Transcript Major issues for health financing in developing countries

Introduction:
Major challenges for health financing
The Elements of Health System
Management
Resource Inputs
(trained staff,drugs, knowledge,
facilities,etc.)
Organization
(ministry, hospitals, etc.)
Financial support
Service Provision
Health Sector Reform:
• Civil service and
public sector reform
• Development in
financing the social
sector
• Managed-market
health care reforms
• Development in
epidemiology and
health economics
Health Sector Reform -2• HSR occurs as part of
changes in public sector
reforms.
• Changes in health
financing: the need to
assess the advantages
and disadvantages of
user fees, community
financing, voucher
systems and different
forms of insurance
• Traditional bureaucratic
structures do not necessarily
sufficient incentives to
guarantee cost-effective or
user-friendly services,
neither are unregulated
private markets capable of
achieving the mix of
objectives that health
systems seek to satisfy.
Need versus Demand
Aging and Economic Growth
0.3
45000
population 65+ (%) Japan
population 65+ (%) Korea
population 65+ (%) Thailand
population 65+ (%) Sri Lanka
GNP per capita, Japan
GNP per capita, Korea
GNP per capita, Thailand
GNP per capita, Sri Lanka
0.25
0.2
40000
35000
30000
25000
0.15
20000
0.1
15000
10000
0.05
5000
0
0
Year:Japan 1910
Korea
1940
1920
1950
1930
1960
1940
1970
1950
1980
1960
1990
1970
2000
1980
2010
1990
2020
2000
2030
2010
2040
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
Thailand /
Sri Lanka
Low-income Countries Have
Weak Capacity to Raise Revenues
• The tax structure in
many low-income
countries is often
regressive
100
Total Government Revenues as % GDP
• Governments often raise
less than 20% of GDP in
public revenues;
80
60
40
20
0
100
1,000
10,000
100,000
Per capita GDP $ (Log scale)
Source: IMF data 2000
Epidemiological Changes

Nature of health care (quantity + quality)
Not necessarily all public goods
Higher service costs
Less and less passive acceptance of service
(  Customers’ satisfaction, better quality of service)
Accountability to be sought after
Major challenges for
health financing

Epidemiological transition

Financial constraints

Allocative inefficiency of health sector resources

Lack of management capacity
Recurrent Costs Problems in
Developing Countries
The International Flow of Development
Resources
(1) Private foreign investment
• foreign direct investment
• foreign portfolio investment (stocks, bonds
and notes)
(2) Public and private development assistance
• bilateral and multilateral donor agencies (grants and
loans)
• nongovernmental organizations (NGOs)
Government Budget
1. Development (Capital) Budget （資本予算）
–
Domestic Financing
– External Financing (development assistance, etc.)
Local currency portion
Foreign currency portion
2. Recurrent Budget（経常予算）
– Domestic resources (tax, user fees)
Absorptive capacity (援助
の吸収能力)
Local currency portion
8
Recurrent Resource Gap
7
(by Y.Uchida)
Shortage in
recurrent budget
6
5
User Fees
4
Actual Recurrent
Budget
3
2
Development
(Capital ) Budget
1
0
2000
2001
2002
2003
2004
Recurrent cost constraints
threaten the productivity of past
investment

A mismatch between capital investment* and
recurrent financial capacity
(*one-off investment)

“R”co-efficient: the ratio of recurrent expenditure to
total investment outlay
District hospitals 0.33  every $1000 spent on the initial capital
development of a district hospital results in $333 of expenditure per
year
external assistance
・Development (capital) budget + recurrent budget
・Foreign currency portion + local currency
portion
A mismatch between capital investment*
and recurrent financial capacity
(*one-off investment)
Symptoms of the recurrent cost
problems
New facilities unable to function because of recurrent
resources
Faculties supplied with equipment but no qualified staff to
operate
Poorly maintained buildings, equipment, facilities, etc.
Transportation difficulties and immobile vehicle fleets
caused by lack of spares, fuel, etc.
A large number of unfilled posts
 
 
The consequences of these
problems





Reduced efficiency
Reduced service quality/quantity
Reduced confidence in public sector facilities
A shortened lifespan for capital investments
Low morale among staff with high turnover
Causes for the recurrent cost
problems
Poor project design
 Weak planning, budgeting and resource mechanisms
（dual budgeting, PIP)
 Resource availability factors
(low per capita income, low growth rates, low savings
rations, weak business sectors)
 Weak management capacity

Balance Sheet: B/S
Assets
Liabilities
Current assets
(Short-term assets)
Current Liabilities
Long-term Liabilities
Fixed assets
(Long-term assets）
Stockholders’ Equity
Aid Coordination
and
Resource Management
Coordination of external resources is central to
the development agenda in many countries.
The following growing recognitions:
Unmanageable proliferation of
projects, policies and demands on
sector ministries
Unmanageable proliferation of projects, policies and
demands on sector ministries

Fragmented (overlapped) sector activities = projectisation
Little resource fungiblility
Several technical specifications
Some disbursement rules and financial years among donors
Enormous works with donors’ missions – heavy administrative
burden
Parallel management system
Parallel Management System

Excessive separate systems created great confusion. The
disbursement and accounting arrangements made financial
control very difficult and rendered it impossible to gain an
overview of the resources employed or to analyse
expenditures.
The fragmentation of control over civil works initiatives
hindered the development of rational capital planning policies
and paid inadequate attention to the aggregate recurrent cost
consequences.
Unmanageable proliferation of projects,
policies and demands on sector ministries
Fragmented sector activities
Little resource fungiblility
Several technical
specifications
A few different disbursement
rules and financial years
Enormous works with donors’
mission
Asymmetric power
relationships
Informal networking
between key
policymakers
/managers in both
donor and recipient
organizations
Ugandan national health plans since
1986
• National Relief Plan 1986
• Rehabilitation and Development Plan
1987
• Ten Year National Health Plan 1990
• Three Year National Health Plan 1992
• National Plan of Action for Children 1992
SWAps (sector-wide approaches):
The
concept
of
coordination,
compressed in the SWAps.
best
SWAps represents a next generation
approach to aid, and set out to provide a
broad framework within which all resources
are coordinated in a coherent and wellmanaged way .
Definition of SWAps
(sector-wide approaches):
All significant public funding for the sector supports a
single sector policy and expenditure program, under
Government
leadership,
adopting
common
approaches across the sector, so as to disburse and
account for all public expenditure.
SWAP Arrangements
Coordination mechanism:
A steering committee:
1) A Code of Conduct which establishes principles and
mechanisms on which SWAp is to be based
2) Formulating and sharing a sector policy
(a set of medium and long term performance indicators)
3) Allocation of development resources and technical
assistance  Basket Fund (pooling arrangement)