Policies to alleviate poverty and redistribute income: improved healthcare provision

Published by Patrick Mutisya · 8 days ago

IGCSE Economics 0455 – Economic Development: Poverty – Improved Healthcare Provision

Economic Development – Poverty

Policy Focus: Improved Healthcare Provision

Access to quality healthcare is a core component of any strategy aimed at alleviating poverty and redistributing income. Healthier individuals are more productive, can earn higher incomes, and are less likely to fall into a poverty trap caused by medical expenses.

Why Healthcare Matters for Poverty Reduction

  • Reduces the financial burden of illness on low‑income households.

  • Improves labour productivity and school attendance.

  • Prevents the inter‑generational transmission of poverty through better child health.

  • Supports human capital formation, a key driver of long‑term economic growth.

Key Policy Instruments

Policy ToolPrimary ObjectiveAdvantagesPotential Drawbacks
Universal Primary Healthcare (UPHC)Provide free or heavily subsidised basic health services to all citizens.Broad coverage; reduces out‑of‑pocket spending; promotes equity.High fiscal cost; risk of over‑utilisation.
Health \cdot ouchers for the PoorTargeted subsidies that allow low‑income families to purchase specific services.Cost‑effective targeting; encourages competition among providers.Administrative complexity; potential for fraud.
Community Health Worker (CHW) ProgramsDeploy trained locals to deliver preventive care and health education.Improves outreach in remote areas; creates local employment.Requires ongoing training and supervision.
National Health Insurance (NHI) SchemesPool risk across the population to finance healthcare.Provides financial risk protection; can be progressive.Implementation challenges; may face resistance from private insurers.

Implementation Steps (Ordered)

  1. Conduct a needs assessment to identify health gaps among the poorest groups.

  2. Design financing mechanisms (e.g., tax‑based funding, donor grants, social health insurance).

  3. Legislate the policy framework and set clear service standards.

  4. Build or upgrade primary health centres in underserved areas.

  5. Recruit and train community health workers and medical staff.

  6. Launch public awareness campaigns about available services.

  7. Monitor utilisation, quality, and financial sustainability; adjust policy as needed.

Economic Impact – Simple Illustration

Assume a low‑income household faces a health shock costing \$200. Without insurance, the household must cut consumption by \$200, reducing utility. With a health voucher covering 80 % of the cost, the out‑of‑pocket expense falls to \$40, preserving \$160 of consumption.

Mathematically, the change in disposable income (\$\Delta Y\$) can be expressed as:

\$\Delta Y = C{\text{without}} - C{\text{with}} = 200 - 40 = 160\$

This extra $160 can be spent on education, nutrition, or savings, helping the household escape the poverty trap.

Evaluation of Policies

  • Effectiveness: Measured by reductions in out‑of‑pocket expenditure and improvements in health indicators (e.g., infant mortality, life expectancy).

  • Equity: Assess whether the poorest groups benefit proportionally more than higher‑income groups.

  • Efficiency: Compare administrative costs per beneficiary across different instruments.

  • Sustainability: Examine fiscal implications and long‑term financing sources.

Suggested Diagram

Suggested diagram: Flowchart showing the link between improved healthcare provision, reduced medical expenses, higher labour productivity, and poverty reduction.

Summary

Improved healthcare provision tackles poverty from both supply and demand sides. By lowering the financial risk of illness and enhancing human capital, such policies contribute directly to income redistribution and broader economic development. Successful implementation requires careful targeting, sustainable financing, and robust monitoring to ensure that the benefits reach the poorest segments of society.