Policy-makers are concerned that health care costs have risen more rapidly than national income. As a proportion of GDP, average health expenditure in the European Region rose from 7.3% in 1998 to 7.7% in 2005 (Table 2.18). The public sector has borne most of this recent rise. The proportion of total spending deriving from public funding such as taxation and social insurance has increased in the past decade, and health care has consumed an increased share of total government expenditure. There are some exceptions to these general trends, such as the decline in health expenditure in the CIS countries and in Albania, Croatia, Estonia, Finland and Lithuania, and the fall in the relative role of public-sector funding in some countries, such as Bulgaria, the Czech Republic, Estonia, Lithuania and Slovenia. Overall, however, the picture shows continued growth in health care spending across the European Region.
Although estimates of future costs depend on the underlying assumptions on the relative role of the main cost drivers, health care costs are projected to increase even further in the future. The future level of public expenditure on health care is very uncertain but is projected to increase by 1–2 or 2–4 percentage points of GDP by 2050 (177,178). When the costs of long-term care are included, the projected increase is 1–4 or 3–6 percentage points of GDP (178). Non-demographic factors – such as the effects of new technology, rising unit costs and changes in health and disability and the associated changes in utilization – are assumed to be the main determinants of future growth. The fact that most of these factors are amenable to policy action should reassure policy-makers.
Home treatment EU EU15 EU12 Israel,
Norway and Switzerland
South-eastern Europe
CIS Total
No. % No. % No. % No. % No. %
No. % No. %
Required in policies, plans or legislation
Yes 21 78 14 93 7 58 3 100 6 86 3 60 33 79
No 6 22 1 7 5 42 0 0 0 0 2 40 8 19
Information not available 0 0 0 0 0 0 0 0 1 14 0 0 1 2
People with mental disorders who have access
All or almost all (81–100%) 3 11 3 20 0 0 0 0 0 0 0 0 3 7
Majority (51–80%) 1 4 1 7 0 0 1 33 0 0 1 20 3 7
Some (21–50%) 5 19 4 27 1 8 2 67 3 43 1 20 11 26
A few (1–20%) 6 22 3 20 3 25 0 0 2 29 1 20 9 21
None 5 19 0 0 5 42 0 0 1 14 2 40 8 19
Information not available 7 26 4 27 3 25 0 0 1 14 0 0 8 19
Source: Policies and practices for mental health in Europe – meeting the challenges (166).
Table 2.17. Requirements for and access to mental health home treatment by country group, WHO European Region
Country groups and expenditure 1998 2000 2002 2004 2005 Index, 2005 (%)
(1998 = 100%) Percentage-point change, 1998–2005 European Region
Total health expenditure (%) 7.43 7.15 7.56 7.61 7.74 104.2 0.31
Public-sector health expenditure (%) 68.07 66.86 67.36 67.89 68.48 100.6 0.41
EU
Total health expenditure (%) 7.87 8.07 8.42 8.78 8.92 113.3 1.05
Public-sector health expenditure (%) 74.45 74.91 75.47 75.25 75.54 101.5 1.09
EU15
Total health expenditure (%) 8.47 8.66 9.00 9.42 9.57 113.0 1.10
Public-sector health expenditure (%) 75.66 75.53 76.20 76.43 76.78 101.5 1.12
EU12
Total health expenditure (%) 5.75 5.70 6.33 6.40 6.49 112.9 0.74
Public-sector health expenditure (%) 70.15 72.68 72.81 70.88 70.92 101.1 0.77
CIS
Total health expenditure (%) 6.55 5.51 5.88 5.38 5.51 84.1 –1.04
Public-sector health expenditure (%) 57.47 53.13 53.31 55.04 56.18 97.8 –1.29
Table 2.18. Total health expenditure as a percentage of GDP and public-sector expenditure as a
percentage of total health expenditure by country group, WHO European Region, 1998–2005 (estimates)
Source: European Health for All database (4).
Factors driving costs
Health care costs can be understood as a simple function of price and the quantity used: costs increase if either or both of these parameters increase. Much empirical research in Europe and beyond has addressed the questions of what drives price and volume increases and their relative role in explaining past and future growth in health care costs. The cost drivers that receive the most attention are associated with the increasing volume of services used.
