2.16 Financing healthcare in low- income developin

2.16 Financing healthcare in low- income developing countries: A challenge for equity in health 168

ESSENTIALS Low-​income developing countries remain challenged by the increasing demand for essential healthcare combined with gov- ernments’ inability to mobilize and allocate adequate financing to health systems. According to their country specific contexts, they need to improve the equity and efficiency of their health systems, in particular their public sector management, and increase their gov- ernmental health spending through enhanced domestic resource mobilization and more efficiency in public spending. They need to sustain external assistance and implement social protection policies that decrease out-​of-​pocket payments, thereby preventing people with catastrophic illness from becoming impoverished. Economic growth and increased health spending alone are not enough to scale-​up healthcare coverage and achieve better health outcomes. These must be combined with accountability of results, transparent management of public funds, and multisectoral efforts with community involvement at implementation level. We should appreciate the progress made in all low-​income developing coun- tries in reducing both under-​five mortality rate (U5MR) and ma- ternal mortality rate (MMR), even if most did not achieve the relevant Millennium Development Goals (MDGs). The successful cases of Bangladesh, Bhutan, Mongolia, and Nepal, who did achieve MDGs 4 (U5MR) and 5 (MMR) over the last 10 years, illustrate good practices that deserve more careful study. Public spending on health in low-​income developing countries has not had a strong effect on reducing U5MR and MMR. Much more evident is the effect of female education. In designing public policy to reduce excess mortality in low-​income developing coun- tries, beyond increasing gross national income per capita, education of women seems to be a crucial issue. There is no magic blueprint for health financing: each country should design its own strategy based on evidence provided by national health accounts. The central issues to be addressed are:
Where does the money come from? Where does the money go to? What kind of services are performed? And what types of goods are purchased? These accounts should be monitored and updated annually on the basis of epidemiological and other relevant evi- dence, and the outcome of this process should generate the support for updates of national health financing strategy. Introduction People have aspirations to fulfil their health needs. Health systems of some nature have existed as long as communities have tried to treat diseases and protect their health, but healthcare has a cost and people cannot access it without creating the ability to pay for it. This chapter provides an overview of the essential health financing issues. It includes policies, concepts, approaches, practices, and experiences that could enhance the understanding of comprehensive health sys- tems reforms that would both provide sufficient financial resources for equitable access to quality health interventions and protect people from catastrophic health expenditures. Health financing is analysed from the perspective of governments, but the roles of other important stakeholders such as the wider society and private sector are also taken into account to assist in the design, implementation, and evaluation of effective health financing reforms. The focus of this chapter is on the group of low-​income developing countries1 considered according to 2014 International Monetary Fund classification as ‘countries that were designated Poverty Reduction and Growth Trust (PRGT) eligible and had a level of per 2.16 Financing healthcare in low-​income developing countries: A challenge
for equity in health Luis G. Sambo, Jorge Simões, and Maria do Rosario O. Martins 1  Afghanistan, Bangladesh, Benin, Bhutan, Bolivia, Burkina Faso, Burundi, Cambodia, Cameroon, Central Africa Republic, Chad, Comoros, Côte d’Ivoire, Congo, Congo Democratic Republic, Djibouti, Eritrea, Ethiopia, Ghana, Guinea, Guinea-​Bissau, Gambia, Haiti, Honduras, Kenya, Kiribati, Kyrgyzstan, Lao People’s Democratic Republic, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Moldova, Mozambique, Nicaragua, Nigeria, Myanmar, Mongolia, Nepal, Niger, Papua New Guinea, Rwanda, São Tomé and Príncipe, Senegal, Sierra Leone, Sudan, Solomon Islands, Somalia, South Sudan, Togo, United republic of Tanzania, Tajikistan, Uganda, Uzbekistan Yemen, Vietnam, Zambia, Zimbabwe.

