Impact of Economic Crisis on Health Spending and MDG Achievement

1. How can the economic crisis affect health spending and MDG achievement? ISPHC Conference March 23, 2010 Maureen Lewis Economic Advisor, World Bank mlewis1@worldbank.org

2. Outline of presentation • Millennium Development Goals and health • Regional health spending patterns • The current economic crisis and impacts on health spending • Implications of crisis on health status and household wellbeing • Coping, compensation and opportunities of economic crisis

3. Millennium Development Goals:progress between 1990-2015 • End poverty and hunger • Universal education • Gender equality • Child health • Maternal health • Combat HIV/AIDS • Environmental sustainability • Global partnerships

4. Achievement of MDGs and improvements in health status • MDG achievement requires: • Good policies • Adequate funding • Adequate targeting • Effective programs • Reaching the vulnerable

9. 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

10. 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 jeopardized • Momentum of health reform can be jettisoned

11. 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

14. 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)

16. 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

17. 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

18. Impact on Armenia’s Households

19. Impact on Turkey’s Households

20. 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 groups • The poor and near-poor are the most vulnerable • The wealthier the country the better they are able to cope • During the Depression of the 1930s US health status improved

21. 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

22. 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

23. 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

24. The Bahamas • The 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

25. Latvia • National 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

26. Conclusions • Crisis effects are strongest in Middle and Low Income Countries of Eastern Europe • Crises 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

27. Conclusions • Countries have become more sophisticated at crisis management • Combination 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