Market solutions for improving the health of the poor

Andre Cezar Medici

Introduction

Markets in health are by definition imperfect. Their main imperfections[1] are associated with the sector’s intrinsic characteristics and the information asymmetries between producers and consumers of health services. In view of the frail state that consumers find themselves in when they are in need of health services, and given the power wielded by suppliers (doctors and hospitals) by virtue of the knowledge that they have, consumers frequently have no option but to accept the treatment, medication and advice offered by service providers.

For these reasons, historically, the health sector has been one in which the structure of supply prevails over demand. The information asymmetry between suppliers and consumers is even more marked for socially deprived groups who lack the education and resources with which to make informed decisions. They lack information both on how to look after their health properly and on how to gain access to health services. They also lack a network of contacts that could provide them a second opinion on diagnoses or alternatives to the solutions prescribed by suppliers, even if they have the means to pay for these services.

Although from earliest times the health market has been predominantly private, growing public intervention in regulating, financing and providing health services over the course of the twentieth century has increasingly changed its nature. From an economic point of view, these interventions are justified in areas such as the provision of public and mixed (public-private) goods in health (sanitary and epidemiological oversight, vaccination, etc.), in covering the financial risk of cost-effective services for the poor, in covering catastrophic health risks for all, in regulating the quality and efficiency of services, and in matters relating to public and collective health.[2]

In welfare economies like those of Europe, and even in other developed countries like the United States, Canada and Japan, public financing of health services, and often their actual provision, cover a large segment of the health market. In some instances, this has led to extremely high costs (particularly in proportion to the results achieved in terms of health service coverage and quality) because of inefficiency in the provision of services and high transaction costs, gaps in coverage (especially among the poor), and defective evaluation and oversight systems, among other failures. Throughout the world, governments have attempted to minimize these shortcomings by relying on private health insurance, and outsourcing public services to private suppliers and nongovernment organizations.

The Private Dimension of Health Spending in Latin America
In Latin America and the Caribbean, private sector spending accounts, on average, for more than half of spending on health.

Private health spending can be evaluated according to its two components: spending on private health insurance and direct out-of-pocket spending. The former represents a more rational method of organizing health spending, since it allows for economies of scale in the purchase of collective health services and, in addition, provides means to protect families against unplanned financial health risks, averting catastrophic costs that could lead to vulnerability and indigence.

Out-of-pocket spending, in turn, is an inefficient method of private spending on health, since families generally lack the information required to manage their health spending properly and to use it in such a way as to meet the criteria of rationalization that the use of private insurance facilitates. In the structure of health insurance, out-of-pocket spending may be used to complement the purchase of drugs and direct payment for consultations, hospitalization, and medical examinations. Generally, co-payments may help provide a more rational structure in the use of out-of-pocket spending when linked to properly designed health insurance schemes, but these are frequently exposed to unplanned spending in cases of catastrophic illnesses. In these cases, the design of such financial protection mechanisms as stop-loss insurance may minimize the negative effects.

In LAC, the country with the highest share of insurance in health spending (Uruguay) has a high rate of private insurance participation. The second country in terms of the importance of insurance in health spending (Costa Rica) has a high rate of public sector participation in the provision of health insurance.

There is no private insurance in countries where the health system is public and universal (Trinidad and Tobago, Jamaica and Brazil). In countries with higher average incomes, such as Chile, Argentina and Colombia (with the exception of Mexico), private insurance plays a strong part in financing health insurance.

In Mexico and in countries with lower average incomes, like those of Central America and some of the Andean countries, the share of private insurance in total health spending is minimal. These are countries in which the share of out-of-pocket spending is high. Consequently, they represent fertile ground for expanding methods of insurance (public or private), following the example of Mexico’s experience with the Popular Health Insurance program (Seguro Popular de Salud).

Direct out-of-pocket spending by families constitutes an important part of private health spending. Such spending constitutes a high proportion of family budgets, ranging from 11 percent (in Cuba) to 57 percent (in Belize). In the largest countries (Brazil and Mexico) where more than half of the region’s population is concentrated, out-of-pocket spending represents 37 percent and 51 percent of health spending, respectively. The poor countries of Central America as well as the countries of the Caribbean also have high percentages of direct spending in the composition of total health spending.