2.16  Financing healthcare in low-income developing countries 169 capita GNI less than (US) $2390’ (IMF, 2014). Qualitative and quan- titative analysis is made for both controllable and uncontrolled vari- ables, beginning with the health situation in low-​income developing countries when the Millennium Declaration was adopted in the year 2000 by the United Nations General Assembly. Particular attention is paid to the way incidence and prevalence of diseases has evolved since then, and the way this has impacted on mortality rate of chil- dren under five years old (U5MR), maternal mortality ratio (MMR), and life expectancy at birth. The cases of the low-​income developing countries recording the best progress in reducing the U5MR and MMR—​Bangladesh, Bhutan, Mongolia, and Nepal—​are analysed in terms of the relationship between their health financing patterns and the attainment of Millennium Development Goal (MDG) 4 (re- duction of child mortality) and Goal 5 (improved maternal health), with particular emphasis on cases in which health targets have been reached with limited financial resources. After discussion of health systems, the chapter then analyses health spending, the financing pattern, and the relationship between the latter and health outcomes in terms of achievement of the MDGs. We caution that there are variances that decision-​makers can con- trol, such as funding, financial access, social protection, quality of healthcare, and efficiency, and aspects that cannot be controlled, such as demographic trends, new norms, and standards resulting from sci- entific breakthroughs, epidemics/​pandemics, and other public health threats, which can all affect health outcomes. In light of current sci- entific knowledge and best practices on health financing, the chapter generates possible outcomes, depending on choices made, that are relevant to the context of low-​income developing countries. Subsequently, the chapter discusses the levels and sources of health financing in low-​income developing countries and the way these could have influenced the scaling-​up of cost-​effective public health interventions towards health MDGs. It makes an analysis of health financing patterns and the way health economic indicators evolved from 1995 to 2013, comparing with what happened in high-​ income countries during the same period. Our last analysis refers to the health production function, which is calculated on the basis of a multivariate regression model using a mathematical equation that relates health outcomes to enabling health system functions. We are not prescriptive and do not generate a blueprint model or template for health financing in low-​income developing countries. Available evidence shows that low-​income developing countries that made some strides in improving key health status indicators applied different models that combined various funding sources such as taxation, social insurance, and direct pay- ments (among other variables) in different macroeconomic envir- onments. We pursue scientific evidence for trustful health financing approaches in the context of low-​income developing countries. We provide ideas on macroeconomic policy and fiscal space measures that could create budget room, and thereby allow governments to provide additional resources to the health sector. Epidemiology of diseases in low-​income developing countries by the year 2000 The overall level of development influences the quality of life and health of a population. Political, economic, social, cultural, and en- vironmental determinants play a role in both the access to care and the health status. We realize that health improvements in the devel- oped world over the last century were mainly due to enhancement of living and working conditions, notwithstanding that scientific breakthroughs and technology innovation played an important role. In most low-​income developing countries health profiles are still characterized by high birth rates, high mortality rates, low life ex- pectancy, and high disease burden, with particularly adverse impact on vulnerable populations such as children and pregnant women. Poverty and hunger, which span over all low-​ and lower-​middle-​ income countries, are central determinants of heath and were considered by the United Nations as the number one Millennium Development Goal (MDG1—​eradicate extreme poverty and hunger). Poverty is the root of malnutrition, drives the spread of disease, increases vulnerability to outbreaks, epidemics, and pan- demics, and deters indigents from seeking healthcare. Iniquities in access to health determinants generate uneven distribution of health outcomes between continents, countries, and within countries (be- tween people according to their socioeconomic condition, age, sex, and geographic area). Human rights movements aim to influence governments to provide the political, economic, and social environ- ments that enable the fulfilment of health as a right of each citizen. The incidence and prevalence of diseases In 2000 the biggest seven killers of the poor in Africa and Southeast Asia were HIV/​AIDS, diarrheal diseases, acute respiratory infec- tions, maternal and perinatal conditions, malaria, measles, and tuberculosis. Among children and young