Title Towards a German Health Satellite Account*)
Date November 2009
Client Ministry of Economics and Technology
Authors Markus Schneider, Thomas Krauss, Uwe Hofmann

German economists have been compiling national health accounts since 1975. However, the System of Health Accounts (SHA) has never been completely integrated with the System of National Accounts. On November 16 2009 the German Ministry of Economics and Technology presented the first pilot "German Health Satellite Account" (GHSA) to the public. This new satellite account raises some important questions:

Which new indicators are available from GHSA?
What is the difference between GHSA and SHA?
What are the results of this new approach?
How can GHSA inform policy makers?

Which new indicators are available from GHSA?

The need to balance increasing need for health care and scarce public resources will always confront health policy makers. Many instruments have been developed to assess benefits and costs of medical technologies at the micro-level. However, the macroeconomic tools are rather limited. The SHA has now been implemented in many countries and has a different focus. SHA describes the provision, functions and financing of health care consumed in a country according to an internationally agreed set of rules. Who pays what for which purpose and who is providing it? From a politico-economic point of view additional questions arise:

  • What is the production and the value added of the health industry?
  • What are the intermediate commodities provided by health industries?
  • Which interdependencies occur with the rest of the economy?
  • What is the extent of imports and exports in the health industry?
  • What is the productivity of the health industry?

While health policy essentially aims to improve population health through health care interventions, economic policy is partly concerned with the contribution of health industries to economic growth, full employment, price stability and the balance of foreign trade. Hence it must address the need to set basic regulations in different health-markets to ensure long-term economic growth.

German health care industry according to SHA and GHSA in billions of € at basic prices, 2005

What is the difference between GHSA and SHA?

GHSA and SHA complement each other. They overlap in consumption but treat other elements differently. GHSA describes the entire value chain of health commodities and their supply and demand. SHA aims primarily to describe final consumption including expenditure on individual diseases. While GHSA comprises the income generated by the production of healthcare products, SHA describes the expenditure of households and all third-party payers.

In contrast to SHA, the GHSA is fully integrated into the System of National Accounts (SNA). Hence the implications of the goods and fiscal operations of the healthcare industry for the overall economy can be made transparent. In order to combine the different statistical approaches to create a coherent and consistent analytical tool, established statistical methods should be used, including the input-output table. The linkages between supply and demand will be delineated both within the healthcare industry and with the rest of the economy. In addition the multiple contractual relationships between private and social insurance will be highlighted. The secondary healthcare market as well as the producers of intermediate commodities are included.

What are the results of this new approach?

Total supply (domestic production and imports) in the healthcare industry is by definition higher than the consumption of health goods, namely those covered by SHA. According to calculations for the year 2005, total supply is about 30% higher than the domestic consumption of health goods. What explains the large difference? First, part of the total supply of health products is used for intermediate consumption, part is exported, and finally part of this supply contributes to changes in stock or is invested.

A remarkable feature of GHSA is the distinction between the first and the second health commodity market, and also the calculation of gross value added. Overall, the health industry generates approximately 10.2% of gross value, of which 7.8% is obtained in the core area and 2.3% in the expanded boundary of the healthcare industry. The healthcare industry also made a trade surplus of € 7.7 billion in 2005. The core area generated € 10.0 billion from pharmaceutical and medical engineering products, while the expanded area holds a trade deficit of € 2.4 billion, in particular because of high imports of organic food.

The health industry is science- and labour-intensive, employing large numbers of staff and spending heavily on research and development. Within health industries as defined in GHSA, almost one in seven workers (13.7%) worked in the health industry, one in ten (10.4%) in the core and one in thirty (3.3%) in the extended health industry.

How can GHSA inform policy makers?

Economic policy:
The development of human capital and productivity is the primary objective of any growth policy. However, monetary links with the overall economy and internationally also underpin the importance of the health industry. It contributes in many ways to growth and employment.

Health policy:
Cost control is often viewed from the perspective of achieving cost savings for public funds. It is necessary to pay more attention to the efficiency of services, but also to look at the macroeconomic context. The many interconnections and wide variety of organizational structures within health care providers, are making health care reforms increasingly complex. A Health Satellite Account is a valuable analytical tool for both informing and evaluating these reforms.

A short summary of the study (in German) can be downloaded from the German Ministry of Economics and Technology. The English version is available here.

*) The study was carried out together with Klaus-Dirk Henke (Technical University Berlin) under the project leadership of Karsten Neumann (Roland Berger Strategy Consultants) in co-operation with the Federal Statistical Office.