Supporting regional public goods for better health in LAC

1. Supporting regional public goods for better health in LAC André Medici Inter American Development Bank

2. Summary • BASIC CONCEPTS • International cooperation in health: a new agenda • The concept of public goods • How complex is the production in the health sector • Public goods in health • Regional needs in health • Regional needs in public goods in LAC: some examples • REGIONAL PUBLIC GOODS: THE IDB POLICY

3. BASIC CONCEPTS

4. old agenda (centered in process) infrastructure; medical technology; health education; applied research; hospital management; supplies; diseases control; epidemiological surveillance; new agenda (centered in goals) health targets: millennium development goals; equity (access and quality); financial sustainability; evaluation and monitoring; good governance; public and private roles; social inclusion; social responsibility and participation; International cooperation in health The new agenda Public goods are present in both agendas, but in a different way

5. CONCEPT: Goods or services witch attend simultaneously two properties when offered, nobody is excluded to access them; they do not have rival consumption: if somebody consumes them, they will keep available for all others in the same quantity; If these two conditions are not completely achieved, the good or service could be considered mixed or impure. CONSEQUENCIES: Public goods are not compatible with private markets; Mixed or impure public goods are more close to the reality: public goods are mostly conceptual and not real; Public and mixed (or impure) public goods do not attend the Pareto’s efficiency principle. As consequence, higher consumption of them can add utility or benefits to the consumers without any additional charge. The concept of Public Goods

6. CONPLEXITY: Involves drugs, vaccines, medical equipment, software, basic supplies; Involves basic services on promotion, prevention and health care (hospital and outpatient care); Involves multidisciplinary efforts on formal education and informal training, basic and applied research and administrative models; Involves financial and insurance markets and derivatives to assure sustainability to health plans in private markets WHERE GOVERNMENT SHOULD INVEST IN? Cost effective actions that involves: Public goods; Private goods, with huge externalities without attended demand; Private goods with catastrophic costs for the entire population; Private goods target to the poor. How complex is the production in health

7. There are few goods and services in health that could attend the two conditions of public goods. Most of goods and services in health are private or public impure goods; The most known public goods in health are epidemiological surveillance, sanitary surveillance, health promotion and environmental measures for prevention against risk factors; Everybody can get benefits by actions like promotion and prevention of chronic diseases, spraying insecticides to combat vectors associated with transmissible diseases; urban sanitation and others. Public goodsin health

8. The case of vaccines is different, since it could be considered a private good linked with individual needs. When vaccination is mandatory and universally covered, Kenneth Arrow arguments that spreading vaccination has collective effects in health that are bigger than the sum of the individual effects. When the available quantity is enough to attend the country or regional demand, vaccines could be considered as public goods (because the two principles used to define public goods are matched). In scarcity conditions, vaccines must be considered a mixed or impure public good. The same argument can be applied to essential drugs and basic services. Essential drugs (specially for transmissible diseases) could have a preventive (collective) effect, but if they are scarce they must be considered mixed goods. Public goodsin health

9. FINANCING: Finance public goods in health could be a public mandate or a collective action. In local regions or small communities cooperative efforts could be used to finance the health public goods provision linked with the capability to pay. The difficult is how to avoid free riders in the process. TRADABLE OR NO TRADABLE: Some public (or mixed) goods in health (or the inputs to produce them) can be considered tradable (vaccines, essential drugs, active principles to produce generic drugs, etc.); BASED ON MERIT OR UNIVERSAL: In the past, some health goods nowadays considered public or mixed (vaccines and essential drugs) were provided based on merit (social security structures). A public good is essentially linked with universal provision. But in scarcity conditions universal provision is not attended generating three effects in equity: the line effect (first are attended, latter are out); the asymmetric informational effect (only who that have inside information is attended); the high income effect (public good provision is concentrated on the higher income regions, keeping out poor communities or distant regions); Targeting could be a mean to avoid or reduce the inequity effects of mixed goods provision in scarcity conditions. Public goodsin health

10. Defining regional needs in health Identifying needs, effective and potential production and comparative advantages among a selected group of countries in health; Identifying differentials on equity among the regions or countries to create compensation mechanisms to promote better equity on the achievement of the health needs; Promoting informational and communicational campaigns about the adequate use and advantages on the consume and production of cost effective health goods and services, putting public and private actors together to collaborate on production and regulation; Promoting regional dialogues among policy makers leading to regional agreements on regulation, production, commercial partnership, to explore comparative advantages, improve coordination and increase common economic and social benefits regarding health goods and services; As consequence of those agreements, promoting reduction or elimination of commercial barriers to reduce transactional costs; Creating incentives and financing mechanisms and credit to those countries that need it to achieve this processes; Monitoring and evaluating the whole process to find means to get means to improve it when necessary; Regional needsin health

11. Coordinating regional needs in health: It is a difficult process that could demand the support of institutions for free trade and economic integration and technical cooperation of international organizations and multilateral banks. We can identify four types of technical cooperation efforts: leaded by the international institutions: when an international organization promotes and get financial support to attend health regional needs (Ex: GAVI on vaccines); networking process: when countries in a integrated economic area develop efforts to adopt a common regulation to achieve health regional needs (Ex. Common parameters to health professionals accreditation on integrated health markets (Ex: European Union); intergovernmental efforts: when many governments, belonging or not to a commercial integrated area, collaborate to attend a health need (the production of the the HIV vaccine); Regional needsin health

