EMMANUEL ROJITH VAZ

GROUP -017

The Role of the Government in Economics

Executive summary
Governments, through ministries of health and other related ministries and agencies, play an important role in
health development, through strengthening health systems and generation of human, financial and other
resources. This allows health systems to achieve their goals of improving health, reducing health inequalities,
securing equity in health care financing and responding to population needs. The role of governments in health
development is well documented worldwide and is illustrated by the impressive growth of health systems, initiated
and supported by governments and pursued through partnership with the private sector, nongovernmental
organizations and charitable institutions.

The dramatic changes and challenges which took place during the last four decades of the 20th century have
greatly affected and led to a repositioning of the government’s role in health as well as other social sectors.
However, the case of the health sector is distinctive from other sectors, as market forces fail to address properly
the health needs of populations, for various reasons, leaving governments with special responsibilities in health
development. As a consequence of market failures, governments have an obligation to intervene in order to
improve both equity and efficiency, to carry out important public health functions and to produce vital public
goods which have a lot of bearing on health development. Moreover, health is perceived in the Region and
elsewhere, not merely as a market commodity, but as a basic human need and a social right, as stated in many
constitutions and signed treaties. Such commitment entails significant roles and responsibilities for governments,
despite changing political and social environments.

Governments in the Eastern Mediterranean Region receive conflicting messages with respect to their changing
roles and responsibilities in the field of health, particularly in relation to privatization policies and moves towards
market economy. This paper sheds some light on the role of government in health development and draws some
lessons on the need to protect this role in view of increasing vulnerability in many countries of the region. Policy
reforms should aim at adapting to new changes and challenges without eroding the social role of government
bearing in mind the societal values and national, regional and international commitments and obligations. Efforts
should be made to strengthen various health system functions with particular focus on governance, financing and
service delivery.
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1. Introduction
Governments, through ministries of health and other related ministries and agencies, play an important role in
health development, through strengthening health systems and generation of human, financial and other
resources. This allows health systems to achieve their goals of improving health, reducing health inequalities,
securing equity in health care financing and responding to population needs [1]. Improved health outcomes are
not attributable to health systems alone, as evidence has shown, but to social, economic, cultural and
environmental determinants also, as reflected in the WHO conceptual framework of Health for All [2].

The role of governments in health development is well documented worldwide and is illustrated by the impressive
growth of health systems, initiated and supported by governments and pursued through partnership with the
private sector, nongovernmental organizations and charitable institutions. Governments, which levy taxes and
benefit from natural resources, have social obligations to provide security and to facilitate socioeconomic
development, including education and health development.

The dramatic changes and challenges which took place during the last four decades of the 20th century have
greatly affected, and led to a repositioning of, the role of governments in health as well as other social sectors.
Moves towards democracy, decentralization and a more active role for civil society in governance, and the growing
importance of the private sector in socioeconomic development, have been accompanied by policy changes
reflecting more privatization, a more restricted role of government in policy development, strategic planning and
management, and greater reliance on market forces.

However, the case of the health sector is distinctive from other sectors, as market forces fail to address properly
the health needs of populations, for various reasons, leaving governments with special responsibilities in health
development. As a consequence of market failures, governments have an obligation to intervene in order to
improve both equity and efficiency, to carry out important public health functions and to produce vital public
goods which have a lot of bearing on health development.

Moreover health is perceived in the Region and elsewhere, not merely as a market commodity, but as a basic
human need and a social right, as stated in many constitutions and signed treaties. Such commitment entails
significant roles and responsibilities for governments, despite changing political and social environments.

Governments in the Eastern Mediterranean Region receive conflicting messages with respect to their changing
roles and responsibilities in the field of health. On the one hand, market economy policies favor restricted
government intervention in both health care financing and delivery of services. On the other hand there is
evidence to show that poverty is increasing in the Region, coverage by social protection is not improving, and
inequities in access to quality health care are on the increase. Such a situation calls for a more proactive role from
governments in various areas, including governance, financing and service delivery, in order to protect equity and
other societal values.

