Public Healthcare needs Sustainable Economies

Public expenses for healthcare in countries of the EU are usually measured as a rate of GDP. In order to have a sustainable economy, this rate has to be big enough for healthcare needs, but also small enough for other parts of the economy. So, the rationale is simple. When healthcare expenses rise, then this rate will also probably rise, so the growth rate of the economy (and GDP) has to be equal or bigger, in order to absorb this rise and maintain balance between parts of the economy.

In European Union trends have shown that healthcare expenses will rise even more in the future. According to the prediction of Economic Policy Committee 2001; Economic Policy Committee and European Commission 2006 the growth rates were also expected to be very high, so the expenses rise would be absorbed. And then the recession came. And unfortunately only half of the prediction came true. The expenses have raised significantly, but the growth rates didn’t. And this is how the fairytale of sustainability problems begins.

What we see in the above graph (taken from Eurostat) is the Real GDP growth rate through time. OK. Now let’s compare it with Healthcare expenses for the same time period in EU. The expenses in every single country go up.

What is needed to achieve economic sustainability??? How can we match the lines?? The GDP growth rate can not be influenced that easily. Unless you have a secret formula to stabilize euro. So, the expenditures have to follow the lines of real GDP growth. This means that public expenditure on healthcare should be cut to equivalent rates. This is not that simple. There are multiple factors that affect cost o healthcare. These factors will be discussed in the next post.

European governments don’t just face the problem of economic sustainability. Fiscal sustainability is something critical to worry about. What is fiscal sustainability in simple words? It is when a country has enough income to cover its expenses. Maybe fiscal sustainability is the greatest challenge of Member States. According to Willem H. Buiter, 2003 growth strategies will fail in the absence of fiscal sustainability. So, what member states do in order to cover their needs, is cutting expenses, raising taxes and borrowing for liquidity. The third creates a growing debt for them, and it makes it even harder to achieve fiscal sustainability in the future. IMF (2010) predicts that the rate of gross debt of general government to GDP will rise from 91% in the end of 2009, to 110% until 2015. It is quite simple to understand that all the above shrink the GDP of Member States. Less GDP means less for each part of the economy, including healthcare. The biggest question is if it also means lower level of health services quality. Maybe cross border care and medical mobility within Europe can increase competition, and lead to better prices and higher quality. Policy makers will show the way, and time will show whether sustainability is achievable or not.