Health services trade
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1 Health Services Trade: How Thailand may benefit from trade liberalisation with ASEAN Jutamas Arunanondchai FPRI 4th AEF Meeting, June, (This version 21/06/04) 1 Health services trade Scope of the study Medical doctors, nurses, dentists, midwives (Professional Services sector); Hospital services (Health services sector negotiation); Health insurance (Financial services sector negotiation); Medical Education and training 2 1
2 Difficulties with health services Economic aspect: Trade brings about benefits in the usual way; Moral aspect: The notion that service performed at a certain standard or quality should be available across all socio-economic groups. 3 Current situation - government No health service liberalisation commitments in GATS nor AFAS. Government policies in health services BOI has been giving tax incentives for investments in private hospitals since 1980s; More recent promotions are: Medical services: General medical services, plastic surgery, dental care and medical examination; Wellness services: Thai traditional massage, spa and long stay; Herbal Health products: Herbs, cosmetics, food and drinks. Set up of accreditation institutions: e.g. Institute of Hospital Quality Improvement and Accreditation for monitoring standards of health care. 4 2
3 Current situation private sector Mode 1: No provision of telemedicine across border on commercial basis. However, there exists some cross-border supply of training and education. Mode 2: Since 1997, some Thai private hospital has been active in promoting exports. In turn, these private hospitals are competing with the public sector for medical doctors. 5 Current situation private sector (cont.) Mode 3: Foreign investments are welcome. Foreign investors have the rights to request to become majority shareholder from MOC. Evidence that some bypass this via nominees. Thus far only 14 out of over 400 private hospitals have some foreign ownership. Mode 4: Movement of medical doctors and nurses from Thailand to US and Europe has been on-going for decades without trade agreements. Less so now than between 1960 and
4 Current problems: Unequal distribution of health personnel nationwide; Mostly concentrated in BKK and Central region. Recent Universal Health Coverage (UC) scheme puts pressure on public health resources. Workload and poor salary are encouraging medical doctors to leave public to private practices. Recent medical graduates working in public sector earn 1/10 of those working in private sector. 7 Problems with current policy to promote private sector exports Likely to raise the demand for health personnel by private hospitals. It is easy for private sector to offer relatively attractive pay packages. Past data suggest that the supply of medical doctors is sensitive to financial incentives. This is likely to exacerbate brain drain from public to private hospitals; Since 2001, evidence of drain as the economy picks up; 8 4
5 Problems with current policy to promote private sector exports (cont.) In general, private hospitals devote more resources per patient, approx. 5 times what public hospitals use => makes public to private drain more severe. Regional distribution of medical doctors worsens as most private hospitals are located in urban areas. Tiered health system lower socio-economic group are priced out of the private system. 9 Ways of overcoming the shortage of medical staff Raise the salary of the public sector employees; Encourage public hospitals to give treatments to foreign patients as a way of raising income of public sector employees; Encourage training/production of MDs: Domestic training: encourage private hospitals participation; Training abroad; Encourage permanent or temporary visits by foreign medical professionals. 10 5
6 How trade agreements may help Thailand: To overcome potential resource constraints by raising the number of health professionals, e.g. medical doctors, through mode 4 and/or through education. So social and commercial goals can be achieved at the same time. Key = eliminate barriers to imports of medical professionals, while maintaining medical standards through MRAs and harmonisation of regulations. 11 Why regional trade agreement like AFAS rather than GATS? Shared experience in Tropical diseases. Liberalisation may not be too costly Given that financial incentives to health service providers are more comparable amongst ASEAN, the liberalisation of health services trade within ASEAN may not lead to such a drastic reallocation of health service resources. 12 6
7 Why regional trade agreement like AFAS rather than GATS? Cont. Differences across countries in regulatory standards are less pronounced, making harmonisation and/or MRA easier to establish in ASEAN Check regulations of various members of ASEAN. 13 7
8 Distribution Service in Vietnam AEF meeting, Siem Reap, June 2004 Status Internal liberalization since late 1980s to abolish state monopoly. No clear separate regulatory documents for distribution services. Regulations instead are scattered in different documents on broader issues. Foreign participation was allowed since mid 1990s, with no more than 50% ownership in joint ventures. Foreign presence is limited due to unclear regulation and market size. 1
