Producing Public Super-Goods through Co-financing – by Michelle Remme
14 May 2015
Producing Public Super-Goods through Co-financing – by Michelle Remme

michelle_remmeThe global development agenda is shifting. There were three health goals in the 8 Millennium Development Goals that served as a guiding priority framework for the past 15 years. Fighting HIV, TB and malaria was one of these goals. But post-2015, the world is embracing 17 proposed Sustainable Development Goals, and health is only one of them.

Coupled with the growing resource needs to sustain HIV programmes and the flat-lining of external financing for the epidemic, this could represent a major concern to the global AIDS response. Or, it could be an opportunity to address the root causes of HIV transmission, and to find innovative, efficient ways to work with other health programmes and other development sectors to realise synergies and achieve multiple goals.

Co-financing could be one way whereby different budget holders jointly fund a programme with multiple benefits. Each budget holder, payer or sector would only contribute an amount that would make their investment cost-effective, when compared with the return they would get for their specific objective. This would allow programmes that have multiple outcomes to be prioritised by the multiple payers, instead of them being undervalued and undersupplied.

Co-financing strategies could support smart domestic economic policy which increases the return of investment from development interventions by prioritising interventions with multiple and/or synergistic outcomes.

From April 27 to April 30, government officials from Malawi, Tanzania, South Africa and Ethiopia, as well as representatives from UNDP, PEPFAR, STRIVE and RethinkHIV, participated in a flagship course on co-financing approaches. The course, entitled “Achieving Value for Money in HIV, Health and Development – A UNDP course for policymakers on Co-financing Approaches” was commissioned by UNDP, with funding from the Japanese government, and was delivered by the Economic Policy Research Institute (EPRI), UNDP and STRIVE. With Professor Charlotte Watts from the London School of Hygiene and Tropical Medicine and a Principal Investigator for RethinkHIV, I presented our work and co-facilitated the course.

The aim was to build the capacity of policymakers in sub-Saharan Africa to co-finance structural interventions such as cash transfers that can tackle national priorities in a cost-effective and sustainable manner. It was framed to link the co-financing challenge to the opportunities offered by aligning social protection and HIV prevention objectives.

IMG_1863To facilitate cross-sectoral cooperation, the participants from each country were from ministries of health, finance, planning, social welfare, education, and national AIDS coordinating authorities. At the end of the 3.5 days in Cape Town, country teams were expected to have developed and deliberated on potential co-financing models that could be implemented in their countries.

After in-depth sessions on the state of the science on social protection, structural drivers and HIV prevention, the second day was all about co-financing. Participants played a stylised game, where they were each upgraded to ministers, with full decision powers on what interventions to allocate budgets to. In the first round, participants allocated their resources individually based on their own criteria. They did not know what others were doing or how well their investments were performing. This is close to the status quo. In the next round of the game, an integrated evaluation framework was activated, which started grading each minister based on how well their investments were achieving their objectives. Everyone was doing pretty badly, with average grades of C or D.

They then started playing around with their allocations and realising that their grades were affected by what other ministers in their country were doing. For example, if the Minister of Social Development spent more on social protection child support grants, the HIV budget holder got a B instead of a C. Eventually, the A’s started pouring in, as ministers were coordinating their resource allocation and reaping synergies from their joint investments. The case for co-financing was made and the word ‘public super-goods’ was coined – a combination of public goods that work together to achieve exceptional impacts that would not be possible without an integrated response.

The next step was for country teams to identify or create such public super-goods, based on their own country context. For example, the Tanzania team decided to focus on the existing Tanzania Social Action Fund (TASAF), which is a World Bank-funded social protection programme. Its cash transfer component was recently evaluated and found to have a range of outcomes, including reduced morbidity, increased school completion rates (especially among girls), increased household savings, and increased household agricultural assets. Such a programme could serve as a platform that could be used to reach multiple development objectives and improve the efficiency of other sectors’ existing investments.

A health budget holder could see value in contributing to this programme, given that it led to a considerable increase in the coverage of community-based health insurance among beneficiaries. 20% of beneficiaries had health insurance, compared to less than 3% in the control group. A demand-side intervention like TASAF could therefore be a key complement to the supply-side health financing system investments under the health budget aimed at increasing universal coverage. Co-financing may be a more efficient use of health resources than expanding the availability of insurance schemes.

There are of course many challenges that come with intersectoral coordination, and probably even more so with intersectoral joint financing. Many have to do with the political economy of resource allocation and the many vested interests at play. But there is also very limited space within government budgets to reallocate resources at the sector level, especially in low income and lower middle-income countries, where much of the budgets are pre-committed to salaries and recurrent costs and only a small development budget exists.

Each team went home with a plan to bring the concept up within their own ministries, and to engage other key ministries. One thing that clearly emerged is that the existing institutional incentives are more likely to hinder than facilitate such co-financing. There will have to be strong top-level commitment to the approach and possibly top-down directives for it to work.

This could be a mechanism to mobilise additional domestic public financing through cross-sectoral efficiency gains and synergistic reprioritisation. However, in countries like Tanzania and Malawi, external financing represents a large share of public development financing, and equally siloed development partners could be strong co-financing advocates or naysayers.

RethinkHIV is planning to continue to engage with these country teams, in particular in Tanzania and South Africa, as they explore avenues to co-finance programmes across sectors. It is also building the evidence base in these countries around specific structural interventions with HIV endpoints, among others, and will analyse how these could be co-financed at scale.

Michelle Remme is Research Fellow in Health Economics at London School of Hygiene and Tropical Medicine.