General overview of the issues related to the economics of the health development

Natalia Gurina


It is important to address the issue of Health and Economic Development for several reasons. The basic assumption in the ministries of finance of many countries is that health care is a tremendous burden on the national economies. And lack of resources, governance, structures and programs for public health could also be a burden on national economies.

On the other hand, there is no automatic relation between a good health status in the population and good resources for the health system. Massive investments in the health system can also produce extremely poor results. But all analysis of the relationship between Health and economic development suffers from the extreme complexity of the relation and the insufficient research performed.

Many economic definitions see development as being a phenomenon measurable by increasing per capita income or gross national product (GNP). Development is therefore generally understood as the process of improving the quality of all aspects of human life (WHO 1992a). Consequently health should be improve with development and increase GNP. But it is far from it. Interrelationship between health and development is complexity. As generally poor individual health can lower work capacity and productivity; in aggregate in a population, this can severely restrict the growth of economies. On the other hand, economic development can improve socioeconomic status, nutrition, hygiene, and sanitation and can make it possible to finance good public health. Poverty can be one of the causes of diseases. The classical cycle of poverty can be broken by development. There are many indicators that show how economic development has contributed to improving quality of life and health status. There are such as increasing life expectancy, falling infant mortality, child and maternal mortality and enhanced access to services.

Recently, the WHO has recognized three major groups of problems, which have contributed, to a growing “health crisis” in many countries. First, the very magnitude and diversity of health hazards associated with development. Secondly, the cost of disease caused by industrialization and urbanization and urbanization and also is medicine itself, the iatrogenic diseases. Thirdly, macroeconomic adjustment, which has resulted in major, cuts in the health and social budgets of many developing – and some developed – countries.

Many development policies can lead to unexpected or unintended effects on health. These can be called the ‘health by product’ if industrialization, which include risk from new dangers at work, exposure to toxic substances, effluent, radiation, traffic pollution and general industrial noise and waste in the environment. The impact of development policies on health in developed countries differs than in developing countries. Developed countries suffer more from occupation hazards, accidents, cardio-vascular disease, and cancers. And developing countries suffer from double health burden, from malnutrition, respiratory infections and diarrhoeal disease and from the same problems as developed countries. It is can describe as double shock for their economic. Besides, economic development very much stronger in most developed countries as compared to developing countries. For example, the debt crisis that takes economic resources away from the fundamental programs of immunization, primary health care and primary education.

For understanding how urbanization, modernization influence on health we should know what they are mean and what differences between them. Modernization has historically been perceived as the process of change towards social, economic and political systems. Modernization implies a complete transformation of many aspects of life, but it is often associated with industrialization. Broad views of modernization see it as involving interrelated technical, economic and ecological processes: changes from simple traditional techniques towards the application of scientific knowledge; evaluation from subsistence farming towards commercial production and specialized agriculture; transition in industry from the use of human and animal power towards industrialization proper and, in ecological arrangement, the movement from farm and village towards urban centers. Modernization is wider concept then industrialization. The health issue concern question about who has better health urban or rural inhabitants and what consequences for it. Urbanization does not automatically equate with better health but it may equate different health and health problems. The more highly urbanized countries do seem to be those which, on average, have the lowest rates of under-5s mortality and longer expectation of life. But increasing life might paradoxically be accompanied by worsening health, as the main killer disease are controlled or defeated. Modernization and industrialization are cause of three main groups of diseases: disease of poverty; environmental diseases; and psychosocial disease.

As noted above, many developing countries today have epidemiological profiles that reflect all types of medical and social needs: infectious and parasitic conditions; chronic and degenerative disease; psychological and psychiatric morbidity; and the social care needs of very young and very old people. Unfortunately universal model for solve that problem does not exist. But understanding the general concept of epidemiological transition from one side and individual peculiarity any country from other can help to overcome difficulties with minimum expenditure for economics.

