Health expenditure patterns

There is great variation in the region in terms of total health spending and the public–private share of total health spending (Fig. 3.1). Tajikistan spent

$ 81 (international dollars, at purchasing power parity (PPP)) in 2006 on health care, while Slovenia spent more than 25 times as much ($ 2063). Approximately a third of the countries spent less than $ 500; another third spent between

$ 500 and $ 1000; and the remaining (less than a) third spent greater than

$ 1000. Similarly, the public–private share of health spending also varies greatly across the region, with private spending accounting for approximately 78%

of total health spending in Georgia and Tajikistan and approximately 12%

in the Czech Republic. This great variation in health spending translates into great variation in the coverage of population benefits and, as a result, into great variation in the attainment of health system objectives. The divergence in opportunities is so significant that the term “transitional countries” loses much of its descriptive relevance because the economic context of the countries has diverged so much that what is possible for the richer countries to attain is not realistic for the poorer countries.

32 Lu and colleagues (2009) analysed the effects of question disaggregation and recall period on the level of health expenditure reported by survey respondents. They found that, in most countries, asking more detailed questions led to higher reported total health spending, and also that shorter recall periods also led to higher estimates.

33 In the case of Turkmenistan, the data on GDP, total government spending and health spending (public and private) are considered to be sufficiently unreliable as to exclude them from use in this chapter. For example, the reported proportion of health spending as a share of total government spending has remained at exactly 14.9% for every year from 1998 to 2006. Other particular known shortcomings in the data will be noted throughout the chapter, as relevant.

The internationally observed relationship between per capita income, government health spending and private OOPS also holds true for the CE/

EECCA countries (Fig. 3.2). International comparisons have long shown that poorer countries tend to rely more on private sources and richer countries on public sources (see, for example, Schieber and Maeda 1997). Tajikistan, Georgia and Azerbaijan had the highest proportions of OOPS as a share of total health expenditures at 75%, 72% and 63%, respectively. This is not surprising, since these three countries are among the lowest income countries in the region, and their governments’ levels of spending on health care are also among the lowest.

More surprising is that, at the same income level as Tajikistan and Georgia, the citizens of Kyrgyzstan and the Republic of Moldova are spending significantly less (54% and 52% of total health expenditures, respectively), and there is a very high level of OOPS in Azerbaijan compared with other countries with per capita GDP of approximately $ 5000 or less. In fact, at any income level there is quite a large variation in the public–private share of health spending, suggesting that other explanatory factors are also at play. Here, we focus on the level of government spending on health, as earlier analyses (Gottret and Schieber 2006;

Kutzin 2008) have shown this to also be an important determinant of OOPS, separate from – but related to – per capita GDP.

Albania Bulgaria Croatia Czech RepublicHungary

TFYR Macedonia Poland

Romania Slovakia SloveniaSerbia

Armenia Azerbaijan BelarusGeorgia Kazakhstan

Kyrgyzstan Republic of Moldova Russian Federation

Tajikistan Ukraine

Uzbekistan Estonia LatviaLithuania

$2500

$2000

$1500

$500

$0

Bosnia and Herzegovina Montenegro

$1000

Public Private

Fig. 3.1 Total per capita health spending, 2006, international dollars Source: WHO 2009a.

As shown in Fig. 3.3, government health spending as a share of GDP has varied greatly across the region during the transition period. In 2006 Croatia was the highest spender, with 7% of GDP dedicated to the health sector, while Azerbaijan and Tajikistan were the lowest spenders, with 1.1%.³⁴ The high spenders are in the range of government health spending of that of the OECD countries (approximately 6.5% of GDP; see OECD 2009), while the low spenders are on par with low-income developing countries (approximately 1.6%; see WHO 2009a).

Most of the divergence in government health spending occurred in the early transition period and there has been little change in ranking since the end of the 1990s. As Chapter 2 illustrated, great divergence took place between 1990 and 1994 in government health spending across the region. In 1994, governments of the former Soviet Union spent only slightly more than 50%

of the 1990 level; governments of central Europe (excluding the Baltics) spent approximately 80–90%; and governments in the Baltic countries increased their spending to approximately 110% of the 1990 level (see Chapter 2, Fig. 2.1).

