Health spending cap may force providers to be resourceful

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Spending on healthcare may have to slow as Western economies stall, bringing an end to a time in which expenditure far outstripped growth in gross domestic product (GDP).

According to Reuters, between 1990 and 2005, health spending in the industrialized world rose in real terms almost twice as fast as GDP, at 4.5 percent compared with 2.5 percent.

Capping healthcare spending at around the current level of 8 to 9 percent of GDP would force healthcare providers to use their existing vast resources more efficiently, Nick Bosanquet, a professor of health policy at Imperial College, London wrote in the British Medical Journal.

An aging population, new technologies and better drugs have all combined to push up the cost of medical care around the world, he said.

As a result, runaway healthcare bills have been created for governments and insurers, who are now pushing back by demanding better deals from suppliers of products and services.

According to Bosanquet, today's market is characterized by “intense competition in large areas of conventional medicine, which is hitting drug industry profits, although those firms specializing in biotech treatments for cancer and other complex diseases are still able to command sky-high prices.”

In the longer term, health spending may well rise as a share of GDP, but Bosanquet said the challenge for the next five years was to redesign services for the future—and for that to happen there had to be strong economic incentives at all points in the health system.

In the same journal, Werner Christie, a former health minister of Norway, wrote that health spending should reflect medical needs, "not unstable economic trends,” reported Reuters.

He argued that given that institutions providing healthcare were among the biggest enterprises and employers in any community, “we therefore need to substantially improve our assessment of healthcare's GDP and may then find that current and even increased investment in health is quite profitable.”