Sustainable health financing in the Pacific (WP22)

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AusAID KNOWLEDGE HUBS FOR HEALTH

HEALTH POLICY & HEALTH FINANCE KNOWLEDGE HUB

NUMBER 22, NOVEMBER 2012

Sustainable health fnancing in the

Pacifc: tracking dependency and

transparency

Joel Negin

Senior Lecturer, Sydney School of Public

Health, University of Sydney

Wayne Irava

Director, Centre for Health Information, Policy

and Systems Research, Fiji National University

David Leon

Sydney Medical School, University of Sydney

Clement Malau

Associate, Centre for International Health,

Burnet Institute

Chris Morgan

Principal Fellow, Centre for International Health,

Burnet Institute


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Sustainable health fnancing in the Pacifc: tracking

dependency and transparency

First draft November 2012

Corresponding author:

Joel Negin

Sydney School of Public Health and Menzies Centre for

Health Policy,

University of Sydney

[email protected]

This Working Paper represents the views of its author/s

and does not represent any ofcial position of the

University of Melbourne, AusAID or the Australian

Government.

ABOUT THIS SERIES

This Working Paper is produced by the Nossal Institute

for Global Health at the University of Melbourne,

Australia.

The Australian Agency for International Development

(AusAID) has established four Knowledge Hubs for

Health, each addressing different dimensions of thehealth system: Health Policy and Health Finance;

Health Information Systems; Human Resources for

Health; and Womens and Childrens Health.

Based at the Nossal Institute for Global Health, the

Health Policy and Health Finance Knowledge Hub aimsto support regional, national and international partners

to develop effective evidence-informed policy making,

particularly in the eld of health nance and health

systems.

The Working Paper series is not a peer-reviewed

journal; papers in this series are works-in-progress. The

aim is to stimulate discussion and comment among

policy makers and researchers.

The Nossal Institute invites and encourages feedback.

We would like to hear both where corrections are

needed to published papers and where additional work

would be useful. We also would like to hear suggestions

for new papers or the investigation of any topics that

health planners or policy makers would nd helpful. To

provide comment or obtain further information about

the Working Paper series please contact; ni-info@

unimelb.edu.au with Working Papers as the subject.

For updated Working Papers, the title page includes

the date of the latest revision.


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Health Policy and Health Finance Knowledge Hub WORKING PAPER 22

Sustainable health nancing in the Pacic: tracking dependency and transparency

SUMMARY

Using recently conducted national health accounts, the

key questions that this working paper aims to answer

are:

How much of health sector spending is contributed

by external development partners in selected Pacic

Island countries?

Are there any areas of health nancing that are

particularly reliant on external funding?

Do any of these contributions represent

dependence?

The external contribution to health sector spending is

9 per cent of total health expenditure in Fij i, 17 per cent

in Vanuatu, 21 per cent in Samoa, 39 per cent in Tonga

and 60 per cent in the Federated States of Micronesia

(FSM). The US contribution to the health sector in FSM

represents almost US$200 per person per year.

Within the health sector, prevention and public health

services are relatively reliant on donors, 30 per cent

of nance for this area in Fiji and 51 per cent in Tonga

coming from donors. This level of spending might allow

donors to inuence sector priorities.

There is no set denition of dependence, but this brief

highlights the need for more data transparency and

openness in health aid investments, especially in light

of recent statements by AusAID and the World Bank

about the need for long-term support to the social

sectors of Pacic Island countries.

Greater data transparency is needed to ensure

accountability on all sides. Improved data sharing can

lead to better policy making and ultimately more aideffectiveness.


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The Paris Declaration on Aid Effectiveness and

the Accra Agenda for Action emphasise the need

for greater coordination and transparency among

development partners and with recipient countries

(OECD 2012). This is mirrored in the core principlesof Australias Partnerships for Development, signed

with 11 individual Pacic countries, which highlight

mutual respect, mutual responsibility, a focus on

results and working together to achieve the Millennium

Development Goals.

