The Macroeconomic and Fiscal Context for Health Financing Policy

Informing the Dialogue Between Ministries of Health and Ministries of Finance in Low- and Middle-Income Countries

Akiko Maeda Cheryl Cashin

3rd MEETING OF THE JOINT NETWORK ON FISCAL

SUSTAINABILITY OF HEALTH SYSTEMS 24-25 April 2014 OECD Conference Centre, Paris, France

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World Bank Goals

End Extreme

Poverty by 2030

Boost shared

prosperity

Financial Protection No one should be impoverished due to out-of-pocket expenditures.

Service Coverage All communities and individuals, especially the bottom 40%, should receive the quality

health services they need through the life cycle and be protected from public health risks.

Healthy Societies Promoting investments that are the foundation of health societies, e.g., water &

sanitation, agriculture, education, social protection, transport, gender, environment, etc.

Universal Health

Coverage

World Bank Goals and Universal Health Coverage

Health Financing and UHC

Universal health coverage (UHC) requires adequate financial resources to pay for state-guaranteed health services. These resources need to be:

• Pooled effectively to provide financial protection

• Redistributed to maintain equity

• Collected and used efficiently and equitably

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• Out-of-pocket payments tend to be the largest revenue source in low-income countries

• Government budget is a significant source of pooled revenues, and it plays a key role in leveraging policy for achieving health sector goals.

Key Issues for MOH-MOF Dialogue in Low and Middle Income Countries

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Severe macroeconomic

and fiscal constraints

• Narrow tax base

and low rate of

collection

• New revenue

for the health

sector may be

substitutive

Stated priorities not always reflected in

budget allocations

• Budget

allocation does

not always

follow National

Plans/MTEF

• Rigidities in the

budget

Budget formation, execution and

reporting process is a source of inefficiency

Historical, line-item

budgeting makes it

difficult to match

expenditure with

priority services

Inefficiencies in health spending coexist with the need to increase

spending

Scope for efficiency

gains exist within

the health sector,

but it will take time

and multi-faceted

investment to

realize these gains

Health Spending Revenue for Health

Key Issues for MOH-MOF Dialogue in Low and Middle Income Countries

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Severe macroeconomic

and fiscal constraints

• Narrow tax base

and low rate of

collection

• New revenue

for the health

sector may be

substitutive

Stated priorities not always reflected in

budget allocations

• Budget

execution does

not always

follow National

Plans/MTEF

• Rigidities in the

budget

Budget formation, execution and

reporting process is a source of inefficiency

Supply-side / line-

item budgeting

makes it difficult to

match expenditure

with priority

services

Inefficiencies in health spending coexist with the need to increase

spending

Scope for efficiency

gains exists within

the health sector,

but it will take time

and multi-faceted

investment to

realize these gains

Health Spending

Scope for cooperation between MOH and MOF

Revenue for Health

Ghana’s Experience

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Ghana is a west African country with a population of ~25 million

Per capita GDP = $1,150 (2010) Life expectancy = 65 years

Ghana’s Experience

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Total Health Expenditure = $54/person

16%

National Health Insurance Scheme

40%

Ministry of Health Budget

44%

Out-of-Pocket

Ghana’s Experience

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0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

2009 2010 2011 2012 2013 2014 2015

Proj

ecte

d G

over

nmen

t H

ealt

h Ex

pend

itur

e (n

omin

al i

n m

illio

ns G

hC)

Improvement in revenue collection

General economic growth

Actual

Economic growth has been robust, but improvements in government revenue collection are critical.

Macroeconomic and Fiscal Context

Ghana’s Experience

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Share of total government budget allocated to health has stagnated even while new earmarked revenue source added and economic growth has been strong.

Health as % of total government budget

0

2

4

6

8

10

12

14

16

18

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

NHIS started Ghana achieved lower-middle income status

Ghana’s Experience

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NHIS funds are transferred to extra-budgetary fund so can be spent flexibly. But often not transferred on time, causing arrears and interest charges.

Rigidities in public financial management

54%

4%

38%

4%

Salaries Administration Service Investment

MOH line-item budget

Ghana’s Experience

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Inefficiencies and unproductive cost grown

-

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

2005 2006 2007 2008 2009 2010 2011

VAT SSNIT Investment Income Premiums Other Grants

Ghana ‘s NHIS has achieved a growing and diversified revenue base

0

100000000

200000000

300000000

400000000

500000000

600000000

700000000

2005 2006 2007 2008 2009 2010 2011

Revenue Claims

But claims per member is growing faster than revenue

NHIS expenditure/member is increasing > 30%/year

Without increase in population coverage, benefits or utilization

Guidance Note on the Macroeconomic and Fiscal Context for Health Financing Policy in LMICs

Objective: to inform the dialogue between Ministries of Health and Ministries of Finance in support of Universal Health Coverage.

The Guidance Note:

• Outlines the key components of the macroeconomic, fiscal, and public financial management context that need to be considered for an informed health financing discussion at the country level.

• Is organized around 4 sets of questions to help structure the policy dialogue firmly in the context of a country’s macroeconomic and fiscal context.

• Points to analytical tools that are available to assist in answering these questions for a specific country.

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Guidance Note on the Macroeconomic and Fiscal Context for Health Financing Policy in LMICs

Key Areas for MOH-MOF Health Financing Policy Dialogue

He

alth

Se

cto

r R

eve

nu

e 1. Realistic government health spending projections

given macroeconomic and fiscal constraints.

2. Realistic opportunities to re-prioritize within the budget

He

alth

Ex

pe

nd

itu

re 3. Opportunities and constraints to better align

health spending with health system objectives

4. Efficiency of current health expenditure patterns

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Sample tool: World Bank Macro-fiscal context and health financing factsheets

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THANK YOU! amaeda@worldbank.org

ccashin@r4d.org

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