Category Archives: Health Economics

Here’s why developing countries should invest in health

20 years ago to this month, Rwanda was the reflection of humanities’ most self destructive instincts. Within a matter of 100 days in 1994, almost 1 million people – 20% of the population – were killed in an ethnic genocide between the Hutu and the Tutsi. Back then, when gory images of the genocide in Rwanda spread across the world, it was impossible to imagine that the country would one day in the future become some sort of a paragon for humanities’ instincts to nurture and nourish.
Yet Rwanda has done exactly that: from the ashes of the war, it has built a health system that is the envy of much of sub-Saharan Africa, and the rest of the world can’t help but stop and take notice. From having almost no health facility, public or private, worth the name at the end of the war, this nation of 11 million people has created a health infrastructure that has helped double life expectancy in almost 20 years.
Close on the heels of the genocide, as if the carnage left by the war were not enough, an epidemic of HIV usurped Rwanda much like the rest of sub-Saharan Africa. Scores upon scores of fathers, mothers, breadwinners were being wiped out, leaving behind all the but the dependents: children and the elderly. Things got so bad at one point, some people had the courage to suggest that the frail must be left to die, to enable a Malthusian purge and make way for a rejuvenation from the remains.
Better sense prevailed and Rwandans took to the onerous task of retooling and rebuilding their country. They came up with a “Vision 2020” that heavily stressed on making Rwanda a middle income country by the year 2020 and proposed that investing in health of the people as a major pillar of that strategy. Health was taken up as a rights issue and equity in health was thought instrumental in achieving the vision.
Their first battle in health care was HIV itself. With assistance from other nations and partners it heavily expanded HIV care, within the 10 years after 2000 the number of people in HIV treatment went up almost 100 fold. HIV rates have now fallen by a third, and facilities that were earlier on established to provide HIV care have now been expanded to provide integrated care.
Life expectancy has doubled from around 30 years in the mid-nineties.  Lesser number of children die today than they ever did, more than 90% of children get vaccinated, two-thirds of the mothers give birth assisted by a trained provider.  Rwanda remains one of the two African countries on track to meet the health related millennium development goals. A community health insurance scheme has been instituted, the poorest of people receive subsidies to participate in such insurance scheme.
Such health outcomes have had economic dividends for Rwanda. Per capita income has gone up three fold to $600 ($1300 in terms of purchasing power parity) in the last 20 years. The experience of Rwanda has but corroborated what has been felt all over the world in the recent times- that health expenditure is not just watering the quicksand, it can make way for real economic gain. Health expenditures have been known to provide at least 3.3 to 10 times the return on investment over a period of time. If the  moral or the legal argument for providing health care were not adequate enough, policymakers could at least pay heed to how it makes economic sense to invest in health care.
For developing nations that aim to rapidly steepen their arc of progress, investing in people’s health makes tremendous sense, not to mention the fact as Rwanda has shown, an equitable health care system helps bury the scars of a difficult past and make way for a new beginning. We would all do well to pay attention.
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Primary care’s woes: It’s in the way you see

Primary care is ever the cinderella-esque tragedy. Ever so maligned, ever engulfed in misery and never really the belle of the ball like she rightfully deserves to be. There may be reasons galore to this. Not least of which is the way primary care work is perceived in this country.

Let me illustrate.

The primary care attending I work with recounted a story from the early 2000s. As is usually the case with visits at the primary care doctor, one day she took care of a sixty something lady with a slew of medical problems: diabetes, heart failure, respiratory disease, high blood pressure and depression. Additionally, the lady had recently lost her husband and had an agonizingly traumatic  bereavement. She spent time counseling her. In addition to all that she had to take care of a retinue of screening and preventive health measures that the primary care physician has to coordinate.

At the end of it all, the lady had a little wart on her great toe that she wanted fulgurated. As a makeshift measure the doctor removed the wart with liquid nitrogen, in a procedure that took less than 5 minutes.

In all the office visit took almost an hour. Orchestrating and coordinating her care took an intense amount of patience, attention to detail and diligence on part of the doctor. Assuming responsibility for the management of such an array of medical conditions is an onerous task by any yardstick.

Some time later, her reimbursements for the visit arrived. She had been reimbursed more for the makeshift procedure that lasted less than 5 minutes over all the rest of the care that she had rendered on the lady!

