A national budget change that shifts the focus from larger state run hospitals to primary health care services could be what the doctor ordered for national productivity and economic growth.
New research from Barbadian economist Shane Lowe has concluded that “government’s spending on primary health care positively influences labour productivity, but expenditure on hospital services and the pharmaceutical programme are potential drags on output per worker”.
Lowe, a former Central Bank economist, is a strategy and economic analyst at CIBC FirstCaribbean International Bank. He is pursuing a PhD in economics at the University of Glasgow.
In his study Determining The Optimal Allocations Of Government’s Health Care Expenditure Budgets, he sought to “uncover the existence and nature of a long run relationship between worker productivity and healthcare expenditures to determine an optimal allocation of government’s health care budget”.
“A re-allocation of finances from the hospital services to fund the primary health care system while simultaneously cutting total spending can yield long term benefits to both productivity and overall economic growth,” he said.
“Hence, based on this analysis, recent budgetary cuts to both the [Queen Elizabeth Hospital] and the drug service should have no negative effects on overall labour productivity.”
He added: “The implications of these results are clear: just improving the efficiency of Government spending, particularly at the hospital and within the drug service can reduce Government’s fiscal burden and provide space to fund more productive projects without jeopardising overall labour productrrivity. Further, this framework can prove a useful tool in determining future budgetary allocations given certain constraints and requirements.”
Lowe said his research suffered from one “major limitation”, noting that “the relatively short data set limited the number of variables which could practically be included in each regression and did not permit an investigation of the effects of each segment of expenditure on output per worker over a considerably longer time period”.
However, he said that despite these limitations, “the findings that spending on the hospital and drug service, two key components of the health care system, do not add to labour productivity require additional research to better understand the underlying reasons behind this before Government goes about cutting budgetary support for both services”.
“Further, if cuts are to be made, Government needs to carefully determine which specific services will be affected, whether they will be provided in future and, if so, under what financing arrangements. These are issues which require more than an economic view of the problem, and thus later studies should account for the social impacts which these cuts may have on the population, particularly the most vulnerable in society,” the economist said.
“Finally, while not a major focus in this study, the finding that real education expenditure, though not statistically significant, negatively impacts output per worker is worthy of further investigation and perhaps greater insight can be had if the quality and level of education spending is accounted for.”
Lowe added, though, that “whatever the financing model chosen, the importance of public health care spending to overall quality of life should dictate that care should be taken not to compromise the quality of health care provided to Barbadians.”
