Health Economics at the Crossroads of Centuries - From the Past to the Future Mihajlo (Michael) Jakovljevic"* and Seiritsu Ogura "Health Economics and Pharmaco onomics, Faculty of Medical Sciences, University of Kragujevac, Kragujevac, Serbia, Department of Aging, Faculty of Economics, Hosei University, Tokyo, Japan Health economics, as an interdisciplinary science, has experienced exceptionally bold evolution through the past eight decades. Generations of committed scholars have built up huge body of knowledge and developed a set of methodological tools to assist health-care authorities with resource allocation process. Following its conception at the US National Bureau of Economic Research and Ivy League US Universities, this science has spread across the Globe. It has adapted to a myriad of local conditions and needs OPEN ACCESS of the national health systems with diverse historical legacies, medical services provi- Edited by: sion, and financing patterns. Challenge of financial sustainability facing modern day Joav Merrick, health systems remains primarily attributable to population aging, prosperity diseases, Ministry of Social Affairs, Israel large scale migrations, rapid urbanization, and technological innovation in medicine. Reviewed by: Despite promising developments in developing countries with emerging BRICS markets Helmut Wenzel, Independent Health Economics on the lead, rising out-of-pocket health spending continues to threaten affordability of Consultant, Germany medical care. Universal health coverage extension will likely remain serious challenge Krzysztof Kaczmarek, Medical University of Silesia in even for some of the most advanced OECD nations. These complex circumstances Katowice, Poland create strong drivers for inevitable further development of health economics. We believe Jacek Klich, that this interdisciplinary health science shall leave long-lasting blue print to be visible Cracow University of Economics, Poland for decades to come. *Correspondence: Keywords: health economics, history, future, health systems, health policy, twenty-first century, bibliography Mihajlo (Michael) Jakovljevic sidartagothama@gmail.com HISTORICAL ROOTS OF HEALTH ECONOMICS Specialty section: This article was submitted Health economics is the leading interdisciplinary science that bridges the gap between the theory to Health Economics, of economics and practice of health care. It has experienced great development with earliest roots a section of the journal dating back for almost entire century. Its extensive diversification into various subdisciplines and Frontiers in Public Health areas of research endeavor is clearly visible today. Thus, it makes an uneasy task to track for its shy Received: 31 March 2016 historical roots and preconditions for the birth of this science. Few would argue that actual cradle of Accepted: 23 May 2016 Published: 09 June 2016 this knowledge was academic tradition of the U.S. Influential impact of the American institutions founded during the heights of Cold War rivalry Citation: extended far beyond their initially supposed outreach. One of the milestone events in the U.S. was Jakovljevic M and Ogura S (2016) establishment of Bureau of Medical Economics by American Medical Association (AMA) back in Health Economics at the Crossroads of Centuries - From the 1931. Shortly after the end of WWII, in 1945, the U.S. Army established the so-called RAND Project Past to the Future. that grew in consecutive years to become RAND Corporation. Initially, its take was to apply math- Front. Public Health 4:115. ematical Game Theory allowing for predictions of plausible scenarios in the geopolitical competition doi: 10.3389/fpubh.2016.00115 with the USSR. Many years after, applications of this same "rational choice" theoretical framework Frontiers in Public Health | www.frontiersin.org June 2016 | Volume 4 | Article 115Jakm'lievtc and nga Cochrane Systematic Reviews (31) and work ofNational Institute for Health and Care Excellence (NICE) {32). One step further in the same direction was development of health technology assess- ment (HTA) procedures (33). Establishment of national HTA agencies across the world throughout INAH'I'A-coordinated (34) efforts served as one of the long-term foundation stones, support- ing the core place of health economics in health policy. THE CHANGING WORLD NEW CHALLENGES FOR THE GLOBAL HEALTH Post WWII global development was characterized by several core landmarks of geopolitical evolution. Early decades were marked by demographic explosion, end of Colonial Era, 45 years ofCold War rivalry between the [1.5. and USSR, rise of the Non-Aligned Movement (3 5), industrial revolution spreading from developed toward Third World economies (36), large scale migrations (37), environmental pollution (38), and ultimately global warming effect (39). Such a complex and dynamic socioeconomic evolu- tion, both in free market capitalist and former socialist economies with some lag, led to tedinological advances and improved health outcomes with longevity on the lead (40). These major develop- ments have accelerated hierarchical establishment and spreading of large national health systems across the world. The very idea of risk sharing and conception of early health insurance funds dates back to the nineteenth century Europe (41). After the WWII, the bulk of medical innovation moved from Europe to the U5. Peculiarity is the fact that the rst nation to effectively deliver universal health coverage for almost entire population including the poor, back in the 1930s, was USSR via its renowned Semashko system. Other countries adopted dilferent strategies to provide universal health coverage ranging from systems based on the state budget, through public insurance