Economic Growth

Aceso Global Policy Working Paper - Health Policy Challenges in Health Economics and Finance in Latin America

Latin American and Caribbean (LAC) countries have achieved a great deal in healthcare over the past few decades, reflecting early investment as well as creativity and experimentation at a level and scope beyond much of what has occurred in other regions. The mixed public-private system serving much of the region, the experience with social health insurance (SHI) and private insurance, and experiments with health service delivery and financing provide lessons that deserve further attention and implementation. Importantly, the rallying cry regarding insufficient spending captures only part of the challenge. Better organization, financing and delivery grounded in targeted incentives and accountabilities could have a major impact on raising access, quality and efficiency.

Regionally the health financing mix entails high reliance on out of pocket payments (OOP) and private insurance. Only 12 countries benefit from over 50 percent of public financing. Waiting time, and time-intensive requirements to access care within publicly financed systems pose high costs to patients. Even the poor turn to private alternatives.

Shortcomings in the quality and efficiency of services to date have received little attention or investment. Quality measures are scarce and no consensus exists on standards; facility management is weak; few studies that touch on relative productivity to measure efficiency; and, costs are largely unknown.

Over the coming decades, the rapidly shifting demographic, social and epidemiological patterns in the region will affect both public revenues and the demand for healthcare. The aging population and the rise of NCDs both have serious implications for healthcare costs in both the public and private sectors, and for the type of care required, e.g. more preventive services, long-term management of chronic conditions, integrated care and palliative care.

Health policy reforms in LAC deserve to be driven by sustainability. Integrated healthcare offers a solution to fragmentation in delivery and financing, and involves reliance on effective information technology that tracks performance and patients, and provider payment reforms that incentivize efficiency and quality, among other initiatives. Maintaining the coexistence of different health systems (SHI, public financing and delivery, private health insurance by employers or individuals) can be supported by the integration of medical records, adherence to protocols and clinical pathways, establishment of health networks built around primary care, along with harmonized incentives and payment systems affecting both hospitals and primary care. These restructuring initiatives can reinvigorate healthcare systems and prepare them for success and sustainability in the 21st Century. They offer a direction for reform that allows adapting to existing circumstances and institutions, but with updated objectives, infrastructure and processes.

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Health Investments and Economic Growth: Macroeconomic Evidence and Microeconomic Foundations

Improvements in health status over the last 50 to 100 years have been nothing short of spectacular. Vaccines, antibiotics, and other pharmaceutical developments have drastically reduced the incidence of illness and death. Economic growth has also helped: richer people are better nourished and educated, and richer countries are more able to afford the public goods (such as supply of clean water and sanitation and control of disease vectors such as mosquitoes) that reduce the transmission of disease.

Do improvements in health themselves help to boost economic growth? A resolution of this debate could boost the urgency of the quest for growth, inform that quest, or both. For example, a finding that economic growth reduces infant mortality could hasten the adoption of potentially growth-enhancing policy reforms. To help inform decision making on public policy, this review aims to: i) examine the routes by which improvements in health might indeed increase incomes and growth, and the related evidences; and ii) investigate the determinants of health itself, particularly evidence on the impact of public expenditure policies on health.

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Health and Growth

This volume, comprising six articles and related commentary, examines the relationship between economic growth and investment in health. It emerged from the Commission on Growth and Development, which convened from 2006 through 2008 to discuss the diverse causes and impacts of economic growth.

While evidence clearly shows that positive economic growth contributes to better health outcomes, as measured by better nutrition, longer life expectancy, and lower communicable disease rates, among other indicators, the extent of the reverse relationship—that is, whether improved population health directly contributes to economic growth—is less clear. The lack of comprehensive metrics to measure health makes determining the degree of this causation challenging, as do other potential compounding factors; for example, countries with more effective health systems often benefit from greater institutional strength overall, complicating the identification of individual causal relationships. The articles in this volume explore existing evidence around this relationship, which is tenuous.

The final article explores the impact of early childhood investment in health and nutrition on future individual and household earnings. On this topic, the scientific evidence demonstrates clearly that investing in health and nutrition at an early age can lead to higher incomes, help break cycles of intergenerational poverty, and contribute to long run economic growth.

 

Co-editor Michael Spence is a senior fellow at the Hoover Institution and Philip H. Knight Professor and Dean, Emeritus, at Stanford University. He was awarded the Nobel Memorial Prize in Economic Sciences in 2001. 

 

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