The financial sustainability of health systems

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An analysis of future public and private spending on health care in 21 industrialised nations was recently carried out by McKinsey & Co in partnership with the World Economic Forum. This analysis was first seen in our report, Spending on health and social care over the next 50 years.

The macro-level analysis identified four main drivers of future health spending:

  • increased patient expectation
  • a growing burden of disease
  • sub-optimal allocation of resources
  • rising unit costs of care.

What does this graph show?

The analysis calculated a best-fit time trend to historic data on health care expenditure as a percentage of GDP for individual countries, then projected the trend forward to 2040.

It then adopted an assumption about the impact of a potentially rising burden of disease, higher patient expectations and technological advances. The resultant 'high spending' estimate assumed that each country's future spending trajectory could be slightly higher than the projected time trend, with expenditure levels given a 2.5 per cent probability* of being one standard deviation higher than the time-trend projection.

Projected potential growth in health care spending by 2040

Projected potential growth in health care spending by 2040

What can be done about spending pressures?

The McKinsey & Co analysis offers two main approaches for dealing with rising spending pressures:

  • doing less: for example, by rationing access to care, imposing budgets and allowing waiting times to rise; or shifting the financial burden to employers or households
  • doing more: by, for example, increasing financing for health through taxation; or by boosting the budget by prioritising health care over other public expenditure.

* This probability was calculated based on the historical frequency of sustained higher expenditures (defined as a country spending more than one standard deviation above its historical trajectory for five consecutive years or more)