13 Dec 2006  Research & Ideas

Improving Public Health for the Poor

Microfinance may offer a window on new methods for widening access to healthcare for the poor, says Harvard Business School's Michael Chu. He and colleagues at the Harvard School of Public Health have embarked on a new project to serve this critical sector. Bringing together public healthcare and market forces "could have huge impact," he says. Key concepts include:

  • Poverty is defined by three billion people in the world living on less than $2 a day.
  • Public health as a private good should be complementary to public health as a public good, not in opposition to it.
  • Project Antares wants to take high-impact initiatives and deliver them through commercial means. Part of its measure of success is whether a higher percentage of the population is helped than would be otherwise.
  • Poverty cannot be tamed with a single solution. It needs an arsenal comprising education, healthcare, housing, access to basic services, and access to capital.

 

Microfinance—essentially small loans that help impoverished individuals create jobs, small businesses, and stronger communities—may offer a window on new methods for widening access to healthcare for the poor.

Led by Harvard Business School senior lecturer Michael Chu and colleagues at the Harvard School of Public Health, Project Antares aims to create a system for devising commercial incentives that provide affordable public health initiatives, or "interventions" in healthcare parlance. Examples of commercial high-impact interventions might be programs to deliver medicines at very low cost or a business providing goods or services that end or reduce respiratory ailments.

Bringing together public healthcare and market forces "could have huge impact," says Chu. That feeling was underscored by Chu's own extensive experience in microfinance and his work developing a course with HBS professor V. Kasturi Rangan on business serving the so-called "base of the pyramid" sector.

Chu says microfinance is one of the few effective responses to poverty that he is aware of, and its concepts and methodologies might inspire different, better answers in public healthcare.

As a joint endeavor, Project Antares was born from conversations between Chu, the School of Public Health's Barry Bloom, who is dean of the faculty, and David Bloom (not related), a professor of population and health economics. While Chu outlined his idea of applying the successful business model of microfinance to impact the health of the poor, the two shared with him their extensive knowledge on health in developing countries. Out of that came a framework for the project. Roslyn Payne, an HBS alumna (HBS MBA '70) with deep interest in the intersection of poverty, gender, and health, and who originally challenged Chu to apply his experience to these issues, stepped up as an angel investor for Project Antares, named after the brightest star in the night sky.

One of the challenges of the project, says Chu, will come in redefining public health as a private good as well as a public good, seeing them as complementary and not in opposition. "Public health defined as a public good has accomplished many wonderful things, but in order to make a quantum leap, redefining it as a private good has great potential."

Chu spoke recently with HBS Working Knowledge.

Martha Lagace: What is missing by defining health, as we do today, as a public good?

Michael Chu: What are the fundamental characteristics that we need for an effective response to poverty? Poverty is defined by three billion people living on less than $2 a day. If you and I were able to devise a magic potion that eliminated poverty immediately but only got it to a hundred thousand people, we would have done nothing but win a small skirmish in the war. To really have a meaningful impact, you have to reach large numbers.

Second, the impact has to be multigenerational: It has to reach large numbers in more than one generation.

So right off the bat you need scale and permanence. Both private and public philanthropy, when they work well, play a key role in fostering the birth of new concepts and ideas. But neither philanthropy nor development agencies are structured for scale or permanence. Some really powerful instruments of philanthropy, like the Bill & Melinda Gates Foundation, are putting hundreds of millions of dollars towards the eradication of a disease. Huge as that is, it's not an effort that can be permanent.

Historically, philanthropy and developmental agencies have often sought government as their partner because government has the potential to provide scale and permanence. But the problem is that you also need efficacy and efficiency, and the constancy of both. And for many reasons the public sector is not very good at providing those.

When thinking about scale, permanence, efficacy, and efficiency, the only thing I know that can provide all four is business. Business provides them not through one single corporation, because corporations are born, prosper, and die, but through the industries that profitable endeavors launch. Project Antares is about taking high-impact interventions and looking at commercial ways of delivering them. If you succeed in making them into viable, profitable enterprises, then you create an industry. And it's the industry that guarantees scale, permanence, efficacy, and efficiency, so long as you have this taking place under a situation of open competition.

If it makes economic sense to deliver healthcare to someone who's poor, then people will compete to do that. If it's commercially viable, you actually address what today under the definition of healthcare as a public good consumes the lion's share of the dollars: the delivery system. The intervention itself is very low-cost; the huge cost of implementing public health programs for the poor is in the delivery system.

Q: Is healthcare for the poor commercially viable?

A: For many people their first reaction is, "Great idea, but it's impossible." That was the same response people had with microfinance. The concept of giving a loan that could start as low as $125 to someone who is poor and then think of that as a viable business was once inconceivable. But today in Latin America, the banks that are most profitable and most solvent in their national banking systems are the ones that specialize in serving the poor.

When thinking about scale, permanence, efficacy, and efficiency, the only thing I know that can provide all four is business.

Project Antares will be applying different models. As we proceed in our work, the School of Public Health has been instrumental in working out a framework in which both HBS and the School of Public Health can try to identify what high-impact interventions are. I've also been looking, along with my research associate, Jean Hazel, and others, at models on the ground that seem really interesting.

Q: What are some of these models?

