Value for money and Health A Treasury perspective VFM Champions’ Conference 29 February 2008 © The Treasury
Outline of presentation • Fiscal and economic context • Long-term expenditure challenge • Unpacking ‘value for money’ • Responding to the VFM challenge
© The Treasury
Fiscal and Economic context
Treasury’s overall vision = higher living standards for all New Zealanders
• Health sector matters for wellbeing: – Effective health services mean lower morbidity and mortality
• Yet funding health services means doing without something else – implying choices and trade-offs © The Treasury
Fiscal and Economic context
Health services receive a large share of government spending
Core Crown expenses in 2007/08 - $56.1 billion
© The Treasury
Fiscal and Economic Context
How does NZ health expenditure compare with other OECD nations?
Total health expenditure as a share of GDP (2005) selected OECD countries
Total health expenditure per capita (2005) selected OECD countries Poland
Poland
6.2
Finland
$867
Spain
$2,255
Finland
$2,331
New Zealand
$2,343
Japan
$2,358
7.5
Japan
8.0
Spain
8.2
United Kingdom
8.3
OECD
9.0
United Kingdom
$2,724
New Zealand
9.0
OECD
$2,759
Sweden
9.1
Sw eden
Aus tralia
9.5
Canada
A ustralia
9.8
France
$2,918 $3,128
Canada
$3,326
France
$3,374
11.1
United States
15.3
United States
0
2
4
6
8
10
12
14 16 Percent of GDP
$6,401 0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
$US PPP
Source: NZ Treasury, from OECD data, 2006
Source: OECD Health at a Glance, 2007
© The Treasury
Fiscal and Economic Context
Total health spending in NZ seems in line with OECD – given our level of wealth… y = 0.1009x - 252.66 R2 = 0.7716
7,000
Positive correlation between national wealth and total health expenditure per capita (2003)
6,000
Health expenditure per capita (US$ PPP)
USA 5,000
4,000
3,000
Aus t
2,000
NZ 1,000
0 0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
GDP per capita (US$ PPP)
Source: NZ Treasury, from OECD data, 2006
© The Treasury
Fiscal and Economic Context
…but the recent rate of growth in our health spending has been relatively high Average annual growth in real per capita health expenditure and GDP, 1995-2005
Source: Health at a Glance OECD, 2007
© The Treasury
Fiscal and Economic Context
What’s driving the growth in health expenditure?
• Demand-side pressures – Expectations as incomes rise – Growing burden of chronic disease – Demographics - an ageing population
• Supply-side pressures – Technology uptake and diffusion – Workforce remuneration and shortages © The Treasury
Long-term expenditure challenge
How much of our GDP will we be spending on publicly-funded health by 2050?
Publicly-funded health expenditure as a percent of GDP: scenarios 35
8.0% average annual growth scenario
30
Percent of GDP
25 20 15 10
Statement on LT Fiscal Position 5.8% average annual growth scenario
5 0 2005
2015
2025
2035
2045
Statement on the Long-term Fiscal Position 2006 © The Treasury
Long-term expenditure challenge
Recent rate of growth seems unlikely to continue…
“…current growth in health spending cannot be maintained without cuts in other areas or significant increases in tax rates – neither of which are tenable.” Minister of Finance Speech to the Business Budget Summit November 2007
• Appears reasonable, and prudent, to expect a more moderate rate of growth in future
© The Treasury
Long-term expenditure challenge
Long-term pressures mean increasing focus on obtaining value for money
• Increased spending on health requires trade-offs: more tax revenue, or relatively less for other priorities • Ministers need assurance of the value of spending on health (existing and potential) • Public need to see that resources are used well – if they are to support increases → Regardless of future decisions about the rate of growth in spending, value-for-money will continue to feature in debate about our health system © The Treasury
Unpacking VFM
What is value for money?
Achieving value for money in health broadly means… …making best use of the resources available for the provision of health services
© The Treasury
Unpacking VFM
More specifically, value for money in health care means…
• Doing things which maximise population health gain – the right quantity / quality / mix of activities within available resources • Using inputs (staff, supplies and assets) in a way which maximises outputs • Paying no more than necessary for inputs (within context of wider govt objectives, such as state sector employment policy) © The Treasury
Unpacking VFM
Components of value for money – a framework
Expenditure
Salaries and wages Clinical and non-clinical supplies Interest, capital charge, depreciation
economy
Inputs
Staff time
Outputs
Outcomes
quantity & quality
attributable to health care
GP consultations
Lives saved, life years added
Clinical and non clinical supplies
Outpatient attendances Hospital discharges
Services from equipment and facilities
Immunisations
productivity
Illness prevented Reduced impact of illness
effectiveness
value for money © The Treasury
Unpacking VFM
Measuring value for money is complex… but vital
• Requires measuring changes in system performance – to inform planning and improve decision-making • No simple indicators of value for money capture sector complexity – multiple data sources required to build picture of performance • But… complexity should not preclude ongoing efforts to develop quality of information across the sector
© The Treasury
Responding to the VFM challenge
How might we respond to a more moderate rate of spending growth?
• Striving for more value from existing resources: innovation will be vital in both provider-arm & community-based settings • Better quality monitoring of changes in system performance – both provider arm and community • Being clear about expected health gains from any allocation of resources
© The Treasury
Responding to the VFM challenge
Where are the value for money opportunities likely to lie?
No quick fixes but broad areas for focus include: ¾ Public positioning ¾ Clinician engagement in decision-making ¾ Addressing chronic disease burden ¾ Sharing innovation to reduce variation
© The Treasury
Responding to the VFM challenge
Getting better VFM means working smarter to get the best outcomes from available resources…
We need to know that we’re getting the most that we can out of the resources we’re putting into health… …because we need to get more, if tomorrow’s health system is going to be one that delivers what we want – at a price we can realistically afford.
© The Treasury