OVERVIEW

Prior to 1940, many people argued that medicine offered little to improve health or prolong life. However, since the discovery of sulfonamides in the mid-1930s, a panoply of medications, surgeries, and preventive measures have contributed enormously to human well-being, with new interventions and better therapies being developed every year. Just as important, there is a better understanding of the complex interactions between disease and the environment, between health and economics, and between social development and collective welfare.

Today, scientific investigations have shown that some therapies are effective, safe, and in many cases affordable to even the poorest of individuals. Other therapies are effective but are more expensive and, thus, require careful balancing of the costs and benefits, which vary with location, culture, and social structure. Still others are less efficacious but still are provided in place of more efficacious, better substantiated, and less-expensive interventions.

Choosing the right set of interventions is therefore an increasingly complex task of public policy. In some cases, the evidence for therapies is so overwhelming that all governments should try to make these interventions available as widely as possible; in other cases, the evidence is conflicting or, more commonly, incomplete. Thus, decisions are much harder to make and governments must be more cautious. In addition, whatever choices governments make are inevitably constrained by resources. And what makes choosing among interventions even more complex is that these choices have life-and-death consequences.

OVERVIEW

The ultimate objective of health care services is to improve health status. In Chapter 3, we saw that choosing the right set of clinical interventions is critical to achieving better health within constrained resources. Chapters 4 and 5 discussed ensuring that all people can afford, and have access to, those interventions. In addition, ensuring that the appropriate medical infrastructure and institutions are in place is also key to achieving better health, as we will see in the next chapter.

However, none of these factors is enough to guarantee improvements in health status. Any intervention—whether clinical or enabling—will not improve the health of individuals if the individuals do not choose to take advantage of it, or if providers do not offer the intervention to their patients. For example, a government can decide to fight a measles epidemic by providing immunizations for children, by allocating public subsidies away from curative services and toward the primary preventive care services, and by geographically targeting communities most in need of measles immunization. None of these interventions, however, will improve measles immunizations for children if the parents do not choose to bring their children into the clinics that provide the service and if community health workers are not skilled.

Figure 6.1 expands the relationship presented in Figure 2.1 to show how health policy affects health status and is mediated by changing behaviors of the stakeholders.

OVERVIEW

In Chapter 1, we argued that good health policy can have a direct impact on improving health outcomes. Exactly which policy to pursue is decided from a complicated mixture of politics, available funding, and technical expertise. The technical elements of this mixture are determined, to varying degrees, by the evidence available for policymaking. Ideally, policy should always be evidencebased, but this is obviously not always the case. Oftentimes, policy is made without evidence—a situation that demands that policy be evaluated in vivo to determine if it is having its intended impact. Other times, policy is made that ignores the available evidence. Creating evidence-based policy, therefore, faces twin challenges: high-quality data must be used during the policymaking (or policy revision) process, and policy made in the absence of evidence must be implemented cautiously until its impact is properly understood.

Data are important for policy analysis for a simple reason: Better data should generate or lead to better policy. Better policy, in turn, is expected to lead to better health outcomes—the ultimate goal of health policymakers.

Do better data actually guide policymaking? It is not hard to demonstrate that information and scientific investigation are used to inform health policy, and there are many examples of this relationship in Asia. For example, data from observational studies have shown that sexually transmitted diseases (STDs) are associated with cervical cancer and the spread of HIV.

For almost two decades, the economy of Thailand grew at an average rate of 11.5 percent a year, but in July 1997 a simmering financial crisis resulted in the forced depreciation of the Thai baht. The crisis soon spread, and by the beginning of 1999, Indonesia, Korea, and Malaysia had experienced two consecutive years of negative economic growth for the first time in 30 years. Equity and real estate markets, which had boomed with the surfeit of domestic and foreign capital, suddenly collapsed under the weight of rising current account deficits and poorly regulated financial intermediaries. The financial contagion also spread to the Philippines, where the peso fell 39 percent, and to the more established economies of Hong Kong and Singapore. Other parts of the world, particularly Latin America and the transition economies of Eastern Europe, have also been severely affected by the crisis.

The crisis in Asia risks undermining one of the most remarkable economic and social achievements in modern history. Absolute poverty had been nearly eliminated in Korea, Malaysia, and Thailand. In 1975, six out of ten East Asians lived on less than a dollar a day; by 1995, this figure was down to roughly two out of ten. Although the precise figure is not known, tens of millions have been dragged back down into poverty by the crisis. For example, by the end of 1998, Thailand had 800,000 newly unemployed workers, and in Indonesia, the figure was a staggering 20 million people.

Countries vary enormously in the health status of their populations—even after controlling for income and education levels. They vary in the amount of resources their health systems draw from the rest of the economy. And they vary in the extent to which their health financing mechanisms shield individuals from the risks of major health care expenditures. Governments' health policies vary as well: Some governments attempt to finance (or mandate the financing of) basic clinical services for all their populations, while others rely on out-of-pocket user fees or private voluntary insurance for much of the financing. Some focus public spending on public health and effective, targeted disease control, while others spend heavily on a few major tertiary facilities. Some governments provide the services they finance, while others use public resources to purchase services from private providers. It is the role of health policy analysis to assess whether these and other government choices affect performance in improving health, controlling costs, and spreading risk.

In this volume, John Peabody and an impressive team of coauthors assemble and interpret a broad range of material and provide a coherent overview of both current conditions and recent trends in health status, health expenditures, and health coverage in Asia—a region whose economic, social, and cultural diversity raises most of the policy issues facing health sectors in any country. The authors are careful not to be too prescriptive.

