Health Expenditures in Major Industrialized Countries, 1960-87

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Health expenditures in major industrialized countries, 1960-87

Introduction

The current debates in this country over assuring access to the 31 million uninsured and the continued escalation of health of the merits of the health care systems in examination of the merits of the health care systems in other countries. Numerous articles on Japan and Canada as well as national media focus on the health care systems in other industrialized nations have placed international comparisons of health care systems at the center of the current policy debate (Evans, 1989; Iglehart, 1986, 1988, and 1989; Health Care Financing Administration, 1989). Much of the debate has been driven by comparisons of gross outcomes and aggregate health spending. For example, of the 24 western industrialized member countries of the Organization for Economic Cooperation and Development (OECD), the United State ranks 21st in infant mortality, 16th in male life expectancy at birth, and 13th in female life expectancy. Yet, the United States spends almost twice as much per person and devotes 50 percent more of its gross domestic product (GDP) than the other major industrialized countries (Organization for Economic Cooperation and Development, 1989b).

Unfortunately, these gross outcome and expenditure comparisons shed little light on the underlying performance of different health systems and cannot be used to attribute differences in performance to specific aspects or policies. Although the goal of all countries' health care systems is to provide access to medically appropriate and medically effective services in a cost-effective manner to their populations, it is almost impossible to evaluate the performance of individual health care systems because of our inability to measure health care outcomes in other than gross terms. Although definitive causal comparisons cannot currently be made, a better understanding of the expenditure performance of different health systems can be obtained through a careful examination of expenditure trends both within and across countries. In examining these trends, it is important to keep in mind that health expenditures in various countries were differentially impacted by the phase-ins of their public programs and the growth in private insurance during the period 1960-75 and the rather traumatic effects of the oil crisis between the mid-1970s and early 1980s.

Health spending in national currencies

Health-to-gross-domestic-product ratio

The most common measure used to compare health care expenditures among countries is the percent of a country's total output devoted to the health sector. This is generally measured by the share of GDP devoted to health. The health-to-GDP ratios for 1960-87 for the seven OECD countries selected for this analysis are shown in Figure 1. In 1960, the percentage shares were 5.5 in Canada, 4.2 in France, 4.7 in Germany, 3.3 in Italy, 2.9 in Japan, 3.9 in the United Kingdom, and 5.2 in the United States. By 1987, the percentage shares had increased to 8.8 in Canada, 8.5 in France, 8.1 in Germany, 7.2 in Italy, 6.8 in Japan, 6.0 in the United Kingdom, and 11.2 in the United States. From a U.S. health policy perspective, two aspects of these figures are of interest. First, although the U.S. ratio was below Canada's in 1960 and close to Germany's in 1975, it has grown sustantially faster since. Second, while the other six countries have more or less stabilized their shares since the early 1980s, the U.S. share has continued to grow and the gap between the United States and other countries has widened.

These statistics provide an overview of the total amount of each country's production that is devoted to health, but they provide no information about whether the ratios are changing because of changes in nominal health spending or changes in nominal GDP. Furthermore, they provide no information about the amount of resources devoted to each country's health sector after adjusting for inflation and population growth. …