Health spending involves a heavy budgetary burden in the population quintiles with the lowest levels of income. Studies based on household expenditure surveys in Brazil show that lower-income families spend a higher share of total family outlays on health than do higher-income families. This is the exact opposite of what occurs in educational spending, where rich people spend proportionately more.

Moreover, unable to benefit from health insurance mechanisms, families end up spending these resources on health goods and services inefficiently. For example, the share of spending on health among poor families is higher for items like drugs, which can account for as much as 70 percent of family budgets in the lowest income deciles in countries like Brazil. Similarly, spending on direct costs for consultations, hospitalization, medical examinations and other procedures reach very high levels among the poor. This justifies providing these services in ways that bring efficiency, economies of scale and lower costs.

Inequalities in Financing and Coverage

Over recent years, there has been much discussion about equality in health. Some argue that direct public spending is more effective in promoting equality, since everyone, even the poorest, in theory, gets medical attention on the basis of their needs. Others argue that equality can be achieved through public regulation and the use of proper economic incentives, and that some market solutions (such as the use of the proper economies of scale, competitive pricing, well-targeted subsidies and the use of suppliers with a reputation for quality) are indispensable in promoting equality.

It is difficult to establish which one of these views is the correct one. Doing so involves bringing in other variables, such as the efficiency of procedures, control and the degree to which there is transparency or social participation to monitor results. In some instances, these variables are impossible to measure, or are taken into account only after the fact in the evaluation of experiences.

Partial information for Latin America and the Caribbean in the 1990s shows that while public spending reached all income quintiles, some governments at particular points during the decade spent health resources in a more equitable manner than others.

For example, in 1991, the distribution of public health spending in Argentina favored the first and third quintiles, public health spending in Guatemala in 1999 and in Ecuador in 1995 favored the wealthiest quintiles. In most cases, this was not intentional, but resulted from policy focus and the implementation of health policies, in the search for greater transparency, oversight and the proper means of evaluation.

For instance, it is possible that the population in the richest quintile in Guatemala consumes more health services for treating chronic ailments because of longer life expectancy, whereas people in lower income quintiles consume less expensive primary medical services. However, it may be the case that in poor countries with fiscal constraints, public health spending directed toward the wealthier sectors end up reducing expenditures on the poor. Once again, asymmetries of information and the distribution of social capital (this time between the poor and the rich) mean that, where there are no proper policies for targeting expenditure, the relatively more well-off have the knowledge, information and lobbying capacity to garner relatively larger shares of health spending.

As we pursue this theme of health coverage, a different sort of picture begins to emerge. The highest levels of service coverage in the first quintile were achieved by two countries that undertook reforms: Brazil and Colombia. In Brazil, reform was driven by a sharp expansion in the public supply of services. Colombia undertook pluralist reforms, with a mix of public finance and private service provision.

Similarly, as table 2 shows, countries like Guatemala demonstrate a striking inequality in coverage as well as in the use of public spending. In addition, the proportion of out-of-pocket spending to overall health spending is high.

It is true that inequality in the distribution of private spending tends to be higher than in that of public spending, since out-of-pocket spending is the most inequitable form of health spending. Still, the question that needs to be asked is: how to encourage the proper use of the market to promote solutions that increase coverage and equity in health, in a context where the large ratio of out-of-pocket spending is both a challenge and a window of opportunity for rationalizing the use of scarce family resources in poor countries?

Market Solutions for Improving the Health of the Poor

The coverage and quality of health services for low-income populations need to be reviewed by analyzing the interrelation between financial mechanisms and service provision. Using this sort of approach, we can study both conventional mechanisms and nonconventional market ones that integrate public and private provision.

Public financing of public provision is the conventional way of organizing the delivery of services to the poor. The public sector finances public health services at different levels of government. Traditional budgetary arrangements are used to fund health establishments, pay salaries and evaluate health services through processes rather than results. A number of studies have shown that such solutions have not had a beneficial effect on health services.