A: I am writing a case on Farmacias Similares, a pharmacy chain in Mexico aimed at the low-income sector. Any medicine on its shelf is at least 30 percent cheaper than in traditional drugstores. It also has a medical clinic next to many of its outlets and these clinics have a doctor that anyone can visit for $2. Today the drugstore chain has upwards of 3,500 outlets and revenues of $900 million. Two-and-a-half million people visit the doctors and 10.5 million people go through "Farmacia Simi" per month.

Just by the numbers I gave you, one could argue that it's delivering $300 million into the pockets of the poor. There are many controversial aspects of this model, but I think it is an example of using market mechanisms to have a high impact on the health of the poor.

Part of our work, just like in microfinance, is to figure out ways in which you make high-impact interventions accessible for what the poor can actually pay.

Another example is Ancora, in Chile. In Chile's public health system, the state provides a per-capita payment for the healthcare of any Chilean citizen. What that means for the poor is access to municipal clinics that, based on the number of people inscribed, get a per-capita payment from the Chilean state. Theoretically, access to basic medical attention is taken care of, but the waiting lines are interminable and medicines are free if the medicines are in stock, which is not always.

Ancora, however, is a model put forward by a private Chilean university, Catholic University, whose hospital and medical school were traditionally associated with excellent healthcare for the affluent. Ancora is an attempt to provide healthcare aimed at low-income populations—breaking even or being commercially viable based on these per-capita payments. And so that is another variant.

Q: What are your next steps for Project Antares?

A: We want to refine the matrix that will allow us to propose what the high-impact interventions are and develop commercial delivery systems for them. Next term, we're looking towards establishing teams of HBS and School of Public Health students who will work on independent field study projects in the development of commercial approaches. All this is part of Phase I.

Hopefully we will then be well-equipped to look for partners in the field—organizations that are interested in testing some of these models on the ground. Our ultimate hope is that we will end up with several projects in the field that deliver these interventions on a commercial basis, growing very fast and reaching the four requisites of effectiveness as a response to poverty: permanence, scale, efficacy, and efficiency.

Q: How can you ensure that the poorest of the poor are included?

A: Antares posits a model in which, in its purest form, the poor pay for what they get. Before you reject it out of hand, consider that other than in North America, Western Europe, and countries such as Australia and New Zealand, my work in microfinance has shown me that whatever little the poor have, they've actually paid for it themselves. We know the reality on the streets is that the poor actually pay for their healthcare. The problem is that they usually pay at the most expensive and least effective point.

So part of our work, just like in microfinance, is to figure out ways in which you make high-impact interventions accessible for what the poor can actually pay.

But having said that, you are still left with those who can't afford to pay. That's why I think it's very important to think of health defined as a private good as complementary to—and not a substitute for—health defined as a public good.

Part of the measure of success of Project Antares will be whether through commercial means we get a higher percentage of the population covered than would be possible otherwise. If everybody were covered through non-commercial means, there would be no need for Project Antares. At the end of the day, if the choice is between 100 percent coverage by public means or the highest possible coverage through a combination of public and private means, while we wait for the first one to come around, we ought to make the most out of the second one.

This issue goes very much to something I've become personally convinced of through my work in microfinance and through the time that I've had to reflect about this at the Harvard Business School: Poverty is not able to be tamed with just one single universal solution. What you need is an arsenal of things that have really high impact, including education, healthcare, housing, access to basic services, and access to capital.

I've become convinced that the way to address poverty effectively is taking this arsenal and figuring out ways in which to make it into viable businesses. That's the only way this arsenal will become large-scale, permanent, effective, and efficient.

In the course that Kash Rangan and I have developed, Business and Base-of-the-Pyramid Markets, we hope to look at such commercial examples of this. Ultimately I think that's why poverty is an absolutely legitimate field of study at the business school and why HBS has a potentially critical role in how the world addresses poverty.

Q: How has microfinance influenced your approach?

A: Turning interventions into commercially viable solutions will be quite challenging, just as hard as it was to develop methodologies that worked in microfinance. Today a lot of things in microfinance seem so natural; one forgets that when they got developed they were very novel.

Part of what is interesting in Project Antares is understanding why some interventions aren't more effective in reaching the people that need them. That will lead to probing for innovative alternatives. In some cases it may be the distribution system; in others it may be a technical solution. Or perhaps you need to redefine the problem altogether.

One of the things our working group has looked at is respiratory ailments that people develop when their cooking takes place in an open fire in an enclosed hut. Sometimes the smoke is used to cure foodstuff that hangs at the top part of the hut. So you can't effectively resolve issues until you see them in context. But at same time, that may give you some ways of being effective that you wouldn't have thought of before. It's one thing to say, "You need to change your system of cooking." Perhaps you could solve it better by saying, "There's a much more efficient way for you to cure your meats."

In a sense, the Harvard Medical School looks at health in individual terms: one disease in one person and how to cure it. The School of Public Health looks at a disease and asks, "What is its effect on society?" From the Business School I think we've brought a perspective of looking at disease from a "user's" point of view, and we try to understand how to best resolve it from the "client's" standpoint.

But what seems natural to us from a business perspective needs to be informed by the knowledge of people who have studied public health for a long time, so that we do not fall into solutions that will get to people but not work or that may have unintended consequences.

At the same time I think our perspective is helpful in trying to understand how any solution will actually impact the practical life of the people. Ultimately we impose on any solution the requirement that it deliver better value at lower cost than before in the eyes of the user, which is why the people will adopt it.

About the author

Martha Lagace is Senior Editor of HBS Working Knowledge.