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MACROECONOMICS AND HEALTH:INVESTING IN HEALTH FOR ECONOMIC DEVELOPMENT
REPORT BY THE MEXICAN COMMISSION ON MACROECONOMICS AND HEALTH (MCMH)
VERSION FOR CONSULTATION AND COMMENTS
November, 18th.
2
Table of contents
1. Overview of the MCMH´s objectives, organization and main findingsNora Lustig
2. The Human Development Trap in MexicoDavid Mayer
3. Inequality in Health and Health Care: Mexico in comparative perspectiveJohn Scott
4. Social Protection in HealthCarlos Noriega
5. The Importance of Public Goods in the Health Sector: A Case Study of MexicoLuis de la Calle
6. Main Recommendations
3
Overview of the MCMH´s objectives, organization and main findings
Nora Lustig
4
• In the case of middle-income countries, the International Commission of Macroeconomics and Health (CMH) stated the following:
“In most middle-income countries, average health spending per person is already adequate to ensure universal coverage for essential interventions. Yet such coverage does not reach many of the poor. In view of the adverse consequences of ill health on overall economic development and poverty reduction, we strongly urge the middle-income countries to undertake fiscal and organizational reforms to ensure universal coverage for priority health interventions.”
• Additionally, the CMH suggested the creation of similar commissions on a national level.
I. Introduction
5
• The Mexican Commission on Macroeconomics and Health was created on July 29th, 2002 by the initiative of the Minister of Health of Mexico, Julio Frenk.
• The Commission includes experts from academic institutions, the government, civil society and the private sector. Based on their professional experience, these experts have been able to analyze and reflect upon the link between health and economic development.
I. Introduction
6
• The Commission’s mandate consists of:
• analyzing the relationship between investing in health and the economic development of Mexico;
• evaluating
• the extent to which advances have been made in health indicators in our country
• Mexico’s investment in health including public goods
• the existing system of social protection against adverse health shocks.
• proposing health-related actions and initiatives, specifically in the realm of public policy, in order to reap benefits for economic development and poverty reduction.
I. Introduction
7
• A study on the direct relation between health and growth in Mexico (1970-1995) using life expectancy and the mortality rate for different age groups as health indicators, suggests that health is responsible for approximately one third of long-term economic growth
I. Introduction
8
II. Health and poverty traps
• Due to its direct and indirect impact, health is one of the important determinants of the incidence of poverty as well as its persistence over time, known as “poverty traps”.
• For a poverty trap to exist, several elements must be combined. The principal ones are:
1. increasing returns on education (remuneration progressively increases for those who have higher education levels) and
2. a population that can clearly (and statistically) be divided in two groups, one with low human capital and another with high human capital.
• In Mexico there is evidence of a poverty trap.
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III. Systemic and Idiosyncratic Shocks and Social Protection
a. Idiosyncratic(illness, death, unemployment, or a bad harvest)
Social Insurance
b. Systemic (epidemics, economic crises and natural disasters)
Safety Nets
• It is important not only to create incentives and implement policies to invest in health, but also to avoid or minimize its deterioration in adverse situations
• Adverse situations
10
IV. Health levels in Mexico
• Health levels in Mexico are below those for countries with equivalent per capita income levels
1. The expected infant mortality rate, controlling for Mexico’s level of development, is 22% below the actual observed rates
2. Mexico reported twenty thousand infant deaths above the norm
11
Millennium Development Goals
Goal 1: Halve the proportion of people who suffer from hunger
• If we use the relationship in height according to age as an indicator of malnutrition, we will find that the decrease between 1988 and 1999 was about 22% less that what was required to fulfill the Millennium Development Goal, assuming a linear trend.
• Between 1992 and 2002, “food poverty” fell by only 10%, much less than the required 44%.
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Millennium Development Goals
Goal 4: Evolution of child and infant mortality indicators
• In terms of Millennium Development Goals, Mexico has shown a progress rate of 55.4%, which is greater than that observed in four of the developed countries and satisfactory in terms of the Goals because it surpasses 44%.
• Likewise, in the last decade Mexico has had a significant improvement in vaccination rates, especially against measles. In 1990 only 75.3% of infants under 12 months had been vaccinated against this disease and in 2002 the number was at 96%.
13
Millennium Development Goals
Goal 5: Maternal health
• The progress on maternal mortality rate is 32.7%, lower than required.
• The number of births attended by trained medical personnel should be 100%, but in Mexico it is only at 86%.
14
Millennium Development Goals
Goal 6: Combat HIV/AIDS, malaria and other serious diseases
• In terms of Goal 6, which consists of reducing the spread of HIV/AIDS and the incidence of malaria and other serious diseases, important progress has been made.
