Why a New Study?Why a New Study?• Global health has been pushed to top of the international

agenda on human rights, national security, and foreign policy grounds, providing countries and the international community with both a tremendous opportunity and a major challenge.

• The international focus on poverty reduction and the MDGs has resulted in new funding, global players and policy dynamics including the new global funds (GFATM, GAVI) and new financers such as the Gates Foundation.

• Over the past 10 years a plethora of new financing instruments, such as PRSPs, MTEFs, PRGFs, PRSCs, SWaps, PERs, PETs, have become the basis for planning, funding, and resources tracking; yet, there has been little systematic assessment of these instruments from a health financing perspective.

Health is an Extremely Complex SectorHealth is an Extremely Complex Sector

• Global governance and policy coherence is a major problem as there are well over a 100 major organizations involved in the health sector, far more than in other sectors (e.g., unstructured plurality).

• As the bulk of the funding needed in the health sector is for long term recurrent costs as opposed to the more traditional short term investment costs, countries need to figure out how to create adequate future fiscal space in their budgets for sustainability.

• There are numerous non-health related factors that affect health outcomes, necessitating complex cross-sector approaches.

• Individual behavior plays a critical role in health outcomes and is very difficult to influence or change.

• Measuring health outcomes—other than sentinel events such as births or death—and attributing causality to specific factors is inherently complex.

• The private sector plays a substantial, often predominant, role in both the financing and delivery of healthcare services and is often absent from the policy debate.

• Market failures in insurance markets and in the health sector more generally require complex regulatory frameworks.

• Finally, the costly financial protection element of health financing is largely unique to the health sector (except for a few standard social protection programs) and creates difficult tradeoffs among competing health objectives for resource constrained governments.

Purposes of StudyPurposes of Study• Provide an overview of health financing policies in

developing countries• Serve as primer on major health financing and fiscal

issues to assist policy-makers and other stakeholders in the design, implementation, and evaluation of effective health financing reforms

• Analyze health financing policies from the perspectives of the basic financing functions of revenue collection, pooling resources, and purchasing services.

• Assess policies in terms of their ability to improve health outcomes, provide financial protection and assure consumer satisfaction in an equitable, efficient, and financially sustainable manner

Global Inequities are Rampant…Global Inequities are Rampant…Developing countries account for 90% of the global disease burden

Burden of Disease

34.4%

55.9% 9.7%

low-income countries middle-income countries high-income countries

Source: WDI 2005 and Lopez, Mathers, and Murray 2006.

Annual Per Capita Health Spending

Low-income countries: $24

Low-middle income countries: $91

Upper-middle income countries: $342

High-income countries: $3810

..but only 12% of Global Health Spending..but only 12% of Global Health Spending

Distribution of Total Global Health Spending

10%

2%

88%

low-income countries middle-income countries high-income countries

Source: WDI 2005 and Lopez, Mathers, and Murray 2006.

There are Large Inequities within Individual There are Large Inequities within Individual CountriesCountries

0

20

40

60

80

100

120

East Asia, Pacific(4 Countries)

Europe, CentralAsia (6 Countries)

Latin America,Caribbean (9

Countries)

Mid.East, N.Africa(4 Countries)

South Asia (4Countries)

S.Sahara Africa(29 Countries)

Total (56Countries)

Lowest 20% of Population Highest 20% of Population

Infant mortality rates among poorest and richest 20%: 56 low- and middle-income countries

The Richest also Benefit from The Richest also Benefit from Government Health SpendingGovernment Health Spending

0 10 20 30 40

Costa Rica

Bulgaria

Bangla.

Madag.

Cote d'Ivoire

India

Ecuador

Armenia

0 10 20 30 40

Costa Rica

Bulgaria

Bangla.

Madag.

Cote d'Ivoire

India

Ecuador

Armenia

% of All Health Spending % of Primary Health Spending

Poorest 20 % Green Richest 20% ORANGESource: World Development Report 2004

Mortality Patterns are UniqueMortality Patterns are Unique

“One-size-fits-all” solutions will not work

Source: United Nations 2005.

Cost-effective Interventions do ExistCost-effective Interventions do Exist

Source: WHO 2004.

