For years I’ve thought that the conventional wisdom in the field of global health is so innocent of elementary economics that no real economist could possibly support it. By “conventional wisdom” I include all unconditional talk of free curative primary care. But in a recent Lancet article, Dean Jamison reports on a set of committee conclusions—the group was chaired by Larry Summers and included Kenneth Arrow and George Akerlof—that calls on every country, no matter what its circumstances, to commit to universal health care (and such a commitment must imply free curative primary care). I can no longer say that no “real” economist would say such a thing, since we are now talking about two Nobel Prize winners and Summers.
So, the argument has to be made explicitly, and people must think for themselves.
First, “public policy—using the very scarce resources that poor countries have available—should first address those problems where market failures create the largest welfare losses. These losses include those resulting from an unfair distribution of income or well-being that a free market could produce.” That came straight out of an introductory economics textbook. Or, to quote Keynes: “The important thing for government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all.”
In other words, “Do public goods before private goods.”
The second part of the argument could be simplified to “Do things you are capable of doing before trying things you’re not.”
This is a realistic modification to public economics. It takes the constraints on government policy—both administrative and political—seriously when such constraints will interfere with getting the policy done at all. Implementation matters. This is just common sense. Politics is usually outside my expertise, but in justifying spending on primary health, people often say, “Oh, well, the money will come out of defense so it has no real opportunity cost.” No. It won’t. Or, you’d better be sure before you start.
On the administrative side, some policies are relatively easy. They can be done with the stroke of a pen or with easily written and monitored contracts. Monetary authorities can buy government bonds; most governments can get a road built (yes, I know, that’s not always so straightforward either). Other policies are really hard: Monitoring CO2 emissions from fixed-point locations (let alone cars), identifying and updating lists of poor people, making sure school teachers are child-centric and, of course, making sure primary health care providers show up for work and apply some due diligence to their job. Some of these are really, really hard. Governments should know their own capabilities and promise those things they know they can follow through on before making promises they can’t keep.
Good public policy makes choices based on both considerations. Given different epidemiological profiles and substantial differences in the capacity of governments (both of which change overtime), it is impossible to predict, before careful analysis, which set of policies would be appropriate in which circumstance at any particular point in time. Some governments might be able to get regulation or infrastructure done well, others might have an advantage in health or education (Cuba or Iran come to mind). There is no reason to believe that all governments are equally well prepared to handle all possible public tasks. Advocating “universal health care” irrespective of country circumstances runs counter to this commonsensical approach.
Two gigantic market failures characterize health in poor countries.
The first is the continued existence of communicable diseases, many of which are combatted by true public goods (or close enough). In today’s rich countries, traditional, 19th century public health problems of water, sanitation, and pest (vector) control and a few immunizations were handled by public authorities. Many of these are still not done in poor countries. Open defecation in India is a massive problem, currently being documented at length by researchers. The lack of sewers and sewage treatment in rapidly growing cities threatens the world with catastrophes. It makes Charles Dickens’s London look benign. Can we pretend we don’t know what to do about this problem? Can we pretend that money for such immediate demands will not be compromised if more money is to go to medical care? Without being sure that there is no trade-off with primary care in a country’s budget (I can attest there is such a trade-off in India), the “universal” part of universal health care is … irresponsible at best.
The second gigantic market failure in health is the universal failure of health insurance markets. This I learned from Professor Arrow in his 1963 paper. But what kind of health problem is most compromised when insurance markets fail? Is it the inexpensive kind (handled in primary care centers) or the expensive kind (handled in hospitals)? I would normally leave this as a rhetorical question, but in order to not be misinterpreted, the answer is: the expensive kind.
So, on conventional economic grounds, there is a very good argument for government intervention on public goods and on the risk/insurance/hospital set of problems. Prima facie, there is not such an argument to made on universal primary health care. Whether health care is particularly important for poor people (not protection from risk—that falls into the insurance problem that everyone faces) must be evaluated against everything else governments might do to rectify an unfair distribution of income. Health care is not an obvious choice in comparison to food, for example, or unconditional cash transfers.
Furthermore, the difficulty of administering public policies can’t be constant across countries and can’t automatically justify publicly provided or insured primary care. From evidence that money often fails to reach clinics (Gauthier and Wane), to absenteeism (Kremer et al., Chaudhury et al.), to poor quality care (Das and Hammer, Das et al.), to substitution with large private sectors (Filmer et al., Leonard), the net impact of public efforts to provide primary care are doubtful in general and, in any case, questionable frequently enough to make advocacy of universal provision … irresponsible at best.