More for less?

How to explain the gap between health spending 
and health outcomes in Norway compared to other countries
Hans Olav Melberg (hans.melberg@gmail.com)
HERO/HELED, UiO, 11. February, 2009.
Project in progress, please do not quote!
Hans Olav Melberg, University of Oslo
Background

• Start of research project

– Comments important

• More questions than answers so far

– But the beginnings of some answers

• Examine literature and numbers

– Sometimes surprising

• Explain approach
– Follow us on the internet: http://verdensmester.blogspot.com/
Health Economics Research Programme at the University of Oslo - HERO  
Structure

• Show the gap: Spending and outcomes

• A frame and the literature

• Exploring some explanations

• The way ahead

Health Economics Research Programme at the University of Oslo - HERO  

 1 000
2 000
3 000
4 000
5 000
6 000
7 000

0
United States 6 401
Luxembourg (1) 5 352
Norway 4 364
Switzerland 4 177
Austria 3 519
Iceland 3 443
Belgium 3 389
France 3 374
Canada 3 326
Germany 3 287
Australia (2) 3 128
Denmark 3 108
Spending, 2005

Netherlands (1,3) 3 094

Greece 2 981
Public expenditure on health

Ireland 2 926
Sweden 2 918

Health Economics Research Programme at the University of Oslo - HERO

OECD 2 759

 
United Kingdom 2 724
Italy 2 532
Japan (1) 2 358
New Zealand 2 343
Finland 2 331
Spain 2 255
Private expenditure on health

Portugal 2 033
Czech Republic 1 479
Hungary (1) 1 337
Korea 1 318
Slovak Republic 1 137
Poland 867
Mexico 675
Turkey 586
Some outcomes
Expenditure Expenditure Life Infant Breast cancer AMI
$ per capita* (% difference) expectancy mortality survival rates mortality

Norway 4364 0% 80.1 3.1 82.8 8.0

Finland 2331 -47 % 78.9 3.0 88.4 11.1

UK 2724 -38 % 79.0 5.1 80.0 11.8

Sweden 2918 -33 % 80.6 2.4 87.0 8.3

Denmark 3108 -29 % 77.9 4.4 85.0 n/a

Germany 3287 -25 % 79.0 3.9 78.0 11.9

France 3374 -23 % 80.3 3.6 79.7 7.6

Health Economics Research Programme at the University of Oslo - HERO  

A frame: The health outcome chain

Population and Environment  Expenditure Treatment Health

•Age distribution •Wage/Price level •Organization •Isolating effect of 

•Climate •Finance system •Economic efficiency treatment
•Nutrition •Administrative costs •Technical efficiency •Different health 
•Alcohol/Tobacco •Cost of litigation indicators
•Exercise •Priorities
•Genes

Health Economics Research Programme at the University of Oslo - HERO  

Literature
• Some large studies
– OECD
– WHO (Murray & Evans, 2003; WHO, 2000).
– McKinsey Global Institute, 1996.

• Focus on US exceptionalism
– administrative costs
– malpractice litigation
– insurance and moral hazard
» Woolhandler, Campbell and Himmelstain, 2005, Garber and Skinner, 2008, McKinsey Quarterly, 2009

• BUT
– Not explain Norwegian exceptionalism
– Many methodological problems

Health Economics Research Programme at the University of Oslo - HERO  

American excess spending

Health Economics Research Programme at the University of Oslo - HERO  

Some possible explanations
• Data problems • Demography
• Wrong indicators • Technology
• Priorities • Diminishing return
• Inefficiencies • Reorganizations
• Wages • Cooperation
• Prevalence • Lags
• Geography

• Does it matter?
Health Economics Research Programme at the University of Oslo - HERO  
Focus on some explanations
• Macro approach
1. High wages
– Examine the degree to which high wages and staff levels can explain
cost differences

2. Different priorities
• Spending in areas with little return on standard indicators?
• Estimate spending on the terminally ill, End of life costs (using NPR
data)
– Diminishing return?

– High disease incidence

• Heart problems and other expensive diagnoses (Alzheimer, MS)
– Related to genes?

• Micro approach: A case study

– Differences in outcomes and costs after acute myocardial infarction in
Finland and Norway.

