Austerity, Healthcare and Learnings from Covid-19

The stringent austerity measures and the resultant cost cuts many countries such as the US, Italy and Spain adopted following the global financial meltdown of 2008-09 have weakened their public healthcare systems, aggravating the impact of the Covid-19 pandemic.

Inarguably, the poster phrase of the global financial crisis of 2008-09 was ‘austerity’. In order to tide over the meltdown, countries were advised by consults and global policy mavens to introduce fiscal prudence measures, which in plain English meant the introduction of severe cuts in social sector investments. As Scottish-American political scientist Mark Blyth observed in his book Austerity: The History of a Dangerous Idea, austerity is a form of “voluntary deflation in which the economy adjusts through the reduction of wages, prices, and public spending to restore competitiveness, which is (supposedly) best achieved by cutting the state’s budget, debts, and deficits..”

During the meltdown, the countries were also advised to stay away from investing in ‘non-essential’ sectors such as education, healthcare, recreational outlets for the poor and so on. The ramifications became quite evident soon. Social welfare lost billions of dollars in support and pretty soon geographies that saw significant cuts in social spends started witnessing social skirmishes, riots. Blyth observes that London, one of the world’s great financial centres, was hit by riots that spread all over the city, and then the country. Sociologists like him, if not economists, were quick to sense that this would snowball into a major long-term crisis going ahead, especially in countries such as the US and the PIGS in Europe (Portugal, Italy, Greece and Spain). 

Cut to early 2020. The Covid-19 pandemic is ravaging the world and the worst affected countries include, yes, the US and the PIGS in Europe, among others. Of course, it would be naive to think that the mayhem that followed was solely the result of the austerity measures initiated by these countries, but now there is enough consensus among economists and sociologists that the austerity measures introduced in these geographies — especially the way fiscal prudence measures crippled public healthcare systems in the US, the UK, Italy and Spain — have contributed significantly towards aggravating the Covid-19 crisis. 

What happened? 

When public funds started drying up in the European countries, the most popular alternative, obviously, became private healthcare. Given the way neoliberal economic policies were promoting private healthcare in Europe and elsewhere, it was quite natural that private healthcare companies started taking their job for granted. As a result, healthcare costs started skyrocketing across the globe. While public healthcare systems were getting billed inefficient or non-productive, private health systems were hailed as the new normal. 

This contrast became more glaring during the Covid-19 crisis, especially at the start of the pandemic in Europe, where the virus reached immediately after its outbreak in Wuhan, China. All of a sudden, hospitals in the EU realised that they were not at all equipped to deal with the crisis and the fund cuts in the past decade had already crushed their efficiencies. According to a report brought out by the non-profit think tank Corporate Europe Observatory (CEO), the alarmingly weak healthcare systems in the EU aggravated death rates, disability rates and other impacts on society. 

The report noted that the pressure from the European Commission to cut public spending (including via the European Semester process) has had chilling effects on healthcare and “elderly care sectors”. This brought in “catastrophic effects during Covid-19, particularly in care homes.” For starters, the European Semester or ES is a policy discussion that happens every year between the European Commission and the States in the EU where the group fixes and sets in motion measures including cost cuts to meet their fiscal target. Since the first ES in 2011, health has been a “recurring theme” and so far the European Commission has issued some 107 diktats on health and long-term care. 

As a result…

Already, there were studies that suggested that the countries that went for supreme levels of austerity following the financial crisis during 2008-13 (Greece, Spain, Ireland and the UK) later saw their child poverty rates go up and access to quality healthcare services take a hit. There was more. One of the most decipherable consequences of the austerity was the drastic reduction in the number of hospital beds, healthcare staff, ventilation facilities, and similar critical care systems, say experts. Even in the private sector where the number of hospital beds increased, there was a significant fall in the number of emergency care faculties. Even the United Nations have endorsed this view. A May 2020 analysis from the UNDP, titled Privatization and Pandemic: A Cross-Country Analysis of Covid-19 Rates and Health-Care Financing Structure, found that privatisation and cuts in public healthcare spending ended up contributing to more deaths from Covid-19. Take Italy. In 1990, the country had an acute care bed ratio of 7 per 1000 people. By 2015, this number had come down to a paltry 2.6 per 1000 people. Only 28 per cent of this fall was in the private sector hospitals. Italy is one of the worst affected by the Covid-19 pandemic. Here, cuts in public health expenditure have been closely linked with a reduction of vaccination coverage.

Countries such as Spain and (even) the UK tell a similar story. In the UK, precious public-funded healthcare systems such as the National Health Service saw drastic cuts in funding and even faced attempts to privatise the service. Europe is still toying with confused and chaotic plans to fight Covid and it doesn’t have a comprehensive public plan for tackling the pandemic going forward. It still seeks private help in formulating the post-Covid healthcare future. For instance, the EU had roped in consultancy firm Mckinsey, which is known for its penchant for private healthcare, to advise its governments on Covid care. The move was widely criticised.

Now what?

In her paper, The effect of austerity on the impact of Covid-19 in EU, Francesco Mattia Frulli of Vytautas Magnus University concludes that the austerity policies did cause damage to public health, directly or indirectly and the pandemic highlighted “serious shortcomings” in the health sector of several countries. The loss of hospital beds in Spain, France and Italy has certainly caused less staff to be available to deal with the emergency; the loss of beds, then, is only one of the negative effects due to the cuts to public health, writes Mattia Frulli, though Portugal seems an exception to this trend. It managed the crisis suitably well.

Several experts say one of the most important ways in which the post-pandemic future of the world should be marked is by bringing back public spending in public healthcare. A Keynesian healthcare support system should be the way out of the current crisis not only for Europe but also for countries such as the US and even India. Increasing public investment in healthcare can significantly enhance the bed-to-patients ratio, availability of and access to healthcare professionals, especially to critical care and children care. 

Investing heavily into long-term care and elderly care is quite paramount at this stage. With the virus mutating into multiple variants and policymaking seems to be gasping to catch up with the pace, a blank check to public healthcare seems the best bet we can place for a safe post-pandemic world.   

Also see: Public Health Needs Private Hospitals Under Check

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