TWISTS AND TURNS OF HEALTH CARE IN THE GLOBAL VILLAGE
The world is facing myriads of challenges in health care terms: a fast-paced growing population, an ever-expanding aging population, new diseases, re-emerging diseases, the poverty of the third world, modern lifestyle problems such as diabetes II, and obesity, lack of training and education, and the increasing costs of health care itself led by sophisticated R&D and patents.
Oscar Cetrangolo, an economist with one of his focuses on health care, spoke with us, shed some light on the landscape of health care today, zooming in on the Southern Cone, and helped us grasp some likely solutions to this very complex issue.
Oscar Cetrangolo
Economist graduated from the University of Buenos Aires
Master’s in Development from the University of Sussex
Full Professor of Public Finance at the University of Buenos Aires
Head of the School of Economics at University of Buenos Aires
What is the ideal health policy? What should it cover? What share of GDP should it account for?
In fact, there is nothing written on one-way solutions in public policies. If someone says that, distrust them. It is a matter of opinion.
Then, what is a good health care system?
That’s exactly what we have to define because that will shape the whole concept. In Europe, for instance, health is not regarded as a normal service because health is what allows you to live, to work, to buy, to consume, to do anything, to be a person in other words, so it cannot be treated as a normal service that someone is willing to buy or can afford to buy. So the idea in Europe, as opposed to that of the States, is that health has to be distributed according to the needs, not the possibilities. The British put this system in motion and the rest of Europe followed suit.
Not long ago in a street poll carried out by a US radio station people said that social insurance should not cover those diseases resulting from harmful habits people are fully aware of like obesity or lung cancer derived from smoking….
Well, in in each country prevails its society’s mindset. In the States there has been a big debate on health reform which in Bill Clinton’s first term picked up speed because the whole health expenditure in the US - not public, but the whole of it - is the highest in the world, around 18% of GDP. This is so because the system is mostly private and if you want to spend less, it has to be public.
What is Obama Care?
In order to understand Obama Care it is essential to understand the American system. In this system, health is not public in the least. If you have a problem, you have to pay for it. There is no such thing as a public hospital and if you have no money, it’s your business. Health is extremely expensive and therefore you need insurance. In the 1970s there was a reform when politicians realized that a system with no safety net was unsustainable and they had to do something for those with no means at all or those with deeper needs than others. These two groups are the elderly and the extremely poor. So they started two programs, Medicare and Medicaid. The former, run by the government, takes full care of the elderly population, the latter of the extremely poor. The big problem are those who are not too old and not too poor, and find themselves downright uncovered. With Obama Care the picture somewhat changed. Obama care forces everyone to have health insurance, but then again, this is not the same as having free access to health care, it is a wholly different worldview. When you prove you have no money to afford health care, you can apply for government subsidies that will cover it - partially or entirely. This meant a revolution and it was rejected not only by Republicans, but - paradoxically - by some Democrats as well.
That is a category - not very old, not very poor - that many freelance professionals may fall into. What happens with, for instance, a freelance accountant that might be earning a livelihood, but may not be doing all that well to afford luxuries?
Well, this is when freelance professionals have the incentive to get a formal, steady job at companies. There are many freelancers that when they do not see their careers take off, they go into or go back to the corporate life. This is very difficult to understand for us, Argentinians.
But in England, for example, there is such a thing as private insurance
Of course, we are speaking of capitalist countries!, but even so public health care is extremely good. The main difference is that in the public system there are waiting lists with priorities, but no one is left out. The first attempt of a reform in England was during the Thatcher period in which the Minister of Economy said that England could not afford a private health system and so they started by applying quasi-market incentives in the public sector, a sort of competition between the private and public sectors. They worked a lot on giving people a spectrum of options to choose, for example, their GP.
What is it like today?
Well, the whole landscape has become complex as a result of a multiplicity of factors. On the one hand there are growing inflows of immigrants, an emergence of new diseases, unprecedented breakthroughs in technology, and different ways of treating various diseases. Even if you have public insurance, the public health sector purchases different things from the private one. And people are provided medicine for free, fully tracked of course, in order to prevent excess consumption.
Is this common in most of Europe?
In Europe, public health care is not under debate. In Germany, for instance, all you have to do is choose your health insurer, there are many non-profit private health insurers and then the government, with public money covers your premium. Premiums vary in price on the basis of your condition. In the past it was the same for everybody, but it also led companies to reject those with serious illnesses or allow more men instead of women, etc. Now if you are older you get twice as much as if you are young and so on and so forth. But no one has to pay for anything.
What percentage of GDP represents health in Europe?
Normal health expenditure in Europe is around 8%-9% of GDP, as opposed to 18% in the United States.
What about now, when life expectancy has extended so significantly and human beings can get to be 85, or 90 years old, but not in very good shape?
Well, there is an ethical discussion these days revolving around the sophistication and cost of treatments depending on the age. For example, if you have gallstones, the system may decide to put you through an ordinary surgical procedure or a laparoscopy, being the latter much more expensive, but performed in one day. A physician would surely be able to answer this question more properly, but it is mostly about weighing up a set of variables. Anyway, most medical treatment is received in the last years or months of your life. In fact, life extension does not hit the health system as much as the pension system. Truth be told, the more efficient the health system is, the hardest hit the pension system is.