– The rate of HIV/AIDS among the adult population in Mexico is one of the lowest in Latin America and the Caribbean in proportion to its population, but it has the second highest number of people living with the disease.
– Regarding malaria, the situation in Mexico is substantially better than that of the rest of Latin America and Caribbean countries. In 2000, only eight cases occurred for every 100,000 inhabitants.
– In Latin America and the Caribbean, there were eight deaths caused by tuberculosis (TB) for every 100,000 inhabitants in 2002. In Mexico during that same year, only five deaths occurred for every 100,000 inhabitants.
15
Millennium Development Goals
Goal 7: Sustainable access to safe drinking water
• In terms of environmental conditions and sanitation, measured through access to drinking water, on average Mexico is very close to achieving the target suggested by the Millennium Development Goals.
• Nevertheless, compared to other Latin American countries, access levels are still lower than those observed in countries like Chile and Colombia.
16
• In Mexico, there is enormous disparity in health levels across states and municipalities:
Infant mortality:
A. In some areas in the state of Chiapas, infant mortality (at 66.2 per thousand live births) is similar to that of countries much poorer than Mexico like Sudan.
B. In contrast, the Benito Juarez district in Mexico City, with a rate of 17.2, has levels similar to Western Europe and Israel.
Beyond the Millennium Development Goals
17
Beyond the Millennium Development Goals Closing the gaps. Infant mortality rate by municipalities, 2000
17.1985
10
20
30
40
50
60
70
10
20
30
40
50
60
70
Infant Mortality rate
Ranked by marginality index
Source: Based on CONAPO (2001).
18
C. There is also great differences in childbirth coverage under medical supervision
i. Half of the states have more than 90% coverage, but there are states with less than 60% coverage.
ii. At municipalities level, the percentage of childbirths attended in the 386 highly-marginalized municipalities is slightly higher than 36%.
In contrast, in the 247 least-marginalized municipalities, coverage in clinics is almost 94%.
Also, in some indigenous communities the percentage of births attended by medical personal is under 10%.
Beyond the Millennium Development Goals
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• Health-related goals for Mexico should include confronting new challenges such as the increase of cardiovascular diseases and diabetes mellitus.
• Chronic illnesses of this nature are associated with changing income levels as well as demographic changes.
• The incidence of diabetes has increased greatly in recent years; at the end of the 70’s it was the fourth cause of death in our country and now it is considered the first, causing 12% of all deaths in Mexico.
New Challenges
20
• In 2003, Mexico’s total investment in health care was 6.1% of the GDP, lower than: 1) The Latin American average (6.3%).
2) Other countries with similar income levels, such as, Chile (7.0%), Costa Rica (7.2%), Brazil (7.6%), and Uruguay (10.9%).
3) OCDE countries, such as, Canada, (9.9%), United States (14.6%).
• In 2001 public investment represented 44% of the total investment in health, while in Latin American countries with similar or even lower income to that of Mexico had a higher percentage of public investment, such as, Argentina (48.5%) and Nicaragua (53.4%) .
V. Are we Investing well in Health?
21
• A comparative international study by the World Health Organization in 2000 indicated that the most critical problem presented by Mexico at the end of the millennium, being ranked 144th among 189 countries, was that of “equity in contributions” for the following reasons:
1) A high proportion of persons (over 50%) does not have any kind of insurance.
2) Out-of-pocket payments represent more than half of total health expenditures.
V. Are we Investing well in Health?
22
• Out-of-pocket payments tend to be greater, as a percentage of total family income, in the poorest homes.
• The Mexican population in the lowest income decile spends, in direct payments, approximately 6.3% of its income on health attention, while homes in the highest-income decile spend 2.6% of theirs.
V. Are we Investing well in Health?
23
• The government program, most important in terms of resources and coverage that provide health benefits is the Human Development Program Oportunidades.
• Oportunidades is associated with…
in maternal mortality (11%) stronger very highly in infant mortality (2%) marginalized municipalities
average food consumption (11%)
V. Are we Investing well in Health?
24
• Investment in health has important returns: according to World Bank estimates (2004), for countries with an institutional quality index that is equal to the mean, a 10% increase in public expenditures in health as a proportion of the GNP is associated with:
1) 7% reduction in maternal mortality rates,
2) 0.69% reduction in mortality rates for children under the age of five, and
3) 4.14% decrease in the number of underweight children under five.
V. Are we Investing well in Health?
25
The Human Development Trap in Mexico
David Mayer
26
• Nobel Prize studies: Nutrition and health explain between a third and half of the economic growth in England over the last two centuries (Fogel).
