The financial crisis in the EU:

Transcription

1 The financial crisis in the EU: its impact on the health sector Martin McKee European Observatory on Health Systems and Policies

2 The causes Deregulation of Banks and Derivative Markets Corruption and Misinformation (Bad Credit Ratings, Off-balance accounting) Housing Bubble Rising Interest Rates in 2006 Massive Capital Inflows Mortgage-Backed Securities Low Interest Rates Risky Subprime Mortgages Herdlike behaviour Rising Consumer Defaults Stock Market Crash Domino effect Bank defaults Source: Stuckler et al

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4 But if it was only stupidity Massive fees for financial transactions Goldman Sachs made $300 million arranging a $1 billion currency swap for the Greek government in 2002 Concealed from European Union regulators

5 Benford slaw on the distribution of the first significant digit in a collection of numerical data P(d) log 10 ([d + 1]/d) P (d) d

6 Benford slaw applied to EU 27 and Greek financial statistics (average 133 observations/ country/ year) P (d) P(d) P(d) EU27 P(d) Greece d Source: Rauch, Göttsche, Brähler, & Engel, 2011

7 In summary Some very rich, very greedy, and very stupid people using your money to play with things they didn t understand: Credit default swaps Naked credit default swaps Derivatives Hedging Mortgage backed securities Subprime credit default hedges (OK, I made that one up) Fraud

8 Debt: If you owethebank$100 that's yourproblem.if you owethebank $100 million, that's thebank's problem John Paul Getty

9 Do public debts matter? the long run experience and especially that of Britain would seem to fly in the face of all such rules Niall Ferguson Great Britain seems to support with ease a debt burden which, half a century ago, nobody believed her capable of supporting. Adam Smith

10 Some basics Lest there be any confusion, austerity is not fixing the economy Countries adopting austerity policies have seen economy worsen, those that did not (Iceland) have seen growth

11 Austerity is notworking

12 But complicated Welfare payments have multiple components Some are automatic stabilisers Unemployment benefit payments go up in a recession as more people lose jobs Some would remain the same, all else being equal Old age benefits, disabled benefits, child benefits In some countries these are being cut Need for more detailed analyses

13 So why are we pursuing austerity? Repeatedly, neo-liberal politicians have taken advantage of crises to undermine social solidarity They are rubbing their hands with glee in the current economic crisis

14 Crucial new evidence The Chief Economist of the IMF has recalculated the fiscal multiplier the impact of additional spending on GDP growth Larger than previously thought Explains why austerity has had much more damaging impact on growth than suspected Makes case for expansionary policy

15 Health sector responses Survey of key informants in WHO member states Analysis of EU-SILC data

16 Possible responses Health expenditure Policy tools Outcomes Cut Financing / contributions Increase Maintain Volume and quality of services Effect on health system goals Reallocate Costs Financial crisis and other constraints / opportunities

17 Overview of responses Many countries largely unaffected by financial crisis so no need for a response Many changes in health systems part of pre- existing plans so difficult to attribute to the financial crisis English reforms will cost far more A few examples of major cuts (some imposed by the international community) Other countries postponed cuts by drawing on reserves

18 National health budgets Cuts in many countries Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Iceland, Ireland, Italy, Greece, Latvia, Romania, Portugal, Spain (bold >20%) In some cases, rising unemployment reduces inflows to funds Some compensated for by increased government contributions (over-compensated in Slovakia) But also increases in some France, Denmark, Turkey

19 Additional income New regional taxes in Italy Increase in taxes on certain types of income in France Increased capital gains tax in Czech Republic Transfer from education budget in Denmark Increased employee/employer contributions Bulgaria, Czech Republic, Greece, Portugal, Romania, Slovenia

20 User charges New or increased: Czech Republic, Denmark, Estonia, Finland, France, Greece, Ireland, Latvia, Netherlands, Portugal, Romania, Turkey Threshold for exemption lowered Belgium Reduced Italy, Hungary

21 Volume and quality of services Commitment to greater emphasis on health technology assessment Czech Republic, Estonia Reduced reimbursement Dental care Estonia, Ireland IVF, physiotherapy, mental health Netherlands Cosmetic surgery Portugal Spa treatment Slovenia

