THE IMPACT OF HEALTH EXPENDITURE ON THE ECONOMIC GROWTH OF CAMEROON

Abstract

This study determines The Impact of Health Expenditure on the Economic Growth of Cameroon. The study uses estimates of government health expenditure, population growth, inflation, life expectancy and physician, (1990-2012), as well as the economic survey and statistical abstracts for the same years.

The analysis is a time series estimation of the effect of government health expenditure on GDP, so as to explain the minimum amount of funding to be allocated to government health sector which would boost economic growth. The study employs OLS regression and correlation between dependent variable and the independent variables. The study attempts to determine the properties of health care in Cameroon, and finds that health care in Cameroon is a necessary good and has an elasticity of 0.22% to GDP per capita.

This is to mean that for every 1% increase in Government health expenditure; GDP should increase by 0.22%.for the policy makers. This study advice on a suitable strategy for financing healthcare in Cameroon as it faces challenges of underfunding and an increased demand of quality and availability of healthcare services that are equitable and affordable for a growing population.

In this study, PHE may simply refer to total government expenditure from government budgetary allocation and financial aid that the Cameroon health sector spends annually on health care delivery systems thus has a major impact on economic growth in Cameroon.

1. CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The economic prosperity of a country can also be considered as a health-related issue (Siaosi, 2014). Health is a crucial determinant of growth and therefore is related to economics and sound social development. Illness brings suffering and healthier lives are likely to be longer and more fulfilling. These facts alone provide a rationale for development work that improves people’s health and brings broader benefits to enhance economic growth and social development.

There are many health indicators used by researchers of the subject to account for the long-run relationship between health and economic growth. Further, they also used several proxies to investigate empirically the connection between the parameters. The examples of such proxies are as follows: the life expectancy, mortality rate, fertility rate, health expenditure, health expenditure as a share of gross domestic product, number of hospital beds per 10000, number of physicians per 10000, the average height of adult men, cognitive functioning, the adult survival rate for men, age of menarche (onset of menstruation) for women. After considering all the various health indicator proxies, this research use life expectancy as the principal basis of the study. Additionally, the study also considers the infant mortality rate and fertility rate to establish whether they have a significant impact on economic growth (Siaosi, 2014).

Most of the developing and developed countries have experienced progress in health; as increases in life expectancy have been accompanied by declines in mortality rates and fertility rates, across the years. Demographic changes are likewise major issues that have led to such increased importance on health. It is a challenge that every country must deal with due to its repercussions

 on productivity and economic growth. It is believed that health and economic growth are interrelated and that a relationship between the two does exist. The World Health Organization (WHO) states that: “the linkages of health to poverty reduction and long-term economic growth are powerful, much stronger than is generally understood”. The United Nations has also exemplified the significance of health through the introduction of the Millennium Development Goals, most of which deal with health improvements across countries, particularly in the African Continent (Adonia, 2013).

Labour is a factor of production which involves the physical and mental wellbeing of an individual that is often employed in developing countries more than capital is been used. This is because capital intensive production (that is high use of machinery) is much more expensive than labour intensive. What more, the increase in the rate of non-healthy individuals in the community increases workforce loss and reduces productivity in developing countries, whose economic growth and economies are based on labour, and creates more significant impacts and losses on the production power as compared to those in the developed countries which mostly employ the use of capital intensive means of production. In this case, developing countries cannot fully take advantage of the cheap labour factor to the extent required. They fall behind even more disadvantaged than an already disadvantageous situation. Therefore, the health status of the society and the labour markets, as well as health expenditures, are more important for developing countries.

Good health can reinforce economic growth by enabling people to be more productive especially in countries that have little corruption, poor healthcare, this can constrain economic growth because it reduces the quality and quantity of labour. As it applies to all countries, an adequate and

effective way of making health expenditure is important for Cameroon, which is a developing country. Health expenditure includes all expenditures for the provision of health services, family planning activities, nutrition activities and emergency aid designated for health, but it excludes the provision of drinking water and sanitation. Health financing is a critical component of health systems. National health accounts provide a large set of indicators based on information about expenditure collected within an internationally recognized framework. Healthcare expenditure can result in better provision of health opportunities, which can strengthen human capital and improve the productivity, thereby contributing to economic performance. It is therefore important to assess the phenomenon of healthcare spending in a country.

How health expenditure impact economic growth is one major fundamental question of most economics. Firstly, improvements in health contribute to better well-being across society. A healthier workforce is expected to contribute to increased productivity as well as less absenteeism compared to an unhealthy workforce. The increased life expectancy brings about changes in expenditure and savings decisions, thus resulting in increased savings rates which in turn boost investment and economic growth rates. Health can impact economic growth indirectly via education, where healthier children tend to have higher school attendance rates, hence improving the overall quality of the labour force, once again resulting in enhanced output. In this manner, health and economic growth are interrelated (Serdar, 2015).

Apart from that, the health sector constitutes an area of employment in the economy and increased health expenditures lead to a rise in the number of those employed in the sector along with the total income of those employed, which contributes to total expenditures and increases aggregate demand. The wealth and poverty of nations can, and have often been analyzed in terms of the state of health of citizens of the nations. Health is fundamental to economic growth and development and is one of the key determinants of economic performance both at micro and macro levels. This derives from the fact that health is a form of human capital that increases an individual’s capability and a component of human well-being which is a means of identifying with economic development (Bloom and Canning, 2013). This explains why governments across the globe are making frantic efforts to achieve good health for all. Thus, following the United Nations (UN) recommendation of average expenditure on health 8% – 10% per cent of the GDP may be considered as a benchmark. And so this study thinks that no amount spent on health by a nation can be too much, as health is wealth to every human being, and has the right to good healthcare, regardless of age and social status.

