Healthy investments

By bne IntelliNews November 7, 2008

Ben Aris in Berlin -

Governments in emerging Europe are barking up the wrong tree. The money they are pouring into building power stations and fixing roads would be better spent on fixing the healthcare system. The World Health Organisation made a remarkable claim during a conference in June: investment into health is the most effective investment a government can make if it wants to increase the wealth that a country produces.

"Politicians see spending on health as a burden, an obligation of the state," says Nata Menabde, the chief regional officer for the World Health Organisation (WHO), which presented the evidence at a meeting to sign a new European Charter on health systems in Tallinn. "However, it is actually amongst the most productive investment available to them."

WHO's research is incomplete, but already shows the importance of the healthcare system on the economy has been badly underestimated in the past. Rather than a sunk cost of a service that is consumed, health is better considered as another form of infrastructure.

What seems to be a counter-intuitive conclusion boils down to the question: what is better - to have more machines and roads or to have more healthy people who can work harder for longer?

Our society's obsession with technology leaves us with a bias in favour of machines and roads, but WHO found spending on improving health not only easily covers it own costs, but actually has the most significant impact in the increase of the wealth of a nation of any kind of investment spending. "There is an obvious relation between wealth and health in that the better off a country is the more healthy its people tend to be and, more importantly, the more interested in maintaining their health its population is," says Menabde. "However, what WHO's extensive research shows is the relationship works the other way round too."

Health systems

Of course doubling GDP is not as simple as doubling the number of kindergartens, and by "health systems" the WHO means a lot more than just doctors and drugs. "A healthcare system encompasses all part of society and its various institutions that affect health. It includes the health ministry's ability to affect policy in other ministries such as transport, environment and education, to follow policies that improve the health of the population," says Menabde. "In this sense, a health ministry is a unique institution in government, as it must go beyond managing the physical assets and personal of the health system."

There is a dynamic triangle between healthcare systems, health and the wealth of a nation. At its most trivial, having healthier workers means a bigger workforce, which retires later and produces more while it is working. However, the health of the population plays a more complicated role in the national economy, as not only are sick workers removed from the factories, but someone has to pay for them while they are sick. Where it starts to get really expensive for the state is that poor health means workers tend to retire early then suffer for decades from progressively intractable (and expensive) illnesses. The result is that poor health's power to destroy productive capacity is multiplied many times over.

Governments in the developed world are already struggling under a growing burden of health costs, which consumes hundreds of billions of dollars of budget money every year. Indeed, in places like the US and Germany the health systems are close to financial collapse. The resources used to treat sick workers are lost to the economy, or at least could be much better employed.

Picking up the baton

Governments have been getting the message. Looking for ways to reduce costs of the healthcare system, the irony is that increasing investment into the health system is amongst the best ways to reduce these costs.

In Eastern Europe the effect of investing in health should be even more dramatic and one of the few options government have to the potentially catastrophic demographic changes in the works caused by the years of economic chaos in the 1990s, which sent life expectancies and birth rates plunging across the region.

Apart from dealing with Eastern Europe's notorious bad lifestyle, the legacy of socialism means many of these countries are predisposed to spending more on public health. For example, the Russian constitution guarantees citizens treatment as a fundamental right. Every Russian infected with the HIV/AIDS virus can expect the state to provide the expensive retrovirus treatment. In practice, the size of the health budgets means the drug is simply not available.

However, even the Russians have started to realise that it's cheaper to invest in education, social programmes and narcotics abuse treatments, than it is to treat the illnesses caused by AIDS or try to replace workers lost to early death from the disease. The government has belatedly begun to spend heavily on dealing with the virus, which is verging on an epidemic in all of Eastern Europe.

Tallinn marked the culmination of this new thinking that governments should realise effective health systems are not a luxury of rich nations, but a fundamental part of the social and physical infrastructure that supports a country's prosperity. In June, 500 senior health officials from over 53 countries met in the city to sign off on a long-waited European Charter on health systems.

The new charter takes the previous agreement signed in Ljubljana 12 years ago a step forward by defining specific policy goals that will improve health systems in the signatory countries. It is an important step forward as the previous agreement only defined the "values" that countries aspire to. Now the signatories are committing themselves to concrete and measurable standards that will allow both their own people and the international community to hold them accountable. "It's a big deal. Politicians do not like pinning themselves down, and especially not on an issue as politically sensitive as health," says Menabde. "Now healthcare results are measurable and comparable. You can't fudge failures any more."

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Healthy investments

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