november, 18th

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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.

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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

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Overview of the MCMH´s objectives, organization and main findings

Nora Lustig

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• 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

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• 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

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• 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

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• 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

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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

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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

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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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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%.

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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%.

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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.

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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.

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• 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

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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).

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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

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• 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?

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• 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.


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• 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.


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• 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%)


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• 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.


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The Human Development Trap in Mexico

David Mayer

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• 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

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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

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Next Generation

Family Wealth: Income,

Education,

Health

Early Child Development

Education

Income, Education,

Health

Health

Evidence for a Poverty Trap in Mexico

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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

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1984 1989 1992 1994

20001996 1998

Twin-Peaked Distribution of Education in Mexico

Fuente: ENIGH 1984, 1989, 1992, 1994, 1996, 1998, 2000

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Nutrition and health, in particular ECD, can be instrumental in debilitating the hold of poverty traps in human capital accumulation

Conclusions

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Inequality in Health and Health Care: Mexico in comparative perspective

John Scott

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• 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

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Concentration coefficient: low hight/age (0-5 year olds)

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Pe

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Tu

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Par

agu

ay

Bo

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Col

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ire

Hai

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Kyr

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sta

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Gh

ana

Ken

ya

Tog

o

Com

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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

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Ye

men

Bu

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a F

aso

Cha

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Be

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Mal

aw

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ia

Uzb

eki

stan

Mal

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iger

Mad

aga

scar

ME

XIC

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EN

NV

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ME

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O (

EN

N)

Gu

ate

mal

a

Ka

zakh

sta

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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

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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

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Des

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(DIF

) SS

A

Tor

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LIC

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SA

IMS

S

IVA

Gas

to F

isca

lm

edic

inas

Inst

ituto

sN

acio

nale

s

ISS

ST

E

Poorest 20%

Richest 50%

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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

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Social Protection in Health

Carlos Noriega

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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

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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

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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

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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

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The Importance of Public Goods in the Health Sector: A Case Study of Mexico

Luis de la Calle

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• Non-exclusive, non-rival• Sub-optimal investment• Provision strategies:

– Best shot– Weakest link– Summation

Public goods

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• 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

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• 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

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• 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

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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)

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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


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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


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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


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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.


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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


november, 18th

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