Interview: Onno Schellekens, Chairman of the Joep Lange Institute
Following the Joep Lange Institute’s first lecture in The Hague on 5th July 2016, Jack Aldane spoke to Onno Schellekens, Managing Director of PharmAccess and Chair of the Institute’s board, to ask how he proposes to make health markets work for the world’s poorest.
‘Urgency’. That was arguably Jim Yong Kim’s (President of the World Bank) choice word for the Joep Lange Institute’s first lecture. What does that word mean to you in the context of healthcare?
We’re all human beings. We all have the same genetic system. And, as long as we have siblings, we can get diseases from each other. It’s in our interest as always with development, to get control of those things that will influence negatively your future. And I would argue global health is at least as disturbing a problem something like climate change. We’re all suffering from the fact that we know there is climate change, but I think if there’s an Ebola outbreak that is more virulent than the virus that we saw in the last crisis, you’ll get a kind of hysteria. Health has the biggest potential global impact after war. It’s a major influence on people’s psychology and a very important condition for stable development.
How much is understood about people’s decisions around healthcare in developing countries?
It’s not really well understood. Rational choices can be made under a functioning state, but if essential institutions aren’t functioning, what then is a rational choice? I think this is a very important question and there needs to be more research on this. For example, when you cannot rely on the state for education or healthcare, or pensions or welfare, then you have to organise it yourself. Issues of ‘costs now’ versus ‘benefits in the future’ become especially difficult. What is a rational choice under those circumstances? We don’t know – people in developed nations have been raised in a situation where this is all taken care of, so it’s very hard for us to think in terms of this ‘different rationality’.
What is the key challenge when tackling access to healthcare for the world’s poorest?
The real issue is that people should be willing to pay for each other. They are already, to a very large extent. We always forget that public services are things that we have chosen to be public. It’s more efficient to do it in a public manner instead of a private manner: redistribution of risks and pre-payments (through taxes or insurance premiums) are in the interest of everybody. I think that’s the biggest gain out of things like this. Once you understand that, and know what things you have to focus on, it makes things more simple and actionable. You can actually do something, instead of just talking about universal access. Because what is universal access?
Indeed, what does universal access to healthcare mean?
Universal access means that individual healthcare is of public interest. On the one hand it’s about the health of one person but it also concerns the health of the whole group. It can reduce the overall risk of the whole group when they know that when they have diabetes, they have a safety net, instead of every individual in that one hundred potentially carrying that risk with them. Conversely, there is a moral as well as an economic imperative for the group to take care of individual, curable or even preventable conditions. Think of the proper physical and mental development of small children instead of stunted growth. Or HIV medication and the prevention of sexually transmitted diseases. So both for those who get sick, and for those who don’t, it is beneficial to know that everybody is basically taken care of. This means that people should be willing to pay individually to reduce the risk of the group and build the entitlements that come with that. However, in most developing countries people don’t trust the state to arrange this in a fair and effective way. If you look at our own history, it’s also taken us a long time to get to that.
How do you propose to tackle this issue at PharmAccess going forward?
We’re working mainly on the use of technology as a solution as long as governments can’t bring together the interests of all their people. The core is that we are linking people through digital connections so they are able to share risk with each other. As Jim Kim said in the institute’s first lecture, technology changes the way we interact. I think that the big challenge ahead is to go from traditional supply-side funding to directly reaching the people when they need care, or welfare support or food supplements, or any entitlement, by making them directly available digitally. It’s a big challenge. There are lots of vested interests. It’s not easy. But it would change the structure of public services fundamentally, empowering citizens in an unprecedented way. Technology has the potential to achieve this.
But how can technology assist with something as fundamental as child nutrition?
You know, a big chunk of public expenditures in rich countries is in fact redistributed income: richer people who pay for services that poorer people benefit from as much, or in most cases even more, than they do themselves. We’ve formalised that through tax payment systems, so once taxes are paid, we accept that someone in the government decides how much goes towards public education, how much on housing support, healthcare, unemployment benefits etc. We have chosen government [for nutrition also] because it’s the most efficient way. In developing countries, income redistribution is also taking place, but in private settings: Parents paying for their kids, urban workers paying for their parents in the village, staff that employers need to take care of. There is a lack of trust to let the government take care of this redistribution, like there was in rich countries until quite recently. We were also taking care of each other in smaller groups throughout our history, until we decided just decades ago to set up a system in which we trust the government to redistribute most of our income. Until the same level of trust is established in developing countries, we believe technology can accelerate trust building enormously, at increasing levels of scale.
Does digital technology in developing countries make it possible to bypass the state?
Not bypass the state. Rather, it makes the state more efficient. It makes it possible to bring together demand and supply more efficiently, and without the necessity of state intervention in terms of raising the money. Take mobile payments. Through mobile payments in developing countries, you can reach much more people much more efficiently with lower transaction costs. What is the role of the state here? Is it that they have to raise the taxes that people are willing to pay for each other? No. What the state can do in the first place is to allow these systems to emerge. In our part of the world these new developments are often blocked by vested interests. In developing countries – look at Kenya – the state has allowed this to flourish. And now look what’s happening. Tens of millions of people suddenly have access to mobile bank accounts and people can pay for each other with very low transaction costs, preventing acute poverty traps in situations without poverty alleviation programmes.
This says something about technology of course, but what does it tell us about people in places where technology facilitates dramatic change?
I think the more choice you give to people, the better. By ‘choice’ I mean, choice in entitlements. If people can decide themselves which trade-off they make, with the cost and benefits united in the same person, it reduces inefficiencies, massively.
What can development finance institutions do better to provide accessible healthcare in developing countries?
[They can] learn from the principles that we have used to create our own wealth, historically. The unbelievably tough choices our parents and grandparents had to make in the past in terms of education and healthcare, involve risks that should really be transferred to the state. The remainder should stay private, including important elements of infrastructure and delivery. That way you get a good crowding-in of private investments for the public good. If that’s not the case, you destroy value instead of creating it. These basic mechanisms also apply to development. How can I expect people to go from post-payment for healthcare costs, to pre-payment for health insurance when there’s no doctor in the clinic? Why is there no doctor in the clinic? Because he cannot get a loan. Why can’t he get a loan? Because in development, we expect his service to be public. This is a fundamental misconception, especially when the poor by default have to rely on private providers for most of their healthcare.
You’ve alluded to human psychology when speaking about investment in healthcare. Does psychology play as important a role in financing development?
I think that wealth in the end is all about human psychology. Look at Game of Thrones if you want – it’s all about psychology of people and ownership, those that are protected versus those that are not protected. The Nobel prize winning economist Douglass North said that if you have a system where you constrain the wealth of a small group of people, it creates more opportunities for all, by reducing the risks for everybody. Then each individual gains, and that’s where you get development. People start to invest in exchange. But the relationship between psychology, health and investment is still underestimated and under-researched.
Onno Schellekens is Managing Director of the PharmAccess Foundation, Chairman of the Joep Lange Institute, and Co-Founder of the Investment Fund for Health in Africa. Schellekens has authored several publications on health insurance, medical treatment and HIV/AIDS in Africa.
By Jack Aldane
Photo: Joep Lange Institute