OREANDA-NEWS. Fitch Ratings-Barcelona/London-28June 2015: Healthcare expenditure accounts roughly for 40%, or EUR60.9bn of regional expenditure in Spain. Fitch Ratings' Special Report "Spanish Autonomous Communities: Healthcare an Expenditure Risk" analyses the rigidity of this expenditure and the risks posed to the autonomous communities budgetary performance.

Under the current institutional framework, Spain's autonomous communities are entrusted with the provision of healthcare services but have limited control over the extent of the services they have to provide, resulting in spending that is inelastic and hard to control. Together with their limited revenue flexibility, this compromises their ability to address the healthcare sector deficit, while their collective solvency is safeguarded by liquidity support from the central government.

The next Funding System for the autonomous communities has not been finalised, though the revision of the current system was envisaged for 2016. Current financial imbalances derived from healthcare responsibilities need to be addressed in the definition of the regional funding scheme in Fitch Ratings' view.

There is a disparity in how healthcare expenditure is accounted for internationally, as different services such as social care, pharmacy and out-/ in-patient services can fall under this term. In Spain, the System of Health Accounts (SHA), developed by the Organisation for Economic Co-operation and Development (OECD), accounts for this expenditure, and more than 90% is the responsibility of the regional governments, the autonomous communities.

Public healthcare is free of charge in Spain, and a dual system of private and public providers exists. Spending on private healthcare was EUR26.5bn in 2013. Over 2010-2013, a time of overall reduction in public spending, private expenditure on healthcare across Spain's regions grew by as much as 6.5%.

Over the same period, while household income fell by 8.8% in the context of an economic downturn, household absolute and average spending on healthcare grew, despite the public healthcare system being universal and free of charge to users in Spain.

The nature of healthcare spending makes it inelastic and causes it to lag economic performance. Thus, while total revenues of the 15 autonomous communities under the common regime fell by 17.1% over 2009-2013, their healthcare expenditure fell by only 11.5%. During 2004-2013, regional healthcare expenditure growth outpaced growth in public-sector GDP, at 38.9% and 19.7%, respectively.