## _wp0713 ## Source details **Canonical URL:** [_wp0713](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp0713.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp0713.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp0713.pdf.json) --- ### Preface — purpose and scope - Economic policymakers often measure success solely by economic growth, overlooking how macroeconomic policy is influenced by and influences the social sectors—education, health, and income security. - Structural adjustment policies have had a profound impact on the social sectors and social development in Low-Income Countries. - In industrial countries, developments in health and pension areas create fiscal pressures with implications for the macroeconomic policy framework. - The primer aims to bridge the divide between macroeconomic policy and health policy by acquainting macroeconomists with fundamental facts about the economics of health care and major health issues confronting countries. - It suggests broad parameters for evaluating a country's health policy and health system performance. ### A. The need for macroeconomists to engage health - Health connects to macro policy through: - Fiscal targets constraining government spending on health. - Tax policy on tobacco, alcohol, and firearms influencing demand and health outcomes. - Exchange rates affecting costs of vaccines and drugs. - Macroeconomists influencing government vs. private roles in health, thereby affecting cost inflation, efficiency, quality, and equity. - Research evidence noted: investments in health can affect economic development (Fogel, 2004; Bloom and Canning, 2000; Bloom, Canning, and Sevilla, 2004). - HIV/AIDS and aging/technology pressures alter growth prospects and fiscal sustainability across country groups. ### B. Unique characteristics and market failures in health - Characteristics: - Good health is intrinsically valued; equity and equal access rest on ethical fairness. - Illness likelihood is uncertain; households face small probabilities of major illness with high cost. - Insurance improves welfare but produces moral hazard and reduces economic efficiency. - Serious market failures: - Information asymmetry → supply-side/professional dominance and provider-induced demand. - Insurance market failures → adverse selection, risk-pooling shortfalls, and exclusion of poor/less healthy. - Result: catastrophic illness can cause poverty; studies show for several LICs, 20-30 percent of households have had to borrow or sell assets each year to pay medical expenses. ### C. Cross-cutting challenges and country-specific issues - Global pressures: - Health spending per capita has risen faster than GDP per capita in many countries. - Concern that rising government health spending (OECD, 2006) will crowd out other public goods. - Aging populations increase illness and health expenses; few countries have coherent fiscal strategies for aging-related fiscal problems. - Middle-Income Countries face a “double disease burden” (communicable diseases among the poor; chronic diseases among middle/upper groups). - LICs with large HIV/AIDS burdens receive rising donor assistance but face absorptive capacity constraints and human resource shortages; vertical donor programs can weaken infrastructure and sustainability. - Examples and projections: - OECD projections: for Korea and Mexico, health and long-term care spending projected to rise from 3.3 percent of GDP in 2005 to 11.9 percent by 2050 absent cost containment (and still 9 percent with policies). - Empirical concentration patterns: approximately 20-25 percent of total health expenditure in any year is spent on 1 percent of the population; approximately 50 percent on 5 percent of the population. ### D. General findings and policy actions (principles) - Three objectives for health resources: - (i) an optimal level of health status distributed equitably; - (ii) an adequate degree of risk protection for all; - (iii) the highest possible level of public satisfaction for the entire population. - Key policy lessons: - One size does not fit all; policy must reflect socioeconomic development, epidemiology, resources, human resources, and institutions. - Governments should create institutions to finance and pool risk; market remedies alone are insufficient. - Minimum government responsibilities: - finance and provide public and merit goods (health education, immunizations, maternal and child health); - target and subsidize primary care and hospital services for the poor; - establish national or regional health risk-pooling for formal sector workers and families; - establish regulations to remedy market failures and monitor market performance; - educate the public to be informed consumers. - Implementing responsibilities may require increasing the health budget, building institutional capabilities, and strengthening human resources. - Because publicly financed benefits often favor higher-income households, governments should shift allocations to target subsidies to the poor. - International organizations should promote affordable technologies and international public goods (e.g., vaccines for malaria and HIV/AIDS). ### E. Road map for readers - Primer purpose: provide macroeconomists essential information to understand health economics and identify policies improving equity, efficiency, health status, reducing poverty, and enhancing stability. - Reading guidance (selected): - Basic understanding of health care systems: pages 12-27, 37-43. - Health policy issues in low-income countries: pages 31-36, 45-57 (54-57 guideposts). - Middle-income countries: pages 30-31, 52-68 (55-56, 66-68 guideposts). - High-income countries: pages 27-30, 69-74 (71-74 guideposts). - Transition economies: pages 74-83. - IMF macroeconomists’ role: pages 83-86. --- ### Why macroeconomists must understand health issues (conceptual pathways) - Determinants of population health status include: - 1. Population age structure - 2. Epidemiological profile - 3. Demographic characteristics (e.g., fertility rate, life expectancy) - 4. Economic affluence - 5. Health-related behavior (nutrition, tobacco, alcohol, drugs) - Health status outcomes affect: - health status, incidence of illness, likelihood of catastrophic illness. - Health system/policy influences: - 1. Health policies (preventive, pharmaceutical regulations); - 2. Availability of medical care; - 3. Quality of medical care. - Two-way interactions: - Health influences labor market and savings variables that affect the macroeconomy. - Health financing and organization directly affect macro variables (fiscal balance, inflation, wages, current account). - Macroeconomic conditions (income level/distribution) influence capacity to deliver health care. ### Macroeconomic channels (selected) - Technology and price indices: new medical technologies and drugs create budgetary pressures and may feed into the consumer price index. - Baumol effect: limited productivity growth in labor-intensive medical sector leads to relative price increases. - Fiscal and competitiveness pressures: rising health spending can raise tax or insurance rates, employer compensation costs, copayments, and pressure product prices. - Financing mix effects: balance of out-of-pocket, social insurance, and public provision affects tax levels, saving rates, and vulnerability to health shocks. - Household saving behavior: expectations of higher medical costs can increase precautionary savings or reliance on mandated savings (example: Medisave in Singapore). - Labor and donor spillovers: donor-funded programs can push public-sector wage pressures and affect retention. - Sovereign risk: perceived fiscal unsustainability from aging/health costs can raise sovereign risk premia and borrowing costs. - Current account: health-related imports/exports (drugs, medical tourism, medical personnel) affect foreign exchange. --- ### Facts and myths about health care and markets (highlights) - Trade-offs and market failures: - Equity vs. efficiency trade-off; price should not be primary rationing for basic care. - Market failures pervasive: information asymmetry, moral hazard, adverse selection, provider-induced demand, patent barriers. - Concentration of expenditure (U.S. 2002 contingency table, Yu and Ezzati-Rice, 2005): - 1 percent of population → 22 percent of total health care expenditure - 5 percent → 49 percent - 10 percent → 64 percent - 50 percent → 97 percent - Elasticities: - Price elasticity of demand for medical services (Newhouse, 1977): about 0.2. - LIC elasticity range: 0.1 to 0.4; among poor families elasticity could exceed 1.0. - Induced-demand elasticity often larger than price elasticity; US government used 0.5; LIC stylized facts suggest near 1.0. - Age-related spending (US example): - Ages 65-74 spend three times more than ages 18-64; ages 75-84 spend four times more. - Five most costly U.S. conditions (2002, Olin and Rhoades, 2005): - Heart disease — 70.0 (Billions of Dollars) — 8.3 percent of Total Health Expenditure - Trauma — 55.8 — 6.9 percent - Cancer — 48.4 — 6.0 percent - Mental disorder — 47.5 — 5.9 percent - Pulmonary conditions — 45.3 — 5.6 percent - Total (these five) — 267.0 — 32.7 percent - Myths debunked (selected): - Social insurance always restricts choice — counterexamples: Canada and Germany. - Health expenditure inflation cannot be managed — counter: most advanced economies (except US) managed inflation since mid-1970s using budget constraints. - Government financing inevitably leads to underfunding and long waits — counter: most advanced economies balance supply/demand; UK and Canada notable historical exceptions. - All preventive care is cost-effective — counter: not universally; some preventive programs lack cost-effectiveness. --- ### Health policy challenges by country group - Cross-cutting: - Per capita health costs rising faster than per capita GDP. - Rationing mechanisms (queues, waiting times, travel distance, quality) create political pressure. - Policy levers: global budgets, mandated savings, incentives for cost-reducing tech, payment reforms, cost-effectiveness evaluation, long-term prevention budgets. - Advanced economies: - Aging and PAYG financing → rising tax burdens and lower national saving. - Chronic disease and long-term care (dementia, Alzheimer’s) require integrated services and financing. - Lifestyle-driven costs (obesity) raise long-term spending. - Support ratio concept: ratio of population aged 15-64 to population aged 65+ used to assess demographic pressure. - Middle-Income Countries (MICs): - Double disease burden → need to transform preventive and curative delivery. - Rising demand for universal/basic coverage; social health insurance politically viable. - Public facilities underfunded → private sector expansion and inequity. - Accelerated aging (e.g., China) due to policies like one-child policy. - Low-Income Countries (LICs): - Progress toward MDGs insufficient: to meet MDG under-five mortality target requires 4.3 percent annual reductions; maternal mortality requires 5.4 percent annual reductions. - Current pace example: 2.4 percent a year compared with the 5.4 percent annual reduction required (maternal mortality). - In sub-Saharan Africa, no country appears on track for under-five or maternal mortality MDGs. - Macroeconomic impact of HIV/AIDS: selected study results report GDP growth rate reductions ranging from 0.3-4% per year across various countries and scenarios (table of studies provided). - CMH estimate: basic preventive and curative services minimum ≈ $30 per capita; most LIC governments spend $6-10 per capita annually. - Human resources shortage: Joint Learning Initiative (2004) estimated sub-Saharan Africa short ≈ 1 million health workers. - Fragile states (LICUS) show much worse indicators (example table with MDG-related indicators). --- ### Conceptual framework: means, ends, and control knobs - Ends (final goals): Health Status; Financial Risk Protection; Public Satisfaction — each with average level and equity dimension. - Means (structural elements): Financing; Organization; Payment; Regulation; Persuasion. - Control knobs for policy: - Equity: - Financing method determines who bears cost and access distribution. - Rationing by price disadvantages the poor; rationing by waiting time disadvantages the rich. - Efficiency: - Allocative efficiency depends on who controls finances and incentives. - Technical efficiency depends on organization and provider incentives; government-financed directly managed hospitals often relatively inefficient. - Regulations (e.g., on generics) affect technical efficiency. - Consumer satisfaction: - Determined by technical and personal quality and price paid. - Influenced by organization, incentives, professional ethics, peer review, and payment systems. - Managing expenditure inflation: - Hard budget constraints, global budgets, and single payment channels effective in many advanced economies. - Multiple insurance plans require coordination (global budget, single payment) to avoid cost escalation. --- ### Stages of health system development (classification and financing shares) - Country stages by per capita GNI (2004 World Bank Atlas): - Stage I: below $826 - Stage II: $826 - $3,255 - Stage III: $3,256 - $10,065 - Stage IV: above $10,065 - Typical financing mixes by stage (Table 7 summary; percentage ranges as reported): - General revenue and donor aid: Stage I: 50-60%; Stage II: 40-50%; Stage III: 20-40%. - Social insurance coverage: Stage I: 10-20% (civil servants/formal sector only); Stage II: 30-60%; Stage III: larger shares. - Private insurance: Stage I: little; Stage II: 5-10%; Stage III: 15-40%; Stage IV: managed care/supplementary. - Self-pay (out-of-pocket): Stage I: 35-45%; Stage II: 20-40%; Stage III: 15-25%; Stage IV: 15-25%. --- ### Generic models of financing and organization (cost-effectiveness contrasts) - Government-oriented model (e.g., Bangladesh, India, Kenya, Nigeria, Sri Lanka) - Government funds and operates multi-tier public network; facilities underfunded and poorly managed; physicians supplement incomes via private practice; regulation weak. - Market-oriented model (e.g., Indonesia, Morocco, Philippines) - Government develops social insurance for formal sector, promotes private insurance and hospitals; private plans serve affluent; dual practice and balance-billing common; regulation used to promote private sector. - Central-planning model (e.g., pre-1985 China, Cuba, Vietnam) - Emphasis on public health, community primary care, centrally controlled vertical public health programs; private practice restricted; relatively better outcomes per GDP share in many cases. - Comparative performance (selected low-income examples, Table 9 data preserved): - Sri Lanka (central-planning model example): Per Capita GNI 1,010; Per Capita GDP (2004 PPP $US) 4,173; Total health expenditure (2003) 3.5; Government (2003) 1.6; Life expectancy 74.4; Infant mortality rate 12.0; Under-age-five mortality rate 14.1; Risk Protection: H. - Bangladesh (government-oriented): Per Capita GNI 440; Per Capita GDP 1,875; Total (2003) 3.4; Government 1.1; Life expectancy 63.5; Infant mortality 56.4; Under-age-five mortality 77.0; Risk Protection: M. - China (central-planning transition): Per Capita GNI 1,290; Per Capita GDP 5,495; Total (2003) 5.6; Government 2.0; Life expectancy 71.4; Infant mortality 26.0; Under-age-five mortality 31.0; Risk Protection: L. - Broad finding: central-planning model often outperforms government- and market-oriented models in cost-effectiveness (lower GDP share, better outcomes). --- ### Transition economies: impacts and reforms - Transition fiscal shock: government revenue as percent of GDP fell sharply (example China: 33 percent of GDP in 1980 → 14 percent in 1996). - Reforms introduced: - User fees, compulsory social insurance, legalization of private practice, encouragement of foreign investment. - Consequences: - Oversupply legacy (beds, staff) and soft budgets produced inefficiency. - Fee-for-service and weak regulation led to rapid expenditure inflation and potential insurance bankruptcies (examples: Czech Republic, Hungary). - Private practice and under-the-table payments increased inequity and corruption risks. - Social insurance implementation timing (reported): - Hungary — 1990 - Czech Republic — 1992 - Poland — 1997* (legislation 1997, effective 1999) - Vietnam — 1997* (legislation 1997, effective 1999) - China — 2000** (social insurance established 1953; expanded coverage in 1997) --- ### Guideposts for macroeconomists: practical actions and priorities - Short-run IMF role and actionable steps (selected): - Action/Step #1: Ensure availability and collection of crucial health information. - Encourage compilation of national health accounts (NHA) annually and reporting on health (and education) outcomes of the poor. - Use Rapid Field Assessment instruments to collect outcome data. - Action/Step #2: Warn policymakers of health market failures and their macro implications. - Action/Step #3: Promote rational health policies recognizing equity-efficiency trade-offs and combining regulation with market mechanisms. - Recommend taxes on tobacco, alcohol, and firearms as both preventive measures and fiscal tools. - Refer other policy specifics to World Bank and WHO strategies. - For middle-income, transition, and advanced economies, macroeconomists should: - Understand how health organization influences macro variables. - Push for transparency (NHA) to identify who bears costs and receives benefits. - Compare spending and results across countries. - Encourage ministries of finance to clarify drivers of health spending. - Understand broad cost-control approaches while avoiding prescriptive technical solutions outside macro expertise. - Knowledge gaps and evidence needs: - Large information gap in most non-OECD countries (lack of regular NHA, poor data on private market operations, catastrophic household spending, consumer satisfaction). - Need for comparative effectiveness and cost evidence to guide technology and coverage decisions; proposal for a commonly financed agency to analyze comparative effectiveness and cost. --- ### Practical guideposts and quick assessment pointers - Data to request when assessing a country: - A copy of the National Health Accounts (NHA). - Statistics on infant mortality rate and health expenditure inflation rate for the past 15 years. - A 25-year projection of national or social insurance program costs as a percent of GDP. - Quick assessment approach: - Compare input indicators (health spending, facilities, human resources) and output indicators (health status, risk-protection, equity, efficiency) with a best-performing and a median-performing country (benchmarks: Sri Lanka, Belize, Canada referenced in source). - Assess access and use by bottom vs upper quartile income groups and rural vs urban populations. - Review outcome data on quality; examine physician density and specialist/family physician mix relative to expenditure and quality outcomes. --- *Source: _wp0713 — PREFACE and selected chapters and excerpts from the IMF working paper (content unit as supplied).