International Trade in Health Services and the GATS

1
International Trade in Health Services and the
GATS

• Presentation at World Public Health Congress,
  Rio, August 24th, 2006
• Chantal Blouin

2
Purpose of the book

• To inform policy makers about the implications of
  international trade in the health sector
• To assist them in the formulation of trade policy
  and in international negotiations in the health
  sector (GATS).

3
What is the General Agreement on Trade in
Services?

• WTO agreement adopted in 1995
• Sectoral commitments on market access and
  national treatment
• Based on 4 modes of supply

4
What is trade in health services?GATS
classification
Mode 1 Cross border delivery Telemedicine E-health
Mode 2 Consumption abroad Patients travelling across borders. Health tourism
Mode 3 Commercial presence Establishment of hospitals, clinics through FDI, joint ventures, mergers
Mode 4 Temporary movement of natural persons Physicians and nurses practising in other countries
5
Process 1st phase 2002-2003

• 7 case studies commissioned Argentina, Chile,
  China, Indonesia, Thailand, Senegal, South Africa
• 13 Background papers such as framework for
  analysis, legal analysis, how to make GATS
  commitments, impact assessment of THS, Public
  health and policy discussion papers for each mode
• Workshop July 9-11, 2003 hosted by University of
  Ottawas Institute for Population Health (with
  CPHA)

6
Highlights from the book

• Impact of health tourism and foreign investment
  on health systems
• Impact of GATS on health policy
• Key recommendation

7
Potential impacts of health tourism (mode 2)

• Additional revenues, which can be harnessed to
  directly benefit the health system
• 1.3 percent of total travel expenditures, i.e.
  approximately 6.5 billion annually.
• Improve the range and the quality of services
  offered in a country
• - Increase disparities
• - internal brain drain

8
Internal brain drain The case of Thailand

• It is estimated that about 1 million foreign
  patients received services in Thai public and
  private facilities in 2001.
• If the influx of foreign patients continues to
  growth at the current rate, the workload for
  servicing foreign patients may go up to 12 per
  cent of the total workload in five years.
• This will require an additional 3,000 full time
  equivalent doctors for urban private hospitals,
  further exacerbating the shortage of health
  professionals in the rural areas.

9
Potential impacts of foreign investment in health
services (mode 3)

• Inflow of foreign capital provides additional
  resources to invest in the health care
  infrastructures and services of the country.
• The most direct beneficiaries of liberalization
  are the households who can afford the services
  offered by foreign suppliers.
• The benefits go beyond the direct impact for
  patients receiving the services from the foreign
  providers, and can have system-wide impacts.
  They can take the form of access to new
  technologies and services, information,
  management techniques.

10
Potential impacts of foreign investment in health
services (mode 3)

• Private providers do always offer services which
  were not offered by the public sector.
• In China, the great majority of hospitals
  involving foreign capital are established in
  urban coastal areas and not in the rural areas.

11
Potential impacts of foreign investment in health
services (mode 3)

• Inflow of foreign capital in certain parts of the
  health system may reduce the burden on government
  resources and allow the public sector to
  reallocate its resources toward the patients with
  less ability to pay.
• In Indonesia, revenues coming from private wings
  supported by foreign investment in teaching
  hospitals cross-subsidize specialized services
  offered to the general population

12
Potential impacts of foreign investment in health
insurance (mode 3)

• The evidence from Latin America showed that
  private insurers, be they foreign or domestic,
  will tend to serve the higher income and low risk
  groups who can pay relatively high financial
  contributions to receive coverage.
• However, the regulatory framework to deal with
  these issues is still weak in many countries

13
Trade in health services in the poorest countries?

• LDCs are the countries in most need of additional
  capital and resources, but may be the least
  likely to receive it.
• In terms of the export capacity of health
  services of LDCs, it appears inexistent given
  constraints on infrastructure and human
  resources.
• With a low supply of health professionals (less
  than 20 physicians per 100,000 people), it is
  difficult to see how offering services to foreign
  patients would be possible, without further
  reducing access to services for the local
  patients.

14
How will GATS affect a countrys health policy?

• Overall, in terms of the general obligations and
  disciplines of GATS, their present impact on
  health policy is not particularly troubling.
• The low level of specific commitments made in
  health-related sectors to date mitigates the
  effect of the general obligations linked to
  specific commitments.
• However, more concerns are likely to arise in the
  future as the level and nature of specific
  commitments in health-related sectors increases.

15
How will GATS affect a countrys health policy?

• From a health policy perspective, measures that
  restrict market access may be more important than
  measures that restrict national treatment
• Restricting market access may serve legitimate
  health policy objectives, such as limitations on
  the number of service suppliers in a geographical
  area based on an economic needs test. (Ex South
  Africa)

16
What is the single most important issue in
determining whether to commit under GATS?

• Will increased liberalization of trade in health
  services lead to better health outcomes?
• Will making a GATS commitment in these sectors
  offer any additional advantage which will lead to
  better health outcomes?
• if the answer to these question is negative, or
  in doubt, then a country should not make GATS
  commitments.

17
What is the single most important issue in
determining whether to commit under GATS?

• Members who would like to open their health
  sector to foreign providers should consider
  experimenting with liberalization outside of
  GATS before making GATS commitments.
• Such unilateral liberalization would allow WTO
  members to experiment with such policies
• Policy reversal remains easier if the experiment
  produces unsatisfactory results.