Wharton Professor Aids African Health Care Mark Pauly Researches Global Health Care Reform
Thousands of people lost their lives in the December 2004 tsunami, but Wharton professor Mark Pauly argues that developing countries face much more devastating crises in everyday health care.
“The irony — and I feel this myself emotionally,” says Pauly, Bendheim Professor and Professor of Health Care Systems, Business and Public Policy, Insurance and Risk Management, and Economics, “is that we now say we want to do something to help the tsunami victims, but people should have been doing that a long time ago.”
For example, he notes, the major killers of children in developing countries are ever-present conditions, such as diarrhea, and infectious diseases, such as malaria.
African Health Care
Pauly’s work on health care reform, which includes analysis of costs and “moral hazard” in the American insurance business, has recently focused on the challenges of establishing successful health insurance systems in Africa, especially Ghana and South Africa.
Two years ago, Pauly and a team of researchers visited South Africa to collect data on the impact of poor health, especially AIDS, on small businesses. “We were trying to make a case to the South African government that improving people’s health would have economic benefits,” Pauly recalls. For example, many very small businesses, such as market stalls, are owned by women. So, if the owner gets sick, the business simply collapses.
Pauly also led a World Bank study on barriers to health insurance in developing countries. Most developing countries have free medical care, but the financing may be woefully inadequate. Therefore, “people who need care end up paying out of pocket, using money they need to buy seeds for their crops or send their children to school.”
After a firsthand look at the health care system in Ghana, and research into solutions in other countries, Pauly feels optimistic. “What Ghana ultimately chose to do [a local government-run insurance program] is admirable because at least it carries forward the principle of having insurance,” he argues. “We can be optimistic because the alternative is worse and there is only room for improvement.”
Despite the many challenges, models of success exist in other developing countries. An area in India created a health insurance system in which people contributed money to a community plan that paid for health care and medicines that otherwise would not have been available.
Singapore, meanwhile, has implemented a modern health insurance system. “It has become the poster child,” Pauly details, “for a country that started with the British health system model, which was free but low quality, and put in place a system of insurance and spending accounts to create quite a well-functioning health insurance system.”
American Health Care
In addition to his interest in health insurance for developing countries, Pauly has studied private health insurance in the U.S., especially issues of administrative costs and moral hazard.
High administrative costs, Pauly says, explain why many people have no health insurance. “If you don’t have access to health insurance from a large employer,” he makes clear, “it will be a lot more expensive for you because you’ll have to pay more to cover those administrative costs — and that extra amount is substantial.”
“Moral hazard,” his other research area, examines the reality that people may use more health care once they have it, ultimately increasing costs and expenses. “When people have health insurance, they will take advantage of it,” Pauly elaborates, calling it “endlessly fascinating and frustrating to look at the ways people have tried to work against this kind of natural inclination.”
On the demand side, a consumer can be discouraged from overusing medical care by paying more out-of-pocket costs. There are also “supply side” strategies such as managed care. “People pay almost nothing out of pocket, but the plan controls moral hazard by employing doctors and owning hospitals and offering incentives to those doctors and hospitals to be frugal and not do everything that patients want.”
“We know much more about where not to set those dials than about where to put them,” he concludes. “My message is that trying to find a painless solution is foolish and doesn’t exist.
What we really ought to do is find out what the tradeoffs are between these different ways to control health care spending. We could have the government or a panel of experts decide, but I’d rather give consumers the power to choose.”
Read more about Professor Mark Pauly’s research in the Wharton Alumni Magazine.