Reducing Under-five MortalityReducing Under-five MortalityHow much health will a million dollars buy?How much health will a million dollars buy?

Source: Disease Control Priorities in Developing Countries, second edition, 2006, Table 1.3.

Service or InterventionCost Per DALY

(US$)

Estimated DALYs Averted Per

Million US$ Spent

Improving care of children under 28 days old (including resuscitation of newborns) 10-400 2,500-100,000

Expanding immunization coverage with standard child vaccines 2-20 50,000-500,000

Adding vaccines to the standard child immunizations (particularly Hib and HepB) 40-250 4,000-24,000

Switching to combination drugs (ACTs) against malaria where resistance exists (Sub-Saharan Africa) 8-20 50,000-125,000

Preventing and Treating Preventing and Treating Noncommunicable DiseasesNoncommunicable Diseases

How much health will a million dollars buy?How much health will a million dollars buy?

*Costs and DALYs are in addition to using inexpensive drugs only. **Incremental to treatment with polypill.

Source: Disease Control Priorities in Developing Countries, second edition, 2006, Table 1.3

Service or Intervention

Cost

Per DALY (US$)

Estimated DALYs Averted Per Million US$

Spent

Taxing tobacco products 3-50 24,000-330,000

Treating heart attacks with inexpensive drugs 10-25 40,000-100,000

Treating heart attacks with inexpensive drugs plus streptokinase* 600-750 1,300-1,600

Treating heart attack and stroke survivors for life with a daily polypill 700-1,000 1,000-1,400

Performing coronary artery bypass surgery in high risk cases** >25,000 <40

Using bypass surgery for less severe coronary artery disease** Very high Very small

†This change is the difference in poverty head count before and after health-care payments are subtracted. All results are

significantly different from zero at the 5% significance level, except for that of Malaysia at $1·08. ‡Percentage point change multiplied by the total population.§Percentage point change as a proportion of the prepayment head count.Source: Doorslaer, Lancet, Oct 14, 2006

Impoverishment Due to Catastrophic Medical Impoverishment Due to Catastrophic Medical Expenses is a Problem and Another Reason for Expenses is a Problem and Another Reason for

Formalized Health Financing ArrangementsFormalized Health Financing Arrangements

Health Financing Functions and Health Financing Functions and ObjectivesObjectives

Functions Objectives

Revenue Collection

Pooling

Purchasing

raise sufficient and sustainable revenues in an efficient and equitable manner to provide individuals with both a basic package of essential services and financial protection against unpredictable catastrophic financial losses caused by illness and injurymanage these revenues to equitably and efficiently pool health risks

assure the purchase of health services in an allocatively and technically efficient manner

Source: Gottret and Schieber, Health Financing Revisited, World Bank, 2006.

Major Health Financing Major Health Financing ModelsModels

Model

Revenue Source

Groups Covered

Pooling Organization

Care Provision

National Health Service

General revenues

Entire population

Central government

Public providers

Social Health Insurance

Payroll taxes Specific groups

Semi-autonomous organizations

Own, public, or private facilities

Community-based Health

Insurance

Private voluntary contributions

Contributing

members

Non-profit plans NGOs or private facilities

Voluntary Health Insurance

Private voluntary contributions

Contributing members

For- and non-profit insurance organizations

Private and public facilities

Out-of-Pocket Payments

(including public user fees)

Individual payments to providers

None Public and private facilities (public facilities)

Global Health Policy BaselineGlobal Health Policy BaselineHealth Expenditures, 2004 (population-weighted)Health Expenditures, 2004 (population-weighted)

East Asia & Pacific 1,457 64 251 4.4 39.8 51.1 0.5 17.6 70 37Eastern Europe & Central Asia 3,801 250 547 6.6 67.8 26.4 1.1 40.5 69 34Latin America & the Caribbean 3,777 273 892 7.3 51.2 36.2 0.4 17.9 72 31Middle East & North Africa 1,833 103 307 5.7 49.1 46.1 1.2 11.9 69 55South Asia 611 27 84 4.6 18.8 76.1 1.5 0.9 63 92Sub-Saharan Africa 732 45 102 6.3 41.8 26.2 6.8 1.4 46 168