These include population ageing and broader demographic changes (see the section above on changing demographic patterns in the Region), rising income and expectations, advances in technology and the associated changing patterns of use. Increasing relative prices of health care, especially given constrained labour markets, also drive costs.
Ageing and demographic changes
The demographic trends in Europe have increased the proportion of people aged 65 and more. These trends include fertility rates’ falling below the natural replacement rate (see the section above on changing demographic patterns in the Region), rising life expectancy (with exceptions, as in some CIS countries) and an increase in internal migration within entities such as the EU. These trends have fuelled concerns about the future health and long-term care costs of caring for an ageing population. Older people’s health continues to improve, however:
most measures of morbidity have declined among them since the 1990s, which suggests either compression of morbidity (179) or a dynamic equilibrium of increasing longevity alongside consistent improvements in health (180).
Further, although older people have much higher health expenditure per person at a given time, the ageing of the population appears to be a relatively minor determinant of the annual growth in health care expenditure. Health care costs are concentrated in the period before death, such that the costs in old age are greater than those in youth, primarily because chronic disease is a greater burden. This needs to be accounted for to measure the relationship between age and expenditure. Actual health-related costs appear to decline with age and, over time, health care costs have risen more slowly for those who are near death than for others.
The trends towards increasing life expectancy, declining mortality (which implies a reduction
in costs since fewer people are dying), and reductions in morbidity among older people (which may or may not reduce the use of health services) all therefore indicate a relatively minor role of population ageing on future health care expenditure (181). Analyses of patterns of health expenditure in past decades indicate that population ageing explains less than one tenth of the growth in health care costs (178).
Population ageing is therefore estimated to be a minor cost driver in projections of future health care costs but a much more important one for the costs of long-term care. Nevertheless, policy-makers must consider how patterns of health care use will change over time and particularly how to promote healthy ageing and ensure the appropriate adoption of technology based on value for money.
Technological change and health care use
Technological change plays a complex role in increasing health care costs. New technologies can reduce costs by improving efficiency or health, thereby reducing the need for further care that may be more costly. Nevertheless, new technologies can lead to increased use of health care, and therefore costs, because they extend the scope and range of the treatments available and can extend treatment to a wider set of indications that may or may not contribute to overall health gain in society.
The uptake and use of new technology, and thus their potential to increase costs, depend on the incentives given to providers in the system (182). Estimates of the effects of technological change on expenditure in Europe suggest that the impact of adopting technical and medical developments serves to increase use and thus costs (177). Based on expenditure data for Switzerland for 1970–1995, one study has estimated an expenditure growth factor of 1%
per year due to technological change (183). Applying this estimate to projections of health expenditure suggests such changes in technology and its use will account for 77% of the growth in health care costs by 2050. Ensuring the use of health technology assessment to support the introduction of new technologies that offer real benefits and to discourage those that are less cost effective is an important challenge for policy-makers, given rising health care costs (184).
Rising income, expectations and unit prices
Health care costs’ associations with ageing and with technological advances are complex, but the other factors believed to drive up costs – such as rising income, higher expectations of health systems and unit prices – are even less measurable and well understood. Health care expenditure is closely related to national income: estimates suggest that health spending tends to rise relatively proportionately with economic growth. Thus, health care appears to be a normal good with an income elasticity that is close to one. Some studies have estimated higher income elasticity, implying that health care is a luxury good and that, as income increases, health care expenditure will increase even more. This could arise from failure to control for the relative prices of the key components of health care, however, such as wages, capital investment and drug prices. For example, one study found that health care expenditure is driven by wage increases that exceed productivity growth in the general economy in 19 OECD countries (185).
On an individual level, rising incomes may also lead to increased expectations for newer and more expensive health technologies. Whether expectations are increasing and whether these may increase health care costs remain untested empirically. Providers have an important role in determining the uptake and use of health technologies. The incentives in place, in addition to providers’ role in managing patients’ expectations, will therefore be increasingly important
in managing health expenditure in the context of an ever more educated population with a wealth of information (and, importantly, advertising) that is available through the Internet and elsewhere.