High-Performance Health Financing for Universal Health Coverage Inclusive Growth Driving Sustainable, in the 21st Century © 2019 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. 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Fax: 202-522-2625 | e-mail: pubrights@worldbank.org Design and layout: Elena Sampedro | www.lacasagrafica.com High-Performance health financing Universal Health Coverage | 3 Executive summary The majority of developing countries will fail to All countries will also benefit from health financing achieve their targets for Universal Health Coverage designed to strengthen health security, thus reducing (UHC)1 and the health- and poverty-related Sustain- the frequency, spread and impacts of disease outbreaks, able Development Goals (SDGs) unless they take ur- and other negative cross-border spillover effects of gent steps to strengthen their health financing. Just failing health systems. Anchoring this agenda in the over a decade out from the SDG deadline of 2030, 3.6 G20 Finance Track and promoting joint leadership by billion people do not receive the most essential health finance and health ministers provides the opportunity services they need, and 100 million are pushed into to break down the silos and tackle the political econo- poverty from paying out-of-pocket for health services. my challenges that continue to hamper progress toward The evidence is strong that progress towards UHC, core high-performance health financing for UHC. to SDG 3, will spur inclusive and sustainable econom- ic growth, yet this will not happen unless countries achieve high-performance health financing, defined here as funding levels that are adequate and sustain- High-performance health able; pooling that is sufficient to spread the financial financing advances UHC and risks of ill-health; and spending that is efficient and equitable to assure desired levels of health service cov- sustainable, inclusive growth erage, quality, and financial protection for all people— with resilience and sustainability. It is no longer plausible to argue that health spending is purely consumption. High-performance health financ- The UHC financing agenda fits squarely within the ing is an investment that benefits the economy through core mission of the G20 to promote sustainable, in- six main channels: clusive growth and to mitigate potential risks to the global economy. All countries stand to benefit from • Building human capital. Investments in essential pri- realizing quality and efficiency gains and freeing pro- mary and community health services such as maternal, ductive resources in one of the largest global industries. neonatal, and child health interventions, including im- munization and nutrition, fuels the creation of human capital during children’s critical early years, laying the foundation of improved educational performance and earning potential. Essential promotive, preventive, and curative health services boost workers’ productivity throughout their lifetimes, often with rapid impact. • Increasing skills and jobs, labor market mobility and formalization of the labor force. The changing nature of work requires skills such as complex problem-solving, 4 | World Bank Group teamwork, innovation and self-reliance. Investing in • Strengthening health security. The West Africa Ebola health is a prerequisite to build and maintain these crisis of 2013-2016 demonstrated that pandemics can skills and increase countries’ capacities to innovate and leave lasting economic scars and set development back generate jobs and growth. High-performance health for years, if not decades. Investments in preparedness financing also guarantees financial protection regard- capabilities including surveillance, primary and com- less of where people live or their employment status, munity health workers, public-health laboratory net- making it easier for people to change jobs and take ad- works, and information systems are essential to detect vantage of new opportunities. It also reduces the costs and mitigate infectious disease outbreaks before they for private firms to grow and create jobs, increasing the spread out of control. In addition to saving lives, in- rate of workforce formalization and the proportion of vesting in preparedness and early action to stop out- people in full-time employment. breaks also help prevent macro-economic shocks and much more costly emergency response efforts. • Reducing poverty and inequity. Scaling up prepaid and pooled financing to reduce out-of-pocket pay- ments can have a swift, substantial benefit for pover- ty reduction. Financial protection has other benefits: Critical health-financing people no longer need to sell assets or borrow to meet health payments. They conserve resources that they shortcomings and emerging can then spend or invest in other ways. Financial pro- threats put UHC at risk tection also allows the sick and poor to protect, main- tain and improve their health and increase their earn- Despite these multiple benefits, the majority of de- ings. As a result, income inequality falls. veloping countries have yet to seize the growth and • Improving efficiency and financial discipline. Im- development opportunities offered by high-perform- provements in the efficiency of pooling and purchasing ing health financing. Major coverage gaps for essential allow expanding the range and quality of guaranteed health services persist; for those who receive services, health services and increasing the extent of financial coverage is too often ineffective, as the quality of ser- protection within existing resource envelopes, while vices is low. To expand equitable coverage with both controlling cost escalation. Combined with measures quality services and financial protection, the overall to increase efficiency in resource mobilization, they levels of health spending, the mix of revenue sources, ensure financial discipline in the sector over the short pooling, and the efficient and equitable use of resourc- and long term. This can have an immediate impact on es matter. This report identifies critical health-financing public spending given that the health sector now