Trade in Health-Related Goods and Services: The Opportunities and Risks That Such Trade Can Bring. A Malaysian Context.

In monitoring the health care performance of a country, macroeconomics creates a more comprehensive outlook on the country’s overall health and healthcare performance. For a long time, it has been established that there is a relationship between health and wealth. In general, wealthier nations are healthier nations. Rising incomes increase government and private spending on goods that directly and indirectly improve health. Increased wealth leads to health, and vice versa. Higher incomes provide the ability to purchase many of the goods and services that promote better health, including more calories and higher quality food products, access to cleaner water, safe sanitation and higher quality and more complete health services both at a societal and individual level.1

Preston wrote that there is a strong relationship between health and wealth, and suggested that there is a significant gain in health (measured by life expectancy) when wealth unto $1,000 per capita. However, after exceeding $1,000 per capita, additional wealth did not lead to significant increases in life expectancy. 2

One of the largest budgetary item in any government is health care spending. In the year 2014, healthcare spending accounts for 9.94% of global GDP3, whereby it is as high as 17.14% of GDP in the United States4 and 4.16% in Malaysia5.

Every finance and health minister must decide how to finance their country’s health care system. There are five major modalities used: general revenue, social insurance, community insurance, private insurance and direct purchaser payment. Every country has adopted to a modality which suits its individual economic status. There are four key factors that determine each country’s capacity to finance health successfully: financial resources, stage of economic development, ability to administer financial services and political will and structure.1

At its core, healthcare policymaking involves complex trade-offs between promoting equitable and affordable access to a basic set of health services, creating incentives for efficiencies in the healthcare system and managing constraints in government budgets. It presents opportunities for cost savings and access to better quality care, but it also raises challenges in promoting equitable and affordable access. Though it takes a large portion of the governments expense, health care is also a good source of revenue.  Examples of this include in sectors such as medical tourism, pharmaceuticals and medical technologies, telemedicine and healthcare worker migration.

The General Agreement on Trade in Services (GATS) emerged from 1994 Uruguay Round of negotiations that created the WTO. It subjects service trade to the ‘same’ treatment as goods on the basis that liberalization increases global efficiency (comparative advantage – lower cost, higher quality, innovation) and
provides multilateral legal framework for liberalizing international services trade (based on existing int. trade law). There are four modes of supply in GATS: cross border delivery (e-health), consumption abroad (movement of patients), commercial presence (Foreign Direct Investment hospitals) and movement of personnel (healthcare workers abroad).6,7,8

Cross border delivery of service is the supply of a service from the territory of one Member into the territory of any other Member. Examples include shipment of laboratory samples, diagnosis and clinical consultations by mail. This brought about the creation of E-health. E-health is the applications of information and communication technologies to the health sector, including clinical and non-clinical functions. Examples of e-health functions include: tele-diagnostics, tele-surveillance, teleconsultation, tele-treatment, and tele-products. 8,9

Night-hawking of tele-radiology service is currently being done between the United States of America with India. Tele-radiology is the electronic transmission of radiological patient images, including CT and MRI scans, from one location to another for the purposes of diagnostic interpretation and reporting. Through tele-radiology, images can be transmitted from the hospital setting, where the images are created, to a radiologist who can review and report on the images remotely. Due to the time difference, this service is of particular benefit to radiologists as they get to outsource their emergency after hours responsibilities. This means that the radiologists get to sleep at night which makes them more productive and efficient the next day. It also results in better patient care, as in the nighthawk tele-radiology model, wherein the scan is reported from a different time zone. This allows the scan to be reported by a well-rested radiologist during his/her daylight hours.10

Opportunities offered through this includes enabling health care delivery to remote and underserviced areas and thus promoting equity, alleviating human resource constraints, enable more cost-effective disease surveillance, improve quality of diagnosis and treatment, upgrading skills and disseminating knowledge through interactive electronic means.9

Some risks of cross border delivery of service include reliance on telecommunications and power sector infrastructure, its capital intensive, possible diversion of resources from basic preventive and curative services and equity issue if it caters to a small segment of the population (i.e. urban affluent).9

The second mode of service under GATS consumption abroad. It is the supply of a service "in the territory of one Member to the service consumer of any other Member". This includes the movement of patients from home country to the country providing the diagnosis/treatment and the movement of health professionals from home to another country to receive medical education and training.

