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?
 

Playing with data of the World Values Survey (2010-2014)

You can find the new data here (wave 6: 2010-2014). 

Dealing with prostitution across Europe

The Guardian posted an interesting article regarding how politicians are dealing with ever-lasting prostitution and the externalities of this social phenomenon. The answer to why prostitution has been around since forever is fairly logic and easy: there´s  an actual market for it; buyers and sellers, services and products...and prices. But the 21st century calls for a new approach to get a hold on social behaviors the likes of prostitution, and it seems that the efforts made by politicians to "solve" them need help from an economic way of thinking.

The Guardian article reads: 

Politicians across Europe are considering reforming prostitution laws as part of the fight against human trafficking and sexual exploitation. France has criminalised the purchase of sex, a model they have taken from Sweden, which has pioneered a hard-line approach to prostitution since 1999. But where do European countries stand now? -The Guardian. 

The interactive map shows how politicians attempt to regulate prostitution in European countries. However, what can we say from an economic point of view? How can economics shed a light on the regulations concerned with prostitution and its externalities? 

What improves health care systems

In a very interesting post on Singapore's hospital industry, Tyler Cowen offers some key lessons:

. . . urbanization is good for your health care system. That is another reason to deregulate urban density. 

. . . congestion prices for your roads make it easier for hospitals to compete. Driving north on the Beltway to a Maryland hospital, from Fairfax, isn’t so great, especially if you are really sick. 

Information and health

We examine the role of information in understanding the differential effects of income on the demand for health. In the health capital framework of Grossman (JPE, 1972), we derive the testable hypotheses that individuals adjust their diet in a healthier direction upon receiving negative health information, and that the effect is greater for richer individuals. Based on unique Chinese longitudinal data and a regression discontinuity design that exploits the exogenous cutoff of systolic blood pressure in the diagnosis of hypertension, we find that, upon receiving hypertension diagnosis, individuals reduce fat intake significantly, and richer individuals reduce more. Our results also indicate that among the rich, hypertension diagnosis is more effective for individuals with lower education.

That is from the new published paper "Does information on health status lead to a healthier lifestyle? Evidence from China on the effect of hypertension diagnosis on food consumption" by Zhao, Konishi, and Glewwe (Journal of Health Economics, March 2013).

The importance of delivery systems in global health

Very interesting ideas by Jim Kim, the new World Bank Presidnet. See a video and highlights of the transcripts of his recent remarks at the Brookings. 

On the health effects of the Cultural Revolution

In this paper we extend this literature to examine the long-term health effects of mass political violence experienced in utero and in childhood using China’s Cultural Revolution as a natural experiment. We find that individuals who were in utero in the Cultural Revolution have reduced lung capacity later in life, but we find no evidence that being in utero has adverse effects on other health indicators later in life. We find more evidence that being an adolescent in the Cultural Revolution has an adverse effect on health later in life. Specifically, we find that individuals who were adolescents in the Cultural Revolution have higher blood pressure and reduced ability to engage in activities of daily living later in life. We also find that males who were adolescents in the Cultural Revolution have reduced cognitive skills later in life, while females who were adolescents in the Cultural Revolution have reduced lung capacity in middle and old age.

That is from the new paper "The Long-term Health Effects of Mass Political Violence: Evidence From China’s Cultural Revolution" by Islam, Raschky, and Smyth.

Should aid reward performance?

Chris Blattman links to a list of new and interesting papers on field experiments on governance and politics. 

Among the papers it is this one: "Should Aid Reward Performance? Evidence from a field experiment on health and education in Indonesia." 

Abstract: This paper reports an experiment in over 3,000 Indonesian villages designed to test the role of performance incentives in improving the efficacy of aid programs. Villages in a randomly-chosen one-third of subdistricts received a block grant to improve 12 maternal and child health and education indicators, with the size of the subsequent year’s block grant depending on performance relative to other villages in the subdistrict. Villages in remaining subdistricts were randomly assigned to either an otherwise identical block grant program with no financial link to performance, or to a pure control group. We find that the incentivized villages performed better on health than the non-incentivized villages, particularly in less developed provinces, but found no impact of incentives on education . . . 

The authors conclude:

In sum, the evidence presented here suggests that properly designed, performance based incentives can be a useful addition to aid programs. We found that adding performance incentives increased health outcomes, particularly in poorer areas with worse performance at baseline. Though the gains from incentives were modest, we found little downside from the incentives.

I have not read the paper entirely but is intriguing that performance incentives worked for health but did not for education outcomes. 

Vermont’s Move Toward Single-Payer Health Insurance

Economix reports:

Now Vermont has passed legislation moving the state toward a Canadian-style universal, single-payer health-insurance system, to be phased in alongside national health-care changes. The plan relies heavily on the prospect of waivers that will allow it to reallocate some federal Medicaidfunds and on other sources of money that have not yet fully specified.

As Vermont moves forward with its plan, a fascinating standard of comparison should emerge. The Canadian single-payer system grew out of successful innovations in the province of Saskatchewan, which led other provinces to follow suit. Here in Massachusetts, many of us are looking hopefully over our shoulder at the Green Mountain State.

Is this a straight mistake, an efficient move, or a needed step in a process of trial and error? 

Are We Finally Winning the War on Cancer?

From the article: Cutler, David M.. 2008. "Are We Finally Winning the War on Cancer?" Journal of Economic Perspectives, 22(4): 3–26.