This discussion paper aims at shedding some light on the evolution of the role and responsibility of governments in
health development and highlights the challenges facing them worldwide and in the Region. The paper describes
the major trends emerging in the WHO Eastern Mediterranean Region in relation to the role of government in
health development and suggests some directions for the future.
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2. Evolution of the role of governments in health development

Human beings and communities throughout history have always strived to cater for their health needs by using
indigenous medicines and the knowledge available from healers, either at home or in small facilities. Religious
leaders have also played an important role in the provision of health care, the art of healing often being
intertwined with religious belief. In ancient Egypt, the doctor was a priest [3]. In Europe, hospitals and health
facilities were often built by churches and charitable institutions and some of them still bear the names of priests
and religious scholars. In early Islamic society religious leaders developed health care facilities and hospitals,
including bimaristans, sponsored well known physicians and established medical schools to train health
professionals. Local organizations, religious and endowment institutions contributed to the development of
organized health care services during the colonial period, when coverage by the modern health system was limited
to the rulers and to the privileged local elite in major cities. These services continue to be provided in some
countries to supplement failing governmental facilities, focusing on the poor and deprived populations, particularly
in slums and remote areas.

The need for self-help in case of disease or injury was behind the development of health insurance in Europe and
in other parts of the world [4]. Industrial workers developed the first sickness funds which later evolved into social
health insurance under Bismarck in Germany, while tax-based health insurance was promoted by Lord Beveridge in
the United Kingdom after the Second World War. In France, mutual aid and mutual societies evolved throughout
the 19th and early 20th century into a social assistance system which covered only a limited population because of
its voluntary nature [5]. The Beveridge Report influenced the development of a comprehensive social security
system in France and in much Organization for Economic Cooperation and Development (OECD) countries after the
Second World War. In low-income countries, where the formal sector of the economy is weak and government
coverage is usually limited, community health insurance schemes have been, and are still being initiated to provide
social health protection. Sickness funds were developed to help workers in dealing with the social consequences of
diseases and injuries for themselves and their families and to avoid catastrophic expenditures as a result of ill
health. The efforts of individuals and communities to ensure they can access health care services now, as then, are
justified by the unpredictable nature of diseases and injuries and their impact on life and well-being.

The evolution of modern health systems after the Second World War was facilitated by dramatic developments in
biomedical technology and important discoveries, such as of antibiotics and other devices. The national
government in France took control of religious hospitals, which became managed by local authorities as part of the
policy of separation between the state and the Church [3]. National governments played a crucial role in the
development of health systems, as part of the sovereign functions including governance, health system
infrastructure and training of the necessary health workforce in all fields of medicine and public health. In most
OECD countries, with the exception of the United States of America, medical schools and major hospitals were
developed by governments and health personnel education was, and still is, heavily subsidized by governments,
whether central or local. This situation is also reflected in the structure of health expenditure in high-income
countries, where 70% or more of total health spending comes from public sources of financing. The high share of
social and public health care financing is explained by the level of social protection which in many countries, apart
from the United States of America, is almost universal.

The adoption of a market economy in many developed and developing economies has not been accompanied by a
disengagement of governments from their social responsibilities in health development. Indeed, the role of health
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development in the formation of social capital and the protection of health as a human right have been accepted
worldwide.

The global political developments following the First World War supported the move towards health as a human
right. The Versailles treaty gave birth in 1919 to the International Labor Organization (ILO) [3] based on the
principle of “peace through social justice” and promoting social security against various hazards, including sickness
and injury.

The United Nations adopted its Universal Declaration of Human Rights in 1948, which states that “everyone has
the right to a standard of living for the health and well being for himself and his family, including food, clothing,
housing and medical care and necessary services, and the right to security in the event of unemployment, sickness,
disability, widowhood, old age or other lack of livelihood in circumstances beyond his control”.

