Growth of Global Health Spending Share in Low and Middle Income Countries

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Abstract
Over the past century medical technology has provided bold gains extending human longevity for almost several decades in most welfare economies worldwide. These public health victories came at the cost of huge increase in health spending. The USA, the largest health care market where total health expenditure (THE) grew from 4% of GDP to 15%, may serve as an example of such changes. The secular trend consisting of rising wages and incomes constitutes major factor in the rising resources dedicated to the medical care. Business cycle booms and recessions affected health care spending slowly and with a significant lag. In this sense health expenditures should not be compared to short term, quarterly or yearly fluctuations in Gross Domestic Product (GDP) but correlates well to “smoothed” income over the previous 3–6 years (Getzen, 1990). Growth of health expenditure is driven by several underlying issues: population birth rates, per-capita income, inflation and so called “excess growth” that is mostly explained by medical technology advances or increased patient demand for services. This “excess growth” is responsible for raising the share of health care in national GDP, and thus challenging fiscal sustainability. Evidence of excess growth is seen in health insurance premiums that persistently rise faster than tax revenues or wages. Isolated excess cost growth was the key underlying reason for the surmountable surge in health care costs visible in the United States since the late 1950s. Unlike the contemporary post WWII era, previous historical records testify of stable medical costs of about 4% of GDP from 1929 to the late 1950s. U.S. Census records of employment in clinical medicine and published consumer expenditure evidence from 1850–1950 show that these costs were mostly keeping pace with wages. If they were slightly exceeding wages it was only about 0.5% annually thus it took more than a century for them to double, much slower than the quadrupling from 1960 to 2000 (Getzen, 2000). Major causes of such a sudden rise in health expenditures were huge economic development, distinctively extended longevity, control of contagious diseases, rising availability of income used to fund research in medicine, effective financing instruments, and ultimately significant discoveries in medical technologies that supported public willingness for further investment into potential novel biological drugs, implants, robotic surgery, radiation therapy, organ transplants, and other wonder technologies (Getzen, 2014). With several decades delay, due to dissemination of knowledge and improved societal welfare across the globe, similar developments began at the far smaller scale in a large number of low and middle income world economies. Among 160 such nations in the beginning of 1990s long term trends have revealed 16 countries which made greater investments in health care and its core outcomes than most comparable nations. These countries were described by Goldman-Sachs as the world's leading emerging markets. They are listed under the acronyms BRICS (Brazil, Russia, India, China, South Africa) and Next Eleven (N-11: Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey, and Vietnam). This ongoing evolution will most likely shape the appearance of global demand and supply of medical services in XXI century and we believe that therefore it deserves closer examination. The last two decades have been particularly dynamic due to ending the Cold War and accelerated pace of globalization. Contemporary evolution was promising for most nations with average world THE rising from 5.7 to 6.8% GDP [a 19.3% gain or approximately 1% yearly increase over 19 years (Table 1)]. Since 1995 World Health Organization (WHO) has established and disseminated National Health Accounts (NHA) system worldwide. These efforts allowed reliable international comparison of financial flows among national health systems with diverse historical legacies. The World Bank (WB) introduced the measure of gross national income (GNI) classification of countries in 1987 with their Atlas method and GNI per capita indexed in US$ currency (World Bank Income Groups, 2015). Availability of national income per capita strongly influences health expenditure. The correlation is straightforward with a secular trend visible in long time horizons in most world regions. We applied historical lists of WB income classification to reveal patterns in global health spending. Participation of 160 low and middle income countries (as defined by WB in 1995) in global health spending (in million const. 2005 $US) was 10.7%. Nineteen years later the world was a much different place. Global welfare of nations recorded bold increases while 23 countries crossed the WB threshold for high income economies. The remaining 137 low and middle income countries (as defined by WB in 2013) were now spending 14.6% of global THE expressed in millions of constant 2005 $US. The landscape of national medical spending has evolved in favor of developing regions. The 160 countries classified as low and middle by WB in 1995 grew from 26.1% of global THE in 1995 to 39.7% in 2013. While high income economies still dominate the global landscape of medical spending, the growth of emerging economies has reduced their share of the total. Table 1. Transformation of Global Total Health Expenditure (THE) 1995–2013. Jim O'Neil's grouping of BRICs was driven primarily designating those whose nominal and purchase power parity (PPP) adjusted GDP growth rates significantly outpaced those of most OECD nations before and during the worldwide economic recession. Similar ongoing development characterizes another group, identified by Goldman-Sachs' as the “Next Eleven.” Profound changes with deep and lasting impact to the global demand for and provision of healthcare services and associated...
Funding Information
  • Ministarstvo Prosvete, Nauke i Tehnološkog Razvoja (OI 175014)