Public funding of private provision enables innovative market solutions that increase the capacity of health services to respond to the needs of the poorest. In Latin America and the Caribbean, when contracts are transparent and results are monitored, outsourcing (such as the purchase of private supply services on the basis of health objectives or basic health packages) has proven to be efficient. According to research by the World Bank, this has been the case of such experiences as IGUALAS in the Dominican Republic. Other instances judged to have had positive effects include the schemes for basic health insurance for mothers and infants (SUMI) in Bolivia, whereby the public sector finances or subsidizes coverage of essential services to poor population groups. The Popular Health Insurance scheme in Mexico also stands out as an innovative experience in subsidized coverage of basic health insurance to groups with few means. It enables the supply and quality of services to be rationalized and expanded on the basis of the scant resources of groups that cannot afford to pay.

Private finance for the provision of public services is not very common, but can occur in instances where the expansion of private service comes up against capacity constraints and where spare capacity can be bought in the public sector. There have been examples of this in Latin America with the expansion of service provision by the ISAPRES in Chile during the 1990s. Similarly in Brazil, companies that organized health plans, such as AMIL and Golden Cross, bought specialized health services from public university hospitals. These experiences are not geared toward improving the health of the poor, but rather to consolidating markets for services aimed at middle-class users. Yet, following this modality, we can also find firms that take advantage of tax concessions, such as income tax rebates, to finance the activities of under-funded hospitals and public services for the poorest in such areas as maternity care. What is crucial here is to guarantee that new private resources are not used to fund more of the same, but to improve and innovate management and to build greater efficiency and quality in service provision.

Private funding for the private provision of services is where we find the widest range of innovative experiences in health for the benefit of the poorest. An important experience in this area is that of PROSALUD in Bolivia. This is an NGO funded through resources donated by international agencies, like USAID, and by the sale of high-quality services, such as maternity care (including for the public sector). Income from subsidies is combined with selling services to higher-income groups in order to provide services to the poorest. Such experiences have been common among philanthropic groups, in the social work of religious organizations, and in many other ways in which tax incentives are used by medium and large private companies.

Although there may be limitations in developing market solutions in the four instances listed above, it would seem that public funding of private provision and private funding of private provision provide the most potential for development. However there are two essential preconditions for their success. Firstly, they must ensure flexibility in the management of human, financial and material resources, so that these are freed from the bureaucratic constraints that have impeded progress in organizing health services in many Latin American and Caribbean countries. Secondly, use should be made of available dispersed financial resources in poor communities so as to ensure greater efficiency in the ways these are used to generate concrete results, minimizing financial risk and maximizing coverage and quality of service provisions to these communities.

The countries of Latin America and the Caribbean have been prodigal in producing innovative experiences in the private management of health services. Many of them, starting with the generation of risk pooling, such as the recent experience in popular health insurance in Mexico, have contributed to increasing levels of social health protection vis-à-vis the catastrophic costs that can decimate family budgets. However, very few of these experiences have been properly evaluated so that lessons can be learned and replicated elsewhere, both within the region and beyond.

International organizations need to promote efforts to assess such experiences and view them as market-based solutions, which—if properly evaluated, systematized and regulated—will be able to contribute to resolving problems of equity and health coverage in the region.




NOTES

[1] Arrow, K.J. 1963. Uncertainty and the Welfare Economics of Medical Care. American Economic Review 53(5): 941-73, December.
[2] Musgrove, P. 1996. Public and private roles in health: theory and financing patterns. World Bank Discussion Paper No. 339.

ICT solutions in health to the poor

Introduction

The increasing use of Information, Communication Technology (ICT) is a key factor to guarantee better solutions, access and quality of social policies driven to the poor. It is clear that the use of ICT promotes better access to quality education and, at the same time, it improves the security of the information systems which offer public services. In the health sector, ICT is use to assure good recording, surveillance systems and to reduce costs allowing a better combat of transmissible diseases, precise interventions for chronicle diseases and better health management in hospitals and primary care services.

Despite all these progresses, there is still a lot of prejudice mixed with ignorance regarding the good effects in the use of ICT to improve health to the poor. Recently I took notice of some efforts to disqualify the donation to a project which use ICT to improve access and quality in a charitable Hospital placed in a poor neighborhood in Brazil.