Understanding external nancing for the health sector

is critical to advancing the aspirations for country

ownership that lie at the centre of the Paris Declaration

and Accra Agenda. Transparency and predictability of

external nancing are vital to health sector ownershipand planning and represent good aid practice.

At the same time, there has been criticism of over-

reliance on donors by some PICs, with calls for

more self-sufciency (ABC Radio Australia 2012;

Hughes 2012). Globally, there is a vibrant debate

about developing countries reducing their domestic

health spending when donor money comes in. This

displacement discussion has important implications for

how donor contributions are viewed and their impact

on strengthening the sector. A 2010 study concludedthat when governments receive international aid

for health care projects, their own spending gets

crowded out or displaced (Lu, Schneider et al 2010).

They found that when $1 is delivered from a donor,

the recipient government removes an average $0.43

of its own spending from the health sector and puts

that money into another sector. The inference that

aid may make governments less responsible for their

own health care is profoundly concerning (Basu 2012).

This study, however, did not assess displacement by

aid modality or whether aid was aligned with country

priorities. This analysis has not been conducted in the

Pacic specically, and it should be noted that in the

region, governments contribute a higher percentage

of the national budget to health than in many other

developing countries.

Whatever the aggregate ndings from the global data,

the magnitude and impact of donor dependence

in the health sector in the Pacic are important to

understanding sustainability, ownership and alignment

with aid effectiveness principles. Despite this, little

analysis has accompanied these important questions.

INTRODUCTION

Pacic island countries (PICs) have been some of the

largest per capita recipients of ofcial development

assistance (ODA) from OECD countries over the past

decades (World Bank 2012a). This has been particularly

true in the health sector, where a few PICs are among

the largest per capita recipients of health aid in the

world (IHME 2009).

Australia provides approximately half of all global ODA

to Papua New Guinea and Pacic island countries.

Overall Australian aid to the Pacic is forecast to

increase from $1.17 billion in 2012-13 to $1.6 billion in

2015-16 (current prices) (Commonwealth of Australia

2012). Saving lives is the rst of the ve strategic

goals guiding the Australian aid program; 16 per cent

of Australias ODA to the Pacic is directed to this

goal. In 2011-12 alone, Australia invested $177 million

for health activities in the Pacic through bilateral and

regional programs (AusAID 2012).

Development partners in recent years have become

more explicit about the need for high levels of donor

funding in some settings. The Australian Independent

Review of Aid Effectiveness, published in 2011, stated:

[I]n the South Pacic microstates(Kiribati, Nauru and

Tuvalu), Australian funding will be a signicant feature

of budgets for the indenite future, and it is best that

Australian aid planning recognise that reality (AusAID

2011). This acceptance of ongoing high levels of donor

funding represents an important shift in thinking.

Similarly, recommendation 16 of the Independent

Review notes that predictable, multi-year funding of

partners should be provided, acknowledging the need

for transparent ongoing support. Similar notions are

expressed in AusAIDs draft Pacic health strategy.The World Bank draft discussion note on the Pacic

Islands also explored the issue of aid dependence in

the region, importantly acknowledging that a number of

PICs will require long-term support in the social sector.

The World Bank note states: [I]nternational assistance

[and] both nancial and sustained technical capacity,

will need to play a key role in supporting shared regional

institutions, delivering public services, and nancing

imports, over the medium to long-term. Delivery of

aid, and approaches to evaluating its impact, couldbe altered to better reect its likely long-term role in

supporting social outcomes (World Bank 2012b).


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Micronesia, and CHIPSR has been engaged to compile

NHAs for Fiji with the recent release of two reports in

early 2011 (for the nancial year 2007/08) and early

2012 (for FY 2009/10).