Such asymmetrical compensation approach produces adverse incentives. Therefore we have family physicians who have to train in minor podiatric and orthopedic procedures like nail clipping and intra-articular injections to make a little extra income to pay their bills! It’s been well established that a well-rounded primary and preventive care is the best health intervention at a systems level. Such routine care can ensure good health while preventing expensive care at the sub-specialists that may accrue later on. However there is no real incentive for the primary care physician to provide such economical care while there is every incentive for the interventionist to jump onto expensive procedures that often are a result of poor primary care and prevention.

It may pay the primary care physician well to start doing more office based procedures, but that beats the point. The point is the recognition of the fact that the meticulous, thoughtful and cerebral work done by primary care physicians is as valuable, if not more, than the procedural work done by interventionists. After all, despite the thankless compensation, the work done by the primary care physician adds way more productive life years to people’s lives per dollar spent than that done by the interventionist for the same dollar spent.

Until we are able to recognise such a fact, primary care’s godsend fairy mother will never arrive, she will never be the belle of the ball. And as long as primary care is not the center of the attraction, healthcare in this country will be eternally doomed to cost overruns that threaten to sink the entire boat on their weight.

The world needs the Global Fund

After the blistering pace of its heady start in the early 2000s, the Global Fund to Fight AIDS,  TB and Malaria (GFATM)  of late has been losing some steam. First, there was the issue with corruption in  Africa, where millions of dollars worth of GFATM funded malaria  drugs were embezzled in over half a dozen  African countries. And then there has been a crippling short fall in finances. Funding requirements to  just meet existing obligations for the year 2011- 2013 run a total of 13 billion dollars. The Fund has a little over  11 billion dollars in  its coffers.

The first issue sabotages credibility. Transparency has been a keystone of the Global Fund’s operation, without which none of the donors will put their money on the table. For an organisation whose sole purpose is to pool together financial resources for the sake of global health, that lack of credibility will be akin to a death blow in the keel.

A discredited Global Fund could likely undo the organisation, but way more importantly, it will undo the revolution that has been unleashed globally in AIDS, TB and malaria control through the use of  such funds.  And the revolution has been nothing short of spectacular. Before the Global Fund arrived AIDS treatment was beyond the fancy of much of the patients in the developing world. Today support from the Fund alone provides AIDS treatment   to over 3 million people and TB treatment to more than 8 million people. Hundreds of millions of insecticide treated bed-nets have been disbursed.

These  three killer infectious diseases together claim around four  million deaths all over the world each year.

Earlier on, due to the lack of a centrally coordinated funding mechanism, donors had their individual funds to disburse,  oftentimes overstepping each other’s priority areas, and in the meantime creating a colossal waste through the creation of a panoply of redundant monitoring mechanisms. Herein was the Global Fund’s genius; it not only did away with such multi-vessel trickle down fund disbursement, it also allowed individual countries to come up with their own priority areas to use the funds on.

The global fund is said to have saved almost as many as 7 million lives since its inception in 2002. As many as 150 countries the world over depend on global fund resources in order to battle these three leading killer infectious diseases.

A few months ago Gabriel Jaramillo, a banker, replaced a public health expert at the helm of the Global Fund after the African scandal rocked the fund. To his credit, Mr Jaramillo is trying to shore up the  fund’s financial discipline while maintaining its global-health do-good ethos.

The discipline may well take care of the credibility part, however there is no denying the squeeze of the difficult economic times. While the continuing generosity of a lot of the donors has been vital  to the Fund, some have been forced to withhold their pledges, or have not been able to scale up their commitments. The two billion dollar funding deficit will force thousands of patients in some far off corner in the world off their treatment regimens. As much as the global fund has been able to renew hope in millions of lives all over the world, such situation will prove to be equally catastrophic not only in the lives of the patients involved, but also to our moral authority to say that we have a collective will to fight off such scourges facing humanity. When the tide of global burden of infectious diseases has been showing signs of inflecting, letting go of our willpower to fight them will only make these diseases much bigger a global public health threat than what we started with.

The seven odd billion dollar price that we need to run the global fund on a year or year basis is indeed a lot of money. However if you consider the fact that 12 million people are benefiting with life saving AIDS and TB drugs from the use of that money globally, and that we could possibly achieve zero malaria deaths by 2015, it swings the balance a lot in the funds favor. When we have been annually spending billions of dollars  in meaningless sabre rattling at borders-crosses  all over the world, and billions more in amassing ammunition that can annihilate the world a dozen times over, saving lives at a few hundred dollars per person per year is a great deal of a return on investment by any standards. For that reason alone, the Fund can’t afford to lose its momentum halfway down the highway.