The WHO Constitution, adopted in its First World Health Assembly in 1948, established as its objective the
“attainment by all peoples of the highest possible level of health” and stated that “Governments have a
responsibility for the health of their people which can be fulfilled only by the provision of adequate health and
social measures”.

In 1968, the proclamation of Teheran provided for the protection of the family and children. In 1974, the Universal
Declaration on the Eradication of Hunger and Malnutrition, called for the elimination everywhere of hunger and
malnutrition. In 1975, the Declaration of the Rights of Disabled Persons affirmed the right of such persons to full
rehabilitation. In 1978, the Alma-Ata Declaration [6] affirmed that “health is … a fundamental human right” and
that “a main social target of governments, international organizations, and the whole world community in the
coming decades should be the attainment by all peoples of the world by the year 2000 of a level of health that will
permit them to lead a socially and economically productive life”.

These universal principles were supported by the United Nations Commissioner for Human Rights on many
occasions. The former commissioner, Mary Robinson (1997–2002) stated that “A world of true security is only
possible when the full range of human rights – civil and political, as well as economic, social and cultural – is
guaranteed for all people. Governments from both the North and the South must expand their thinking and
policies to encompass a broader understanding of security beyond the security of states.” All these declarations
and treaties have influenced the role of government in the field of health development and have helped shape
health systems, particularly at the level of policy-making where political commitments made at national, regional
and global levels are accommodated.

The landscape with respect to the role of government in developed economies is similar in many aspects to that of
developing countries, particularly in the Eastern Mediterranean Region. In many countries that were formerly
ruled by colonial powers, colonization has affected the development of health systems and has impacted on health
development in several aspects, including organization of service delivery and training of human resources for
health.
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3. Domains of government role in health development

Ministries of health are responsible for leading health development through the implementation and improvement
of main health system functions [1], including leadership and governance, health care financing, provision of health
services, and generation of inputs for health development, including human resources for health and biomedical
technology. Efforts are coordinated with other related ministries and departments.

Leadership and governance

Governments are the guardians of social commitments and values such as solidarity, social justice and equity,
which are stated in their constitutions, signed treaties and conventions. In many constitutions worldwide, and in
the Eastern Mediterranean Region, the rights to health care and education are clearly indicated and governments
are responsible for providing access to these services without financial barriers and for ensuring that the value of
health as a basic human right of all is protected [3].

Ministries of health oversee the overall development of health systems using their governance function, which
includes policy analysis and formulation, regulating service delivery between partners, developing norms and
standards for quality assurance and ensuring the implementation of agreed upon policies and strategies. The
governance function is supported by a routine information system, supplemented by population-based surveys
and by health legislation in line with national ethical values. The governance role is becoming of paramount
importance in view of the increasing complexity of health systems and changing epidemiological and demographic
scenarios. Ministries of health are mandated to assess the performance of health systems in terms of equity,
quality improvement, and efficiency and population satisfaction with health services. Several analytical tools have
been developed by WHO to help ministries of health in carrying out periodic performance assessment exercises
and to develop their strategies based on evidence.

The need for government intervention in health care is explained by the peculiarity of health services which cannot
be left to market forces only for generation and distribution. Evidence shows that market forces have failed to
work in the health sector for several reasons including inter alia the asymmetry of information between patients
and health care providers, the existence of public goods with positive externalities, adverse selection and moral
hazard. Patients, who are not knowledgeable about their health problems, rely on health care professionals to
make health and medical decisions on their behalf. Patients are ill-equipped to assess the adequacy of physicians’
decisions and actions and focus on the environmental and interpersonal aspects of clinical services, the elements
that they are best able to evaluate [8]. Some important health services, called public goods, such as mass
immunization, environmental health activities, health education and promotion, surveillance, control for
communicable diseases at borders, etc., are not profitable for private providers and are mainly provided by
governments.

