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Financing Primary Health Care Agnes Soucat Lead Economist Health, Nutrition and Population The World Bank Introduction Purpose of conference: Review progress on PHC and make recommendations. Given the interest on PHC, this presentation will concentrate on Public Health Expenditure issues and fiscal space. Leaving the important issues of the main functions of health financing and the alternative financing models such as SHI, NHS and others for another opportunity. After 30 years of Alma-Ata: How come we still have it wrong? Three Facts: • The majority of health spending in LIC is still private and out of pocket. • Government expenditures tend to concentrate in upper levels of care and benefit the better off • Donor Funding in LIC do not necessarily finance government or country priorities nor finance the greatest needs according to morbidity and mortality indicators. Main Messages • Countries have to prioritize public spending in health according to their own morbidity, mortality, and availability of funding. • A great degree of impact can be made in making accessible health interventions at a low cost through sustainable, domestic financing. • Fiscal space for additional expenditures is a binding constraint. To ignore this facts only leads to distortions that inhibits countries, specially LIC, to fund PHC in a sustainable manner. • Donor funding (especially in LICs) can generate distortions if it is not focused on non-volatile and longterm financing. • Additional spending in health “alone” does not necessarily improve health outcomes. Health outcomes are determined by interventions in multiple sectors. 1. PHC development is key for improving health outcomes Africa is still facing a daunting challenge for achieving MDGs: an example with child mortality Cost-Effectiveness is one criterion for prioritizing health expenditures How much health will a million dollars buy? Cost Per DALY (US$) Estimated DALYs Averted Per Million US$ Spent Expanding immunization coverage with standard child vaccines 2-20 50,000-500,000 Taxing tobacco products 3-50 24,000-330,000 Performing coronary artery bypass surgery in high risk cases** >25,000 <40 Using antiretroviral therapy that achieves high adherence for a large percentage of patients 350-500 2,000-3,000 15-50 20,000-60,000 Service or Intervention Detecting and treating cervical cancer Source: Disease Control Priorities in Developing Countries, second edition, 2006, Tables 1.1- 1.4 But Financial Protection is also Important Source: Herrin and Racelis 2007 As is Equity Income Quintile Source: Gwatkin et al. 2007 An example in Ethiopia Major health problems in the country can be solved with low cost interventions Infant and Child Mortality: Diarrhea (24%), pneumonia (28%) as the main causes of early death of children; HIV has emerged as a growing cause of early death (6.2), Malaria 5%; malnutrition underlies over half of these deaths Maternal Deaths: hemorrhage 25%; infections 15%; ecclampsia 13%; complicated abortions 10%; obstructed labor 8%; High fertility (TFR is 5.9 children per women in 2000, 6.4 in rural area) is an underlying factor 2. PHC strategies can be costly Given Past Growth Trends, Some Countries Will Have Problems Accommodating Even a Basic Package of Services 120.0 Government Health Expenditures/GDP (assuming 5 percent annual GDP growth and total health expenditures of $34 per capita) Eritrea Ethiopia Ghana 100.0 80.0 Projected 60.0 Lesotho Malaw i 40.0 Nigeria 20.0 Uganda 0.0 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 Percent Kenya United Republic of Tanzania Zambia Alternative Cost Estimates for Basic Package of Services Country Rwanda Ethiopia Current health expenditure per capita $14 (2005) $5 (2005) Model used Estimated additional health expenditure per capita required MBB $13 (2015) Up to strengthening national hospitals MBB/MP $12 (2015) Up to expansion of obstetrical care The Challenge of Scaling Up in Ethiopia US$ (2004 constant $) 35 Strategy 30 Step 5: Expansion and upgrade of referral care 25 Step 5 20 Step 4 Step 4: Expansion and upgrade of emergency obstetrical care Step 3: First level clinical upgrade 