9 Status (cont) Metro is the only foreign distributor in supermarket business. Distribution of foreign well-known branded products is through commissioned agents and/or parallel imports then local retailers. Franchising is very limited (KFC was franchised to a Singaporean company that has joint venture with local partner) Reform Priority Regulatory framework in place for foreign entry, looking ahead the perspective of Vietnam s accession to WTO, regional agreement, development of domestic industries that need distribution services. Development of distribution (both domestic and international for export) for local agricultural products to benefit farmers. 2
10 Reform Priority (cont) Strengthen marketing capacity of local distributors in reaching foreign markets, to be closer to end consumers, and thus gain higher value-added for the country. Clearly define distribution services for data collection and statistics purposes, given the increasing importance of this activity in the economy. Benefit of international engagement Foreign entry will serve the high end of the market (urban middle class), instead of competing in the same segment with domestic distributors. Foreign distributors with well-established international network may facilitate Vietnam s export in the first stage, when local distributors are not capable to do so. Opportunity to strengthen capacity of local exporters/distributors to reach foreign markets. Engaging in distribution helps firms increase value-added and profitability, thus move up the value chain. 3
11 Thank you for your attention 4
12 VIETNAM S HEALTH SECTOR AND SERVICES TRADE LIBERALIZATION Presented at the 4th meeting of ASEAN Economic Forum Research Project on Trade in Services June 22-23, 2004 Outline Public, private, FDI sectors Financing health care Performance (achievements & challenges) Policy priorities Vietnam s WTO negotiation 1
13 4 levels Central level Provincial level District level Communal level Public Sector Type/level of hospital Central - General - Specialty Provincial - General - Specialty - Traditional Medicine District (all general) Non MoH (all general) All hospitals Public hospitals by level and specialty, 1997 Facilities Number % of total Beds Number 8, , ,452 4,965 98,117 % of total Average size (beds/facilit ies) Source: World Bank et al (2001), Vietnam Growing Health: A Review of Vietnam s Health Sector. 2
14 Persons per hospital bed, selected Asian countries, Taiwan HongKong Korea Singapore Sri lanka Vietnam Chi na Thailand Malaysia Cambodia Philippines India Bhutan Indonesia Pakistan Myanmar Bangladesh Nepal Source: World Bank et al (2001), Vietnam Growing Health: A Review of Vietnam s Health Sector. Private sector Since 1986, private provision of health services was allowed. The official rationale for allowing private provision was that this would meet (excess) demand that the public sector was unable to fulfill, and make fuller use of health workers who had retired from the public sector. Since 1989, the government has implemented numerous laws, ordinances, and decrees which govern the private health sector (e.g. Ordinance on Private Medical Practice) 3
15 Number of private health facilities, by type (Oct-1998) No Type of facilities Number Private health facilities 1 General hospitals 4 2 Maternity homes Polyclinics 98 4 Consulting rooms of general practitioners Specialized clinics Dental clinics Lab tests and functional exploration X-ray examination Cosmetic surgery Infirmary Rehabilitation and nursing care Family planning services Foreign-invested health facilities 5 Private pharmaceutical facilities 14 Private pharmacies or drug outlets Sales agents for pharmaceutical companies 8822 TOTAL Foreign sector Market access Allowable forms of health care: Hospital (policlinic & specialty) Policlinic & specialty units Maternity unit Paraclinical unit Allowable forms of investment: Business Cooperation Contract Joint-venture 100% Foreign Invested Enterprise 4
16 Foreign sector Entry conditions The following conditions should be met by foreign health service provider in order to obtain license from MOH : There is a particular demand of the Vietnamese and foreign people residing in Vietnam and foreign invested enterprises can meet the demand Enterprises can meet all requirements on location, equipment, and other necessary conditions according to Ministry of Health s regulation Managers of the enterprises must meet professional requirements and must have practice certificate issued by the Ministry of Health Doctors, medical personnel working in these enterprises must have professional certificates suitable to the assigned duties and must have specialty practice of at least 3 years. The enterprises must have plan to transfer technology and train Vietnamese personnel. Foreign investment in health sector (by October 2003) Type of investment project Number of investment projects Registered value (million USD) Hospital, medical exam unit Pharmaceutical Medical equipment, device Total Source: Ministry of Planning & Investment of Vietnam 5
