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Cost Pressures |
PROLOGUE
Health Care Cost Pressures In A Global Context
Necessary conditions are almost universally easier to identify than sufficient ones. Money is required to pay for health care; how much money is enough is a vastly harder question to answer. Even if one knew how much to spend, it would be necessary to determine the channels for directing it and the goods and services to buy with it. Questions about what a whole country ought to do don’t arise readily in most other sectors of the economy. Spending on defense is an exception, but it’s still simpler than health spending in most countries, because it’s a public monopoly, even if private firms supply most of the weapons and other inputs. Economic theory isn’t much help, either: The advice to spend on health to the point where the elusive marginal value of another dollar becomes equal to the marginal return from spending on everything else can’t be followed, even for public spending. When health spending results partly from millions of individual private decisions, as it does in low- and middle-income countries, any sense that a government controls the health sector is illusory.
To consider only what and how the government ought to spend is to ignore those private decisions. So, as William Hsiao, the K.T. Li Professor of Economics at Harvard, argues, it becomes essential to take a systemic view, to make certain large decisions about the architecture of the health system, and to define the role of the government in it. Only that way offers a chance to push the system toward greater efficiency and equity and to control cost inflation. Despite huge differences in the size of the health sectors across countries and in public shares of spending, the experience of the countries in the Organization for Economic Cooperation and Development (OECD), and increasingly of middle-income countries, provides some evidence of what works best. Answers are a long way from consensus still, both because the evidence is incomplete and sometimes contradictory and because of lingering ideological views about the proper roles of governments and markets.
The issue of how much to spend and how to do it can’t be fully separated; the "right" amount no doubt depends somewhat on how the system is organized. More than that, it obviously depends on a society’s health problems and their potential solutions, and on what it wants to achieve. William Savedoff, a senior partner at Social Insight who has worked for the Inter-American Development Bank and the World Health Organization, starts with the seemingly simple question of how much money for health is enough; he shows how the question changes and more complex answers are needed as those other factors are taken into account. "Fundamentally," he notes, "there is no shortcut." One might conclude the same thing from Hsiao’s analysis.
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