OECD countries spent more on health since 1970, OECD report says

The industrialised countries' spending on health expenditures relative to gross domestic product has surged by more than half since the 1970s, according to the latest statistics from Organization for International Co-operation and Development (OECD), the Paris-based club of 30 of the world's most advanced economies.

In 2003, OECD countries spent about 8.8 per cent of their GDP on health spending, an increase from 7.1 per cent in 1990 and just over 5 per cent in 1970, said the OCED in its report Health at a glance: OECD Indicators 2005.

But the share of GDP allocated to health spending varies considerably across countries, ranging from 15 per cent in the US to less than 6 per cent in the Slovak Republic and South Korea.

Following the US were Switzerland and Germany, which spent 11.5 and 11.1 per cent of their GDP on health, respectively.

OECD countries with higher GDP per capita tend to spend more per capita on health. Population ageing also contributes to the growth in health spending.

The percentage of the population 65 years or older has risen in all OECD countries, and this is expected to continue in the years and decades ahead, particularly given the ageing of the "baby-boom" generation (which will begin reaching the age of 65 in 2010 and beyond). Since older populations tend to be in greater need of health and long-term care, population ageing can be expected to increase public expenditure in these areas, the OECD said.

Rise in drug spending

The rapid rise in drug spending in recent years - more than 5 per cent per year growth on average since 1997 - has been an important driver in the overall rise in total health spending. In fact, most OECD countries have seen growth in pharmaceutical spending outstrip growth in total health spending over this period.

In the US and Australia, pharmaceutical spending has increased at more than double the rate of growth in total health spending in recent years. Significant growth has also been observed in Ireland and Korea, albeit from a relatively low per capita base at the beginning of the period. The rate of growth was much more moderate in Japan.

In 2003, drug expenditure per person was highest in the US (more than $700 per person), followed by France (just over $600), Canada and Italy (about $500). The lowest spending of just over $100 was in Mexico and in Turkey. Variations in drug spending across countries reflect differences in volume, structure of consumption and price level. Difference in income levels across countries also affects spending on drugs, the OECD said.

On the other hand health costs have also risen over time, and in most countries health expenditure increased at a faster rate than overall economic growth. Advances in the capability of medicine to prevent, diagnose and treat health conditions are a major factor driving health cost growth, the OECD said, but didn’t provide the statistics for health costs.