systems, to more market- oriented solutions with Bismarckian, Beveridge, and (1.8. system being the most prominent examples. Great attainments in living standards, education, medical care, and public health policy led to bold advances in population health indicators. These were most visible in the U.S., Western European nations, and Iapan at the time. They consisted of extended longevity, falling fertility rates, decreasing morbidity from infectious diseases, improved mater- nal health, and early diildhood survival. With some gap, they were followed by the socialist countries. Low-income Southern Hemisphere nations of Africa, Latin America, and Asia remained signicantly below these thresholds and needed decades to catch pace with the industrialized economies of the North (42). Since the end of Cold War Era, observing the time horizon 1989-2016 World has become a much different place. During the i990s and early 2000s. globalization processes continued to accelerate worldwide. This meant rise of the newly industrialized or the so-called \"emerging\" markets such as the BRICS (43) and Next Eleven nations (44), heavily dominated by the overachieve- ment of People's Republic of China (45). In health-care arena, it has reected in so called transitional health-care reforms with the most typical pattern in Eastern Europe. These reforms tended to move focus of former socialist health systems from curative, hospital-based health care toward preventive-oriented, History and Future Hoallh Economics outpatient-centered health care. Health nancing pattern tended to make relief to state-owned health insurance funds toward ever larger share of the out-of-pocket spending by the ordinary citizens (46). Population aging as a global phenomenon (47, 48) became evident over the past three decades, with Japan on the lead (49, 50). Current UN forecasts indicate that China will be fastest aging large nation deep into the twenty-rst century (51). Surprisingly, aging of nations ultimately reached some of the traditionally young nations such as the Arabic (52) ones of MENA region and Turkey (53). Such a huge demographic transition was virtually unpredictable for strategic thinkers of nineteenth century. Soon, it became obvious that this population change will be coupled with explosive increase in incidence and prevalence of non- communicable \"prosperity diseases" (NCDs). Remarkable fea- ture of core NCDs is their chronical clinical course characterized with growth in medical services demand, long lasting disability, work absenteeism, and premature mortality. The third major con- tributor to the skyrocketing costs of medical care provision was technological innovation in medicine. Diagnostic frontiers and therapeutic opportunities extended tremendously. Availability of cutting-edge technologies joined with improved a'ordability of ordinary \"golden-standard\" services leads to increased citizen demand, further threatening nancial sustainability of con- temporary systems. Cost containment elforts and polices soon became top policy priority not only in rich Western and Asian countries but elsewhere across the globe as well. HEALTH ECONOMICS - CONTRIBUTION TO MODERN DAY HEALTH SYSTEMS It is broadly recognized that building of health care capacities has high, but long-term, return on investment in terms of popula- tion health and an overall societal productivity. Throughout the past half a century and more, the great legacy of academic health economics has created huge diversity of methodological tools to assist resource allocation processes. Some of the most commonly used were cost-effectiveness, cost-utility, cost-benet. budget-impact, and resource utilization analysis. It continues to strive and create new approaches for the future such as improving management ofscarce resources through managed and integrated care environment. Health economics has established itself as a mature science long time ago. The landscape of its major subdisciplines remained essentially unchanged since the 19705, although some areas were getting momentum more rapidly than others. This happened due to a myriad of local circumstances in the largest, most advanced health markets notably in Northern America, Western Europe, Far East of Asia, and Australia. To some extent, this focus of academic interest was driven by legislative framework and priorities of major research funding agencies (54-57). Another factor was pharmaceutical and medicinal device industry motive to invest heavily into those branches of health economics they regarded essential for the success of their market access and reimbursement strategies (58, 59). Last but not least, academia itself recognized the core weaknesses of national health systems Fronliers nPutJac Heallh | www.mlielsnag June2016 | Volmted J AriaJens Jakovljevic and Ogura History and Future - Health Economics has found its civilian applications in areas such as the build-up health economics that had been available only in the U.S., are of welfare state in liberal capitalism, social affairs, and ultimately now available in Europe and East Asian countries. Furthermore, economics of health care (1). even the latest quantitative tools in health economics find their Some of the first pioneering works prior to WWII can be way into these countries in no time through electronic journals found in publications by Milton Friedman back in the 1930s and textbooks. However, most compelling reasons come from the (2, 3). Most commonly cited source responsible for name "bap- huge differences between U.S. and the other countries, including tism" of this science is Selma Muskin's paper published 1958 Western Europe and Japan. U.S. is not a typical high-income entitled: "Towards the definition of health economics" (4) to