* ### Preface................................................................................................................. ### _wp0713 - Preface................................................................................................................. ### Content overview - Preface........................................................................................................................................4 - I. Introduction and Guide ...........................................................................................................5 - A. The Need for a Guide for Macroeconomists.............................................................5 - B. Unique Characteristics of Health and Health Systems..............................................6 - C. Challenges and Issues................................................................................................7 - D. General Findings and Policy Actions........................................................................8 - E. Road Map to the Primer ..........................................................................................10 - II. Why Macroeconomists Must Understand Health Issues.....................................................12 - III. Facts and Myths about Health Care and Health Sector .....................................................17 - A. Basic Facts about the Health Sector........................................................................17 - B. Myths about Health Care Systems ..........................................................................21 - C. Basic Health Economics: Health Markets and Market Failures .............................23 - IV. Health Policy Challenges and Issues Confronting Nations ...............................................25 - A. Major Issues Confronting All Nations ....................................................................25 - B. Challenges Facing Advanced Economies ...............................................................27 - C. Challenges Facing Middle-Income Countries.........................................................30 - D. Challenges Facing Low-Income Countries.............................................................31 - V. A Conceptual Framework for Classifying Health Systems ................................................35 - A. Ends: Objectives .....................................................................................................36 - B. Means: Structural Elements ....................................................................................37 - C. Control Knobs for Policy ........................................................................................40 - VI. Stages of Health System Development and Their Performance........................................42 - A. Characterizing Different Stages of Health System Development...........................42 - B. Stages I and II: Low-Income and Lower-Middle-Income Countries ......................43 - C. Stage III: Upper-Middle-Income Countries (per capita GDP Incomes of $5,001-12,000, on 1997 PPP basis) ....................................................................60 - D. Stage IV: Advanced Economies ............................................................................67 - E. Transition Economies ..............................................................................................74 - VII. What Role Can Macroeconomists Play? ..........................................................................83 - A. Low-Income Countries ...........................................................................................83 - B. Middle-Income, Transition, and Advanced Economies..........................................85 - References................................................................................................................................87 ### Tables listed in the Preface - 1. United States: Contingency Table of Health Care Expenditure, 2002 ................................18 - 2. United States: Health Expenditure for the five Most Costly Conditions, 2002...................20 - 3. Selected Countries: Projected Shares of Elderly and the Support Ratio, 2000-2050 ..........28 - 4. Summary of Studies of the Macroeconomic Impact of HIV/AIDS in Africa .....................33 - 5. Progress on MDGs in Fragile States Compared to Other Poor Countries, 2000 .................35 - 6. The Objectives of a Health System......................................................................................36 - 7. Health Care Financing and Service Provision, by Stage of Economic Development .........43 - 8. Economic Development Stage I. Three-Tier Health Care System ......................................49 - 9. Selected Low-Income Countries: Health Expenditure and Results by Model ....................55 - 10. Low-Income Countries: Comparison of Health Care System Performance ......................57 - 11. Input and Output Indicators of a Best-Performing Low-Income Country: Sri Lanka .......58 - 12. Input and Output Indicators of a Median-Performing Low-Income Country: Belize .......59 - 13. Upper-Middle-Income Countries: Health Care Expenditure and Results by Model .........63 - 14. Upper-Middle-Income Countries: Comparison of Performance by Model .......................64 - 15. Input and Output Indicators of Two Best-Performing Upper-Middle-Income Countries .66 - 16. Input and Output Indicators of a Median-Performing Upper-Middle-Income Country: Colombia.............................................................................................................67 - 17. High-Income Countries: Health Expenditure and Results by Model ................................72 - 18. Comparison of Performance: Advanced Economies .........................................................73 - 19. Input and Output Indicators of Best-Performing Countries among Advanced Economies: Canada............................................................................................................75 - 20. Selected Transition Countries: Social Insurance Arrangements........................................79 - 21. Middle-Income Transition Economies: A Summary of Common Health Sector Problems, Reform Measures, and Consequences ..............................................................81 ### Figures listed in the Preface - 1. A Road Map for Reading the Primer ...................................................................................11 - 2. United States: Average Health Care Expenditure by Age Group, 1999..............................20 - 3. Selected Countries: Total Health Care Expenditure, 1960-2003 (percent of GDP) ............22 - 4. United States: Concentration of Health Care Expenditure over Time.................................29 - 5. Selected Countries: Comparison of Actual National Health Expenditure and Government Statistics on Health Expenditure .....................................................................45 - 6. Government Revenue as a Fraction of GDP, by Average per Capita Income Level...........46 - 7. Selected Transition Countries: Government Revenue, as Percent of GDP .........................74 - 8. Selected Transition Countries: Number of Physicians (per 100,000 inhabitants) ...............77 - 9. Selected Transition Countries: Number of Hospital Beds (per 10,000 inhabitants)............77 ### Box and Charts listed - Box 1. Sri Lanka: A Country with Exceptional Performance .........................................................56 - Chart 1. Channels through which Health may Influence Macro and Microeconomic Variables .......13 - Chart 2. Means, Intermediate, and Final Ends of a Health System ....................................................39 *Preface page and table of contents from the source PDF* ### PREFACE ### _wp0713 - PREFACE ### Preface — purpose and scope - Economic policymakers often measure success solely by economic growth, overlooking how macroeconomic policy is influenced by and influences the social sectors—education, health, and income security. - Structural adjustment policies have had a profound impact on the social sectors and social development in Low-Income Countries. - In industrial countries, developments in health and pension areas create fiscal pressures with implications for the macroeconomic policy framework. - The primer aims to bridge the divide between macroeconomic policy and health policy by acquainting macroeconomists with fundamental facts about the economics of health care and major health issues confronting countries. - It suggests broad parameters for evaluating a country's health policy and health system performance. ### A. The Need for a Guide for Macroeconomists - Health care has gained prominent recognition in development: the UN Millennium Development Goals (MDG) set 10 specific targets to be achieved by 2015, of which three explicitly pertain to health. - Research findings cited: investments in health can have a significant effect on economic development (Fogel, 2004; Bloom and Canning, 2000; Bloom, Canning, and Sevilla, 2004). - HIV/AIDS has undermined development prospects in several African countries and threatens growth momentum in several Asian economies. - For middle-income, transition, and industrial countries, pressures from the health sector—partly due to aging populations and rapid technological change—affect fiscal sustainability, inflation, and possibly the current account. - Macroeconomic policies affect health: public expenditure targets, inflation control, tax policy, and exchange rates influence provision of health care and health status (Glied and Remler, 2002). - Specific macro links noted: - Fiscal targets constrain government spending on health. - Tax policies on tobacco, alcohol, and firearms influence demand and health outcomes (Jha and Chaloupka, 1999). - Exchange rates affect costs of vaccines and drugs. - Macroeconomists influence choices about government vs. private roles in health, affecting cost inflation, efficiency, quality, and equity. ### B. Unique Characteristics of Health and Health Systems - Good health, broadly shared, is intrinsically valued; equity in health and equal access to health care are based on ethical notions of fairness. - Health care differs from other essential goods: likelihood of illness is uncertain; households face a small probability of major illness but would have difficulty affording treatment. - Insurance increases societal welfare (Arrow, 1963; Nyman, 2006) but causes moral hazard and reduces economic efficiency. - Serious market failures in the health sector: - Supply-side dominance and professional dominance due to information asymmetry between physicians and patients. - Medical profession can induce demand and set high prices, leading to rapid health cost inflation and deterioration in service quality. - Insurance market failures: adverse selection deters pooling; private insurers select healthy, leaving less healthy and poor uninsured, creating large fiscal burdens for government. - Cost of serious illness as a poverty cause in LICs: - Average cost of a hospitalization typically exceeds the annual median household income. - Studies find that for several LICs, 20-30 percent of households have had to borrow or sell assets each year to pay medical expenses (Russell, 1996; Sauerborn, Adams, and Hien, 1996; Liu, 1995; Gu and Tang, 1995). - Households need medical insurance or subsidized health services to prevent financial bankruptcy. ### C. Challenges and Issues - Key global challenges identified: - Health spending strains household and government budgets; health expenditure per capita has risen faster than GDP per capita in many countries. - Concern that rising government health spending (OECD, 2006) will crowd out other public goods and services. - Aging populations confront advanced economies and several emerging markets (China, Korea, Thailand, Singapore) with illness and health expenses increasing with age; few countries have coherent fiscal strategies to address aging-related fiscal problems. - Middle-Income Countries (MICs) face a “double disease burden”: communicable diseases affecting the poor and chronic diseases affecting middle- and upper-income groups, forcing reforms in financing and delivery and raising equity concerns (Reddy and others, 2005). - LICs challenged by HIV/AIDS receive rising donor assistance but face absorptive capacity constraints and severe human resource shortages: - Vertical disease programs have sometimes weakened infrastructure and drained human resources needed for common diseases. - Multiple donors with differing priorities and requirements create waste and confusion. - Sustainability of vertical programs is a concern as donors’ funds may not be stable or longlasting. - Footnote: The term “health expenditure inflation rate” refers to the real rate of increase in health expenditure per capita.2 ### D. General Findings and Policy Actions - Major lessons for policymakers and macroeconomists: - Good population health significantly contributes to human capital development and economic productivity; micro-studies and macro studies show health influences learning, labor force size, absenteeism, worker efficiency, and economic growth (Jackson, 1993; Kramer, Allen, and Gergen, 1995; Novello and others, 1992; Mushkin, 1962; Fogel, 2004; Bloom and Canning, 2000; World Bank, 2004). - Health resources should aim for three objectives: - (i) an optimal level of health status distributed equitably; - (ii) an adequate degree of risk protection for all; - (iii) the highest possible level of public satisfaction for the entire population. - Achieving these objectives requires trade-offs, especially between equity and efficiency. - One size does not fit all: nations differ by socioeconomic development, epidemiological patterns, resource capacity, knowledge base, human resources, and institutions. - Governments should establish institutions to finance health care and pool risk rather than rely only on the free market; the roles of market vs. government vary by function (financing vs. provision). - Regulatory remedies have not succeeded in fully correcting market failures in voluntary private insurance; government-managed "free" public health services often are inefficient and non-responsive. - Market mechanisms can improve efficiency and quality, but government must be responsible for equitable financing and distribution of essential health goods. At a minimum, government should: - (i) finance and provide public and merit goods (health education, immunizations, maternal and child health services); - (ii) target and subsidize primary care and hospital services for the poor; - (iii) establish national or regional health risk-pooling mechanisms for formal sector workers and their families; - (iv) establish regulations to remedy market failures and monitor market performance; - (v) educate the public to be informed consumers of health services. - Implementing these responsibilities may require increasing the health budget, building institutional capabilities, and strengthening human resources. - Because publicly financed health benefits in developing economies usually favor higher-income households, governments should shift resource allocations to target subsidies to the poor and those in greatest need. - Costly advanced-country technologies and infrastructure (e.g., sophisticated medical treatments, clean water and sanitation) are often unaffordable for LICs; affordable technologies are underexploited because they are not profitable for industrial country researchers or pharmaceutical firms. - International organizations should promote affordable technologies and support investment in international public goods, such as vaccines for malaria and HIV/AIDS. - Footnote: A useful collection of papers on many policy issues relating to health economics is covered in Musgrove (2004).3 ### E. Road Map to the Primer - Purpose: provide macroeconomists with essential information to understand the economics of the health sector and identify health policies that improve equity, efficiency, health status, reduce poverty, and enhance social and political stability. - The primer does not provide in-depth information but offers an extensive bibliography and highlights when macroeconomists should engage health sector specialists. - Subsequent chapters address six basic questions: - Chapter II: why it is critical for macroeconomists to understand health policy issues. - Chapter III: basic facts (and myths) macroeconomists should know about the health system and health care financing. - Chapter IV: common health policy challenges for all countries and challenges specific to countries at different development stages. - Chapter V: analytical framework to assess the health care system. *Source: _wp0713 - PREFACE* ### Chapter VI provides ideas on guideposts that can be used in considering health policy options ### _wp0713 - Chapter VI provides ideas on guideposts that can be used in considering health policy options ### Road map and reading guidance - Chapter VI is lengthy because health issues and their economic considerations vary significantly across countries; the chapter discusses health issues and policy separately for each stage of development. - Figure 1: A Road Map for Reading the Primer — navigational guidance (pages referenced in the source): - For a basic understanding of health care systems: Read pages 12-27, 37-43. - For health policy issues in low-income countries: Read pages 31-36, 45-57. Read pages 54-57 only if interested in guideposts. - For health policy issues in middle-income countries: Read pages 30-31, 52-68. Read pages 55-56, and 66-68 if interested in guideposts only. - For health policy issues in high-income countries: Read pages 27-30 and 69-74. Read pages 71-74 if interested in guideposts only. - For health policy issues in economies in transition: Read Pages 74-83. - For the role of IMF macroeconomists: Read pages 83-86 on what IMF macroeconomists can do. ### Why macroeconomists must understand health issues - Historical context and policy relevance: - Health care policy has not generally been seen as the domain of macroeconomists; recent attention followed the World Health Organization’s (WHO) Commission on Macroeconomics and Health (CMH, 2002). - The CMH report supported prominence of health goals (examples): reduced infant and maternal mortality rates; reduced prevalence rates for HIV/AIDS, malaria, and tuberculosis; and reinforced the Millennium Development Goals. - Core CMH argument: - Progress in improving health in LICs could be a critical factor influencing the growth potential of a country. - The CMH explored ways in which better health status could: - improve the quality of the labor force; - enhance productivity, both in the short and long run; - limit the extent to which catastrophic illnesses can lead to households falling into poverty; - raise household savings rates; - reduce fertility rates. - Footnote: "These points were principally developed by the report of Working Group I of the CMH." (footnote number 4 preserved) ### Broader arguments linking health and the macroeconomy - Scope: - Arguments apply not only to LICs but also to middle-income and advanced economies. - Principal focus: how issues of health influence the macroeconomy. - Causal pathways (shorthand graphical argument summarized in Chart 1): - Determinants of population health status: - 1. Population age structure - 2. Epidemiological profile - 3. Demographic characteristics (e.g., fertility rate, life expectancy) - 4. Economic affluence - 5. Health-related behavior (nutritional intake, tobacco, alcohol, drug consumption) - Health status outcomes: - Health status - Incidence of illness - Likelihood of catastrophic illness - Health system and policy influences on health status: - 1. Health policies (preventive, pharmaceutical regulations, etc.) - 2. Availability of medical care - 3. Quality of medical care - Two-way interactions: - The health status of a population influences microeconomic labor market and savings variables that can affect the macroeconomy. - How a society organizes and finances health policy can have a direct and independent impact on macroeconomic variables, with the extent of impact differing across countries depending on the size and relative importance of the health care sector. - The state of the macroeconomy — notably the level and distribution of income — influences the capacity of a government and the private sector to provide health care and implement health policies. ### Implications for macroeconomic analysis and policy engagement - Rationale for macroeconomists to include health in their agenda: - Understanding health determinants and health system organization is necessary to interpret macroeconomic performance and to design policies that account for health-related channels. - Chapter structure and pointers (to assist macroeconomists in focusing on relevant sections): - Use the provided road map (Figure 1) to steer to country-type–relevant sections. - Chapter VII (not excerpted here) offers concluding thoughts on specific advice macroeconomists can provide, given their normally peripheral role in health policy, to ensure macroeconomic policy issues are taken into account. *Source: _wp0713 - Chapter VI provides ideas on guideposts that can be used in considering health policy options (excerpt).* ### 4. Organization of medical care system ### 4. Organization of medical care system and its financing ### Macroeconomic channels through which health policies and organization affect the economy - Pressures for introduction of new medical technologies and drugs create budgetary pressures, and "the higher cost of such new products and procedures may ultimately be reflected in the consumer price index." - Demographic and disease-driven demand pressures: OECD (2006) projections — for Korea and Mexico, health and long-term care spending will rise from 3.3 percent of GDP in 2005 to 11.9 percent by 2050 in the absence of cost containment policies (and still as high as 9 percent of GDP even with the implementation of such policies). - The "Baumol effect": limited productivity growth in a labor-intensive medical sector leads to relative price increases as sectoral wages rise with national productivity growth while sectoral productivity lags. - Fiscal and competitiveness pressures: rising health spending may force higher tax or insurance rates (e.g., payroll tax rate), raise employer compensation costs, increase copayments, and put pressure on product prices and competitiveness. - Financing mix matters: the balance between out-of-pocket (OOP) financing, social health insurance (employee/employer/government copayment arrangements), and publicly financed provision affects tax levels, saving rates, and the potential for health shocks to push households into poverty. - Household saving behavior: prospects of higher medical costs can influence savings; evidence suggests the elderly in the United States may save more to finance catastrophic or long-term care; some countries rely on mandated savings (example cited: Medisave in Singapore). - Externality and labor market effects: donor-funded expansions (e.g., HIV/AIDS programs) can create pressures for higher public-sector wages to retain medical staff, spilling over to other public wages. - Capital market and sovereign risk implications: perceived fiscal unsustainability from aging and rising health costs can raise sovereign risk premia and borrowing costs. - Current account effects: health and pharmaceutical exports, medical tourism, and export of medical personnel can be sources of foreign exchange; the import-intensity of health sector spending may affect the current account. - Political economy dynamics: social health insurance can incentivize businesses to shift financing burdens to government. - Health status constraints on policy: high disability incidence among older workers may constrain governments' ability to raise formal retirement ages. ### Empirical observations and examples - Role of government vs private sector: market failures mean private-sector dominance does not necessarily constrain spending growth; households often deplete assets or incur debt to finance care. Example: "in China, less than 15 percent of national health expenditure is financed by tax revenue. Yet that has not prevented the real health expenditures rising by 15 percent annually, substantially in excess of GDP growth." - Macroeconomic relevance: the health sector can influence the fiscal balance; tax rates; wage rates and competitiveness; prices; interest rates; and the current account. - Distributional and intergenerational issues: benefits and financing burdens often fall on different population segments (e.g., retirees benefit while wage earners or taxpayers pay), raising normative and fiscal questions for macroeconomic policymakers. --- ### III. Facts and myths about health care and the health sector #### A. Basic facts - Trade-off between equity and efficiency: "basic health care and risk-protection have to be equitably distributed and price should not be used as the primary rationing tool. This implies a significant trade-off between equity and efficiency." - Resource allocation objectives: public and private financing must aim at (i) improving population health, (ii) protecting people from financial catastrophe, and (iii) meeting public expectations of service availability—these multiple objectives create difficult trade-offs. - Market failures are pervasive: asymmetry of information, imperfect agency relationships, barriers to entry, moral hazard, adverse selection, and risk-selection impair efficient operation across financing, provision, and pharmaceutical/device markets. - Supply-side drivers: evidence suggests supply-side factors (technology and induced demand) drive health cost inflation more than consumer demand. - Highly skewed distribution of health expenditure (typical pattern): "approximately 20-25 percent of a country's total health expenditure in any year is spent on one percent of the population, and approximately 50 percent of expenditure is spent on five percent of the population. For 20-25 percent of the population, there is no spending for health care in a given year." - United States contingency table (2002, all age groups) — Percent of Total Population vs Percent of Total Health Care Expenditure: - 1 -> 22 - 5 -> 49 - 10 -> 64 - 50 -> 97 - Source: Yu and Ezzati-Rice, 2005. - Demand elasticities and induced demand: - Price elasticity of demand for medical services (US Rand study): about 0.2 (Newhouse, 1977). - Elasticity range for LICs: 0.1 to 0.4 reported in some studies; for poor families elasticity could be greater than 1.0 (van der Gaag, 1991; Gertler and van der Gaag, 1990). - Elasticity of induced demand: US government used value 0.5 for planning; in LICs stylized facts suggest induced-demand elasticity near 1.0. - Conclusion: "the elasticity of induced demand is comparatively larger than the price elasticity of demand." - Age and per capita spending: "in the US, those between ages 65 and 74 typically spend three times more on health care than those aged 18-64. This ratio increases to four times for the group aged 75-84." - Concentration of conditions (US, 2002): Health Expenditure for Five Most Costly Conditions: - Heart disease — 70.0 (Billions of Dollars) — 8.3 percent of Total Health Expenditure - Trauma — 55.8 — 6.9 percent - Cancer — 48.4 — 6.0 percent - Mental disorder — 47.5 — 5.9 percent - Pulmonary conditions — 45.3 — 5.6 percent - Total (these five) — 267.0 — 32.7 percent - Source: Olin and Rhoades, 2005. #### B. Common myths debunked - Myth #1: "National or social insurance restricts patients' choice of providers; private insurance gives much greater choice." — Counter: Canadians under social insurance have total freedom to choose providers; Germans have greater freedom under social insurance than many Americans under private insurance. - Myth #2: "Health expenditure inflation cannot be managed because it is driven by the demand for services produced by new, cost-increasing technology." — Counter: most major advanced economies (except the United States) have managed health expenditure inflation since the mid-1970s by imposing effective budget constraints and breaking an endogenous link between technology and insurance; the US provides an "open" budget to the health sector. - Myth #3: "Government-financed health services inevitably become underfunded, resulting in shortages, inferior quality of services, and long waits." — Counter: while LICs and MICs may face underfunding, most advanced economies have balanced supply and demand; the UK and Canada are notable exceptions in having longer waits historically. - Myth #4: "All preventive care is cost-effective." — Counter: not always; some preventive programs (e.g., certain influenza vaccination for healthy working adults) may not be cost-effective; some preventive measures can produce serious side effects. - Myth #5 (implied): "All private providers are more efficient than public providers." — Counter: private insurance often has higher costs (marketing) and private provision can charge much higher prices for similar quality services (example: Singapore). #### C. Basic health economics: market failures summarized - Financing market: asymmetry of information leads to adverse selection; insurance creates moral hazard. - Provision markets: urgency and information asymmetry impede competition; provider-induced demand and monopolistic pricing power exist; licensing and barriers to entry constrain competition. - Pharmaceutical and device markets: patent protections and barriers to entry reduce competition, though intended to encourage R&D. - Government action: can correct some market failures but is also subject to political economy distortions (e.g., patronage employment, corruption, resource allocation biased toward affluent/urban groups, preference for curative hospital services over primary/preventive care). - Policy implication: the question is not market versus government, but the appropriate mix and harmonization given societal objectives; where both market and government failures are serious, second-best policy solutions are often necessary. --- ### IV. Health policy challenges and issues confronting nations #### A. Major cross-cutting issues - Universal problem: per capita health care costs rising faster than per capita GDP, increasing shares of government, employer, and household income devoted to health care. - Key policy questions: how to finance rising burden and how to contain pressures for expenditure growth. - Demand-side drivers: HIV/AIDS pandemic, heightened expectations, worldwide medical news and advertising, and diffusion of "American practice standards" via medical education and telemedicine. - Supply-side drivers: commercialization of medicine, profit incentives in biomedical research, patent protections and adoption of costly technologies by hospitals and physicians for reputation/profit. - Rationing and equity: price rationing is not appropriate for basic health needs; common rationing mechanisms include queues, waiting times, travel distance, quality differences, and availability—excessive rationing causes political backlash. - Dynamic adaptation: health systems must adjust to epidemiological, demographic, and technological change; policymakers face choices including: - (i) effective global budget constraints for the health sector; - (ii) mandating household savings to prefund future care; - (iii) public incentives for cost-reducing technologies; - (iv) altering payment systems to promote cost reduction; - (v) evaluating new technologies by cost-effectiveness; - (vi) establishing long-term budgets for prevention (e.g., HIV/AIDS). - Measures to influence expectations and demand: truth in advertising, government-funded social marketing, standard treatment protocols mindful of resource constraints, capping insurance benefits for "heroic"/experimental services, mandatory medical savings accounts (MSA) for long-term/catastrophic care, reverse mortgage and low-interest loans for catastrophic expenses. - Medical education reforms: develop medical standards adjusted to national economic status and publicize role models practicing appropriate medicine. #### B. Challenges for advanced economies - Aging population and PAYG financing: elderly dependency ratios projected to accelerate by 2010 for many advanced economies, with ratios tripling for many by 2030; population aging will increase tax burdens on working-age populations and affect labor market and national saving rates. - Chronic disease prevalence and long-term care: shifts toward chronic illnesses and functional disability (e.g., dementia, Alzheimer's) require integration of housing, social services, nursing home care, and medical services. - Changing expenditure concentration: recent trends suggest medical expenditure concentration on a tiny group has reduced; aging may therefore have a different effect on cost growth than previously thought. - Lifestyle-related costs: rising obesity and related chronic conditions (diabetes, hypertension, cardiovascular disease) can increase long-term health spending. - Table 3 (selected projected demographic figures, United Nations Population Division 2006): projected shares of population over age 60 and 80 years or older, and potential support ratios for selected countries/areas (multiple country-specific numerical projections listed in source). Note: "The support ratio is defined as the ratio of the population aged 15-64 to the population aged 65 and over." #### C. Challenges for middle-income countries (MICs) - Double disease burden: simultaneous prevalence of infectious diseases among poorer/rural groups and chronic diseases among urban/middle-income groups; requires transformation of preventive and curative delivery systems. - Demand for universal/basic coverage: rising demand from formal sector workers and middle class for more universal risk protection and reduced fragmentation of financing; social health insurance is often politically viable. - Public sector adequacy and private expansion: underfunded and bureaucratic public facilities lead to private for-profit providers meeting middle-class demand; dual practice by public physicians can reduce public service quality and exacerbate two-tier systems and inequity. - Accelerated aging (example: China): policies (e.g., one-child policy) create faster demographic transitions and earlier onset of aging-related financing and delivery challenges; need to plan for long-term care financing and delivery reform. #### D. Challenges for low-income countries (LICs) - Poor progress toward MDGs: example benchmark — to meet MDG of reducing under-five mortality would require mortality rates to fall on average by 4.3 percent per annum, compared with recent experience of annual reductions of 2.3 percent. (Source text ends mid-discussion of maternal mortality trends.) --- *Italic line: Source: IMF Working Paper — 4. Organization of medical care system and its financing (content unit as supplied).