Health, Healthcare
Expenditures, and the Wealth
of Nations
Kenneth Ouriel, MD
Senior Vice President and Chief of
International Operations
NewYork-Presbyterian
Health of Nations
There is probably no goal more important to a country than improving the
health of its population; decreasing the prevalence of disease and
suffering, infant mortality, and improving overall survival.
Nations have been proactive when investing in capital infrastructure,
defense, and, to a lesser extent, education. Sadly, health is almost always
one of the last targets for investment – possibly because the returns are
neither tangible nor immediate – they may take decades to realize.
Importantly, what can a nation do to bring about improvement in overall
health status? Capital investment alone will not suffice; it must be
coupled with education and creation of a proper infrastructure to support
the efficient care of patients and, more importantly, prevention of disease.
Further, investment must be directed toward those initiatives that will
actually provide a return; not measured in dollars or rupees, but rather in
outcomes that are evident to the population – objective outcomes such as
increased life-expectancy, decreased disability, and an improved sense of
well-being.
Success Story: 40 years of progress in Turkey
Life Expectancy (yrs at birth) Infant Mortality (per 100,000 pop)
United States
Turkey
Turkey
United States
What did it cost to achieve these improvements?
Healthcare Cost Per Capita Healthcare Cost Per Life-Yr
United States
United States
Turkey Turkey
The Health and Wealth of Nations: A Study
We performed a study on 16 countries selected for their diversity.
– Well-developed economies: US, UK, Ireland, Germany, Japan, Sweden,
France, Austria
– Emerging markets: India, China, Brazil, Indonesia, Jordan, Turkey, Brazil,
Zimbabwe
Data was collected from the UN, WHO, and OECD websites
The data points included population size, demographics, healthcare
expenditures, mortality rates, rates of key diseases, and a broad spectrum of
financial variables.
Regressions were performed to determine the drivers of overall health,
national wealth (GDP per capita, GDP growth).
Surrogates such as life-expectancy, infant mortality, and the rates of disease
states were used to assess the health of a nation.
Gain in Life Expectancy
Relationship to Healthcare Expenditures
Japan
United States
Turkey
As life expectancy increases, more and more must
be expended to realize further gains
Chart: The 20-yr national
investment necessary to
achieve a 1-yr increase in life
expectancy between 1980 and
2000
Findings: Countries with long
life expectancies spent more
achieve further increases.
Implications: Initially, relatively
modest investment will increase
the health of a nation. As overall
health improves, however,
further improvement becomes
more and more expensive.
And, Health Expenditures and Health are not
always well-correlated…
The change in infant
mortality rates between
1980 and 2000 was most
impressive in the countries
that spent the least.
Diabetic mortality rates
actually increased in many
countries; notably, the
countries that spent the
most on healthcare!
Macroeconomic Basics:
The marginal product of capital curve
“Steady State”
Beyond this point, further gains in GDP are small
Back to the Basics:
As national wealth increases, further investment returns less and less benefit
Capital Stock Investment of “20”:
•UK’s GDP/cap rises negligibly
•China’s GDP/cap nearly doubles
UK
China
At the Steady State:
The only way to increase GDP is through TFP
Total Factor Productivity
UK
TFP (Total Factor Productivity):
•TFP- Traditionally thought of as those
technological innovations that, ceteris paribus,
improve efficiency or productivity
•Examples: IT and other technologic innovations
•Novel thought: Health as a determinant of TFP?
Does improved health of a nation translate into
increased wealth for that nation?
90 National health has a “MPK-like” curve:
•When healthcare infrastructure is immature (e.g. China),
even small investments will reap large gains
85 •But countries with well-developed healthcare institutions
(e.g. UK) will not benefit, even from large investments.
80
“Health” 75 UK
(Life-Expectancy)
70
China
65
Healthcare Infrastructure
At the Margin:
The only way to improve “health” is through technology
Technology in Healthcare
UK
Improving Health:
•When a country is at its “steady state”, no amount of
traditional capital investment will improve “health”
•Health can only improve through technologic
innovation- Examples: Genomics, “Plaque-o-lysin”
Is there evidence that “health” of a nation
improves TFP?
Again, look at our basket of 16 countries
Regress a variety of independent variables against each nation’s TFP; with
TFP as the “factor” that increases GDP independent of capital investment
Predictors of TFP:
Coefficients Standard t Stat P-value Lower Upper
Error 95% 95%
Intercept -17.9837 1.581076 -11.3744 1.08E-24 -21.0967 -14.8707
Agriculture -0.26204 0.051846 -5.05415 8.05E-07 -0.36412 -0.15996
Inflation -0.07074 0.026539 -2.66553 0.008157 -0.123 -0.01849
1/ Life Exp -4.1925 0.397354 -10.5511 5.71E-22 -4.97486 -3.41014
Conclusion: In addition to the well-described determinants of TFP (agrarian
society, inflation as negative determinants), health stands out as a highly
significant driver (p<0.0001).
Implications
In countries with immature healthcare infrastructures; traditional
capital investment in health-related enterprises will improve the
health of the nation.
In countries with well-developed healthcare infrastructures, no
amount of further traditional investment will result in noticeable
benefit.
– In these nations, benefit will only accrue through technologic
innovation
In either case, improvement in health can be predicted to produce
highly significant increases in national wealth (GDP/cap)
If a nation’s goal is to increase wealth (GDP/cap), there may be no
better means than to focus on healthcare through traditional capital
investment (emerging nations) or technologic innovation (mature
economies).