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The impacts of austerity on health

05 April 2019
Health sector workers checking through files
Austerity is a policy used by governments to save money, either as an overall reduction in government spending as a percentage of GPD (Gross Domestic Product), or specific reductions in government spending. However it is defined, austerity causes specific losses to specific people.

Austerity has become an issue especially in recent years, mainly in Southern Europe after the 2008 global economic crisis and in Latin America after the end of the commodity boom in 2012.

Governments justify austerity with a discourse saying it is necessary to promote “fiscal consolidation”, “fiscal sustainability” or “rationalize the public expenditure”, which in layman’s terms means to solve the fiscal deficit in a short term period, reduce the pressure of the external debt over the public budget, and by the fallacious financial unsustainability of social policies created by previous left-wing administrations. As a consequence, the “solution” presented is a contraction of public expenditure, associated with labour, health and pension reforms.

International Financial Institutions (IFIs) hold a major role in recommending austerity measures; in Europe, the triumvirate, also known as the Troika, composed by the European Central Bank, the European Commission and the IMF, enforced it. In Latin America, the Bretton Woods Institutions (IMF and World Bank) seem to be recovering their influence to recommend fiscal adjustment. An analysis of 27 European and Non-European countries, part of OECD, between 1995 and 2011 showed that the increase in public debt with IFIs, apart from its volume, is associated with higher cuts in health. (REEVES, 2014)

The ILO, in joint research with the University of Columbia, launched a paper reviewing 616 IMF country reports in 183 countries, published between February 2010 and February 2015. The result shows that, following IMF prescription, reforms to the health sector are being considered by 56 governments in 22 developing and 34 high-income countries.

Health reform Measures by Region, 2010-15 (number of countries)

East Asia and Pacific

2

Eastern Europe/Central Asia

9

Latin America/Caribbean

2

Middle East and North Africa

3

South Asia

0

Sub-Saharan Africa

6

All countries

56

Source: Authors’ analysis of 616 IMF country reports published from February 2010 to February 2015

Health sector workers are affected in different ways by austerity measures. These include: by adjustments in the wage bill to achieve cost-savings - under consideration by 130 governments across the globe – including non-adjustment of salaries in line with local inflation; by reductions in investment in public health care, that may lead to dismissals - reductions in medical personnel - and overload; by privatizations. And in many cases, they are even blamed for the existence of the crisis.   

Austerity measures may include introduction or increase of user fees for health services, discontinuation of allowances and increased copayments for pharmaceuticals. These lead to increased out-of-pocket expenditure for health. Meanwhile, a lower quality of health service provision leads to worse health outcomes[1]. The effects are especially intense in fragile health systems, worsening health inequities between as well as within countries. 

Public health workers are not the only ones affected by cuts in health expenditure, service users also suffer. The hardest hit are those with low incomes, who cannot afford to pay for the services and so are excluded from or receive less critical assistance when their needs are greatest.

There is also a displacement of the effects of the crisis from the public sphere to households, which is commonly not seen in economic analyses. Women are disproportionally more affected than men, and when when the state does not provide welfare services it is usually the women who take charge of the care of elderly, sick people and children, through unpaid domestic work.[2]  

Other uneven effects of austerity measures are associated with weakened mental health, depression, anxiety, increased substance abuse, such as alcoholism and tobacco use, and higher suicide rates[3]. The European Centre for Disease Control warned that serious health hazards are emerging because of fiscal consolidation measures introduced since 2008.

One systematic review of the Greek economic crisis between 2009 and 2013 observed the following impacts on the health system of the country: reduction in public health expenditure in both the provision of services; reduction of the work-force in health, reduction of working hours, as well as wage and pension losses; reduction in the offer of health services, including the services provided by university hospitals; fluctuation of the pharmaceutical market, with an increase in consumption during the period observed – mainly medication for the treatment of psychiatric illnesses– followed by the decrease in the consumption, which led to the closure of some pharmaceutical factories in the country; reduction in the financing for biomedical research[4].

Consequently, the quality of health services in Greece was affected, both by the restriction in service provision, as well as by the disposition of health staff, whose performance was jeopardized by the situation of stress in their private and professional lives. Nikolaos Grigorakis et al also call attention to the increase in out-of-pocket expenses to the Greek population, thanks to the obstacles preventing normal access to public health services. This is further intensified by the reduction of household income as a consequence of high unemployment, reductions in wage and social assistance, and of the reimbursement of medical expenses from health insurance.

Countries such as Spain and Portugal, which implemented austerity policies, faced similar problems, while Iceland, where austerity was rejected by popular vote, increased investments in health, producing a different result[5]. According to Vieira, who did a broad revision of the impacts of economic crisis and fiscal austerity: 1) the economic crisis can aggravate the social problems and increase social inequalities; 2) the economic crisis can worsen the health status of the population; 3) the fiscal austerity measures, which establish the reduction of social protection expenditure aggravate the effects of the crisis over the health, particularly the social conditions; and 4) the preservation of social protection programs is an important measure to protect the health of the population and to recover the economic growth in a shorter period[6].

The health and social protection policies are a factor that mitigates the effects of unemployment and/or reduction of work income. The countries which maintained or reinforced social protection policies, including cash transfer, during the periods of crisis, as a countercyclical measure, presented best economic and social performance, as well as less incidence of mental health and suicides.[7]

An essential point in this discussion, for Latin Americans and other developing countries, is to learn from recent European experience the best ways to present solid and convincing results about the harmful effects of austerity on the health of the population, which is useful for collective bargaining[8].

