Jun 27, 2014

When can a developing country afford a better health-care system?

At what level of income per-capita a developing country can afford, on average, a much better health care system?

Let's assume that the best health care system is offered by countries or territories like Hong Kong, Singapore, Japan, Israel, Spain, Italy, Australia, South Korea, Switzerland, and Sweden. In other words, the top 10 according to a Bloomberg raking. We know that broadly speaking these systems can be described in the following way: 

1. Hong Kong (mixed system). There are public and private hospitals, although the majority are public. For eligible people the public hospitals work as a universal system. 

2. Singapore (universal, publicly and privately funded, and with co-payments to reduce over-utilization). The government regulates prices, but there is high competition in costs. "Patients are free to choose the providers." The current health care system started in 1983, broadly speaking. 

3. Japan (universal, publicly funded, and the government pays 70% of the costs, the patients pay the remaining, and that varies depending on age and income). Patients are free to choose providers. The government regulates fees, and the universal system started in 1961.

4. Israel (universal). The universal system began in 1995. Private insurance plays an important role.   

5. Spain Universal coverage started with the General Health Law of 1986. 

6. Italy (mixed private and public sector). Universal coverage coexists with a free-market system. Universal coverage started in 1978.

7. Australia. The universal health care was instituted in 1984. It coexists with a private health system. From Wikipedia:
The government encourages individuals with income above a set level to privately insure. This is done by charging these (higher income) individuals a surcharge of 1% to 1.5% of income if they do not take out private health insurance, and a means-tested rebate. This is to encourage individuals who are perceived as able to afford private insurance not to resort to the public health system.[13] [There are other pretty serious penalties that people with certain characteristics have to pay if they don not take private insurance]
. . . Medicare is funded by a 1.5% tax levy on taxpayers with incomes above a threshold amount, with an extra 1% levy on high income earners without private health insurance, and the balance being provided by the government from general revenue.[14]

8. South Korea. Universal, and the reform started in 1977 and ended in 1989.   

9. Switzerland (universal).

10. Sweden (universal). 

Most of these systems are classified as "universal," which means that, in general, most, or all, of the people are covered. That does not tell us anything about funding (which can be mainly by the government, or a combination of individuals and government sources), nor does it tell us anything about who provides the services (again, by government or not). For the complexities in the classification of health-care systems, see here

How rich were these countries when the main structure of their health systems, as we know them today, started?

Gross domestic product (PPP) per capita GDP
Current international dollar

1983. Singapore.         9737
1995. Israel.               17389
1986. Spain.               10284
1984. Australia.          12876
1989. South Korea.      6965
*Source: IMF. I did not consider the other countries as their starting year was not stated in the source or data was not available. 

Which gives us an average of 11450.

Take a country like Guatemala that in 2014 has an estimated GDP (PPP) per capita (current international dollars) of 5,480, and a real growth rate of 3%.

Guatemala will need to double its income per capita, which leaving many things constant, could happen in 24 or 25 years, in 2038!

Technology and other factors, like substantial institutional improvements, can make that happen sooner (and the opposite is also true). 

To be sure, the relationship between income per-capita and the quality of health care is not linear, and the US is an example of that. 

What are the problems with this analysis?

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