Medical tourism is considered to be the direct impact of the globalization of healthcare services. High cost of medical treatment in developed countries has fuelled the development of medical tourism, causing patients to visit other destinations for cheaper yet sophisticated treatment. The industry is recognized to have immense growth potential in numerous emerging economies, as a rising number of countries are striving to become major exporters of medical services. The value of the global medical tourism industry was pegged at US$10.5 billion in 2012. This is estimated to grow to US$32.5 billion by 2019, developing at a strong CAGR of 17.9% during the forecast period. 8,11,12,13

The biggest advantage of medical tourism is a financial one. It also happens to be the disadvantage. Financial benefits include lower costs of health care for importing countries, patients with little or no insurance coverage are more likely to afford care by travelling to countries where the cost differential is so great. Exporting countries will also benefit greatly from the revenue earned. On the other hand, this creates a lacuna. Many healthcare providers in the exporting country will prefer providing “medical tourism” service since the revenue is much greater than treating locals, doctors will also want to move to treating medical tourists. This will cause the charges for service to rise, which not be affordable to some locals and those paying out of pocket. More locals will seek public healthcare service which will result in making the government hospitals more congested, increase the waiting time and decrease the quality of service given. 12

However, there are still many benefits from this mode of service. For exporting countries, this can generate foreign exchange earnings to increase resources for health, and it can help upgrade health infrastructure, knowledge, standards and quality. As for importing countries, they can overcome shortages of physical and human resources in speciality areas and receive a more affordable treatment.11,12,13

Risks of consumption abroad includes the possibility of creating two-tiered market structure at the exporting country, crowding out local population (unless these services are made available to local population), diversion of resources from the public health system and the outflow of foreign exchange for importing countries.11

 The third GATS mode of service is commercial presence. This is the establishment of hospitals, clinics, diagnostic and treatment centres and nursing homes and training facilities through foreign direct investment (FDI) through cross border mergers/acquisitions, and joint venture/alliance. It creates opportunities for foreign commercial presence also in management of health facilities and allied services, medical and paramedical education, IT and health care.6,7,8

Benefits of FDI service includes the potential to generate additional resources for investment in upgrading of infrastructure and technologies, reduce the burden on public resources, create employment opportunities, raise standards, improve management, quality, improve availability, and even improve education (through foreign commercial presence in medical education sector).6,7

Risks of FDI investment includes the need for large initial public investments to attract FDI, if public funds/subsidies are being used there is a potential diversion of resources from the public health sector, it may also create a two-tiered structure of health care establishments, it can lead to an internal brain drain from public to private sector and crowding out of poorer patients in public sector.6,7,17,18

Malaysia is home to many international universities offshore medical campus. Monash University from Australia has a medical faculty in the Malaysia campus. Likewise, Newcastle University from the United Kingdom also has a campus in Malaysia. Through these universities, the exact curriculum as taught in main campus is being preached. Students also get a chance to do exchange years on other offshore campuses and they graduate with a degree recognized in both the main country and offshore campus’ country. This is very beneficial in improving the quality of medical education, creating doctors of international standard, job opportunities for foreign medical educators and graduates from these universities also have better employability chances in other countries. 14,15

The fourth mode of GATS is movement of health professionals. This includes doctors, nurses, paramedics, midwives, consultants, trainers, and management personnel. Factors driving cross border movement includes: wage differentials between countries, search for better working conditions/standards of living, search for greater exposure/training/qualifications, and also demand and supply imbalances between countries. There seems to be many variations in this mode between countries, some countries encourage outflow (e.g. Australia encourages foreign health professionals to migrate giving them many immigration benefits), others create impediments (e.g. In Malaysia only medical specialists in demand are given opportunity to practice in public, other lower level health workers do not get to work in the public sector). 8,16,17