15 Step 3 10 Step 2 Step 1 5 Current Health Expenditures 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Step 2: Health services extension program Step 1: Information and social mobilization for behavior change 3. PHC should be funded by the government, although various forms of public funding are possible Nature of PHC Services • Well-known, cost-effective and sustainable interventions that can have a large impact on mortality and morbidity • Non-insurable (without government subsidization) – because PHC services are highly predictable • Nature of PHC services (public goods) necessitates public sector financing. Public funding of PHC can take several forms • Removing user fees may not be best solution, if: – public finance systems do not ensure money will reach PHC facilities – or if public funding is not based on performance (i.e. Rwanda or Congo) • Government can also fund demand (instead of supply) through mandatory health insurance (i.e. Rwanda, Ghana) 4. Whatever mechanism is chosen for funding PHC, fiscal space will be a binding constraint What is Fiscal Space? Fiscal space = The availability of budgetary room that allows a government to provide resources for a desired purpose without any prejudice to the sustainability of a government’s financial position. Fiscal Sustainability Capacity of governments, in the future, to finance desired expenditure programs, service its debts, and ensure its solvency. Cover cost of borrowing and recurrent costs Replacement of donor funding Sources of Fiscal Space Government budget constraint: G = Taxes + B (domestic) + ΔM + B (external) + Grants Is there potential to increase tax revenue? Can borrowing be increased (domestic or external)? Is there room to print money to finance expenditure? Can you finance by receipt of grants? Consistency with Macroeconomic Framework 1. Revenue-generation capacity is limited in low-income countries For low-income countries, it may not be feasible to expect higher than 15% of GDP as source of revenue from taxes. Tax revenue as share of GDP in low-income countries, 2004 Afghanistan Average 14% Central African Republic Bhutan Bangladesh Cambodia India Nepal Tajikistan Sierra Leone Burkina Faso Togo Cote d'Ivoire Kenya Ghana Madagascar 0 20 40 Tax revenue as share of GDP (%) 60 2. Domestic and Foreign Borrowing Key issue: both domestic and external borrowing imply the need to repay in the future! Are the returns high enough to justify borrowing? Will borrowing stimulate economic growth, enhancing repayment ability? Governments need to be particularly careful about domestic borrowing: unlike the case with external borrowing, there is no possibility of debt cancellation. Borrowing adds to non-discretionary expenditure in the future. Debt sustainability is still a concern in LIC and it does not make much sense to borrow for what in PHC are largely recurrent expenditures. 700% 600% 500% 400% 300% 200% 100% 0% Source: World Bank 2006 Country Zimbabwe Zambia Uganda Togo Tanzania Swaziland Sudan South Africa Sierra Leone Seychelles Senegal Sao Tome Rwanda Nigeria Niger Mozambique Mauritius Mauritania Mali Malawi Madagascar Liberia Lesotho Kenya Guinea- Guinea Ghana Gambia, Gabon Ethiopia Eritrea Equatorial Cote d'Ivoire Congo, Rep. Congo, Comoros Central Cape Verde Chad Cameroon Burundi Burkina Botswana Benin Angola Percent 2. Some Countries Face Difficult External Debt Repayment Problems External Debt to GDP Ratio in SSA, 2004 3. Seignorage Offers very limited room for creation of fiscal space. In the normal course of growth, seignorage to the order of 0.5-1% of GDP may be sustainable. Seignorage as share of GDP: Income Group Low-income countries Lower-middle-income countries Upper-middle-income countries High-income countries 1990s 4.4% 3.7% 3.9% 1.4% 2000s 3.0% 2.0% 2.2% 1.7% Excessive seignorage can lead to inflation: >10% can disproportionately affect the poor and can be detrimental to the broader investment climate. Can have other compounding negative effects on the macro economy (e.g., on exchange rates). 