There has not been an NHA conducted in Papua New

Guinea. However, in PNG the National Fiscal Economic

Commission assisted the Department of Health to carry

out work on the nancing needs for the new National

Health Plan (NHP) 2011-20 with an estimated cost of

14.17 billion kina. A forthcoming World Bank study on

human resources in health, and complementary work

under way on health system nancing, will provide

additional evidence. Alignment of the plan to the

National Health Service standards would also assist in

updating the actual cost of the NHP. There is still a needto carry out an NHA (or similar) to determine clearly the

structural arrangements, donor contributions and PNG

government contributions to the health sector. The

Solomon Islands also have not conducted an NHA, but

there are plans for one to be started in 2013.

NHAs are valuable to PICs because they allow countries

to track the nancial resource ows within their health

systems, while following an internationally recognised

standard methodology. The routine and timely

production of NHAs can help PICs make informeddecisions about the nancing status of their health

systems as well as assisting comparative analysis

among the countries in the region. Unfortunately,

while the methodology enables this to be done, the

obstacles to monitoring this accurately lie in PICs poor

health information systems and the absence of data

from health providers and development partners.

This paper extracts its ndings from the NHA data and

analysis conducted by CHIPSR with support from the

World Health Organization, the Nossal Institute and theUniversity of Sydney.

RESULTS

In Fiji in 2010, government nanced 61 per cent of total

health expenditure, private sources (including out-of-

pocket) 30 per cent and external sources 9 per cent

(Fiji Ministry of Health 2010). Government spending

decreased since the 2007 NHA, and the contributions

from private and external sources increased (FijiMinistry of Health 2008).

Recent work by the Nossal Institute for Global Healths

Health Policy and Health Finance Knowledge Hub aims

to bridge the knowledge gap with regard to health

nancing in the Pacic.

Although there is a number of health nancing data

sources available, this working paper uses the recently

conducted national health account (NHA) analysis in

the region to answer the following questions:

How much of health sector spending in Pacic Island

countries is contributed by external development

partners?

Are there any areas of health nancing that are

particularly reliant on external funding?

Do any of these contributions represent

dependence?

NHA processes have only recently been standardised

in Pacic Island countries. This paper also aims to

provide an example of how NHA data can be used

for rapid secondary analyses with relevance to policy-

makers.

METHODOLOGY

The analysis presented here comes from a variety ofsources, most of which were supported by the Nossal

Institutes Knowledge Hub over the past few years.

The main partner for this analysis has been the Centre

for Health Information, Policy and Systems Research

(CHIPSR) at the Fiji National University. CHIPSR has

been deeply engaged in developing, supporting and

analysing national health accounts (NHAs) in the region.

BACKGROUND

NHAs are a new source of data that has become

available over the last few years and which allows

a deeper analysis of the contribution to health

spending from external sources against that from

various domestic sources. NHAs systematically track

the ow of money into and through the health system.

Each transaction is classied specically within the

International Classications for Health Accounts,

which provide precisely dened, mutually exclusive

classications that allow comparability across countries.

In recent years, NHAs have been completed in

Tonga, Samoa, Vanuatu and the Federated States of


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Tongas dependence on external nancing is more

than four times that of Fiji. Trend data are available for

Fiji, Samoa, Tonga and FSM and are shown in Figure

1 as percentage of donor contribution to total health

expenditure.

The situation in FSM is notable in that more than 60 per

cent of total health expenditure in the country is donor

fundedalmost entirely from United States government

grants. These grants are a long-term source of funds,

with agreement for continued funding until 2023.

Public nancing accounts for only about 10 per cent

of health expenditure, revealing that the government

of FSM is entirely dependent on external funding. The

risks inherent in such a situation are vast. In order to

encourage the government of FSM to nd alternativesources of funding and to reduce dependence, the US

government is reducing the amount of funds available

by 10 per cent a year. Health sector nancing options

for the government of FSM might include user fees,

a national health insurance scheme or an employer-

based private modelall of which have their own issues

of equity and efciency.