22 Coverage Ireland excluded over 70s from statutory coverage for primary care Czech Republic excluded some foreigners Spain excluded illegal migrants (but some regions refused to implement it) Hungary increased checks of entitlement (but in context of increasing racism) Several countries in the Balkans are increasing coverage, currently less than universal

23 Waiting times Estonia increased maximum waiting times for outpatient appointment from 4 to 6 weeks England abandoned targets for waiting times (but not because of crisis) as expected, waiting times have increased

24 Sin taxes Increased taxes Alcohol and cigarettes Bulgaria, Estonia, Ukraine, Czech Republic, United Kingdom Soft drinks France, Finland However, main role of such taxes is to change consumption

25 Prices Policies on pharmaceuticals largely reflected a continuation of existing policies, although often accelerated Strengthened negotiating poisitionwith industry Austria, Latvia, Poland, Portugal, Slovenia Greece imposed a major reduction on what it would pay Significant shortages in pharmacies

26 Salaries Widespread pay freezes (de facto cuts with inflation) UK, Slovenia or cuts Cyprus, Greece, Ireland, Lithuania, Portugal, Romania Or reduced rate of increase Denmark Increased pension contributions (de facto wage cuts) Ireland, UK

27 A few words about health Our research from previous crises predicts: Rise in suicides, but can be avoided by increased social spending, especially on active labour market policies Fall in road traffic deaths Reduced access to health care in some cases Possible long term effects, but easily lost because of low signal to noise ratio

28 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

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

30 Suicides in old and new EU Member States: 2007=1

31 Deaths on the roads Deaths/ 100, Lithuania Hungary Netherlands

32 A Greek tragedy 32

33 Greece EU-SILC data from 2007 and % increase in people reporting not visiting a doctor even though they felt it necessary 14% increase for dentists Seems to be mainly due to reduced access (distance, opening hours) and not cost Hospital admissions Up 24% between 2009 and 2010 Reported decline of 25% in admissions to private hospitals Kentikelenis A, Karanikolos M, Papanicolas I, Basu S, McKee M, Stuckler D. Health effects of financial crisis: omens of a Greek tragedy. Lancet 2011; doi: /s (11)

34 Greece EU-SILC data from 2007 and % increase in people reporting not visiting a doctor even though they felt it necessary 14% increase for dentists Seems to be mainly due to reduced access (distance, opening hours) and not cost Hospital admissions Up 24% between 2009 and 2010 Reported decline of 25% in admissions to private hospitals Kentikelenis A, Karanikolos M, Papanicolas I, Basu S, McKee M, Stuckler D. Health effects of financial crisis: omens of a Greek tragedy. Lancet 2011; doi: /s (11)

35 More on Greece Increased use by Greeks of street clinics previously provided for undocumented migrants Reports of substantial increase in heroin addicts and very substantial rise in HIV infections But drink driving down

36 New cases of HIV in Greece cases Unknown Hetrosexual Homosexual Injecting drug users Oct-11

37 Spain Health policy determined regionally Important natural experiment Major cutbacks in Catalonia Surgeons offering to operate for free But not in some other regions

38 Percentage point increase in diagnoses of mental illness among patients attending primary care in Spain: 2006/7 and 2010

39 Suicides in England Conclusion: The study provides evidence linking the recent increase in suicides in England with the financial crisis that began in English regions with the largest rises in unemployment have had the largest increases in suicides, particularly among men.

40 . and in the USA

41 Have we been here before? How to solve a slump: "A solid majority of economists" agree: The government borrows more and invests the cash either in building schools and hospitals or in providing benefits and tax cuts This boosts demand and generates employment This can be paid for by borrowing wartime UK government ran "astronomical budget deficits", while "the rate of interest has shown no rise since the beginning of 1940 If it becomes too costly to keep on top of the national debt then ministers should raise more funds, not by taxing ordinary pay or spending, which would slow the economy, but with a levy on idle wealth A booming economy and healthy profits would be good for the "leaders of industry", but they will never support such government intervention The main sources of resistance are "so-called 'economic experts' closely connected with banking and finance" and "big business". Michał Kalecki, 1942

42 Thank you for your attention