OECD projections show that over the next two decades, growth in health spending from public sources is likely to be twice the average growth in government revenues (in a ‘base’ scenario). This reflects underlying cost pressures such as rising incomes, population ageing, potential productivity constraints and technology. It also reflects constraints on the revenues that governments can expect to raise. In a context where governments are facing raising competing priorities (such as climate change or defence), urgent action is needed to finance more resilient health systems while ensuring fiscal sustainability.
Health budgeting
Health expenditure needs are increasing, but at the same time, governments are facing strong pressure to reduce deficits and fund competing priorities for government spending. In this context, it is important there is an effective dialogue between budget and health authorities. Furthermore, good budgeting practices for health are therefore essential, to help governments continue to deliver high quality health services, and guarantee access to all, while ensuring the sustainability of health systems and overall public finances.
Key messages
Budgeting is not simply about controlling spending. Rather, good budgeting practices facilitate the realisation of health policy objectives whilst respecting fiscal sustainability – with a focus on maximising the efficiency and effectiveness of spending. The OECD Joint Network of Senior Budget and Health Officials has developed a set of good budgeting practices for health, to support countries to finance more resilient health systems.
The OECD Joint Network of Senior Budget and Health Officials was created in 2011. It brings together senior officials from Ministries of Finance (central budget authorities), and senior officials from Ministries of Health (and Health Insurance Funds when relevant) in charge of planning and budgeting in their ministries. The Joint Network provides a platform to foster dialogue and a shared understanding of the challenges and possible solutions.
Context
Public spending on health has traditionally grown faster than inflation and government revenues.
On average, public spending on health as outpaced OECD core inflation by around 2 percentage points in 2010-19. After an exceptional growth in 2021 to combat COVID-19, average growth of nominal public spending on health dropped below core inflation for the first time in decades, leading to an average decrease in OECD countries of 1.5% in real terms. While health budgets may be set to return to growth in nominal terms, they may see a decrease in real spending in the face of higher-than-expected inflation, at least in the short term.
Good budgeting practices for health are needed through the budget cycle.
An effective budget process improves decisions on whether, when, how, and by how much to fund public health. It is based on sound institutional arrangements for the health sector, and must follow clear and efficient practices in all phases of the budget cycle: planning, formulation and approval, execution, review and oversight.
Related data
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