17 Public-private shares in financing total health expenditure (%), Public Private Source: World Bank et al (2001), Vietnam Growing Health: A Review of Vietnam s Health Sector. Public spending on health as a percentage of aggregate health spending, selected Asian countries (%), 1990s Cambodia Vietnam India Nepal Thailand S.Korea Indonesia Bhutan Bangladesh Lao China Philippines Mal aysia Srilanka Source: World Bank et al (2001), Vietnam Growing Health: A Review of Vietnam s Health Sector. 6
18 Public spending on health ( ), Asia Public spending on health Per capita (US$) Bangladesh Nepal Pakistand India Laos Vietnam Indonesia Cambodia China Srilanka Philippines Thailand Malaysia South Korea As % of total government expenditure Pakistan Myanmar India Indonesia Srilanka Malaysia Philippines Nepal Vietnam South Korea Thailand Cambodia China As % of GDP Myanmar India Indonesia Pakistan Nepal Bangladesh Malaysia Phillipines Laos Srilanka Vietnam South Korea Thailand China Cambodia Source: World Bank et al (2001), Vietnam Growing Health: A Review of Vietnam s Health Sector. Productivity of public health spending, : Service consultations per million (constant 1994) VND of public health spending y 1993y 1994y 1995y 1996y 1997y 1998y Source: World Bank et al (2001), Vietnam Growing Health: A Review of Vietnam s Health Sector. 7
19 Productivity of public health spending, : Inpatient days per million (constant 1994) VND of public health spending y 1993y 1994y 1995y 1996y 1997y 1998y Source: World Bank et al (2001), Vietnam Growing Health: A Review of Vietnam s Health Sector. Productivity of public health spending Health service consultations have not kept pace with public health spending between Two possible explanations: Real decline in the productivity or efficiency of public health system Reflect other factors: - Improvement of quality of public sector inpatient and outpatient contacts over time (more drugs, medical supplies, better-trained health workers, etc) - Increase of in the number of preventive health activities 8
20 Achievement Impressive gains in health indicators during the last three to four decades Reduction of infant, child and maternal mortality to levels that are typically observed in countries that have two or three times the per capita income of Vietnam This achievement is made for the most part, without much external assistance. Infant, child and under-five mortality rates, Period Infant mortality Child mortality Under-five mortality % decline, to Source: World Bank et al (2001), Vietnam Growing Health: A Review of Vietnam s Health Sector. 9
21 Challenges Increased inequality in health opportunities: The betteroff sections of Vietnamese society have been more able to take advantage of opportunities in the health sector, while the poor have lagged behind Limited coverage of the health insurance program: about 12% of the population Heavy reliance on hospitals for treatment: hospitals which are not the most cost-effective facilities to treat the types of diseases that prevail in Vietnam, are overutilized relative to primary health facilities, particularly among the better-off segment of the population. Dangerously escalated levels of antibiotic resistance in the population: due to self-medication Policy priority in future Subsidize properly the poor and expand coverage of the health insurance program in order to ensure access of the population, especially the poor, to health services. Reduce excessive and irrational use of drugs in the population by allowing sale of antibiotic and other special drugs only on the basis of physician s prescription. Set up appropriate structure between community health care and hospitals by increasing scope of community health system (preventive, environment sanitation, protection of mothers and newborn, etc) and declining properly curative sector. 10
22 Vietnam s WTO negotiation The Second Offer (April 2003): BCC, Joint-venture, 100% Foreign Invested Enterprise. Minimum investment capital for a hospital is 20 million USD, a policlinic is 2 million USD and a specialty is 1 million USD In comparison? With other sectors (banking, telecom, maritime services, etc): Health services are highly open that does not require foreign equity limit and transition period With Status quo: Almost the same level of openness. 11
23 Pros of openness Share some health care burden with public hospitals which are now overloaded Bring quality services to the local population and foreigners who live and work in Vietnam Transfer techniques, technology and provide professional training to the Vietnamese Cons of openness At this stage, no motivation is found for the protection of health services in Vietnam, since the demand is huge and remains unmet by the existing health facilities. Foreign presence thus does not put much threat to the local service providers, both private and public. 12
24 Thank you for attention! 13
Trade in health services in the ASEAN region
Health Promotion International, Vol. 21 No. S1 doi:10.1093/heapro/dal052 # The Author (2007). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org
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