Keeping up with the Johanssons: How does UK health spending compare internationally?

What’s new?

The latest internationally agreed revisions—the System of Health Accounts 20115—show that rather than a total (public plus private) spend of 8.7% of gross domestic product (GDP) in 2014, the UK spending was in fact 9.8%.

As table 1⇓ shows, total spending was 12.4% (£19.8bn (€22bn; $26bn)) higher in 2014 than estimated under the previous definition. Current public spending was 13.4% (£16.8bn) higher and private spend 31.0% (£8.6bn) higher.

The reasons for these increases are shown in figure 1⇓, which breaks down the differences in total spending between the old and new accounting methods for 2014. Along with some (relatively) small additions to spending, capital spend (on items that are used for several years, such as buildings and IT) at £5.6bn, is the largest exclusion. Long term care (eg, residential nursing homes) and health related social care (the majority of local authority social care spending, including care where the need results from a health condition or supporting activities of daily living such as walking and bathing) plus payments to carers (£25.4bn in total) are the largest additions. The figures continue to include preventive care, but the new accounting methods further blur the line between health and healthcare. Several of the changes in the accounting method are to adjust for problems identified in the previous method that reduced the comparability and accuracy of countries’ estimates.5 This comparison is only possible using 2014 data published by the ONS. Since then the OECD has revised the total UK spend from £179.5bn to £178.6bn for 2014. Nevertheless, the ONS breakdown remains illustrative of the new accounting changes.

Fig 1 Breakdown of the effect of new calculation method (SHA 2011) on UK healthcare spending figures, 2014 (NPIS=Non-profit institutions serving households)

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How does the UK compare?

The UK is not particularly unusual in the amount it spends on health compared with the other 14 original countries of the EU. Sweden, France, and Germany all spend 11.1% or more of their GDP on health whereas Portugal, Greece, and Luxembourg all spend 9% or less of GDP.

The UK is about average for overall spending, with health spend as a percentage of GDP the ninth highest out of the 15 EU countries (fig 2⇓). It is marginally above the unweighted average of the other 14 countries and about 1 percentage point above the OECD average (excluding the UK). Matching this OECD average would imply a reduction in UK spending of about £15bn.

Fig 2 Current spending on health as a proportion of GDP in EU-15 countries, 2014. (EU-14 excludes UK. The unweighted average takes the average of percentage spends (of GDP) across a group of countries, ignoring the absolute amounts spent on health and the absolute size of countries’ GDPs. The weighted average treats the group of countries as one country—producing an average weighted for size of spend on health and GDP)

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This is a major revision from the UK’s position with the old definition, under which its health spending as a percentage of GDP was below the EU-14 and OECD averages (both weighted and unweighted). Growth in health spending tends to be gradual—on average only slightly higher than GDP growth. As a result, movement in the rankings of countries’ spending is usually minimal unless there are major changes in health systems, serious economic events, or redefinitions of health spending.

In terms of absolute spending (adjusted to reflect different purchasing powers of currencies in different countries and adjusted to a base year, for comparison) the UK spends $3675 per person a year on health. This is just below the EU-14 average ($294, or 7.4% less). This is a considerably closer than under the previous definition, with the UK now spending almost $1000 more per person. It is still much less than the Netherlands ($4857) but much more than Greece ($1870).

The amounts spent on different types of healthcare vary widely. Two thirds of spending in Portugal goes on curative care, whereas for Belgium it is less than half (fig 3⇓). The UK is about average—spending about the EU average of 56% on curative care. The Netherlands spends the most on health related long term care (over a quarter of its spending). Three of the top five highest spenders on health overall are in the bottom five for curative care spending (as a percentage of all spending), whereas three of the top five lowest spenders on health spend the most on curative care.

Fig 3 Shares of spending on different types of healthcare: EU-15 countries, 2014.

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As the population gets older, and lives longer with more morbidities, preventive and long term care will become more important. Understanding how money is being spent in these areas across the EU can help inform this transition from a more traditional medical model (with a strong focus on curative care) to a different approach and gives an idea of the financial implications of this. High spending countries spending less on curative care might reflect the short term costs of this approach, but that is unlikely to explain it all. Some of the variations—between proportions of total health and care spend of countries on curative compared with preventive care or outpatients compared with day case activity—might simply reflect different interpretations of the new accounting rules. But some will be real (and perhaps loosely correlated with total spending levels), reflecting a combination of factors; for example, historical differences in the way health systems are organised and funded, variations in relative costs of different forms of care, medicocultural variations, patient preferences and needs, and deliberate policy (such as investing more in preventive care or encouraging more day case work as a substitute for inpatient care).67

In curative care, for example, the UK, along with Ireland, Portugal, Sweden have moved further than other countries in shifting care away from inpatient care to day case, outpatient, and home based care (table 2⇓). This reflects decades of trends in the UK of activity driven by deliberate policy and enabled by changes in clinical practice.8

What do international comparisons suggest for UK spending?

