Work in progress The consequences of the 2008 Financial Crisis. Martin McKee European Observatory on Health Systems and Policies

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1 Work in progress The consequences of the 2008 Financial Crisis Martin McKee European Observatory on Health Systems and Policies

2 Proposed structure of report An introduction to terminology Lessons from previous crises Conceptual frameworks to understand economic crises and their impact on health systems and health Origins and nature of the current crisis Consequences and responses Measures to reduce potential for another financial crisis Reduce risk of future crises Creation of timely and effective monitoring systems Strengthening social protection Strengthen health systems

An introduction to terminology Probably more uninformed statements have been made on the issue of public sector debt and deficits than on any other topic in

3 An introduction to terminology Probably more uninformed statements have been made on the issue of public sector debt and deficits than on any other topic in macroeconomics. Proof by repeated assertion has frequently appeared to be an acceptable substitute for the more conventional methods of proof by deduction or by induction. Buiter, 1985

4 Deficit as a % of GDP Italy Germany Greece France Portugal Japan USA UK % % -8.00% -6.00% -4.00% -2.00% 0.00% Japan Italy Greece USA France Portugal Germany UK Gross debt level as a % of GDP 0.00% 50.00% % % % % Maturity (average of government debt, years) UK Greece Italy France Portugal Germany Japan USA

5 Different debts UK Spain France Italy Switzerland Germany Government Corporate non financial Household Financial sector Russia Source: The Economist % of GDP

6 The choice of language is as much political as technical Headlines from the Clinton era, but strangely not from the Reagan era

7 Lessons from previous crises

8 Source: Hanley 1931 Life Sources: NYT Oct 1930; AP 1932; WP 1930

9 The impact of a 1% increase in unemployment on mortality Cause of Death External Causes Suicide Suicide (0-64) Homicide Drug Abuse Alcohol Poisoning Accidents Drowning Poisoning Ill-Defined Causes Transport Accidents Falls Cardiovascular Disease Cardiovascular Disease (0-64) Ischaemic Heart Disease Cerebrovascular Disease Psychiatric Disorders Liver Cirrhosis Ulcer Neoplasms Lung Cancer Alzheimer Diabetes Diabetes (15-44) Maternal Mortality Infant Mortality Infectious Diseases Respiratory Infections Tuberculosis All-Cause Country-Years Suicide Transport accidents Effect Size (95% CI) (-0.68, 0.18) 0.49 (-0.04, 1.02) 0.79 (0.16, 1.42) 0.79 (0.06, 1.52) (-7.67, 0.17) 0.81 (-5.93, 7.54) (-0.88, -0.02) (-1.34, 1.04) (-1.90, 1.73) (-3.51, 0.54) (-2.14, -0.64) 0.11 (-0.42, 0.65) 0.03 (-0.25, 0.30) 0.13 (-0.16, 0.42) 0.31 (-0.15, 0.77) (-0.45, 0.14) (-3.47, 2.05) 0.12 (-0.78, 1.02) 0.24 (-0.44, 0.91) 0.04 (-0.07, 0.16) 0.05 (-0.14, 0.24) 0.12 (-1.71, 1.96) 0.54 (-0.33, 1.40) 0.46 (-1.68, 2.60) (-3.06, 2.73) (-0.59, 0.47) (-1.18, 0.56) 1.89 (0.02, 3.76) 0.18 (-0.58, 0.94) 0.05 (-0.19, 0.29) Decreases MR Increases MR Percentage Change

10 Protection Increased social spending strongly mitigates impact of unemployment on suicide At $190 per capita per annum, no association between unemployment and suicide Most effective social spending is on labour protection (keeping people in work so firms can respond rapidly when recovery comes)

11 Association (Spain) or lack (Sweden) of unemployment and suicides Unemployment red, suicides - blue

12 Impact on health expenditure Work in progress Some evidence that health budgets suffer more than other budgets in the aftermath of recession Expenditure falls most where out of pocket spending is greatest Impact greatest on pharmaceuticals Reductions seem to be greater in tax revenues rather than social insurance revenues

Impact on development assistance No statistically significant association was found in the short or long run between measures of economic recession and the amount of official Development Assistance

13 Impact on development assistance No statistically significant association was found in the short or long run between measures of economic recession and the amount of official Development Assistance for Health committed or disbursed. Any significant decrease in overall Development Assistance for Health following the current economic recession would have little historical precedent and claims of inevitability would be unjustifiable.

