DELSA/GOV 3rd Health meeting - Gijs VAN DER VLUGT, Camila VAMMALLE, Claudia HULBERT

BUDGETING PRACTICES FOR

HEALTH Gijs Van der Vlugt (Dutch Ministry of Finance)

Camila Vammalle (OECD) Claudia Hulbert (Consultant)

3rd Meeting of the Joint Network on Fiscal Sustainability of

Health Systems OECD Conference Center, 24-25 April, Paris

Presenter

Presentation Notes

Hello, I am … I will try to be brief, to give as much time possible to the discussion.

Country respondents

Answers for 27 countries Provincial answers (Canada)

Australia Austria Canada Chile Czech Republic Denmark Estonia Finland France Germany Hungary Iceland Italy Japan

Korea Mexico Netherlands New Zealand Norway Poland Portugal Slovak Republic Slovenia Sweden Switzerland Turkey United Kingdom

British Columbia Manitoba Northwest Territories Sakatchewan Quebec Yukon

Presenter

Presentation Notes

The aim of this presentation is to give you an (quick) overview of the results of the survey of budgeting practices for health. This is a survey we sent out to the budget delegates last summer, and for which we received 27 answers in the fall 2013. I would like to thank deeply those delegates that answered the survey, and also those who came to the workshop we organised in Paris in January, where we clarified the answers and discussed further on these budgeting issues. We will present here the synthesis. I would also like to give my thanks to Gijs van der Vlugt, from the Dutch Ministry of Finance, who spent several months in Paris working on this survey, clarifying the answers with the delegates, and participating in the production of this synthesis I also need to thank Claudia Hulbert, who took over after Gijs on the analysis of the answers, and whose contribution to the synthesis (and in particular to the decentralisation section that we will present later) was of prime importance.

1. General issues on budgeting for health 2. Expenditure frameworks and ceilings 3. Bringing efficiency gains back to the budget 4. Leeway and influence of central budget

authority on health expenditure 5. Main co-ordination challenges 6. Conclusion

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Overview of the presentation

Presenter

Presentation Notes

This presentation will be structured as follows: 1 2 3 4 5 6 Part on decentralisation will be presented later in session 6.

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A great variety of different budgeting systems for health

Centralised, National Health

Systems

Social Insurance Systems

Decentralised Systems

Decentralised, social insurance

systems

Decentralised, national health

systems

1. General issues on budgeting for health

Presenter

Presentation Notes

There is a great variety of different treatments of health expenditure in budget across OECD countries. The main objective of the survey was to shed some light on these institutional frameworks, and identify and present the different instruments available to control health care expenditure. To start with, we can identify, from a budgeting point of view, three main types of systems: Centralised, national health systems, where the bulk of health care expenditure are in the central government’s budget. Social insurance systems, which have a separate budget for health, with specific revenues assigned to finance health. Decentralised health systems, where most health care expenditure is controlled by sub-national governments and is therefore in sub-national governments’ budgets. Within decentralised systems, they can be either national health type (health in the budget of SNGs), or social insurance type (mainly finance through payroll contributions and insurance premiums). The present paper did not analyse whether these different systems generate different results in term of health care expenditure growth or quality of services. There are no systematic differences in the answers to the survey between national health systems and social insurance systems. However, decentralised systems (Austria, Canada, Sweden) found it difficult to answer the questions from the central government point of view. Canada requested six provinces to answer the survey, and differences in practices, procedures and challenges faced between these provinces are as large as between countries. We will discuss further about the specific case of decentralised countries in session 6.

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Most countries use budget ceilings for central government’s expenditure on health

Use of budget ceilings for health expenditure by central governments

Source: OECD survey of budget officials on budgeting practices for health, 2013, Q. 45

2. Expenditure frameworks and ceilings

No specific ceilings for

health 13%

Expenditure ceilings for

overall expenditure

by the Ministry of Health (or

Social …

Expenditure ceilings by program

16%

Expenditure ceilings by category of

health services (e.g. hospitals, primary care,

etc.) 35%

Presenter

Presentation Notes

Most OECD countries use some kind of budget ceiling for central government’s expenditure on health. Some countries only have spending targets, but these tend to become more and more binding. For example the French National Target for Health Spending (ONDAM) is considered more and more as a ceiling than as a target. Ceilings may be overall ceilings on expenditure by the Ministry of Health, or may also constrain specific categories of health services (hospitals, primary care, etc.). Today, about 80% of OECD countries use medium-term expenditure frameworks (OECD, 2014), and health expenditure is thus constrained by these.

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Many countries have developed early warning systems but delays in reporting expenditure information may reduce their ability to take corrective measures

Delay in reporting expenditure to CBA

Source: OECD survey of budget officials on budgeting practices for health, 2013, Q. 49 and 22

2. Expenditure frameworks and ceilings

0 1 2 3 4 5 6

NetherlandsSwitzerland

FinlandAustria

Czech Rep.France

GermanyMexico

NorwayUK

AustraliaChile

DenmarkEstonia

HungaryNew Zealand

PolandSlovak Rep.