* ### 2.4 percent a year compared with the 5.4 percent annual reduction that would be required to ### _wp0713 - 2.4 percent a year compared with the 5.4 percent annual reduction that would be required to ### Progress toward MDG health targets and key constraints - The targets referenced: reducing under-five mortality and maternal mortality rates by 4.3 and 5.4 percent annually, respectively (equivalent to reducing under-five mortality by two-thirds between 1990-2015, and reducing maternal mortality by three-quarters between 1990-15). - Current assessed pace: 2.4 percent a year compared with the 5.4 percent annual reduction that would be required to achieve the MDG target. - In sub-Saharan Africa, no country appears on track to attain the MDG targets for under-five mortality or maternal mortality. - Common issues in low-income countries (LICs): - HIV/AIDS. - Inadequate fiscal space. - Limited human resources for health. ### Macroeconomic impact of HIV/AIDS (summary of studies) - Many LICs, particularly in Africa, have been particularly affected by HIV/AIDS with profound macroeconomic effects on labor supply, human capital, foreign investments and economic growth. - Vertical donor-funded disease programs (Global Fund, US initiatives) have increased funding for HIV/AIDS but have in many cases reduced the available fiscal space for other preventive and basic curative services. - Table 4: Summary of studies of the macroeconomic impact of HIV/AIDS in Africa — selected reported results (effects expressed as percentage-point differences from a “No AIDS” scenario): - Dixon, McDonald and Roberts (2001), 41 countries (1960-98), Late 1990s: GDP growth rates reduced by 2-4% a year; large variation across countries. - World Bank (2001b), Swaziland, Early 1990s: Average annual growth rate of GDP during 1991-2015 will be 1.3% lower; Average annual growth rate of GDP per capita during 1991-2015 will be 0.2% higher. - World Bank (2001a), Namibia, Early 1990s: Average annual growth rate of GDP in 1991-2015 will be 0.8% lower; Average annual growth rate of GDP per capita during 1999-2015 will be 0.1% higher. - World Bank (2000), Lesotho, Early 1990s: Average annual growth rate of GDP during 1999-2015 will be 1.4% lower; Average annual growth rate of GDP per capita during 1999-2015 will be 0.3% lower. - Bonnel (2000), About 50 countries (1990-1997), Mid 1990s: Rate of growth of GDP per capita in Africa reduced by 0.7% per year in the 1990s (1.2% for a country with HIV prevalence of 20%). - Quattek and Fourie (2000), South Africa, Mid 1990s: Average rate of GDP growth over next 15 years will be 0.3-0.4% lower per year. - Arndt and Lewis (2000), South Africa: Annual growth rate of GDP is lowered by about 0.5% in the late 1990s, rising to 2.5-2.6% during 2008-2010; GDP per capita will be 8% lower in 2010 than in the absence of AIDS; implies that AIDS lowers average annual growth rate of GDP per capita by 0.7% during 1997-2010. - Greener, Jefferis and Sifambe (2001), Botswana, Late 1990s: During 1996-2021, annual growth rate of GDP reduced by 1.1-2.1%, 1.5% in the scenario considered most likely; Little effect on per capita GDP: annual per capita GDP growth rate between 0.6% lower and 0.4% higher due to AIDS; 0.1% lower in the scenario considered most likely. - BIDPA (2000a), Botswana, Late 1990s: Average rate of growth of GDP in 2000-2010 reduced by 1.5% per year. - Bloom and Mahal (1995), 51 countries (1980-1992), Early 1990s: Statistically insignificant effect on income growth. - Cuddington and Hancock (1994), Malawi, Early 1990s: Average rate of growth of GDP in 1985-2010 reduced by up to 1.5% per year; Average growth of per capita GDP reduced by up to 0.3% per year (for ‘extreme’ assumption about future AIDS prevalence). - Cuddington (1993a, 1993b), United Republic of Tanzania, Early 1990s: Average annual rate of growth of GDP in 1985-2010 reduced by up to 1.1%; Average annual growth reduced by up to 0.5%. - Kambou, Devarajan and Over (1992), Cameroon: GDP growth rate over 1986-1991 reduced by 1.9% per year. - Over (1992), 30 sub-Saharan countries, Early 1990s: Average annual growth rate of GDP during 1990-2025 reduced by 0.9% on average (up to 1.5% in 10 worst affected countries); Average annual growth rate of GDP per capita reduced by 0.15% per year (up to 0.6% in 10 worst affected countries). - Sources cited for the table: UN Economic and Social Affairs Department, Population Division (2004). ### Fiscal constraints and need for external assistance - The CMH report estimated a minimum amount of spending required to provide basic preventive and curative services at around $30 per capita. - Most LICs spend far less than this estimate annually on health on a per capita basis; most governments annually spend only $6-10 per capita. - Potential domestic measures to create fiscal space for health include: - Rationalizing unproductive expenditure. - Commercializing some government services. - Raising the government revenue share to at least 15-18 percent of GDP. - Some additional borrowing. - Even with such measures, the amount of effective “fiscal space” for health is limited because of competition with other pressing priorities in other sectors. - Conclusion: To minimally provide basic health services, most LICs will need external assistance for some time, preferably through long-term sectoral budget support in the form of grants. ### Human resources for health shortages - Joint Learning Initiative (2004) suggested that sub-Saharan Africa is short approximately 1 million health workers (largely doctors, nurses, and midwives, but also including laboratory workers, pharmacists, and trained community health workers) to provide basic health services. - Constraints on human resources: - Limited capacity to train doctors and nurses. - Poor conditions of service: low salaries, poor opportunities for medical training, severe and risky working conditions (in part because of the AIDS epidemic), and difficult living conditions for rural postings. - Emigration of trained doctors to industrial countries or to externally-funded clinics in other LICs (working at higher than public service salaries in AIDS clinics). ### Fragile states (LICUS) and comparative deprivations - The World Bank identifies 34 “Low Income Countries Under Stress” (LICUS), representing 418 million people. - LICUS populations suffer poor health and failed health systems that often force households into impoverishment when struck by serious illness. - LICUS are about 25-35 percent worse off than low-income countries in terms of per capita income, per capita total expenditure on health, infant and maternal mortality rates, and the incidence of TB. - Table 5 excerpted indicators (2000) comparing Low Income Fragile States and other low and middle income states — values appear as reported: - Low Income Fragile States - Population871m4361m - MDG1: Number living on less than $1 a day343m821 m - MDG2: Primary education enrollment33%15% - MDG3 Primary education: female: male enrollment ratio0.840.92 - MDG4: Child mortality rate per 1,000 (2002)13856 - MDG5: Maternal mortality rate per 100,000 734270 - MDG6: # of people living with HIV/AIDS17.121.4 - Malaria death rate per 100,000907 - MDG7: Proportion of Population without access to safe water38%18% - MDG8: Telephone and cellphone subscriptions per 100 people4.518.8 - Source note: DFID (2005). ".." indicates that data are not available. DFID's definition of fragile status covers those "countries where the government cannot or will not deliver core functions to the majority of its people, including the poor." ### A conceptual framework for classifying health systems (macro and micro levels) - Macro-level objectives (ends) of a national health system: - Improve people’s health. - Prevent health-related impoverishment. - Gain public support and satisfaction. - Consider equity and efficiency; affordability is an important health system goal. - Objectives decomposed into dimensions: Health Status, Risk Protection, Consumer Satisfaction — each with average level and degree of equity in the distribution. - Trade-offs: - Inter-sectoral trade-offs: deciding total health spending versus spending on education, housing, environmental protection, research, defense. - Intra-sectoral trade-offs: e.g., improving average health status vs. achieving an equitable distribution of health; excluding coinsurance to advance equal access vs. imposing coinsurance to promote efficiency. - Historical and social values constrain feasible reform options (examples: egalitarian traditions in European health systems vs. libertarian traditions in the US). - Means: five major structural elements of health systems (causal elements to achieve objectives): 1. Financing and its institutional organization - Financing instruments: financing methods, allocation of funds, rationing, institutional arrangements for financing. - Five financing methods: national (social) health insurance (NHI), general revenue, private insurance, community financing, out-of-pocket payment. - Choice of financing method determines funds available, who bears the burden, and who controls allocation. - Allocation and governance considerations affect transaction costs, political influence, corruption risk. - Rationing mechanisms where services cannot be offered free or in sufficient quantity: price, waiting time, inferior quality. 2. Organization for delivery of health care - Organization affects provider management, efficiency, quality, and availability. - Four organizational choices: competition, ownership, decentralization, integration. - Trade-offs between publicly-funded government facilities and private providers; public facilities tend to be less efficient and less user friendly in international experience. - Market failures (cream-skimming, price gouging, demand inducement) in for-profit facilities require sound payment systems and regulation. 3. Payments or incentive structure - Payment methods and amounts establish incentives, affect cost, efficiency, and quality. - Payment methods include fee-for-service, salary, capitation, per admission adjusted for case-mix, etc. - Payment method influences provider behavior, hours worked, treatment choices, entry of qualified physicians, hospital organization, integration of services, and quality of care. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp0713.pdf* ### 4. Regulation ### 4. Regulation ### Regulation: purpose and challenges - Regulation refers to the government’s use of its coercive power to impose constraints on organizations and individuals. - Effective regulation requires good design and wording as well as the ability of a government to ensure enforcement. - Failures include poor establishment and execution of regulations and regulatory capture—when a regulatory agency promotes the interests of the regulated rather than the public interest. - In health systems, regulations are established for four major purposes: - (i) to provide safety protection to improve the health of the general population; - (ii) to set the rules of the game for transactions and exchanges in order to improve efficiency and quality of health services; - (iii) to enhance social equity by assuring that everyone has access to basic health care; and - (iv) to correct market failures in order to enhance efficiency and the quality of health care and insurance products. ### Persuasion: demand- and supply-side effects - The private sector and the government influence beliefs, expectations, lifestyles, and preferences through advertising, education, and information dissemination. - Private firms use advertising to inform and sell; governments use education and information (examples: anti-tobacco campaigns, nutrition and exercise campaigns in the US, Taiwan’s public education programs in health education, prevention and promotion). - Impacts of some government education programs “have not been systematically evaluated with evidence.” - Professional ethics is noted as a neglected area in Taiwan. - Persuasion impacts the supply side: professional ethics taught in medical schools instills balancing social benefits with self-interest. - The internet is a powerful means for persuasion—actively by governments and private sector, and passively as individuals learn about health risks and treatment possibilities. ### Means, intermediate outcomes, and final goals of a health system - Chart 2 (text summary) links structural elements (means) to outcomes (ends). - Means listed: Financing; Organization; Payment; Regulation; Persuasion. - Intermediate outcomes listed: Access; Quality; Efficiency. - Final goals listed: Health status; Financial risk protection; Public satisfaction. - The framework is used to analyze how introduction of an NHI system changes outcomes given characteristics of the five means. ### Control knobs for policy H3: Control knobs for equitable health care - Multiple determinants of population health exist beyond health care (education level of women, environmental pollution, sanitation); relative impacts remain unclear. - Equity in health care has four parts: equity in financing, equity in access to health care, equal level of health status, and equitable risk-protection. - Equity in access is largely determined by the financing method: - The financing method determines who bears cost and distribution among income groups. - The targeting of public funds through the budget determines who receives health benefits. - Insurance benefit design and risk pooling affect affordability of expensive services. - Rationing methods determine access: rationing by price disadvantages the poor; rationing by waiting time disadvantages the rich because their opportunity cost of time is generally higher. H3: Control knobs for efficiency (cost-effectiveness) - Two kinds of efficiency: allocative and technical. - Allocative efficiency: - Depends on who controls financial resources and their allocation power. - Balances cost effectiveness of improving risk-protection and the level of health status. - Affected by incentive structures (patient payments in money and time; physician payment mechanisms). - Technical efficiency: - Affected by organization of services and incentive structures facing providers. - Example: government-financed and directly managed hospitals shown to be relatively inefficient. - Influenced by regulations (example: regulations governing use of generic drugs). H3: Control knobs for consumer satisfaction - Consumer satisfaction depends on quality of service delivered (technical and personal) and price consumers pay. - Technical quality: - Largely affected by organization, regulation, and incentives. - Depends on education and training, professional ethics, community standards of practice, effectiveness of peer review, and payment incentives. - Self-regulation and external regulations have seldom worked adequately; external regulations can be legally complex and expensive. - A potentially effective approach: organize practitioners into practice groups with internal peer review and external accountability. - Personal quality (patient-assessed) affected by organizational structure, payment incentives, rationing methods (e.g., by waiting time), and choice of physicians. H3: Control knobs for managing health expenditure inflation - Per capita health expenditure has risen steadily, exceeding per capita GDP growth, putting pressure on government budgets and household incomes. - Over the past twenty-five years, most advanced economies (except the US and Switzerland) have found effective ways to manage health expenditure inflation. - Effective approaches when financing is through multiple insurance plans: - Establish a global budget covering all plans, with a single channel of payment to providers. - Finance health care with general revenue (health budget competes with other priorities in the political arena). - Advanced economies are addressing how to control expenditure inflation while balancing demand and supply and improving efficiency and quality. ### Stages of health system development and their performance H3: Overview - The chapter presents an analytical framework for macroeconomists to understand health systems across countries at different development stages. - Cluster analysis identifies three "distinct" groups of countries, distinguished for ease by per capita GDP (boundaries are artificial; distribution is continuous). - Table 8 (referenced) and further text summarize financing and service provision by stage. H3: Table 7 summary — Health Care Financing and Service Provision, by Stage of Economic Development - Table covers Stage I (Low income), Stage II (Lower middle income), Stage III (Upper middle income), Stage IV (High income). - Country classification by per capita GNI (2004, World Bank Atlas method): - Stage I: below $826 - Stage II: $826 - $3,255 - Stage III: $3,256 - $10,065 - Stage IV: Above $10,065 - Financing sources (percentage shares relate to proportion of population in each category of coverage): - General revenue and donor aid: - Stage I: 50-60% - Stage II: 40-50% - Stage III: 20-40% - Stage IV: (text notes) Countries with a high share of general revenue include National Health System (United Kingdom, New.Zealand.), Medisave and catastrophic insurance in Singapore - Social insurance: - Stage I: Only for civil servants and formal sector employees 10-20% - Stage II: 30-60% - (Additional notes: Direct provision: National Health Insurance (Canada & Australia); Indirect provision: Bismarkian (Germany, Japan)) - Private insurance: - Stage I: Little - Stage II: 5-10% - Stage III: 15-40% - Stage IV: Managed care plus Medicare (United States), or supplementary in many countries - Self pay: - Stage I: 35-45% - Stage II: 20-40% - Stage III: 15-25% - Stage IV: 15-25% H3: Stages I and II: Low-Income and Lower-Middle-Income Countries Stage classification examples: - Low income countries (per capita GDP below $826). The 59 countries in this group include inter alia, Bangladesh, Haiti, India, Kenya, Mali, Nigeria, Peru, Senegal, Tanzania, Vietnam, and Yemen. - Lower-middle income countries ($826-$3,255 per capita GDP). The 54 countries in this group include inter alia, China, Ecuador, Egypt, Indonesia, Morocco, Peru, Philippines, and Tunisia. 