Health spending may have to slow as economy stalls

By Ben Hirschler

LONDON (Reuters) - Spending on healthcare may have to slow as Western economies stall, bringing to an end a period in which expenditure has far outstripped growth in GDP, a leading health policy expert said on Friday.

Between 1990 and 2005, health spending in the industrialized world rose in real terms almost twice as fast as gross domestic product (GDP), at 4.5 percent compared with 2.5 percent.

Nick Bosanquet, a professor of health policy at Imperial College, London, believes this is unsustainable in an era of lower growth.

Capping healthcare spending at around the current level of 8-9 percent of GDP -- the typical rate for most developed countries apart from the United States -- would force healthcare providers to use their existing vast resources more efficiently, he wrote in the British Medical Journal.

"There will be no incentive to invest in a new kind of health service while the easy option of continued growth in high spending in the old one remains," he said.

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

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

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.

Not everyone agrees, however.

Writing in the same journal, Werner Christie -- a former health minister of oil-rich Norway -- said health spending should reflect medical needs, "not unstable economic trends."

He argued that healthcare was not simply a cost, given that institutions involved in 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," he said.

(Editing by Andy Bruce)