financingTheFuture articleIn June 2012, The United States Agency for International Development (USAID) joined hands with the Governments of India and Ethiopia, and many other development and private sector partners, with the ambition of ending preventable child and maternal deaths by the year 2035, and forging a Grand Convergence in life expectancy between rich and poor nations. Later that year, the President’s Emergency Fund for AIDS Relief (PEPFAR) rolled out a blueprint to achieve an AIDS-Free Generation. In 2013, the World Bank Group set an equally ambitious goal of eliminating extreme poverty and boosting shared prosperity by 2030. This Spring, the World Bank President was joined by the UN Secretary-General to take on Universal Health Coverage (UHC), recognizing its centrality to ending extreme poverty.  

Achieving these bold visions requires significantly larger, more strategic and innovative investments in health and the public sector. Yet, evidence suggests that such investments are not only affordable but are likely to provide handsome returns. The Lancet Commission on Investing in Health estimates that the requisite investment for attaining these health goals is only one percent of expected economic growth by 2035 and as such very affordable. Moreover, it estimates a positive return on this investment 9 and 25 times (see figure 1).
Figure 01Despite the clear and compelling economic rationale, and despite the efforts of countries and development partners to achieve the Millennium Development Goals (MDGs) by the end of 2015, unacceptable shortfalls are likely to remain. Too many mothers and children will continue to die from preventable causes because they lack access to essential, quality care, or because they cannot afford to pay for the care they need. Moreover, against the backdrop of this large unmet need, the development and global health landscapes will continue to change, with half of today’s low-income countries transitioning to middle-income countries. Chronic conditions—such as heart disease and diabetes—will rapidly become an even greater threat. The post-2015 Sustainable Development Goals (SDGs) will need to put forward a health agenda that comprises the unmet goals from the current MDGs, as well as the new challenges of chronic diseases and injuries characteristic of rapidly developing societies.    

Encouragingly, there is ample evidence that cost-effective interventions simply need to be delivered to end preventable maternal and child deaths and to sharply reduce deaths and disability from chronic illnesses. Delivery, however, appears not to be so simple: worldwide, one billion people lack access to health care, and about 100 million people face poverty every year as a result of out-of-pocket health care costs.

Fortunately, there is growing evidence that achieving the health outcomes that will make up the SDGs is best accomplished through universal health coverage (UHC), or when everyone has access to quality, essential health services without struggling to pay for them. Countries like Brazil, Mexico, Thailand, and Turkey have shown the promise of universal health coverage for their people, and more and more countries—like Kenya, Indonesia, Myanmar, Nigeria, Peru, Philippines, Senegal, and South Africa—are prioritizing similar reforms to achieve UHC.

Countries can chart their progress towards UHC by using new time-bound targets: scaling up equitable access to essential health services and preventing poverty due to out-of-pocket payments for health care. Developed by the World Bank and the World Health Organization, these targets can be applied to all countries, rich and poor, as envisioned in the post-2015 framework.

A critical dimension of these reforms relates to the financing of the health sector and the challenge of transitioning from out-of–pocket payments when illness strikes to pre-payment and pooling systems like insurance. UHC, however, is not about Official Development Assistance (ODA) paying for insurance premiums: rather it is about nurturing the development of institutions that can effectively mobilize the requisite finances and deploy them into modern systems of service provision to foster equitable access to good quality treatment and care. Such a transformation in the financing of health seems ambitious, however, like the achievement of the Grand Convergence described above, it is highly affordable. A 2012 report by the Rockefeller Foundation found that the cost of creating the institutional capacity to implement UHC is only about 2.5 percent of a country’s total health expenditure, over the period of reforms.  

