Health spending during Covid-19: how does the UK compare?

Sarah Reed, Laura Schlepper and John Appleby analyse how health spending has changed across different countries in response to the pandemic, and assess why the UK may have spent more comparatively.

Blog post

Published: 02/11/2021

Across the globe, Covid-19 has had a significant impact on health care spending – sparking debate on how much countries should spend on health, and what’s needed to recover from the economic and health shocks of the crisis.

While the degree of the recovery challenge will vary across different countries, no health system has been spared by the pandemic. In this blog we look elsewhere to understand how health spending has changed across other nations in response to the crisis, and the questions this raises about how the UK compares.

Government spending on health care increased more in the UK during the pandemic than in many other advanced economies

In many countries, governments increased health care spending in response to the pandemic, although there is wide variation.

In the UK, government health spending per head of population grew by 21.9% in 2020 compared to 2019 – second only to Estonia (23.5%) among European OECD countries reporting data. However, in Germany and Sweden spending only increased by 3.9%, and in Norway expenditure stayed relatively flat (0.3%).

But despite having lower increases, even last year these countries still spent more overall on health as a share of their GDP and per head. While the UK government spent $4,306 per capita in 2020 (up from $3,533 in 2019), historic and current investment of the highest spending countries ranged from over $4,000 in 2014 (Germany, Sweden and Norway) to $5,800 in 2020 (Germany and Norway).

Changes in health spending per head of population by country 02/11/2021

Chart

Note:  

Health expenditure are based on per capita current government/compulsory health spending (all functions) in USD, adjusted to take account of the different purchasing power of the national currencies. Expenditure on health measures the final consumption of health care goods and services for residents, including medical services and goods, public health and prevention, and administration and financing. Covid-19 emergency budgets are included in the 2020 data where these are spent directly on treating and preventing Covid-19 (such as PPE, test and trace programmes, and reimbursement to hospitals for keeping treatment capacity available or postponing elective activities). Vaccines purchased but not yet administered in 2020 are not counted in total spend. Growth rates are presented in nominal terms, unadjusted for inflation. The UK’s relative position doesn’t change even when we account for total health expenditure, which includes voluntary and out-of-pocket spend.

Source:  

Nuffield Trust analysis of OECD health expenditure data for European OECD countries where 2020 data is available.

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So what might explain the UK’s large spending increase during the pandemic? Does it reflect the variable experience of the crisis across countries, or were some better prepared to deal with the impact of Covid? Here we explore a few factors that could explain the variation across countries, and why the UK may have spent more comparatively.

The first important thing to note is that not all OECD countries have reported their 2020 spend yet, and figures for those that have are provisional. And for some countries, such as Norway, spend doesn’t fully account for its test and trace infrastructure. Similarly, Germany’s accounts only include Covid-related expenditure, so won’t yet fully include spend on routine health services in the first year of the pandemic. (Although Germany, like many countries, deferred or cancelled routine and elective care in the early waves of the pandemic, so spending on non-Covid health care is unlikely to be above what it would be in a typical year.)

There are also important contextual differences in each country’s experience of the pandemic that would influence the levels of health spending by governments.

Countries had different testing and tracing capabilities going into the pandemic, for instance, and developed different containment strategies to curb transmission. We know that a large proportion of the UK’s additional spend in the early phases of the pandemic went towards the Test and Trace programme, whereas Germany entered with stronger public health infrastructure and made greater use of local laboratories, so may not have had to make the same level of investment to build capacity.

Similarly, health systems had varying levels of stocks of personal protective equipment with which to respond to the crisis, so the volume purchased and the prices obtained will have affected health budgets differently.

Countries have also experienced different rates of Covid transmission, and waves of outbreaks will have hit at different times. That the UK had higher rates of Covid hospitalisations in the first year of the pandemic than most other countries analysed here will also partly account for differences in extra spending in 2020 (see the chart for the full list of European OECD countries who reported data).

The UK government had to increase spending as a matter of genuine urgency – a positive action reflecting the government’s ability to rapidly redirect resources to respond to the crisis, and a core component of health system resiliency.

The increase in UK spending may, however, also reflect the UK’s structural vulnerabilities going into the pandemic.

For example, during the first wave the UK experienced high rates of Covid infections acquired in hospital partly due to the lack of testing capacity, outdated building design, and high levels of bed occupancy that made it difficult to isolate Covid patients. This is in part a product of consistently low levels of investment in health care capital as a proportion of GDP, which meant less flexibility in the earlier waves of the pandemic to cope with rising Covid cases.

Countries that have spent a larger share of their economic wealth on health over time – like Austria, Germany, Sweden, Norway and the Netherlands – appeared to have more stable levels of funding in 2020. The inverse is true for countries with relatively lower levels of government health spending, such as Estonia, Slovenia, Poland and Ireland.

Lessons for recovery?   

The complexities and contextual factors associated with the pandemic, particular policy responses and health system differences make it difficult to draw definitive conclusions about the variation in spending increases in 2020. But as we seek to learn lessons from Covid, the question of whether greater investments in health care in non-crisis times may have reduced the level of emergency funding needed to respond effectively to the pandemic warrants important reflection.

With the pandemic continuing, the total picture of how health spending will change across different countries remains to be seen.

The Spending Review announced a real increase in capital spending for the English NHS of just over £1 billion (around 3.6% a year) by 2024/25 to increase capacity. Virtually all the increase will be in 2022/23, however, with near-flat real funding in the two years to 2024/25. While this funding may go some way in modernising infrastructure and clearing maintenance backlogs that have accumulated over years of underinvestment, its effectiveness will also depend on further investment in staff and public health capacity.

Our analysis makes clear that health systems will be entering recovery from different starting positions, and the levels of funding needed and options available to rebuild from the pandemic will vary as a result. Our forthcoming work will explore this issue head on, and seek to understand the scale of the recovery challenge in different countries, and the lessons we might learn as health systems work through common challenges.

Suggested citation

Reed S, Schlepper L and Appleby J (2021) “Health spending during Covid-19: how does the UK compare?”, Nuffield Trust comment.

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