health professionals, ENV Expenditure, ESCS, Nox 6 Expenditure, ESCS, Smoking Expenditure, ESCS, Alcohol 5 4 3 2 1 0 Source: Joumard, André & Nicq (2010), "Health Care Systems: Efficiency and Institutions", OECD Economics Department Working Paper, No. 769.

Panel regressions model specification (log form) Υ = it α + i β HCR it + γ φ θ SMOK + it DRINK + it DIET it + δ AIRPOL + σ EDU + λ GDP + ε it it it it

Panel regressions: contribution of main explanatory variables to cross-country differences in life expectancy Life expectancy at birth Determinants Spending Education Tobacco Alcohol Diet Pollution GDP 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 Countryspecific effect Source: Joumard, André, Nicq & Chatal (2008), "Health Status Determinants: Lifestyle, Environment, Health Care Resources and Efficiency ", OECD Economics Department Working Paper, No. 627.

Panel regressions: years of life not explained by the model With health care resources measured in monetary terms 3 2 1 0-1 -2-3 -4-5 Source: Joumard, André, Nicq & 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) 7 usa 6 5 4 3 2 1 0 kor che tur cze pol swe fra can aus isl nor nzl aut nld grc gbr deu fin dnk irl hun 0 1 2 3 4 5 6 7 DEA (years)

Complementing overall efficiency score by other performance measures -- France France OECD average Avoidable admissions Vaccinations Overall efficiency Amenable mortality 2 Equity Heart failure Bronchitis 1 0 ALL, in-patient care Colorectal cancer Asthma Influenza Measles DTP -1-2 Lung cancer Breast cancer AMI Fracture of femur Average length of stay Adm. costs Consultations/doctor Cataract Occupancy Turnover Source: OECD Health Data 2010.

2. Reaping efficiency gains -- Impact on public spending Main assumptions: Health outcomes improve as they did in the past Two scenarios on the spending side are compared: 1. No reform scenario spending increases as it did in the past 2. Reform scenario efficiency gains are realised to finance all or part of health status improvements Potential savings in public spending are large

Exploiting efficiency gains would allow to improve health outcomes further 6 Gains in life expectancy, years increase over 1997-2007 Potential gains in 2007 through greater efficiency 5 4 3 2 1 0 Source: OECD Health Data 2009; OECD calculations.

Exploiting efficiency gains would help to contain future spending 140 120 % increase in per capita spending, in real terms 1997-2007 2007-2017, if exploiting efficiency gains 100 80 60 40 20 0 Source: OECD Health Data 2009; OECD calculations.

Potential savings in public spending are large % 2017 GDP Source: OECD Health Data 2009; OECD calculations.

How to reap efficiency gains? A new set of policy indicators provides guidance France OECD average Group 2 Regulation of prices billed by providers User information on quality and prices Regulation of workforce & equipement Population covered 5 4 3 2 Scope of basic coverage Depth of coverage Choice of insurer, basic coverage Regulation of prices paid by thirdparty payers 1 0 Insurer levers, basic coverage Volume incentives embedded in provider payment schemes -1-2 Over-the-basic coverage Degree of private provision Patient choice among providers Stringency of the budget constraint Gate-keeping Priority setting Price signals on users Consistency Delegation to insurers Degree of decentralisation

To conclude 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)

For more information OECD (2010), Health Care Systems: Efficiency and Policy Settings. Joumard, André, Nicq & Chatal (2008), "Health Status Determinants: Lifestyle, Environment, Health Care Resources and Efficiency", OECD Economics Department Working Paper, No. 627. OECD, Health at a Glance (bi-annual publication).

Characterising health care systems: country groups Source: Joumard, André & Nicq (2010), "Health Care Systems: Efficiency and Institutions ", OECD Economics Department Working Paper. No. 769.

No health care system clearly outperforms the others No big-bang reform is warranted Source: Joumard, André & Nicq (2010), "Health Care Systems: Efficiency and Institutions", OECD Economics Department Working Paper, No. 769.