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Health Financing in Africa: Challenges and Opportunities for Expanding Access to Quality Health care Chris Atim, PhD Executive Director, African Health Economics and Policy Association (AfHEA) Presentation at Fifth Annual Meeting of the African Science Academy Development Initiative (ASADI) Improving Maternal, Newborn, and Child Health in Sub-Saharan Africa La Palm Royal Beach Hotel, Accra November 9 - 11, 2009 OBJECTIVES OF PRESENTATION AND PAPER Explore current paradigm for health financing in Africa and whether it needs review Examine financing targets and gaps Explore challenges facing African governments to finance health Discuss complementary financing mechanisms 2 HEALTH FINANCING PARADIGM IN SSA Current paradigm Diagnosis: Principal problem facing the region is a shortage of funds Solutions: (1) Mobilize internal and external resources (2) Focus on key diseases and conditions (3) Set targets and monitor progress Proposed paradigm Acute shortage of funds to meet targets, but also problem of how funds spent Governments should lead effort to explore innovative financing mechanisms Focus also on how money is spent, not just how much Collaborate with donor partners to ensure external resources help build the health system 3 HEALTH FINANCING: TARGETS Abuja: Government spending on health should be at least 15% of total government spending Commission on Macroeconomics & Health (CMH): Estimated $34 per capita for a basic package of health service East Asia & Pacific: 10.1% Latin America and the Caribbean: 12.5% East Asia & Pacific: $62 (current US$) Latin America and the Caribbean: $272 (current US$) Are targets meaningful? Relevant? 15.0 B o t s wana 14.5 Z im babwe Sao T o m e 14.0 Ghana 13.0 Gam bia 13.0 Percentage of national budgets allocated to health sector 13.0 T anzania N am ibia 12.0 Uganda 12.0 11.3 Libya 11.0 M o zam bique 10.0 So ut h A f ric a Senegal 9.0 Z am bia 9.0 M alawi 9.0 M adagas c ar 9.0 8.1 T unis ia T o go 8.0 M aurit ania 8.0 M ali 8.0 C ape Verde 8.0 Swaziland 8.0 R wanda 8.0 M aurit ius 8.0 Source: African Union. Progress Report on the Implementation of the Plans of Action of the Abuja Declarations for Malaria, HIV/AIDS and Tuberculosis; Revised Final Draft, 22 December 2005. 7.2 C o t e d'Iv o ire 7.2 D jibo ut i B urk ina F as o 7.0 Kenya 7.0 CA R 7.0 6.0 N iger 5.0 A ngo la 4.8 Sudan N igeria 4.0 Eq. Guinea 4.0 DRC 4.0 3.3 Egypt C had 3.0 B urundi 3.0 2.0 Et hio pia 0.0 5.0 10.0 15.0 20.0 5 HEALTH FINANCING LEVELS ARE LOW – THE $34 PACKAGE OF BASIC HEALTH SERVICES The CMH target Per capita health spending, 2004 Cameroon Lesotho Côte d'Ivoire Zambia Congo Zimbabw e Ghana Angola Burkina Faso Benin Mali Nigeria Guinea Kenya Chad Malaw i Uganda Gambia Togo Rw anda Mauritania CAR Mozambique Tanzania Eritrea GuineaNiger Liberia Madagascar Sierra Leone Ethiopia DRC Burundi Few countries spend $34+ The CMH Target 0 10 Per capita govt. expenditure on health 20 30 40 Out-of-pocket expenditure on health 50 60 Private pooled expenditure on health Source: WHO SIS Note: Countries spending >$90 total per capita on health were excluded to improve graph’s readability. These countries include Swaziland, Mauritius, Namibia, Gabon, South Africa, and Botswana. 6 …WHAT DIFFERENCE WOULD THE ABUJA TARGET MAKE? public spending private spending Abuja shortfall in public spending $80 $70 health expenditure (US$, 2004) $60 $50 CMH target $34 $40 $30 $20 $10 <$250 $250-$499 country, sorted by GDP per capita Source: World Bank, WDI 2007; author’s calculations. $500-$999 Congo Angola Côte d'Ivoire Cameroon Senegal Lesotho Benin Chad Nigeria Zimbabwe Kenya Zambia Mauritania Ghana Burkina Faso Guinea Mali Togo CAR Tanzania Mozambique Gambia Uganda Niger Madagascar Rwanda Sierra Leone Malawi Liberia Eritrea Ethiopia DR Congo Burundi $- $1,000+ THE 15% ABUJA TARGET IS IMPORTANT As an indicator of African Governments’ commitment to contribute significantly to health sector As a signal to partners that African Governments are matching their words with action BUT … It is not a relevant indicator of what is needed to provide basic health care services to the population Depends on the denominator: 15% of what? Other factors such as demography also key Per capita spending is a better indicator of effort 8 AFRICA REGION IS OFF-TRACK TO MEET THE MDGS What is needed to meet the MDGs? One estimate: more than 12% of GDP (at regional level) would need to be spent on health to reach the targets by 2015 Current level: 4.7% of GDP goes to health Additional $20-25 billion per year needed Sources: Disease Control Priorities Project, 2007; and African Development Bank, 2002. 