Chris Atim , PhD Executive Director, African Health Economics and Policy Association ( AfHEA )

1. Health Financing in Africa: Challenges and Opportunities for Expanding Access to Quality Health care Chris Atim, PhD Executive Director, African Health Economics and Policy Association (AfHEA) Presentation at Fifth Annual Meeting of the African Science Academy Development Initiative (ASADI) Improving Maternal, Newborn, and Child Health in Sub-Saharan Africa La Palm Royal Beach Hotel, Accra November 9 - 11, 2009

2. Explore current paradigm for health financing in Africa and whether it needs review Examine financing targets and gaps Explore challenges facing African governments to finance health Discuss complementary financing mechanisms Objectives of presentation and paper

3. Current paradigm • Diagnosis: Principal problem facing the region is a shortage of funds • Solutions: • (1) Mobilize internal and external resources • (2) Focus on key diseases and conditions • (3) Set targets and monitor progress Health financing paradigm in SSA Proposed paradigm • Acute shortage of funds to meet targets, but also problem of how funds spent • Governments should lead effort to explore innovative financing mechanisms • Focus also on how money is spent, not just how much • Collaborate with donor partners to ensure external resources help build the health system

4. Health financing: Targets Abuja: Government spending on health should be at least 15% of total government spending East Asia & Pacific: 10.1% Latin America and the Caribbean: 12.5% Commission on Macroeconomics & Health (CMH): Estimated $34 per capita for a basic package of health service East Asia & Pacific: $62 (current US$) Latin America and the Caribbean: $272 (current US$) Are targets meaningful? Relevant?

5. Percentage of national budgets allocated to health sector Source: African Union. Progress Report on the Implementation of the Plans of Action of the Abuja Declarations for Malaria, HIV/AIDS and Tuberculosis; Revised Final Draft, 22 December 2005.

6. Health financing levels are low – the $34 package of basic health services Few countries spend $34+ The CMH Target Source: WHO SIS Note: Countries spending >$90 total per capita on health were excluded to improve graph’s readability. These countries include Swaziland, Mauritius, Namibia, Gabon, South Africa, and Botswana.

7. …What difference would the Abuja target make? Source: World Bank, WDI 2007; author’s calculations.

8. As an indicator of African Governments’ commitment to contribute significantly to health sector • As a signal to partners that African Governments are matching their words with action • BUT … • It is not a relevant indicator of what is needed to provide basic health care services to the population • Depends on the denominator: 15% of what? • Other factors such as demography also key • Per capita spending is a better indicator of effort The 15% Abuja target is important

9. What is needed to meet the MDGs? • One estimate: more than 12% of GDP (at regional level) would need to be spent on health to reach the targets by 2015 • Current level: 4.7% of GDP goes to health • Additional $20-25 billion per year needed Africa region is off-track to meet the MDGs Sources: Disease Control Priorities Project, 2007; and African Development Bank, 2002.

10. Heavy dependence on donor funding raises concerns: sustainability, priorities Notes: Disbursements include PEPFAR, GFATM, and World Bank MAP funding. Source: Heller, Peter. “Pity the Finance Minister”: Issues in Managing a Substantial Scaling up of Aid Flows. IMF Working Paper WP/05/180. September 2005.

11. Heavy dependence on donor funding raises sustainability, predictability and volatility concerns: Rwanda 100% 90% 33% 80% 42% 50% 52% 53% 70% 60% 50% 42% 25% 40% 30% 28% 30% 40% 20% 32% 25% 10% 19% 18% 10% 0% 1998 2000 2002 2003 2006 Public Private Donor Source: Rwanda NHA 1998-2006

12. More money is CERTAINLY needed… Source: WHO SIS; World Bank World Development Indicators 2007 (2004 data).

13. Sustainable health systems approach needed • Equity must be consciously pursued • Concerns with high levels of out-of-pocket spending • Efficiency of current spending important • Priorities for allocation of spending • How to spend the next $1 of additional funding • Effectiveness of health spending can be improved …but money alone is not enough

14. Economic growth rates have improved, but not enough to meet health and poverty reduction targets Average annual % change in GDP in SSA countries in last decade: 5-6% India: 9% (2006) China: 11% (2006) Domestic revenue raising capacity is improving, but constrained Average tax revenue to GDP ratio: 18% (early 2000s) OECD: 40% and above Macroeconomic constraints /opportunities affecting public sector health financing

15. Fall in commodity prices due to reduced demand – oil, agric produce, minerals, tourism all affected • Thereby affecting Govt revenues and fiscal space for health spending • World Bank estimates growth slowing to 2.4% in 2009; from 4.8% in 2008 • Kenya, Tanzania, Zambia, DRC, Nigeria and Namibia reported higher drugs’ costs due to rising import prices /currency effects • Contraction in donor economies could threaten levels of external assistance • Global Fund facing financing gap of $4BN through 2010 • DRC, Lesotho, Liberia. Benin and ECSA countries report decreased funding from some donors for certain activities including HIV/AIDS impact of current global crisis