12. Reciprocity -The reciprocities’ agreements guarantee to visitors and foreign residents in a country the same rights than nationals regarding access to health care and health goods. The main reasons to sign reciprocities’ agreements are: Tourism and business; Similarity of health protection systems; Work migration; Reciprocity agreements are feasible when countries present similarity in the health system structure and in the coverage of health needs. Countries with common borders and huge inequalities have problems to establish and to maintain reciprocity agreements. Regional needsin health

13. Regional needsin health Regional Integration & Licensing, Certification and Accreditation in Health Licensing Certification Accreditation Applied on Health Services Health Personnel Services or Trainning Regulation Government Government, Peers Government, Peers Required for Service permission Contract or Renew Services contract Porpose Minimal Standards Follow protocols Quality control Time Regime Permanent Permanent of fix term Fix term Standards Minimal Work competencies Processes, outcomes Quality Accessment Not necessarily Yes Yes Process Evaluation No Some times Yes Management Easy Intermediary Complex Renew Process Almost automatic Recertification Complex evaluation

14. Health public goodsin LAC • In average LAC is better attended by RPG than other regions worldwide • But there is a long way to achieve basic health needs (including health public goods) in LAC countries. • There is huge inequities in health access, financing and provision • Some examples • Vaccines; • Essential Drugs and Supplies; • Promotion and Prevention; • Epidemiological Surveillance; • Health coverage & inequality;

15. Health public goodsin LAC • Vaccines: in average, almost achieved - minimal effort

16. Impacto de la Inmunización en las Américas Virus derivado de la vacuna Tipo-1en 2000 y 2001 * Los datos son de cobertura para niños <1 año y son provisorios * 2003 - 105 casos confirmados Los datos son de cobertura para niños <1 año y son provisorios En 2001, 54% del total de casos de TNN procedieron de Haití Países con casos en los últimos tres años: Argentina, Bolivia, Brasil, Colombia, República Dominicana, Ecuador, El Salvador, Guatemala, Haití, Honduras, México, Nicaragua, Panamá, Paraguay, Perú, & Venezuela * Datos provisorios # Datos de cobertura para niños <1 año

17. PAHO National and International Expenditures with Immunization Programs in the Americas and the Caribbean - 1987-2001 US$ millions 800 654 657 600 National 430.8 400 International 200 113.8 53 61 Years 0 a 1987-1991 1992-1996 1997-2001 a b a) Includes the polio elimination b) Includes the measles elimination

18. Health public goodsin LAC • Essential Drugs and Supplies (% attended ARV needs)

19. Health public goodsin LAC AIDS Prevention, Care and Treatment Resource Needs Estimates 2004 - 2007 Actual Expenditure 2000 Patterns from National AIDS Accounts in 15 Countries

20. Inequity in health

21. Inequity in health MDG

22. Equity in health public expenditure Distribución de los beneficios del gasto publico en salud por quintil de ingreso

23. THE IDB RPG POLICY

24. Supporting RPGin LAC • Why the IDB needs to support RPG? • fiscal constraints imposed by the current macroeconomic situation in the region; • rising interest of donors and the international community to support public goods; • RPG involves goods, resources and services as the establishment technical standards, best practices and knowledge; training programs and information dissemination; • The excludability or rivalry (total or partial) are crucial to define academically a good as public or impure. For the IDB proposes this definition is relaxed considered in macroeconomic sense (nations - not individuals). • IDB considers as RPG those goods and services that promote and provide shared benefits among nations in a considered region.

25. Stages to develop RPGin LAC • Early Stage: • dialogues, shared experiences, meetings, conferences, seminars, exchanges of best practices; • institutional demands are minimal; • Later Stage: • coordination of specialized institutions to produce RPG; • club goods, institutional complexity to joint management and investments; • establishment of a supranational firm with a regional regulatory body;

26. Issues and conditions offered by the IDB ISSUES • Early Stage: Avoiding some countries to benefit more than others (free riding); • Later Stage: Multinational coordination required to produce RPG (it could be easier when the benefits are quantifiable). CONDITIONS OFFERED BY THE IDB • Provide an environment of trust to interaction among countries of the Region; • The Bank networking with other national and international organizations; • Regional perspective combined with the capacity to provide and finance research; • Support countries with weak capacity of consumption and production of RPG; • Provide loans to later stage of RPG alone or co-sponsored with other sources of financing.

27. Financing RPGby the IDB • Design of a new instrument to finance RPG co-sponsored by the larger donors community; • Specific criteria for project evaluation and selection (based on evidence and demonstrate the the project solves a national problem in each participating country; • Specification of the benefits generated by the RPG and demonstrates that it attends to the properties of pure or impure RPG; • no costs for all and no competition for other countries of the region enjoys the benefit; • Those evaluation criteria are essential to the allocation of grant funds in the initiative;