Over-consumption of health services or “moral hazard” occurs when these services are free at the point of use and
is also caused by over-production of services by providers when no costs are incurred to patients, particularly
those who are insured. Such behavior escalates the cost of health care and calls for cost-containment strategies
and programmes which are usually initiated by governments. Adverse selection is practiced by private insurers not
willing to enroll the old, the chronically ill and some vulnerable groups who are in greater need of social protection.
Governments usually intervene to compensate for the market’s reluctance to ensure inclusion of the most
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vulnerable groups [8]. Also, in view of the unpredictable nature of diseases and risk of impoverishment during
sickness, governments are major players in developing pre-payment and insurance schemes, whether social,
private or a mix of both.

Health service delivery

In most OECD countries, while health care financing is socialized, delivery of health care services is secured by both
public and private providers and nongovernmental organizations. The role of government is often to steer the
overall health development by designing health policies and programmes, securing essential public health
functions and regulating the delivery of health services. In most OECD countries, governments provide health care
services, including public goods such as promotive and preventive services and hospital care. While the role of
private hospitals in service delivery is growing in these countries, public hospitals remain the reference for quality
standards, prices of services, training of quality health professionals and health and medical research in various
aspects.

Ministries of health are responsible for health protection and undertake that responsibility by implementing the
essential public health functions, including surveillance systems and provision of public goods such as programs for
mass immunization, environmental protection, food fortification, food safety, etc. The delivery of essential public
health functions is becoming complicated in view of increased globalization and its impact on changing lifestyles,
including eating habits and the rapid increases in international travel and communication technology.

In order to fulfill its public health functions and to protect national health security, governments, through
ministries of health, are responsible for the provision of necessary medicines and vaccines and supporting
laboratory networks. Access to quality and affordable vaccines used in national immunization programmes faces
several challenges, including limited financial resources, inappropriate supply systems and lack of effective national
regulatory authorities to implement quality and safety standards. Strategic decisions have to be made by
governments in terms of national investment in developing self-reliance and self-sufficiency in medical technology,
including medicines and vaccines.

Governments are also involved in the provision of clinical services at primary, secondary and tertiary levels of
health systems. These services are provided in communities, work settings and public institutions including health
centers, investigation networks and hospitals. In most countries health services are provided to the military,
security forces and to their dependents in special settings.

The role of government in service delivery contributes to increasing equity in access to health care, particularly in
rural and remote areas where qualified private providers, concerned about their income, are in limited supply. The
direct provision of health services by governments contributes to market regulation for both pricing and quantity
of services.

Government-owned health and hospital facilities are the reference places for training of human resources and are
often the most appropriate sites for research activities in the field of health, public health and medicine. The
development of bio-medical and health research is totally indebted to the support of government institutions in
design, funding, protection of ethical values and in monitoring the impact of research activities on health
outcomes.

Governments are becoming increasingly concerned about managing the public–private mix in health service
delivery, the result of the many active privatization policies initiated in welfare-oriented health systems and aimed
at increasing the supply of private services. The last two decades of the 20th century witnessed waves of health
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policy and sector reforms aimed at improving the efficiency of health systems and increasing equity in relation to
access to health care. For example, reforms have been designed to introduce private practice in publicly owned
hospitals in the United Kingdom, Australia and some developing countries as part of public-private partnership.
Business-oriented rules for management have been introduced in publicly dominated service delivery systems in
OECD countries and elsewhere. The main stakeholders, which include professional associations and unions, have
different attitudes towards these reforms, ranging from active support to total disapproval. Governments and
researchers are equally interested to assess the impact of privatization policies in equally the financing and health
delivery systems.

In USA, when for-profit hospitals were compared with not-for-profit hospitals, the performance was found to be
similar [3]. Extensive study of immunization programmes in Canada has shown that public institutions offer
advantages over private institutions with respect to accountability, standardization of procedures, vaccine handling
practices, human resource use, records management, cost, etc. [3]. In California, seven local county governments
turned their public hospitals over to private management in the late 1970s in the hope of achieving greater
efficiency. After several years of trial, five of the seven “private management contracts” were terminated as no
evidence of reduced unit operating costs or improved efficiency could be found [3].