1. General description Disease patterns - For LICs, communicable and infectious diseases are prevalent and are the major cause of death. - Many lack access to clean water and latrines; high percentage of infants and children suffer malnutrition; many pregnant mothers are anemic. - High rate of infant mortality (ranging from 70 to 130 per 1,000 live births). - Low life expectancy (ranging from 45 to 65 years). - For LICs, the urban population begins an epidemiological transition; limited public resources must deal simultaneously with communicable and chronic diseases. Health spending, use of resources, and health outcomes - In LICs and lower MICs, the government finances a large portion of national health expenditure, but a significant share—often close to half—is paid directly by patients. - Government statistics on national health expenditure usually understate spending because they omit or underestimate private spending (Figure 5 referenced for comparison). - In general, Stage I countries allocate only a small portion of their government budgets (less than $2 per capita, on 1997 PPP basis) to public health and prevention. - Two-thirds or more of the public health budget is spent on hospital services. - The principal medical center (usually in the capital) receives half the total hospital budget. - Although most of the population lives in rural areas, most public health budget is spent on services used by the urban population. - Health outcomes vary greatly (example: India infant mortality 73 per 1,000 live births; Sri Lanka 17 per 1,000 live births; China 42 per 1,000 live births). Differences do not necessarily reflect level of health spending as percent of GDP. Government capacity and performance - In all Stage I countries, central government revenue (as a percent of GDP) is relatively low—typically below 15 percent. - Health issues usually have low priority, resulting in lack of national strategy for health development. - Governments often separate policies on medical education and pharmaceutical industry from health sector policies. - Health spending by ministries of education can be as large as ministries of health because the former fund and manage medical centers that provide clinical training. - Public health services are inefficient: excess capacity often found at lower-level facilities. - Quantitative and econometric studies of several LICs have found inefficiency to be between one-third and one-half of spending (Osei et al, 2005 and Zere et al., 2006). Supply and use of services - Donor-sponsored public health and disease prevention programs may be effective; other public health programs often underfunded and poorly managed. - For minor illnesses, populations rely on self-care and self-medication. - Rural primary care: health stations staffed with modestly trained practitioners or recent graduates often exist only on paper; those that exist offer poor quality, inadequate drug supplies, and inconvenient hours; many staffed by two practitioners seeing only three or four patients per day. - Patients often prefer indigenous practitioners and pay out-of-pocket; in urban areas, more than half of outpatient services come from the private sector. - For serious illnesses, affluent seek private hospitals when available; most use free or heavily subsidized government hospitals which act as de facto insurance but are rationed by waiting time and poor quality. - Physicians often hold two jobs—in a public hospital and private fee-for-service practice; many earn the majority of income from private practice and may self-refer affluent patients from public hospitals to private clinics. 2. A three-tier system in terms of access - Stage I governments accept responsibility for providing necessary health care but often do not allocate sufficient funds or deliver services effectively. - Donor-funded vertical programs (immunization, maternal and child health, family planning, malaria, TB, HIV/AIDS) create separate bureaucracies, clinics, and supply systems that may overlap and compete for limited trained staff and equipment; sustainability jeopardized when donor funding ends. - The financing and provision of health services effectively segmented into three tiers based on ability to pay: - First tier: Affluent households pay directly for private sector physicians and private hospitals for secondary inpatient services; affluent also use public teaching hospitals for tertiary services at very low fees; private sector preferred for drugs availability, shorter waiting times, choice of physicians, personal attention, and amenities. - Second tier: Middle-income households covered by limited pay-as-you-go social insurance (typically covers civil servants and workers in large enterprises); the plan contracts with public and private facilities charged on a fee-for-service basis; tertiary services contracted from medical centers; services rationed by waiting time and poor service quality. - Third tier: Poor and low-income households rely on public facilities (nearly free) but face long waits, absent physicians, inconvenient hours, dilapidated facilities, unavailable drugs, and unfriendly providers; many resort to self-care, self-medication, or indigenous practitioners; household surveys find poor and low-income households spend a significant portion of their income on drugs and indigenous medicines. *Source: _wp0713 - 4. Regulation* ### 3. Generic models of health care financing and organization ### 3. Generic models of health care financing and organization ### Government-oriented model (e.g., Bangladesh, India, Kenya, Nigeria, and Sri Lanka) - Financing - Government focuses almost exclusively on financing and delivery of public health services. - Government takes a position of benign neglect toward social insurance or community financing; these forms are free to develop without government policy and support and are usually insignificant and underdeveloped. - Macro-organization - Government organizes, funds, and operates a network of health facilities at three levels: sub district, district, and provincial. - Health practitioners employed as civil servants are assigned to facilities; number and staffing based on "needs" criteria that ignore demand considerations. - Facilities at each level have assigned duties: preventive services, primary care, and hospital services; everyone has equal access. - Typical operational outcomes: - Government facilities are underfunded, poorly managed, and short on drugs and supplies. - Public health and preventive services are poorly managed. - At sub district level: supply of public health services usually far exceeds demand. - At district and provincial hospital levels: demand far exceeds supply; services overcrowded and rationed by waiting time, poor quality, and supply shortages. - Patients often must buy their own drugs and surgical supplies; services sometimes rationed by under-the-table payments. - Incentives - Underpaid physicians at district and provincial levels supplement incomes by establishing private practices and self-referring affluent patients. - More qualified physicians earn most income from private practice; high financial rewards lead to high absenteeism and other abuses. - Regulation - Government capacity to establish and enforce regulations is limited; laissez-faire policy toward private providers. - Private pharmacies dispense drugs without prescription; pharmacists' assistants advise patients. - Private insurance operates in a laissez-faire environment; few private insurance plans survive due to little safeguard against fraud and abuse by patients and providers. ### Market-oriented model (e.g., Indonesia, Morocco, the Philippines) - Financing - Government still finances a large share of health expenditure but plays a more active role in developing social and private insurance. - Government establishes compulsory social health insurance for formal sector employees and civil servants via legislation. - Government may use tax incentives to promote private insurance and subsidize private hospitals directly or via tariff policies on imports. - Private insurance companies usually charge high premiums affordable only by the affluent; only affluent and privately insured populations can afford private hospitals. - Macro-organization - State organizes, funds, and operates three-level network based on "needs criteria"; everyone has equal access to government-funded facilities. - Government facilities typically poorly managed and underfunded; pervasive imbalance between supply and demand persists. - Private insurance plans frequently establish own clinics, employ physicians, and contract with private hospitals—akin to staff-model HMOs (called prepaid medical plans in LICs) to avoid fraud and abuse; little competition between private and public hospitals because they serve different client groups. - Incentives - Underpaid public physicians hold two jobs. - Private insurance may pay general practitioners by capitation and establish fee schedules for specialists and hospitals. - Many private providers “balance bill,” charging patients amounts beyond insurance payments. - Regulation - Government uses regulations to promote private insurance and hospitals; example: Philippines allows private prepaid medical plans to form an informal cartel to set prices and inhibit new insurance products. ### Central-planning model (e.g., China before 1985, Cuba, Vietnam) - Emphasis and service delivery - Government emphasizes public health and disease prevention, promotes community initiatives, mobilizes resources at community level, deploys modestly trained practitioners for rural health education and primary care, and makes essential drugs available at modest cost. - Financing - Countries typically spend a smaller portion of GDP on health care yet deliver significantly better health outcomes. - Government directly finances only a small portion of national health expenditure but organizes social insurance for formal sector workers and community financing for rural primary care. - Public hospitals funded by payments from social insurance and community health funds, user fees, and government subsidies. - Macro-organization - Three-level delivery network: government subsidizes and manages two upper levels (district health centers and hospitals); local communities fund and manage the lowest level (primary care stations). - Government operates a centrally controlled vertical program for public health, disease prevention, and family planning; health education, immunization, and maternal and child health often quite effective. - Central drug distribution system assures availability of essential drugs for most people. - Private practice, private hospitals, pharmacies, and insurance plans are prohibited (private practice allowed only for retired physicians). - Typical operational outcomes: - Demand exceeds supply for hospital services; tertiary hospitals extremely crowded. - At health centers and primary care stations, supply exceeds demand and facilities frequently idle. - Incentives - All government physicians and health practitioners are salaried with lifetime job guarantees; promotions based on seniority. - Resulting service quality often poor; long waiting lists for senior specialists. - Under-the-table payments and private practices forbidden, so political power and personal connections are used to bypass queues. ### Differences between LICs and lower MICs - Key structural differences - Size of the affluent population. - Share of population employed in the formal sector. - Ability and capacity to manage social insurance efficiently. - Development effects - Growing affluent population affects allocative efficiency and equity, especially in market-oriented countries (e.g., Philippines, Morocco, Indonesia). - Affluent and powerful populations, concentrated in capitals, demand modern medical services from public hospitals and government-funded new medical centers (heart institutes, transplant centers, oncology centers). - Global market for new medical technologies strains treasuries, reducing public funding for the poor and public health services and decreasing quality of services. - Private market for primary and secondary services expands to meet demand of affluent and middle-income households; more public sector physicians establish private clinics and laboratories charging high fees. - Affluent households demand insurance coverage; market-oriented countries often offer tax incentives for private insurance; large corporations begin providing self-administered health insurance. - Growing formal sector employment offers opportunity to expand social insurance (embryonic Bismarckian systems in Latin America); social insurance plans may develop direct provision of services (insurance-run hospitals and clinics), creating a new tier and political interest group. ### Comparison of performance - Broad finding - In terms of cost-effectiveness, the central-planning model clearly outperforms the government-oriented and market-oriented models. - Central-planning countries spent less of their GDP on health care but achieved better health outcomes and risk-protection. - Selected Low-Income Countries: Health Expenditure and Results by Model (selected data from Table 9) - Government-oriented model - Bangladesh - Per Capita GNI (2004 WB Atlas method): 440 - Per Capita GDP (2004 PPP $US): 1,875 - Total (2003): 3.4 - Government (2003): 1.1 - Life expectancy: 63.5 - Infant mortality rate (per 1,000): 56.4 - Under-age-five mortality rate (per 1,000): 77.0 - Risk Protection: M - India - Per Capita GNI (2004 WB Atlas method): 620 - Per Capita GDP (2004 PPP $US): 3,115 - Total (2003): 4.8 - Government (2003): 1.2 - Life expectancy: 63.5 - Infant mortality rate (per 1,000): 61.6 - Under-age-five mortality rate (per 1,000): 85.2 - Risk Protection: M - Kenya - Per Capita GNI (2004 WB Atlas method): 460 - Per Capita GDP (2004 PPP $US): 1,063 - Total (2003): 4.3 - Government (2003): 1.7 - Life expectancy: 48.4 - Infant mortality rate (per 1,000): 78.5 - Under-age-five mortality rate (per 1,000): 119.5 - Risk Protection: L - Nigeria - Per Capita GNI (2004 WB Atlas method): 390 - Per Capita GDP (2004 PPP $US): 1,113 - Total (2003): 5.0 - Government (2003): 1.3 - Life expectancy: 43.7 - Infant mortality rate (per 1,000): 101.4 - Under-age-five mortality rate (per 1,000): 196.6 - Risk Protection: L - Sri Lanka - Per Capita GNI (2004 WB Atlas method): 1,010 - Per Capita GDP (2004 PPP $US): 4,173 - Total (2003): 3.5 - Government (2003): 1.6 - Life expectancy: 74.4 - Infant mortality rate (per 1,000): 12.0 - Under-age-five mortality rate (per 1,000): 14.1 - Risk Protection: H - Market-oriented model - Indonesia - Per Capita GNI (2004 WB Atlas method): 1,140 - Per Capita GDP (2004 PPP $US): 3,583 - Total (2003): 3.1 - Government (2003): 1.1 - Life expectancy: 67.4 - Infant mortality rate (per 1,000): 29.6 - Under-age-five mortality rate (per 1,000): 38.4 - Risk Protection: L - Philippines - Per Capita GNI (2004 WB Atlas method): 1,170 - Per Capita GDP (2004 PPP $US): 4,558 - Total (2003): 3.2 - Government (2003): 1.4 - Life expectancy: 70.8 - Infant mortality rate (per 1,000): 26.0 - Under-age-five mortality rate (per 1,000): 34.4 - Risk Protection: M - Central-planning model - China - Per Capita GNI (2004 WB Atlas method): 1,290 - Per Capita GDP (2004 PPP $US): 5,495 - Total (2003): 5.6 - Government (2003): 2.0 - Life expectancy: 71.4 - Infant mortality rate (per 1,000): 26.0 - Under-age-five mortality rate (per 1,000): 31.0 - Risk Protection: L - Vietnam - Per Capita GNI (2004 WB Atlas method): 550 - Per Capita GDP (2004 PPP $US): 2,704 - Total (2003): 5.4 - Government (2003): 1.5 - Life expectancy: 70.3 - Infant mortality rate (per 1,000): 17.4 - Under-age-five mortality rate (per 1,000): 23.2 - Risk Protection: M - Source note from table: Source: World Bank 2006. Note: L, M, and H denote low, medium, and high, respectively. ### Guideposts for macroeconomists - General guidance - Macro economists should rely on guidance from the World Bank and WHO in appraising health system performance and support policy advice from these institutions. - The Disease Control Priorities Project (Jamison et al, 2006) is a useful resource for intrasectoral policy choices and cost-effectiveness of interventions. - Performance assessment approach - Compare a country’s input and output indicators with those of a best-performing country and a median-performing country. - Input indicators: health care spending, available facilities, human resources. - Output indicators: level of health status, risk-protection, equity and efficiency. - Table 12 gives a benchmark country for Sri Lanka as a “best” performing country and Table 13 gives a benchmark for Belize as a “median” performing country (tables referenced in source). - Broad policy recommendations - Formulate a rational and coherent overall health sector policy to rationalize resource allocation and coordinate health-related programs across ministries. - Establish a cabinet-level committee, chaired by the deputy prime minister, to review and monitor health policy implementation. - Formulate a list of essential drugs to enable bulk purchases via international bidding and establish an organized, nationwide distribution system. - Avoid a fee-for-service payment system for social and private insurance because it increases health care cost inflationary pressures. - Be cautious about accepting donor assistance for tertiary hospitals because operations and maintenance costs can absorb a significant portion of a country’s health budget; carefully assess costs and benefits before accepting such assistance. - Avoid situations where a ministry of health and/or social insurance plan funds and manages its own facilities because ministries can become “captured” by ministry-employed practitioners, resulting in their interests dominating those of patients. *Source: _wp0713 - 3. Generic models of health care financing and organization* ### Box 1. Sri Lanka: A Country with Exceptional Performance ### Box 1. Sri Lanka: A Country with Exceptional Performance ### Exceptional outcomes and comparative context - Among the Stage I countries, other countries in this category had infant mortality rates of 61-114 per 1,000 live births in 1996, while Sri Lanka had a rate of 17 per 1,000 and a life expectancy of 73 years, and spent only $2 per capita (on a 1996 PPP basis) for health care. - These accomplishments are highlighted as "enviable" relative to Stage I peers. ### Key factors behind Sri Lanka’s performance - Professional culture of health care practitioners: - Health practitioners "place professional commitments first, self-interest second." - Despite low pay and poor working conditions, they are dedicated to their public health duties. - "Most experienced public sector physicians have private practices on the outside and earn most of their income from these, they still work their full shift for the public facilities and perform their duties faithfully." They do so voluntarily, without tight management. - Well-organized village-level system: - Staffed by midwives who provide effective health education and basic primary care for mothers and children. ### Elementary policy strategies recommended - Introduce or increase excise taxes on tobacco. - Avoid across-the-board cuts in health programs; if cuts are necessary, make them in tertiary and university hospitals, which are less cost-effective and do not offer risk-protection to low- and middle-income households. - Develop a coherent health financing plan that includes: - developing social insurance to fund tertiary and hospital services for the urban population; - shifting current government funds in order to subsidize the urban poor and rural populations; - developing community-level financing for rural residents; - targeting hospital subsidies to ward services; - charging user fees for A-class services, based on their full cost plus a profit margin; - using the profits of such a system to cross-subsidize ward services. *Source: Box 1. Sri Lanka: A Country with Exceptional Performance (excerpt).