• Similar results are found using diverse health variables, countries and regions, including Mexico and Latin America.
Nutrition and Health Promote Long-Term Economic Growth
27
Human Capital
Investment
Production and
Technological Change
Intergenerational Feedback
Human Development
Economic Growth
Pro-Market Reforms in: Trade, Investment, Legal
and Financial Institutions…
Characterized by Market Failures
Human Development and Economic Growth
28
Next Generation
Family Wealth: Income,
Education,
Health
Early Child Development
Education
Income, Education,
Health
Health
Evidence for a Poverty Trap in Mexico
29
Poverty Trap Twin-Peaked Distribution of Educational Achievement
Slow Transition or Poverty Trap
Underinvestment in ECD Unrealized Returns to ECD
Underinvestment in Education
Unrealized Increasing Returns to Education
Early Child Development (ECD) and the Intergenerational Accumulation of Human Capital
30
1984 1989 1992 1994
20001996 1998
Twin-Peaked Distribution of Education in Mexico
Fuente: ENIGH 1984, 1989, 1992, 1994, 1996, 1998, 2000
31
Nutrition and health, in particular ECD, can be instrumental in debilitating the hold of poverty traps in human capital accumulation
Conclusions
32
Inequality in Health and Health Care: Mexico in comparative perspective
John Scott
33
• Inequalities in health and access to health care in Mexico are high by international standards
• The capacity to reduce these inequalities through public action is constrained by:– Low fiscal capacity– Low health priority in public spending allocation– Fractioned public health care system with deep
contrasts in financing, benefits, and coverage
Health and Health Care Inequalities
34
Concentration coefficient: low hight/age (0-5 year olds)
Do
min
ica
n R
epu
blic
Pe
ru
Tu
rke
y
Par
agu
ay
Bo
livia
Col
om
bia
Ca
me
roon
Co
te d
'Ivo
ire
Hai
ti
Kyr
gyz
sta
n
Gh
ana
Ken
ya
Tog
o
Com
oro
s
Moz
am
biq
ue
Ba
ngla
des
h
Nam
ibia
Zam
bia
Egy
pt
Pak
ista
n
Nep
al
Indi
a**
Zim
bab
we
Cen
tra
l Afr
ican
Re
publ
ic
Tan
zan
ia
Uga
nda
Ye
men
Bu
rkin
a F
aso
Cha
d
Be
nin
Mal
aw
iN
iger
ia
Uzb
eki
stan
Mal
iN
iger
Mad
aga
scar
ME
XIC
O (
EN
NV
H)
ME
XIC
O (
EN
N)
Gu
ate
mal
a
Ka
zakh
sta
n
Mo
rocc
o
Nic
ara
gua
Bra
zil
-0.450
-0.400
-0.350
-0.300
-0.250
-0.200
-0.150
-0.100
-0.050
0.000
Baja talla
Bajo peso
Distribution of adult height (20-64): 2000
152
153
154
155
156
157
158
159
160
161
162
1 2 3 4 5 6 7 8 9 10
Distribution of IMR: 2000
Ordenados por TMI66.9
17.2
10
20
30
40
50
60
70
35
Share of public spending on heath and nutrition benefiting poor and non-poor
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Opo
rtu
nida
des
IMS
S-
Sol
idar
idad
Des
ayu
nos
(DIF
) SS
A
Tor
tilla
LIC
ON
SA
IMS
S
IVA
Gas
to F
isca
lm
edic
inas
Inst
ituto
sN
acio
nale
s
ISS
ST
E
Poorest 20%
Richest 50%
36
Oportunidades (transferencias)
IMSS-Oportunidades
DIF (Desayunos)
SS
LICONSA
Total Primaria
Total Materna
IMSS
Total Hospitalaria
Pemex
IVA medicinas (gasto fiscal)
Institutos Nacionales
ISSSTE
-0.800 -0.600 -0.400 -0.200 0.000 0.200 0.400 0.600
Fuente: Estimación del autor utilizando ENIGH 2002, ENSA 2000 (IMSS-Opotunidades, Institutos Nacionales)
Concentration Coefficients of Public Spending on Health and Nutrition: 2000-2002
37
Social Protection in Health
Carlos Noriega
38
Health shocks: Greater incidence and more frequently amongst the poor
Health expenditures: Catastrophic expenditures lead to extreme poverty
Relevance of poverty trap for Mexico:•Total health expenditures: 52% in the form of OOPE•Coverage: more than 40% of population is not covered
HEALTH COVERAGE
0
20
40
60
80
100
I II III IV V VI VII VIII IX X
Income Deciles
%
Social Security Oportunidades UNCOVERED
HEALTH FINANCING
0 20 40 60 80 100
1
2
3
%
PUBLIC PRE-PAID OUT-OF-POCKET
Poverty Trap
39
Most efficient way to confront health risks
Most efficient way to confront equity issues
De-link financing from access: Equal treatment for equal needs independently of income level
Target state subsidies to the poor: demand subsidies
Eliminate financial uncertainty for the poorest
Reduce health gaps between the better-off and the poorest
Advantages of universal coverage
40
Towards a National Health System A consistent and well integrated legal, financial and operational
framework. Separation of financing from provision of health services
Revenue collection Public funding: more progressive Co-financing: federal-local governments
Pooling Single risk-pool through a singe financing pool Public insurance covers basic health services Private insurance covers complementary services
Allocation Defined basket of services provided Decentralization contracting services
Characteristics of a National Health System
41
