Economic and environmental crises put pressure on health spending

News / Elise Snashall-Woodhams / November 22, 2019

Sluggish economic growth and a beleaguered planet mean high-income countries must re-evaluate their default ‘more is better’ approach to healthcare spending, according to new research from Deakin’s Institute for Health Transformation.


The paper from health economist Associate Professor Martin Hensher – recently published in the journal Health Economics, Policy and Law – examines the worldwide trend towards ever-slower economic growth and what this means for healthcare.

Associate Professor Hensher said that since the 1960s healthcare spending in developed countries had increased rapidly as a proportion of GDP. In Australia, the share of total healthcare spending has doubled in the past 50 years, rising from less than 5 per cent of GDP in 1971 to 10 per cent in 2018.

But Associate Professor Hensher said a slowing global economy coupled with ecological constraints was forcing healthcare systems to confront the reality that more healthcare was not necessarily better healthcare.

“Healthcare systems have to start making some changes, as we can’t and won’t keep growing at the pace we’ve been previously accustomed to,” he said.

“Slowing growth in healthcare expenditure is already visible across the globe, and this directly reflects the long-standing trend of slower economic growth. These trends will impact the private sector every bit as seriously as the public health system.”

Associate Professor Hensher’s research identifies several key forces that have been driving economic growth lower for decades, with little sign that conventional economic policies are being adjusted to meet these challenges.

“Future healthcare systems will need to be much more tightly focused on reducing overtreatment and low-value care, reducing environmental impact, and improving efficiency in both public and private sectors,” he said.

Associate Professor Hensher said the expanding use of technological advances was the biggest driver of increases to healthcare spending.

“Many amazing new technologies have allowed us to deliver better outcomes and improved survival over the years. But as we keep on introducing new technology that allows us to diagnose, treat and care for people in new ways, this new technology is not necessarily replacing older interventions, it’s often being prescribed to a whole new set of people,” he said.

“Over time, new drugs and technology tend to be used in larger and larger numbers of people. We have more ‘things’ to do and more people using them. When you look at the economic law of diminishing returns, the more you give something to people the less it will benefit them, and – in the case of healthcare – the more chance of harm occurring.

“The danger is some of what we’re doing is hurting people rather than helping them. For example new cancer drugs may help extend life by a few weeks or months in some patients, but do nothing more than inflict debilitating side effects in some others.

“Most poignantly, in the USA the well-intentioned introduction of improved new drugs for pain control in the 1990s has led to the catastrophic opioid epidemic, which has killed more than 400,000 Americans. These were useful drugs which can be of great value to patients when used carefully – yet they unintentionally and unexpectedly triggered harms at an almost unimaginable scale.”

Associate Professor Hensher said strong evidence now existed of pervasive overuse of healthcare across the world.

“Estimates suggest that between 10 and 30 per cent of all care currently provided may constitute overuse globally. While estimates of all forms of ‘waste’ in healthcare systems, not just overuse, generate similarly large numbers. Perhaps 20 per cent of all health spending in OECD countries is wasted, and up to 30 per cent of US health spending,” he said.

Read more:

The Mandarin: Are you ready for the challenges of a post-growth world? How overconsumption and low growth will impact future public policy and decide society’s well-being

Insight+: Wasteful healthcare: Double burden on patients and environment