At a country level at least, the level of healthcare spending depends on several factors, with changes in (national) income (ie, GDP) being important.9 Cross sectional comparisons show that countries with higher GDP per person tend to spend more on healthcare.

The revised spending figures for 2014 suggest the UK is spending about what might be expected; just 0.7% less per capita than expected given the size of its GDP (equivalent to UK health spending of just £1.25bn) (fig 4⇓).

Fig 4 GDP per capita versus total health spend per capita in EU-15 countries, 2014 (new health accounting definitions. Purchasing power parities (PPP) are adjusted measures that equalise the purchasing power of different currencies by eliminating price differences between countries). Luxembourg is excluded from this analysis because of its unusual economy; a large proportion of the people who work in Luxembourg commute from other countries, for example, but their economic output is counted as part of Luxembourg’s GDP. This distorts the relation between health spend and GDP per capita—as can be seen by the inclusion of Luxembourg in the regression (the red dotted line)

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Another view of the effect of the accounting changes is how NHS spending would have to change in order to match other countries’ spending levels. Figure 5⇓ shows that matching the EU-14 average spend implies a (relatively) small decrease in NHS spending of just £2bn. Matching the spending level of Sweden on the other hand would require an increase of £24bn.

Fig 5 Percentage change in UK total health spend if it matched other EU-14 countries’ spending levels in 2014 through changes in NHS spending alone

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Spending decisions

Arguments about how much to spend on healthcare in the UK often draw on the fact that the UK spends less as a proportion of its GDP than other countries (for example, Tony Blair’s commitment for increased spending from 200010). The big boost to UK health spending between 2000 and 2009 was in part based on a desire to “keep up with the Joneses” (or, rather, the Johanssons , the Schmidts, et al). Indeed, the goal set at the turn of the century was to match the average spend of other European Union countries.11 But the fact that the UK seemed to lag behind other countries’ health spending was never a sufficient argument to spend more. It also presumed that the basic spending figures were comparable.

The latest health and social care accounting revisions are designed to provide a more comparable description of spending. But it would be wrong to suggest that this new accounting system perfectly captures exactly how much different countries spend on health and health related social care. The lines between categories of spend are still not always clear, and country level interpretations of the accounting conventions are likely to vary.

For the UK, a particular issue is that over half of the net increase in its health spending is the result of £13.5bn of public spending on health related social care being reclassified as health spending. This is close to the total public spend on adult social care in England.12 So, the accounting gain on health is largely offset by the loss on the social care. Unfortunately, as the UK (along with around half of OECD countries) does not supply the OECD with data about non-health related social care spending it is impossible either to see the effect of this accounting transfer or to compare countries’ combined health and social care spending.

The new data may muddy the water on the question of whether the NHS (in the narrow sense) is underfunded or overfunded, especially without a clear understanding of how investment in health and social care affect each other. In the UK (particularly in England) the systems are funded, accessed, and delivered very differently. But this is not true in all countries, with social care playing a different role in many countries from that in the UK. By including social care spending are we glossing over these differences?

However, the important question raised by the new accounts is about the adequacy of public funding of health and social care in the UK. Does the change in data simply point to a need to think (and debate) differently about funding? As Keynes (allegedly) said: “When the facts change, I change my mind. What do you do sir?”

There is no doubt that arguments for increased health spending based on the UK’s (historically) low level relative to other similar countries has been substantially attenuated by the re-evaluation of the UK’s health spend. But just as previously being below average was not sufficient reason to increase spending, now being average is not sufficient reason to withhold spending. The data do not tell us that we should spend as much as Sweden or France, but they might tell us that we could.

Being average internationally is not synonymous with the most desirable level of funding (or, indeed, a level that maximises the benefits of the country’s scarce resources). What other countries spent on health was only ever a rough point of triangulation to inform domestic decisions. Many other factors will influence and drive such decisions in different countries—from variations in need, relative efficiency, and incentive effects arising from differences in funding sources and payment methods.

It also bears reiterating that the new accounting methods, while changing the UK’s standing internationally, do not change the reality of spending levels within the UK. A tough reality that—for many providers of health and social care—will not be eased by changes in definitions or accounting methods. And one in which the UK still employs fewer nurses (8.2 per 1000 population) than the OECD average (8.9), fewer doctors (2.8 v 3.3) and computed tomography scanners (8.0 per million population v 26.2).2

Although the revised spending data shed new light on the UK’s relative international position, decisions about overall public health and social care spending are of course a matter for individual countries. A combination of the technical (as a society, what returns do we get from spending on health and social care instead of other things? What is a reasonable level of productivity improvement?) and the political (what is the electorate’s public spending preferences?) will inform those decisions.