In Cuba, after the revolution of 1959, the abrupt transformation of the health system from being dominated by the
private sector to one of almost wholly public character, and its association with a vast increase in service delivery,
and spectacular improvement in Cubans’ health status and a number of social determinants including literacy, is
well documented [3]. In Chile, the military dictatorship of the 1970s reduced government involvement in service
delivery and encouraged privatization of health care with negative impact on access for the poor segments of the
population although life expectancy for the population as a whole did not decrease as a consequence.

In 1989, a general review of health service privatization throughout the world was published [8] which concluded
that while the main objective of privatization was to widen individual choice, “the luxury of truly having free choice
in the health care field remained confined to a small group of privileged consumers in industrialized societies”. It
predicted that the pendulum will gradually shift to more state control, as the conceptual and methodological
lessons of health services privatization are learned, but that the timing of such a shift will depend on larger political
forces in a turbulent world.

Health care financing

Governments play a major role in health care financing by mobilizing the necessary resources through public
budgets and other contributive mechanisms, pooling resources allocated to health development, guiding the
process of resource allocation and purchasing health services from various providers. Ministries of health are
entrusted to protect equity in access by improving financial risk protection, by reducing financial barriers to access
particularly to the poor and to vulnerable populations, and by ensuring that health care financing by all income
groups is fair. Health care financing is becoming an important function in health systems as inequities inside and
between countries with respect to access increase because of financial barriers and lack of appropriate social
protection.

Human resource development

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As human resources constitute the main inputs and assets in health systems, governments are responsible for
designing appropriate policies for human resource development aimed at meeting the real needs of populations,
securing appropriate skills mix, improving equity in distribution of human resources, managing them properly, and
monitoring and evaluation of the national health workforce. Governments set national standards for health
personnel education and develop systems for accreditation of training institutions. Appropriate policies and
strategies for human resources development depend on the degree of intersectoral collaboration between
ministries of health and ministries of education and other related departments. Often the lack of coordination
among various stakeholders leads to duplication and inefficient production of the health workforce. Promotion of
the centrality of health in socioeconomic development Governments play a crucial advocacy role in promoting the
central role of health in overall social and economic development. Several studies, including the report of the
Commission on Macroeconomics and Health, have shown the interplay between health and economic
development and have concluded that intersectoral collaboration should be developed in order to harness the
important synergies between health and development.

The focus on the social determinants of health gained momentum following the Declaration of Alma-Ata, which
targeted the achievement of health for all through primary health care, and this focus was further affirmed in the
UN strategies for comprehensive socioeconomic development following the World Summits for Social
Development in 1995 and 2000. Several initiatives were taken by ministries of health and other related ministries
of the Region to improve health outcomes through promoting the social and economic determinants of health,
such as a sustainable environment, literacy, female education and empowerment, and poverty reduction.

4. Key challenges facing governments in health development

The changes and challenges which evolved globally, regionally and nationally during the last half of the 20th
century have had significant impact on health systems, on the pace of their development and on health outcomes.
In the political field, democratization with more participation of civil society in governance and focus on local and
decentralized government has affected the configuration of health systems worldwide and in the Region. Policy
development is becoming more participatory, and organization and management of health services delivery is
being further decentralized to provinces and even to communities. This trend was strengthened following the
Alma-Ata Declaration.

The main challenge since the early 1980s is represented by the move towards market economies and the reduction
in interest in central planning in social and economic development. In many developing economies,
macroeconomic reforms including structural adjustment and stabilization programmes, were implemented under
pressure from the International Monetary Fund and the World Bank and were often accompanied by cuts in public
spending on social sectors including health and education. Cost- sharing policies were implemented in order to
compensate for diminishing government budgets allocated to health. Macroeconomic reforms led to restrictions in
recruitment of new health professionals and replacement of retirees as part of public sector downsizing policies
and programmes. The reduction in government health spending contributed to passive privatization, as public
institutions increasingly lacked the necessary medicines and motivated human resources, encouraging those users
of the public sector who could afford it to shift to private providers.

