Published on Investing in Health

Mobilizing domestic resources for universal health coverage

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Photo © Dominic Chavez/World Bank
In September 2015 the entire world committed to 17 goals and 169 targets. In addition to eradicating poverty, this sustainable development agenda will cover economic, social and environmental issues. Economists have estimated that the cost of implementing the Sustainable Development Goals (SDGs) will run into trillions of dollars.  So countries, donors, foundations and the private sector are being asked to fund interventions that will improve everything from our skies to our oceans, including our health that will improve, education, wellbeing, etc., and everything in between. All of which are, of course, crucial for sustainable development. 
Because of the tightening aid environment given the global downturn, migration and refugees issues, domestic resource mobilization (DRM) for development has become the subject of many international meetings and keynote addresses on health, education, sanitation, infrastructure, climate change, etc. I am a proponent of DRM: I was one of the first finance ministers to warn the Least Developed Countries (LDCs) that we need to do better on this front because the resources to achieve the SDGs would not be forthcoming at the levels required.But I must confess some concern that DRM has become the new rallying cry of the development community in an era of scarce resources. Yet even with increased DRM, each sector must focus hard on the justification for their prioritization.
Given the new expanded development agenda outlined by the SDG's, the competition for resources will become increasingly fierce. As a Finance Minister, I was inundated with very laudable proposals for funding from various sectors and ministries. Deciding what to prioritize was often a very tough decision, as I am sure is the case for many Finance Ministers. To increase the priority given to health care from increased domestic resources, the health community, both globally and nationally, would need to make a better and more holistic case for health that includes the economic benefits of investing in health. To secure the funding needed for UHC, the Ministers of Health and the health community in general really need to learn to speak the language of Finance Ministers.
So what is Universal Health Coverage?
At its core, UHC is the basic principle that all people should receive quality health services that meet their essential needs (to be defined) without exposing them to financial hardship in paying for them. While it is likely that all of us here already have some affordable access to healthcare, it is a basic human right that has not been met and remains beyond the reach of many people particularly in developing countries. At the core of UHC is ensuring equity in access to health care where there is currently none. Therefore it is important to design UHC with the poor and difficult to reach afforded foremost priority - to first guarantee a minimum package of essential health care to those who would otherwise be unable to afford it.
Despite the encouraging progress in recent years in areas like reproductive health and family planning, the world is very far from universal coverage, even as regards priority services. For example, every year 46 million births are unattended by skilled personnel and 23 million infants still do not receive basic vaccines. Every year 100 million people are pushed into poverty and a further 150 million suffer financial catastrophe because of out-of-pocket expenditure on health services. Countries that are closest to UHC in terms of attainment of WB-WHO indicators are mostly OECD countries. This inequity gets to the heart of the MDG’s unfinished agenda. Unless we make UHC our focus now as we transition to the SDGs then we will continue to have preventable human suffering, especially of women and children, and this can act as a significant barrier to many if not all of our global development goals.
Why should we care about UHC?
Many health ministers are already well aware of this. But it is important to understand that this issue goes well beyond health, and as such is a matter for every part of government, and every government. Not just because of the moral argument that all people should have access to health as a human right, but also because it’s simply sound economics. There is now compelling evidence to suggest that investing in health yields remarkable returns.
A 2014 Chatham House report estimates that for lower-income countries (LICs) and middle-income countries (MICs), health contributed to annual growth in income to the tune of about 1.8 per cent annually. For sub-Saharan Africa, the annual contribution was as large as 5.7 per cent. A recent study, published in the journal Health Affairs, gives further detail on these returns. Looking at 94 low and middle income countries, the researchers found that for every dollar invested in childhood immunisation we can expect to save US$ 16 in healthcare costs, lost wages and productivity due to illness. If you take into account the full value people place on living longer, healthier lives, then that return on investment increases even further to US$ 44. This is evidence that expenditure in healthcare is a considerable investment with significant returns.
So where do these gains come from? These come from investing in ‘prevention’ so that you avert illness and the huge societal and economic burden that sickness entails. As we say “Prevention is better than cure”. A child when vaccinated remains healthy and doesn’t require healthcare or treatment, both of which come at a cost to governments and families, and can prevent parents from going to work. A healthy infant is also more likely to attend and do better at school. So rather than pushing families into poverty through medical bills, through a simple preventive intervention such as vaccination, you’re not only boosting the earning and spending capacity of parents, but also helping to create a more productive ‘next generation’ in the process. Put simply, keeping a child healthy, such as through childhood immunisation, helps boost a country’s economy. Ultimately it’s not just about preventing disease; it’s about keeping people healthy so they can live to their full potential.
A review of historical studies provides further evidence of the economic impact of improving health outcomes. According to a Chatham House report, from 1970-2000 around 11 per cent of the growth in LICs and MICs can be attributed to reductions in adult mortality during this period. Further proof that a healthier population can help lead to a healthier economy. UHC provides a platform to make that possible and is a very good investment.
How much is needed to finance UHC in LIC/LMIC?
The big question is what will it cost? For low income and low-to-middle income countries affordability is critical. It doesn’t matter what the return on investment is if a country can’t afford it in the first place. According to the Lancet Commission for Investing in Health, between US$ 70 and US$ 90 billion in additional health spending annually is needed in order to ensure that a set of key health services identified in the SDGs as important stepping stones towards UHC are universally available. That means that, at current levels of health spending, LICs and LMICs will need to increase health expenditures by a third.
These are a significant amount of resources but there has been some progress towards increasing resources for health. Between 1995 and 2013, global health spending increased, driven by economic growth. Indeed, total health expenditure grew more rapidly than GDP, with average spending as a share of GDP increasing from 4.9 to 6.4 per cent over the same period.
However, although very positive, this does not paint the full picture. A closer look reveals that although General Government Health Expenditure (GGHE) increased during this period, the majority of this increase came from high income countries.

