Cost Explosion in the Health System

Research projects on eHealth are often motivated by the so-called cost explosion that we are supposed to face in Europe. For example, The Economist Insights writes that “basic problem is the spiralling cost of healthcare” and that “healthcare systems [..] are facing financial ruin“.

I used to believe this prediction until a very good book called Lügen mit Zahlen: Wie wir mit Statistiken manipuliert werden (Lying with Numbers: How we are being manipulated with statistics) by Gerd Bosbach, Jens Jürgen Korff offered a different perspective. Since the book is only available in German, I decided to re-do their calculations on my own and present the results in English.

I downloaded the total yearly expenses of the German public health system from the official institution: Gesundheitsberichtserstattung des Bundes. This is how the numbers look:

CostExplosion1

Phew. Certainly not an explosion, but the curve is clearly pointing skywards.

But wait! Did you notice the y-axis? It does not start at 0, a common trick, as pointing out by Bosbach and Korff, to make changes look more dramatic.

Let’s fix the y-axis:

CostExplosion2

Okay. That looks less worrying now. But still, the curve points upward. The cost may not be “spiraling”, but the numbers are certainly getting bigger.

But wait! Numbers are always getting bigger. This is called inflation. So let’s put these number into perspective by showing them as fraction of the German GDP (source: statista.com):

CostExplosion3

Look at that! Expenses have been hovering are around 10-11% of the GDP. It seems convincing that a society should spend a stable fraction of its wealth on health.

Admittedly, there is a slight increase. If I draw a linear trend line on this diagram, health cost will be 16.8% of the GDP in 2060 — but how can really tell what will happen in those 45 years from now.

On the other hand, this is also a matter of how to select the data. If I had only shown data from 2009 – 2013, a trend line computed in these figures would even have looked as if the relative health costs were decreasing.

So, next time somebody pull the “cost-explosion-in-health-system” card, hit them with facts.

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