be country in the world; it has been almost the only country without followed by her another famous paper "Health as an Investment" universal coverage among OECD countries, many of its public in 1962 (5). At that time, health was broadly regarded as rather health issues are unique, whose individualistic behaviors and consumptive branch of the economy. Mushkin's analysis was values are often not shared by other countries. Countries with probably the first understanding that health investment has universal health insurance coverage often faced financial crisis long-term beneficial consequences for the community. Probably, much earlier due to population aging, and countries that followed single most famous and cited contribution laying grounds for simplistic text-book policy prescriptions often failed (13). this discipline was Kenneth Arrow's paper "Uncertainty and the We should be aware that aforementioned bibliographic welfare economics of medical care" published in 1963 (6). These evidence published by World Bank, regardless of its undisputed arguments were further extended by Michael Grossman who methodological soundness, is some 5 years outdated. Since the became known worldwide for authoring the Theory of Human late 1980s and the end of Cold War Era, health economics rapidly Capital in 1972 (7). Interestingly, this method to assess indirect expanded worldwide (14). Leading engines of such development opportunity costs of lost productivity became standard in health were academic centers of excellence whose establishment began economics. It continued to attract academic attention for many in Western Europe (15) and Japan as early as in the 1970s (16). decades, and its creator even published two anniversary papers in Furthermore, the process of mushrooming of scientific endeavor, recent years (8, 9). This same year was remembered for one more funded research, establishment of under- and postgraduate cur- classical piece by Victor Fuchs entitled: Who Shall Live? (10). This ricula, and publication of textbook materials (17) in major world contribution probably puts grounds for ethical consideration in languages accelerated (18). Following traditional OECD econo- health economics that are about to remain hot topics until today. mies (19, 20), new cores of fruitful efforts in the field occurred in Particularly useful insight was provided by recent bibliographic major emerging markets such as the BRICS (21, 22) nations and study based on EconLit and Google Scholar indexing databases Eastern Europe (22). Some of the prominent examples of such encompassing 40 years of health economics development from countries hosting some of the top 25 ranked centers of excellence 1971 to 2011 published by Wagstaff and Culyer (11). It gives were Taiwan (China), South Africa, China, and India (23). On the us thorough evidence on regional distribution of most relevant opposite side, clearly recognized geographical areas presenting publications, top ranked academic institutions, and top cited almost serious lack of health economist capacities and locally researchers. Although discipline evidently accelerates since the published knowledge are most of the sub-Saharan Africa and 1960s, there is clear gap in favor of the U.S., which hosts almost Middle Eastern and Central Asian regions (24). 70% of top 100 researchers. It was distantly followed by Canada, Large part of preconditions for such an extensive evolution UK, Australia, and afterward few continental European countries were legislative changes across the Globe driven by the increasing such as the Netherlands and Sweden. Top five most influential costs of medical cares, slowing-down in economic growth, and journals listed were Journal of Health Economics, Health the intensifying competition for the limited resources among the Economics, Health Services Research, Pharmacoeconomics, and sectors of health care. Since the early 1990s, many governments, Journal of Human Resources. Top 10 most cited scientists globally led by Australian (25) and Canadian (26) examples, adopted according to multiple criteria (h-index, I' factor, cumulative cita- budget-impact and cost-effectiveness evidence as mandatory tion rate, etc.) were (in decreasing order of appearance) David M. for new medical technologies approval and reimbursement. This Cutler, Jonathan Gruber, Paul Newhouse, Mark V. Pauly, W. Kip wise decision effectively improved resource allocation strategies Viscusi, Janet M. Currie, Michael Grossman, Frank A. Sloan, across the world, leading to better access and affordability of Adam Wagstaff, and Eddy van Doorslaer. According to their medical services to the general population (27). On the other h-index, the highest ranked institutions were Harvard University, side, it created an administrative pressure toward the manu- World Bank, MIT, University of California at Berkeley, Chicago facturers of pharmaceuticals and medical equipment. These, in University, Pennsylvania University, Michigan University, and turn, led to a great diversity of new job openings for professional York University being the only European higher education estab- industry-affiliated health economists (28). All these intercon- lishment among the top ten. nected developments in the triangle of the national authorities, Beginning from its very inception in the U.S. in between the academia, and industry led to a great increase of capacities in 1940s and 1960s, health economics productivity continues to terms of both knowledge and its applications. outpace European and that of major Asian economies, led by Methodological mile stone essential to cost-effectiveness Japan (12). While the U.S. dominance in the output measures equation was reliable assessment of clinical efficiency of certain of health economics is still apparent, its monopoly is weaken- medical technology (29). Important step in this direction was ing for technical and substantive reasons. Technically, the high revealing concept of evidence-based medicine (EBM) (30). 