Health, Austerity and Economic Crisis. Assessing the Short-term Impact in OECD countries

Author Van Gool K, Pearson M.
Reference OECD Health Working Papers, Sept 2014
The economic crisis that started in 2008 has had a profound impact on the lives of citizens. Millions of people lost their job, saw their life-savings disappear and experienced prolonged financial hardship. The economic crisis has also led a number of OECD governments to introduce austerity measures to reduce public deficits. The health sector, like many other social welfare programmes, has witnessed extensive spending cuts and has also been the subject of substantial reforms. The combined effects of economic crisis, austerity and reforms have led many OECD health systems into unchartered territory. 

This paper looks at the impact of economic crisis on health and health care. It summarises findings from the published literature on the effects of economic crisis that took place over the past few decades and also describes recent health policy reforms, focusing on those countries where the economic crisis has hit hardest. Finally, this paper analyses the empirical relationship between unemployment and health care use, quality and health outcomes, using data from OECD Health Statistics. In doing so, it investigates whether the effects of unemployment on health outcomes have been extenuated by austerity measures. 

Results show that economic downturns are associated with adverse outcomes for some, but certainly not all, health indicators. During times of economic crises, mental health deteriorates and the prevalence of communicable diseases appears to rise, but at the same time there are fewer deaths from transport accidents. There is less consistent evidence on the relationship between economic conditions and overall health outcomes such as mortality and health care quality. However, this paper finds that a higher rate of unemployment is strongly linked to lower health care use, which may have longer term consequences that are not yet evident in the available data. Recent health care austerity measures are associated with a decline in hospital admissions in OECD countries, but not in pharmaceutical consumption. This provides some evidence that falls in pharmaceutical expenditure can primarily be explained by efforts to negotiate lower prices and encourage use of cheaper bioequivalent generics. While many of the health reforms undertaken since the start of the economic crisis can make a positive long-term contribution to the health system’s productivity and efficiency, there may also be negative impacts. The short-term effects examined in this paper suggest that austerity measures have had mixed success in protecting patients from reduced health care access, but there remains an important need to actively monitor the wider long-term health impact of the economic crisis.