How can the economic crisis affect health spending and MDG achievement? How can the economic crisis affect health spending and MDG achievement? ISPHC Conference.

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How can the economic crisis affect health spending and MDG achievement?

ISPHC ConferenceMarch 23, 2010

Maureen LewisEconomic Advisor, World Bank [email protected]

Outline of presentationMillennium Development Goals

and healthRegional health spending

patternsThe current economic crisis and

impacts on health spendingImplications of crisis on health

status and household wellbeingCoping, compensation and

opportunities of economic crisis

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Millennium Development Goals:progress between 1990-2015

End poverty and hungerUniversal educationGender equalityChild healthMaternal healthCombat HIV/AIDSEnvironmental sustainabilityGlobal partnerships

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Achievement of MDGs and improvements in health status

MDG achievement requires:◦Good policies◦Adequate funding◦Adequate targeting◦Effective programs ◦Reaching the vulnerable

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2001 2002 2003 2004 2005 2006 20070

1

2

3

4

5

6

7

8

Total health expenditure (percent of GDP)

East Asia & Pacific Europe & Central AsiaLatin America & Caribbean Middle East & North AfricaSouth Asia Sub-Saharan Africa

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2001 2002 2003 2004 2005 2006 20070

0.1

0.2

0.3

0.4

0.5

0.6

0.7

General government/total health spending

East Asia & Pacific Europe & Central AsiaLatin America & Caribbean Middle East & North AfricaSouth Asia Sub-Saharan Africa

7

2001 2002 2003 2004 2005 2006 20070

100

200

300

400

500

600

700

800

Per capita government health spending (PPP int. $)

East Asia & Pacific Europe & Central AsiaLatin America & Caribbean Middle East & North AfricaSouth Asia Sub-Saharan Africa

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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070%

1%

2%

3%

4%

5%

6%

7%

8%

Latin America & Caribbean - Total Health Expenditure as % of GDP and Average GDP Growth

Avgerage GDP Growth Total Health Expenditure as % of GDP

Year

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Impact of the current crisis on health spending

Eastern Europe has fared the worst and spending has been cut

Latin America has fared relatively well:◦Mexico, Caribbean, El Salvador were hard

hit because of ties to the US but health (and education) spending protected

◦More insulated from global crash and better prepared

◦Counter cyclical household transfers: government spending rose on conditional cash transfers

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Why the crisis affects health

Household income declines making health care, food and other goods less affordable

Public health spending potentially at risk

Spending on HIV/AIDS and access to services at risk

Safety nets jeopardizedMomentum of health reform can be

jettisoned

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Dynamics of growth and health spending

Education spending more volatile than health spending, but health spending is more affected by crises

Trends in health spending are consistently positive but growth in spending is highly volatile

Post-crisis response is rapid

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

0

2

4

6

8

10

12

14

0

50

100

150

200

250

Changes in Growth Rates of Government Health Expenditure and GDP and Projections, 1996-2011

GDP growth (right axis)

Government Health Expendi-ture Growth (right axis)

Government Health Expendi-ture per Capita in PPP Dollars (left axis)

Perc

ent

Change

Govern

ment H

ealth

Expenditu

re p

er C

apita

(PP

P)

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

0

1

2

3

4

5

6

7

8

9

0

20

40

60

80

100

120

140

160

Changes in Growth Rates of Private Health Ex-penditure and GDP with Projected Trends for

Developing and Transition Countries, 1996-2011

GDP growth (right axis)

Private Health Expenditure Growth (right axis)

Private Health Expenditure per Capita in PPP Dollars (left axis)

Perc

ent

Change

Priv

ate

Health

Exp

en

ditu

re p

er C

ap

ita (P

PP

)

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Marker for declines in health spending: pharmaceuticals

Pharmaceutical purchases good indicator of overall health spending as it follows downturns

WHO data show decline in Europe due to downturn in the Baltics, Romania and Ukraine

Little decline in pharmaceutical purchases elsewhere

(Note: data excludes poorest countries due to data deficiencies)

