Macroeconomics and Health: The Case of Mexico

Case Analysis

FULLANTE, Ma. Khristine Abelinde January 17, 2011

11088230 Health Economics

The Macroeconomics and Health: The Case of Mexico presented a direct link
between health and economic growth. It generally states that the two go hand in hand in
a manner that economic growth simultaneously influences health care and vice-versa.
As Catherine Overholt and Margaret Saunders (1996) said, “Health status both affects
and is affected by macroeconomic phenomena, and the way that the national income is
spent affects the welfare of the population.”

Reading the case study, it can be concluded that the economy of Mexico was
able to withstand a high rate of economic growth during the late 1950’s and 1960’s.
Mexico’s Gross Domestic Product (GDP) grew high because of developing the domestic
market of the country. The strategy that the government used was very effective to the
Mexican economic development. In effect, the government was able to allocate enough
money for social expenditures. However, the considerable growth rate was not
maintained and as a result, it was insufficient to sustain the GDP per capita in the
1980’s. Furthermore, the standard of living of a large group of population of Mexico has
remained stationary, if not depreciated.

Government intervention in the health care system of a country is important.

Santerre & Neun (2007) in their book Health Economics: Theories, Insights, and
Industry Studies presented a model describing the reasons for government intervention,
the public interest theory. According to the public interest theory, government takes the
role of promoting and amending policies for the enhancement of the efficiency and
equity of the health care system of the country. Furthermore, public interest functions
when the government restores efficiency and promotes equity when there is market
failure. These are done through encouraging competition, providing consumer
information, reducing harmful externalities, or redistributing income in society (Santerre
& Neun, 2007). In the case of Mexico, the government had to cut and adjust their
budget for social expenditures to recover from the economic crisis. It includes reducing
food subsidies and supports only a particular population group. It also increased
minimum wage rate lower than the inflation, and devalued the peso.

Overholt and Saunders (1996) stated that “Lower economic growth results in
unemployment and lower incomes. With less income, people, particularly those at the
lowest income levels, experience deterioration in their diets and nutritional status and
increased morbidity.” This is true in Mexico. When the government made major budget
cuts in government social expenditures (health, education, and social security),
Mexicans experienced inadequate health care, lack of basic needs, and poor health
status such as malnutrition and other nutritional deficiencies. These were even more
worsened when a large amount of government budget was allotted for debt services.

As mandated in the Millennium Development Goal, the government should

provide universal access to health care. In the Philippine context, we have a
government initiated program that adopts key reform strategies in health financing,
regulation, services delivery, and governance of health services called Fourmula One
for Health of the Department of Health. Along with this is securing public funds to
provide health insurance coverage to the poorest of the poor (Capuno & Kraft, 2010).
This may be a good program but, as we can see, the government fails to establish
policies that will provide quality and equitable health services to all. Our country still
lacks resources to fully realize the goal of the Fourmula One for Health.

In realizing economic growth, a healthy population is needed as it is important in

alleviating poverty. Moreover, the case clearly stated the role of the government in
enhancing efficiency and equity in the country. Resources should be allocated efficiently
at all levels of the economy (Santerre & Neun, 2007). This could only be done through
the development of policies supporting macroeconomic stability. With the effort of the
government, the most favorable socioeconomic conditions associated with better
income will apparently lead to better health outcomes.
References:
Capuno & Kraft. (2010). Household choices, circumstances and equity of access to
basic health and education services in the Philippines. University of the Philippines
School of Economics. Retrieved from
http://www.sesc.econ.upd.edu.ph/dp/index.php/dp/article/view/667 on January 13,
2010.

Overholt & Saunders. (1996). Policy Choices & Practical Problems in Health
Economics. World Bank.

Santerre & Neun. (2006). Health Economics: Theories, Insights & Industry Studies.
Thomas Learning Asia.