Health Economics Research Programme at the University of Oslo - HERO  

A closer look at wages and efficiency

• Case study: Norway vs. Finland

• Norwegian nurses
– Earn 40% more!
– Have substantially higher staff levels
• but problem with OECD data on nurses

• Norwegian physicians
– More in Norway (3.7 vs. 2.7)
– Earning difficult to identify

Health Economics Research Programme at the University of Oslo - HERO  

What would Norwegian health spending per
capita be with Finnish wages and staff? ($)
Total spending

0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000

Finland

Norway, unadjusted

Norway, same wages as Finland

Norway, with equivalent GDP wage

Norway with same staff levels

Norway, with same number of total staff as

Finland assuming nurse salary for all

Health Economics Research Programme at the University of Oslo - HERO  

What does this mean?
• Estimates (not to be quoted, assumptions and uncertainty!)
– Finnish wage levels could decrease our costs by 18%
– Finnish staff levels could decrease our costs by 15%

• Interpretation
– Cut wages to nurses?
• Norwegian nurses are paid more than Finnish, but so are most other
Norwegians as well!
• If nurses get the same relative wage in Norway as in Finland (compared to per
capita gdp), then the total costs goes down by 5%, not 18%.

– Overstaffed?
• Maybe

• Key point
– Not extremely overstaffed, but balance is different compared to others

Health Economics Research Programme at the University of Oslo - HERO  

About diminishing return and priorities

• Life expectancy and spending

– World pattern: Diminishing marginal return?
– Gapminder figure (Click: http://graphs.gapminder.org/ and press Play)

• Spending in the last few years of life

– Growing and diminishing return

• Controversy: Does spending increase health?

– Robin Hansen: Free or cheap health care mainly encourage demand that
do not give health?
• Rand insurance study
– Stephen Martin et al: Stor og statistisk god studie av pengebruk og utfall i
ulike Primary care trust
• Eks.: 120 000 kroner mer på kreftbehandling ga et ekstra leveår

Health Economics Research Programme at the University of Oslo - HERO  

Prevalence as an explanation

• Do Norwegian suffer more from expensive diseases?

– Heart problems
– MS
– Alzheimer
– Osteoporose

• Methodological problems
– Supply side effects
– Case-mix problems

• Area for further research

Health Economics Research Programme at the University of Oslo - HERO  

Incidence per 100000 of Acute Myocardial
Infarction in 2004.
450

400

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300

250

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Health Economics Research Programme at the University of Oslo - HERO  

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Health Economics Research Programme at the University of Oslo - HERO

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Discharge rate per 100000

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Discharge rates for hip fractures
APOE e4 and heart disease
APOE e4 and heart disease

450
Heart infarction rate per

400
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100000

250
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0,1 0,15 0,2 0,25 0,3 0,35 0,4
Fraction at least one copy with e4

Health Economics Research Programme at the University of Oslo - HERO  

Incidence and mortality acute cardiac infarction
0.75

Ireland

0.5
Death rate per 100000

Finland

0.25

USA
Norway

0
0 50 100 150 200 250 300 350 400 450
Incidense per 100000

Health Economics Research Programme at the University of Oslo - HERO  

Conclusion

• Wages and staff level explain much, but not all

– Importance of staff level an indicator of problems technical
efficiency
– Importance of wage levels an indicator of general cost problems
(more specific to Norway than to nurses)
• BUT: Inbalance in staff composition?
– Ratio of highly qualified (and paid) staff to lower qualified
is higher in Norway than other countries?

• Data quality and method

– More work to be done
– Project timeline: 3-4 years
– Follow us on the net!

Health Economics Research Programme at the University of Oslo - HERO  

Appendix

• Video of the relationship between the number of

medical doctors per capita and life expectancy over
many years and countries (Gapminder)
– Click: http://graphs.gapminder.org/ and press Play

• Some figures about spending

Health Economics Research Programme at the University of Oslo - HERO  

More on health spending
- Nominal spending
- Base year 2000

Health Economics Research Programme at the University of Oslo - HERO  

More on health spending
as % of GDP
as per capita PPP (base=2000)

Health Economics Research Programme at the University of Oslo - HERO  

Nordic comparison
(Nominal spending per capita in US dollars)

Health Economics Research Programme at the University of Oslo - HERO  

More on health spending: Nordic comparison
(PPP adjusted dollars, base year 2000)

Health Economics Research Programme at the University of Oslo - HERO  

More on spending: Nordic comparison
(% of GDP)

Health Economics Research Programme at the University of Oslo - HERO