Transcript Slide 1

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.