Just to avoid situations like that, we are sharing some examples about how ICT is changing the health environment and contributing to improve health systems in poor countries.

E-health recording is possible in the context of Bangladesh
Health service providers are getting hyperactive windows from the blessing of cybernetic connection. Newly developed computer based gadgets are best companion for doctors along with their traditional equipment like stethoscope and thermometer in many countries. Last week 120 health practitioners were successfully trained up on ICT implications in medical science in an international course titled e-Health & Learning: Health Informatics Training Courses for Practitioners (e-HL-HIC).

After the certificate distribution ceremony, the course contact, Dr Abul Kashem Mia, professor of BUET said: "A significant contribution can come from our doctors' community in developing a database system for keeping patients' records. Our doctors and hospitals are not following updated info preserving system. They are not even habituated to keeping patients' health data in their chambers and hospitals. They give prescriptions, pathology test reports, x-ray reports, etcetera to the patients to preserve in their house. Eventually, many of the patients lose the records. In the developed countries doctors are obliged to keep the report in their data bank. But we are witnessing contrary scenario in this country. In the era of info-tech patients do not need files to go from one medical department to another. By entering a patient's name all concerned doctors can see her or his reports right in their chambers or hospitals. After our two successful IT projects for the doctors' community, we are watching them gradually develop positive attitude towards keeping patients records in their responsible area. Now they have realized that data based software will catapult their services as well as save some additional expenditure”.

Health professionals in Ethiopia to get IT training

Ethiopian Minister of Health Dr. Kebede Worku said that the government of Ethiopia is preparing a Plan for Accelerated and Sustained Development to End Poverty (PASDEP) for the next five years in which health, gender and HIV/AIDS are given emphasis.
Speaking at a Health Care Technology Management Symposium, the State Minister indicated that manpower training, construction and establishment of well equipped health facilities are targeted areas to realize access to primary health care services universally by 2009/2010.

"Ethiopian Science and Technology Agency (ESTA) and the Ministry of Education (MoE) have developed a curriculum for the training of health technology technicians (diploma and degree level) and this would be the long-term solution for the poor planning, inappropriate procurement, and poor maintenance," he added.

Ethiopian science and Technology Agency Director General Mulugeta Amha on his part said that "the Agency, the Ministry of Health and ORBIS International, through a memorandum of understanding signed between them, have launched a project called BETTER (Biomedical, Engineers and Technical Training and Equipment Rehabilitation) project." One of the major objectives of the project is to organize clinical engineering workshop for participants drawn from the Ministry of Health, health bureaus, medial directors, heads and staff of maintenance centers and allied health professionals, he added.

India: Computerized registration of patients at CMCH

The Coimbatore Medical College Hospital has computerized registration of in-patients and out-patients in five of its wings. According to the hospital officials, the irksome wait for someone to painstakingly write out the details and issue coupons is as good as over.

The State Government's assistance for computerization will now ensure the maintaining of clear records that have no ambiguity caused by poor handwriting. Besides, patient details can also be had at the click of a button. Details such as patient name, age, address, in-patient or out-patient number, the type of disease and the nature of treatment and the duration will be fed into the system by six data entry operators appointed for this purpose.

A tertiary level referral unit hospital, the CMCH serves poor patients from Coimbatore, Erode and the Nilgiris districts. From writing out forms to nearly 5,000 out-patients a day that takes hours, the new system is expected to take only 30 seconds for each patient.

Uganda pioneers in healthcare information system
Uganda has become the first country in the world to be benefited from a healthcare information system that works for managing, measuring and monitoring the distribution of Anti retroviral drugs (ARVs). Harvey Stewart, the chief executive of Rocky Mountain Technology Group (RMTG), said the government approached them for a system which can block misuse of ARVs and improve distribution and accountability to donors’ satisfaction.