Sub-Saharan Africa1 462 21 58 4.7 43.6 46.8 15.0 0.9 46 168 Low-income countries 533 24 79 4.7 23.9 70.0 5.4 1.1 59 122Lower middle-income countries 1,681 91 365 5.4 47.3 42.8 0.5 14.4 70 42Upper middle-income countries 5,193 342 676 6.6 57.8 30.2 0.7 32.2 69 28High-income countries 33,929 3,810 3,637 11.2 60.4 14.9 0.0 26.0 79 7

High-income countries2 31,243 2,778 2,527 8.8 76.0 16.6 0.0 39.3 79 7

Life

Expectancy

at birth

(years)

Out-of-pocket (% total health expenditures)

External (% total health

expenditures)

Regions & Income Levels

Per capita GDP ($US)

Per capita health

expenditures ($US)

Total health expenditures

(% GDP)

Per capita health

expenditures (PPP)

Under-5

mortality

rate (per

1,000 live

births)

Public (% total health

expenditures)

Social Security (% total health expenditures)

Source: World Bank, WHO, 2007. All regional and income class aggregated data weighted by the series denominator1. SSA GDP and health spending data excluding South Africa 2. HICs GDP and health spending data excluding the United States

:

Key Expenditure FactsKey Expenditure Facts• Public spending accounts for less than 25% percent of total health spending

in LICs, some 50% in MICs but over 60% in HICs:

→ Policy-makers need to focus on private spending as well as public.

• Public spending on health is some $10 per capita in LICs, over $100 in MICs, and $2000 in HICs:

→ Policy-makers in LICs will be challenged to provide an essential package of basic services.

• Out-of-pocket payments account for 70 percent of health spending in LICs, 40 percent in MICs and 15 percent in HICs:

→ Policy-makers need to focus on improving formal risk pooling mechanisms in order to provide financial protection and protect the poor.

• Social health insurance accounts for some 1% of all health spending in LICs, 20% in MICs, and 30% in HICs:

→ Policy-makers in LICs need to carefully evaluate whether they have the enabling conditions in place for SHI to succeed.

• While external sources on average account for only some 6 percent of total health spending in LICs, in over 20 African countries, it accounts for more than 30 percent:

→ Policy-makers in LICs and MICs need to keep focused on internal sources of finance, as these sources account for the bulk of their health revenues.

Domestic Resource Mobilization is Domestic Resource Mobilization is Limited in LICs and MICsLimited in LICs and MICs

RegionsTotal Revenue as % of GDP

Tax Revenue as % of GDP

Social Security Taxes as % of

GDP

Early 2000s

Americas 20.0 16.3 2.3Sub-Saharan Africa 19.7 15.9 0.3Central Europe, Baltics, Russia & Other Former Soviet Republics 26.7 23.4 8.1Middle East & North Africa 26.2 17.1 0.8Asia & Pacific 16.6 13.2 0.5Small Islands (Pop. < 1 million) 32.0 24.5 2.8

Low-income countries 17.7 14.5 0.7Low middle-income countries 21.4 16.3 1.4Upper middle-income countries 26.9 21.9 4.3High income Countries 31.9 26.5 7.2

More Money is Not EnoughMore Money is Not Enough

* Public spending and child mortality rate are shown as the percent deviation from rate predicted by GDP per capitaSource: Spending and GDP from World Development Indicators database. Under-5 mortality from Unicef 2002`, WDR 2004

Vietnam

Philippines

Sri Lanka

Papua New Guinea

Pakistan

Nepal

Malaysia

Cambodia

Bangladesh China

India

Indonesia

Lao PDR

Thailand

-150

-100

-50

0

50

100

150

-150 -100 -50 0 50 100 150

Per capita public spending on health 1990s average (Log difference betw een actual and predicted by GDP per capita x100)

Under-

5 m

ort

alty r

ate

2000

(Log d

iffere

nce b

etw

een a

ctu

al a

nd p

redic

ted b

y G

DP

per

capita

x100)

Source: World Bank, PREM:, 2007.