* ### 1. General description ### 1. General description ### Overview - Advanced economies seek to contain health expenditure inflation while achieving health care objectives through varying financing, organization, payment systems, and regulation. Five generic models have survived. - Three common objectives (except in the US): - Equal access and universal coverage — achieved in all advanced economies other than the US. - Cost-containment — a priority; health expenditure is consuming an increasing share of national income. - Efficient and high-quality health care — reforms emphasize market processes, competition, contracting, incentives, and regulation. ### Cost-containment mechanisms observed - By the early 1980s, Canada and most western European countries established global budgets and a single source of payment for providers. - Rationing mechanisms include: price, limited choice of providers, increased waiting time, and influencing physician practice patterns toward conservatism. --- ### Generic models (descriptions and key features) - National health service model (e.g., the UK) - Government funds health care primarily out of general tax revenues; budget apportioned to regions by a need formula. - Total health expenditure managed through the political process. - Primary care readily available; less cost-effective procedures rationed by waiting time. - 13 percent of the population purchases private insurance to bypass queues. - 1989 reform introduced an internal market; subsequent refinements aim to make it more effective. - National health insurance model (e.g., Canada) - Universal free medical services (dental and outpatient drugs excluded). - Federal and provincial joint funding; program administered by provinces. - Provincial plans must meet federal standards: universal, comprehensive, portable, and include “all medically needed services.” - Patients choice of providers; referral via general practitioner to specialists. - Physicians paid fee-for-service; expenditure inflation managed with global budgets for hospitals and physicians’ services. - Provincial medical associations set physicians’ fees through internal bargaining to satisfy global budget caps; provinces keep practice profiles and associations monitor/discipline physicians. - Social insurance model (e.g., Germany) - “Social solidarity”: mandatory sickness fund enrollment for workers below a specified earnings level ($45,000, in l996). - Premiums set as a percent of wages; a uniform basic benefit package with co-payments. - Until July 1, l998: global hospital budgets and regional global budgets for physician services and pharmaceuticals managed inflation via negotiations between sickness fund associations and medical associations. - July 1998 changes: regional budgets for physician services replaced by a fixed fee schedule and service volume targets; regional pharmaceutical budgets replaced by practice-specific soft targets. - Uncertainty about the long-term inflation-management effect of the 1998 changes; many experts expect a return to global budgeting. - Voluntary health insurance model (e.g., US) - Emphasis on individual freedom and choice; low priority to equity; relies on voluntary private insurance, largely employment-based. - Government finances elderly (Medicare) and the poor (Medicaid); system still leaves approximately 44 million uninsured. - Numerous private plans weaken purchaser bargaining power and enhance providers’ ability to earn monopolistic profits, accelerating expenditure inflation. - Managed competition (Enthoven, 1994) supported by many large businesses: requires complex organizations, substantial administrative costs, unclear long-run effectiveness for containing inflation despite past successes. - Individual savings accounts (Medisave) with catastrophic insurance model (e.g., Singapore) - Government mandates that every worker save 6-8 percent of annual wages for inpatient and expensive outpatient procedures into individual Medisave accounts. - Catastrophic insurance premium paid from Medisave. - Government hospital wards divided into classes A, B, and C; B and C heavily subsidized. - Government tried market competition between public and private hospitals; when this did not moderate expenditure inflation, reverted to planning and regulation. --- ### Comparison of model performance (key statistics from tables) - Per Capita GNI (2004 WB Atlas) and Per Capita GDP (2004 PPP $US), Total health expenditure (2003, % of GDP), Government (2003, % of GDP), Life expectancy (2004), Infant Mortality Rate (Per 1,000), Under-Age-5 Mortality Rate (Per 1,000): - National health service model (e.g., UK) - Per Capita GNI: 33,940 - Per Capita GDP (2004 PPP $US): 30,843 - Total (2003): 8.0 - Government (2003): 6.9 - Life expectancy (2004): 78.5 - Infant Mortality Rate: 5.3 - Under-Age-5 Mortality Rate: 5.8 - National health insurance model (e.g., Canada) - Per Capita GNI: 28,390 - Per Capita GDP (2004 PPP $US): 31,129 - Total (2003): 9.9 - Government (2003): 6.9 - Life expectancy (2004): 79.8 - Infant Mortality Rate: 5.2 - Under-Age-5 Mortality Rate: 5.7 - Social insurance model (e.g., Germany) - Per Capita GNI: 30,120 - Per Capita GDP (2004 PPP $US): 28,147 - Total (2003): 11.1 - Government (2003): 8.7 - Life expectancy (2004): 78.5 - Infant Mortality Rate: 4.2 - Under-Age-5 Mortality Rate: 4.7 - Voluntary health insurance model (e.g., US) - Per Capita GNI: 41,400 - Per Capita GDP (2004 PPP $US): 39,618 - Total (2003): 15.2 - Government (2003): 6.8 - Life expectancy (2004): 77.4 - Infant Mortality Rate: 6.7 - Under-Age-5 Mortality Rate: 7.6 - Medisave + catastrophic insurance model (e.g., Singapore) - Per Capita GNI: 24,220 - Per Capita GDP (2004 PPP $US): 27,273 - Total (2003): 4.5 - Government (2003): 1.6 - Life expectancy (2004): 79.3 - Infant Mortality Rate: 2.6 - Under-Age-5 Mortality Rate: 3.3 - Best-performing country among advanced economies (Table 19: Canada) — selected indicators: - Health expenditure per capita (2003, PPP basis): 2,669 - Health expenditure, total (2003, as percent of GDP): 9.9 - Hospital beds (2002, per 1,000 people): 3.7 - Physicians (2003, per 1,000 people): 2.1 - Life expectancy (2004): 79.8 - Infant Mortality Rate (2004, per 1,000 live births): 5.2 --- ### Comparative conclusions (from analysis) - Three main conclusions: - To ensure equity, a government must play a strong role in financing health care. - Efficiency and quality can be improved with competition, incentives, and macro-organization. - Health expenditure inflation can be managed by establishing a “hard” budget constraint for the health sector. - Competition and demand-side measures (such as direct patient payments) have proven to be ineffective in controlling health expenditure inflation. --- ### Guideposts for macroeconomists (practical data and assessment guidance) - Data to request: - A copy of the NHA. - Statistics on the country's infant mortality rate and health expenditure inflation rate for the past 15 years. - A 25-year projection of national or social insurance program costs as a percent of GDP. - Quick assessment approach: - Compare the country’s input indicators (health care spending, available facilities, human resources) and output indicators (health status, risk-protection, equity, efficiency) with a best-performing country and a median-performing country. - Table 21 gives benchmarks for a Stage IV country—Canada. - Performance review pointers: - Compare access to and use of services by bottom and upper-quartile income groups, and by rural and urban populations. - Request and review outcome data on quality of medical services. - Quality and expenditure inflation correlate with the number of physicians per capita and the mix of family physicians and specialists; assess whether the government has a rational medical manpower policy aligned with health objectives. --- ### E. Transition economies — impact on the health sector ### Structural and fiscal impacts - Transition from centrally planned to market-oriented systems altered the role and capacity of the state and profoundly impacted the health sector. - Government revenue as a percent of GDP dropped sharply in transition economies during initial transformation. - Example (China): from 33 percent of GDP in 1980 to 14 percent in 1996. ### Consequences for health systems - Declining government revenue coincided with increased fiscal demands: price inflation raising wage demands and medical input costs, while needing to fund social programs and unemployment support, often led to reduced real funding for public health services. - Widening income disparities affected demand for health services: - Affluent households pay higher prices and offer under-the-table payments for higher-quality or faster services. - Senior physicians may leave public employment for private practice; governments may allow evening private practice to retain personnel, which can further weaken public services. - Growth of for-profit hospitals supplying high-technology services can prompt public hospitals to compete, raising costs. - Corruption risks: under-the-table payments and kickbacks can increase when practitioner incomes fall relative to affluent groups, undermining public provision and equity. *Source: _wp0713 - 1. General description* ### 2. Background on centrally planned health systems ### _wp0713 - 2. Background on centrally planned health systems ### Under socialism: financing and provision - Systems followed the Soviet model: supplier-dominated; availability of resources constrained production. - Service provision organized into two levels: provincial and county. - Disease prevention and public health were the state's responsibility and often organized as vertical programs. - The state financed and owned urban health care facilities, which provided free services to patients. - In rural areas, communes were responsible for financing and providing primary care. - The state financed medical education. ### Structural imbalances and legacy capacity - Under central planning, supply exceeded demand for hospital beds, physicians, nurses, and other health practitioners. - When public facilities were privatized, large-scale layoffs caused social unrest. - In Eastern European transition economies, decentralization transferred hospitals and clinics to municipalities that often lacked funds to support excess hospital beds and redundant health practitioners. - Many government facilities remain underutilized. - Wages for health practitioners are set low relative to other professionals to keep costs low. - Public hospitals operate inefficiently under a “soft” budget: the government sets performance targets and makes up any deficits hospitals may have, resulting in little incentive to be efficient or to offer quality services. - These inherited problems are exacerbated by new socioeconomic conditions of transition. ### Figure data and indicators (as presented in source) - Figure 8 labels (Selected Transition Countries: Number of Physicians per 100,000 inhabitants) shows numeric labels in the figure area: - 214 - 271 - 310 - 317 - 407 - 0 50 100 150 200 250 300 350 400 450 - Country labels shown: Poland, Czech Republic, EU Average, Hungary, Russia - Figure 9 labels (Selected Transition Countries: Number of Hospital Beds per 10,000 inhabitants) shows numeric labels in the figure area: - 39 - 65 - 98 - 110 - 131 - 0 20 40 60 80 100 120 140 - Country labels shown: EU Average, Poland, Hungary, Czech Republic, Russia ### Major health policy problems confronting transition economies - Compensation and deferred benefits: - Health care compensation under socialism emphasized economic and social security over current cash compensation. - Compensation package for workers and collective farmers included: low cash wages; deferred compensation (high pension and guaranteed health care after retirement); housing, sickness, and disability pay; health care during working years; child allowances; and job security. - Deferred compensation obligations were not prefunded, creating large social and moral obligations and liabilities during transition. - Shift to social insurance: - Challenge: how should the social insurance program pay hospitals and clinics, and how much? - Governments relied on the marketplace to set prices; if physicians and hospitals use market power to set high monopolistic prices, social insurance plans can go bankrupt (example: Czech Republic and Hungary). - Opening to foreign trade and investment: - Inflow of foreign capital, pharmaceuticals, and medical technology improved medical services but increased health care costs as major hospitals sought equal technical sophistication. - Affluent households may pay for imported drugs and new technologies; the poor cannot—creating a dilemma: government or social insurance finances higher costs, or a de facto two-tier access system emerges. ### Initial transformation of the health sector - First impact: government became unable to finance public health services. - Common reforms introduced following IFI advice: - Establish user fees. - Introduce compulsory social insurance plans. - Encourage foreign investment in new medical facilities and technologies. - Legalize private medical practices. - IFIs did not advise on prerequisites for successful revenue mobilization for the health sector, including creating new organizations, developing management know-how, and setting up information systems and regulatory measures. - Lack of competition allowed public hospitals to continue operating inefficiently under obsolete bureaucratic rules and retain monopoly power. - All transition economies introduced or expanded compulsory social insurance as a new source of financing. - Risks usually pooled on a regional basis. - Tax evasion is a serious problem; an effective tax collection system can take years to establish. - In the absence of effective collection, only about one-half to two-thirds of the expected social insurance contributions are collected, and the government must make up the shortfall (case examples: Czech Republic, Hungary, and China). ### Social insurance adoption timing (selected countries) - Countries and Year social insurance was established: - Hungary — 1990 - Czech Republic — 1992 - Poland — 1997* - Vietnam — 1997* - China — 2000** - Note: *Legislation was passed in 1997 but scheme became effective in 1999. - Note: **China had established social insurance in 1953 and expanded coverage in 1997. ### Health status effects during transition - Decline in preventive programs and shortage of drugs and medical supplies resulted from inadequate public funding. - Limited budgets were used first to pay health practitioners. - Need for health care increased (example: incidence of mental illness rose due to unemployment and job insecurity). - Russia experienced an unprecedented reversal in health status, especially among middle-age males; life expectancy of Russians dropped. ### Generic models: country groupings and key reform experiences - Two groups: middle-income transition countries (Eastern European, highly urbanized, relatively high per capita income) and low-income transition countries (China, Vietnam, some Central Asian countries; predominantly rural). - Low-income countries experienced less economic contraction and unemployment but faced greater demand for resources to address communicable diseases and malnutrition in rural areas, and chronic illnesses and aging in urban areas. #### a. Middle-income transition countries (e.g., Poland, Czech Republic, Hungary, and Baltic countries) - Financing: - Major problem: financing existing government