Misallocation of resources in health services

Public money is spent on health interventions of low cost-effectiveness, such as surgery for most cancers, at the same time that critical and highly cost-effective interventions, such as the treatment of tuberculosis and sexually transmitted diseases, remain under-funded.

Preventable and curable conditions which greatly distress patients, and which are linked with high suicide rates, such as skin disease, are not sufficiently funded partly because their indirectly fatal consequences are not acknowledged by the authorities.

Much of the money spent on health is wasted, for example brand-name pharmaceutical are purchased instead of generic drugs. It is also common that government spending for health goes disproportionately to the affluent in the form of free or below-cost care in sophisticated public tertiary care hospitals and in subsidies to private and public health insurance.

World health spending – and thus also the potential for misallocation, waste and inequitable distribution of resources – is huge. For the world as a whole in 1990, public and private expenditure on health services was about $1,700,000 million, or 8 percent of total world product. High income countries spend almost 90 percent of this amount, for an average of $1,500 per person. The USA alone consumed 41 percent of the global total – more than 12 percent of it gross national product (GNP). Developing countries spent about $170,000 million, or 4 percent of their GNP, for an average of $41 per person. In some countries a single teaching hospital can absorb 20 percent more more of the budget of the ministry of health, even though almost all cost-effective interventions are best delivered at low level facilities. In Indonesia, government subsidies to health for the richest 10 percent of households in 1990 were almost three times those going to the poorest 10 percent.