Healthcare is cheap... but can we afford it?
A lack of funding has seen the budgets of regional governments spiral out of control
Seventy billion euros is not exactly small change. But this is what Spain spent on public healthcare in 2009, according to the Health Ministry. The figure accounts for approximately 6.5 percent of GDP, compared to 5.4 percent in 2004. This increase (the biggest in the OECD in euros per inhabitant) was easy enough to sustain during the boom years, but now times are much tougher. Some regions, such as Catalonia, have reacted by making major cutbacks, and Madrid also plans to cut spending on public centers. Yet Spain has some of the best health statistics in the OECD and the EU: the second-longest life expectancy; low infant mortality; and practically universal coverage. It is also the country's biggest employer, with more than 600,000 healthcare professionals. But if the system works so well, why is it always being called into question?
Ramón Gálvez, the last managing director of the Castilla-La Mancha healthcare service (SESCAM) under the Socialist government, is convinced he has the answer: it's the most expensive item on regional budgets, coming in at 35 percent of total expenditure. That's why, with the economic crisis raging, finance ministers are eager to make cuts.
But it may not be so simple. According to Healthcare Minister Leire Pajín, some people are trying to "take advantage of the crisis" to "dismantle the welfare state." As she sees it, this is unacceptable: "The system isn't wasteful. Whether its efficiency can and should be improved is a different matter," she says. "The coverage offered is similar to what you get in the rest of the EU, but for less," she says. According to Pajín, the cost per person is 1,500 euros a year, versus 2,100 in France and 2,500 in the United Kingdom. That's why, she says, "it's not a cost problem, but a revenue problem."
Even the secretary of social policy for the Popular Party (PP), Ana Pastor, agrees on this point: the system isn't too expensive, but is rather under-budgeted. Since 2003, the year when powers over healthcare were transferred from the central government to Spain's semi-autonomous regions (a long process that began in 1981 with Catalonia), regional governments have always budgeted less than what they ended up spending (falling between two and three billion short each year, according to José Martínez Olmos, who has served as health secretary during every Zapatero administration, and Mario Mingo, the PP's health spokesperson in Congress.)
It was a measure that was easy to sell: healthcare, the crown jewel, was never going to be left unattended. If regions had a hole in their budget, they could later turn to extra sources of funding ? big daddy government ? to fill it. And they would have popular opinion behind them. A poll commissioned by the Spanish Nurses Association shows that 79.4 percent of the population approves of "the state assuming, with no restrictions, all increases in spending, even though it means going further into debt." This trust in the central government is also reflected in other answers: 70 percent would approve if healthcare powers were returned to the central government.
What's more, the regional funding system established by the last PP administration should ensure that care provided on the regional level is at least as good as the services provided by Insalud, the centralized entity that used to manage healthcare for the 11 regions, plus Ceuta and Melilla, that didn't have the power to manage their own services. But it soon became apparent that this was not the case. For one, according to Martínez Olmos, the amount earmarked for regional healthcare was based on figures from 1999, although the transfer was not completed until three years later.
In 2004, the first Conference of Regional Premiers got the central government to promise them more money for healthcare: a total of 9.8 billion extra euros until 2009, not counting the estimated five billion, which, according to Pajín, regions have saved thanks to reductions in the price of medications (three billion during the Socialist era alone, plus additional savings deriving from the new reference pricing system introduced by the PP) and pay cuts for healthcare workers.
Despite all these measures, the system is currently between 15 and 20 billion euros in the red, according to the Medical Profession Forum. And much of this deficit is being financed by pharmaceutical suppliers, primarily laboratories (nearly three billion euros, according to Farmaindustria) and healthcare technology companies (4.5 billion, according to the sector federation FENIN). But now these traditional creditors ? the regions have always owed them money, although the debt has increased 270 percent since 2007 in the case of FENIN, for example ? have been joined by pharmacies.