Countries would also need to ensure that catastrophic and impoverishing out-of-pocket payments (OOPPs) are kept to a minimum. OOPPs can be large and unpredictable, and can often be the triggers that push a family into poverty. Because of this, they act as a very real barrier to health services and economic success for the poorest members of society. To remove these barriers, it is recommended that governments commit to ensure that OOPPs represent at least less than 20 per cent of the total health expenditure and there are no OOPPs for priority health services or for the poorest families. Currently, however, LICs and LMICs are only halfway towards this target, with OOPPs accounting for an average 43 per cent and 34 per cent respectively of total health expenditures.
What can countries do to ensure financing of UHC? 
Of course, reaching these targets will require financing. But how exactly? Even within the poorest countries there are opportunities to increase domestic resources and improve the efficient use of resources dedicated to health. The tax base in many of these countries has been increasing over recent years due to economic growth, with the African continent one of the fastest growing prior to the current downturn. The recent slow-down in global and regional growth means that countries cannot solely rely on this income source going forward.
Improving efficiency in health expenditure can also yield more. The 2010 World Health Report suggested that around 20–40 per cent of total health spending – which would represent around $1.4–$2.9 trillion in 2012 – might be lost through waste, corruption and other forms of inefficiency. Some of the leading causes of inefficiencies include higher-than-necessary prices for medicines; use of substandard and counterfeit medicines; overuse or oversupply of equipment and technologies; an inappropriate or costly mix of staff; inappropriate hospital size; etc. By making the necessary changes, we can ensure that resources allocated to healthcare are used most efficiently to achieve the highest results.
Most LICs and LMICs, even with the economic downturn, have considerable scope to raise revenue through increases in tax collection efforts and government charges. For example, the International Monetary Fund (IMF) estimates a potential of up to 4 percentage of GDP in additional tax revenues for LICs. Developing countries can improve tax collection through more efficient tax administration, and broadening the tax base. This is not easy and can take time but is do-able. In addition, there is scope within developing countries to increase tax revenues by reforming tax policy. For example, indirect taxes like VAT are still low in some countries, and this offers an opportunity for increase.
Similarly, tackling tax avoidance and evasion, and tax incentives for companies, such as those related to natural resources can raise additional revenues in LICs and LMICs. Governments could also greatly benefit from plugging leakages in revenues resulting from corruption and the illicit flow of funds. According to Global Financial Integrity (GFI), a Washington DC-based anti-corruption think tank, the global proceeds flowing from cross-border criminal activities, corruption and tax evasion is estimated at between US$ 1 trillion and US$ 1.6 trillion. In Africa alone, the High Level Panel on Illicit Financial Flows, chaired by former South African President Thabo Mbeki, estimates that as much as US$ 50 billion in illicit funds is being illegally diverted per year. That is double the amount of overseas development aid (ODA) that the continent received in 2014.