Some facts:   

Between 1990 and 2004, age-adjusted cancer mortality fell by 13 percent.

Lung cancer (including cancer of the trachea and bronchus) is the leading cancer-related cause of death, accounting for 28 percent of cancer deaths.

The risk of developing lung cancer is 10 times higher among heavy smokers (people smoking 25 or more cigarettes per day) than among nonsmokers (this ratio is termed the relative risk).

Between 1990 and 2004, tobacco-related cancer mortality fell by 8 percent, accounting for 22 percent of the total reduction in cancer-related deaths over this time period.

Colorectal cancer mortality declined by 26 percent between 1990 and 2004, accounting for 22 percent of the overall reduction in cancer deaths, the same share of the reduction as tobacco-related cancers.

Breast cancer is the third leading cause of cancer mortality (second among women), accounting for 7 percent of all cancer deaths.

. . . [t]he reduction in lung cancer incidence is a result of reduced rates of smoking. Lung cancer incidence follows smoking trends (with a lag), and studies suggest that reductions in smoking can explain the bulk of trends in lung cancer incidence (Holford, Zhang, Zheng, and McKay, 1998).

[regarding colorectal cancer] the most important factor in reduced mortality is increased colonoscopy screening.

Another take on the war on cancer is in this TED video.

Quality of medical advice in low-income countries

Some facts from the article by Das, Jishnu, Jeffrey Hammer, and Kenneth Leonard. 2008. "The Quality of Medical Advice in Low-Income Countries." Journal of Economic Perspectives, 22(2): 93–114:

Doctors in Tanzania complete less than a quarter of the essential checklist for patients with classic symptoms of malaria, a disease that kills 63,000–96,000 Tanzanians each year. A public-sector doctor in India asks one (and only one) question in the average interaction: “What’s wrong with you?” In Paraguay, the amount of time a doctor spends with a patient has nothing to do with the severity of the patient’s illness.

. . . [t]hree years of medical school in Tanzania result in only a 1 percentage point increase in the probability of a correct diagnosis.

[The] usage of health facilities in India—both in a relatively rich urban sample and a relatively poor rural sample—is higher than the U.S. average of 3.15 visits per person per year

The average time spent with patients in Paraguay is similar to that in many high-income rich countries. At over eight minutes per visit, Paraguay ranks higher than Germany and Spain, though lower than the United Kingdom or Belgium. In contrast, consider Delhi. In the average interaction, the doctor sees the patient for 3.8 minutes, asks 3.2 questions, and performs just over one examination procedure.

. . . [c]ommunity meetings “empowered” women to demand better care from their doctors and that consequently there was a large increase in effort and hence the quality of care delivered.

. . . [s]tandard measures of health care quality in low-income countries, based on physical infrastructure and sometimes on availability of certain drugs, are sorely inadequate. The quality of medical advice cannot be “proxied for” by measures of physical infrastructure.



Economics of HIV/AIDS

From Canning, David. 2006. "The Economics of HIV/AIDS in Low-Income Countries: The Case for Prevention." Journal of Economic Perspectives, 20(3): 121–142:

• . . . [a] dollar spent on prevention is around 28 times more effective in reducing the burden of disease, as measured by illness and premature death [in contrast to treatment] . . . the limited resources available to combat HIV/AIDS in low-income countries should be targeted toward prevention rather than treatment.
• While other criterion can be used for setting priorities, promoting AIDS treatment using antiretrovirals in resource-constrained countries comes at a huge cost in terms of avoidable deaths that could be prevented by devoting resources to prevention interventions that would substantially lower the scale of the epidemic.
• Based on a study of discordant couples (where one partner has the HIV virus, but the other does not) in Uganda, the risk of causing a new infection is highest in the first two and a half months after infection (a transmission risk of 0.0082/coital act) and in the last 24 months of life (0.0028/coital act), with a low of 0.0007/coital act in the middle period (Wawer et al., 2005). While these transmission rates per sex act are low, the cumulative probability of transmission from repeated unprotected sex with an infected partner quickly becomes large.
• Mother-tochild transmission can be dramatically lowered by giving HIV-positive mothers a single dose of nevirapine at the onset of labor and a single dose to the infant at birth. This policy may reduce transmission to below 3 percent at birth.
• The ABC—Abstain, Be Faithful, Use Condoms—initiative in Uganda, combined with a high level of political commitment to HIV prevention, was successful in significantly reducing the prevalence of AIDS.
• Recent evidence from a randomized trial appears to support the beneficial effects of male circumcision in reducing HIV transmission.
• Medeiros, Diaz and Filho (2002) find in a Brazilian study that the average duration of benefits from first-line antiretroviral therapy was only 14.1 months. This finding suggests that a need for second-line antiretrovirals will quickly emerge in Africa, but while drug costs of first-line treatment are now low, with generic drugs being available at a cost of around $175 per year, the costs of the second-line drugs can be ten times higher.
• The major opportunistic infection, and leading cause of death for those with AIDS in Africa, is tuberculosis.
• Brazil is successfully providing universal access to antiretroviral therapy.
•  . . . [f]ocus on prevention in the high-mortality countries of Africa will reduce new HIV infections in the region by around 3.53 million per year, as compared with an estimated reduction of 40,000 a year with antiretroviral therapy.
•  Development of an effective HIV/AIDS vaccine would bring enormous benefits because of the many millions of HIV infections that could be avoided, which justifies large investments even if the probability of success is low.

This is a TED video that examines AIDS stats from an economic point of view.