The case for health information exchanges

Picture a medical  district that bundles more than half a dozen hospitals in the matter of a few square miles, toss in a patient population that walks in and out of every single hospital and what results is a yet another utterly forgettable night at work for an already harried intern.

Patient visits are everywhere, health information is everywhere, and in an environment of competing interests were coordination between care providers is systematically stymied, putting together the jigsaw of the patient’s medical history and care for a midnight admission becomes a nightmare come alive. This in fact should have been the patient’s nightmare as well, but no body is telling him  how hospital information systems refusing to talk with each other is putting his care on the back burner.

With the advent of the electronic medical records (EMR),  sharing health information between disparate care providers should have been easy. Turns out it is not.

There are challenges. Some technological but mostly to do with policy and practice.

First there is the issue with adoption of EMR itself. Not every provider still can manage to see the value proposition in EMR. But even when that has been sorted out, the idea of  sharing health information in exchanges is still a hard ball to sell to providers. They think they have nothing to gain by sharing and supporting such exchanges.

Care providers fear losing revenue that is currently generated by what would then prove be redundant care, were such information freely available. Furthermore in the current scheme of things, care providers are often asked to support such information exchanges, when in fact they are the ones who are losing money out of expensive information infrastructure they have to pony up, and the revenue they have to give up. And then there is the issue of inertia: “things were so much better the old-fashioned way” kind of attitude to overcome.

If it does not make an outright  business sense for care providers, who does a health information exchange benefit?  

Free flowing, standardized, interoperable health information will co-ordinate patient care by an order of magnitude. Such a scenario won’t be a chip at the stone incremental innovation; it will be a path breaking way forward.  Aggregating such data bases at a central or federated repository will help scale and  analyse such data at a population level thereby helping form epidemiological trends and predict disease out breaks. De-identified data sets can be used in research studies that will benefit society in the longer run.

Individual patient care will improve simply by the fact that information is freely available and care can be coordinated over geographical barriers. Patients can’t be stopped from moving from one hospital to the other, we can at least have their health records  move with them.

One of the major challenges today to ensure efficient and effective, yet affordable health care is to move patient care out from the hospital to the community and to design health interventions at a population level than at just the individual level. Such practices will need population level data; health information exchanges will achieve just that. And a tremendous amount of value will be created right there.

There in lies the value proposition to such information exchanges. This is a societal good that needs benevolent policy environment to grow to fruition.

To be fair, the Health Information Technology for Economic and Clinical Health (HITECH) Act  made policy provisions to encourage such information exchanges. More than half a billion dollars worth of funds were ear marked for state-wide adaptation of such information exchanges. In fact some form or the other of health information exchanges have been tried out as far back as the ’80’s. However thorny issues remain. Most of them as mentioned ahead, are policy and practice issues.

The states and the federal government have a magic wand they can flaunt here: the Centers for Medicare and Medicaid (CMS) by virtue of being the largest payer in this country can tie up payment with participation in such health exchanges. To be fair, hospitals and care providers should not be burdened by the costs of supporting such exchanges. Since  such exchanges are a societal good, such costs which can easily run into the 10’s of million of dollars to set up and millions of dollars each year to run, should come out of the public domain where such benefits are actually accrued.

Then there is the challenge of standardising such health information, so that information provided by one care provider is trusted by the other.

And there is the tricky issue of patient privacy: how to use such information to the greatest benefit without compromising on patient privacy. Who gets to see and use what, who sets permissions and who maintains the final custody of  the information, these are valid but challenging policy questions.

And finally though great technological advances have been made, challenges still remain on how to create interoperable databases and  use such information in a meaningful way in the doctors offices. Experiences from Indiana, that runs one of the oldest health information exchanges in the country show that oftentimes the final mile to the doctor’s office is the hardest mile to cover for such information exchanges.

Such challenges aside there is a real case for health information exchanges. This is an idea whose time has rightfully arrived. With a right set of policy environment, this might as well prove to be the be the leapfrogging health innovation we have all being dying to see.

How to expand the health care dollar

In the last 30 years health care spending has gone up by almost 30 times, to an unmanageable 2.6 trillions dollars today. Such economic burden is as unbearable as it is outrageous.

What drives health care costs? Where does all that money go?

Here is a breakdown of the health care dollar. Apparently as it turns out, most of the health care dollar goes in patient hospitalisation and physician services.

