Financing Heath Care in Low Income Coutnries Concepts, Challenges, and Management implications

Factors influencing Organizational Innovations The Problem The Innovation The Organization The Context First of all we need to understand the problem in order to be able to understand what management measures we need to use to implement the innovation. We need to understand the innovation in order to be able to explain what it is and why it is important – to all stakeholders and to those that will adopt it.

The problem Health outcome Health outcome is improving, except for MDG 5 Health spending by region Let’s break down the problem into its different parts: 1; The problem is that health outcome in relation to MDG 5 is not improving – provision of services, access to health services (health seeking behavior) 2; Another problem is spending on health care. Low income countries in all regions spend much less on health care than higher income countries and depend much more on private expenditures mostly out of pocket payments. Severe institutional, fiscal, economic, and political constraints limit the use of all organized means of financing. Asia 6 %of GDP (poorer countries 3%), 25% public spending 75% private spending mostly oop Africa 2-3% of GDP, 40% public spending 60% (6-7 USD /capita) private spending (10USD/captia) (50% oop) donor funding an important source of revenue.

The innovation Free health care for under five children and pregnant women The innovation which is going to address the problem is to provide free health care for under five children and pregnant women. Let’s look at the innovation from a Health Financing and Planning perspective

The basic principles: Raise enough revenues to provide individuals with a basic package of essential services and financial protection against catastrophic health expenditure Manage these revenues to pool health risks equitably and efficiently Ensure the purchase of health services in ways that are allocatively and technically efficient. The basic idea is that this can be done in a better way – the innovation is a relative advantage to what we have before!! Let’s look at the situation as it is before the reform.

Sources for Revenue Collection Tax collection Budget reallocation Debt relief Donor funding Lets look at some common issues and problems around resource generation in LIC. Tax collection: increases in tax revenues is slow and small. The tax base is one problem, large informal sector, large rural population, administrative capacity to collect taxes. On average 16% of GDP in SSA. Low ratios of tax to GDP imply that there is room to increase revenues form taxation – however this is not easy. Budget reallocation: Politically very difficult, implies hard political decisions. It takes a lot of time to do. Debt relief: The idea is to release resources bound for debt services and use it for financing social services (health care). Studies have shown that since the debt relief initiative was initiated debt services payments in relation to fiscal revenue has declined from 24% on average to 15% in 2003 and is continuing to decline. Is this is creating a fiscal space for more resources to be allocated to health care? Important question – has it led to more resources for health? Studies have shown a small increase in health spending in HIPCs during 1998-2002 form 6% - 8% (Hinchliffe 2004) Debt relief is a slow process. Donor funding: 20-30% on average in SSA. Issues: lack of predictability, increase focus on disease specific interventions, large number of new actors. Many different entry points into the sector; budget support, sector program support, earmarked support, GHI, TA support, Makes it veryy difficult for the gov to plan on a long term basis.

Risk pooling and financial protection Can low-income countries realistically finance universal coverage for a basic package of essential services and provide financial protection for their populations? In order to answer this question we need to look at the breadth and the depth of the coverage (% of population that will be covered, and the % of out of pocket spending).

Evidence on Financial Protection Evidence show that almost no Low Income Country have been able to provide their populations with high level of financial protection (WB 2006/WHO 2005)

Equity and Efficiency of Health Spending How do we know that the use of currently available resources are directed towards interventions that have the greatest marginal impact on health outcome? Is it possible to reach the MDGs and not target the poor? Utilization of primary care services

Purchasing of Services What services should be purchased by the government? How and from whom? For whom should the government purchase health services?