The ‘theory’ the basic principles of epidemiological transition “focuses on the shifting web of health and disease patterns in population groups and their links with several demographic, social, ecological and biologic changes”. The ‘theory’ addresses the nature of the relative balance between various causes of mortality in particular (and morbidity implicitly) and the ways in which changes occur while societies modernize. Behavior, lifestyles, public health measures are critical influence on health the same as medical care. Epidemiological transition as originally envisaged involves a one-way movement in the main stages from preponderance in the Old World of epidemics of infections and famine, through an era of receding pandemics, to a pre-eminence of degenerative or sometimes ‘man-made’ disease. Some authors discussing a fourth stage of epidemiological transition, in which length of life expectance increases but in which health may deteriorate, as the causes of chronic but non-fatal morbidity are yet to be defeated. The ‘speed’ of the transition and the factors influencing it, however, appear to have varied from one group of countries to another. The transition in the West is now almost complete. It took 100 to 200 years. The accelerated transition may be seen in countries such as Japan and the former Soviet Union and probably also in certain others in Eastern Europe and Southeast Asia. Mortality and fertility declined rapidly, and a rapid change took place to a modern epidemiological profile. Noted epidemiological transition even within one country may be different between rich and poor part of citizens. It might be possible to use the concept of epidemiological transition to provide a basis for planning to meet the type and scale of future health care needs that might reasonable be expected within various countries. Example of epidemiological change in middle-income countries can show that increase GNP does not always increase life expectancy and decline infant mortality. One of the main problem arise when we are deal with data from different countries is their quality and availability. In order to increase their quality need create universal way of recording data.

When we talk about any transition we should keep in mind that always have some vulnerable groups which require high attention from public health. These vulnerable groups are urban and rural poor, women, children and elderly. To approach health and health strategies from the economic perspective is fundamentally different from objectives that are ethical in nature. We can not choose the one or the other. We only should know that both perspectives exist and that both are used in stronger or weaker proportions. An economic approach to health development is intended to achieve a productive population. This of course raises question about the population above retirement age. People over retirement age participate only marginally in production. In many countries they contribute by being supportive to those that belong to the workforce and as informal tutors to children. But in an increasing number of countries that are no longer very much the case. An economist would never recommend ignoring their existence for that reason. That would be to make them more diabolic than they are. But economists tend to see their existence also as an economic burden to society that decreases consumption possibilities for younger generations and reduces investment possibilities. Contrary to that - from the perspectives of health ethics their existence is a mark of success and progress. Life has been sustained and for longer periods than ever before. This is an important achievement. The quantitative approximation of goal achievement in health ethics may be seen as “the realization of the health potentials that are genetically laid down in man”.

An important public health issue is resources allocation with stress on primary care and high technology for diagnosis and treatment facilities and for pharmaceutical products and medicines. WHO publications illustrate the cost-effectiveness of community services as opposed to curative health care in terms of lives saved. The World Bank’s World Development Report 1993 focuses on the interplay between human health, health policy and economic development. The report has three main messages, principally for developing country. First, an environment should be fostered which enables households to improve health. Second, government health expenditure should be made more effective and reorientated towards helping the poor through low-cost, high effectiveness programs. Third, competition and diversity, especially involving carefully regulated private sector competition for public services are advocated.

For better understanding how development influences on health we should know more detail about economic crisis. The late 1960s were created a radical theory of development, the dependency approach. Dependency theorists argued that, in order to escape from the disadvantages of peripheral status, Third World countries had to cut off all links with industrialized nations and develop autonomously. China, Cuba, Mozambique and other countries, which had adopted a broadly socialist development path, were held up as successful examples of the way forward for less developed countries. Today it is common for observers of the political spectrum to acknowledge that the health problems of the Third World poor stem less from an absolute lack of resources than from the massive disparities that exist between rich and poor. But since the late 1970s most developing countries began to implement market-oriented economic. These police, who are known as economic adjustment, have been imposed on indebted Third World countries as conditions of financial assistance. Despite efforts to industrialization and diversify, many less developed countries (LDCs), remained dependent on the export of primary commodities to developed countries for foreign exchange earnings. Because of adverse terms of trade, primary exports generated insufficient wealth to import manufactured goods, industrial supplies and agricultural technology. Third World government was therefore forced to rely on foreign investment and foreign loans to finance economic development. In what was to become a vicious cycle, such borrowing increased the need to earn foreign exchange to replay loans and hence the need for primary produce. Primary commodity dependency combined with external debt was to prove disastrous for many low-income nations. By the early 1980s Third World countries were paying more in interest and repayments on loans then they were receiving in new finance. Losing confidence in the security of international lending, the commercial banks became much more reluctant to provide new loans. Third World debtors had little choice but to turn to the World Bank and the International Monetary Fund (IMF). The letter debtor nations agreed to implement economic adjustment policies. Economic adjustment is based upon the belief that growth can only be achieved through the operation of the free market. Adjustment packages typically include both short- and long-term measures. There is, however, strong opposition to this market-oriented strategy. Some critics suggest that the IMF and World Bank are acting mainly in the interests of Western financial institution. A second criticism that has been leveled at the adjustment model is that, by focusing on the economies of individual countries, it ignores the fact that economic problems faced by LDCs stem in large part from world market tendencies outside their control. As critics of earlier modernization strategies pointed out, the benefits of market-oriented economic growth rarely ‘trickle down’ to the poorest section of society. Indeed, there is powerful evidence to suggest that the key to understanding patterns of ill-health lies in the distribution of resources within a country rather than the absolute levels of economic growth. Such evidence played a significant role in the birth of the primary health care movement.

