William Hsiao, is K.T. Li Professor of Economics and Director of the Program in Health Care Financing at the School of Public Health, Harvard University
Peter S. Heller, former Deputy Director, Fiscal Affairs Department of the International Monetary Fund.
International Monetary Fund WP/07/13 – January 2007
“……..Health care has gained prominent recognition in development. The UN Millennium Development Goals (MDG) set 10 specific targets to be achieved by 2015, of which three explicitly pertain to health. Research studies document that millions of households in developing nations are impoverished each year by health expenditures, retarding poverty alleviation efforts, and an emerging body of research shows that investments in health can have a significant effect on economic development (Fogel, 2004; Bloom and Canning, 2000; and Bloom, Canning, and Sevilla, 2004). HIV/AIDS has undermined the development prospects of a number of African countries and threatens to weaken the growth momentum of several important Asian economies.
For middle-income, transition economies, and industrial countries, the challenges posed by the health sector for macroeconomists differs, but is no less daunting. Increasingly, pressures emerging from the health sector—in part due to the aging of populations and in part due to the rapid pace of technological change in the medical sector—are affecting fiscal sustainability, inflation, and possibly even the current account of the balance of payments.
For those working in the health sector, it is also obvious that macroeconomic policies can have a measurable impact on health care. Macroeconomic guidelines relating to public expenditure targets, inflation control, tax policy, and exchange rates will have effects on the provision of health care and ultimately on the health status of the population (Glied and Remler, 2002). Since a large share of health funding comes from the government, fiscal targets will constrain how much a government can spend on health. Tax policies relating to tobacco, alcohol, and firearms will influence people’s demand for these products and
ultimately their health (Jha and Chaloupka, 1999). And the exchange rate will be a factor determining the cost of vaccines and drugs.
Macroeconomists concerned with the fiscal balance will also influence decisions on the respective roles to be played by government and private markets in the health sector. Such decisions will influence the pace of health cost inflation, the efficiency and quality of health care, and the degree of equity associated with its financing.
This primer represents an effort to bridge the divide, enabling particularly macroeconomists to obtain at least a basic understanding of the key health policy and health system issues that may arise which are integral to their understanding of the macroeconomy…..”
[Full text PDF]