The situation in Samoa and Tonga is quite distinct

from that of FSM, as there are a number of donors

contributing to the health sector in these two countries.Major partners including Australia, New Zealand and

Development assistance for the health sector has risen

from FJ$6.9 million in 2007 to FJ$22.1 million in 2010

and, as a share of total health expenditure, from 3.4 per

cent in 2007 to 8.8 per cent in 2010.

In an extension of the traditional NHA methodology, the

CHIPSR team has endeavoured to break down external

funding by contributor to understand better who is

providing funds to Fijis health sector. The 2010 report

conrms that the Australian government is by far the

dominant funding source, providing FJ$13.3 million,

or 60 per cent of total external funds. The Global Fund

(FJ$3.2 million) and WHO (FJ$2.35 million) are the next

two most prominent funding sources (both of which

receive substantial funding from AusAID as well). More

details on sources of external funding are available inanother Nossal Institute paper available on its website

(Negin, Irava and Morgan 2012).

Reaching 9 per cent of total health expenditure, ODA

is a considerable and increasing contributor to the

health sector in Fiji. But further analysis is needed to

understand whether this level represents dependence.

Comparable data are available from Samoa, Tonga,

Vanuatu and FSM from their NHA reports. Using the

most recent data (2007), external donors provide16.5 per cent of total health expenditure in Vanuatu,

21.4 per cent in Samoa and 39.2 per cent in Tonga.

FIGURE 1. DONOR FUNDING AS PERCENTAGE OF TOTAL HEALTH EXPENDITURE

2003

70%

60%

50%

40%

30%

20%

10%

0%

FSM

FIJI

SAMOA

TONGA

20052004 2006 2007 2008 2009 2010


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Tonga, which, in turn, are less reliant than FSM. The

country-specic data are critical to understanding

health sector nancing and areas that possibly require

alterations.

We acknowledge that the data provided are not

perfect and may well not represent the complete or

precise situation in the Pacic. Some contributions

might be missing or not reported accurately due to

the difculty of obtaining clear data from partners. We

present this information as the best available data on

health nancing in the region and, importantly, also to

highlight the need for better data collection and funding

transparency.

The implications of the large funding contributionby external partners for public health activities are

considerable, as there is a risk that development

assistance inuences priorities. An earlier working

paper published by the Nossal Institute suggested that

external allocations may follow donor priorities rather

than domestic focus areas or more general health

system strengthening. Despite much higher mortality

rates from non-communicable diseases in the Pacic,

external funding for HIV was found to be considerably

higher than for NCDs: from 2002 to 2009, US$68

million for HIV and US$33 million for NCDs (Negin andRobinson 2010).

the World Bank all contribute similar amounts, thus

diminishing the dependence on any one partner.

Beyond the percentage contribution by external actors,

the absolute amount of the contribution is important toexamine. Figure 2 shows the per capita contribution

from external sources for the countries for which trend

data are available. The US contribution to FSM stands

out at almost US$200 per person, many times that in

Tonga, Fiji and Samoa.

The NHA methodology is able to provide further

information on what activities receive external funding.

Specically, 30 per cent of the nancing for prevention

and public health services in Fiji comes from external

donors, suggesting some level of dependence.Similarly, the external contribution to the public health

category in Vanuatu in 2007 was 34 per cent of the total,

and in Tonga 51 per cent of funding for prevention and

public health services came from donors (Negin, Irava

and Morgan 2012).

DISCUSSION

NHA data show considerable diversity in external

nancing for health in the Pacic and in donor

dependence in certain focus areas. Fiji is less

dependent on external sources than Samoa and

FIGURE 2. DONOR FUNDING PER CAPITA IN REAL US DOLLARS

2003

$250.00

$200.00

$150.00

$100.00

$50.00

$0

FSM

FIJI

SAMOA

TONGA

20052004 2006 2007 2008 2009 2010


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NHA experience has shown that it remains difcult

to gather the data necessary to differentiate external

funding by technical area or health system function.

