Economic Survey of Norway 2005: The performance of the Norwegian health care sector

The following OECD assessment and recommendations summarise Chapter 4 of the  Economic Survey of Norway 2005 published on 8 August 2005.

What are the key issues in health care?

There is universal access to publicly-provided health care at all ages and for a very wide variety of treatments. It is not very surprising therefore, that public spending on health is high. But relative to mainland GDP, spending is also high compared with similar countries, especially after large salary increases were granted to many health-care professionals in 2002.

Per capita health expenditure and per capita GDP
In USD PPP, 2002 (1)  

1. 2001 for Australia and Japan; 2000 for Turkey.
Source: OECD Health Data, 2004.

This is the case despite a series of wide-ranging reforms designed to make greater use of market mechanisms instituted in recent years, a purchase system for patented drugs that results in low prices for them, and a system for encouraging use of generics where available. The reforms have succeeded in eliminating shortages, raising efficiency and improving citizen satisfaction. Nevertheless, spending accelerated after the reforms.  Centralisation of hospital ownership may have increased political influence, encouraging spending that cannot be justified on cost-benefit grounds. Although hospitals in principle must repay debts incurred by them in the short-term, there are no adequate sanction mechanisms to force them to do so. Co-payments by patients are modest, and the background of swelling oil wealth may have sapped willingness to control costs. Diagnosis related groups (DRG) procedures are arguably too well-remunerated in some areas, leading to supply-driven interventions, while their absence in others (e.g. psychiatry) may have resulted in sub-optimal supply. Generalist doctors have a gatekeeper role, but are said to over-refer patients to hospitals.

Controlling costs in health care can be time-consuming, entailing studies and cost-benefit analyses to establish the suitability of new drugs and treatments, and the efficacy of existing ones.  In principle, though, such mechanisms exist in Norway, but they are too often sidestepped by pressure by citizens on politicians to approve new drugs and treatments. Even if it is not always possible to resist such pressures, the normal certification procedures should be followed subsequently.  In a related area, the recent political decision to raise the proportion of DRG finance to 60%, instead of lowering it, was an expensive one that should be reconsidered soon.  In this context, greater reliance on regularly updated international benchmarking should be considered. Spending overshoots by hospitals should be only partially reimbursed, and the possibility to replace the management of hospitals in chronic deficit should be used more actively. Market forces to rein in spending would arguably be more effective if they acted more intensively at the interface between the patient and the health service supplier. Co-payments are comparatively low, blunting the incentive of patients to demand cheaper treatments, even if the incentives to suppliers to give them are in place. It would therefore be desirable to gradually introduce co-payments where they do not already exist (e.g. hotel-type services in hospitals) and raise them where they already exist. As in many other countries, exceptions can be made for those on low incomes or the chronically sick.

Hospital efficiency 1992-2003
1992 = 100

Source: SINTEF Health Research.

Municipal expenditure for primary care per inhabitant
by size of municipalities
Share of total expenditure

Source: Statistics Norway, Primary physician service, municipal expenses, 2002.

Return to the Economic Survey of Norway 2005 homepage

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A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.

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