• Estimates of revenue effort may suggest that an additional several percent of GDP could be raised through domestic revenue measures.• Additional grants from donors are unlikely. • Spending efficiency can be improved. • Macroeconomic and debt management may suggest that new borrowing over the period should be limited. • Seignorage (govt prints money which it loans to itself) is yet another, but generally limited, mechanism for creating fiscal space.

Fiscal Space* is Needed In Order to Fiscal Space* is Needed In Order to Expand CoverageExpand Coverage

*Budgetary room that allows a government to provide resources for a desired purpose without any prejudice to the sustainability of its financial position

Aid

Borrow ing

Revenue Expenditure Eff iciency

More Money Alone Will Not Achieve More Money Alone Will Not Achieve Results Unless Countries Deal with Results Unless Countries Deal with Their Major Constraints Including:Their Major Constraints Including:

• Macroeconomic issues (e.g. capacity to raise more money domestically, fiscal space)

• Institutional issues (e.g. administrative capacity, level of corruption)

• Health staffing issues (e.g. skills and number of administrative, managerial & medical staff)

• Social/cultural/political issues (e.g. political and social stability, cultural norms, etc)

External Aid is an Important Source of External Aid is an Important Source of Health Spending in Some CountriesHealth Spending in Some Countries

0

2

4

6

8

10

12

14

16

EAP

ECA

LAC

MENA

SA

SSA

Source: WHO, WDI. SSA excludes South Africa. Data are for 2004

Development Aid is Increasing but Falls Far Short of What is Needed and Development Aid is Increasing but Falls Far Short of What is Needed and PromisedPromised to Meet the MDG (0.54) and Monterrey Commitments (0.70) to Meet the MDG (0.54) and Monterrey Commitments (0.70)

To meet 2010 commitments (ODA of US$130 billion per year), need an average increase of about 8% per yearTo meet 2010 commitments (ODA of US$130 billion per year), need an average increase of about 8% per yearSource: OECD DAC database.

Source: World Bank, Global Monitoring Report 2007

Donor Aid for Health has Increased Donor Aid for Health has Increased SignificantlySignificantly

Source: Michaud 2006

Most of the recent increases:

•Focus on Africa

•Focus on specific diseases

•Come from bilaterals and ‘other’ multilaterals (GAVI, Global Fund)

0

2

4

6

8

10

12

14

16

2000 2005

year

US$ b

illion

s

Private non-profit

Other multilaterals

Development banks

UN agencies

Bilateral agencies

However, Donor Commitments for Health However, Donor Commitments for Health are Volatile and Unpredictableare Volatile and Unpredictable

Try managing this…

MOH MOEC

MOF

PMO

PRIVATE SECTORCIVIL SOCIETYLOCALGVT

NACP

CTU

CCAIDS

INT NGO

PEPFAR

Norad

CIDA

RNE

GTZ

SidaWB

UNICEF

UNAIDSWHO

CF

GFATM

USAID

NCTP

NCTP

HSSP

HSSP

GFCCPGFCCPDAC

CCM

T-MAP

3/5

SWAPSWAP

UNTG

PRSP PRSP

Donor collaboration is a challengeDonor collaboration is a challenge

Source: Mbewe, WHO

Bilateral Donor Support to Tanzania, 2000-2002Bilateral Donor Support to Tanzania, 2000-2002

Source: Foreign Policy, Ranking the Rich 2004

Vertical Aid Distorts PrioritiesVertical Aid Distorts Priorities

Drug Use

Malaria

Nutrition HIV/AIDS

Health system

PMTCT

Maternal health

New born care

Safe and Supportive

Environment

Skilled birth attendance

Case management

Community

Management

Source: Mbewe, WHO

Fragmentation in international effort

….

Source; Don De Savigny & COHRED

Donor Funding in RwandaDonor Funding in Rwanda

Distribution of Donor Funding by Strategic Objective

$m$20m$40m$60m$80m

HIV/ AIDS funding

other health services

Donors Distort Salary StructuresDonors Distort Salary Structures

GFATM HAS ALLOWED SIGNIFICANT SALARY INFLATION TO OCCUR, PARTICULARLY FOR PROGRAM MANAGERS

Dollars per month Cambodia salaries for health programs

Viet Nam salaries for HIV/AIDS programs

Cambodia salary story• MoH salaries ranged from $50 to

few hundred per month• CCM decided to pay GFATM-

associated employee $1,200 per month

• For Round 5 grant proposal, CCM further escalating salary cap ($1,200 + annual increase)

• National programs followed suit for increasing salaries, resulting in major country-wide salary inflation

• “This has been phenomenally destructive.”

