Healthy People Drive Strong Economies

Dieynaba Nioula Kane remembers vividly when, for the first time in her life, she was forced to ask friends and family for money. It was out of desperation after the birth of her fifth child, a little boy with a life-threatening condition that needed specialist treatment in the capital. Dieynaba was forced to leave her job teaching French and hurriedly relocate to Dakar, where she was able to find the health services he needed.

But the expenses quickly piled up. Hospital bills, a tracheostomy, medicines, dressings, fees for nurses and doctors, plus the cost of food and transportation to and from the hospital. As she took a break from paid employment for four years to focus on her son’s health her family’s economic conditions deteriorated. It took the family years to recover.

Country health systems built on the principles of Universal Health Coverage (UHC) ensure that all people have access to the quality essential health services they need without suffering financial hardship. They enable the good health for children to thrive at school and for adults to be productive at work. They also prevent catastrophic expenses for families.

Financing UHC efficiently and equitably is important to ensure inclusive growth—especially since the health sector accounts for 11 percent of global GDP. Japan, the current President of the G20, credits its own adoption of a UHC-based system in 1961 for the decades of social and economic development that followed.

This weekend at the G20 Summit in Osaka, the World Bank Group will publish a new report that explains how people in developing countries, just like Dieynaba, spend half a trillion dollars on direct healthcare costs each year. This burden falls most heavily on the poor who spend a larger proportion of their meagre budgets dealing with health crises because they are not covered by a universal healthcare system like the UK’s NHS.

For individuals who live without this protection, the impact is catastrophic—every year, out-of-pocket medical bills result in 100 million people like Dieynaba living in extreme poverty.

For societies and economies, the big improvements in health of recent decades are at risk. Economic growth is stifled by a less productive workforce. And we are all more exposed to the pandemic disease outbreaks that can spread rapidly in an interconnected world.

Part of the reason is that developing countries don’t spend enough on health. By 2030, we estimate that the world’s 54 poorest countries will have a funding gap of US$176 billion per year between what they have and what they need for decent, affordable health services.

Unfortunately, however, the problem goes deeper than not enough money. Between 20 and 40 percent of health spending in developing countries is wasted or used inefficiently, and low-income countries are also starting to face the challenges of an aging population and an increase in chronic, non-communicable diseases.

Together, these factors will drive an upward spiral of healthcare costs which will further burden the poor and create a disastrous recipe for potential health and economic setbacks in the coming decades. It is in the interests of the whole world to guard against economic risks, and we owe thanks to the government of Japan for putting this on the agenda of the G20.

The solutions start with budget decisions made by countries themselves. Enlightened finance ministries will see investments in their citizens as central to their future growth and prosperity in an economy that will increasingly value workers with higher order cognitive skills. In other words, a healthier workforce will be a more competitive workforce.

The World Bank has been working with countries through its Human Capital Project to increase such investments, including in health, which is currently as low as 3 percent of some countries’ budgets.

When it comes to improving how budgets are to spent there are proven strategies that deliver better more bang for the buck. For example, improved primary healthcare services and community health are likely to reach more vulnerable people in remote places. Similarly, taxing tobacco, alcohol and sugary drinks raises revenue and improves general health across the population.

International assistance is also an important part of the equation. The UK’s leading commitment to development assistance and work through joined-up innovative efforts have been key to many recent developing country health gains like improved immunization, treatment for HIV-AIDS and better maternal and child health and nutrition. And investing in effective health systems at a country level has a positive payback loop for donors in areas like limiting the spread of infectious diseases.

In even the most optimistic scenario, however, boosting country and donor investments in health would only cover half the 2030 health financing gap in developing countries. New approaches are needed for people like Dieynaba to avoid the health trapdoor that plunges them into poverty.

For example, tapping into a fraction of the pernicious half trillion dollars per year currently spent on pay-as-you-go healthcare represent frontier investment opportunities for pre-paid and pooled health financing. This would be a good first step to protect all people’s health -- and their household budgets – in a way that drives better health and inclusive growth.