Variations in per capita health spending can be the result of differences in prices for healthcare goods and services, and in the quantity of care that individuals are using (“volume”). Breaking down health spending into these two components gives policy-makers a better understanding of what is driving the differences, and therefore guides them to what responses can be put in place to increase value for money.
Eurostat and the OECD have calculated purchasing power parities and price level indexes for GDP and some 50 product groups, including health and hospitals, on a regular and timely basis.
Whilst attention often focuses on how much is spent on health, the fact that health prices in Switzerland are three times that of Mexico means that looking at the dollar spend per head can be misleading.
To better understand the impact of volume and prices on health spending across countries, data expressed in national currencies are converted into a common currency using Purchasing Power Parities (PPP). PPPs are conversion rates that show the ratio of prices for a basket of goods in one currency to the same goods in another. When PPPs are used to convert expenditure to a common unit means, the results are valued at a uniform price level and the comparison of expenditures across countries reflects only the differences in the volume of goods and services consumed.
PPPs are calculated by first gathering price information for a representative basket of products and services and averaging them within groups. These product group prices are converted to price relativities, which are then weighted and averaged for each aggregation level (for example hospitals, healthcare, or GDP).
Hospital expenditure typically accounts for around a third of overall health spending in OECD countries and therefore weighs heavily in the overall health price level calculations. The OECD leads the work on collecting and analysing comparable and output-based prices for a representative sample of hospital services.
By end 2013, the output-based methodology has become an integral part of the Eurostat-OECD Purchasing Power Parity comparison, and health and hospital price levels are publicly available for all OECD countries.
Hospital price levels, 2017 (OECD average=100)
Note: (1) Based on different calculation methodology.
Source: OECD Health Statistics 2019.
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