Tax innovation is another potential revenue source through sin taxes, telecoms taxes, additional corporate and social responsible tax etc. These taxes are sometimes earmarked to specific expenditures like health care or education. But earmarking can introduce rigidity and sometimes be counterproductive. At this point in time I must tell you that your colleagues on the education side are having the exact same conversation on how to use additional domestic resources for education. And I know those in infrastructure are doing the same. I therefore think that there is room for a more cross-sectoral or multi-sectoral approach, bringing together at the minimum, health and education to argue for increased prioritisation as resources increase.
This highlights the imperative need to improve the dialogue between cabinet Ministers, in particular in making the case for health and education as a strong investment.
Existing external aid resources must be used more efficiently
As a final consideration I would like to discuss how better use of external aid can help bring us closer to UHC too. Under the MDGs we saw increases in development assistance for health (DAH). In LICs, DAH increased six-fold between 1990 and 2014 and now accounts for up to 30 per cent of health expenditure. Despite increased domestic expenditure, most LICs especially fragile states still need considerable DAH when it comes to improving the health of their populations. Without this assistance, these countries would not have seen the progress that we have made so far.
However, in recent years we have witnessed how donor assistance priorities have shifted at a global level. Health is now just one of many competing issues on the donor agenda, along with climate change, security, humanitarian crises and refugees, among others. Therefore, we cannot expect DAH to continue to increase at the same pace and donors are increasingly looking for value for money. In this context, it is even more important that we ensure aid is put to the most efficient and effective use, allocated towards the areas of greatest need and that countries prepare for an eventual reduction in support as they grow wealthier.
Gavi, the Vaccine Alliance - the organisation of which I am Board Chair - is one example of how this might be achieved. Gavi supports countries to introduce new vaccines and strengthen their immunisation programmes – one of the best buys in health. It has a systematic approach to evaluating which vaccines are funded based on where it can achieve the greatest value for money. And it puts sustainability at the centre of its business model with every country, no matter how poor, contributing to Gavi-supported programmes. Countries’ contributions increase as they get richer until they eventually transition out of Gavi support altogether. This model ensures country ownership, builds fiscal and budgetary space for immunisation and puts countries on the path to sustainability.
In this regard, it is important that countries, and developing partners too, focus on DAH being used to help leverage domestic and even private resources to improve health financing as a means of funding improvement to our health systems.
To conclude, I believe we have a strong investment case in UHC especially some of the essential elements on prevention such as immunization. We also have the potential to improve the efficiency with which present resources are used in health and to raise additional resources. But we must remember we have to argue the case. We need to put finance and health together. We need partners and allies in education. We need to leverage our external assistance wisely, using it to produce measurable results. Above all, we must not take anything for granted.
Dr. Ngozi Okonjo-Iweala, Chair of the Board of Gavi, the Vaccine Alliance, recently gave the keynote address at the first Annual Universal Health Coverage Financing Forum in Washington, DC, April 14-15, 2016.
Gavi, the Vaccine Alliance
Annual Universal Health Coverage Financing Forum


Ngozi Okonjo-Iweala

Director General, World Trade Organization

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