Compared with other major suppliers, the amount owed to pharmacies is still small (around 400 million as of September, according to the Spanish Federation of Pharmacists FEFE, which estimates that by the end of the year, it will reach 1.2 billion and affect practically every single region). But they have been the ones to sound the alarm because they represent a sector that doesn't usually have to grapple with outstanding invoices, because pharmacies make up the layer of the healthcare system closest to the people (there are more than 21,000 pharmacies all over Spain, which serve around two million people every day, according to Martínez Olmos) and they are small family businesses, which have a much harder time negotiating debt repayment.
In the medium term, there doesn't seem to be any easy solution. And the debate itself is based on shaky premises. The Andalusian healthcare chief, María Jesús Montero, mentions the "myths" of the system, for instance that the private sector manages healthcare more efficiently. To debunk this, she cites the example of the Netherlands. In 2006, this country spent 9.8 percent of its GDP on healthcare (Spain spends somewhat less: 6.5 percent on public healthcare and another three percent on private care). This year, the Dutch government totally overhauled the system, implementing a mandatory private health insurance plan for everyone in the country. As a result, it now spends 12 percent of its GDP, the second-largest share in the OECD after the United States (17.4 percent, primarily on private healthcare).
The Socialists' refusal to open up the system to the private sector does not mean, however, that it can't coexist with agreements and consortiums (in Andalusia, for instance, with the brothers of San Juan de Dios, admits Montero). This is nothing new. Private entities have always been part of the Spanish system. According to the 1986 healthcare law, civil servants can choose between the national healthcare system and MUFACE, whose service is provided by private insurance companies (the validity of which is endorsed by the over 90 percent of all public workers who choose it, year after year).
One thing seems clear: the system needs more money, but with conditions. This is the famous "finalist" funding championed by the Socialists, whereby tax revenue is ring-fenced for a specific purpose. The Medical Profession Forum has also defended this idea in a manifesto that it drew up in protest of budget cuts. "What we can't have is a situation where the government gives money to make a registry of healthcare workers, for example, and then the regions spend it on who knows what," says the president of the Medical Association Organization, Juan José Rodríguez Sendín.
Martínez Olmos cites the following figures: 187 million euros in 2010 alone to the Valencian regional government, 122 to Galicia, 217 to Madrid and 49 to La Rioja (all governed by the PP) handed over by the Health Ministry were spent on something else. That's why the Socialists think that the extra revenue gained from reductions in the price of medication, special taxes (tobacco and alcohol) and other measures (computerization of medical records and e-prescriptions, which have reduced the number of primary care appointments) should be spent ? at least in part ? on reducing the debt.
But according to current law, the central government can't tell the regions how to spend their money. Under the transfer of powers model, regions receive a certain share of the taxes collected by the central government, depending on their population and other factors such as population density and ageing, but then they can do what they want with it. Perhaps because the Popular Party established the basis of this model, it has not supported any initiatives to change it. Both Pastor and Mario Mingo insist that the healthcare system will have the additional revenue it needs if the PP wins the elections, because the economy will improve as a whole under its leadership.
Both of the main parties rule out the copayment option, although those surveyed by the nurses association said they would accept it if it were "income-based." The president of the doctors association insists on its uselessness: "If you look at healthcare expenditure, every country in the OECD that has [copayment] spent a larger share of their GDP on healthcare than Spain."
Other possible measures include returning powers to the central government, or at least reinforcing the regional system by giving an "executive" role to the Inter-territorial Council ? the advisory body that coordinates healthcare between the national and regional ministries. Some people, like Javier Rey, in charge of health for the Alternativas Foundation, even call for a new law.
"The existing law is too open, and allows situations like the current model in Madrid, which is very detrimental." Rey is convinced that if major reforms are not made, the system could collapse. Meanwhile, it seems more than likely that short-term solutions will continue to be implemented. Until the next crisis.
The increasing spend on drugs
The amount that hospitals spend on pharmaceuticals has risen from 3.7 billion euros in 2006 to nearly 5.8 billion euros in 2010 — around 55 percent — according to a study of the Spanish pharmaceutical market conducted by the consulting company IMS Health. More outpatients — resulting from an ageing population and the chronification of illnesses such as cancer — and the high price of innovative drugs, which have been introduced to treat diseases such as sclerosis, are the main reasons behind this rise in spending, which until then had always been under 10 percent. These factors are joined by the lack of specific measures to curb an expense that is seeing regional governments sink further into debt.