The divergence in health spending stabilized thereafter and most of those who were relatively low spenders in 1997 remained low spenders in 2006, with high spenders also remaining high spenders. As shown in Fig. 3.3, however, there were

34 Recall from Fig. 3.1 that Tajikistan is considerably lower when measured in comparative PPP-adjusted dollar terms, given its far lower GDP per capita than Azerbaijan.

80

Out-of-pocket spending as a % of total health spending

5 000 10 000 15 000 20 000 25 000

0

R = 0.66²

GDP per capita, PPP $

Fig. 3.2 Out-of-pocket health spending and per capita income in 2006 Source: WHO 2009b

Notes: AL: Albania; AM: Armenia; AZ: Azerbaijan; BA: Bosnia and Herzegovina; BG: Bulgaria; BY: Belarus; CZ: Czech Republic; EE: Estonia; GE: Georgia; HR: Croatia; HU: Hungary; KG: Kyrgyzstan; KZ: Kazakhstan; LT: Lithuania; LV:

Latvia; MD: the Republic of Moldova; ME: Montenegro; MK: TFYR Macedonia; PL: Poland; RO: Romania; RS: Serbia;

RU: Russian Federation; SI: Slovenia; SK: Slovakia; TJ: Tajikistan; UA: Ukraine; UZ: Uzbekistan.

some exceptions to this pattern. For the most part, these are countries whose estimated government health spending as a share of GDP was considerably higher in 1997 than in later years. This likely reflects more change in the denominator (that is, GDP grew considerably faster than public spending on health) than in health expenditure levels per se. There is far less change in the relative ranking between 2001 and 2006, suggesting an even more stable pattern. A few changes indicate real shifts (in the Republic of Moldova, for example), while others may reflect ongoing data problems.³⁵

For the entire period 1997–2006, 13 of the countries ended with a higher level of government health spending as a percentage of GDP than when they started;

12 had a lower level, and 2 had about the same. Since 2001, however, most (20) of the countries increased their health spending levels while only a few (5) had lower levels as a share of GDP by 2006. Spending patterns for the new EU countries appeared to stabilize from 2001, with only 6 of the 10 experiencing an increase (usually quite modest), 3 a decrease, and 1 no change. Interestingly,

35 In the former Yugoslav Republic of Macedonia, for example, the data on government health spending do not exclude the non-health expenditures by the national Health Insurance Fund, such as those for sick leave, maternity benefits, and so on. This may result in overestimation of spending levels relative to Serbia.

Albania Bulgaria Croatia

Czech Republic

Hungary

TFYR Macedonia

Poland

Romania Slovakia SloveniaSerbia

Armenia

Azerbaijan BelarusGeorgia Kazakhstan Kyrgyzstan Republic of MoldovaRussian Federation

Tajikistan Ukraine

Uzbekistan Estonia Latvia Lithuania

7

0

Bosnia and Herzegovina Montenegro

6 5 4 3 2 1

2001

1997 2006

Fig. 3.3 Government health expenditure as a share of gross domestic product (GDP):

1997, 2001, 2006 Source: WHO 2009a.

most (9 of 11) of the countries that were formerly part of the USSR experienced an increase after 2001, and of the remaining non-EU countries, five increased their spending and one (Croatia, the highest spender) experienced no change.

These patterns of change brought about some convergence in spending levels by 2006 compared with 2001, but the differences in government spending levels (both in PPP dollar terms and as a percentage of GDP) remain significant between the central Asian and Caucasus countries (mostly under 2.5% of GDP) and the many other “transitional” countries, which now spend between 4% and 7% of GDP.

What explains these patterns? Mathematically, public spending on health as a percentage of GDP is simply the product of total public spending as a percentage of GDP and the share of that spending allocated to the health sector.

Hence, the amount that a government spends on health depends in part on its overall fiscal constraint and in part on decisions that it makes with regard to priorities. In the following sections, we disentangle these factors that determine government health spending both in terms of fiscal context and priorities.