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0,84

1,24

0,90

1,20

1,10

0,92

1,00

1,28

0,80

0,85

0,90

0,95

1,00

1,05

1,10

1,15

1,20

1,25

1,30

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

Average pharmaceutical expenditure indexGlobal and WHO regions

(Evolution on Q1 08)

GLOBAL AFRO AMRO EMRO EURO SEARO WPRO

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UNDISBURSED FUNDS CUSHION HIV/AIDS

•HIV/AIDS funding has increased rapidly since 2000• Overall funding is continuing to grow but at a slower rate• Countries have had difficulty absorbing Global Fund grants• Overhang of undisbursed funds at country level can cushion HIV/AIDS funding

East Asia & Pacific

Eastern Europe & Central

Asia

Latin America & Car-ibbean

North Africa & Middle East

South Asia

SSA: East Africa

SSA: Southern

Africa

SSA: West & Central Africa

World0%

10%

20%

30%

40%

50%

60%

29%

24%

35%37%

39%41%

49%

37%38%

Undisbursed GFATM HIV/AIDS Grants as Percentage

of Total Active Grants (Rounds 1-7)

% Active Rnd 1-7 Grants Not Yet Disbursed

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Household impacts of crisis

Among hard hit countries household coping important

Complements (or substitutes for) public safety net spending

Suggests trade offs households are forced to make

In Africa overhang of food crisis affecting nutrition and other household spending

Qualitative evidence suggests impacts on low income households in some less affected countries

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Impact on Armenia’s Households

1 2 3 4 50.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Stopped visiting health centersStopped buying medicineDecreased food conumption

Income quintiles

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Impact on Turkey’s Households

Poorest 20% Middle 20% Richest 20%0%

20%

40%

60%

80%75%

32%29%

14%14%

5%

Decreased the amount of food consumption Reduced the use of health services

Reduced education expenditures

Asset Quintile

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Crises and Implications for Health Status

Over the period 1980-2004, one million excess infant deaths in Africa due to 1% or greater decline in GDP

Effects vary across income groupsThe poor and near-poor are the

most vulnerableThe wealthier the country the

better they are able to copeDuring the Depression of the 1930s

US health status improved

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Coping and compensating for economic crises in health

Factors that protect health status in an economic crisis: ◦counter cyclical government spending◦continued spending on public health ◦Targeted spending on sound programs

Government role critical for households

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Lessons from Previous Crises: Argentina 2001-2002

The Argentina 2001-2002 Crisis◦Health spending halved between 2001 and

2002, however: share of health in government expenditures

rose, public health programs spending increased 70%

◦13% of households cancelled their health insurance and 57% reported reduction in utilization of preventive services

◦National cash transfer program expanded to support the poorest households

◦Lessons reflected in current crisis

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Crisis as Opportunity

Difficult changes can often only be addressed during a crisis

Political decisions are more feasible during crises

Crisis requires rethinking how programs function and what they cost

Some reforms are long overdue

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The BahamasThe Bahamas has taken the

opportunity to rethink and streamline its HIV/AIDS program:◦Closer oversight of drug

procurement◦Better forecasting of ART needs◦Substitution of generics for brand

drugs◦Increased focus on adherence to

keep people on first line drugs longer

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LatviaNational income declined by 15

percentage points Crisis response relied almost

exclusively on contraction in public spending

the government has implemented long pending reforms:◦ eliminated unused hospital beds◦ invigorated outpatient care◦ prioritized effective health care

procedures by adjusting the list of ineligible health services

ConclusionsCrisis effects are strongest in Middle and

Low Income Countries of Eastern EuropeCrises have strong effects on

government and household spending on health

Lowest income households are most likely to curtail spending

Foreign assistance levels and crisis in developing and transition countries unrelated so government role key for coping

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ConclusionsCountries have become more

sophisticated at crisis managementCombination of lower deficits and

higher priority of social spending have contributed to protecting education and health spending in most countries this time

Most reforms are not being derailed by the crisis

Projected recovery expected to be rapid, but will take longer in hardest hit countries