"This product, expected to be in use in Uganda by mid next year, is the most advanced and complete system in the world," Stewart said. Named ARVims Version 2.0, the system was designed by RMTG, an American technology company dealing in the development of software and services for the retail pharmacy industry. It is a product of collaboration with Uganda's

Ministry of Health, since 2003 and has been tried at Mulago, Mengo and Jinja hospitals.
Stewart said the system would enable public health officials to conveniently and accurately manage confidential information starting from when a patient registers for a program. It tracks all physician-patient conference information, monitors pharmacy inventory and produces reports for accountability and forecasting. Dr. Peter Waldron, the advisor to the RMTG president, explained that the system records periodic inventory summaries, stock usage, monthly and quarterly patient regimen and treatment trends. It also allows patients who change their places of residence during treatment to transfer between clinics because data can be transferred safely and confidentially.

"It provides other information to facilitate drug needs or usage tracking to prevent fraud as well as a number of patient demographic statistics and World Health Organization clinical stage summaries." The system was initially planned for 11 regional hospitals before it will be spread across 316 treatment facilities across the country. Ultimately, the system will improve the quality and consistency of treatment, as well as facilitate the management and effective use of medical resources. The Ministry of Health will also be in position to use clinical information to avoid 'stock outs' and other issues of procurement.

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If you have good examples and short notes about ICT in health benefiting the poor, please, notice this blog or sent a message to andrem@iadb.org.

How could the Millenium Development Goals fit better to Latin America and Caribbean needs?

André Medici

Alfredo Solari[1]

Introduction

Health conditions are related to and influenced by, the entire set of Millenium Development Goals (MDGs), not only those three directly aimed at health. Improved health status and increased access, effectiveness and equity of health services, provides synergistic support for the achievement of the MDGs not directly related to health. Given the synergy between health and all the MDGs, the new proposed targets are related not only with those MDGs aimed directly at health status (i.e.: Children and Maternal Mortality and AIDs, Malaria and Tuberculosis), but also with NonH-MDGs.

The advanced phase of the demographic and epidemiologic transitions being experienced by most LAC countries reduces in this region the relative importance of the health related MDGs. Achieving the “original” MDGs would impact only 17% of the regional burden of disease, compared with 95% in Sub Saharan Africa and 42% in all developing countries. Two thirds of the burden of disease in the LAC region is associated with non-communicable diseases (cardiovascular, cancer and mental disorders), and an additional 14% is related to injuries due to external causes, where violence and traffic accidents predominate.

These health problems affect mostly the poorest population groups and the socially excluded. Thus, the most salient dimensions of non-communicable diseases and injuries should be considered by the countries of the LAC region and by the international community, as valid targets for poverty reduction in the framework of the MDGs.

The achievement of the original health-related MDGs is addressing important poverty needs in the LAC Region. However, given the epidemiological profile of the poor in LAC, those goals need to be supplemented by others related to their predominant health needs. It should be considered that the epidemiological profile varies extremely across countries within the region, with Life Expectancy at Birth of just 53 years in Haiti and 78 years in Chile, Costa Rica or Cuba.

This precludes the establishment of identical goals for all the countries in the region. Thus, each country should evaluate its specific burden of disease as well as its distribution across income level, and identify its relevant health priorities. Based on that, they can set the goals and select the indicators that better reflect their health needs. Therefore, although this section suggests some additional targets, it does not preclude each country from setting its own priorities, goals and targets.

Thus, the methodological approach of results based management proposed by the MDGs becomes a common approach to all countries, regardless of their specific priorities, goals and targets.It is suggested that countries consider the following topic areas to adapt the original health-related MDGs to the changing epidemiological profile: obesity in children; access to school health programs; access to contraceptive services and products; reduce violence, specifically domestic violence; and reduce incidence of relevant communicable diseases, like Chagas and Tuberculosis, among others.

Proposing new targets for 2015

Reducing obesity among childhood – The second target of the first MDG (Malnutrition) would likely be achieved by most countries of the region with the exception of Central American countries, where nutritional status actually deteriorated during the 90´s. Making sure that this negative trend is reverse and the goal is achieved by all countries constitutes a priority for national and international action. But there is an emerging nutritional threat looming in the LAC horizon: the increasing proportion of obesity among all age groups starting with children under five years of age.