If the long-term prospects of adjustment countries are subject to considerable debate, few deny that the impact of adjustment has been negative in the short term. Rising unemployment and the fall in real wages, the promotion of the cash-cropping sector at the expense of landless laborers and urban dwellers, and the removal of food subsidies have led to a deterioration in living standards, reflected in the rise in malnutrition and infectious disease. At the same time, cuts in public expenditure and the emphasis on cost recovery have made vital public services increasingly inaccessible to those who have the greatest need for them. Two factors make difficult assessment of the impact of economic adjustment on health. The first is can not easily separate out the effects of debt and the effects of economic adjustment policies. The second is that the impact of economic changes on health is, to a great extent, cumulative over time. Let us look more detail the impact of economic adjustment on health and welfare. Third World health profiles continue to be dominated by high infant and child mortality from infectious disease such as diarrhoea, measles and acute respiratory infections. A low nutritional status predisposes an individual to infection. Because of the critical role of nutrition, it is important to examine the effects of adjustment on food security at household levels. Maternal malnutrition affects birth weight as well as the duration, quantity and quality of breastmilk.

An important aim of economic adjustment policies has been to shift the economic focus from urban consumers to rural producers. In low-income urban areas, where many Third World dwellers live in grossly substandard, overcrowded conditions, the lack of investment has resulted in the further deterioration in environmental conditions and a generally increased exposure to infectious disease. This, combined with the rapidly falling purchasing power of urban dwellers, makes it difficult to break the cycle of malnutrition and infection. Population movements can also lead to the introduction of new pathogens into individual household level. As the subsistence sector has experience significantly lower price rises than export crops, women have hardly benefited from adjustment policies. Often difficult for women to obtain profitable work. As the economic attractions of prostitution have increased, so too have the risk of contracting and transmitting HIV infection.

One of the most controversial issues in structural adjustment is its impact on health care expenditure. Declines in health spending are significantly related to both degree of indebtedness and participation in adjustment programs. The lack of health supplies combined with low wages has damaged the morale of health personnel, many of whom supplement their incomes in the private sector. As a result, standards of care in government health services in many adjustment countries have plummeted. The concept of cost recovery has been formally incorporated into international health policy through the adoption of the Bamako Initiative. Based upon the assumption that many people are willing to pay for treatment if they perceive a service to be of good quality, this UNICEF scheme provides loans for the purchase of essential drugs at cost. The most fundamental criticism made of the Bamako Initiative is that it appears to accept the shift towards the market-based allocation of health care.

A second sector to be adversely affected by cutbacks in public expenditure is education. In many adjusting countries, expenditure on school has decline rapidly, as have enrolment rates. Even where education free, the cost of clothes, shoes, textbooks, bus fares and ‘donations’ to school fundraising efforts are beyond the reach of many poor households. At the same time that education expenditure has declined in adjusting countries. The problems of child labor and child abandonment reflect the growing difficulties faced by women in managing their households. Many households respond to this growing pressure by withdrawing their daughters from school. As a result, female dropout rates remain significantly higher than male. Female education will have repercussions on future trends in child survival.

