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  • Understand the dual relationship between economics and health: how poverty can affect health and how health problems can result in poverty
  • Comprehend the possible linkages between wealth and health and how both absolute and relative wealth have an impact on health
  • Describe four key mechanisms by which health can affect wealth
  • Show the interrelationships between health and economics looking at three key diseases (malaria, tuberculosis, and HIV/AIDS)
  • Outline and describe four key factors in choosing the type of health care financing system
  • Outline and describe five major financing methods for health care
  • Describe and define risk pooling, risk aversion, adverse selection, and moral hazard

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Peter Chirwa is a 4-year-old boy in northern Malawi. His family grows their food on their farm to provide subsistence for the year. When harvests are good, he and his five brothers and sisters eat well throughout the year, but when the harvests are bad, as they have been over the past 3 years, his brothers and sisters become malnourished and sick. Over the past year, two younger siblings died from malnutrition and pneumonia. Unfortunately, Peter’s family is poor and cannot afford to buy food in the market. His family survives on less than 50 cents per person per day, far below the global absolute poverty line of $1.

Peter’s uncle lives five houses down. Gaunt and thin and dying from AIDS, he gazes from his bed to his visitors. He has spent all his money trying to buy the lifesaving drugs but can no longer afford the prices. He will probably die in a few months. His family sits by the bedside caring for him, knowing that their future holds nothing but utter destitution. Just down the road, the devastation from poor health can impoverish families and leave them with no income, opportunity, or hope.

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For a long time, it has been recognized that there is a relationship between health and wealth.1 Three possible different pathways may explain this relationship:

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  1. Increased wealth leads to health.

  2. Improved health leads to wealth.

  3. The relationship is caused by a third unknown factor.2

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Rising incomes increase government and private spending on goods that directly (e.g., purchasing health care and better nutrition) and indirectly (e.g., better housing, water, and sanitation facilities) improve health3 (see Figure 19-1.)

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Figure 19-1.
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Health to wealth correlations. The figures provided are for the year 2004 or the latest year for 179 countries. (From World Development Indicators 2006.65) World Bank. World Development Indicators 2006. Washington DC: World Bank, 2006.

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In the past decade, there has been increasing recognition that poor health can lead to poverty.4 These interrelationships are linked with political, demographic, and social pressures.

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The first part of this chapter analyzes the ...

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