The COVID-19 pandemic showed the importance of robust and agile health and social protection systems to help weather crises by protecting people’s lives and preserving living conditions. Social protection and healthcare are on average the largest government spending categories in OECD countries, and increased in significance during the pandemic. Meanwhile, demographic trends, such as higher life expectancy and low fertility rates, add further financial pressure on health and social protection systems, increasing demand for more and better medical care, as well as for pensions and other types of social aid and support (OECD, 2021).
Within social protection, the largest spending category is old age pensions, amounting to 10.9% of GDP in the OECD-EU countries in 2021. Italy (14.3%) and Finland (13.9%) spent the largest share of GDP on old age pensions (Table 11.6). Between 2019 and 2021, spending on old age pensions as a share of total social protection spending fell by 1.6 p.p. in the OECD-EU countries due to relative increases in other categories (Online Table G.6.6), such as unemployment benefits, which increased by a similar amount over this period. Outside OECD-EU countries, there were decreases of old age pensions spending as a share of total social protection expenditures across all countries with available data, with the largest relative decreases in Colombia (6.8 p.p.) and Iceland (5.5 p.p.).
The second largest spending category within social protection is sickness and disability benefits, accounting for 2.9% of GDP on average across OECD-EU countries in 2021. Families and children is the third largest category in social spending, averaging 1.9% of GDP in the OECD-EU, with the highest share in 2021 in Denmark (4.2% of GDP) (Table 11.6).
Within healthcare, the largest public spending category remains hospital services, corresponding to 3.4% of GDP on average in OECD-EU countries in 2021. It includes fixed medical equipment and facilities. Among the countries with available data, the United Kingdom spent the most on hospital services (7.6%) (Table 11.7). Public spending on hospital services as a share of total health spending fell by 1.6 p.p. on average in OECD-EU countries between 2019 and 2021, continuing a downward trend that started in 2009, possibly explained by shorter stays in hospitals in the last decade (OECD, 2021). The second largest spending category within healthcare is outpatient services, averaging 2.5% of GDP. This category includes services delivered at home or in consulting facilities and fell by 2.1 p.p. of total healthcare spending from 2019 to 2021. Finland spent the most on outpatient services (3.4%) in 2021.
The public health services category includes research, disseminating information, and the purchase of vaccines and masks for the population. Although it is a relatively small category of spending (0.6% of GDP in 2021), it increased substantially as a share of total health spending, by 4.6 p.p. between 2019 and 2021, due to the COVID-19 pandemic. The largest increases were observed in Switzerland (18.5 p.p.), Austria (11 p.p.) and Hungary (10 p.p.) (Table 11.7 and Online Table G.6.7).