adults (0–​44 years old), more than 36 million people lived with HIV/​AIDS worldwide, 95% in developing countries and especially in sub-​Saharan Africa. The same year, about 8.8 million people developed active tuberculosis and 1.7 million died of the disease, with 99% of all tuberculosis (TB) cases living in developing countries, and malaria killed more than 1 million people (3000 deaths a day), mostly children under 5 years old and pregnant women in sub-​Saharan Africa. Maternal death The main causes of maternal death are severe haemorrhages, infec- tion, hypertension, prolonged obstetric labour, and complications of unsafe abortions. In low-​income developing countries in 2000, the MMR was 628.1 per 100 000 live births compared with 18 per 100 000 in high-​income countries. The under-​five mortality rate The U5MR was 132.2 per 1000 live births in low-​income developing countries, compared with 9.7 in high-​income countries, yet with the existing knowledge and available technologies it would have been possible to prevent and treat most of the diseases responsible and reduce suffering of many millions of people over the world. Life expectancy at birth In 2000, life expectancy at birth in low-​income developing countries was 55 years, compared with 76 in high-​income countries. This was strongly correlated with very high infant and child mortality and premature death. There were, however, some examples of success in the midst of poverty such as: (1) Cambodia, with the highest HIV/​AIDS preva- lence in Asia (4%), succeeded in slowing the spread of HIV infec- tion among sex workers under 20 years old, from 40 to 23% between

170 section 2  Background to medicine 1998 and 2000; (2); the Vietnam malaria programme that reduced the malaria death toll by 97% between 1992 and 1997; and (3) the successful tuberculosis programme in Peru that increased the direct observed treatment short-​course coverage from 70% in 1990 to 100% in 1998, with a cure rate of 90%. Examples such as this pro- vided evidence of the feasibility of reducing disease burden in low, lower-​middle, and upper-​middle-​income countries. Best practices and success stories encouraged world leaders to strive towards a global response to fight these three killer diseases, giving direct help to the most vulnerable people, removing significant obstacles that keep them in poverty, preventing their families from falling into poverty, and strengthening health services’ capacity and improving health status in general. Striving towards health Millennium Development Goals in low-​income developing countries All United Nations member states and about 23 international or- ganizations committed to achieve the following Millennium Development Goals (MDGs), established following the Millennium Summit of the United Nations in 2000, by 2015: • to eradicate extreme poverty and hunger; • to achieve universal primary education; • to promote gender equality; • to reduce child mortality; • to improve maternal health; • to combat HIV/​AIDS, tuberculosis, malaria, and other diseases; • to ensure environmental sustainability; • to develop a global partnership for development. In 2005, the G8 finance ministers agreed to provide enough funds to the World Bank, International Monetary Fund, and the African Development Bank to cancel $40–​55 billion in debt owed by members of the heavily indebted poor countries to allow them to redirect resources to programmes for improving health and education and for alleviation of poverty. Each economically ad- vanced country was expected to progressively increase its offi- cial development assistance to reach a minimum net amount of 0.7% of its gross national product at market prices by the middle of the decade. In 2009, the High-​Level Taskforce on Innovative International Financing for Health Systems estimated that on average $44 per capita—​rising to $60 in 2015—​would be needed to ensure coverage with a set of essential health services in 49 low-​ income countries. The following indicators were selected to assess the progress of health status in low-​income developing countries from 1990 up to 2014: to reduce by two-​thirds, between 1990 and 2015, the under-​ five mortality rate (MDG target 4); to reduce by three-​quarters the maternal mortality ratio (MDG5 target 5); to reduce the burden of HIV/​AIDS, tuberculosis, malaria, and non​communicable diseases (MDG target 6); and to increase life expectancy at birth. The following paragraphs assess the progress made in reaching these important indicators in the 60 countries under review. For analysis we computed, for each country and based on the World Health Organization (WHO) estimates, the way each indicator evolved from 1990 to 2013. A critical analysis of MDGs 4 (U5MR) and 5 (MMR) reveals four categories of countries (Table 2.16.1 and Fig. 2.16.1): 1. Those who are clearly outliers: Zimbabwe and Lesotho are inside the red ellipse in Fig. 2.16.1 because their very high burden of HIV/​AIDS has negatively impacted on child and maternal health. Table 2.16.1  Progress towards MDG4 (U5MR) and MDG5 (MMR) in low-​income developing countries Country % reduction in MDG4 % reduction in MDG5 Bhutan –​72.9% –​86.7% Malawi –​72.3% –​53.6% Nepal –​72.1% –​75.9% Bangladesh –​71.4% –​69.1% Liberia –​71.3% –​46.7% Mongolia –​70.5% –​65.6% Tanzania, United Republic of –​69.0% –​54.9% Ethiopia –​68.6% –​70.0% Niger –​68.2% –​37.0% Bolivia –​68.1% –​60.8% Cambodia –​67.7% –​85.8% Eritrea –​66.9% –​77.6% Rwanda –​65.7% –​77.1% Madagascar –​65.2% –​40.5% Nicaragua –​64.8% –​41.2% Mozambique –​63.2% –​63.1% Kyrgyzstan –​63.2% –​11.8% Uganda –​63.0% –​53.8% Honduras –​62.4% –​58.6% Senegal –​60.8% –​39.6% South Sudan –​60.8% –​59.4% Yemen, Republic of –​58.9% –​41.3% Guinea –​57.6% –​40.9% Gambia, The –​56.5% –​39.4% Lao People’s Democratic Republic –​55.9% –​80.0% Tajikistan –​55.9% –​35.3% Zambia –​54.6% –​51.7% São Tomé and Príncipe –​53.8% –​48.8% Myanmar –​53.5% –​65.5% Vietnam –​53.0% –​65.0% Benin –​52.5% –​43.3% Moldova –​52.3% –​32.0% Burkina Faso –​51.7% –​48.1% Mali –​51.7% –​50.0% Burundi –​51.5% –​43.1% Haiti –​49.7% –​43.3% Congo, Republic of –​46.7% –​38.8% Afghanistan –​45.7% –​66.7% Nigeria –​44.9% –​53.3% (continued)

2.16  Financing healthcare in low-income developing countries 171 2. A second group of countries (Somalia, Central African Republic, Kenya, and Cameroon) that made very small improvements (in- side the orange ellipse in Fig. 2.16.1) are countries that faced frequent humanitarian crises or/​and present high inequalities. 3. A third group of 14 countries (inside the blue rectangle in Fig. 2.16.1) with an achievement above the median (Bolivia, Cambodia, Eritrea, Ethiopia, Honduras, Lao, Malawi, Mozambique, Rwanda, São Tomé and Príncipe, South Sudan, Tanzania, Uganda, Zambia). 4. Four countries with very good progress towards these two goals: Mongolia, Bangladesh, Nepal, and Bhutan (inside the green ellipse in Fig. 2.16.1). In Mongolia and Bhutan primary healthcare services are fully state funded, ensuring free access to everyone, and social health insurance population coverage is high. This, however, is not so in Bangladesh and Nepal. Bangladesh invested significantly in strengthening the health sector. In Nepal specific programmes provided free delivery of care and financial incentives to pregnant women to access a variety of maternity services, including antenatal care, de- livery in a facility and postnatal care. Programmes targeting child health have been intentionally community-​based. In this group of countries, wealth inequalities (as measured by Gini Index) are low. Regarding MDG6, the HIV prevalence for adults dropped on average from 3.6% to 2.5% (from 2000 to 2013), while the average number of deaths due to tuberculosis (per 100 000 population) de- creased from 50 to 30. For the same period, the reported number of Country % reduction in MDG4 % reduction in MDG5 Guinea-​Bissau –​44.9% –​39.8% Togo –​42.1% –​31.8% Djibouti –​41.3% –​42.5% Uzbekistan –​40.5% –​45.5% Sudan –​40.2% –​50.0% Sierra Leone –​40.0% –​52.2% Kiribati –​39.0% –​48.0% Ghana –​38.8% –​50.0% Comoros –​37.9% –​44.4% Côte d’Ivoire –​34.0% –​2.7% Congo, Democratic Republic of –​32.7% –​27.0% Chad –​31.3% –​42.4% Papua New Guinea –​31.1% –​53.2% Cameroon –​30.6% –​18.1% Kenya –​28.4% –​18.4% Mauritania –​23.5% –​49.2% Solomon Islands –​22.2% –​59.4% Central African Republic –​21.3% –​26.7% Somalia –​19.0% –​34.6% Lesotho 13.6% –​31.9% Zimbabwe 18.6% –​9.6% –0.8 –0.7 –0.6 –0.5 –0.4 –0.3 –0.2 –0.1 0 0 –0.1 –0.2 –0.3 –0.4 –0.5 –0.6 –0.7 –0.8 –0.9 –1 % Reduction in MDG4 Weak Good progress % reduction in MDG5 0.1 0.2 Fig. 2.16.1  Achievement of MDG4 (U5MR) and MDG5 (MMR) (% of reduction between 1990 and 2013). Source: WHO, Millennium Development Goals Indicators. 2014.

172 section 2  Background to medicine malaria deaths decreased on average 65%. However, the pattern of progress was different across countries: for example, in Malawi and Zimbabwe, both with very high HIV prevalence, considerable pro- gress has been made in the last 15 years, but this has not happened in other countries, such as Mozambique. TB rates remain high in countries like Nigeria, Somalia, and Cameroon. Mean life expectancy at birth in low-​income developing countries has improved from 55.08 years (in 2000) to 61.57 (in 2012), com- pared with 76 (in 2000) to 79 (in 2012) in high-​income countries. Age-​standardized mortality rate due to communicable diseases, non​communicable diseases and injuries has dropped 35%, 7%, and 20%, respectively, from 2000 to 2012. In summary, the progress towards health MDGs in low-​income developing countries is heterogeneous, with some champions, a large group of good performers, a group of countries with slow im- provements, and two countries with no progress. In 2018 the WHO published a progress report on the health-related MDGs, which re- corded impressive progress in some countries. Bangladesh, Bhutan, Mongolia and Nepal did achieve MDGs 4 (U5MR) and 5 (MMR) over the last ten years (Tables 2.16.1 and 2.16.2), but most low-​ income developing countries did not and will need to address them in their national health development policies and related health system designs. Apart from HIV/​AIDS, tuberculosis, and malaria with serious impact on MDGs 4 (U5MR) and 5 (MMR), many other infectious diseases—​neglected tropical diseases and epidemic prone diseases—​ mostly hit poor people. These diseases place a substantial economic burden on health systems and contribute to