Health expenditure & economy

In an ageing Europe, a healthy society and active workforce will be key determinants of sustainable productivity and economic growth and thus key conditions for the EU’s Lisbon Agenda to deliver. Human capital has for long been recognised as a contributor to economic wealth, but it is forgotten that people can only accumulate and provide human capital if they are healthy, both physically and mentally. Far too often politics consider health as a cost and not as long-term investment in human capital.

  • The EU-25 spends on average 7.76% of its GDP on health. The average in the EU-15 is 8.6% and in the new member states 5.8%. For individual member states health expenditure, click here
  • Cardiovascular Disease (CVD) is the number one cause of death in Europe and industrialised countries, and CVDs cost around 3% of EU's annual GDP (135 billion euro) and 500 million lost work days in work-related health problems and accidents. 
  • Mental health illness affects over 27% of European adults every year and can cost European economies up to 4% of GDP in lost productivity and other social costs.
  • Tobacco is the single largest cause of avoidable death in the EU. According to estimates, the sickness and death caused by smoking costs EU countries a little more than 1% of GDP annually (100 billion euro).
  • Recent estimates suggest that between 2 to 8% of the total health care costs in Western countries are attributable to obesity. Costs related to obesity vary between 70 and 150 billion euro a year in Europe.  

The link between health and the economy has been the subject of a number of studies, which demonstrate, for example, that spending on health explains a much larger share (16-27%) of growth rates than expenditure on education (around 3%) (Beraldo, Montolio and Turati), and suggest that governmental intervention should not focus on pro-growth but rather on health-enhancing policies (Garland L. Brinkley).

The Lisbon process (2000) concludes that health contributes to productivity, labour participation and economic growth, and that actions and investment in the prevention of disease are needed to improve both health and the economy. 

reflection process on future EU health policy, in 2004, established that one of the key principles to guide the development of EU health policy over the coming years is the role of good health as a driver of economic growth. The process also highlighted the need to exploit synergies between different policies and to mainstream health into all policy-making. 

The Commission proposal (2005) for the EU health strategy for the period of 2007-2013 states that bad health drives up costs and is a burden on the economy and, that, consequently, better health contributes to Europe's productivity, labour force participation and sustainable growth.

The link between health and economic development in low-income, developing, countries has already been demonstrated. Significant economic benefits can be achieved in these countries by investing in improving health. The Commission's Health and Consumer Protection Directorate published, in August 2005, a study entitled The contribution of health to the economy in the European Union, in which it demonstrates that a similar link also exists in high-income, developed countries, such as the EU member states. 

A key message of the publication is that better health can have a positive impact on various economic outcomes, and is not merely an automatic by-product of economic progress. This argument gives policymakers a powerful justification to invest more in health as a means to achieve their economic objectives.

Impact of health on: 

  • education:  Healthier children have higher rates of school attendance and improved cognitive development, thus greater human capital accumulation. 
  • labour productivity:  Healthy workers are more productive than workers who are otherwise comparable, except for their health. 
  • labour supply:  EU's huge demographic change, currently underway, will, as such, have a huge effect on the amount of the active workforce. Further, ill health of ageing people may force them to retire earlier than expected, leading, as fertility rates are decreasing, to even fewer active workers to keep the economy rolling.

Possible remedies:

  • reduction of the avoidable disease burden:  Disease burden in developed countries is mainly due to non-communicable diseases such as obesity or cardio-vascular diseases, which are often 'avoidable'. More focus is thus needed on effective prevention to ease the pressure on treatment. 
  • health investment across government:  Many of the non-communicable and avoidable diseases are in fact often driven by lifestyle related factors. This means that health, education, and cultural factors are closely related, and that health investment must involve a mixture of actions addressing issues across government, outside the reach of traditional healthcare systems.

Pfizer believes that healthcare systems can get a better return on investment thanks to the effective use of innovative medicines, which can reduce morbidity and lessen the need for expensive hospital care. Pfizer also stresses the importance of supporting further research into major diseases such as CVD, diabetes and mental health.

GlaxoSmithKline (GSK), another pharmaceutical company, highlights the key role of the pharmaceutical industry as a key partner for governments, doctors and patients in achieving better health for a wider number of people. GSK also underlines the potential contribution of medical research, innovation and the use of leading edge technologies in improving clinical care. The company thinks that the challenge for all governments in the future will be to find a balanced approach to reward innovation, manage costs and deliver rapid patient access to optimal treatment.

The European Federation of Pharmaceutical Industries and Associations (EFPIA) thinks that national governments should give higher priority to regional healthcare improvement proposals, which encourage higher investment and structural reforms in both funding and delivery systems. It also would like to see the Commission to provide guidance, co-ordination and expertise to healthcare leaders at regional level responsible for preparing and administering projects using EU funds. In general, EFPIA underlines the role of the pharmaceutical industry in contributing to health and to patient expectations by developing new life-saving and life-enhancing medicines.

The European Generic Medicines Association (EGA) argues that the future health care costs, for which a drastic increase is foreseen due to demographic change, can be contained by boosting the use of generic medicines, the prices of which are, according to EGA are "typically 20% to 80% below that of brand-name pharmaceuticals".

Josep Figueras, the Director of the European Observatory on Health Systems and Policies and head of the WHO European centre on health policy, highlights the need for solidarity as a means towards sustainability in healthcare. "Solidarity is at the core of the European health systems, such as WHO, EU or the Council of Europe," he said warning about possible economic impact of reduced solidarity.

Figueras also said that the European public health systems needed to be made more performant in delivering health. "This can be done through increased transparency and accountability," he said.

The European Public Health Alliance (EPHA) thinks that the Commission's call for investing in health must not be interpreted as investment in health infrastructure or pharmaceutical industry, but as allocating more resources and focusing on prevention and promotion. The EU budget for 2007-2013, according to EPHA, ignores the critical link between healthy people and a healthy economy as the heading 3b including the key programmes on youth, culture, education, health and consumer policy, dialogue with citizens and the rapid response and preparatory instrument for major emergencies has been significantly reduced. 

The European Coordination Committee for the Radiological, Electromedical and Healthcare IT Industry (COCIR) believes that modern health infrastructure is essential for economic development. It states that "health infrastructure is of value for the population and also a critical condition for economic growth. The process of building up a modern healthcare infrastructure should not only cover hospitals, a traditional symbol of healthcare, but should also focus on the necessary conditions to keep people healthy (education and prevention) and on curing people when ill (traditional healthcare).

The European Union of Private Hospitals (UEHP), representing the private hospital sector, underlines the role of private sector in reducing waiting lists in hospitals in many European countries, as these are often too long.

The Standing Committee of European Doctors (CPME) thinks that it is necessary to strengthen the role and activities of Commission's Health and Consumer Protection Directorate General SANCO to ensure that health issues are accorded more importance. CPME thinks that DG SANCO should be given the right and responsibility to influence all policies affecting health. 

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