14 Conceptual frameworks Emergence of financial crises Consequences for health Consequences for health systems 14

15 Conceptual framework: Health What we expect: Increased suicides Reduced deaths from road traffic injuries But - considerable variation among countries Increase in suicides less where there is strong social protection and, especially, active labour market programmes Reduction in traffic deaths less where rates already low

16 Ratio: 2007=1 1.7 Early results Change in suicides (2007=1) Austria Czech Republic Finland Greece Hungary Ireland Lithuania Netherlands Romania United Kingdom

17 Deaths/100,000 Deaths on the roads Lithuania Hungary Netherlands

18 Another indicator of falling deaths on the roads

19 per cent Survey data: Prevalence of psychiatric disorders among patients attending primary care in a Southern European country: 2006/7 and Major Depressive Anxiety Disorders Alcohol Related Disorder Disorder 2006/ Somatoform Disorder

20 Policy options Cut health expenditure Increase health expenditure Conceptual framework: health systems Policy tools Volume and quality of care provided Ration care: Explicit (eg priority setting, HTA, benefit package, entitlement, waiting lists) Implicit (eg informal payments and service dilution) Facilities (eg closures) Staffing numbers Capital investment Costs Salaries Prices of medical goods (eg drugs) Overheads (eg reconfiguration) Payments to providers (eg adapt provider payment, strategic purchasing) Contributions Increase/decrease: Government (tax) Employer/employee (SHI) Household (user charges) Borrowing Investment (eg Private Finance Initiative) Borrowing / increase deficit (eg loans) Deplete reserves/ assets Use reserves/deplete capital Sell assets Other sector reforms Eg pensions, jobs, benefits Type of care (NHA) Health care functions Curative care (inpatient and outpatient) Rehabilitative care Long-term nursing care Ancillary services to health care (eg diagnostics and patient transport) Medical goods dispensed to outpatients (eg drugs and appliances) Prevention and public health services Health administration Other health care-related functions eg capital formation; education and training; R&D etc Health care providers Hospitals Nursing / residential care facilities Ambulatory health care Retail sale and other providers of medical goods Provision and administration of public health programmes General health administration and insurance Outcomes Health expenditure Increase / decrease in deficit Change in public / private share Effects on health system goals: Financial protection Efficiency (eg productivity, administrative, allocative) Equity (eg catastrophic expenditure, utilisation, health) Quality (eg survival, readmission, following guidelines) Health status (eg avoidable mortality) Satisfaction (eg patient surveys) Responsiveness (eg waiting times, unmet need) Non-health system effects Poverty Other public sector spending Unemployment Ongoing: assess capacity for implementation, political feasibility and fiscal preparedness

21 Framework for recommendations Reduce the risk of future crises Creation of timely and effective monitoring systems Strengthening social protection Strengthen health systems

22 Prevention is better than cure Restructure finance Separate investment and consumer arms of banks Strengthen regulation Prevent institutions becoming too big to fail Re-specialise economies Services are not enough, we must make things people want And adapt to end of fossil fuel economy Reduce global imbalances And find ways to deal with massive capital flows Reduce income concentration Forget the health arguments, the economic arguments are enough Reform global governance More flexible and representative G20 Re-educate economists Reverse the neoclassical dominance that has existed since the 1960s Increase pluralism and expand training in behavioural economics Source: Wade, 2009

23 Monitoring and analysis Financial data Instantaneous Mortality data Within the decade Country Belgium 2004 Portugal 2004 Slovakia 2005 Last year of mortality data Denmark 2006 Romania 2009

24 Strengthening health and social protection systems... to follow 24

25 Questions and comments? Analysing Health Systems and Policies

Source OECD HEALTH DATA 2010, October

Source OECD HEALTH DATA 2010, October Financial Crisis in the EU countries Health impact Health Systems Response A framework for decision making Lisbon, 11 th January 2012 Josep Figueras www.healthobservatory.eu Total Health Expenditure %