Health spending may have to slow as economy stalls

By Ben Hirschler

LONDON (Reuters) - Spending on healthcare may have to slow as Western economies stall, bringing to an end a period in which expenditure has far outstripped growth in GDP, a leading health policy expert said on Friday.

Between 1990 and 2005, health spending in the industrialized world rose in real terms almost twice as fast as gross domestic product (GDP), at 4.5 percent compared with 2.5 percent.

Nick Bosanquet, a professor of health policy at Imperial College, London, believes this is unsustainable in an era of lower growth.

Capping healthcare spending at around the current level of 8-9 percent of GDP -- the typical rate for most developed countries apart from the United States -- would force healthcare providers to use their existing vast resources more efficiently, he wrote in the British Medical Journal.

"There will be no incentive to invest in a new kind of health service while the easy option of continued growth in high spending in the old one remains," he said.

An aging population, new technologies and better drugs have all combined to push up the cost of medical care around the world.

The result has been runaway healthcare bills for governments and insurers, who are now pushing back by demanding better deals from suppliers of products and services.

Today's market is characterized by intense competition in large areas of conventional medicine, which is hitting drug industry profits, although those firms specializing in biotech treatments for cancer and other complex diseases are still able to command sky-high prices.