International Trade in Health Services and the GATS

1. International Trade in Health Services and the GATS Presentation at the CEEC, La Havana, July 13-14, 2006 Chantal Blouin

2. Purpose of the book • To inform policy makers about the implications of international trade in the health sector • To assist them in the formulation of trade policy and in international negotiations in the health sector (GATS).

3. What is the General Agreement on Trade in Services? • WTO agreement adopted in 1995 • Sectoral commitments on market access and national treatment • Based on 4 modes of supply

4. What is trade in health services?GATS classification

5. Process: 1st phase 2002-2003 • 7 case studies commissioned: Argentina, Chile, China, Indonesia, Thailand, Senegal, South Africa • 13 Background papers such as framework for analysis, legal analysis, how to make GATS commitments, impact assessment of THS, Public health and policy discussion papers for each mode • Workshop July 9-11, 2003 hosted by University of Ottawa’s Institute for Population Health (with CPHA)

6. Highlights from the book • Impact of health tourism and foreign investment on health systems • Impact of GATS on health policy • Key recommendation

7. Potential impacts of health tourism (mode 2) • + Additional revenues, which can be harnessed to directly benefit the health system • 1.3 percent of total travel expenditures, i.e. approximately $6.5 billion annually. • + Improve the range and the quality of services offered in a country • - Increase disparities • - internal brain drain

8. Internal brain drain: The case of Thailand • It is estimated that about 1 million foreign patients received services in Thai public and private facilities in 2001. • If the influx of foreign patients continues to growth at the current rate, the workload for servicing foreign patients may go up to 12 per cent of the total workload in five years. • This will require an additional 3,000 full time equivalent doctors for urban private hospitals, further exacerbating the shortage of health professionals in the rural areas.

9. Potential impacts of foreign investment in health services (mode 3) • Inflow of foreign capital provides additional resources to invest in the health care infrastructures and services of the country. • The most direct beneficiaries of liberalization are the households who can afford the services offered by foreign suppliers. • The benefits go beyond the direct impact for patients receiving the services from the foreign providers, and can have system-wide impacts. They can take the form of access to new technologies and services, information, management techniques.

10. Potential impacts of foreign investment in health services (mode 3) • Private providers do always offer services which were not offered by the public sector. • In China, the great majority of hospitals involving foreign capital are established in urban coastal areas and not in the rural areas.

11. Potential impacts of foreign investment in health services (mode 3) • Inflow of foreign capital in certain parts of the health system may reduce the burden on government resources and allow the public sector to reallocate its resources toward the patients with less ability to pay. • In Indonesia, revenues coming from private wings supported by foreign investment in teaching hospitals cross-subsidize specialized services offered to the general population

12. Potential impacts of foreign investment in health insurance (mode 3) • The evidence from Latin America showed that private insurers, be they foreign or domestic, will tend to serve the higher income and low risk groups who can pay relatively high financial contributions to receive coverage. • However, the regulatory framework to deal with these issues is still weak in many countries

13. Trade in health services in the poorest countries? • LDCs are the countries in most need of additional capital and resources, but may be the least likely to receive it. • In terms of the export capacity of health services of LDCs, it appears inexistent given constraints on infrastructure and human resources. • With a low supply of health professionals (less than 20 physicians per 100,000 people), it is difficult to see how offering services to foreign patients would be possible, without further reducing access to services for the local patients.

14. How will GATS affect a country’s health policy? • Overall, in terms of the general obligations and disciplines of GATS, their present impact on health policy is not particularly troubling. • The low level of specific commitments made in health-related sectors to date mitigates the effect of the general obligations linked to specific commitments. • However, more concerns are likely to arise in the future as the level and nature of specific commitments in health-related sectors increases.

15. How will GATS affect a country’s health policy? • From a health policy perspective, measures that restrict market access may be more important than measures that restrict national treatment • Restricting market access may serve legitimate health policy objectives, such as limitations on the number of service suppliers in a geographical area based on an economic needs test. (Ex: South Africa)

16. What is the single most important issue in determining whether to commit under GATS? • Will increased liberalization of trade in health services lead to better health outcomes? • Will making a GATS commitment in these sectors offer any additional advantage which will lead to better health outcomes? • if the answer to these question is negative, or in doubt, then a country should not make GATS commitments.

17. What is the single most important issue in determining whether to commit under GATS? • Members who would like to open their health sector to foreign providers should consider ‘experimenting’ with liberalization outside of GATS before making GATS commitments. • Such unilateral liberalization would allow WTO members to experiment with such policies • Policy reversal remains easier if the experiment produces unsatisfactory results.