The amount hospitals spend on drugs, however, has not been made public. The government is not disclosing this figure, even though it has a legal obligation to do so as of this year. Health secretary Alfonso Jiménez claims that the data have not been released, given that some regions have still not handed over the information. Thus, we only know what the regions pay for prescription drugs dispensed by pharmacies. This figure, over 10 billion euros a year, has gone down following decrees passed by the central government.
In 2010, in the middle of an economic crisis, hospital pharmaceutical expenses went up eight percent at best. In the past, this increase has been double-digit: over 15 percent in 2008 and over 12 percent in 2009, according to IMS Health.
As it wrestles with budget shortfall, these are percentages that Spain can't afford. Yet the health secretary, who was also head of the Health Ministry's pharmacy department until last month, denies that hospital drug expenditure is out of control. "Just the opposite: sometimes, it is much more controlled than what is spent on prescriptions," he says.
But one thing is undeniable: the increase in hospital drug costs drives up spending and adds even more uncertainty to the debt situation of regional governments, which owe pharmaceutical companies over 5.5 billion euros for hospital drugs alone. To that we must add another five billion in bills for other health supplies, plus outstanding invoices from pharmacies and clinics with which they have agreements. All in all, some experts estimate that they could owe as much as 15 billion euros.
One of the reasons for this constant swell in spending is the change in model for outpatients who receive treatment at hospitals, where the presence of chronic conditions such as sclerosis, cancer and HIV has become increasingly prevalent. This has shifted part of what used to be spent on prescriptions to hospitals. "The increase in expenditure has to do with the fact that patients are getting older and older and have more chronic conditions. There has also been an increase in the number of outpatients, with chronic conditions such as hepatitis, cystic fibrosis, certain tumors, etc., who do not consume material resources because they're not hospitalized, but who require personnel and medications because their treatments are administered by hospitals," says José Luis Poveda, president of the Spanish Hospital Pharmacy Society (SEFH).
The figures speak for themselves: admitted patients consume just 20 percent of all hospital drugs; patients who go to the hospital to receive some kind of treatment use 30 percent; and the remaining 50 percent goes to outpatients. "In a hospital like La Fe, in Valencia, we've gone from treating 5,000 such patients in a year in 2009 to over 8,000," says Poveda. Hospital drug expenditures now account for 36.5 percent of all pharmaceutical costs.
But why should these patients have to go to the hospital to get their medication? "To save the commission that drug stores receive [over 20 percent]. It should have gone down with the modification of the maximum amount paid to pharmacies — their trading profit — but this doesn't seem to be the case," says Ricard Meneu, member of the Institute for Healthcare Services Research Foundation.
That is what has occurred, for example, in Valencia and the Balearic Islands, with medication for hematologic diseases, oral chemotherapy and fertility drugs. These expensive products — some can cost up to 3,000 euros — are now only given out at hospitals. "It's a way to control and save," says Olga Delgado, head of pharmacy services at the Son Espases University Hospital in Majorca.
The high price of certain drugs is undoubtedly one of the reasons for excessive spending. Medications that treat certain conditions are extremely expensive. But "they are being used whether or not they are cost-effective," says Luis Oteo, head of the healthcare services management department at the National School of Health. The president of the SEFH agrees: "Just because a medication is new doesn't mean it's innovative. To be innovative, it must have more added value than the previous drug, and it should only be funded if it does."
The national healthcare system currently covers over 90 percent of all drugs approved by the Spanish Drug Agency, according to the SEFH. The health secretary sees this as an advantage: "In the Spanish system, patients fortunately have access to any drug that offers some kind of advantage in treatment." Jiménez admits, however, that the cost-effectiveness of drugs should be studied more. In fact, a law passed by the government envisages the creation of a committee to determine the cost-effectiveness of products before funding them, but it still doesn't exist. Only a few regions have something similar.
That's why for now, hospital drug committees are the ones that do this job, according to Olga Delgado. "We can choose the medication that we buy. Of all the drugs that exist, hospitals usually buy around 2,000; this means honing selection criteria and establishing rules for their use. A lot of money can be saved that way."
