Overview

Key messages:

• The recent cost-of-living crisis has drawn attention to the effects of economy-wide price growth on health systems, but there is little known about how different health system actors are affected by, or how they can be made more resilient to, the effects of economy-wide inflation.
• The effects of high inflation vary substantially across purchasers, providers and patients, depending on factors including health system characteristics, regulatory mechanisms, market power, provider cost structures, and payment mechanisms.
• Providers are typically more exposed to market prices than purchasers, although the extent of their exposure to growth in the prices of health care inputs (e.g. labour, energy, etc.) varies depending on their underlying cost structure.
• A substantial number of countries do not automatically adjust budgets, provider payments or other types of financing for inflation as a general rule; this may not present problems in the short term, but over time if adjustments are not made, the cumulative effects of inflation can have adverse consequences for health systems.
• Countries that do explicitly adjust provider payments to account for inflation typically do so using a general consumer price index, but this may not appropriately capture changes in health care-specific input prices, such as labour (i.e. wages) and health care goods.
• It can be tempting for purchasers who have the power to set prices to not fully adjust health care budgets for higher inflation and thus to pass much of the burden of inflation on to health care providers. However, there is a natural limit to how much providers can cope with this by increasing their productivity.
• Health care workers have protested insufficient wage growth in many countries during the recent cost-of-living crisis, disrupting access to care.
• Providers may be inclined to compensate for reduced profit margins by taking on more private patients or charging balance billing where this is allowed, reducing access for those who cannot afford to pay. Ultimately, patient care suffers if providers face financial losses when their payments do not keep up with economy-wide prices.
• Higher materials and building prices, plus rising borrowing costs, have led to delayed capital investments. Shortages in building materials and steeply higher prices have also made capital projects more expensive.
• In the recent inflationary period, some countries took steps to reduce out-of-pocket spending on health care. However, non-health system policies to protect households, such as energy subsidies, seem to be more commonly put in place.
• European health systems should design strategies to respond to growth in economy-wide prices. The precise mechanisms are likely to be context specific, but should typically include: some reasonable compensation for providers to account for inflation-related costs, ringfencing investments in capital and workforce, financial protection for vulnerable populations from out-of-pocket spending on health care, and containing growth in parallel private care sectors.