OVERVIEW

We argued in Chapter 1 that when governments pursue health-sector activities, their efforts are driven from the top down by a set of broad health-sector objectives. Governments seek to improve health status, ensure equity, and insure against catastrophic illness. Establishing and prioritizing those objectives is challenging enough, but governments have the much harder problem of managing the health-sector operations that derive from those objectives. Translating those objectives into operational programs is a difficult management task.

Just exactly how hard it is to manage health-sector activities is illustrated by the difficulties China has had during its reform efforts. A decade ago, Chinese macro health policy shifted health care financing and delivery activities toward a free market system. All levels of health facilities were encouraged to rely on user fees to support their operations. For political reasons, China continued its system of administered prices so that public hospitals continued to be run by the government. The government hospitals were only funded for basic wages and capital. User fees were intended to cover all other hospital costs. The government then set prices of many basic services at less than or equal to cost, while allowing higher prices to be charged for certain imported drugs and new high-technology procedures. Thus, hospitals and providers were able to make a profit on these services, which they could use to subsidize basic services and to award wage bonuses.

OVERVIEW

In Chapter 1, we discussed when governments should intervene and how values influence these judgments. Government interventions should correct market failures that cause health outcomes to be lower than they otherwise could be, cross-subsidize the poor's access to medical care, and correct health insurance market failures. In Chapter 3 we described a set of health interventions that governments can and should make available to improve the health of the population. These interventions can be prioritized, not only in terms of their costeffectiveness, but also in terms of how well they meet the requirements for government intervention. We also noted that governments have resource constraints, which means they cannot fully subsidize all programs and activities they want to. At the end of Chapter 3, we talked about some ways that governments can work within their resource constraints to improve health outcomes by delivering care more efficiently through higher quality and by using traditional medical practices.

In this chapter, we examine how governments can achieve their objectives in the health sector by how they finance and allocate public expenditures. Public expenditures are defined as the cost of services and subsidies purchased by, and sometimes delivered through, the public sector. How these expenditures are financed is a critical element of successful health policies because financing determines the budget available for public activities. It also has implications for how expenditures are allocated.

OVERVIEW

One of the key roles of government in the health sector we outlined in Chapter 1 is promoting equity or remedying inequities by improving access to health care. As we saw in Chapters 3 and 4, ensuring equity involves both the delivery of health care—governments need to prioritize interventions, and the financing of health care—governments need to put policies in place that enable individuals to afford those interventions.

Over the past three decades, Asian governments have made a concerted effort to improve access to health care. Many countries invested in facility infrastructure and health manpower to extend direct public provision of free or low-priced services to poor urban neighborhoods and rural areas (e.g., Indonesia, India, Papua New Guinea, the Philippines, and Sri Lanka). Some countries also expanded insurance, particularly for civil service workers and others in the formal wage sector (e.g., South Korea and Singapore) or for farmers through rural cooperatives or communes (e.g., China and Viet Nam). More recently, some governments have fostered the start-up of community financing schemes or have disseminated health cards to the poor (e.g., Thailand and Indonesia). These investments in health, combined with the development gains made possible by economic growth, as discussed in Chapter 1, have led to impressive gains in health status throughout many Asian countries.

However, such investments are not sufficient to ensure equity.

Self-interest and the public interest frequently conflict. In a corrupt relationship both the briber and the recipient are better off, but the transaction violates government policy. A criterion other than willingness to pay is supposed to prevail. Sometimes corrupt public officials claim that bribes have not influenced their behavior. They are simply “gifts of good will.” Private individuals and firms may, nevertheless, believe that such gifts are, in fact, a requirement of good service up and down the government hierarchy. Even those who pay to receive something they ought to obtain for free believe that bribery is better than the alternative presented by the corrupt official. They may believe that politicians and judges will be biased against them if no money or favors have changed hands. The systemic effect of permitting such payoffs is damaging. Those with discretion will be tempted to create a large number of vaguely specified rules that create more chances for payoffs. Those who have not paid in the past may be tempted to pay in the future because it appears to be the norm.

Although individual payoffs may seem to further efficiency and even fairness, systemic corruption will seldom do so. In a repressive state, where many policies are harmful to all except a favored elite, corruption may be a survival strategy. Toleration of this practice, however, may just permit an illegitimate and inefficient system to persist. Corruption scandals can then be a sign of a country's growing political maturity.

Democracies based on strong legal foundations provide a stable framework for economic activity. For this framework to operate efficiently, however, politicians must seek reelection and must feel insecure about their prospects, but not too insecure. This leads to a “paradox of stability.” Too much security of tenure can further corrupt arrangements. Too much insecurity can have the same effect.

The strength of the competitive political environment raises the stakes and reduces the likelihood of corruption. A competitive political system can be a check on corruption. For elected politicians the most immediate form of “punishment” occurs at the polls. The electorate may extract a cost even if the payoffs are kept secret. Bribes and illegal campaign donations are given in return for a benefit. Often the quid pro quo is something the corrupt politician would not have done without the payoff. If politicians vote against the interests of their constituents, they can expect to suffer at the polls.

The distinctive incentives for corruption in democracies depend on the organization of electoral and legislative processes and on the methods of campaign finance. These factors may be intertwined. Some electoral systems encourage the development of strong political parties while others encourage politicians to develop personal followings. Corrupt possibilities are related to the relationship between political structure and private wealth.

Electoral Systems

In a democracy, electoral voting rules and legislative processes interact with underlying political cleavages to affect the opportunities for corruption.