Analyses of the inter-relationships between health, productivity, and economic growth can be conducted at the individual level, at regional levels within a country, and for aggregate data on countries. In developing countries, there are numerous micro studies in biological and social sciences showing the benefits of better health on productivity. There are several methods of describing the funding of health care systems. These usually consider both the funding and service delivery arrangements of the system. There are essentially four methods of funding health care services; they are general taxation, social health insurance, private health insurance, and direct payments by patients. Different combinations of these exist in practice. However, government health expenditure consists of recurrent and capital spending from government budgets, external borrowings, and grants (including donations from international agencies and NGOs) as well as compulsory health insurance funds (Eneji et al., 2013). Total health expenditure is the sum of government and private health expenditure. It covers the provision of health services (preventive and curative), family planning activities, nutrition activities, and emergency aid designated for health.

Government health expenditure consists of recurrent and capital spending from government (central and local) budgets, external borrowings and grants (including donations from international agencies and nongovernmental organizations), and social (or compulsory) health insurance funds. Total health expenditure is the sum of government and private health expenditure. It covers the provision of health services (preventive and curative), family planning activities, nutrition activities, and emergency aid designated for health but does not include the provision of water and sanitation. (WHO, 2017).

The Cameroon health system has two important features. It is a pluralistic system because it is characterized by multiple sources of financing and health care providers. The main financing sources are the government, government enterprises, foreign aid donors, private enterprises, households, religious missions and NGOs, and the providers are government health facilities, government enterprise health clinics, health facilities of religious missions and NGOs, private clinics, pharmacies and drug retailers, and traditional doctors. It is also a vertical system in the sense that financing sources deal directly with the providers without going through intermediaries or financing agents.

Cameroon’s relatively good economic performance during the 1970s and the oil boom of the early 1980s favored a rapid expansion of the network of health structures. With a population of 13.5 million in 1997, the country had 1,031 government-operated health facilities which included 1 teaching hospital, 2 referral hospitals, three central hospitals, 8 provincial hospitals, 38 divisional hospitals, 132 district hospitals, and 847 health centers (World Bank, 1996), backed up by a medical staff of 14,292 (Ministry of Government Health 1998: 7). A number of State-owned enterprises also operate health facilities for their staff.

There is an important sub-sector of private health providers who complement and often compete with government providers, consisting of non-profit religious missions and NGOs, for-profit providers, and traditional healers. The bulk of non-profit facilities are operated by the Catholic and Protestant Health Services: the former operates 179 facilities (including 8 hospitals) with a staff of 1,315 and the latter122 health facilities (including 24 hospitals) with a staff of 2,633 (World Bank, 1996); there were roughly 200 for-profit clinics (Deschamps, 1996) and a few thousand traditional healers (Lantum, 1996; personal communication). Following the Bamako initiative in 1987 the government adopted a new health policy in 1992 based on the decentralization of health care delivery, emphasis on primary health care, and the participation of beneficiary communities in the co-financing and co-management of health care facilities (Government of Cameroon, 1992).

In addition, Cameroon has benefited from innovative financing of health after numerous international initiatives aimed at achieving the Millennium Development Goals (MDGs) by 2015.  The Health Sector Wide Approach (SWAP), adopted in 2010, emerges as a key instrument for mobilizing and optimizing the use of resources for the implementation of the Health Sector Strategy. Despite these measures, the “Average Propensity of Total Medical Consumption” of households is high in Cameroon, where 51% of the population lives on less than two dollars a day.

1.2 Problem Statement

The national productivity and overall economic growth of any nation is the function of the health of such a nation (Siaosi, 2014). The improvement and extension of healthcare delivery in Cameroon have been constrained by gaps in financing, its contribution is still marginally low whereas the extent of its impact on economic growth is undermined and the desired results have not been met. This is particularly worrisome as several questions have been raised on the situation and which, the study intends to answer within its scope and context. Arising from the above background of the study, this study seeks there is causality between income and healthcare expenditure as well as whether healthcare expenditure is a driving force for economic growth in Cameroon.

Cameroon faces a problem of insufficient financial resources to support its growing demand for healthcare. In an article on 30th June 2019 – The daily standard reported that cash shortage is being

blamed for the rise in health woes in Cameroon. The Ministry of Government health noted that government (budget) allocations to healthcare expenditure had been increasing over the years, at a constant rate of 2.3% but the funding was insufficient to cater for the growing demand of healthcare delivery, this in turn led to the worsened state of healthcare indicators in the country. The danger then as experienced is that the inefficiency in government healthcare expenditure would lead to increased costs of service delivery over time, and therefore weakens the sustainability of healthcare financing. Cameroon overall health system performance was also ranked 151th among the 167 Member States (WHO, 2020).

The Cameroon’s rate of infant mortality (56.872 deaths per 1000 live births) is among the highest in the world. It therefore becomes imperative to ask if governance has an impact on the effectiveness of health expenditure in Cameroon. Thus, this study sought to examine the impact of health expenditure on the economic growth of Cameroon.

1.3 Research Questions

1.3.1 Main Research Questions

What is the impact of health expenditure on the economic growth of Cameroon?

1.3.2 Specific Research Questions

1. What is the contribution of capital expenditure on health and its impact on economic growth in Cameroon?

2. What is the contribution of recurrent expenditure on health and its impact on economic growth in Cameroon?

1.4 Objectives of the Study

1.4.1 Main Objective

The main objective of the study is to evaluate the impact of health expenditure on the economic growth of Cameroon.

1.4.2 Specific Objectives

Specifically, the study seeks to;

3. Examine the contribution of capital expenditure on health and its impact on economic growth in Cameroon

4. Examine the contribution of recurrent expenditure on health and its impact on economic growth in Cameroon