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Jakovljevic M, Getzen T. Growth of global health spending share in low and middle-income countries. Health Econ Policy Law (2009) 4(02):179-93. and middle income countries. Front Pharmacol (2016) 7:21. doi:10.3389/ doi:10.1017/$1744133109004836 fphar.2016.00021 53. Lagomarsino G, Garabrant A. Adyas A, Muga R, Otoo N. Moving towards 13. Jakovljevic M. The key role of leading emerging BRIC markets for the future universal health coverage: health insurance reforms in nine developing of global health care. Serb J Exp Clin Res (2014) 15(3):139-43. doi:10.5937/ countries in Africa and Asia. Lancet (2012) 380(9845):933-43. doi:10.1016/ sjecr 1403139J $0140-6736(12)61147-7 14. Jakovljevic M, et al. Health Economics and Policy Challenges in Global Emerging 64. Ashmore M, Mulkay MJ, Pinch TJ. Health and Efficiency: A Sociology of Health Markets. New York City: Nova Science Publishers (2016). Economics. Milton Keynes: Open University (1989). 45. Hu S, Tang S, Liu Y, Zhao Y, Escobar ML, De Ferranti D. Reform of how health care is paid for in China: challenges and opportunities. Lancet (2008) Conflict of Interest Statement: The authors declare that the research was con- 372(9652):1846-53. doi: 10.1016/50140-6736(08)61368-9 ducted in the absence of any commercial or financial relationships that could be 46. Jakovljevic M. Groot W, Souliotis K. Health care financing and affordability construed as a potential conflict of interest. in the emerging global markets. Front Public Health (2016) 4:2. doi:10.3389/ fpubh.2016.00002 Copyright @ 2016 Jakovljevic and Ogura. This is an open-access article distributed 47. Jakovljevic M. The aging of Europe. The unexplored potential. Farmeconomia under the terms of the Creative Commons Attribution License (CC BY). The use, Health Econ Ther Pathw (2015) 16(4):89-92. doi:10.7175/fe.v1614.1220 distribution or reproduction in other forums is permitted, provided the original 48. Jakovljevic M. Laser U. Population aging from 1950 to 2010 in seventeen author(s) or licensor are credited and that the original publication in this journal transitional countries in the wider region of South Eastern Europe (original is cited, in accordance with accepted academic practice. No use, distribution or research). SEEJPH (2015). doi: 10.12908/SEEJPH-2014-42 reproduction is permitted which does not comply with these terms. Frontiers in Public Health | www.frontiersin.org June 2016 | Volume 4 | Article 115Jakovljevic and Ogura History and Future - Health Economics and adapted responding to local needs (60). Thus, the major and accessible to ordinary people than ever before (61, 62). Thus, fields of scientific endeavor in health economics and its fruits a scientific discipline, originally stemming from the Game were different in the U.S., Benelux, and Nordic regions of Europe Theory, gave birth to several generations of gifted and devoted and Japan. According to Wagstaff and Culyer based on EconLit- economists, physicians, and other expert profiles. All of them adopted JEL system, over the past 40 years, these disciplines were were building huge body of knowledge that continues to grow health and its value, efficiency and equity, determinants of health further. We witness complex evolution of global population health and ill-health, public health, health and the economy, health landscape across nations. Such a profound and long-term change statistics and econometrics, demand for health and health care, creates a major challenge of financial sustainability of modern day health insurance, supply of health services, human resources, and health systems. Contemporary health policy elites believe that markets in health care and economic evaluation. achievement of universal health coverage remains primary goal Great legacy of academic health economics shall remain one (63). We believe that these circumstances create strong long-term of the prime examples of bold development of interdisciplinary drivers for inevitable further development of the science of health health sciences. It has served governments, hospital sectors, and economics. For many years, it has been supporting the build up of pharmaceutical and medicinal device industry across the world welfare societies in many nations (64). Whether health economics for more than half a century. This knowledge has facilitated wiser shall remain in the elite club of interdisciplinary health sciences and more just resource allocation. It allowed to the national exhibiting long-lasting impact to policy-making and strategic health systems worldwide to deliver more medical care, save more thinking will be seen in the upcoming decades. lives, extend human longevity, and improve the quality of life in patients suffering from chronic illness probably as much as core AUTHOR CONTRIBUTIONS medical discoveries themselves. This contribution is less obvious compared to the innovation in clinical medicine. But far-reaching MJ and SO contributed equally in study design, conception, and consequences of implementing methods of health economics in drafting of the manuscript. Both authors had essential contribu- policy decisions have made medical services far more affordable tions to the final appearance of this grand challenge article. REFERENCES 16. Yoshikawa A, Bhattacharya J, Vogt WB, editors. Health Economics of Japan: Patients, Doctors, and Hospitals Under a Universal Health Insurance System. 1. Rebelo LP. 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