9 HEAVY DEPENDENCE ON DONOR FUNDING RAISES CONCERNS: SUSTAINABILITY, PRIORITIES HIV/AIDS Disbursements* Relative to Size of Health Sector and GDP in 2005 Country % of public health spending % of total government spending % of GDP Ethiopia 43.8 3.3 1.1 Kenya 51.9 3.8 1.1 Mozambique 23.2 2.8 1.0 Rwanda 80.6 Not available 2.5 Tanzania 26.7 4.4 0.7 Uganda 150.2 12.7 3.1 Zambia 40.3 4.0 1.2 Notes: Disbursements include PEPFAR, GFATM, and World Bank MAP funding. Source: Heller, Peter. “Pity the Finance Minister”: Issues in Managing a Substantial Scaling up of Aid Flows. IMF Working Paper WP/05/180. September 2005. HEAVY DEPENDENCE ON DONOR FUNDING RAISES SUSTAINABILITY, PREDICTABILITY AND VOLATILITY CONCERNS: RWANDA 100% 90% 33% 80% 70% 50% 52% 42% 53% 60% 50% 42% 40% 30% 40% 25% 30% 28% 20% 10% 0% 10% 1998 Source: Rwanda NHA 1998-2006 18% 25% 32% 2000 2002 2003 Public Private Donor 19% 2006 MORE MONEY IS CERTAINLY NEEDED… Health financing in Sub-Saharan Africa Regional averages, 2004 Indicator Health spending as a percent of GDP Current level 4.7% Target level >12% to reach MDGs by 2015, but not realistic Government spending on health as a percent of total government budget 7% 15% Per capita spending $21 $34 Out-of-pocket expenditures as a percent of private health expenditures 80% As low as possible Out-of-pocket expenditures as a percent of total health expenditures 46% As low as possible Source: WHO SIS; World Bank World Development Indicators 2007 (2004 data). 12 …BUT MONEY ALONE IS NOT ENOUGH Sustainable health systems approach needed Equity must be consciously pursued Concerns with high levels of out-of-pocket spending Efficiency of current spending important Priorities for allocation of spending How to spend the next $1 of additional funding Effectiveness of health spending can be improved 13 MACROECONOMIC CONSTRAINTS /OPPORTUNITIES AFFECTING PUBLIC SECTOR HEALTH FINANCING Economic growth rates have improved, but not enough to meet health and poverty reduction targets Average annual % change in GDP in SSA countries in last decade: 5-6% India: 9% (2006) China: 11% (2006) Domestic revenue raising capacity is improving, but constrained Average tax revenue to GDP ratio: 18% (early 2000s) OECD: 40% and above IMPACT OF CURRENT GLOBAL CRISIS Fall in commodity prices due to reduced demand – oil, agric produce, minerals, tourism all affected World Bank estimates growth slowing to 2.4% in 2009; from 4.8% in 2008 Kenya, Tanzania, Zambia, DRC, Nigeria and Namibia reported higher drugs’ costs due to rising import prices /currency effects Contraction in donor economies could threaten levels of external assistance Thereby affecting Govt revenues and fiscal space for health spending Global Fund facing financing gap of $4BN through 2010 DRC, Lesotho, Liberia. Benin and ECSA countries report decreased funding from some donors for certain activities including HIV/AIDS 15 HEALTH SYSTEMS CONSTRAINTS ON PUBLIC SECTOR FINANCING The resource gap is a problem – but health systems constraints are an important bottleneck impeding achievement of health sector goals Crisis in human resources for health To reach MDGs, SSA needs 1 million+ additional skilled workers Supply chain management, etc. Government leadership and effectiveness are often weak Eg As seen from various public expenditure tracking surveys (PETS) WHAT COMPLEMENTARY OR ADDITIONAL HEALTH FINANCING MECHANISMS ARE THERE? Revenue raising and risk pooling through insurance Community-based health insurance National/social health insurance schemes Performance-based financing Innovative international financing mechanisms 17 COMMUNITY-BASED HEALTH INSURANCE CBHI Community-based health insurance Set up by communities, workers, providers, NGOs, etc Pooling of community funds to pay for care of needy Rapid growth in West and Central Africa (WCA) Results from CBHI surveys: Sizes are small – <1000 to 5000 members Urban v. rural: Tend to have a rural bias: 41% covered rural areas exclusively, compared to 34% covering urban populations exclusively. Services covered: drugs (about 78% of mutuelles offered this benefit) maternity care (around 58% of mutuelles covered normal delivery and 55% covered cesarean operations). outpatient and inpatient services with at least 55% of mutuelles offering each of these services. 