SloveniaKorea

(months) None 1 to 2 3 to 6 6 to 12 12 to 24

8%

35%

19%

38%

There is an EWS and sets in motionrequired action for future yearsThere is an EWS and sets in motionrequired action for the current yearThere is an EWS, but an alert does notlegally require actionNo EWS

Existence of an Early Warning System

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While most countries produce long-term projections, these do not always influence policy making or debate

Use of automatic reductions in health care spending

Source: OECD survey of budget officials on budgeting practices for health, 2013, Q. 38 and 4

3. Bringing efficiency gains back to the budget

No 72%

Yes but only on part of HCE 28%

YES 44%

NO 56%

Use of spending reviews as a tool to identify possible cuts in health care expenditure

Presenter

Presentation Notes

Ministries of health make their best to improve efficiency in health care spending, and ministries of finance try to bring at least some of these savings back to the general budget. Indeed, this would allow financing new programmes in health without necessarily increasing the health budget by that same amount. – or re-allocating the funds to other priority areas. Some countries use automatic mechanisms which cut the baseline allocation of some type of health spending (ex. hospitals budgets) by the amount of the expected/assumed productivity gains. Other countries prefer to carry out specific spending reviews to identify where cuts could be made. Finally, other countries opt for incentive-based mechanisms or sign performance agreements. Finally, other countries uses incentive-based mechanisms, such as allowing ministries of health to keep the efficiency gains, or providing performance payments for improving productivity are also used. Some countries use a combination of all these instruments. Less than a third of countries introduced automatic reductions in health care budgets (Figure 14). When such a system exists, it never aims to introduce systematic reductions in total health care spending, but affects some part of expenditure only. Moreover, frameworks regulating the evolution of health care spending differ widely from one country to another. In some countries, the growth rate of health care expenditure is capped (Austria, Canada); in others, objectives/budgets are set in terms of productivity gains to be reached (Denmark, the UK)

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Share of discretionary vs. mandatory health spending (average 2006-2012)

0% 20% 40% 60% 80% 100%

KoreaItaly

GermanyNetherlands

MexicoFinlandEstonia

SwitzerlandAustriaNorwaySweden

AustraliaAVERAGE

SloveniaSlovak Rep.

IcelandDenmark

Czech Rep.Japan

New Zealand

Discretionary Mandatory

4. Leeway and influence of CBAs on health expenditure


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Top priority areas for health expenditure control for budget officials

0 2 4 6 8 10 12 14 16 18

Outpatient care spending

Primary health care services

Spending on prevention programs

Long term care spending

Pharmaceutical costs

Hospital expenditure



10

Influence of the CBA over health care-related policies

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Hospital tariffs Hospitalbudgets

Pharmaceuticalprices

Listing of newdrugs

Listing of newmedicalservices

Payments todoctors

Spending onpublic health

programs

considerable moderate little none



11

Number of years with overspending out of the last 7 years

0

1

2

3

4

5

6

7

8

Years out of last 7 with overspending Years out of last 7 without overspending



12

Size of over- and under-spending in percentage of budgeted spending, max and min (2006-2012)

-15

-10

-5

0

5

10

15

20

Und

er/o

ver

spen

ding

as

a sh

are

of to

tal h

ealth

ca

re e

xpen

ditu

re



13

Perceived co-ordination challenges between the MoH and the CBA

0

5

10

15

20

25

Sharing of informationbetween the Ministry of

Health and the CBA

Lack of incentives forco-operation between

the CBA and theMinistry of Health

Lack of establishedrelationships betweenofficials from the CBA

and the Ministry ofHealth

Lack of capacity at theCBA to assess policies

proposed by theMinistry of Health

Is a major challenge Is somewhat of a challenge Is not a challenge

5. Main co-ordination challenges


14

Types of relations between CBA and MoH

0

1

2

3

4

5

6

7

8

9

Specific co-ordination body

gathering officialsfrom CBA and

MoH

Regular informalconsultation and

meetings

Ad hoc bodiescreated for specificneeds (discussing a

reform, etc.)

Consultation forbudget preparation

only

None

5. Main co-ordination challenges

15

Controlling health expenditure: a difficult but often successful task

Health is one of the

top two policy

areas from which it is hardest to

achieve savings

19%

In general, it is harder to achieve savings in

health than in

most areas 50%

Health is as hard as any other

area of governme

nt spending

31%

More successful

than in other

areas of policy 19%

As successful as in other

areas of policy 58%

Less successful

than in other

areas of policy 23%

Perceived difficulty of achieving savings in health vs. other

expenditure areas

Perceived success in controlling health expenditure

Source: OECD survey of budget officials on budgeting practices for health, 2013, Q. 42 an 29

6. Conclusion

Presenter

Presentation Notes

To finish on an optimistic note: For most ministries of finance, controlling health expenditure is harder to achieve than other expenditure areas. For a quarter of respondents, health is actually one of the two hardest areas to achieve savings. Still, about 80% of respondents feel that they are at least as successful in controlling health care costs than in other areas of policy!

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DELSA/GOV 3rd Health meeting - Gijs VAN DER VLUGT, Camila VAMMALLE, Claudia HULBERT