facilities and staff. - Most established compulsory social insurance to replace general-revenue financing. - Tax evasion is a serious problem. - Risks usually pooled at regional level or by industry/occupation. - To reduce moral hazard, social insurance plans contract providers and pay fee-for-service; benefits packages usually require co-insurance and cover a “reasonable” level of health services to all insured. - Private supplementary insurance available for services beyond the basic package, creating two tiers. - Macro-organization: - To address oversupply and bloated bureaucracy, most decentralized hospitals to regional and municipal levels; local governments often not better able financially or managerially. - Greater managerial autonomy often given to hospitals and clinics. - Governments encourage private investment to modernize hospitals; joint ventures between government-owned hospitals and private investors sometimes used. - Growth of private hospitals has been slow; some countries privatized general practitioner services with capitation payments. - Incentives: - Core difficulties: who sets prices and how to control service volume. - Letting physicians and hospitals set prices caused problems; letting insurance plans set prices also problematic (insurance bankruptcies in the Czech Republic). - Fee-for-service systems led to increased service volume. - Some countries now learning from Western European use of hospital global budgets and DRG payment systems. - Regulations: - Weak capacity to regulate private and social insurance, ensure provider qualifications, and assure minimal quality of services, pharmacies, and pharmaceuticals. - Even when laws exist, enforcement is weak due to lack of information and control; legal systems and courts are underdeveloped. - Summary of challenges: - Reversing formerly socialist welfare policies while dealing with large deferred obligations. - System shifted from supply-side to demand-side dominated, compressing decades of reform into a few years. - Difficulties caused by lack of understanding of potential market failures and challenges linking public and private components. - Table 21 (as summarized in source) — Examples of problems, reform measures, consequences, remedial actions (key points extracted): - Lack of general revenue → Establish compulsory social insurance; patients choose providers; money follows patients; insurance pays fee-for-service → Rapid expenditure inflation; some social insurance plans go bankrupt; government bailouts → Reduce payment rates; change payment methods; limited control on quantity of services. - Demand by physicians for higher income → Legalize private medical practices → Rapid price inflation and increased quantity of services, causing deficits for social insurance plans; health costs shifted to households; creates two-tiered health care → Insurance moves from fee-for-service to capitation or per case; providers increase quantity; charges to households to offset income loss. - Oversupply of beds and staff → Decentralize to local governments → Burden shifted to local governments; no significant reduction of beds and staff; inefficiency persists → Necessary but painful rationalization programs, including retraining. - Demand for higher-quality care by higher-income households → Allow private insurance and private hospital development; liberalize pharmaceutical imports → Rapid health expenditure inflation; costs shifted to households; two-tiered care → Private insurance reduces payment to providers, shifting costs to households. #### b. Low-income transition countries (e.g., Cambodia, China, and Vietnam) - Urban areas faced problems similar to middle-income countries and implemented similar reforms with similar consequences. - Rural challenges: - Collapse of funding base for rural health care following economic transformation. - Governments often allowed physicians to establish private practices and patients to pay fee-for-service. - Under-the-table payments in government facilities became widespread. - Funding for rural health stations (staffed by modestly trained practitioners like village doctors) collapsed; these practitioners established private practices and sold medications and gave injections for livelihood. - Public health care, disease prevention, and technical quality of primary health care declined. - Rural households had to pay directly for hospital costs, pushing many into poverty. *Source: _wp0713 - 2. Background on centrally planned health systems* ### 6. Guideposts for macroeconomists ### 6. Guideposts for macroeconomists ### Transition economies: priorities and market failures - Transition economies face social and economic transformation that can overwhelm health care systems; macroeconomists should focus on economic stability and growth, high unemployment, and corruption. - Most productive role: educate economic leaders and suggest specific policies. - Policymakers often lack clarity on the government's role in health care; in allocating public resources, priority should be given to public health and disease prevention, and to subsidies for poor and low-income households, rather than maintaining jobs and incomes of government-employed health practitioners. - Health care markets exhibit serious market failures; the health sector cannot follow the same policies as other economic sectors. - Example: the fee-for-service payment system is highly inflationary and often encourages physicians to prescribe inappropriate tests, treatments, and medications. - Without a coherent health policy linking public and private sector health services, transition economies will continue to face: - rapid health care cost inflation; - increasing inequality in access to health care; - inefficiency. - Specific policy recommendations mentioned for transition economies: - institute tobacco excise taxes; - strongly encourage the use of generic drugs, following practices in the US. ### Low-Income Countries (LICs): the case for health investment and the information gap - The CMH (Commission on Macroeconomics and Health) was initiated by WHO to provide an evidence base for economic and financial policy makers in LICs on why spending on health is more than simply a consumption good. - CMH sought to show that higher spending on health can yield significant economic benefits: - foster higher productivity and growth, both in the short and long term; - enable greater use of available labor resources and natural resources where disease vectors limit capacity; - serve as a key instrument in addressing high rates of poverty; - influence critical demographic variables (in particular fertility rates) that may be sources of low productivity, dissaving, and low human capital formation. - CMH emphasized health’s importance in budgetary priorities; macroeconomists should continue to draw on analyses demonstrating health’s economic benefits when considering budgetary tradeoffs. - Major obstacle in LICs: systematic lack of information on health sector issues—an information gap is the major barrier preventing IMF or country macroeconomists from helping officials consider health’s impact on macroeconomic policy. - Most non-OECD countries have not gathered basic data on inputs and outputs of their health system, e.g.: - total health spending; - the poor's access to health care; - the efficacy of resources used; - operations in the private market; - the proportion of households driven into poverty by large medical outlays; - consumer satisfaction. - This information gap impedes formulation of appropriate health sector policy. - To allocate public resources effectively, policymakers need to know: - how much health care contributes to health, economic growth, or well being; - the relative marginal benefits from additional spending on health care compared to spending on education, sanitation, and rural development. - This knowledge is largely absent. ### Role of the IMF and short-run actions for LICs - The IMF, as a macroeconomic institution, can do little in the short term to improve health system performance in most low- and middle-income countries because these countries lack sufficient information, institutional capacity, and human resources to make systemic changes. - IMF staff should be selective in covering social issues, doing so only when these issues have a sizable and direct effect on macroeconomic developments. - In the short run, the IMF should support WHO and World Bank efforts to help countries build a better foundation for health policy. - Actionable steps the IMF can take: - Action/Step #1: Ensure the availability and collection of crucial health information. - IMF can influence government decisions on what broad information is important to collect for informed public policy decision-making. - Health officials are more likely to collect necessary information if the ministry of finance mandates and finances the collection. - Recommendation: compile national health accounts (NHA) each year, and issue a report on health (and education) outcomes of the poor. - Outcome data can be collected with Rapid Field Assessment instruments. - Despite efforts by WHO and WB, most low and middle-income countries are not compiling NHA on a regular basis. - Action/Step #2: Warn policymakers of market failures in the health sector. - IMF economists should advise economic decision makers that health care markets have many anomalies. - A health sector consists of more than a dozen markets, most susceptible to serious market failures. - Action/Step #3: Promote rational health policies. - Health sector development requires a strategy recognizing equity and efficiency tradeoffs and government and market failures. - Sound policy requires a combination of regulation and competition, public and private financing, and institutional capacity building. - In most low- and middle-income countries, taxes on tobacco, alcohol, and firearms should be increased as preventive health measures and fiscal tools relevant for IMF economists to consider. - For other health policies, the IMF can reference the strategy for the health sector developed by the World Bank. ### Middle-Income, Transition, and Advanced Economies: agenda for macroeconomists - For middle-income and advanced economies, the key issue is reconciling benefits from higher health spending with macroeconomic costs. - Five-fold agenda for macroeconomists: - Understand how the organization of health care may influence macroeconomic variables. - Encourage governments to obtain greater transparency in health resource allocation (establishment of national health accounts) and identify who bears burdens and receives benefits of current health spending. - Better understand how countries differ in health spending and results on health status indicators. - Galvanize ministries of finance to obtain clarity on factors influencing health spending; pressure agencies to clarify major differences in approaches to health care provision relative to other countries. - Understand broad approaches used to control health care costs, while avoiding specific policy proposals for which macroeconomists may be ill-suited due to potential unintended consequences. ### Knowledge gaps, technology, and the need for evidence-based health care - There is an enormous gap between the recognized need to use resources effectively to achieve quality health outcomes and the knowledge base available to implement such policies. - Policymakers need comparative knowledge of how counterparts in other countries address similar problems and the differences in results obtained. - Rapid technological changes force decisions about financing new drugs and medical techniques; governments and insurers need evidence on cost-effectiveness and whether to finance newer, potentially more expensive treatments. - The limited evidence base leads to reliance on blunt policy instruments (e.g., rationing, limits on wage rates, controlling prices, global budget constraints) to close financing gaps. - Observations suggest underfunding of the global public good of “evidence-based health care” amid rapid medical and pharmacological change. - Proposed value: an agency charged with conducting analyses of comparative effectiveness and cost that could be commonly financed and yield benefits to all countries. *Source: 6. Guideposts for macroeconomists (from _wp0713 - 6. Guideposts for macroeconomists).* ### REFERENCES ### _wp0713 - REFERENCES ### Equity, Redistribution, and Financing of Health Care - Aaronson, J.R., P. Johnson, and P.J. Lambert, 1994, "Redistributive Effect and Unequal Tax Treatment," Economic Journal, 104:262-270. - Abel-Smith, B. and R. Panda,1992, "Can the Poor Afford ‘Free’ Health Services? A Case Study of Tanzania," Health Policy and Planning, 7(4):329-41. - Abel-Smith, B. and E. Mossialos, 1994, "Cost Containment and Health Care Reform: A Study of the European Union," Health Policy, 28, 89. - Baker, J.L. and van der Gaag, J., 1993, "Equity in the Finance and Delivery of Health Care: Evidence from Five Developing Countries," in Equity in the Finance and Delivery of Health Care, ed. by Eddy van Doorslaer, Adam Wagstaff and Frans Rutten, (London: Oxford University Press). - Birdsall, N. and Hecht, R., 1995, "Swimming Against the Tide: Strategies for Improving Equity in Health," Human Resources Development and Operations Policy (HRO) Working Papers, Number 55. - Culyer, A.J. and Wanstaff, A.,1993, "Equity and Inequality in Health and Medical Care," Journal of Health Economics, 12:431-457. - Gottschalk, P., B. Wolfe and R. Haveman, 1989, "Health Care Financing in the U.S., U.K. and Netherlands: Distributional Consequences," in Changes in Revenue Structures, ed. by A. Chiancone and K. Messere, Wayne State University Press. - Grosh, M., 1995, “Toward Quantifying the Trade-Off: Administrative costs and Incidence of Targeted Programs in Public Spending and the Poor. Theory and Evidence, Latin America, ed. by Van de Walle, D. and Nead, K. (World Bank: The Johns Hopkins University Press). ### Health Economics, Macroeconomics, and Growth - Bloom, D., and D. Canning, D., 2000, “The Health and Wealth of Nations,” Science 287(5456), pp. 1207-1209. - Bloom, D., D. Canning, D. and J., Sevilla, 2004, “The Effect of Health on Economic Growth: A Production Function Approach,” World Development, 32(1): 1-13. - The Commission on Macroeconomics and Health, 2002, Health, Economic Growth, and Poverty Reduction: Report of Working Group 1 of the Commission on Macroeconomics and Health (Geneva: World Health Organization). - The Commission on Macroeconomics and Health, 2002, Macroeconomics and Health: Investing in Health for Economic Development (Geneva: World Health Organization) - Haacker, Markus, ed., 2004, The Macroeconomics of HIV/AIDS (Washington DC: International Monetary Fund). - Follette, G., and L. Sheiner, 2005, “The Sustainability of Health Spending Growth,” National Tax Journal, LVIII, No. 3 (September). - Fogel, R., 2004, “Health, Nutrition, and Economic Growth.” Economic Development and Cultural Change, 52(3), pp. 643-658. - Heller, P.S., 1998, "Aging in the Asian Tiger Economies," Finance and Development, 35(2), 26:29. - Heller, P.S., 2004, “Implications of Demographic Change for Health Care Systems,” in International Monetary Fund, World Economic Outlook (Washington DC) pp. 158-159. ### Aging, Demographics, and Public Expenditure on Health - Australia Productivity Commission, 2005, Economic Implications of an Ageing Australia (Canberra). - Bryant, J., A. Sonerson, M. Tobias, J. Cheung, and M. McHugh, 2005, “Population Ageing and government health expenditure,” New Zealand Treasury Policy Perspectives Paper 05/01) (March). - European Commission and Economic Policy Committee, 2006, The Impact of Ageing on Public Expenditure: Projections for the EU25 Member States on Pensions, Health Care, Long-Term Care, Education, and Unemployment Transfers (2004-2050) (Brussels). - Heller, P.S., 2006, “Asia: Is It Prepared for an Aging Population?, in Nihon University Population Research Institute conference volume (forthcoming). - Heller, P.S., 2006, “The prospects of Creating ‘Fiscal Space’ for the Health Sector,” Health Policy and Planning,, vol. 21, No.2 (March), pp. 75-79. ### Insurance, Risk, and Market Structure - Arrow, K.J., 1963, "Uncertainty and the Welfare Economics of Health Care," American Economic Review, 53:941-973. - Cutler, D.M., 1996, "Why Don’t Markets Insure Long-Term Risk," mimeo, Department of Economics, Harvard University: Boston. - Cutler, D., and Zechhauser, R., 1998, "Insurance Markets and Adverse Selection," in A Handbook for Health Economists, ed. by Newhouse, J and Culyer, T., (forthcoming), North-Holland. - Chollet, D.J., Lewis, M.,1997, Private Insurance: Principles and Practice, Innovations in Health Care Financing, an international conference sponsored by the World Bank, March 10-11, 1997, Washington, DC. - Carrin, G., De Graeve, D., and Deville, L., “Introduction to Special Issue on the Economics of Health Insurance in Low and Middle-Income Countries,” Social Science & Medicine, 48:859-864. - Chabot, H.T.J.,1989, A National Community Health Insurance Scheme At Village Level: The case from Guinea-Bissau, background documents to Joint NGO-UNICEF study conference on Sustaining PHC in Africa: Community Participation and Financing: Freetown, Sierra Leone, September 26–30, 1989. ### Health Systems, Reform, and Developing Country Evidence - Abel, H., 2005, Can We Say No? The Challenge of Rationing Health Care (Washington DC: Brookings Institution). - Anand, S. and L.C. Chen 1995, "A Framework for Assessing the Health Implications of Economic Policies," draft paper prepared for the Office of Development Studies of the UNDP, New York. - Berman, P.A., and others., 1997, "National Health Accounts in Developing Countries: Appropriate Methods and recent Applications," Health Economics, 6(1), 11:30. - Berman, P.A., _____, 1999, "What Can the US Learn from National Health Accounting Elsewhere?" Health Care Financing Review (Winter1999), 21(2), 47-63. - Booth, D., Milimo, J., Bond, G., and others., 1995, Coping with Cost Recovery: A Study of the Social Impact of and Response to Cost Recovery in Basic Services (Health and Education) in Poor Communities in Zambia, report to SIDA, commissioned through the Development Studies Unit, Department of Social Anthropology, Stockholm University. - Gu, X. and others., 1993, "Financing Health Care in Rural China: Preliminary Report of a Nationwide Study," Social Science and Medicine. 