18 NATIONAL /SOCIAL HEALTH INSURANCE SCHEMES (NHIS/SHI) National health insurance schemes (NHIS) Set up by Govts to extend health care access to all the population Learnt from failed social insurance (SHI) experiences of initial post-independence period Focus particularly or at least equally on enrolling rural and informal sector workers previously excluded from SHI schemes. Decentralized and community-based, not workplace-based. Countries Ghana, Rwanda and Tanzania (NHIS built on previously-existing CBHI pilot schemes). Nigeria, Gabon and Kenya (more classic or traditional SHI in their initial reliance on formal sector population groups 19 EXAMPLE: NHIS IN GHANA National Health Insurance Fund (NHIF) established in 2003 Financed by 2.5% National Health Insurance VAT levy and diversion of 2.5% of the social security contributions of formal sector workers to the NHIF (Ghana has now achieved Abuja target) NHIF is used to subsidize membership of formal sector employees, pensioners, children under the age of 18, pregnant women, indigents and those over 70. Informal sector adults are the only people who pay cash to join the schemes; all others are ‘exempted’ from paying when they join. Rapid growth in membership, totaling about 12.5 million people or about 55% of the total population by end 2008. Driven mainly by the subsidized groups: children under 18 make up over 50% of members; exempted make up over 70% of members But indigents make up only about 2.4% of members. An equity problem? 20 REVENUE RAISING AND RISK POOLING THROUGH INSURANCE - SUMMARY Community-based health insurance Pros: mobilize resources, provide financial protection, quality gains, pro-poor and pro-rural Challenges: small risk pools, financial sustainability concerns, low population coverage National health insurance schemes Pros: can cover large population groups, focus on enrolling rural and informal sector, can build on community-based schemes, allows earmarked taxes (Abuja target), rapid growth possible (Rwanda, Ghana) Challenges: difficult to extend coverage to really poor, long term financial sustainability an issue 21 PERFORMANCE-BASED FINANCING: DEFINITIONS AND EXAMPLES Mechanisms that tie funding to measurable results Link demand- and supply-side incentives with households, providers, and institutions Examples: Conditional cash transfers (Mexico, educ pilots in 15 African countries) Performance-based contracting for HIV services (Rwanda) Immunization grants (GAVI) 22 PERFORMANCE-BASED FINANCING Pros increase technical efficiency of service provision stimulate demand for priority services non-health benefits (i.e. incentives tied to school attendance) Quality improvements Challenges requires sustained efforts from countries and donors taking to scale and integration with health system needs significant resources and skills 23 INNOVATIVE INTERNATIONAL FINANCING MECHANISMS Global funds and health partnerships Examples: GAVI, Global Fund, IHP+, Global Business Plan Bilateral initiatives Examples: PEPFAR, PMI Mechanisms to address market failures Examples: UNITAID, Advance Market Commitments, IFFIm, AMFm Debt and performance-based aid modalities Examples: IDA buy-downs, debt conversion 24 INNOVATIVE INTERNATIONAL FINANCING MECHANISMS Pros Designed to address challenges with international health aid architecture Fresh approach to problem solving Generating new resources for health Challenges Proliferation of mechanisms challenges harmonization and alignment efforts (Paris Declaration) Increased burden on countries Funding priorities may not align with country priorities 25 MAIN MESSAGES Need to update paradigm for health financing in the region Targets help galvanize attention but are not panacea and need to be tailored to countries Track per capita spending as well as 15% target More money is needed but money alone is not sufficient Attention to funding priorities, health systems, equity and efficiency also needed Complementary or additional financing mechanisms should be considered 26 THANK YOU