Getting more for our current spending is a smart way to improve health system performance. That rings especially true in the current context: budgets are tight and health expenditures are projected to increase by 3% annually in real terms.
Increasing the returns to health spending is good for health outcomes and it can support the argument for increasing the relatively low spending on health across the region.
How much could we gain by improving health spending efficiency?
We can get a sense of the potential gains by comparing each country against peer countries that have similar per-capita spending, after accounting for contextual factors such as different demographics and overall income levels
At each level of per capita spending, there are countries that have achieved better results than others. The key question is: What if these countries performed as well as their best-performing peers?
We calculated these “potential gains” for several health system outputs for the period between 2015 and 2019. The graph below shows the results for life expectancy at birth: with improved efficiency, the region could gain approximately 3.5 years with the same per capita spending. That is equivalent to 4.6% improvement. To put this into context, between 2000-2015 life expectancy at birth in the region increased by 3.4 years. There is some variation across countries, including those with similar per capita health spending, such as the Dominican Republic, El Salvador, and Paraguay.
Is it time to reduce health spending?
This does not mean that current spending on health is sufficient or should be reduced. These results do imply that we could achieve more with current spending.
In fact, increased health spending in Latin America and the Caribbean could lead to improved outcomes, similar what we observe in OECD countries that spend more and achieve better results.
The policy challenge, therefore, is to ensure that current and future spending is as efficient as possible. What can countries do? The IDB publication Smart Spending for Health: How to make each dollar count has many ideas and strategies, from prioritizing cost-effective interventions to reducing waste and shifting to results-based payment methods. Download it!
Excellent piece of work!
Fascinating to see that the general finding (potential of 3.5 additional years of life expectancy) is about the same as other studies on the potential gains from greater efficiency in health spending – in particular the ones from York University (Castelli et al 2021; Moreno-Serra et al 2018). Gives me more confidence in the results.