HEALTH FINANCING Trends in Sub-Saharan Africa Luize Guimarães Scherer Navarro/Tomas Lievens June 2012 Health Financing Preface / Acknowledgements This keynote paper was developed for use in the CABRI dialogue on ‘Value for Money in the Health Sector: health financing and expenditure management for allocative and technical efficiency’. This is the 2 nd CABRI dialogue on Value for Money in the Health Sector. The team to support the dialogue is led by John Kruger. Other team members are: Tomas Lievens (health expert), Luize Guimaraes (case study researcher) and Clara Picanyol (case study researcher). Responsibility for errors in interpretation or facts remains with the author. Oxford Policy Management Limited 6 St Aldates Courtyard Tel +44 (0) 1865 207300 38 St Aldates Fax +44 (0) 1865 207301 Oxford OX1 1BN Email [email protected] Registered in England: 3122495 United Kingdom Website www.opml.co.uk Health Financing Table of contents Preface / Acknowledgements 1 List of tables and figures 3 Abbreviations 4 Introduction 5 1 Health Financing framework: objective and policy instruments 7 1.1 The objectives of health financing 7 1.2 Health financing: the sources, collection and pooling of funds 8 1.3 Health services purchasing 24 1.4 Beyond the health financing framework: what to fund? 32 2 Two common trends in health financing in SSA 35 2.1 Performance Based Financing for Health 35 2.2 User fees for health services 38 3 Conclusion 42 References / Bibliography 43 Annex A Preconditions for PBF 46 2 © Oxford Policy Management Health Financing List of tables and figures Figure 1.1 Health financing framework 7 Figure 1.2 Progress toward the Abuja Target: general government expenditure on health as percentage of total government expenditure 9 Figure 1.3 Progress toward the CMH Target: public and private per capita health expenditures 10 Figure 1.4 Relationship between age (one identifiable risk factor) and expected cost of health care use 12 Figure 1.5 Measures to promote health insurances amongst the poor, learning from Africa 15 Figure 1.6 Total health spending by source, 2005 17 Figure 1.7 Out of pocket expenditures in the African region compared to private and government expenditures 18 Figure 1.8 Donor Financing for Health by WHO Region (2000, 2006) 19 Figure 1.9 Main methods of Financing Health care scale in terms of equity, risk pooling, risk selection and efficiency 22 Figure 1.10 Understanding the payment function: different payment methods and their implications 26 Figure 1.11 Child mortality rates compared to Government health spending per person (in USD) 30 Figure 1.12 Government health spending per person (USD) compared to child mortality rates 30 Figure 1.13 Life expectancy compared to total health spending per person (USD) 31 Figure 1.14 Total health spending per person (USD) compared to life expectancy 31 Figure 1.15 The path towards Universal Coverage ? 34 Figure 2.1 Out-of-Pocket Expenditure (as Percent of Private Expenditure on Health) 39 Box 1.1 Risk and the insurance jargon 11 Box 1.2 SHI development the case of Ghana 12 Box 1.3 CBHI in western Africa: challenge of scale and potential solutions 15 Box 1.4 Building on CBHI towards universal Coverage: the Rwanda model 15 Box 1.5 Catastrophic health expenditures 17 Box 1.6 Medical Savings Account 18 Box 1.7 Technical efficiency 24 Box 1.8 Provider payment & purchasing 25 Box 1.9 Main sources of inefficiency 32 Box 2.1 The case of Niger and of Cote d Ivoire 41 3 © Oxford Policy Management Health Financing Abbreviations AU African Union CBHI Community Based Health Insurance CMH Commission on Macroeconomics and Health FTT Financial Transaction Tax GNI Gross National Income GNP Gross National Product ILO International Labour Organization MHO Mutual Health Organization NHI National Health Insurance NHIF National Health Insurance Fund ODA Overseas Development Aid OOPE Out Of Pocket Expenditure OPM Oxford Policy Management PHI Private Health Insurance SHI Social Health Insurance SSA Sub Saharan Africa UNAIDS United Nation Aids Agency WHA World Health Assembly WHO World Health Organization WHR World Health Report 4 © Oxford Policy Management Health Financing Introduction As was recently pointed out at a high-level health financing dialogue (Gomes Sambo et al. 2011), the African region has the highest disease burden relative to other regions but its per capita health spending is the lowest. And, in contrast to the wealthier regions of the world, a very large proportion of health spending in Africa comes directly from the pockets of its citizens and not from general government revenue or insurance funds. The health financing dialogue at the Fifteenth Ordinary Session of the Assembly of the African Union 2010 (Gomes Sambo et al. 2011) attributed the current unsatisfactory state of health financing in the African continent to “lack of clear vision and plan for health financing; a lack of national health accounts and other evidence to guide development and implementation of national health financing policies and strategies; low investments in sectors that address social determinants of health; predominance