How healthy is the market for healthcare?

AS Nobel Laureate and economist Kenneth Arrow observed in the early 1960s, healthcare services could not be marketed. This is of particular importance when welfare of a state is concerned. It is so because of two strongly distinguishing aspects of health care. Firstly, one doesn't know when or whether he will need care. Secondly, even if one does, the service can be extremely expensive. For instance, the lump-sum payment involved with coronary bypass surgery or routine visits to doctors, and other costs involved, would force people to pay out-of-pocket.
Despite Arrow's assumption regarding welfare concern, many countries tolerate market failure in healthcare sector as indicated by the rising health expenditure, which the poorest section cannot afford. Bangladesh is no exception to this.
Rising health expenditure is a growing concern in Bangladesh. A report published by the Bangladesh Bureau of Statistics shows that nearly 16% of the ill population does not seek treatment due to high healthcare cost. This, according to the World Health Organization (WHO), leaves a heavy burden on private expenditure for health on individuals, which leads to 64% of total health expenditure being financed by individuals out-of-pocket against the global average of 35%.
WHO also reports that every year approximately 44 million households throughout the world face catastrophic health expenditure, and about 25 million are pushed into poverty by the need to pay for healthcare services. Public health researchers and policy-makers define health expenditure to be catastrophic when people have to pay for medical expenses, which in many instances leads to “financial catastrophe” in case the individual or the household is economically not well-off. Many people may even decide not to use the services, simply because they cannot afford either the direct costs, such as for consultations, medicines and pathological tests, or the indirect costs, such as transport.
An analysis of data on global prevalence of disease by WHO puts forward that as of 2011 in Bangladesh, major chronic health events such as cancer (6.27%), kidney diseases (5.6%), cardiovascular diseases (14.21%), and road accidents/injuries (3%) contribute most in terms of cost of treatment.
Consultations with a number of senior physicians indicate that in the context of Bangladesh any individual incurring any such disease may have to face the minimal cost incurred annually against the treatment cost of up to Tk. 75,000 for cancers, Tk. 50,000 for cardiovascular diseases, Tk. 30,000 for kidney diseases and Tk. 22,500 for injuries from accidents. The incidence of poverty as of 2010 is estimated to be 31.5% at national level, with 17.6% being extremely poor with as low per capita income as Tk. 1,103 only annually. This raises serious concerns of health financing for this poorest segment of the population in case of chronic illness.
What is more worrying is that total health expenditure is projected to be Tk. 1,300 billion by 2022, which is nearly eight times the total health expenditure in 2007 as per Ministry of Health and Family Welfare (MoHFW). This means per capita healthcare expenditure will increase a few-fold in this decade. If purchasing of healthcare remains out-of-pocket, it will make the poor people extremely vulnerable unless their income grows commensurately. A possible solution is increasing government investment in health.
Government health expenditures are principally funded through general revenue taxation or development assistance. Despite the growing health expenditure, the government has been less than successful in reducing the demand gap between consumption and financing of healthcare.
The public sector must revise their required budget allocation in health sector reform. In this regard, the Bangladesh Health Watch report suggests that if the government aims to allocate the target expenditure of Tk. 1,872 (approximately $24 per person per year) by 2015, then its budget has to grow at a higher rate of 35% over the period 2010- 2015.  
To sum-up, rising health expenditure against prevalence of chronic illness and related costs of treatment may pose threats of loss of income, particularly for the poorest segment of the society. This may accentuate further indebtedness and asset depletion, which may lead to a fall in consumption expenditure below subsistence level.   
Decades back, economist Arrow's theory of market of healthcare has shown that the uncertainties arising regarding cost of healthcare can be transferred through the market by some alternate risk-pooling mechanism. This calls for focusing on the concerns for deepening and broadening the resource base for health in the country. More importantly, a united step by policy-makers and healthcare researchers, among others, towards formulation of proper National Health Policy is needed to address the vulnerability to chronic diseases.

The writer is a Research Assistant at the Institute of Governance Studies (IGS), BRAC University.
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