Future Financing of Health in Africa by Mthuli Ncube
16 Dec 2015
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Future Financing of Health in Africa by Mthuli Ncube
POST BY: RUSH Foundation

The economic case for investing now and how to create alternative sources of funding.

 I attended and presented at the CABRI Conference on Financing Healthcare in Africa: Challenges and Opportunities, in Dar es Salaam last week of November.

First things first: I was struck by the news headlines as I came into Dar es Salaam, about the new President of Tanzania, Dr. Magufuli, who seems to be so focused on service delivery and rooting out corruption. He is positioning himself as an action man: he has visited hospitals and bemoaned the health services. If he carries on with this energetic and focused approach, he might achieve a great deal for Tanzania, a country with such innate potential.

Back to the CABRI conference. CABRI brings together senior officials in ministries of finance and budget in Africa, in the quest to build their capacity. This is an appropriate group with whom to have a conversation regarding the future funding of health.

There are two global imperatives around health: The targets for SDG3 on Health; and achieving universal health care. On the financing, the Abuja target of earmarking 15% of government expenditure on health over the next few decades is key to meeting UHC targets and SGD targets by 2030. But this is far from being the case, currently with only six countries meeting this target, according to a UNAIDS 2013 report.

Four things struck me: First, how large the problem of NCDs is becoming; Secondly, how low income countries are responding to the domestic funding challenge; third, how difficult it is to handle the transition or graduation of countries that have achieved middle-income status; and finally, how high the rates of return from investing in health are and the financing options that this presents.

The problem of NCDs

Firstly, as countries strive for UHC coverage, one is struck by the rise of ‘non-communicable diseases’ (NCDS), as a disease burden. Even HIV/AIDS has become a quasi-NCD, having transitioned ‘from a death-sentence, to a debt-sentence’, thanks to the success of ARTs. I raised this point on presenting the short RethinkHIV paper by that name published in Finance and Development by Collier, Sterck and Manning (2015) http://www.imf.org/fandd. WHO projects that 28 million people in the African Region will die from a chronic disease over the next 10 years. This rate of increase of deaths from NCDs will outstrip that from infectious diseases, maternal and perinatal conditions and nutritional deficiencies more than 4-fold in the next 10 years. Clearly, NCDs will be next health battle for Africa. Africa’s middleclass is growing at 3.2% per annum, and NCD’s also reflect the growth of this middleclass, which is afflicted by most NCDs. This may mean the health systems and global and domestic funding, need to be configured differently to respond to NCD challenge, including HIV which is now a quasi-NCD.

Responding to the domestic funding challenge

Secondly, what struck me was how low-income countries in Africa, such as Tanzania and Ivory Coast, are responding to the domestic health financing challenge, through national health insurance schemes. Countries seem to fully understand the need to raise domestic resources to fund health and to get the beneficiaries to contribute as well. Tanzania has a nascent national health insurance scheme, covering public sector workers, and a community-health insurance scheme. The challenge is how to cover people in the informal sector. Here, mobile-phone based insurance-payment systems have the potential to deal with access to the informal sector.

Handling middle-income status

Thirdly, countries that are transitioning out of funding by the international community need a transition plan, as do the global funders. First of all, GNI per capita cannot be the sole determinant for such graduation. GNI per capita needs to considered with, if not adjusted, using the levels of disease-burden and general poverty. I raised this point, and also pointed out the need for focusing on ‘key-populations’ and ‘key-poor regions’ in some of these middle income countries. A new financing architecture is required involving donors and recipients in the design of virtuous commitment mechanisms that deliver real health benefits for those affected on the ground.

Returns on investing in health

Finally, I used the RethinkHIV Policy brief by Ncube and Kabajulizi (2015) on the ‘Economic Benefits of Investing in HIV in Uganda’, to show how high the rate of return on investing in HIV is. In Uganda, the rate of return on investment in effective HIV interventions is of the order of 186 % over the next 35 years. What an investment! This finding should assist health officials in communicating the economic benefits of health investment to their colleagues in national treasuries. National treasuries have competing needs, and such as infrastructure investment, and the health sector needs to begin using an economics and investment-language to compete for valuable resources. Health is one of the better long-term investments around and studies now make it clear it shouldn’t be considered a hand-out or a concession.

Such a high rate of return on health investments suggests there may be a case for re-thinking borrowing in order to finance health. Could a ‘health-bond’ or ‘HIV-bond’ be successfully launched? My view is that IFIs and global funders could be enticed to offer a partial guarantee on such bonds and make them more attractive.

The fact that CABRI, an association of national treasuries, was having a discussion on sustainable financing of the health sector, is an excellent start towards financing UHC, and bodes well for the creation of a common language with which ministries of health communicate more regularly and transparently about costs and benefits with ministries of finance.

BLOG by Prof Mthuli Ncube, Leader of RethinkHIV, and Professor of Public Policy, Blavatnik School of Government, & Fellow, of St Antony’s College, University of Oxford