of out-of-pocket spending; underdeveloped prepaid health financing mechanisms; large informal sectors vis-à-vis small formal sectors; and unpredictability and non-alignment of [the] majority of donor funds with national health priorities”. There is today a consensus that in general, more resources, and less out-of-pocket expenditure, are necessary to fund the health sector if Sub-Saharan Africa wants to significantly improve its indicators and reach the Millennium Development Goals. Ministries of Finance and Ministries of Health have to work together on this: exploring complementary routes that can be used to increase the resources to the sector at a national level and to join the international partners’ reflection about the design and feasibility of global and regional mechanisms to complement national commitment. While there is a general understanding that more money is needed, more money alone is not enough to overcome Sub-Saharan Africa’s health challenges. How money is spent is just as important as how much is spent, in other words, ensuring value for money in the health sector. Wastage is however difficult to eradicate in any health system and the routes to improving efficiency not straightforward (WHO 2010). Ministries of Health and Finance need to work at this together. As pointed out by the Director-General of the WHO in launching the World Health Report 2010, entitled “financing for universal coverage”, the report was commissioned in response to the need “expressed by high and low income countries for practical guidance on ways to finance health care. The objective of the report was to transform the evidence, into a menu of options for raising sufficient resources and removing financial barriers to access, especially for the poor.” The report points out that on the road towards universal health coverage, “countries will take differing paths … depending on where and how they start …”. Within the context of exploring value for money this keynote paper sets out some of the options with regard to two key components of the health system, namely: health financing and payment provider mechanisms. Health financing has three main functions: revenue mobilization and collection, risk pooling and resources allocation. Health financing policy is key to the health system, as it determines: i) the sources of fund, and therefore how much is available to the sector; ii) how health risks are pooled; iii) who controls the funds and how they are allocated; iv) The equity of the sector funding, and hence indirectly, how many people will fall into poverty (or not) as a consequence of potential catastrophic expenditures to cover health services. Provider payment focuses on the way in which services are purchased strategically; and on the incentives implicit or explicit between providers and purchasers (through formal or informal contracts) and their implication to health service delivery. 5 © Oxford Policy Management Health Financing For both areas mentioned above the keynote paper provides a theoretical framework and outline possible approaches. Examples of how countries in SSA have used some of those approaches are provided. The final section the paper discusses two common trends in health financing across African countries: performance based financing and targeted free health care. Some evidence is reviewed which provide to consider when designing and implementing health financing policies. 6 © Oxford Policy Management Health Financing 1 Health Financing framework : objective and policy instruments Health Financing is central to all health system s. The World Health Report 2010 states that “health financing is much more than a matter of raising monmoneyey for health. It is also a matter of who is asked to pay, when t hey pay, and how the money raised is spent ”. It encompasses the mechanisms through which resources are mobilized, ranging from general revenue and social and private health insurance to out-of-pocket payments . It includes the way in which health risks are pooled and financial resources allocated , as well as institutional arrangements for financing. Key Messages Health financing policy is a key instrument to imprimproveove the equity of health financing The choice of revenue sources i s a key determinant of equity in financing Pooling and purchasing arrangements that support momorere efficiency createcreate greater scope for re-distribution The structure of benefits affects utilization which in turns affects acceptabilityacceptability of financial burden 1.1 The objectives of health financing The objectives of health financing policy are derivederivedd from the overall health system performance goals. These goals as described in t he world health report of 2000 are: • To improve the level and distribution of health of the population; • To improve the level and distribution of responsivenresponsivenessess of the health system to thethe expectations (other than health) of the population; • To improve the “fairness” of financial contributions to the health system made by the population; and to improve overall system efficiency, i.e.