lifelong disadvantage of already deprived people. For example, malaria hits the subtropical areas around the world—​the poverty belt—​and in high endemicity areas of sub-​Saharan Africa it accounts for 40% of public health ex- penditure, 30–​50% of inpatients admissions, and up to 50% of out- patient visits. There is currently a shift in global focus from communicable dis- eases to non​communicable diseases as the major cause of morbidity and mortality in low-​income developing countries, but most of these countries are facing the burden of both. More research is required to understand the associations between communicable diseases and non​communicable diseases. The 2002 emergence of severe acute respiratory syndrome (SARS) in Asia; the 2007 bird flu outbreak caused by highly pathogenic H5N1 avian influenza in Asia, Europe, and Africa; the 2009 swine flu pan- demic produced by H1N1 influenza in South-​America; the 2014–16 and 2018–19 (ongoing) haemorrhagic fever epidemics caused by Ebola virus in West Africa; and the Zika virus epidemic of 2015–16, which began in the Americas; have all vibrantly demonstrated the vul- nerability of communities to emerging and re-​emerging diseases, and the need for more resilient health systems at local and global levels. By identifying ways to strengthen health systems and improve access to essential healthcare, it is possible to reach people in poor resource settings, even in remote areas, and rescue them from the trap of disease–​poverty–​disease. Tackling diseases requires invest- ments in knowledge, technology, manpower, and other required capacities to strengthen the overall health infrastructure. However, bearing in mind that interrelationships between health–​disease and its determinants are complex and dynamic, and often taking place in turbulent and unforeseen environments, leaders, and health man- agers must apply a critical approach to designing and developing health systems. Governments, partners, communities, and other im- portant stakeholders require reliable and appropriate evidence at the right time to develop health policies, strategic plans, and operational budgets that respond to epidemiological patterns in terms of pro- vision of care, and reflect equity principles in terms of access to it. The challenge of financing healthcare in  low-​income developing countries General approach of health systems financing A health system can be defined as all organizations, people, and actions whose primary intent is to promote, restore, or maintain health. According to WHO a national health system has six core components: health workforce, service delivery, health technologies (medical products, vaccines, and technologies), financing, informa- tion, and leadership and governance. Health systems play a key role in improving the health status of populations and contribute to the improvement of living standards and economic and social development. In health terms, ‘ideally Table 2.16.2  Likely timescale for achieving MDGs 4 and 5 in low-​income developing countries MDG 4 –​ Reduce under 5 mortality MDG 5 –​ Improve maternal health Achieved by 2019 Bangladesh; Bhutan; Mongolia; Nepal Bangladesh; Bhutan; Mongolia; Nepal Achieve 2020–​2029 Benin; Bolivia; Cambodia; Comoros; Eritrea; Ethiopia; Ghana; Haiti; Honduras; Kiribati; Lao People’s Democratic Republic; Liberia; Madagascar; Malawi; Myanmar; Nicaragua; Niger; Rwanda; São Tomé and Príncipe; Senegal; Sierra Leone; Somalia; Tajikistan; Tanzania; Uganda; Yemen; Vietnam Central African Republic; Kiribati; Rwanda; Tajikistan; Vietnam Achieve 2030–​2039 Burundi; Djibouti; Gambia; Guinea; Mali; Mozambique Myanmar; Sudan; Uganda Achieve after 2040 Afghanistan; Burkina Faso; Cameroon; Central African Republic; Chad; Congo (DR); Congo; Côte d’Ivoire; Guinea-​Bissau; Kenya; Kyrgyzstan; Lesotho; Mauritania; Nigeria; Papua New Guinea; Solomon Islands; Sudan; Togo; Uzbekistan; Zambia; Zimbabwe Afghanistan; Benin; Bolivia; Burkina Faso; Burundi; Cambodia; Cameroon; Chad; Comoros; Congo (DR); Congo; Côte d’Ivoire; Djibouti; Eritrea; Ethiopia; Gambia; Ghana; Guinea; Guinea-​Bissau; Haiti; Honduras; Kenya; Kyrgyzstan; Lao People’s Democratic Republic; Lesotho; Liberia; Madagascar; Malawi; Mali; Mauritania; Mozambique; Nicaragua; Niger; Nigeria; Papua New Guinea; São Tomé and Príncipe; Senegal; Sierra Leone; Solomon Islands; Somalia; Tanzania; Togo; Uzbekistan; Yemen; Zambia; Zimbabwe

2.16  Financing healthcare in low-income developing countries 173 everyone should have a fair opportunity to attain their full health potential and, more pragmatically, none should be disadvantaged from achieving this potential if it can be avoided’ (Whitehead, 1990). In healthcare the principle of equity should lead to universal access of everyone to available care for equal need, equal utilization, and equal quality. Around the world, health systems face serious chal- lenges in terms of their financial sustainability and providing equity in health and universal access to quality healthcare. Although public funding—​through taxes or social insurance—​is dominant, out-​of-​ pocket payments from citizens represent an important share of total spending. In general, the financial flows in a health system run between three types of agents:  