4. External aid is an important source of health spending in Sub-Saharan Africa External aid as % of total health spending (2002) Percent of total health expenditure 20 18 16 14 12 10 8 6 4 2 0 East Asia & Pacific Eastern Europe & Central Asia Latin America & the Caribbean Middle East & North Africa Region South Asia Sub-Saharan Africa Donor aid for health has increased significantly 16 Most of the recent increases: 14 US$ billions 12 Private non-profit 10 Other multilaterals Development banks 8 UN agencies Bilateral agencies 6 4 2 0 2000 2005 year Source: Michaud 2006 • Focus on Africa • Focus on specific diseases • Come from bilaterals and multilaterals (e.g. GAVI & Global Fund) Where Does All the Aid Go? On average, for every $1 disbursed by donors to our 14 case study countries, we estimate: Not recorded Recorded but not in Govt spending Aid earmarked to specific projects Budget support $0.30 $0.20 $0.30 $0.20 Most assistance is provided outside government systems, making efficient planning, budgeting and M&E difficult. Donor Aid for Health in Rwanda Financing Agent Share of Donor Aid NGO 55% Development Partner Direct Management 19% Central Government 14% Direct To Local Government Or Health District 12% Total 100% • Aid is spent in public or public-sector assisted facilities, but Government manages only 14% of aid to health, and only 20% of total health expenditures – less than NGOs (27%) • Leads to a distorted spending pattern and high administrative costs absorbing 27% of health spending Source: NHA 2003 Donor commitments for health are VOLATILE and UNPREDICTABLE Try managing this… Donor collaboration is a challenge GTZ WHO CIDA UNAIDS RNE INT NGO 3/5 UNICEF Norad WB Sida USAID T-MAP MOF UNTG CF DAC GFCCP PEPFAR GFATM HSSP MOH PMO PRSP MOEC SWAP CCM CTU NCTP CCAIDS NACP LOCALGVT Source: Mbewe, WHO CIVIL SOCIETY PRIVATE SECTOR Vertical aid distorts priorities : Example from Rwanda Distribution of Donor Funding by Strategic Objective $80m other health services $60m $40m HIV/AIDS funding $20m $m Cap ice y acit erv . os p al H s S th ferr t. Ins Re al He ss cce ss cce .A r. A anc Fin og Ge C V, D, HR Source: MoH Donor Mapping Study (2005) and NHA 2003 Geographic Distribution of Donor and Govt funding $14 $12 $10 $8 $6 $4 $2 $0 u ye Ki b a mb Byu al i Ki g ta re Bu i eny G is a li Ng al i Ki g oro o ng G ik ma a ra G it ra u ta Um o u ng Ki b ugu an g Cy i ge r h en Ru • Project type support dominates, leading to: – Geographical inequalities: $11.84 p.c. in highest funded province $1.86 p.c. in lowest funded – Inequalities by strategic objective: $46.6m earmarked for HIV/AIDS, vs. $18.3m for malaria vs. $1.1m for IMCI – Short time horizon: 55% of projects end in one year or sooner Improve Donor Funding Through: • • • • • • • Country ownership Alignment Reduced earmarks Focus on comparative advantage Pooled financing Improve data collection Increased coordination 5. Increasing PHC funding will not be enough Increasing public spending is not enough * Percent deviation from rate predicted by GDP per capita More Spending in other sectors is needed % grwth govt health spending % reduction U5MR 1990-2015 0% 0% 3% 5% 8% 10% 13% 5% ec grwth -10% & 2.5% female educ grwth -20% & 2.5% roads grwth & 2.5% wat & san grwth -30% -40% -50% -60% -70% & 2.5% grwth in all 15% More money alone will not achieve results unless countries deal with their major constraints including: • Macroeconomic issues – capacity to raise more money domestically • Institutional issues – administrative capacity, level of corruption • Health staffing issues – skills, salaries, and number of administrative, managerial & medical staff • Social/cultural/political issues – political and social stability, cultural norms, etc. Conclusions • Developing PHC is key for improving health outcomes in Africa, although efforts in other sectors are also needed • This PHC strategy implies a major increase of resources and well-targeted health expenditures • PHC is a public good and should be funded by the government, which does not mean that only supply should be funded • Fiscal constraints are binding, particularly in lowincome countries (LICs). • In LICs, donors need to consider possible distortions when providing financing outside the basic package of services. They should focus on long-term and non-volatile interventions.