It is health that is real wealth and not pieces of gold and silver

By Aram Barra

Pubic Health FinancingGandhi once said ‘it is health that is real wealth and not pieces of gold and silver’. However, how different countries pay for their health, and how much they are willing to give, is not such a straightforward matter.

It is difficult to say how much a country should spend on maintaining and improving the health of its population without carefully studying the challenges faced, the epidemiologic trends, the effectiveness of inputs and wider social determinants of health. Certainly a complex question after all.

In today’s world, high-income countries spend about a hundred times more on health per capita than low-income countries; even after adjusting for cost of living differences, high-income countries are spending about 30 times more on health. In addition, most poor countries fail in providing essential health services, thus making over half of the related spending dependent on out-of-pocket payments by consumers.

Nevertheless, direct health spending has proven positive effects much larger that those found by other public investment, such as infrastructure, education and sanitation. Because of this, William D. Savedoff has suggested there are at least four different approaches to answer the question of how much a country should spend on health:

  1. Peer approach. This approach parts from the complexity that underlies the relationship between health spending and health outcomes. For this reason, it suggests to instead focus on observing similar countries to evaluate and learn from comparable experiences. In short, it is similar to the process of ‘benchmarking’ in the private world.
  1. Political economy approach. Instead of focusing on a fixed figure for health spending, this model looks into why the current spending is too high or too low. This is, it obtains quantitative estimates to model a politics-free process in which you maximize inputs vs. outputs.
  1. Production function approach. Another approach to answer the question proposes to estimate a health predicting function through cross-national or panel data analysis. According to a population’s health conditions, this method incorporates epidemiological trends, inputs and the relative effectiveness of the system. The model may be used to predict the change in health spending necessary to reach a given goal.
  1. Budget approach. According to Savedoff, the most complete approach is to determine the desired health status and thus define inputs to achieve the goal. In other words, specific programs, agencies or governments may conduct a regular budget process, always aiming to fulfill a particular goal. International organizations have published pre-designed packages of services and estimated a cost.

Fundamentally, there is no shortcut when it comes to defining how much a country should invest in health. From the approaches suggested by Savedoff, only the budget approach seems feasible, however, it also requires to complex questions such as defining a desired health status and pricing it. Nevertheless, these and other factors will be included in defining the public investment on health of any given country regardless of the approach we use.


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