Who should pay for global health, and how much?

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Who should pay for global health, and how
much? Lessons from Kyoto.
L.R. Carrasco, R. Coker, A.R. Cook
National University of Singapore
Singapore
[email protected]
Global Health: A Public Good without a
Collective-Choice Rule
• Global health is a public good: ill health in one part
of the globe has consequences elsewhere.
• Donors benefits: reduction of communicable disease
emergence and transmission and macroeconomic
interactions, trade, travel, migration, food security,
environmental degradation.
• Despite the benefits: global health continues to be
underfunded.
• Extra US$36 to US$45 billion needed annually to
meet the health MDGs.
Global Health: A Public Good without a
Collective-Choice Rule
• Exacerbated by the ongoing global financial crisis.
• Absence of a mechanism to encourage— or
enforce—any expected contributions from each
country: tragedy of the commons.
• Only few contribute but all benefit.
• Other global commons are climate change
mitigation. The Kyoto protocol is an example of a
collective-choice rule to establish the expected
contributions from each country.
Parallels with Tradable Carbon
Permits: Global Health Permits?
• Humanity faces new challenges to manage global
commons and only one planet to experiment with.
• Important to draw lessons from other successful
strategies on global commons management.
• Market-based systems of tradable carbon emission
permits.
• Cap-and-trade mechanism: carbon emissions of
countries are capped and as a result countries need
to buy permits that compensate for their emissions
in excess of the cap.
Parallels with Tradable Carbon
Permits: Global Health Permits?
• It is much cheaper to cut emissions in low-income
countries. Likewise it is much cheaper to reduce
disease burden in low-income settings.
• Potential for parallelisms?
• For carbon markets the currency is avoided tons of
carbon.
• Suitable metric for global health? disability adjusted
life years (DALYs).
• Many ways to set the cap-and-trade rule. We base it
on health expenditure, GNI and cost-effectiveness.
Parallels with Tradable Carbon
Permits: Global Health Permits?
• Perspective of a hypothetical global social planner
aiming to reduce global disease burden: the greater
the investment on low cost-effectiveness
interventions in high- and middle-income countries,
the more inefficient the allocation of resources to
reduce global disease burden.
• System encourages compensation for the resulting
inefficiency by requiring the support of highly costeffective projects in low-income countries.
• Currently cost-effectiveness threshold different for
each country.
Parallels with Tradable Carbon
Permits: Global Health Permits?
• We propose a global health cost-effectiveness
threshold (GHCET): 3GNI of the threshold that
defines low income countries.
• Interventions in middle and high-income countries
that do not meet the GHCET need to buy DALY
credits from low-income countries.
• Straightforward at the project level. In the interim, at
the global level: difference between the hypothetical
DALYs averted domestically and those that could be
averted in a low-income setting based on GNI and
health expenditure of each country.
Carrasco et al. (2013) PLOS Medicine
How does it work? Global
approximation
• To estimate expected contributions, we define:
 CHi
CHi 
Ei  


3

GNI
3

GNI
LI
i 

• where Ei denotes the “force of expected contribution
to global health” by country i; CHi is the annual
health expenditure.


 E

i
Fi   N
 V   DHi
 E


i


 i 1

where Fi > 0 indicates the annual level of
defaulting; V is the total volume of the
necessary increase in global health
contributions to meet the health MDGs; and
DHi are the total health commitments of
country i per year.
How does it work? Project level
Carrasco et al. (2013) PLOS Medicine
How does it work? Project level
Carrasco et al. (2013) PLOS Medicine
Results
Results
• The greatest defaulting countries per capita to meet
the health MDGs were the US (US$22–US$33) and
several affluent European countries (e.g.,
Switzerland, US$23–US$31; Austria, US$21–
US$27; and Germany, US$18–US$24).
• Only a few countries contribute more than expected:
Ireland, the UK, Denmark, the United Arab Emirates,
Luxembourg, and Norway.
• high-income countries would account for 74%–77%
of the remaining US$36–US$45 billion.
Results
• 19%–28% of the total increase, or US$6.8–US$10
billion, would come from the US, 5%–6% from
Japan, 4%–6% from Germany, 3%– 4% from
France.
• Middle-income countries would also contribute
substantially, with 6%–7% from China (i.e., US$2.1–
US$2.7 billion), 3% from Brazil, 2% from India.
Discussion
• Incentive to buy permits from more cost-effective
projects: more efficient, ranking of allocation
priorities.
• Many implementation challenges: attract the
attention of a nucleus of countries (UK, Norway,
UEA?).
• Kyoto-style binding agreement. Who to run market,
assign credits? Risk of free riders.
• Cap-and-trade systems for climate change
mitigation have shown the potential for the market to
grow rapidly (from US$11 to US$140 billion from
2005 to 2011). Feasible for global health?
Conclusions
• Experiences from carbon permit markets are
encouraging: efficiently raise resources to help
manage global commons.
• an analogous tradable DALY credits market could
scale-up global health commitments.
• We need to be ready to implement the most
powerful strategies to manage global commons. A
DALY tradable credit market offers unexplored
promising potential.
Many thanks! [email protected]
Carrasco LR, Coker R, Cook AR (2013) Who Should Pay for
Global Health, and How Much? Plos Medicine 10: e1001392.
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