Getting such institutional capacity in place will be especially important given the significant costs estimated by the 2013 Lancet Commission on Investing in Health1 for achieving the Grand Convergence and progression toward universal health coverage for low- and middle-income countries over the period of 2015-2035. For example, among low-income countries, the requisite increase in spending on health to meet these goals is determined to be US$24-26 per person per year through 2035. This level of investment would require total health expenditure per capita to almost double to reach approximately four percent of Gross National Income (GNI).  
Figure 02
In general, total health expenditure tends to grow as countries’ economies expand, what some call the “first law of health economics.” Figure 2 demonstrates this robust relationship between per capita GDP and per capita total health expenditure among 126 developing countries.  However achieving the recommended doubling of health expenditure per capita raises important questions related to where such resources are likely to be found such as through taxation. In fact, lower- to middle-income countries have increased their tax revenues as a percentage of growing gross domestic product (GDP) from 12-14 percent to 16-18 percent over the past decade, though this is still short of the 20 percent needed to sustain MDG goals. A recent report by the Institute for Health Metrics and Evaluation (IHME)2 indicates that lower- to middle-income countries have increased their health spending by 10 percent per year, much faster than the growth of ODA for health. Figure 03
However, the expansion of tax revenue for health may not be fast enough in countries that transition from low- to middle-income status and where ODA contributions are likely to be reduced. Where public spending fails to fill the gaps, individuals are forced to meet the costs for health services by paying out-of-pocket, which typically sends them into financial ruin as a result of domestic economic growth. Both donors and countries must work together to strengthen domestic resource mobilization to avoid this predictable financial “ditch” in health expenditure. Figure 3 illustrates this gap. We must avoid this predictable financial “ditch” not only by anticipating the percentage of budgets that fund the health sector, but also by creating systems that promote pre-paid, risk-pooled financing.

Dialogue on domestic resource mobilization and innovative financing was a key highlight of the Mexico City High Level Meetings in April on Effective Development and Cooperation hosted by the Government of Mexico. The meetings were a follow-on to the previous Paris, Accra and Busan discussions. The meetings in Mexico City focused on how principles and innovative mechanisms including “new” ODA, coordination, transparency, private sector investments, south-south cooperation, and domestic resource mobilization can all work toward effective and sustainable development. The sessions on domestic resource mobilization explored avenues for cooperation between donors and countries to strengthen systems and institutional capacity to mobilize existing domestic resources. For example, strengthening tax administration systems allows countries to capture a higher percentage of taxable dollars available.

Supporting the emergence of financing models that will facilitate the achievement of the post-2015 development goals in general, and in health more specifically, is a core mandate of development partners such as the World Bank Group and USAID. Together, there is an unprecedented opportunity to work together with countries to forge strategies that will facilitate the rapid emergence of fair and sustainable financing for health. These strategies will place a premium on domestic resource mobilization mechanisms—both new and old—supported and supplemented by ODA. The strategies will stretch to include other global financing partners such as GAVI; the Global Fund to Fight AIDS, Tuberculosis and Malaria; foundations and other bi-laterals in the spirit of the International Health Partnership, such that the collective efforts of development partners are aligned with country plans.

While concerted efforts around mobilizing more money for health are imperative in charting pathways towards UHC, they are not sufficient. Attention is also required on getting more health for the money. In this regard, the experience of the World Bank Group in systematically structuring incentives into health care delivery systems to achieve better results—so-called results based financing (RBF)—is extremely encouraging. The weight of evidence from close to 40 countries—largely concentrated in Africa—that have invested over US $2.5 billion in RBF over the last five years, points to better value for money in terms of improved health outcomes; increased and more equitable access to better quality services; and greater efficiency. For example, a randomized trial in Rwanda showed a significant increase in coverage of institutional deliveries, preventive care visits for children and quality of care in the facilities with RBF compared to the baseline and control facilities (See Figure 4).

The example of “more health for the money” through RBF emphasizes the critical importance of the need for “know-how” related to delivery of services. This includes not only recognizing the spectrum of key ingredients such as health workers, supply chains for medical products, information systems and community mobilization, but also investing in understanding how they can be brought together to ensure comprehensive and continuous patient-centered care.  

This “know-how” is in high demand and short supply. To strengthen the supply of systems “know-how” the World Bank Group is actively investing in the “science of delivery” and USAID recently opened an office of health systems. These efforts are converging together with other partners around the theme of patient centered health systems at the Third Global Symposium on Health Systems Research in Cape Town in October 2014. Building the evidence base of what works in practice will foster the joint learning necessary to accelerate the timely achievement of the post-2015 development agenda in health. GHDFigure 04