Chart of the Week: Inequality, Your Health, and Fiscal Policy

The gap in life expectancy between rich and poor people is a worldwide phenomenon, and has grown dramatically in recent years in some countries.

In our Chart of the Week, we show how this longevity gap, which reflects inequality in access to health care and its impact on peoples’ overall health, varies across countries. Men with a lower level of education live shorter lives, on average, than their better educated fellow citizens: this gap ranges from four years in Italy, to 14 years in Hungary, according to the October 2017 Fiscal Monitor.

These health gaps represent a huge loss for people and the countries where they live. Poor health leads to disruptions in employment, which results in lower lifetime earnings. Also, a labor force with poor health hurts a country’s productivity and economic growth.

So, what can countries do?

Improved health depends on a broad range of factors—income, education, nutrition, drinking water, environment, sanitation, hygiene and healthy behaviors. Another key determinant of health is access to quality health services. The poor often lack health coverage, and when covered, they tend to receive a lower quality of service.

Countries need a multifaceted approach—with fiscal policy playing a vital role—to narrow health inequality. The right mix of fiscal policies can help improve access to quality health care, and improve poor peoples’ overall health:

  • Access to health care. Expanding health coverage for the poor usually requires ensuring provision of health care by either the public or private sectors in less developed or rural areas, since this is where many low-income people live. As equal access does not automatically lead to equal use, governments can do two further things to improve people’s health: disseminate information on the importance of health; and make access to social programs conditional on using health services, which is the case for the cash transfer programs in Brazil and Mexico.
  • Quality of health care. Standardizing health care for all may require the development and enforcement of appropriate regulations and guidelines, and directing more resources to the health care facilities mostly used by the poor. For the additional resources to be most effective, countries need to spend the money to provide incentives to improve the performance of health care providers, including doctors and nurses.
  • Nutritional programs, and improving access to clean water and sanitation. Food subsidy programs and student meal programs are generally effective ways to provide nutrition for low-income households. Investments to provide access to safe water and sanitation services could yield substantial health benefits.
  • Unhealthy behaviors. Taxing smoking, sugar and alcohol can help improve health outcomes and raise revenues. The health costs of energy subsidies that add to increased pollution are very large: eliminating energy subsidies by raising fuel prices could reduce associated pollution deaths by nearly 60 percent. While there are concerns that a large share of these taxes may fall on the poor, the overall effect would help the poor if the revenues are directed to finance spending that benefits mostly those with lower incomes.
  • Efficient spending. Reforms to address health spending inefficiencies can help free resources. This includes, for example, curbing tax deductions for health expenses as they tend to benefit the rich more than the poor, tackling corruption and waste, and shifting health spending toward the most cost-effective services such as primary and preventive care.

The impacts of these reforms can be substantial. The Fiscal Monitor illustrates that eliminating inequalities in basic health coverage, while keeping spending levels unchanged, could raise life expectancy, on average, by 1.3 years in both emerging market and low-income countries.

Many countries, like Brazil, China, Ethiopia, India, Mexico, Thailand and Tunisia have expanded health coverage, and more can be done. There will be difficult choices and challenges for governments to design and implement an effective reform strategy that suits their needs. However, there is ample room for all countries to reduce health inequality and improve the health of their people.

Fuente: IMF

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