A considerable part of this difculty arises from a

lack of nancial transparency from some donors.Despite professed commitment to the ownership

and coordination principles enshrined in global aid

effectiveness declarations, there continues to be

a need for some development partners to improve

expenditure reporting to national governments, both

to comply with NHA data gathering and to provide

disaggregation needed for better planning. During the

NHA process, some donors were unable to provide

clear funding allocations because they worked to

funding cycles different from that of the government. A

possible means for improving data collection would be

greater incorporation of capacity building in accounting

and nancial management in donor health sector

grants to strengthen the ability of ministries to manage

external funding.

Lack of transparency can lead to inconsistencies in the

data. For example, whereas the Chinese government

was recognised as a signicant contributor to the Fijian

health sector in 2007, no comparable information was

available in 2010. The data from Japan were also not as

clear as desired. Not all agencies break down their data

in as transparent a way as others. For example, some

of the data provided by United Nations agencies might

include the salaries of staff. More consistency and

transparency in the methods of reporting are needed.

Efforts are being made outside of the health sector

to strengthen assessment of donor funding. The

World Banks Public Expenditure and Financial

Accountability (PEFA) assessment process, which has

been conducted in a number of countries in the region,

includes indicators that examine donor contributions to

the budget. Specic donor-related indicators include:

predictability of direct budget support;

nancial information provided by donors for

budgeting and reporting on project and program

aid;

proportion of aid that is managed by use of national

procedures.

Over the past seven years, 16 PEFA assessments

have been conducted in 11 countries in the Pacicregion (including Timor-Leste). In those assessments,

donors have received only four A scores (three for

The discrepancies between disease burden and

external nancing suggest that funds might be directed

to areas that do not necessarily match PIC priorities or

needs. Donor dependence in the area of public health

has considerable risks, and greater discussion isneeded of how these funds are allocated and to which

focus areas. Globally determined funding priorities

are not necessarily appropriate for the Pacic. There

is currently a push by development partners for PICs

to develop sub-accounts for HIV or maternal and child

health but not for NCDs. This highlights the need to

better track external funding, not only in terms of total

value but also with regard to focus areas and source.

Much is made of the issue of alignment in the Paris

Declaration on Aid Effectiveness and, in order for thoseprinciples to be met, donor funding should support

the priorities of recipient countries. Where there are

national health strategic plans, donor funding must

align clearly with those plans in a transparent manner.

Sector wide approaches (SWAps) are one tool to

facilitate information sharing and joint planningthough

the results of Pacic health SWAps have been mixed

(Negin and Martiniuk 2012). Additionally, rigorous

analyses currently under way in PNG and the Solomon

Islands, dening service standards and their costs, arenecessary to ensure that NHAs and similar analyses

reect the needs of PIC governments.

The issue of donor dependence is a difcult one. There

is no clear denition as to what constitutes dependence.

Is it 9 per cent, as in Fij i, or only an external contribution

approaching 60 per cent, as in FSM? When the

Australian government notes that its funding will be a

signicant feature of budgets in some PICs, does that

suggest an external contribution of 10 per cent, 30 per

cent or more? Have these questions been asked? Oris dependence more an issue of inuence rather than

amount?

Given the size of PICs and their level of economic

development, some ongoing support from partners

is to be expected, but the question that arises is what

level of donor support is considered safe and at what

level the support becomes dangerous dependence.

Do development partners ask these questions when

determining their nancial support to the sector?

Despite the clear benet from having this type of

nancing information for planning and coordination,


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multilateral partner (such as UNICEF) also counts its

funding. This complexity highlights the need for more

openness of who is funding what and where.

Transparency also plays a wider role in health sectorcollaboration in the Pacic. Beyond facilitation of

health planning, a push for more openness and

communication has been highlighted as critical to

inuencing policy in the Pacic (Brien 2011; Negin,

Morgan and Condon 2012).