Benefits of this mode for the sending country includes promoting the exchange of knowledge among professionals, upgrading of skills and standards (provided service providers return to the home country) and gains from remittances and transfers. The host country benefits by having shortage of health care providers, improve access, quality and contain cost pressures fulfilled.16

Some potential risks for the sending country includes permanent outflows of skilled personnel (brain drain), loss of subsidized training and financial capital invested, and adverse effects on equity, availability and quality of services.16,17,18

An example of this is movement of healthcare workers in OECD Countries. The Organisation for Economic Co-operation and Development (OECD) countries, while facing acute shortage of health care professionals, started recruiting such professionals from developing countries. Countries like the US and the UK even resorted to targeted recruitment of health care workers, particularly nurses from developing countries like Philippines and India. Migration of health care professionals from developing to developed countries has had negative impact on many Sub-Saharan African (SSA) countries.19 This gave birth to two competing schools of thoughts. While one school of thought accuse industrialised countries of sucking in labour from some of the poorest countries of the world that can ill afford to lose health care staff, the neo-liberals on the other hand feel that migration of health care professionals forms an integral and beneficial component of globalisation and the liberalisation of service sector.16,17,18

On the aspect of health-related goods, the key players are pharmaceuticals and medical technology industries. Pharmaceuticals are the single most important health-related product traded, comprising some 55% of all health-related trade by value. Many high-income countries produce and export high value patented pharmaceuticals, and low- and middle-income countries import these products; although some produce and export low value generic products. This leads to many developing countries experiencing a trade deficit in modern medicines, which often fuels an overall health sector deficit.1 High prices might make medicines unaffordable and also the research and development investment might not be appropriate for some diseases that disproportionally affect low income countries because markets are not big enough to incentivize R&D based companies to invest in these areas. Regulating pharmaceuticals have also become a challenge with globalization and developments in transportation.  Products transported through global courier delivery services are of a wide variety and small quantity. It is not possible to monitor them. There is a possibility for misuse through this, if not properly managed and regulated.8,20,21

One of the core value of healthcare is fair and equal service to all. The health sector is not usually the first place people associate with economists. It is not supposed to be about money, profit, production and markets. But times are changing. Health service is not just concerned with treating the diseased, but also preventing illness, setting regulations to ensure health and occupational safety, creating standards and surveillance to ensure everyone is safe from hazards that can affect health. 22

In the name of ensuring goodness for the people, we may be at risk of affecting trade and business for the sake of health.22 Now this is going to be a controversial viewpoint but for the sake of academic discourse, it is necessary to view both healthcare and large corporations on the same dais. It is biased to protagonist health and antagonize corporations.

Let’s take tobaccos industry as an example. Their business is being heavily taxed and many restrictions are being set in the name of ensuring health of the population.23 Many claims have been made, some proven, that smoking cigarettes is bad for health and has many dire consequences. This notion has been heavily promoted but the tobacco industry is not dying. People are still smoking cigarettes, knowing very well of the negative health implications it has. Hence the implication of such regulations and barriers of trade is neither helping prevent illness nor supporting development of the economy.  It is crucial that both viewpoints are taken into consideration in developing policies and action plans.

In conclusion, health and wealth flow bi-directionally. More wealth can buy better health care services and goods that can improve health. Macroeconomics affects the health sector through trade in health-related goods and services and these can be classified under the GATS agreement into four modes: cross border delivery, consumption abroad, commercial presence and movement of personnel.8 They all carry risks and benefits both respectively and combined, it is vital to delve into and incorporate these modes into each country own healthcare systems to stay in trend with the current global healthcare concept.

Reference

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