Economics and Health – A Macro View Tasmanian Health Conference 2014

1. Economics and Health – A Macro View Tasmanian Health Conference 2014 Martin Hensher Director Strategic Planning – DHHS Adjunct Associate Professor – UTAS School of Medicine

2. LITERACY RATES AGEING POPULATION OBESITY CHRONIC DISEASES UNEMPLOYMENT POVERTY HIGH BURDEN OF DISEASE HEALTH CARE COST INFLATION

3. Gross Domestic Product Source: Australian Government, Department of Health 2014 (OECD data)

4. …and Total Health Expenditure consistently grows faster than GDP

5. What factors drive that increasing spend? USA Australia Canada Source: Grattan Institute Source: Canadian Institute for Health Information

6. Is this sustainable? Source: King’s Fund 2014 A new settlement for heath and social care (p33)

7. Unsustainable and unaffordable? • In the long run, rising expenditure on health care is not in itself a problem • A growing economy will sustain health care’s growing share as long as additional health care is adding value to society • And the key driver of increasing health expenditure and costs – technology and innovation – is itself a critical driver of economic growth • Indeed, health care is arguably the very essence of the service economy of the future that nations like Australia must embrace (c.f. Stiglitz)

8. John Maynard Keynes1883 - 1946 “The long run is a misleading guide to current affairs. In the long run we are all dead.”

9. What might get in the way? • Future economic growth prospects • Short to medium term fiscal challenges • Health sector efficiency

10. Growth Prospects? • But if the economy is not growing (or growing slowly), then the growth in health expenditure we are accustomed to will be much harder to finance… • And that is when things start to feel uncomfortable right now, not in 30 years’ time…

11. Post-GFC Emergency Braking: From >4% Growth to Zero Average health expenditure growth rates across OECD countries, 2000-2010 Source: Morgan and Astolfi, OECD 2013

12. Emerging Macroeconomic Concerns • Recognition of rising income inequality over the last 30 years (made worse by the GFC) – and that income inequality retards overall growth • Evidence beginning to show “austerity” makes things worse • Fears that the causes of the GFC are far from played out (e.g. China’s shadow banking sector) • Fears that the ending of stimulus and quantitative easing could take the steam out of the world economy very quickly • Concerns from serious economists that we are now in a new era of long-run growth at rates well below the (recent) historical trend • Stiglitz – long-term adjustment • Summers – “secular stagnation” • Gordon – “six headwinds” • So, economic growth may not go back to “normal”, which would mean health expenditure growth could not go back to “normal” either

13. Fiscal and Policy Challenges • Federal Budget 2014 poses significant challenges for health system especially: • Changes to funding agreements with states and territories • GP Co-payment • And policy uncertainty while negotiation around the Federal Budget continues • Potential changes to Federation and taxation arrangements in coming years?

14. Source: ABC FactCheckhttp://www.abc.net.au/news/2014-06-23/has-hospital-funding-been-cut-by-50-billion-fact-check/5486988

15. Where does this leave Tasmania? • We spent (for the latest year figures are available) very close to the national average on health care (public and private)

16. But that equivalent spend represents a far bigger share of our State’s economy

17. Implications • So the feedback from health spending to the wider Tasmanian economy is proportionately more important • And more sensitive to significant funding shocks • And more reliant on federal funding, with a weaker state revenue base

18. What is our current trajectory?

19. What is our current trajectory?

20. What is our current trajectory?

21. What can we do about this? • Make sure we do the right things • Stop doing the wrong things • So that resources are used to maximise benefit • Not wasted on care that brings minimal benefit • Or even on care that actively causes harm

22. Improving what we do • Focus on cost-effective care across the whole system: • Are our interventions and procedures the right ones, given the available evidence on costs and effectiveness? • Reduceoverdiagnosisand overtreatment: • Do we use only the right technologies (those with proven benefits) on the right patients (only in those populations for whom the benefits are proven) • Improve outcomes and reduce waste by minimising avoidable patient harms

23. And improving how we do it… But • Deliver care in the most cost-effective place (both its setting and its geographical location): • Alternatives to hospital for high volume / low complexity cases • Appropriate centralisation of low volume / high complexity services (if necessary interstate or in partnership with private sector) • Manage the patient’s journey effectively – active management of patient flow (referral pathways, admission and discharge planning, scheduling, theatre and resource utilisation etc.) • Which both require better integration of care and services, and systematic clinical and process redesign • Use information resources more effectively to shape and deliver care – both strategically and day-to-day

24. Do we have the courage to: • Start with the evidence, rather than our history and past disappointments? • Use the data effectively instead of disputing it? • Collaborate and share risks (and benefits)? • Individually and corporately engage to make evidence-based change real – through Clinical Advisory Groups?