This chapter presents an overview of the main indicators and characteristics of health spending and financing across OECD countries. The discussion starts with a comparison of overall health spending in terms of per capita expenditure and in relation to other macroeconomic variables, such as GDP. Current levels of spending as well as trends over recent years are presented, taking into account the likely impact of the economic slowdown on future health spending. As well as indicators of total spending, the chapter also provides an analysis of the different types of health services and goods consumed across OECD countries, with a separate focus on pharmaceuticals as one of the main drivers of health spending growth over recent years.

Differences in spending levels per capita reflect a wide array of market and social factors, as well as countries’ diverse financing and organisational structures of their health systems.

In 2007, OECD countries devoted 8.9% of their GDP to health spending (Figure 7.2.1). Trends in the health spending to GDP ratio are the result of the combined effect of trends in both GDP and health expenditure. Apart from a few countries (Hungary and the Czech Republic), health spending grew more quickly than GDP over the last ten years (see Figure 7.1.3 under the previous indicator). This has resulted in a higher share of GDP allocated to health (Figure 7.2.3). The share of health expenditure to GDP is likely to increase further, following the recession that started in many countries in 2008 and became widespread in 2009.

The allocation of health spending across the different types of health services and medical goods is influenced by a range of factors, including the availability of resources such as hospital beds, physicians and access to new technology, the financial and institutional arrangements for health care delivery, as well as by national clinical guidelines and the disease burden within a country.

Spending on pharmaceuticals accounts for a significant proportion of total health spending in OECD countries. Increased consumption of pharmaceuticals due to the diffusion of new drugs and the ageing of populations (see Indicator 4.10 “Pharmaceutical consumption”) has been a major factor contributing to increased pharmaceutical expenditure and thus overall heath expenditure (OECD, 2008d). However, the relationship between pharmaceutical spending and total health spending is a complex one, in that increased expenditure on pharmaceuticals to tackle diseases may reduce the need for costly hospitalisation and intervention now or in the future.

Attributing health care expenditure by disease and age is important for health policy makers in order to analyse resource allocations in the health care system. The information provided can play an important role in assessing the impact of ageing populations and changing disease patterns on spending. It can also provide input into the modelling of future health care expenditures (Heijink et al., 2006). Furthermore, the linking of health expenditures by disease to appropriate measures of outputs (e.g. hospital discharges by disease) and outcomes (e.g. survival rates after heart attack or cancer) can provide useful input in monitoring the performance of health care systems at a disease-based level (AIHW, 2005).

All OECD countries use a mix of public and private financing of health care, but to differing degrees. Public financing is confined to government revenues in countries where central and/or local governments are primarily responsible for financing health services directly (e.g. Spain and Norway). It comprises both general government revenues and social contributions in countries with social insurance basedfunding (e.g. France and Germany). Private financing, on the other hand, covers households’ out-of-pocket payments (either direct or as co-payments), thirdparty payment arrangements effected through various forms of private health insurance, health services such as occupational health care directly provided by employers, and other direct benefits provided by charities and the like.

International trade in health services and one of its main components, medical tourism, have been attracting increasing attention from health analysts, the medical profession, public health policy makers, and trade and tourism promotion agencies. Discussions on the opportunities and threats of such trade have been conducted with relatively little data to inform them.