Mobilizing the private sector for HIV and social health protection Joep M.A. Lange

1. Mobilizing the private sector for HIVand social health protection Joep M.A. Lange (acknowledging Onno Schellekens and Marianne Lindner) PharmAccess Foundation Amsterdam Institute for Global Health & Development

2. How I (a physician) feel talking about financing (in 12+ slides)

4. Health systems in Africa Africa spends very little on health care Health care in Africa is underfunded Population X mio Burden of communicable diseases DALYS Total health expenditure x $ mio Africa Rest of the world Source, WHO 2008

5. Tanzania Health expenditure per capita in sub-Saharan Africa is far from sufficient 24.Sudan 25. Cote d’Ivoire 26.Rwanda 27.Uganda 28.Angola 29.Malawi 30.Congo Rep. 31.Gambia 32.Zimbabwe 33.Zambia 34.Senegal 35.Lesotho 36.Cameroon 37.Sao T & Pr. 38.Cape Verde 39.Swaziland 40.Equatorial Guinea 41.Namibia 42.Gabon 43.Mauritius 44.Botswana 45.South Africa 46.Seychelles 1.Congo Dem. Rep. 2.Burundi 3.Niger 4.Ethiopia 5.Sierra Leone 6.Eritrea 7.Liberia 8.Guinea Bissau 9.Comoros 10.Madagascar 11.Central Afr Rep. 12.Tanzania 13.Mozambique 14.Chad 15.Togo 16.Guinea 17.Mali 18.Mauritania 19.Burkina Faso 20.Ghana 21.Benin 22.Nigeria 23.Kenya

6. The AIDS response did create islands of sufficiency in a swamp of insufficiency (Gorik Ooms, MSF)

7. Health systems in Africa Donor funding goes mostly to the public sector The private (for-profit) health sector is underfunded Other Private sector Public sector Source: National Health Accounts 1997-2002 (latest year available); McKinsey analysis

8. Public financing of health in developing countriesLu C, et al. Lancet 2010;375:1375-87 • Development assistance for health (DHA) to government had a negative and significant effect on domestic government spending on health (minus $ 0-43 to 1.14 for every $ of DAH). • DAH to the non-governmental sector had a positive and significant effect on domestic health spending.

9. Health systems in Africa Public services benefit the rich more than the poor The poor are often not reached Percentage of lowest and highest quintile using public health services Source: Preker AS, Langenbrunner JC et al (2005)

10. Health systems in Africa The private-for-profit health sector is an important provider for the poor > 40% of lowest income quintile receive health care from private providers Percentage of lowest and highest quintile receiving care from private providers Source: The business of health in Africa, IFC 2008

11. Health systems in Africa Risk pooling is very scarce Africans lack protection against medical costs; solidarity is limited Social security and private prepaid health care spending Only 4% of total health expenditure in Africa is financed through health insurance Source: WHO 2008

12. Health systems in Africa Private out-of-pocket expenses are ~50% of total health expenditure Many fall in a poverty trap; increased inequity Source: WHO 2008

13. The second law of health economics Rich countries have a lower share of out-of-pocket expenses than poor countries

14. Demand Medical care usage Supply Quality health care low low low low Delivery Health systems in Africa African health systems are stuck in a vicious circle: low demand and low supply of health care Access to quality basic health care among the poor is low Financing

15. The need for an alternative approach • There are good reasons to involve government in health care: • Efficiency concerns: market failures, externalities • Equity concerns/ social justice: health (care) as a human right • However, preconditions for state-led model to work are not met in Africa: • Reasonable level GDP/capita: sufficient domestic government resources • State capacity to enforce means-tested contributions for health care and actually deliver services nation-wide • Innovative approaches to healthcare development are needed

16. The role of donor funding • How to use donor money in such a way that: • the total amount of financial resources in the health system increases, and • access to quality basic health care among low-income people is increased?

17. The role of donor funding • Strategies that avoid crowding out effects and reduce out-of-pocket expenses • Set up voluntary risk pooling and prepayment for low-income groups • Channel private out-of-pocket payments into risk pools • Those who can pay do pay • In tandem with boosting supply chain • No supply, no prepayment • Telecom industry: low-income people do prepay when the service is good

18. HIF Dutch gov 100 mln User premium contributions 2-3 mln IFHA 50 mln MCF 2 mln Alternative model: a virtuous circle of health care World Bank 5 mln USAID 20 mln • Demand • Out-of-pocket • Access to health care • Ownership • Solidarity • Supply • Quality • Efficiency/ cost • Risk/ investment • Data Financing Delivery • Patient • Empowerment • Willingness to pay

19. Example Hygea (Nigeria) Supply side: Reduced risk and increased investment • Reduced investment risk due to collateral arrangement consisting of long-term donor commitment through HIF. • This made it possible for insurer to attract new debt and private equity investments: • Debt capital: • Reduction cost of debt capital by two-thirds • FMO/IFC inserted significant new debt capital • Private equity: • IFHA significant minority share in insurer • Few years later significant capital from venture capital fund Mo Ibrahim • Total amount of money in the value chain increased 10 times