Elements Coverage aimed at poor/rural population Portable and with a standardized coverage (cost-effective
interventions) Co-financed by federal-local governments plus user-fees Separates financing from provision of health services Advantages Affordable pre-paid health care Public funding with progressive subsidies Challenges Segmentation of health institutions Coordination with social security institutions
Seguro Popular de Salud
42
The Importance of Public Goods in the Health Sector: A Case Study of Mexico
Luis de la Calle
43
• Non-exclusive, non-rival• Sub-optimal investment• Provision strategies:
– Best shot– Weakest link– Summation
Public goods
44
• Public health: Elimination of diseases, micronutrient distribution mechanisms, measures to control disease transmission.
• Knowledge and information: Information campaigns, knowledge dissemination (e.g., new treatments), standardization of information/data bases, intellectual property rights protection.
• Protection against sanitary risks: Immunization campaigns, accident prevention, health and safety in the work place.
Inventory of Public Goods
45
• Increase in labor productivity
• Savings on health expenditures
• Increase in the attractiveness of investing in human capital; increases life expectancy and the rate of depreciation for human capital investments
• Improves investment environment in general
• Promotes technological development
• Advances market expansion
• Incorporates human assets previously left inactive (infrastructure for the handicapped)
Development impact
46
• Public goods contribute to the economic development process.
• Quality and quantity of public goods is a barometer of a country’s level of development.
• PGs make an important contribution to improving social inequalities; non-exclusivity means universality of coverage.
• PGs provide the means to attend to systemic health risks.
• It is important to consider the appropriate means used to generate the PG: Best shot, weakest link, summation.
• A consideration of PGs should be incorporated into the design of public health policies.
Conclusions
47
Main Recommendations
1. Regarding goals that Mexico must take on, it is important to go beyond the Millennium Development Goals in several dimensions:
– Moving up the time frame for specific targets
– Establishing targets at the sub-national level to reduce the large existing gaps
– Including the fight against illnesses and diseases not considered in the Millennium Development Goals (such as hypertension and diabetes mellitus)
48
2. To generate a process to define health targets at the national and state level, and, when possible, at municipal levels. These goals…
– Should be defined in areas which make them socially and politically legitimate as well as financially and institutionally feasible.
– Should Include general health aspects such as food consumption, sanitation, housing and the environment
Main Recommendations
49
3. To revise and overhaul current investment programs in public health at all government levels in order to make them coherent with agreed-upon goals. In particular, it would be desirable…– To increase total expenditures– Reassign funds towards preventive medicine and
programs with a specific focus– Redistribute funds among regions and
socioeconomic groups in order to make the system more progressive
– Complementary public investments should meet current needs
Main Recommendations
50
4. To eradicate malnutrition and poor nutrition among children. To revise and develop policies that guarantee good nutrition in Mexico in terms of supporting and rationalizing production and distribution of foods, promoting good dietary habits, and assuring a sufficient supply of micronutrients
5. To guarantee timely access to appropriate medical attention in cases of pregnancy, childbirth and postpartum care in marginalized rural and urban areas in order to reduce maternal and perinatal mortality and morbidity
Main Recommendations
51
6. To guarantee continuity, improvement and adaptation to the new challenges of current social programs with proven impact upon health.
7. To encourage public actions and social involvements in which citizens insist on government accountability and promote the accumulation of social capital.
8. To develop a hierarchy of public goods in the health sector coherent with agreed-upon goals and adapt the public investment programs accordingly.
Main Recommendations
52
9. To ensure the proper functioning of social safety nets in order to avoid poverty traps in situations of crises, natural disasters and idiosyncratic adverse shocks
10. To take steps towards a universal medical insurance system with desirable characteristics
Main Recommendations