population, financing organization(s), and healthcare providers, as described in Fig. 2.16.2. The payment for healthcare provided to the population can come from two major sources: payments made by the population at the time of use and/​or payments made by third-​party payers. The latter source of payment is based on previous fund-​raising among the population, which finances the health system. Within this general description fall the various existing systems, such as financing by taxes, social insurance, or private insurance premiums. Consequently, the financing organization may be the state, sickness funds, or insurance companies. Adjusting the financial model to the socioeconomic context is the central problem for health financing in any country in the world. The diversity and complexity of outcomes and determinants of health leads to a difficult question: how can we evaluate the perform- ance of a health system? In this chapter we consider three out of the five indicators proposed in the World Health Report of 2000: the overall health status, the distribution of health in the population, and the distribution of the financial contribution. With the epidemio- logical transition from infectious diseases to non​communicable ­diseases, the measure of non​fatal consequences of diseases, espe- cially chronic diseases and external causes, proves to be relevant in both low-​ and high-​income countries. The distribution of health and health determinants, in turn, allows for the assessment of equity in the distribution of health outcomes in terms of MMR and U5MR, life expectancy, and disease burden in general. The application of these indicators to WHO member countries and the resulting classification of countries has given rise to an intense debate, either directed to the results or to methodological and scientific aspects of the assessment. The context in low-​income developing countries In low-​income developing countries, the first aspect to consider is that the state plays a central role, not only in funding but also in provision of services, through a model of national health service supported by social insurance, usually associated to formal em- ployers. A second issue is the amount of out-​of-​pocket payments by families to support healthcare. In the African region, where about 60% of low-​income developing countries are situated, the general government expenditure on health constituted 48.7% of total ex- penditure on health, and by the end of 2011 only 6 of the 45 coun- tries reporting on this factor had met the Abuja target of allocating at least 15% of total government expenditure to the health sector. Moreover, out-​of-​pocket payments form over 50% of total health spending, which exposes families to the risk of catastrophic health expenditure. Advance payment schemes are a possible way to over- come this problem. These can be arranged through general taxation and/​or compulsory contributions to health insurance. A third aspect to consider is the need to promote efficiency in national health services to optimize resource allocation and maximize results. The 2010 WHO report on health systems financing estimated that 20–​ 40% of resources dedicated to health are wasted. In recent years there has been an increase in the number of African countries seeking universal health coverage based on man- datory prepayment schemes. The literature identifies a wide range of factors that would allow these countries to progress towards uni- versal health coverage: revenue growth, which increases the finan- cial capacity of companies and citizens; improving tax collection systems, which increases the volume of contributions; the devel- opment of communication infrastructures, improving geographic access to healthcare; increase in the health system workforce; pro- moting social solidarity, facilitating financial transfers from the rich to the poor and from the healthy to the sick; and strong leadership by governments in respect to all these issues. However, it is unlikely that universal health coverage can be achieved solely through tax funding in the present circumstances. The ability for low-​income countries to generate more tax revenue is limited by structural factors: per capita income is relatively low and gross domestic product (GDP) growth is modest; there are large informal economy sectors (including agri- culture) that make it difficult to collect taxes; there are low volumes of taxable imports; and due to institutional factors related to political instability there is weak institutional capacity, weak accountability, and inefficient tax administration systems. All these are exacerbated by the unpredictability and non​alignment of myriad partners with national health priorities. For example, an important share of health financing, especially in Africa, comes from international funding, with a particular increase in funding for specific diseases such as that provided by the Global Alliance for Vaccines and Immunization and the Global Fund to Fight AIDS, Tuberculosis and Malaria. Payments to providers Collection of funds for health care Out-of-pocket payments Financing organizations Population Healthcare providers Delivery of healthcare Fig. 2.16.2  Financial flows in health systems.

