Better Spending

Better Spending, Better Lives

The region is aging. Latin America and the Caribbean is going through a demographic transition where women have fewer children, giving space to a veteran population that needs more (and better) medical coverage. The picture is clear: countries must invest in health and distribute resources more efficiently.

Many believe that better health care has to do with how much money the country invests. More hospitals, more medical personnel would mean better health. And while that is an important factor, not everything has to do with quantity. The efficiency of health spending plays a fundamental role in the performance of the region in terms of health: if Latin America were a more efficient region in terms of health spending, Latin Americans could live almost four more years. And in countries like Bolivia, Guyana, Trinidad and Tobago, and Suriname, that number could rise to seven and reach almost 80 years.


Mejor gasto, mejor salud


According to our report, Latin American and Caribbean countries are generally inefficient in how they spend their money on health. Today, the region is not only behind the developed economies (grouped in the OECD) in health expenditure per capita1,109 dollars versus 4,701, but 22 of 27 countries in Latin America and the Caribbean are below the average in terms of its effectiveness in health expenditure. And 12 of them, almost half of the total, in the bottom 25% of the entire study.


Where are the inefficiencies?

In many places. According to the publication, inefficiencies are in the waste of supplies, the duplication of exams, and unnecessary hospitalizations just to name just a few. Also, regulation for medication pricesvital to make health spending more efficientis done in only a few countries, such as Ecuador, El Salvador and Colombia, where medicines can be up to 40% cheaper.

Inefficiency on health spending is reflected in how countries underutilize generic drugs and end up spending more on buying brand-name medicines, which can be more than 40% more expensive. However, the study highlights the case of Mexicowhere the State provides tax exemptionsor the case of El Salvador, where the government economically supports small pharmaceutical companies that manufacture generic medicines.

Likewise, the region makes little use of incentives for doctors to prefer the use of generics, while, as the publication highlights, Hungary financially rewards doctors or pharmacies who prescribe and dispense the cheapest version of generic medicines.

The unnecessary hospitalization of patients also removes resources that are vital for other pathologies. If there was a better and more efficient public health expenditure, especially with an emphasis on improving primary care, Latin America could have avoided 9.6 million unnecessary hospitalizations in 2009.


What to do to have a more efficient system?

Chile, Costa Rica and Uruguay are the three countries with the most efficient health spending in the entire region. Why? According to our report, government effectiveness, transparency, citizen participation in policymaking, and regulatory quality are essential to improve how governments spend their money.

For example, these countries have developed mechanisms for electronic purchases, which show where public resources are going (and how they are spent). Similarly, Brazil has been able to save almost 2 billion dollars after the implementation of the well-known HTAs (Health Technology Assessments), which allowed changing a high-cost drug for a cheaper, but equally effective one. Another strategy suggested is the regional purchase of medicines by blocks of countries, which would also include sharing information among all countries.

The region must provide a better health care standard at all levels to develop policies that are efficient and effective. In times of slower growth and fiscal pressures, in addition to aging populations, there is no better time than this to carry out these reforms, necessary to improve lives in the region.

You can download the entire report here.

Improving Lives