By the mid-1980s it was becoming increasingly clear that the health and welfare of the poor had significantly deteriorated. Thus, in 1987, UNICEF issued a two-volume study outlining its proposal for “Adjustment with a human face”. These included more expansionary macro-policies aimed at sustaining level of production and employment; meso-policies designed to ensure a fairer share of incomes and resources; sectoral policies to support small-scale production and special support program. But they do nothing to counter the international conditions that gave rise to economic crisis in the first place. The tragedy of economic adjustment is that the assumptions on which the model is based have long been contested. Decades of experience have demonstrated that economic growth does not in itself guarantee improvements in health and welfare. As the rich get richer and the poor get poorer in an increasingly unequal world, it is clear that the principles and goals of economic adjustment are far from removed from those of health for all.

In the face of limited and often shrinking resources for health are necessary systematic approaches to make the inevitable difficult choices. In the developing world, this recognition has been longer established than elsewhere, and sharpened by recent and continuing economic difficulties. In many countries, health expenditures have fallen faster than government expenditures overall. Even were resources in the health sector used to maximum effect, it is unlikely that the world be sufficient to meet basic health needs. Current circumstances in general preclude increased public expenditures, whether financed through debt or through increased taxation; while political realities make reallocations from other areas to health unlikely. Consequently, many developing countries have been looking at alternative and additional ways of generating the additional resources required. The challenge is to find ways of raising resources which distribute the burden according to ability to pay; which encourage the provision of appropriate services; and which make those services available in accordance with needs rather than solely in accordance with willingness to pay. At the same time, low per capita expenditure on health are frequently exacerbated by the use of health-sector resources on intervention of limited effectiveness and/or efficiency. Health services should be appropriate to both the needs and the means of developing countries. Poor macro resource-allocation decisions are compounded by strategic and operational inefficiencies; the reasons are many. Utilization of health facilities has been shown to be correlated with distance to the nearest facility. Consequently, present patterns of service-provision effectively limit coverage to a small proportion of the population. Poor financial and service planning often means that the supply of essential resources to health facilities is a best erratic. Recurrent expenditure on items such as drugs, fuel, and essential maintenance are often under-funded. Support services are often beset with logistical and management problems. These factors and others effectively limit the capability health workers; limit their capacity to provide outreach services. As a result, these low-level facilities are often under-used, whilst higher-level facilities and staff are overworked, distorting still further who gets what, and who is denied. Highly specialized medical care is neither necessary nor desirable for the majority of conditions found in developing countries. Attempts to extend health-service coverage have led to the increased use of minimally trained health workers working in often-remote rural locations. However, for such workers to function effectively, they must not be isolated from the rest of the rest of the health-care system. Considerable inefficiencies often result from inefficient procurement and selection procedures; poor storage and stock-control arrangements; and inadequate transportation and distribution of drug supply systems. Health sectors have generally performed poorly in the areas of planning and financial management.

We need study economy concern health as topic with concepts and techniques. Historically, the focus of health economics was on how to calculate the value of health to the economy. Now attention is being given to the study of how to achieve a socially optimal allocation of resources. The of the relationship between health and economic development is a perennial one: the attention it receives seems to wax and wane, perhaps depending on the relative affluence (or poverty) of the health sector and the degree to which it feels bound to justify its activities by reference to their positive impact on economic development. Because of the financing crisis facing the health sector in many countries, many health economics have in recent years focused their attention on financing issues. Obtaining information on financing and expenditure pattern is a necessary first step to making policy decisions on changes. In discussion of alternative options for the financing and provision of health care, the role of the private sector is receiving increasing attention. Perhaps the most hotly debated of the various financing options facing developing countries is the use of user fees in the public sector. A crucial issue in the discussion of the desirability of user fees has been the effect of fees on utilization: to what extent will fees deter use? This question can be examined using classic economic techniques of demand analysis. For example, the choice of delivery type was relatively to changes in money price, and suggests policy options to improve the coverage and quality of delivery services. Study of the cost of health institutions is vital to improve efficiency.

In developing countries, where resources are especially scarce, the potential benefits to be derived from the application of economics to decision-making should be clear. Seldom are policies the outcome of systematic evaluation of the costs and benefits of alternative options. Consequently, few developing countries are maximizing the impact they could have upon health status, given the resources available to them. In the present austere environment, even greater attention needs to be given to the role that economics can play in improving health standards. Considerable progress has been made in the development, adaptation, and refinement of theory, end in empirical investigation.