Ask almost anyone how to fix a struggling health system and the answer arrives before you have finished the question. More funding. More doctors, more beds, more budget. It is the one prescription that unites every political party in Europe, which is itself a reason to be suspicious of it.
Because the spending is not, on the whole, the problem. The OECD average is now over 9% of GDP on health, roughly three quarters of it public money. Budgets have climbed for years. And still the queues persist, the waiting-time guarantees go unmet, and patients wait months for a referral they will eventually attend in person, carrying their own paperwork between the rooms.
If more money were the cure, the best-funded systems would be the calmest. They are not.
A fifth of the money is already lost
Here is the figure that should reframe the entire conversation.
Up to one fifth of all health spending across the OECD makes little or no contribution to anyone's health, and could be redirected to better use.
OECD, Tackling Wasteful Spending on Health (2017)
Read that slowly. Not one fifth of the next increase. One fifth of the whole. In a sector spending more than 9% of GDP, that is an enormous pool of money already collected, already spent, and already producing nothing.
Where the fifth goes
The OECD is unusually specific about where that money leaks away. Broadly, into four places:
- Low-value clinical care that delivers no benefit: tests that change no decision, procedures that improve no outcome.
- Preventable harm. Around one in ten patients is harmed during the course of their own treatment. The OECD now estimates that treating the consequences of avoidable safety lapses costs roughly USD 606 billion a year, close to 9% of all health spending, more than the entire annual health budget of Japan.
- Administrative cost that adds nothing a patient would ever notice or value.
- Fraud and error, which the OECD puts at more than 6% of health expenditure.
But a large and very fixable share of the waste is something simpler than any of these. It is patients being treated in the wrong, most expensive setting.
The wrong setting is the expensive one
This is the heart of it, and it is worth being precise.
Think of a man with type-2 diabetes whose condition is never quite managed. The appointments are hard to get, the advice comes in fragments, the early warning signs go unwatched. One night a foot infection turns serious and he is admitted as an emergency. That admission is costly, largely avoidable, and entirely typical. None of the money that treats him was missing from the system. It simply arrived years too late, in the most expensive room in the building.
Multiply him across a continent and you get the numbers.
- Hospitalisations for conditions like diabetes, asthma, COPD and heart failure, all largely avoidable with strong primary care, account for 5.8% of all hospital bed-days. In 2016 they cost USD 21.1 billion across 30 OECD countries.
- A sizable share of emergency admissions, in the OECD's own words, could have been handled in primary care or managed by patients themselves with the right support.
And much of the waste begins long before anyone reaches a hospital. Estimates of inappropriate antibiotic prescribing in primary care run anywhere from 45% to 90% of prescriptions. A quarter of patients with chronic conditions in the EU received none of the recommended preventive tests in the past year. These are the cheap early steps that get skipped, and later return as the expensive late ones.
A hospital bed is the most expensive room in healthcare. We are filling a meaningful share of them with people who should never have needed one.
Capacity is not the binding constraint
The instinct to add capacity runs straight into the OECD's own conclusion: primary care has not, on the whole, succeeded in keeping people out of hospital, and the remedy it recommends is not simply more of everything. It is doing things differently, through better coordination between providers and better use of resources and incentives.
Sweden, from last week, makes the point uncomfortably. It has among the highest densities of doctors in Europe and still cannot meet a waiting-time guarantee it has held on the books since 2010. The clinicians are there. The routing is not. Pour more doctors into a system that cannot direct them to the patients who need them, and mostly what you raise is the cost base.
Capacity is an input. Resolved cases are the output. Most systems measure and fund the first while quietly failing at the second.
What this does to the business case
If a fifth of the money is already wasted, and the largest avoidable slice of that is misrouting, then the economics of reform turn upside down.
A continuous-care layer, the one this series has been building toward, is usually pitched as something you pay extra for. The numbers say the opposite. Its entire job is to put patients in the right setting at the right time and close the case before it escalates into the expensive ward. That is not new spending. It is recovered spending.
Put plainly:
- The money to fund coordination is already inside the system, sitting in avoidable admissions and preventable harm.
- Every case resolved in primary care instead of an emergency ward is a saving, not a cost.
- The resolved-case metric from Part 2 is also the financial metric. Closed cases are cheaper than open ones left to drift.
This is why the honest case for continuous care is not "spend more to care better." It is "stop paying for the consequences of misrouting, and use a fraction of what you recover to do the routing properly."
The question for the budget holder
So the next time a health system asks for a bigger budget, there is a prior question worth pressing first.
Before we add money, how much of what we already spend is paying for patients being in the wrong place?
If the OECD is even roughly right, the answer is: enough to fund the fix several times over. The shortage is real in places, and Part 1 did not pretend otherwise. But it is not the first problem. The first problem is that we keep buying more capacity to feed a system that loses a fifth of everything we give it.
Next week, the final piece. Who should own this layer, who should pay for it, and how to build it without quietly recreating the two-tier system that started this whole conversation.
Sources
- OECD (2017), Tackling Wasteful Spending on Health, OECD Publishing, Paris. doi.org/10.1787/9789264266414-en. On the one-fifth of spending that is wasteful, the one-in-ten patients harmed, fraud and error above 6%, and emergency admissions treatable in primary care.
- OECD (2020), Realising the Potential of Primary Health Care, OECD Publishing, Paris. doi.org/10.1787/a92adee4-en. On avoidable hospitalisations (5.8% of bed-days, USD 21.1 billion across 30 countries in 2016), inappropriate antibiotic prescribing, and missed preventive care.
- OECD (2022), The Economics of Patient Safety, OECD Health Working Paper No. 145, OECD Publishing, Paris. On the roughly USD 606 billion annual cost of treating avoidable harm. one.oecd.org.
- European Observatory on Health Systems and Policies (2023), Health Systems and Policy Monitor: Sweden. eurohealthobservatory.who.int. On the statutory waiting-time guarantee that has never been met.
Part 3 of a four-part series. Part 2 covered why coordination fails. Part 4 covers ownership, funding and the risk of a two-tier system.
