Resource Needs and Funding for Health Systems Professor Brook K. Baker Health GAP (Global Access Project) Northeastern U. School of Law, Program on Human Rights and the Global Economy Seminar: Right to Health: Challenges in Funding, Health Systems and Universal Access in Development Policies, Madrid, Spain June 2, 2010

Outline of Presentation Current global health spending: domestic health spending and development/donor assistance for health. Global health resource needs and financing gaps. Campaigning for adequate and sustained donor financing for health – what should we be doing?

Health Spending in Developing Countries with 92% of Global Disease Burden is Anemic 2004, global health spending $4.1 trillion 2003, dev. country health spending $410 billion World Bank Strategy for HNP Results , health spending in SSA $27 billion. GHWA Education (2008). Out of pocket – 70% in LICs 50% in African countries)

Domestic Resources for Health: Abuja 15% Commitment; New Revenues At the end of 2009, only six African countries had ever met their 2001 Abuja Declaration commitment to spend 15% of their budget on health. Countries must also pursue a job- growth and domestic revenue agenda –Resource extraction fees –Tax avoidance and capital flight –Pro-growth, job-creation policies

Would Meeting Abuja 15% Make a Difference? USAID Roundtable (2008)

Donor/Development Assistance for Health DAH estimates vary depending on what is included. Actual disbursements are generally significantly less than commitments. A large portion of DAH never hits the ground.

Kaiser Estimates – DAH

DAH by Major Component

2007 DAH by Sub-Sector (Kaiser 2009)

Development Assistance for Health Lancet 2009; 373: 2113–24

Allocation of ODA to Health Has Increased

But, ODA has stagnated since 2005

Increasing Donor Assistance for Health is Essential “Massive increases in external assistance are needed” to finance MDG health goals. (WB, Health Financing Revisited 2006) Old estimates of resource needs (CMH & World Bank) range between $25 billion and $70 billion in additional aid, per year, to meet MDG health goals. Ibid estimates from the Task Force on Innovative Financing has calculated additional global health resource needs for LICs alone of $45 billion by These estimates may be far low, esp. when all dev. countries are included.

How big is the gap? Who will pay?

TOTAL DEVELOPING COUNTRY HEALTH RESOURCE NEEDS AND GAP (Baker, 2010)

Recurrent Dilemmas in DAH Earmarks & conditionalities. –Only 20% to government budget support. –Over 50% is off budget and not available to support the health system or to pay recurrent public sector costs: staff, infrastructure, training, management, etc. –Very high overhead costs, small percentage hits the ground Unpredictable, short-term and volatile.

Recurrent Dilemmas in DAH Lack of coordination/harmonization. Tied aid and donor-provided technical assistance. Overhead losses. Corruption and inefficiency in recipient bureaucracies.

Subadditionality Donor health aid is often fungible, meaning that countries can disinvest in health at the same time that donors are investing, usually as a result of IMF/ministry of finance macroeconomic restraint policies and misguided government spending priorities.

IMF Macroeconomic Fundamentalism Inflation, fiscal deficit, & reserve targets Debt payment first, reduce unproductive government spending Wage caps and budget ceilings

IMF Macroeconomic Fundamentalism Foreign aid is unreliable, must be discounted Sustainability – stay within future fiscal space Growth is secondary to stability

Hydraulic Pressure → Subadditionality On average, 37% of all additional aid was indirectly diverted to increase foreign currency reserves; another 37% was diverted to reduce domestic debt; only 27% was actually spent. Figure A2.9.

Poorer, Weaker Countries Spent Even Less Good performers (low inflation, high reserves) spent 49%, weak performers only 17%.

Poorer, Weaker Countries Spent Even Less Good performers (low inflation, high reserves) spent 49%, weak performers only 17%.

Sub-Sub-Additionality New study shows that for every $1 of foreign aid, governments may have reduced their own spending, on average, by $1.14! –Lu et al., Lancet (2010). An unpublished study finds a high correlation between subadditionality and IMF loans.

Health Spending Faces Competition: Food and Fuel Shocks Food prices went up 83% from and have remained high Oil increased over 300% but has fallen back since Global food resource needs estimated between $20-30 billion a year. These price shocks had adverse effects on imported inflation, government spending, and currency reserves

Global Recession and Climate Control Current financial crisis: lower remittances, fewer exports, eroded terms of trade, lower tax revenue; increased debt, lowered reserves Climate control and mitigation resource needs - $100 billion/year. Global Fund needs $20 billion PEPFAR flat-funded FY What are the prospects for increased resources for health?

Campaigning for Global Health Funding Mobilizing and allocating domestic resources for health – long overdue Donor achievement of.7% ODA, including.1% for health – long overdue Innovative financing for health, esp. CTL/FTT for health – an idea whose time has come. Attacking IMF macroeconomic constraints and achieving additionality – long overdue