36(1993). 385:391. - Gu, X. and Tang, S., 1995, "Reform in the Chinese Health Care Financing System," Health Policy, 32(1995), 181-191. - Gotret, P. and G. Schieber, 2006, Health Financing Revisited: A Practitioner’s Guide (Washington DC: World Bank). ### Preventive Interventions, Vaccination, and Cost-Effectiveness - Borgdorff, M., K. Floyd, and J. Broekmans, , 2002, “Interventions to reduce tuberculosis mortality and transmission in low- and middle-income countries,” Bulletin of the World Health Organization, 80(3), pp. 217-27 . - Bridges, C., W. Thompson, M. Meltzer, G. Reeve, W. Talamonti, N. Cox, H. Lilac, H. Hall, A. Klimov and K. Fukuda, 2000, “Effectiveness and Cost-Benefit of Influenza Vaccination of Healthy Working Adults,” Journal of the American Medical Association, 284(13), pp. 1655-1663. - Daviglus, M., 2005, “Health Care Costs in Old Age are related to Overweight and Obesity Earlier in Life, “ Health Affairs (September). - Garner, P., 1989, "The Bamako Initiative, Financing health in Africa by selling drugs," Br. Med. J. 299, 277-278. ### Methods, National Accounts, and Empirical Analysis - Berk, M.L. and Monheit, A.C., 2001, “The Concentration of Health Care Expenditures, Revisited,” Health Affairs 20(2), 9-18. - Gerdtham, U.G. and Jonsson, B., 2000, “International Comparisons of Health Expenditure: Theory, Data and Econometric Analysis,” in Handbook of Health Economics, ed. by Culyer, A.J. and Newhouse, J.P., North Holland. - Gerdtham, and others, 1992, "An Econometric Analysis of HCE: A cross-section Study of the OECD Countries," Journal of Health Economics, 11. - Feldstein, P.J., 1993, Health Care Economics, Fourth Edition. Albany, NY: Delmar Publishers, Inc. - Berman, P.A., and others., 1997, "National Health Accounts in Developing Countries: Appropriate Methods and recent Applications," Health Economics, 6(1), 11:30. - de Ferranti, D., 1985, "Paying for Health Services in Developing Countries: An Overview," World Bank Staff Working Paper, No. 721, Washington, DC. *References list from _wp0713 - REFERENCES* ### Bibliography of the Literature on Developing Countries," Evaluation and Planning ### Bibliography of the Literature on Developing Countries, Evaluation and Planning ### Health financing and public/private roles - Holahan, J., 1997, Crowding Out: How Big a Problem?. Health Affairs, 16(1):204-206. - Hurst, J.W.,1985, Financing Health Services in the United States, Canada and Britain King Edward’s Hospital Fund, London, Affairs, 10(3), 7-21. - Jack, W. 1999, Principles of Health Economics for Developing Countries. (Washington, DC: The World Bank). - Korte, R., and others, 1992, “Financing Health Services in Sub-Saharan Africa: Options for Decision Makers during Adjustment,” Social Science and Medicine, 34 (1):1-9. - Makinen, M and Block, S., 1986, Pricing for Cost Recovery in Primary Health Care in Guinea, CCCD, Guinea. - McClellan, M., Skinner, J., 1997, The Incidence of Medicare, National Bureau of Economic Research Working Paper 6013. - Musgrove, P., 1996, Public and Private Roles in Health—Theory and Financing Patterns. World Bank: Washington D.C. - Musgrove, P., 2004, Health Economics in Development (Washington: The World Bank). - Nolan, B., Turbat, V., 1993, Cost Recovery in Public Health Services in Sub-Saharan Africa, mimeo, Economic Development Institute, Human Resources Division, Washington D.C.: The World Bank. - Schieber, George J., Maeda, Akiko, 1997, “A Curmudgeon’s Guide to Financing Health Care in Developing Countries” in Innovation in Health Care Financing, Proceedings of a World Bank Conference March 10-11, 1997, ed. by George Schieber (Washington, DC: The World Bank). - Shaw, R.P., Griffin, C.C., 1995, Financing Health Care in Sub-Saharan Africa through User Fees and Insurance, A Directions in Development Book, (Washington DC: The World Bank). - World Bank, 1987, Financing Health Services in Developing Countries: An Agenda for Reform, (Washington DC: The World Bank). - World Bank, 1993. World Development Report 1993: Investing in Health, (New York: Oxford University Press). - World Bank, 1997:1, Sector Strategy for Health, Nutrition and Population (Washington, DC: The World Bank.). - World Bank, 1999a, World Development Indicators (Washington, DC: The World Bank). - World Bank, 1999b, A Preliminary Assessment of Sri Lanka/s Health Sector and Steps Forward (Washington, DC: The World Bank). - World Bank, 2004, The Millennium Development Goals for Health: Rising to the Challenges, (Washington). - World Bank, 2006a, World Development Indicators (Washington DC: The World Bank). ### Community financing, user fees, and Bamako Initiative - Litvack, Jennie, I. and Claude, B., 1993, "User Fees and Improved Quality of Health Care Equals Improved Access: Results of a Field Experiment in Cameroon," Social Science & Medicine, 37(3)369-83. - McPake, B., Hanson, K., and Mills, A., “Experience to Date of Implementing the Bamako Initiative: A Review and Five Country Case Studies,” Health Economics and Financing Programme, Health Policy Unit, Department of Public Health and Policy, London School of Hygiene and Tropical Medicine. - McPake, B., 1993, “Community Financing of Health Care in Africa: An Evaluation of the Bamako Initiative,” Health Economics and Financing Programme, London School of Hygiene and Tropical Medicine, London. - McPake, B., 1993, “Implementing the Bamako Initiative in Africa: A Review and Five Case Studies,” London School of Hygiene and Tropical Medicine, Department of Public Health and Policy, Health Policy Unit, London. - Moens F.,1990, "Design, Implementation, and Evaluation of a Community Financing Scheme for Hospital Care in Developing Counties: A Pre-paid Health Plan in the Bwamanda Health Zone, Zaire," Social Science & Medicine, 30(12):1319-27. - Mooney, G., 1996, "And now for Vertical Equity? Some concerns arising from aboriginal health in Australia, Health Economics, Vol. 5: 99-103. - Mwabu, G., Mwanzia, J., Liambila, W., 1995, "User Charges in Government Health Facilities in Kenya: Effect on Attendance and Revenue," Health Policy Plan, 10(2):164-70. - Stinson, W., 1982, Community-Financing of Primary Health Care, PHC issues. Series 1 No. 4, American Public Health Association: Washington DC. - Stinson, W., 1984, Potential and Limitations of Community-Financing, World Health Forum, 5(1):123-5. - Unger, J.P., Mbyae, A. and Diao, M., 1990, "From Bamako to Kolda: A Case Study of Medicines and the Financing of District Health Service," Health Policy and Planning, 5:367-77. - Waddington, C., Enyimayew, K.A., 1990, "A Price to Pay, Part 2: The Impact of User Charges in the Volta Region of Ghana," Int. J. Health Planning. Management, 5: 287-312. - Sepehri, A. and Pettigrew, J., 1996, "Primary health care, community participation and community-financing: experiences of two middle hill villages in Nepal," Health Policy and Planning, 11(1):93-100. - Makinen, M and Block, S., 1986, Pricing for Cost Recovery in Primary Health Care in Guinea, CCCD, Guinea. - Vogel, R.J. 1987, Health Cost Recovery in Mali and Senegal: Preliminary Report after Mission, World Bank, Population, Health, and Nutrition Department, Washington, DC. Processed. - Vogel, R.J., 1990, "Health Insurance in Sub-Saharan Africa,” WPS 476. World Bank, Africa Technical Department, Washington, DC. Processed. ### Equity, distribution, and tax/progressivity measurement - Kakwani, N.C., 1977,"Measurement of Tax Progressivity: An International Comparison," Economic Journal, 87, 71-80. - Suits, D., 1977, "Measurement of Tax Progressivity," American Economic Review, 67:747-52. - Lambert, P.J.,1989, The Distribution and Redistribution of Income, A Mathematical Analysis. Basil Blackwell, Oxford. - Wagstaff, A., Doorslaer, E., Van, and Paci, P.,1989, "Equity in the Finance and Delivery of Health Care: Some Tentative Cross-country Comparison," Oxford Review of Economic Policy, 5, 89-112. - Wagstaff, A., 1992, "Equity in the of Health Care: Some Cross-country Comparison," Journal of Health Economics, 11(4):361-387. - Wagstaff, A., Van Doorslaer, E., 1993, "Equity in the Finance of Health Care: Methods and Findings," in Equity in the finance and delivery of health care: An international perspective, ed. by Wagstaff, A., Van Doorslaer, E., Rutten, F., (New York: Oxford University Press). - Russell, S., 1996, "Ability to pay for Health Care: Concepts and Evidence," Health Policy and Planning, 11(3):219-237. - Miller, L., 1989, "Equity in the Context of Community Financing of Primary Health Care: Who Pays and who Benefits?" Ph.D. Thesis, Johns Hopkins University. - Mooney, G., 1996, "And now for Vertical Equity? Some concerns arising from aboriginal health in Australia, Health Economics, Vol. 5: 99-103. ### Health systems reform, marketization, and regulated competition - Hsiao, W.C., 1994, Marketisation—The Illusory Magic Pill. Health Economics 3(6) 351:357. - Hsiao, W.C., 1995a, "The Chinese Health Care System: Lessons for the Other Nations," Social Science and Medicine 41(8), 1047:1055. - Hsiao, W.C., 1995b, "Abnormal Economics in the Health Sector," Health Policy, 32(1995), 125:139. - Massaro, T.A., and others, 1994, Health System Reform in the Czech Republic—Policy lessons from the initial experience of the general health insurance, Journal of the American Medical Association, 271(23), 1870-1874. - Marmor, T. R. and Michael S. Barr, 1992, “Making Sense of the National Health Care Reform Debate,” Yale Law and Policy Review, 10 (2):228-82. - OECD, 1992, The Reform of Health Care: A Comparative Analysis of Seven OECD Countries, Health Policy Studies No. 2. - OECD, 2006, “Future Budget Pressures Arising from Spending on Health and Long-Term Care,” OECD Economic Outlook, 2006/1 , No. 79 (June), pp. 145-55. - Roemer, M.I., 1993, National Health Systems of the World, Vol. 1 and 2 (Oxford: Oxford University Press). - Saltman, R. and von Otter C., 1992, Planned Markets and Public Competition, Open University Press, Buckingham. - Saltman, R. and Figueras, J., eds., 1997, European Health Care Reform: Analysis of Current Strategies (Copenhagen: World Health Organization). - van de Ven, W.P.P.M., 1995, "Regulated Competition in Health Care: with or without a Global Budget?" European Economic Review, 39:786. - van de Ven, W.P.P.M.,1996, "Market-oriented Health Care Reforms: Trends and Future Options," Social Science & Medicine, 43(5):655-66. - van de Ven, W.P.P.M., Schut, F.T. and Rutten, F.F.H., 1994, "Forming and Reforming the Market for third-party purchasing of Health Care," Social Science & Medicine 39:1405. - van de Ven, W.P.P.M., Schut, F.T., 1994, "Should Catastrophic Risks be included in a Competitive Health Insurance Market?" Social Science and Medicine 39:1459. - Porter, M.E., and E. O. Teisberg, 2006, Redefining Health Care: Creating Value-Based Competition on Results (Cambridge MA: Harvard Business School Press). ### Health workforce, human resources, and technical efficiency - Joint Learning Initiative, 2004, Human Resources for Health: Overcoming the Crisis http://www.globalhealthtrust.org/Report.html - Osei, D., S. d’Almedia, M. George, J. Kirigia, A. Mensa, and L. Kainyu, 2005, “Technical Efficiency of Public District Hospitals and Health Centres in Ghana: A Pilot Study,” Cost Effectiveness and Resource Allocation, 3(9). - Zere, E, T. Mbeeli, K. shangula, C. Mandlhat, K. Mutirua, B. Tjivambi, and W. Kapenambili, 2006, “Technical Efficiency of District Hospitals: Evidence from Namibia using Data Envelopment Analysis,” Cost Effectiveness and Resource Allocation, 4(5). - McGuire, T., 1999, "Physician Agency," in A Handbook for Health Economists, ed. by J. Newhouse and T. Culyer(forthcoming), North-Holland. ### Disease control, tobacco, chronic disease, and AIDS - Jamison, D.T., J.G. Breman, A. R. Measham, G. Alleyne, M. Claeson, D.B. Evans, P. Jha, A. Mills, and P. Musgrove, 2006, Priorities in Health (Washington DC: World Bank) - Jamison, D.T., ___________, 2006. Disease Control Priorities in Developing Countries, 2nd Edition (Washington DC: Oxford University Press and World Bank). - Jha, P. and F. Chaloupka, 1999, Curbing the Epidemic: Governments and the Economics of Tobacco Control (Washington, World Bank). - UNAIDS, 2005, AIDS in Africa: Three Scenarios to 2025 (Geneva). - UNAIDS, 2006, 2006 Report on the Global AIDS Epidemic (Geneva). - Reddy, K. Srinath, B. Shah, C. Varghese, and A. Ramadoss, 2005 “ Responding to the threat of chronic diseases in India,” in The Lancet, 366. 9498 (November 12), pp. 1744-1749. - Olshansky, S.J., D. Passaro, R. Hershow, J. Layden, B.A. Carnes, J. Brody, L. Hayflick, RN Butler, DB Allison, DS Ludwig, 2005, “ A Potential Decline in Life Expectancy in the United States in the 21st Century,” New England Journal of Medicine, 352, pp. 1103-1110. - Olshansky, S. J., 2005, “Projecting the Future of U.S. Health and Longevity,” Health Affairs (September). - Spinaci, S., L. Currat, P. Shetty, V. Crowell, and J. Kehler, 2006, Tough Choices: Investing in Health for Development: Experiences from National Follow-Up to the Commission on Macroeconomics and Health (Geneva: World Health Organization). - World Health Organization, 2002, The Report of the Commission on Macroeconomics and Health (Geneva). - World Health Organization, 2002, Report of Working Group I of the Commission on Macroeconomics and Health (Geneva). ### Health economics theory, measurement, and technology impacts - Hsiao, W.C., 1995b, "Abnormal Economics in the Health Sector," Health Policy, 32(1995), 125:139. - Mushkin, S., 1962 Health as an investment, Journal of Political Economy, 70(5), 129:157. - Newhouse, J.P., 1977, "Health Care Expenditure, A cross-national Survey," The Journal of Human Resources; 12(1):115-25. - Newhouse, J.P., 1992, "Health Care Costs: How much of a Welfare Loss?" Symposia: Health Economics, 6(3), 3:21. - Luft, H.S., 1986, "Compensating for Biased Selection in Health Insurance," Milbank Quarterly, 64(4):566-591. - Pauly, M.V. ,1990, "Financing Health Care," Quarterly Review of Economics and Business, 30:63. - Weisbrod, B.A., 1991, "The Health Care Quadrilemma: An Essay on Technological Change, Insurance, Quality of Care, and Cost Containment," Journal of Economic Literature, 29:523-52. - Lubitz, J., 2005, “Health, Technology, and Health care Spending,” Health Affairs (September). - Lakdawalla, D., D. Goldman, and B. Shang, 2005, “The Health and Cost Consequences of Obesity Among the Future Elderly,” Health Affairs (September). - Nyman 2006, “The Value of HealthInsurance,” The Edgar Companion to Health Economics ed. by Andrew Jones (Cheltenham, UK: Edward Elgar). - Olin, G. and Rhoades, J., “The Five Most Costly Medical Conditions, 1997 and 2002: Estimates for the U.S. Civilian Noninstitutionalized Population,” MEPS Statistical Brief No. 80. - Yu, W. and Ezzati-Rice, T., 2005, “Concentration of Health Care Expenditures in the U.S. Civilian Noninstitutionalized Population,” MEPS Statistical Brief No. 81. ### Country-specific studies, health system surveys, and population prospects - Indonesia, 1998, "Country Problems of Health Sector Performance in Indonesia," National Institute of Health Research and Development, (Jakarta: NIHRD). - Liu.,Y.L., Hsiao, W.C., Li,Q., Liu,X.Z., and Minghui, R.,1995, "Transformation of China’s Rural Health Care Financing," Social Science & Medicine, 41(8):1085-93. - Liu., and others, 1998, “Is Community Financing Necessary and Feasible for Rural China?” in Health, Health Care and Health Economics, Perspectives on Distribution, ed. by Barer, Getzen, and Stoddart, John Wiley & Sons, Ltd., pp. 231-251. - Malaysia, Government of, 1998, Proceedings of the Conference on Health and Environment, (Kuala Lumpur: Economic Planning Unit). - Republic of Singapore Ministerial Committee on Health Policy, 1993, Affordable Health Care, A White Paper, Singapore, Ministry of Health. - World Health Organization, Regional Office for Europe, 1996, Health Care Systems in Transition: Czech Republic. - World Health Organization, 1998, Health Care Systems in Transition: Poland. - United Nations, Department of Economic and Social Affairs, Population Division, 2006, World Population Prospects: The 2004 Revision. - United Nations, 2004, The Impact of AIDS (New York). - U.S. Government, Agency for Health Policy and Development, 1998, National Medical Expenditure Survey Database. - Zshock, D.K., 1979, "Health Care Financing in Developing Countries," American Public Health Association International Health Programs Monograph Series No. 1, Washington D.C.: American Public Health Association. ### Cross-sectoral links, education, and social determinants - Jackson, A.S., 1993, "Opportunity to Learn: The Health Connection," Journal of Negro Education. - Novello, A.C., and others, 1992, "Health Children Ready to Learn: An Essential Collaboration between Health and Education," Public Health Reports 107(1).3:15. - Kramer, R.A., Allen, L., and Gergen, P.J., 1995, "Health and Social Characteristics and Children’s Cognitive Functioning: Results from a National Cohort," American Journal of Public Health, March, 85(3).304:16. - Sauerborn, R., Adams, A., and Hien, M., 1996, "Household Strategies to Cope with the Economic Costs of Illness," Social Science and Medicine, 43(3), 291-301. - Pena, R., Thorn, A., Arogan, A., 1994, "Results from a Community Intervention Project in the Nicaraguan Mining Community El Limon: An Overview," Social Science and Medicine, 38(4): 632-9. *Compiled from the PDF chapter "Bibliography of the Literature on Developing Countries," Evaluation and Planning.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp0713.pdf_