174 section 2  Background to medicine While universal health coverage is an ideal that no country can fully achieve, many countries are now getting closer to universal coverage and others are making good progress using different ap- proaches. Interpreting universal health coverage in the context of each country involves disaggregating the concept in terms of ob- jectives and emphasizing the progress in improving equity in access to health services, in improving service quality, and in providing fi- nancial protection, while considering the access to other key health determinants. What do countries need to do to make progress towards health MDGs? Research has shown, for example, that in countries with good governance, additional government health spending does re- duce child mortality. World Bank studies also concluded, however, that development assistance has a stronger effect in countries with solid policies and institutions than in countries with only average-​ quality policies and institutions, and an insignificant effect in coun- tries where policies and institutions are weak. The crucial question remains how to finance the extra spending that is required for most countries to attain the MDGs. Health spending can be divided into three categories:  private (out-​of-​ pocket expenditures and private insurance); public (financing from general revenues and social insurance contributions); and external sources (development assistance). There is evidence that where out-​ of-​pocket spending is less than 20% of total health expenditure, the risk of catastrophic health expenditure is negligible. Two other im- portant indicators in this context are the share of general revenues allocated to the health sector (the 2001 Abuja target, only for African countries, pledged to increase government funding for health to at least 15%) and the per capita total expenditure on health. The High-​ Level Taskforce on Innovative International Financing for Health Systems estimated that on average $60 per capita in 2015 would be needed to ensure coverage with a set of essential health services in low-​income countries. Health spending As illustrated in Table 2.16.3, the median expenditure on health as a percentage of GDP has grown from 4.5% in 1995 to 5.9% in 2013, largely attributable to increase in median government expenditure from 1.9% to 3% of GDP over this period. Government expenditure on health as a percentage of total government expenditure rose from a median value of 8.5% in 1995 to 10.5% in 2013. However, this pat- tern is very heterogeneous, and only 8 of the 57 countries reporting on this factor had met the Abuja target of 15%. In 2013, median per capita total expenditure on health was $137.6 compared with $55.2 in 1995 (at constant 2011 prices). It was less than $44 in only four countries, $44 to $60 in two countries and over $60 in 51 (90%) of the countries. Health financing pattern Concerning health-​spending categories, the median out-​of-​pocket payments as a share of total health expenditure decreased from 48% in 1995 to 40.5% in 2013. This indicator is still above 20% in 49 countries, meaning that many of the population in most of the countries (86%) remain exposed to the risk of financial catastrophe and impoverishment. Median government expenditure on health constituted 40.7% of total expenditure on health in 1995 and 49.2% in 2013. The external resources for health made up less than 20% of total health expenditure in half of the countries, 20–​50% in 21 countries, and over 50% in six countries. These figures contrast with those obtained by high-​level income countries, as can be seen in Table 2.16.3. The relationship between the pattern of health financing and the attainment of the MDG Key health spending and health financing indicators for coun- tries performing best in terms of both MDG4 (U5MR) and MDG5 (MMR) are shown in Figs. 2.16.3–​2.16.6. The pattern of the four countries is substantially different: whereas Bhutan and Mongolia achieved good performance with relatively high and considerable increasing per capita expenditures on health, Bangladesh attained MDGs achievement with relatively low per capita health expend- itures. The pattern of Nepal health economic indicators is similar to the median of the countries (Fig. 2.16.3). There is also a surprising amount of variation across countries in the share of GDP allocated to government health programmes and its trend over time. Countries achieving the two MDGs spend quite different amounts: Bangladesh with relatively low and unchanged share over time; Mongolia had relatively high and increasing trend (Fig. 2.16.4). Bangladesh, Bhutan, and Mongolia decreased gov- ernmental health expenditures as a percentage of total government expenditures between 1995 and 2013, while in Nepal this indicator increased over time, presenting the same pattern as the median of the 57 countries (Fig. 2.16.5). The share of the three health-​spending categories composition is also different across countries. In Bangladesh and Nepal, the share of out-​of-​pocket expenditure in total health spending is persistently Table 2.16.3  Health economic indicators for low-​income developing countries (LIDC) and high-​level income countries (HIC) LIDC HIC Indicator/​Year 1995 2013 2013 Per capita total expenditure on health (PPP, Int US$, and constant prices 2011) 55.2 137.6 4516 Total expenditure on health as a percentage of GDP 4.5 5.9 11.6 Government expenditure on health as a percentage of GDP 1.9 3.0 7.3 General government expenditure on health as a percentage of total government expenditure 8.5 10.5 16.8 Out-​of-​pocket expenditure as a percentage of total expenditure on health 47.9 40.5 15 Government expenditure on health as % of total health expenditure 40.7 49.2 60.6 Source: World Bank Statistics.

