Economics and Global Health: The Basics
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Transcript of Economics and Global Health: The Basics
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Economics and Global Health: The Basics
Kevin Chan, MD, MPH, FRCPC, FAAPAssistant Professor of Pediatrics and Fellow, Munk Centre for Global Studies, University of Toronto and Pediatric Emergency Physician, Hospital for Sick Children
November 2010
Figure 1
Prepared in collaboration with the Global Health Education Consortium.www.globalhealtheducation.org
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Overview
• Explain why health is important and different than other goods and services in terms of economics
• Discuss challenges in financing health care priorities and how it can be done
• Identify future challenges to health care financing
Figure 2
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Economics and Global Health
• As countries become richer, health care rises
• Global health economy is growing faster than the global GDP
• In 2007, US $5.3 trillion dollars worldwide with 59 million health care workers according to the WHO
% of GDP
Year
8.2%
8.7%
9.2%
2000 2007 2015
Source: World Health Organization, World Health Statistics 2009 http://www.who.int/whosis/whostat/EN_WHS09_Full.pdf
Figure 3
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Health and Wealth: A Bi-Directional Relationship
Strong Economic Performance
Higher Individual Incomes
Purchasing of health
promoting goods and
services
Improved Health
Good healt
h
Human Capital Increas
es
Individual
Productivity
Increases
Overall Economic Growth
Rate Increases
Economics to Health
Health to Economics
Figure 4
Source: Pritchett, L and Summers, L. , Wealthier is Healthier, Journal of Human Resources, March 1996.
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HIV/AIDS: How Health May Affect Wealth
• Decreases investment in human capital
• Downward “death spiral”• Affects economic and
intellectual elites– Health workers infected in
similar proportions to rest of population
• Impacts demographic dividend
• Affects working age individuals
• Destroys social network, thus slowing down growth
Figure 5
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Drivers of Supply vs. Drivers of Demand
Drivers of Supply•Health Care Providers •In-patient Beds •Equipment (CTs, MRIs,
dialyses, etc.)•New Technologies
Drivers of Demand•Population Demographics
•Age Structure•Total Population
•Health Status•Health Behavior•Education
Figure 6
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What Makes Health Different From Other Goods and Services?
4 Key Differences:• Government is involved• Uncertainty around patient’s health and what
providers will do• Asymmetric knowledge between various groups• Externalities
Figure 7
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Government Intervention
– Funds and pays for certain health care services– Creates guidelines for private and public health sectors– Measures competency and qualifications of providers– Encourages investment in prevention– Drives economic behaviors amongst providers - setting prices, specifying practice
locations– Helps finance education (e.g., student scholarships)– Conducts and sponsors research (e.g., NIH, Canadian Institute of Health Research)
Figure 8
Government has a special role as steward of the health sector …• Examples of Government Intervention
• Political Structure Will Play a Role
• Supply and Demand
• Balancing Resources and Finances
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Uncertainty
• Patient Level– Patients often enter the health system uncertain
about their current state of health
• Provider Level– Chosen interventions used for a specific illness can
vary widely depending on the provider and their preferences
Figure 9
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Asymmetric Knowledge
• Patient – Health Care Worker Relationship– Knowledge around treatment decisions
• Provider-Supplier Relationship– Knowledge about real cost of supplies
• Consumer – Insurer Relationship– Moral hazard– Adverse selection
Figure 10
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Externalities
• The costs and benefits which arise from an individual’s action has an effect on other people
• Positive Externalities – Impose benefits on others
• Negative Externalities – Impose costs on others
Source: Pan American Health Organization, WHO, http://www.paho.org/English/DPI/categ05.htm
Figure 11
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Financing Health Care
Source: WHO World Health Statistics 2010, http://www.who.int/whosis/whostat/EN_WHS10_Full.pdf
Figure 12
Composition of World Health Expenditures (World Spent US $5.3 Trillion on Health in 2007)
• General Tax Collection— Government expenditure
• Social Insurance— Compulsory— Inclusion of targeted individuals— Targeted to health
• Private Insurance— Voluntary— Advantage in technological
advancement— Change of high administrative costs
• Out-of-Pocket — Direct payment
• Other— Aid from other countries
or charitable organizations
Government Expenditure
35%
Out-of-Pocket 18%
Other 4%
Private Insurance18%
Social Insurance25%
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Key Factors to Finance Health Care
Available Financial Resources Stage of Economic Development
Administrative Capacity
Political Will
Figure 13
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Economics and Global Health: Wide Variation in Investments in Health
Figure 14
The boundaries and names shown and the designations used on this map do not imply the expression of any opinion whatsoever on the part of the WHO concerning the legal status of any country, territory, city or area of its authorities, or concerning the delimitation of its frontiers or boundaries. Dotted lines on maps represent approximate border lines for which there may not yet be full agreement.
Data Source National Health Accounts series, WHO Map Production: Public Health Information and Geographic Information Systems WHO
Health Spending Around the World, 2006From the World Health Organization
< 3
3.1 - 5
5.1 - 8
8.1 - 10
10.1 - 13
> 13
Data not available
Share of Gross Domestic Product, %)
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Challenges in the Future
• Epidemiological Transition: – From more communicable diseases to non-
communicable disease• Aging Population:
– Higher medical costs and resources– Need for more long-term care services and facilities
• Population Growth:– 75 million people added every year (mostly in the
poorest countries)
Figure 15
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Low Income Lower-Middle Income
Upper-Middle Income
High Income0%
20%
40%
60%
80%
100%
50%
16% 15%7%
40%
73% 75%
87%
9% 11% 10%6%
Epidemiological Transition
• Movement from communicable (infectious disease) to non-communicable disease (chronic illness, cancer)
• Affects needed skills and resources
• Increase population and community-oriented interventions
• Target high-risk groups
• Coordinate interventions with other sectors
Source: Mathers et al., 2003, as cited in Suhrcke, 2006
Figure 16
Communicable, Maternal, Perinatal, and Nutritional Conditions
Chronic or Noncommunicable Diseases
Injuries
Worldwide Share of Deaths by Causes and World Bank Income Category (2002)
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Aging Population
Source: UN-DESA: World Population Prospects, 2004, as cited in NIH: Why Aging Matters, 2007
Young Children and Older People as a Percentage of Global Population • Aging populations reduces
revenues
• Increases demand for
long-term care services
• Greater need for prevention
and primary care
Figure 17
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Population Growth
• The world is growing at a rate of 80 million people/year– ~99% growth in low and
middle income countries
• Other global challenges (i.e. climate change) also affect health
• Adds pressure on resources, including health care resources
Source: United Nations Department of Economic and Social Affairs/Population Division, World Population to 2300
Figure 18
Estimated World Population, 1950-2000, and Projections 2000-2050
High
Medium
Low
Popu
latio
n (B
illio
ns)
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Additional Resources
• WHO’s information on Health Financing: http://www.who.int/topics/health_economics/en/
• World Economic Forum’s work on health: http://www.weforum.org/en/initiatives/globalhealth/index.htm
• Kaiser Family Foundation’s Global Health Gateway: http://globalhealth.kff.org/
• United States Agency for International Development (USAID): http://www.usaid.gov/
• United States President’s Emergency Plan for AIDS Relief – Global Health Initiative (PEPFAR): http://www.pepfar.gov/ghi/index.htm
Figure 19
This tutorial was prepared in collaboration with the Global Health Education Consortium.For more information about the organization, visit: www.globalhealtheducation.org