What’s the Trump administration’s stance on Obama Care?
Trump’s administration is split. On the one hand, the Tea Party, the far right, wants to do away with it. On the other hand, some Republicans show a more lukewarm stance saying “Well, watch out because a fair share of people are happy with it”. Trump himself favored some middle-ground stance, but it wound up being rejected by both sides. Obama Care is still in force. The public deficit is the driving force in the wish to change.
Latin America seems to run its own show. Brazil, for example, has a very expensive private health care system, a very deteriorated public one, companies are not forced to provide health insurance, and many people are left uncovered.
“In Europe, for instance, health is not regarded as a normal service because health is what allows you to live, to work. to buy, to consume, to do anything, to be a person. ”
Well, Latin America is very heterogeneous. Nevertheless, we can say that most Latin American countries are closer to the European system than to the US one. The organization is key. Our countries have two ways to run the system and throughout the 1950s and 1960s most of them ran both at the same time: the public health system and social security, in the latter the State obliges workers to pay contributions to obtain health insurance. It is social because it is mandatory and it is managed through non-profit organizations. Only in Argentina is this done through unions, in Uruguay is through mutuals, and in other countries through public institutions run by the government. This was implemented at a time in which full employment was expected to be a viable goal and in which everybody was going to have full social security coverage, until they realized such a goal was impossible.
Why was this so?
“The Argentine health care system is one of the most corrupt. It is difficult to speak of this country’s health system without speaking of corruption”
This was so because the main characteristic of Latin America is inequality, it is the most unequal region in the world, topped off by low taxation and high informality. The system was then split into those with social security and those without. Thus, it drifted away from the European idea, to the point of becoming polar opposites, that in which everybody has the same coverage with public money, and in which public money has to be spent equally on everyone depending on the needs not the money.
What was the main obstacle?
Latin America’s main problem is taxation. First off, taxation is very low due to the high level of informal economy and also due to political unwillingness. The only two countries that stand out and are close to European standards are Argentina and Brazil.
What about Chile?
No, in Chile taxation is around 20% of GDP. By and large they get money from copper or some other sources of income.
Now zooming in on Argentina, what is the present situation here?
“Argentina is a mess. it’s very inefficient with three systems coexisting: the public system, the private system, and the social security”
Argentina is a mess. It’s a very fragmented system. In GDP terms, we spend more than Europe, around 10%, out of which 4%-5% is social security, deducted from your wage and part of the premium paid for by the employer. Social security is in the hands of labor unions. While in some other countries, like Uruguay, the money from social security contributions based on income goes to a pool and the government distributes it according to people’s needs, in Argentina you deduct money that does not go to public organizations but to labor unions. To this we must add that workers can choose private health insurers that have agreements with labor unions and part of the social security payments goes to the premium payment in private insurers. This is a crazy idea. This system does not exist in any country but in Argentina. The public sector is spending around 2.5% of GDP, no more than that, and it is fully decentralized in a federal country, with the system depending on the province’s budget. To fully understand the degree of inefficiency the system shows, we have to understand that people have three coexisting systems: private (many), public, and social security. Crazy.
Health costs seem to be increasing constantly and insanely, making it very hard for some freelance workers to remain in a private system, is this so?
The big problem is inflation. With high levels of inflation, we end up discussing relative prices every month, every week, every day. The problem for these people is not that the cost of health insurance is increasing, it is inflation. For example, rates increased by 10% in the past 4 months, but I don’t know whether such increase is real or nominal.
Not long ago, I watched a TV interview with the president of a renowned private health insurer in which he stated that the leap in the exchange rate had hit them hard as their inputs amount to 60% in dollars.
The big problem the whole system faces is that its profitability depends on the wages in dollars and their spending on wages and technology.
What role does corruption play in the health care system in Argentina?
“If the Minister of Health is a doctor, it should be a sanitary doctor, a doctor who knows economy, who knows sociology and can interact with different players on an interdisciplinary team. ”
The Argentine health care system is one of the most corrupt. It is difficult to speak of this country’s health system without speaking of corruption. The ways of committing corruption at every link of it are numerous.
What is the solution to this intricate web that is the health system today?
There is no one solution. There is a road of reforms with many steps. In the public sector you should increase the role of the central government. I wrote a post about it on the University’s blog, Alquimias Economicas. https://alquimiaseconomicas.com/2018/12/10/algunas-ideas-sobre-un-sendero-de-reformas-para-el-sector-de-la-salud/
Should a minister of health be a doctor or an economist?
I don’t know. Today the important thing is to have a team. It is OK if it is a doctor, but no ordinary doctor, it should be a sanitary doctor, a doctor who knows economy, who knows sociology and can interact with different players on an interdisciplinary team. No physician coming from a hospital can be Minister of Health. Now the Ministry of Health - and this is not very well known - has an area of health economy and this is very important.
What book do you advise anyone who might not know anything about health economy to read to get acquainted with the subject?
I would advise reading the chapter on health in Joseph Stiglitz Manual of the Economy of the Public Sector. It is amazing.
What do you read in your free time?
I read fiction. Now I am reading a collection of stories by Brazilian writer Ruben Fonseca.
Jorge Reparaz
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