2. The fiscal dimension of health financing refers to the size or quantum of funding via the state. It is generally strongly influenced by: the values of the society and by extension the role of the state in the particular environment ; and and the values that guide government policy interventions. 2

3. Fiscal implications are the consequences that result from the dimension of the fiscal intervention. The main issue here would be the sustainability of the fiscal support. 3

4. As economists practicing in the Caribbean one cannot but reflect on Sir Arthur Lewis’ (1948) dictum that ”…good economics begins with a concern for the conditions under which people live...” In this regard the two issues that matter will be 1)the adequacy and reliability of access – lined to economic welfare and 2) the cost or affordability of health care – linked to economic viability. 4

5. The assumption we make is that fiscal policy is driven by five main considerations that influence the fiscal dimension and implications of financing health care services: 1. government’s perception of its role in the society—a perception which would be influenced by the value system that guides its policymaking; 2. the level of financial resources available to the government; 5

6. 3. government’s understanding of certain key causal relationships, particularly the link between health spending and health outcomes as well as the impact of health on the functioning of the economy; 4. government’s perception of the socioeconomic needs of particular segments of the population; and 5. contingent civic or political pressures to which the policy makers feel they should be responsive. 6

7. Health care is considered a merit good by Caribbean governments and this is reflected in fiscal planning. It is also true that Ministries of Health hold themselves responsible for the quality of all care, including that provided at private health facilities. Governments in the region have two main concerns in regard to fiscal outlay on health: 1. the impact of public health spending and 2. the efficiency of that spending. 7 Driver 1: Role of the Government

8. Total Revenues In the Caribbean countries under study, total revenue experienced modest growth in some countries while in other countries, such as Trinidad and Tobago, the growth in total revenue was significant. Seven out of ten countries considered experienced average annual revenue growth between 6% and 9%. Two countries experienced growth higher than 10% and only one country saw growth of less that 3% annually, 8

9. Public Health Spending out of Revenues The Bahamas registered the highest percentage of public health care spending out of revenues averaging 14% between 1999 and 2005. Closely followed by Antigua and Barbuda and Barbados. For the same period, Trinidad and Tobago recorded the lowest percentage share of public health care spending out of revenues averaging 6%. 9 Driver 2: Availability of Resources and the Propensity to spend on Health

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11. National Health Spending When national spending on health is taken into consideration the government is the biggest spender in every country. In Guyana, over the period 1996-2005, the government accounted for 83% of national health expenditure, and averaged 71% in Antigua & Barbuda, Dominica and Grenada. On the other end of the scale, in Trinidad and Tobago the government’s share of national health spending averaged 42% over the same period. 11

12. Public Health Spending as % GDP 12

13. Public Health Spending and GDP: Fiscal Commitment Note that the trends are all very stable The overall average share turns out to be 3.6% with a range between 1.5% and 5.2%. In spite the rhetoric the region is well below the international (universal coverage) range of between 6% and 12% of GDP.

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17. Public Health Spending and Per Capita GDP Over the ten-year period 1996-2005, the observed tendency particularly in Jamaica, was for the share of government spending on health to vary inversely with per capita income (an 11% percentage decrease between period points). This phenomenon also occurred to a lesser degree in Barbados (-5%); Dominica (-6%), St. Lucia (-3%) and St. Vincent and the Grenadines (-4%). This countercyclical trend may be an indication of the government’s concern for the equity dimension of its fiscal support. 17

18. If fiscal outlays are to effectively impact on health status we would also expect to observe allocations in a number of health-related areas such as : population feeding programmes; the expansion of sport and recreational facilities; subsidies on selected food items as well as on selected exercise and recreational equipment. Given the proliferation of chronic diseases in the Caribbean, these would be areas where governments may be expected to incur a cost. 18

19. The government’s perception of the socioeconomic needs of particular segments of the population also impacts on fiscal policy. For example, in the Caribbean the health of the following groups has always been of immense interest to governments: women; children; and the elderly. Ideally, policy would be informed by up-to-date health needs assessments. In practice, in the Caribbean, the public health systems are structured to ensure that the needs of the specific groups mentioned are looked after. 19

20. In the Caribbean today there are contingent pressures emanating from issues like crime and the HIV/AIDS epidemic. The latter has led countries of the region to prepare National HIV/AIDS response programmes almost all of which benefit from international assistance and domestic budgetary support. 20

21. The major issues surrounding the fiscal implications of public health care spending are: Affordability/Sustainability. Given government commitment, are the projected financing requirements feasible in the light of expected future government revenues? If they are not, what kinds of adjustments can we expect? Tax reforms to yield larger revenues or a more modest approach to universal health care? Possibility of a bonus. An externality resulting from the government’s fiscal support? If health expenditure has a meaningful productivity impact on the economy then this human capital effect will strengthen the fiscal position of the government, by expanding the revenue base of the country. 21

22. In this Caribbean context, with a significant burden of chronic disease and a growing burden of HIV/AIDS, and with governments acknowledging a major responsibility in the area of health the challenge of fiscal capacity will remain. Starting, as most of the countries do, with chronic fiscal deficits, the prospects for sustaining a universalist posture are not favorable. The region is at present significantly below international levels. The requirement for external support for specific areas will remain, certainly for the medium term. 22

23. A ray of hope? (1) The ray of hope in all this lies in four things: i) the agreement of countries to a regional response to the HIV/AIDS epidemic, through PANCAP – the Pan Caribbean Partnership Against HIV/AIDS. This is a model which can be applied to other areas where we are all affected ii) the collaboration which has already begun in the area of chronic diseases; iii) the preliminary discussions which have begun in respect of a regionally funded basket of essential services and iv) The growing recognition by governments of the region that the health systems of the region need to be modernized by the introduction of health information systems to monitor the quality of care and to track the costs of the system with a view to effecting the cost controls which would generate higher levels of efficiency.

24. The Road Ahead So is universal health coverage possible in the Caribbean? It would seem that regional cooperation, tax reform and a commitment to higher levels of efficiency are the three pillars that will be needed to realize and sustain universal coverage in the Caribbean.