OCPS, What role should private healthcare play?

36-40 billion euro of private financing compared to115 billion of public money: these are the official figures on healthcare consumption in Italy. But these numbers are skewed by the lack of a clear distinction between ‘public’ and ‘private’. Depending on how the two are defined, the perimeter of private healthcare consumption in this country can fluctuate anywhere from 27.5 to 49.5 billion euro.

Table 1 - Perimeters and estimated ranges for private healthcare expenditures in Italy 

All too often, the debate on healthcare available outside of the Italian National Health Service (NHS) ends up taking on ideological connotations. In fact, many see growth in the private sector simply as the other side of the coin of the failure of the public system.

But in actual fact, healthcare services that the market currently offers are becoming more and more extensive and diversified; at the same time, people’s healthcare needs are becoming more and more specific. These new types of offerings don’t substitute but rather complement public healthcare, which can’t provide these services directly. So the co-existence of public and private providers actually represents an overall expansion of the market.

Based on these assumptions, our fine-grained research into the dynamics of private healthcare can shine a light on the actual market trends, and the problems that the Italian health system will be facing in the coming years.

In Italy, private healthcare consumption is a structural phenomenon; the higher a person’s income, the greater this consumption. This is the first finding of a study by the Observatory on Privately Financed Healthcare Consumption (OCPS) at SDA Bocconi School of Management. Corroborating the complementary relationship between public and private, the highest per capita private financing is found in the regions with the highest average income, which is also where the public healthcare system works the best, like in Val d’Aosta and Lombardy.

Figure 1 - Public healthcare expenditure vs total healthcare expenditure

The type of purchases people make in the context of private consumption is vastly diversified. In fact, healthcare products represent 34.6% of total private expenditures (pharmaceuticals, etc) and hospital services tally 13.6%. But it’s outpatient treatment that takes over half of the pie (51.6%), with dentists getting the biggest slice (8.5 billion euro worth of private money). The study also showed that different product types are linked to different spending profiles: while spending for the dentist mimics the dynamic of luxury goods, the pattern for purchasing medicines is comparable to buying basic necessities.

As far as the boundary line between public and private healthcare expenditures, the share that Italians pay by themselves, or ‘out of pocket,’ is especially high for medical equipment (74% of the total), pharmaceuticals (38%), outpatient care (39%) and long-term care (LTC) (34%). On the other hand, nearly all ordinary hospitalizations and day hospital treatments are covered by the NHS (96% and 92% respectively).

Figure 2 - Expenditure breakdown by product/service and payment method

One peculiar aspect has to do with methods for financing healthcare consumption. In Italy, around 85% to 90% of the cost of private healthcare comes directly out of pocket. In contrast, intermediate financing represents a much smaller portion (covered by voluntary insurance policies), estimated at 10% to 15% of private healthcare spending. This is lower than what we find in other countries such as France (where 83% of the population is covered by supplementary health insurance) or Spain (where 25% have private insurance).

In any case, the number of Italians who enjoy integrative health coverage is on the rise, mainly thanks to group health insurance plans. In fact, from 2010 to 2017 the number more than doubled, from 6 to 13 million people. A bigger pool of beneficiaries not only shores up the ‘multi-pillar’ nature of the NHS, boosting intermediate consumption; this trend could also have a positive impact on prices and the profitability of the healthcare market.

The data collected by the OCPS on healthcare consumption in Italy demonstrate the urgent need to reflect on the evolution of the Italian NHS, beyond the schematic contrast between public and private. This is particularly relevant to three areas which should be the focus of future study.

1. The functioning of the healthcare market, as far as safeguarding the consumer, setting minimum product/service standards, offering guarantees, and establishing a basic regulatory framework.
2. The integration among the various stakeholders and systems that serve to safeguard public health, to ensure a continuous flow of information, for example with regard to patients’ medical history.
3. The availability of accurate, shared data, not only on the market (number of health insurance policies and coverage offered, number of operators), but also on services provided by the government.