The proportion of obese young children, measured as weight for height, in LAC is 4.4%, compared with 3.3% as an average in all developing countries. Within LAC there are differences by sub-region: the proportion of obese children is lower in Central America, larger in the Caribbean and the largest in the Southern cone countries where it reaches almost 5%. It is suggested that the LAC countries considered children obesity as a development priority and, using the Body Mass Index (BMI) as an indicator, target the reduction of the proportion of overweight children by the year 2015.

Access to school heath programs – Universal coverage of primary education by LAC countries opens up a practical (school based) setting to improve health promotion and disease prevention, through health education aimed at school-age children. These programs have huge impact to guarantee good nutritional standards, control of communicable diseases in childhood, access to immunization and basic orientation about healthy behavior among children, teenagers and even families.

Many LAC schools are developing these types of programs, although there is little systematized information about this trend. Accessing this information through the Ministries of Education and Health it would be feasible to establish a base-line for 2006 and a target for the year 2015. The indicator could be the percentage of schools (or students) that have implemented health promotion programs. This could be a new target associated with MDG 2 of universal completion of primary education.

Access to contraceptive services and products for women of reproductive age – The improvement of maternal health, in particular the reduction of maternal mortality is the most challenging health-related MDG in LAC. There has been limited or no progress in this indicator from 1990 to the present. On the contrary in some countries of the region Maternal Mortality is increasing.

The indicator selected to reflect improvements in maternal health is the proportion of deliveries births attended by skilled personnel. This indicator covers only the curative response to the problem. Lower maternal mortality in LAC has resulted from timely access to contraceptive services and supplies, showing the importance of this intervention for improving maternal health. The rate of contraceptive use, among women in reproductive age in stable unions, is under 40% in countries like Haiti, Peru, Guatemala and Guiana. The effective access to contraceptive services is not only important for maternal health per se, but also contributes to gender equity and women empowerment.

Thus, improving access to contraceptive benefits could be established as a target in relation to two MDGs: 3 (gender) and 5 (maternal health). The Demographic and Health Surveys, undertaken regularly in many countries of the region, or general-purpose household surveys, can provide the information required to monitor this variable in the coming years in LAC.

Domestic violence – In countries like Guatemala and Peru in 2000, household surveys showed domestic violence to be suffered by over 41% of women in stable unions. Violence is not only widespread; it is also a serious development challenge in LAC for two reasons: it increases the costs of social programs and it detracts from productivity and investment. Domestic violence is a particular challenge because of its negative effects upon women and children.

Thus in LAC, an indicator of domestic violence would be an important contribution to ensuring better health status and gender equity. Given its relevance, household surveys done in the region are figuring out ways to improve measurement and avoid under-reporting of domestic violence. The improvement of the data on domestic violence could be one of the targets associated with MDG 5.

Reducing the incidence of Tuberculosis and Chagas– In LAC these two diseases cause a burden that is five to ten times larger than that of Malaria. Public health programs aimed at preventing and controlling Tuberculosis and Chagas in LAC are worsening in many LAC countries. The inclusion of specific targets related with these two diseases is a good way to improve the response of the national epidemiological surveillance systems and to improve the health status of millions in the next decade in LAC.

Reducing Violence - With 10 DALY lost per 1000 people per year LAC presents the highest violence rates of the developing world (3 per thousand). Most episodes of violence are associated with organized crime and drug dealing – problems that are present in many countries in the Region. The fight against violence constitutes one of the bigger challenges to promote a stable economic and social environment and to develop an adequate institutional setting to achieve all MDG. A specific target associated with reducing violence could be established under the umbrella of the MDG 8. The reduction of the number of homicides could be the proxy indicator associated with this target.

Final Remarks

The discussion about indicators and policies to promote appropriated health targets to LAC countries cannot be missed. The Inter-agency expert group, coordinated by the UNDP, will meet at the end of October in Rome, and the inclusion of new indicators will be discussed there. If your planned proposal targets this; we would be able to provide more information later at the end of September, since we are in the process of convening an expert review group that will look at the suggested indicators more in detail.

Other related references about MDG could be find in:

http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=591088 and http://www.iadb.org/sds/publication/publication_3594_e.htm

[1] Alfredo Solari is an independent consultant in health and nutrition and former Ministry of Health of Uruguay.