PSI advocates for public, universal, rights-based, people-centred, and good quality health care. Investment in health and social welfare is essential and is not a burden on public finances. On the contrary, health, social and medical-social activities are genuine creators of wealth and are affordable, even in the poorest countries.

The focus of the debate should always be on the people, not only on the expenditure. There are other alternatives to address the current fiscal deficit that do not include cuts in public expenditure, but that include more progressive taxation and control over tax evasion and avoidance. Governments should sustain their commitments to public health, pensions and social services during the periods of crisis and introduce new schemes to extend health and social protection for all.

References:

 

BARRETO, M. L. Austerity comes to Latin America: Lessons from the recent European experience on studying its effects on health. Debate. Salud Colectiva. 14(4):681-684. 2018. Available in: https://www.researchgate.net/publication/329703731_Austerity_comes_to_Latin_America_Lessons_from_the_recent_European_experience_on_studying_its_effects_on_health

Bruff, I.; Wöhl, S. Constitutionalizing Austerity, Disciplining the household: Masculine Norms of Competitiveness and the Crisis of Social Reproduction in the Eurozone. In: Hozic, Aida A. and True, Jacqui (eds.): Scandalous Economics: Gender and the Politics of Financial Crises, Oxford: Oxford University Press, 92-108.

FERNANDEZ, A. et al. Effects of the economic crisis and social support on health-related quality of life: first wave of a longitudinal study in Spain. The British Journal of General Practice: The Journal of the Royal College of General Practitioners, v. 65, n. 632, p. e198–203, mar. 2015. https://bjgp.org/content/65/632/e198

ILO: The Decade of Adjustment: A Review of Austerity Trends 2010-2020 in 187 Countries. ESS Working Paper No. 53. Columbia University and the The South Centre, 2015. Available in: https://www.social-protection.org/gimi/RessourcePDF.action?ressource.ressourceId=53192

KARANIKOLOS, M. et al. Financial crisis, austerity, and health in Europe. Lancet (London, England), v. 381, n. 9874, p. 1323–1331, 13 abr. 2013. Available in: https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(13)60102-6/fulltext

KENTIKELENIS, A. et al. Greece’s health crisis: from austerity to denialism. Lancet (London, England), v. 383, n. 9918, p. 748–753, 22 fev. 2014. Available in: https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(13)62291-6/fulltext

LABONTÉ, R.; STUCKLER, D. The rise of neoliberalism: how bad economics imperils health and what to do about it. Journal of Epidemiology and Community Health, v. 70, n. 3, p. 312–318, mar. 2016. Available in: https://www.researchgate.net/publication/282361067_The_rise_of_neoliberalism_How_bad_economics_imperils_health_and_what_to_do_about_it

Mladovsky, P.; Drivastava, D.; Cylus, J.; Karanikolos, M.; Evetovits, T.; Thomson, S.; McKee, M. 2012. Health policy responses to the financial crisis in Europe (Copenhagen, WHO). Available in: http://www.euro.who.int/__data/assets/pdf_file/0009/170865/e96643.pdf

REEVES, A. et al. The political economy of austerity and healthcare: cross-national analysis of expenditure changes in 27 European nations 1995-2011. Health Policy (Amsterdam, Netherlands), v. 115, n. 1, p. 1–8, mar. 2014. Available in: http://researchonline.lshtm.ac.uk/1386879/1/1-s2.0-S0168851013003059-main.pdf

Schramm JMA, Sousa RP, Villarinho L. Políticas de austeridade e seus impactos na saúde: um debate em tempos de crises. Rio de Janeiro: Centro de Estudos Estratégicos da Fiocruz, Fiocruz; 2018. Available in:  http://www.cee.fiocruz.br/sites/default/files/1_Joyce%20M-R%C3%B4mulo%20P-Luiz%20V_austeridade_1.pdf

SIMOU, E.; KOUTSOGEORGOU, E. Effects of the economic crisis on health and healthcare in Greece in the literature from 2009 to 2013: a systematic review. Health Policy (Amsterdam, Netherlands), v. 115, n. 2-3, p. 111–119, abr. 2014. Available in: https://www.sciencedirect.com/science/article/pii/S0168851014000475/pdfft?md5=86e37425eee9a50b2ef85e03a9e6e887&pid=1-s2.0-S0168851014000475-main.pdf

Stuckler, D.; Basu, S. 2013. The body economic: Why austerity kills (New York, NY, Basic Books).

The World Health Organization (WHO). 2010. Health systems financing: The path to universal coverage, World Health Report 2010 (Geneva). Available in: https://www.who.int/whr/2010/whr10_en.pdf?ua=1

VIEIRA, F. S. Crise econômica, austeridade fiscal e saúde: que lições podem ser aprendidas?. Brasília: Instituto de pesquisa econômica aplicada, 2016. Available in: http://repositorio.ipea.gov.br/handle/11058/7266.

 




[1] See Karanikolos et al., 2013; Mladovsky et al., 2012

[2] Bruff And Wöhl, 2015

[3] See WHO, 2011; Stuckler and Basu, 2013

[4] Simou & Koutsogeorgou 2014

[5] Karanikolos, 2013

[6] Schramm, Paes-Sousa & Pereira Mendes, 2018

[7] Fernandez et al., 2015; Karanikolos et al., 2013; Kentikelenis et al., 2014; Labonté E Stuckler, 2016

[8] Barreto, 2018

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