Work in progress The consequences of the 2008 Financial Crisis Martin McKee European Observatory on Health Systems and Policies
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 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
Deficit as a % of GDP Italy Germany Greece France Portugal Japan USA UK -12.00% -10.00% -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% 100.00% 150.00% 200.00% 250.00% Maturity (average of government debt, years) UK Greece Italy France Portugal Germany Japan USA 0 2 4 6 8 10 12 14
Different debts UK Spain France Italy Switzerland Germany Government Corporate non financial Household Financial sector Russia 0 100 200 300 400 500 Source: The Economist % of GDP
The choice of language is as much political as technical Headlines from the Clinton era, but strangely not from the Reagan era
Lessons from previous crises
Source: Hanley 1931 Life Sources: NYT Oct 1930; AP 1932; WP 1930
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 662 657 657 496 261 203 516 506 504 611 515 516 662 662 660 662 490 662 514 662 661 500 655 499 584 671 660 511 462 521 Suicide Transport accidents Effect Size (95% CI) -0.25 (-0.68, 0.18) 0.49 (-0.04, 1.02) 0.79 (0.16, 1.42) 0.79 (0.06, 1.52) -3.75 (-7.67, 0.17) 0.81 (-5.93, 7.54) -0.45 (-0.88, -0.02) -0.16 (-1.34, 1.04) -0.09 (-1.90, 1.73) -1.48 (-3.51, 0.54) -1.39 (-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) -0.16 (-0.45, 0.14) -0.71 (-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) -0.17 (-3.06, 2.73) -0.06 (-0.59, 0.47) -0.31 (-1.18, 0.56) 1.89 (0.02, 3.76) 0.18 (-0.58, 0.94) 0.05 (-0.19, 0.29) -6-4 -2 0 2 4 6 Decreases MR Increases MR Percentage Change
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)
Association (Spain) or lack (Sweden) of unemployment and suicides Unemployment red, suicides - blue
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 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.
Conceptual frameworks Emergence of financial crises Consequences for health Consequences for health systems 14
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
Ratio: 2007=1 1.7 Early results Change in suicides (2007=1) 1.6 1.5 1.4 1.3 1.2 1.1 1 Austria Czech Republic Finland Greece Hungary Ireland Lithuania Netherlands Romania United Kingdom 0.9 0.8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Deaths/100,000 Deaths on the roads 30 25 20 15 10 5 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Lithuania Hungary Netherlands
Another indicator of falling deaths on the roads
per cent Survey data: Prevalence of psychiatric disorders among patients attending primary care in a Southern European country: 2006/7 and 2010 50 45 40 35 30 25 20 15 10 5 0 Major Depressive Anxiety Disorders Alcohol Related Disorder Disorder 2006/7 2010 Somatoform Disorder
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
Framework for recommendations Reduce the risk of future crises Creation of timely and effective monitoring systems Strengthening social protection Strengthen health systems
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
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
Strengthening health and social protection systems... to follow 24
Questions and comments? Analysing Health Systems and Policies