1,200

1,800

800

250-40050-200

MoH DFIDGFATM

Round 4

GFATM

Round5

National

programs

* Increase for program managers only of GFATM grants

Viet Nam salary story

• MoH salaries ranged $50-100 per month

• DFID offers health worker incentives in HIV/AIDS program; WB begins programs with significantly higher pay in overlapping districts where “poaching”will occur

• GFATM granted PR (MoH HIV/AIDS program) salary request of $900 per month for program managers

• Donor and GHP practices lead to escalating distortion of salaries and poaching of resources within HIV/AIDS sector

500

900

100-15050-100

MoH DFID WB GFATM*

Source: Global Health Partnerships: Assessing Country Consequences, McKinsey and Co, November 2005

Global Health Reforms Will Fail UnlessGlobal Health Reforms Will Fail Unless

• The global community lives up to its aid commitments and improves donor harmonization

• Countries base decisions on sound policy and global evidence bases tailored to individual country circumstances

• Countries improve their capacity to absorb more aid and to spend it effectively and wisely

• Donors and countries better align their preferences, political expectations, and processes

• Monitoring and evaluation efforts are given higher priority in development

• Contents• Foreword xiii• Acknowledgments xvii• Acronyms and Abbreviations xviii• Overview 1• The numbers 2• Patterns and effectiveness of current health spending 3• Health financing functions and sources of revenues 4• Risk pooling mechanisms 7• Development assistance for health 12• Realities of government spending and policy levers 14• Health financing challenges in low-income countries 15• Health financing challenges in middle-income countries 18• Learning from high-income countries 20• 1 Health transitions, disease burdens, and health• expenditure patterns 23• Demographic dynamics 24• The epidemiological transition and health spending 28• Implications of demographic and epidemiological transitions for• health financing 32• Global distribution of health expenditures 34• Sources of health spending 36• Annex 1.1 Population pyramids and global health expenditures by• region and income group 39

• 2 Collecting revenue, pooling risk,• and purchasing services 45• Health financing functions: definitions and implications 46• Revenue collection and government financing of health services 49• Risk pooling, financial protection, and equality 54• Risk pooling and prepayment 58• Purchasing 61• Health financing policies and fiscal space to increase• health spending 63• Annex 2.1 Classifications of health financing systems 66• 3 Risk pooling mechanisms 73• State-funded health care systems 75• Social health insurance 82• Community-based health insurance 96• Voluntary health insurance 103• Annex 3.1 The four types of financial risk in voluntary/private• health insurance 115• 4 External assistance for health 123• Trends in official development assistance 125• Trends in private financial flows 131• Trends in health aid 133• The effectiveness of aid 138• Recent efforts to revamp aid 150• 5 Improving health outcomes 161• Government health expenditures 163• Reaching the Millennium Development Goals for health 164• Annex 5.1 Government health expenditures, donor funding,• and health outcomes: data and methods 170

6 Increasing the efficiency ofgovernment spending 185Institutions and policies at the country level 187Policy instruments to improve public sector management 189Targeting health expenditures 198Decentralizing health care 2017 Financing health in low-income countries 209Health spending by region 211The cost of the Millennium Development Goals 214Public sources of revenue for health 218Private sources of revenue for health 227Equity and efficiency of health spending in low-income countries 236Annex 7.1 Four models to estimate the cost of the Millennium Development Goals for health at the country level 2448 Financing health in middle-income countries 249Commonality and variations in health systems 250Common health financing challenges 252Revenue mobilization 254Risk pooling 259Purchasing services 265Other considerations 272Annex 8.1 Summary of recent health reforms in middle-incomecountries 2739 Financing health in high-income countries 279Main reform trends in high-income countries 280Coverage decisions and benefit entitlements 282Collection of funds 290Pooling of funds 298Purchasing and remuneration of providers 302Index 311

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