How much will it cost in 2050? Future health spending in Brazil, Chile and Mexico Amanda Glassman and Juan Ignacio Zoloa Inter-American Development Bank June 14, 2013

Public spending on social sectors including health has increased… In real terms, public spending on health increased 88% since 1995 Fastest growth: – DR (336%) – Venezuela (244%) – El Salvador (161%) – Chile (112%) – Brazil (98%) – Mexico (71%) 2 Source: Panorama Social 2013, ECLAC Total public spending on social sectors, % GDP 57%

3 Source: IHME, 2013 (

As countries grow wealthier, they shift towards public spending 4 Source: Hsiao 2005

Expectations are increasing over time… 5 Source:

What can we expect in the future then? Long-term fiscal projections and simulations – Identify factors that can be modified via public policy – Allows for ex ante identification of inter-temporal inconsistencies in needs and revenues Illustrative analyses – Models that allow for modification of assumptions 6

Methods Estimate probability of acquiring disease and seeking care Assume: – Current patterns of screening and treatment stay constant (improbable) – Prices of services and medical technology in relation to general price levels remain constant Use annual projections of age structure, education, labor market participation Assign probabilities to individuals, assign expenditure to each person 7

Levels of risk factors in Brazil, Mexico and Chile, circa 2008 GeneroFumadoresSedentarios Mujeres23.8%4.4% Hombres37.7%3.7% Total30.5%4.1% 8

Projections of 10 conditions based on age structure and risk factors, Brazil Source: Own analysis based on PNAD 2008 and IBGE projections 2008.

Public spending projections associated with hospitalization for 10 conditions, Brazil 10 Source: Own analysis based on PNAD 2008 and IBGE projections 2008.

Projections in public spending (% GDP), under different policy scenarios, Brazil 11 Source: Own analysis based on PNAD 2008 and IBGE projections 2008.

Potential public policy levers and impact on spending scenarios to 2050 (% GDP), Chile 12 Source: Own analysis based on ENS 2009 and INE projections.

Geographic distribution of variations in health spending – 25% increase in smokers (trend) 13

Key messages Even under conservative assumptions, public spending on health will grow more rapidly in the future, pushed by aging, risk factors and technology. Labor market participation and growth can slow the spending trajectory, as can policy measures related to risk factors. Benefits and access expansion should be accompanied by policies to maximize value for money and contain current and future costs. 14

Conclusions Only a few Latin American countries conduct long-term fiscal projections in support of social policy decisions, none as a matter of routine – Without LT projections, can’t understand implications of policies and trends on public finances, can’t manage expectations and can’t maximize welfare. Possible to do but merit greater methodological development, more and better data. – HH surveys on behavior, disease and utilization – Spending and cost by episode of illness 15

ANNEX 16

Metodología y datos: Salud (1) 1.Identificar los factores históricos que determinen el gasto publico en salud: – Demanda: demografía, epidemiologia, participación laboral, niveles educativos, ingresos, factores de riesgo (tabaco, sedentarismo, alcohol), lugar de residencia, utilización de servicios de salud. Proyecciones demográficas oficiales. Encuestas de hogares con módulos sobre salud. – Oferta: niveles de detección y tratamiento, precios, productividad, calidad de la oferta, gasto. Datos administrativos oficiales sobre el gasto en salud. 17

Metodología y datos: Salud (2) 2.Simular en base a la historia: – Cambios en la estructura etaria, consistentes con estimaciones oficiales. – Probabilidad de contraer enfermedad utilizando modelo probit tomando como variables explicativas edad, genero, nivel educativo, etnia, factores de riesgo y otras características socioeconómicas. – Asumiendo que las relaciones entre las variables explicativas y las enfermedades se mantienen constantes 18