A Perspective on the Philippine Health Human Resource Crisis

1. A Perspective on the Philippine Health Human Resource Crisis A. Kraft, J. Capuno, O. Solon April 21, 2006

2. Clarifying Measures of Unmet HHR Needs • Total needs = HHR requirements derived from medical services utilized if services were free • Needs met by the private sector = HHR services utilized at prevailing market prices (i.e. professional fees, salaries) • Needs met by the public sector = HHR services delivered (vs. available) under public budgets • Unmet HHR needs = total less HHR services provided by the private and public sectors

3. Unmet Needs and the HHR Crisis • If consumer willingness and abilities to pay and if government budgets are limited, unmet needs are likely to exist, out-migration not withstanding. • Removing unmet needs entirely will mean effectively setting prices to zero via demand or supply side subsidies • That we have unmet needs does not necessarily imply that we have an HHR crisis • But an HHR crisis will definitely exacerbate unmet needs

4. A Starting Point • Filipino doctors, nurses and other medical professionals will stop leaving the Philippines when: Expected net compensation abroad = Philippine net compensation package + “Love for the Philippines”

5. Possible Sources of the HHR Crisis • Increased net compensation abroad  increased global demand • Decreased net domestic compensation  reduced effective domestic demand owing to economic difficulties • Decreased motivation to remain in the Philippines owing to political, peace and order situation, etc. • All of the above

6. The Source Matters Analysis of extent, impacts, self-adjustment, and possible public policy interventions will vary depending on primary source of the Philippine HHR crisis • Change in global demand • Change in domestic capacity to pay HHR • Change in love of country • All of the above

7. Source 1: An HHR Crisis Triggered by Increased Global Demand • Increased global demand  increase net compensation abroad  out-migration • HHR out-migration  domestic HHR scarcity  upward pressure on local HHR compensation (subject to resource constraints) • If increases in local compensation cannot match global offers  out-migration continues • Higher domestic prices and continuing out-migration  increased domestic unmet needs

8. Source 2: An HHR Crisis Triggered by Reduced Domestic Demand • Reduced income and employment, high inflation and fiscal deficits, etc.  reduced demand for health care  reduced demand for HHR services • Reduced local HHR compensation makes jobs abroad more attractive  out-migration • Out-migration  increases unmet needs • Reducing out-migration will require increasing local compensation which is restricted by the very economic condition that prompted reduced demand for health care services

9. Source 3: An HHR Crisis Triggered by a Loss of Hope for the Future as a Filipino • Political crisis, peace and order, etc.  out-migration (more likely permanent) • HHR out-migration  domestic HHR scarcity  upward pressure on local HHR compensation • If increases in local wages cannot compensate for the loss of hope for the future  out-migration continues • Higher domestic prices and continuing out-migration  increased domestic unmet needs

10. Source 4: All of the Above (Possibly the Philippine HHR Crisis) • Global versus local compensation differentials are much larger • Resources available to support adjustments are much limited • Greatest increase in unmet needs • Health care (and HHR services) will be limited to profitable market centers and vote-rich areas leaving numbers of un-served areas • Wide variations in quality of care will prevail within the country • By this definition, the Philippine health care system may have already collapsed

11. Long-term Adjustments and Impacts • Increasing compensation differentials will encourage entry into high-demand HHR professions • Local demand may still be served by the HHR waiting or transit pool, but with high turnover rates • Effective screening by global HHR employers will reduce the average quality of remaining HHR • Quality based hiring may reduce domestic capacity to train quality graduates

12. Possible Forms of Interventions (1) Subsidize local HHR compensation • Cost of filling the global versus domestic compensation differential is prohibitive • There may be more productive alternative uses of public subsidies (e.g. NHIP premium subsidies) • Limited resources to subsidize compensation should be well targeted • Targeted subsidies for compensation are better than scholarships • Subsidies might be counterproductive if not linked to quality of HHR performance

13. Possible Forms of Interventions (2) Tax global HHR returns • Only exit related activities can be effectively taxed (travel, passport, work permits) • Only taxes on the supply-side can be workable (license, placement, certification) • Bilateral agreements do not necessarily bind private transactions (if they do, its effectiveness will be compromised by grey HHR markets) • Remove subsidies or impose taxes on local HHR training (e.g. tuition tax) and grant rebates to those who stay

14. Possible Forms of Interventions (3) Impose quantity restrictions • There are legal, ethical, and enforcement obstacles to banning out-migration of HHR • Domestic service requirements for graduates require effective and incorruptible enforcement mechanism • Domestic service requirements might have to be introduced in the context of basic training

15. Possible Forms of Interventions (4) Increase effective demand for local HHR • Expand NHIP coverage and improve benefits and payment systems • In addition to clinical capacities, critical investments in medical tourism include basic infrastructure (e.g. transport, communications, peace and order)

16. Possible Forms of Interventions (5) Facilitate system self-adjustments • Facilitate sorting and matching through better information • Remove restrictions on HHR substitution (MD vs. nurse vs. midwife) • Manpower pooling with formation of ILHZs • Promote consumer-side adjustments (e.g. prevention, better health practices) • Secure availability of trainers (subsidize teachers not students)

17. Considerations in Choosing Interventions • Some interventions costlier to implement than others • Non-consideration of motives and incentives may result in adverse or unintended effects • Interventions not limited to health human resource sector, i.e., demand side interventions • Interventions that also achieve Fourmula One reforms may be prioritized

18. Concluding Remarks (1) • The Philippine HHR crisis is a combination of increasing global demand, declining domestic demand, and less love for the Philippines • This combination makes the impact of HHR out-migration on unmet needs more serious • This combination also severely restricts the range and effectiveness of policy interventions

19. Concluding Remarks (2) • Carefully choose doable and incentive-compatible policy interventions: • Targeted and performance-linked compensation subsidies • Tax activities directly related to out-migration (travel, passport, work permits, placement, certification) • Introduce domestic service requirements in the context of basic training • Expand NHIP coverage and improve benefits and payment systems to increase effective demand • Secure availability of trainers (subsidize teachers not students)

20. Thank you very much for your attention.