2.16  Financing healthcare in low-income developing countries 175 higher than in the other two countries (Fig. 2.16.6). This clearly shows that distinct health financing patterns can lead to the same result, namely substantial improvement in MDG4 (U5MR) and MDG5 (MMR). The health production function Health economists define the health production function as a math- ematical equation that relates health outcome to a set of factors, namely per capita income, share of government health spending in GDP, education attainment, and access to health services. Using women years of education as a proxy for educational attainment and the percentage of urban population as a proxy for access, we have estimated the impact of each variable on achievement of MDGs, adjusting for possible confounders. The multivariate regression for 2009 data shows that there are two relevant indicators that affect U5MR (MDG4): GNI per capita and female education. Adjusting for other factors, the under-​five mortality rate decreased by 0.327% when GNI per capita increased by 1%. Relating to female education, the U5MR was roughly 7% lower per additional year of female edu- cation. MDG5 (MMR), after adjusting for other factors, decreased by 0.58% when GNI per capita increased by 1%, and there was a 15% reduction in maternal mortality rate per additional year of female education. Conclusions Low-​income developing countries remain challenged by the increasing demand for essential healthcare combined with gov- ernments’ inability to mobilize and allocate adequate financing to health systems. In spite of people’s motivation to pay for better access to quality healthcare, the poor health infrastructure, low salaries in the health sector, and limited access to essential health techno­ logies all frustrate implementation in the field of equitable health policies and the aspiration towards universal health coverage. Economic growth and increased health spending alone are not enough to scale-​up healthcare coverage and achieve better health outcomes. These must be combined with accountability of results, transparent management of public funds, and multisectoral ef- forts with community involvement at implementation level. We should appreciate the progress made in all low-​income developing countries in reducing both U5MR and MMR, even if most did not achieve the relevant MDGs. The successful cases of Bangladesh, Bhutan, Mongolia, and Nepal, who did achieve MDGs 4 (U5MR) and 5 (MMR) over the last ten years, illustrate good practices that deserve more careful study. While we appreciate the rise in median government expend- iture for health in low-​income developing countries from 40.7% in 1995 to 49.2% in 2013, it is very important to recognize that the median out-​of-​pocket payments as a share of total health expend- itures is still above 20%, which means that most people in these countries are seriously exposed to catastrophic illness and im- poverishment, and this situation has not significantly improved. Poverty increases the need for healthcare while dwindling the capacity to pay for it. 0.00 100.00 200.00 300.00 400.00 500.00 600.00 Bangladesh Bhutan Mongolia Nepal Median 1995 2013 Fig. 2.16.3  Per capita total expenditure on health in 1995 and 2013 (PPP, Int$, constant prices 2011). 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 Bangladesh Bhutan Mongolia Nepal Median 1995 2013 Fig. 2.16.4  Government expenditure on health as a percentage of GDP in 1995 and in 2013. Source: World Bank statistics. 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 Bangladesh Bhutan Mongolia Nepal Median 1995 2013 Fig. 2.16.5  General government expenditure on health as a percentage of total government expenditure in 1995 and in 2013. Source: World Bank statistics.

176 section 2  Background to medicine Finally, it is important to highlight that health financing should be fit for its purpose as a key input to national health systems. It should be consistent with national health policies and budgeting models that enable the health system to perform its functions and ensure social protection. There is no magic formula, no blueprint model to be pro- scribed. Communities, governments, and international development partners should keep striving for improved local, national, and global health, which presupposes improved health financing at all levels. FURTHER READING IMF (2014). Poverty reduction and growth trust. International Monetary Fund, Washington DC. Sambo LG, Kirigia JM (2014). Investing in health systems for universal health coverage in Africa. BMC Int Health Hum Rights, 14, 28. Wagstaff A, et  al. (2006). Millennium development goals for health: what will it take to accelerate progress?. In: Jamison DT, et al. (eds) Diseases control priorities in developing countries, 2nd edition, Chapter 9. World Bank, Washington DC. Whitehead M (1990). Concepts and principles of equity and health. Copenhagen, World Health Organization Regional Office for Europe. WHO (2000). World health report. World Health Organization, Geneva. WHO (2012). Malaria in Africa. World Health Organization, Geneva. WHO, et al. (2002). Scaling up the response to infectious diseases. World Health Organization, Geneva. WHO (2018). Millenium Development Goals (MDGs). World Health Organization, Geneva. https://www.who.int/news-room/ fact-sheets/detail/millennium-development-goals-(mdgs) 61.30 30.79 11.60 69.56 47.90 36.24 69.21 82.50 26.48 40.70 2.45 5.90 3.96 11.40 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00 60.23 25.41 37.01 46.15 40.50 35.26 73.84 60.25 43.29 49.20 4.51 2.74 10.56 10.30 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00 Bangladesh Bhutan Mongolia Nepal Median Bangladesh Bhutan Mongolia Nepal Median Fig. 2.16.6  Share of out-​of-​pocket (in blue), government (red), and other health expenses (green) (as a % of the total health expenditure) in 1995 (left) and 2013 (right). Source: World Bank statistics.