If we were able to cut down on health care expenditures to half- which would still be at the OECD expenditure average- we would save enough to wipe out the entire federal budget deficit at one fell sweep. However with the kind of political and social climate that exists in the country today, any attempt at a responsible debate on health care is met with a dogged head-in-the-sand rhetoric.

As someone eminently enlightened painfully suggested a while ago, it may require a force of inevitability for the country to change course and do a radical rethink on health care expenses. Any change will have to be forced by an eventuality like a demoralising depression or insolvency to force people to understand that continuing as usual is not possible.

As a fore thought, where could all these cuts come from?.

The chart above easily explains where the cuts must come from: hospital costs, and associated costs  will follow on the way down. And although drugs and device costs appear to be smaller percentage of the pie above, considering that they are a rather minuscule component of health care services delivery,  their relative contribution to the cost are larger. And worse off, such costs are escalating beyond control faster than any other cost group.

Furthermore, as patterns of illnesses change from short term, acute illnesses to chronic illnesses that tend to linger on, the role of hospitals in treating these have to be re-evaluated. Are chronic conditions like heart failure really managed well in the hospital every fifteen days that there is an increase in severity, or can they be managed well enough in the community? That would ensure a much lesser cost to the health care system, and a much better care experience for the patient as well.

A lot of the care that is provided in the hospital is wasteful and inappropriate; the reason is the american hospital industry is geared toward demand creation, not meeting appropriate demand. And when it comes to health care, where the provider himself can often define what demand is, creating demand for services is not a terribly hard thing to do. Furthermore, even when the provider does not benefit financially with this artificial creation of demand, the legal environment in which we operate, heavily encourages unnecessary service utilisation.

To top it all, there is hardly any incentive or reason, neither to the consumer, nor to the care provider, to utilise less services and bring the costs down.

Therein is a recipe for a perfect disaster, a colossus of spending, an all sucking financial black hole is formed right there.

Taming healthcare: here’s how

The New York Times recently published an interesting interview about how to tame runaway health care spending. The subject of that interview is the revered Stanford health economist Victor Fuchs. Mr Fuchs has real clear headed solution as to how to solve America’s runaway health care spending.

Now don’t get too excited; this may be a pill that works, but this is one bitter pill to swallow. This is in fact something we all have known in the deep dark recesses of our minds, we just did  not have to courage to confront it and the authority to express it. Now that Fuchs has laid bare the inevitability of the idea, one can just hope the idea stays alive in the realm of public debate.

Fuchs makes a very commonsense solution; that we do valued added taxation for the entire health care coverage for the entire population based on income to cover for basic health care. Any additional health care insurance that individuals may want to get will have to be bought at the private market using after-tax dollars. People will pay proportionate to the income so that those who are poor do not get left out in the scheme.

The hard question that’s yet to be answered is weather healthcare is a societal good that society must ensure at a certain basic level or is it just another tradable service at the market place that profit motive will best take care of. In America today we are pretending that it is the latter when it in reality has been very much the former. On the one hand we focus that private insurance will best take care of our health needs, when we know on the other that one sixth of the population is without insurance today; and we end up subsidising, often inadequately, their health care one way or the other, as not doing so is not congruent with our value system. In the end we end up with neither the competitive advantage of a free market place nor the moral authority of a just and equitable society; furthermore we manage to bloat health care expenditures (that is a fodder for another blog post altogether) to such unsustainable amounts that we hold the entire economy to ransom.

Suggesting going to to a taxation based single payer system in today’s America is revolutionary at best and blasphemous at worst, depending on how we interpret the idea. Either way it is equally disturbing and disruptive of business as usual.  The thing is, this looks like an idea whose time has arrived.

We have choices we can make; we either overhaul health care and wipe out the entire fiscal deficit or do not do it and whatever we do as short fix the system will just be tantamount to plugging the bare holes when the entire dam is about to give away. Fuchs also makes a rather startling but very true remark that any meaningful change will not come from inside the policy circles and will have to be forced by external eventualities like an economic depression or countries like China refusing to buy American bonds.

Until that happens we can have visions of an improbable utopia that the market gods will fix all that is wrong with healthcare, or get back on our senses, suck up to our miseries and own up to them by cutting down on the largesse and rationing healthcare. In case you still think that is blasphemous to the capitalistic spirits of America, here is the news: we are already doing it, while we are being hypocritical about it and proving ourselves to be idiots all along the way.