Active privatization policies were also adopted in most health systems through incentives provided to private
investors in the form of subsidized loans and tax credits, particularly in poor and deprived regions. Incentives were
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also developed in many health systems of the Region allowing government health workers to practice privately
inside and outside the public facilities.

In the social field, the main challenges are represented by growing poverty, widening disparities within and
between countries and increasing social exclusion. Almost 3 billion people are living on less than US$ 2 per day,
despite rising per capita income in many developing countries. The average income ratio at global level of the
richest 20% of the population to the poorest 20% is 82 to 1, compared to 30 to 1 in 1960 [9]. The increase in social,
economic and environmental vulnerability is associated with a deterioration of health status among deprived
communities and calls for a more proactive role from governments.

Globalization has also had an impact on health systems, and particularly on access to health care. The conflict over
acquisition of affordable antiretroviral treatment for poor AIDS patients in South Africa and other developing
countries illustrates some of the threats posed by the implementation of TRIPS agreements. The migration of
scarce human resources from countries of the South will further weaken health systems as a result of GATS
(General Agreement on Trade in Services), as is being witnessed in some regions including Africa.

5. Conclusions
Governments have an important role in health development in both developed and developing economies in view
of their social mandate and the peculiar nature of the health care market. The efforts initiated by governments to
build modern health systems must be continued and adapted to the new changes and challenges in the political,
economic, social and cultural fields.

Despite the pressures facing governments in managing the social sectors, ministries of health should continue to
play their leadership role in health development and should advocate for the importance of investing in health and
of protecting the social values of equity, solidarity and fairness.

Health development should be coordinated between all concerned government ministries and agencies and with
all stakeholders, including academia, professional associations, the private sector and civil society organizations.
Efforts must be made to promote the centrality of health in comprehensive socioeconomic development.

The private sector is assuming a growing role in both financing and delivery of health care. However, care must be
taken to ensure that such developments are not at the expense of an effective and efficient public sector and to
ensure that they are implemented under strong leadership and governance from the government. Privatization of
health service delivery must be well designed and guided by ministries of health and other related departments,
taking into consideration the social obligations of governments in health development and the main health system
goals.

WHO will provide the necessary technical support to help ministries of health in better implementing their roles in
health development through its normative and technical cooperation functions, and by promoting networking and
exchange of experiences and good working models in various fields? WHO will also promote a culture of policy and
strategy development based on evidence and will promote national and regional health policy forums where
important issues are debated and where agendas for further research-to-policy activities are developed. WHO will
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continue to remind governments of their global commitments to the inspirational and noble goal of health for all
and to implement effective strategies to achieve the health-related Millennium Development Goals.

WHO will continue to support Member States in owning and in using its analytical tools to assess equity, efficiency
and overall health system performance through capacity-building, institutional development and provision of
technical expertise. Particular interest will be paid to supporting governance, financing and human resources
functions. The WHO regional observatory on health systems will help in assessing health development in the
Region and in networking among policy-makers and health professionals in order to address the challenges facing
health systems in achieving their goals. Monitoring and evaluation of the role of governments in health
development will be among the tasks of the regional observatory.

6. Recommendations
1. Governments should promote investment in health development as having important economic return and
should advocate the centrality of health in all development initiatives.

2. Governments should continue to play their leadership role in health development in order to protect societal
values of equity, solidarity and fairness in line with health for all policies and strategies which consider health as a
human right and not as a market commodity.

3. Governments should strengthen their governance capabilities, particularly in policy development, regulation
and public/private mix management. The role of government in service delivery should be protected in order to
secure access for the poor, vulnerable groups and rural and remote populations. Particular interest should be paid
to improving working conditions for professionals working full time in government facilities.

4. Governments should promote the development of national health system observatories aimed at developing
forums to assess equity and health system performance and to better adapt policy reforms to the evolving changes
in the political, economic and social fields.