16. Health systems constraints on public sector financing • The resource gap is a problem – but health systems constraints are an important bottleneck impeding achievement of health sector goals • Crisis in human resources for health • To reach MDGs, SSA needs 1 million+ additional skilled workers • Supply chain management, etc. • Government leadership and effectiveness are often weak • Eg As seen from various public expenditure tracking surveys (PETS)

17. Revenue raising and risk pooling through insurance • Community-based health insurance • National/social health insurance schemes • Performance-based financing • Innovative international financing mechanisms What complementary or additional health financing mechanisms are there?

18. Community-based health insurance • Set up by communities, workers, providers, NGOs, etc • Pooling of community funds to pay for care of needy • Rapid growth in West and Central Africa (WCA) • Results from CBHI surveys: • Sizes are small – <1000 to 5000 members • Urban v. rural: Tend to have a rural bias: 41% covered rural areas exclusively, compared to 34% covering urban populations exclusively. • Services covered: • drugs (about 78% of mutuelles offered this benefit) • maternity care (around 58% of mutuelles covered normal delivery and 55% covered cesarean operations). • outpatient and inpatient services with at least 55% of mutuelles offering each of these services. Community-based health insurance CBHI

19. National health insurance schemes (NHIS) • Set up by Govts to extend health care access to all the population • Learnt from failed social insurance (SHI) experiences of initial post-independence period • Focus particularly or at least equally on enrolling rural and informal sector workers previously excluded from SHI schemes. • Decentralized and community-based, not workplace-based. • Countries • Ghana, Rwanda and Tanzania (NHIS built on previously-existing CBHI pilot schemes). • Nigeria, Gabon and Kenya (more classic or traditional SHI in their initial reliance on formal sector population groups National /social health insurance schemes (NHIS/SHI)

20. National Health Insurance Fund (NHIF) established in 2003 • Financed by 2.5% National Health Insurance VAT levy and diversion of 2.5% of the social security contributions of formal sector workers to the NHIF (Ghana has now achieved Abuja target) • NHIF is used to subsidize membership of formal sector employees, pensioners, children under the age of 18, pregnant women, indigents and those over 70. • Informal sector adults are the only people who pay cash to join the schemes; all others are ‘exempted’ from paying when they join. • Rapid growth in membership, totaling about 12.5 million people or about 55% of the total population by end 2008. • Driven mainly by the subsidized groups: children under 18 make up over 50% of members; exempted make up over 70% of members • But indigents make up only about 2.4% of members. An equity problem? Example: NHIS in Ghana

21. Community-based health insurance • Pros: mobilize resources, provide financial protection, quality gains, pro-poor and pro-rural • Challenges: small risk pools, financial sustainability concerns, low population coverage • National health insurance schemes • Pros: can cover large population groups, focus on enrolling rural and informal sector, can build on community-based schemes, allows earmarked taxes (Abuja target), rapid growth possible (Rwanda, Ghana) • Challenges: difficult to extend coverage to really poor, long term financial sustainability an issue Revenue raising and risk pooling through insurance - summary

22. Mechanisms that tie funding to measurable results • Link demand- and supply-side incentives with households, providers, and institutions • Examples: • Conditional cash transfers (Mexico, educ pilots in 15 African countries) • Performance-based contracting for HIV services (Rwanda) • Immunization grants (GAVI) Performance-based financing: definitions and examples

23. Pros • increase technical efficiency of service provision • stimulate demand for priority services • non-health benefits (i.e. incentives tied to school attendance) • Quality improvements • Challenges • requires sustained efforts from countries and donors • taking to scale and integration with health system needs significant resources and skills Performance-based financing

24. Global funds and health partnerships • Examples: GAVI, Global Fund, IHP+, Global Business Plan • Bilateral initiatives • Examples: PEPFAR, PMI • Mechanisms to address market failures • Examples: UNITAID, Advance Market Commitments, IFFIm, AMFm • Debt and performance-based aid modalities • Examples: IDA buy-downs, debt conversion Innovative international financing mechanisms

25. Pros • Designed to address challenges with international health aid architecture • Fresh approach to problem solving • Generating new resources for health • Challenges • Proliferation of mechanisms challenges harmonization and alignment efforts (Paris Declaration) • Increased burden on countries • Funding priorities may not align with country priorities Innovative international financing mechanisms

26. Need to update paradigm for health financing in the region Targets help galvanize attention but are not panacea and need to be tailored to countries Track per capita spending as well as 15% target More money is needed but money alone is not sufficient Attention to funding priorities, health systems, equity and efficiency also needed Complementary or additional financing mechanisms should be considered Main messages

27. Thank you