Caribbean & Central America - May 2023

Two recent studies call for more investment in the health sector in Central American countries in order to boost social and economic development.

In mid-April, the Federación Centroamericana y del Caribe de Laboratorios Farmacéuticos (Fedefarma), a regional pharmaceutical industry body, published two pieces of research demonstrating a link between productivity and quality of life and investment in the health sector. At the same time, researchers say that spending must be efficient in order to maximise the benefits, as higher spending does not guarantee better outcomes by itself.

The two studies focus on Costa Rica, Panamá, Guatemala, and the Dominican Republic and were conducted in collaboration with Sanigest International, a Panama-based healthcare consultancy, and the WifOR Institute, an economic research institute headquartered in Germany. Researchers found that in 2021, public spending on health was 5.3% of GDP in Costa Rica, 5% in Panamá, 2.7% in the Dominican Republic (DR), and 2.4% in Guatemala. By way of comparison, the Organization for Economic Co-operation and Development (OECD) recommends minimum spending equivalent to 9% of GDP, which no country in Latin America achieves, and the World Health Organization recommends 6% of GDP as a minimum.

As for health system coverage, Costa Rica is top with 92%, compared with 71% in the Dominican Republic, 63% in Panamá, and 17% in Guatemala. The main issues identified by researchers are inadequate and inefficient primary care, long waiting lists, and poor management of the prevention and treatment of chronic and rare conditions. In addition, the proportion of healthcare costs paid by patients, known as out-of-pocket spending, sits at 56% in Guatemala, the highest in the region. In the Dominican Republic, this figure is 47%, followed by Panamá at 28% and Costa Rica at 20%. The OECD recommends that a maximum 20.6% of spending should be out of pocket.

For researchers, Central American nations need “a paradigm shift among governments so that they no longer see healthcare as a cost and see it as a long-term investment that will bring about socioeconomic development”. One benefit they identify is that health interventions can help to improve education levels, as healthy children can study for longer. Research shows that educational attainment can increase by up to seven percentage points with early health interventions. 

At the same time, investment and budget management should be collaborative processes in order to maximise efficiency, they say. Spending should be tied to quantifiable short- and medium-term goals, say researchers, in order to avoid waste. Recommendations to improve budget management include streamlining purchasing processes and addressing labour informality and a lack of liquidity.

Given ongoing economic headwinds in Central America it seems unlikely that we will see any great increase in overall spending on healthcare in the coming years. And while improving management systems to increase budget efficiency could offer opportunities to boost coverage and quality at a lower cost, reformist efforts would likely run into roadblocks in the shape of vested interests. As healthcare systems are linked to such a wide array of economic sectors and geographies, meaningful change will likely come as a result of root and branch reform rather than bureaucratic tinkering.

Other development goals

The research also links healthcare to other development goals such as connectivity, with internet access essential to implementing digital health strategies. Costa Rica again scores highest, with 80.5% internet access, followed by the Dominican Republic on 76.9%, Panama on 64.4%, and Guatemala on 50%. This is just one example of how the healthcare sector is connected to wider development goals.