Above and beyond providing more transparent

funding information, development partners need to

strengthen the capacity of PIC government ofcials

and civil society members to understand and analyse

resource allocation and its links to health policy.The NHA and other nancing information becomes

inuential only when it is analysed, discussed and

presented. The capacity to translate this information in

a manner relevant to the local health system needs to

be developed. The Flagship Course on health nancing

and health systems that is being adapted to the Pacic

region is one such mechanism that aims to build skills

among PIC ofcials.

CONCLUSIONS

The national health accounts initiative is a start to

increasing understanding of health nancing in the

Pacic, but it should not be seen in isolation from wider

health sector nancing analyses. While the initiative

captures contributions, it does not yet capture what

is required to fund the health system fully nor stated

priorities set by national governments. A critical rst

step is for each country to dene clearly both their

national goals and objectives and the amount of funding

that will be needed to meet those goals. Once that isoutlined, development partnersas well as the national

governmentmust state transparently how much

funding they are providing and to which components

of the national strategy.

The small economies of most PICs make it even more

critical to understand the nancing and payment

arrangements. The NHA-style analysis being performed

should be part of an overall process of strengthening

systems in the Pacic. Leaders and managers should

understand the nancing, payments and organisationalstructures in the individual countries to enhance service

delivery.

Nauru alone) and one B score, the rest being C and

D. In countries that have had multiple assessments,

little progress has been seen on the donor indicators.

Despite the lack of progress, assessment of donor

actions will potentially bring important benets to thetransparency and clarity of contributions to the health

sector specically.

This type of analysis will become of greater importance

in the Pacic as donor contributions are placed under

strain due to the global nancial crisis, as new donors

such as China and Taiwan become more prominent

and as non-state actors expand their service provision.

The non-government Church Health Services have

been a major health provider for some time, especially

in PNG. The private sector is becoming more active inSamoa and Fiji and is predicted to provide increasing

services in PNG as the economy booms. Increasing

private health care provision raises concerns regarding

potential inequity in health services for the population.

The data presented here on nancing for health in the

Pacic demand that important questions be asked

about the sources and amounts of external funding,

about the reliance on donors for public health funding

and about sustainability. This type of information

is necessary for better health sector planning andfor strategic coordination among partners and

governments. Specically, this information is needed to

help Northern Pacic countries prepare for changes in

US funding. It would also have helped PNG respond to

the recent withdrawal of Global Fund support.

Greater transparency is also needed to improve

accountability. As part of aid effectiveness principles,

development partners have committed to more

predictable funding. For example, recommendation 16

of Australias Independent Review of Aid Effectivenessstates: AusAID should devote greater senior

management resources to developing and managing

relationships with key partners. Predictable, multi-

year funding of partners should be provided and

micromanagement avoided (AusAID 2011). In order

for development partners to meet this goal, more

transparent statements of long-term funding are needed.

Australias push to fund more activities through

multilateral partners complicates the needed

transparency in donor funding. There is the risk ofdouble counting if AusAID counts both its multilateral

and bilateral contributions to a certain country and the


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should clearly articulate costing and map out funding

arrangements to address priority health needs. Such

a strategy would then serve as the foundation for

harmonisation of support to the health sector by

partner agencies. This of course does not guaranteethat resource allocations and national strategies will

match, but does provide a basis for discussion and

accountability.

In line with the World Health Assembly resolutions

(World Health Organization 2011) on policy development

and health systems strengthening, it is critical that

countries develop or update their national health

sector strategies. This will encourage countries in theregion to base their health interventions on evidence

and enhance the capacity to lead and coordinate their

health sector responses. Such health sector strategies


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Communicable Diseases: Implications or Priority Setting in the

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do health planners need to know? A case study of Fijis

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Sustainable health financing in the Pacific (WP22)