rep- constraints, including: resents a significant share of government expenditures in many countries—on average more than 11 percent. • Total per capita health spending from all sources is very low in developing countries, averaging $40 in • Fostering consumption and competitiveness. Finan- low-income countries (LICs), $135 in lower middle-in- cial protection frees people from making precautionary come countries (LMICs), and $477 in upper middle-in- savings and can stimulate expenditures on other goods come countries (UMICs). This compares to $3,135 in and services. The ability of a country’s entrepreneurs, high-income countries (HICs). companies, and workers to continually adapt and inno- vate is paramount to future competitiveness, facilitated • Part of this low spending is because many develop- by the impact of UHC and health and human capital ing countries allocate relatively small shares of total accumulation. By driving efficiency gains in the health government spending to health—levels that are in- sector, health financing also frees productive resources adequate to support coverage with essential quality for new strategic uses, supporting countries to gain or health services for all. Developing countries devote keep a comparative advantage in international trade. on average 10 percent of government expenditure to High-Performance health financing Universal Health Coverage | 5 health, compared to 15 percent in HICs. There are very Additional international assistance is needed to catalyze large variations, from around 3 percent up to nearly similar advancements in other disease areas, strength- 30 percent, with some UMICs giving the lowest prior- en health systems, support governments in tackling low ity to health. government revenue generation and strengthen their capacities to carry out all health-financing functions re- • Part of low government spending can also be at- quired for accelerated progress towards UHC. tributed to the low capacity to mobilize revenues. In close to half of developing countries, government ef- Emerging and intensifying challenges are driving up forts to raise taxes consistently fall short of 15 percent health care costs and pose risks for future domestic of gross domestic product (GDP), a threshold that the revenue mobilization, efficiency, and equity. Some of IMF has identified as critical to engender sustained, the leading challenges include rising consumer expecta- inclusive growth. tions; population aging and the corresponding increase in the burden of non-communicable diseases and de- • Low levels of domestic government financing mean mand for long-term care; progress in medical technol- that there is currently a substantial gap between the ogy; limited administrative capacity to raise revenues; costs of financing an essential package of quality slow formalization of economies; changes in the form services for everyone and resources available in low- and content of work; pandemic threats; anti-microbi- and lower middle-income countries. Even with good al resistance; and forced displacement of populations. economic growth, this gap is not expected to narrow If not addressed early, these factors may make it even greatly over the next decade, remaining at approxi- harder for countries to attain the high-performance mately $176 billion for the 54 countries that are un- health financing required for UHC. likely to reach upper-middle-income status by 2030. Closing the substantial UHC financing gap in 54 low- • As a result of low levels of government spending, out- and lower middle-income countries will require a of-pocket payments constitute a large share of health strong mix of domestic and international investment. expenditures in developing countries, amounting to Countries’ own fiscal measures to increase taxes as a more than half a trillion dollars or $80 per capita share of GDP and the share of government expendi- annually. As noted earlier, these payments deter some tures dedicated to health, on top of economic growth, people from using needed health services, and push could reduce the estimated financing gap in 2030 by about one-third, from a total of about $176 billion to others into poverty or trap them once there. approximately $114 to $122 billion. Additional inflows • Inefficiencies and inequities in health financing are may come from the private commercial sector, but the widespread. Estimates suggest that between 20 and 40 amounts are likely to be limited. Current levels of DAH percent of health funding is wasted across all countries, totaling $11 billion for these countries will not be near- on average. In terms of equity, poor people often con- ly enough to close the gap. A substantial increase in tribute a higher proportion of their incomes in health DAH with support to develop the capacity to absorb payments than the rich, without subsequent compensa- external financing, stronger engagement of the private tion through fiscal transfers in cash or in kind, while fre- sector, and innovative health-financing policy solutions quently receiving fewer health services of lower quality. in countries will all be needed for countries to have a chance of reaching UHC and realizing the ensuing ben- • Rapid increases in development assistance for health efits of sustainable, inclusive growth. (DAH) since 2000 have resulted in major health gains in the poorest countries, yet DAH levels have stagnat- ed in recent years and DAH must evolve to help ac- celerate progress toward UHC. In the past, DAH has predominantly supported infectious disease programs. 6 | World Bank Group A roadmap for International collaboration country action to accelerate progress Global consensus has emerged around three lines Many international initiatives are designed to support of action for countries to build high-performance health financing in developing countries. Bilateral and health financing: multilateral agencies and development banks, and global alliances, networks, and platforms are making important • Scale what works. Countries can make substantial contributions beyond development finance to facilitate progress by adapting proven health-financing princi- technical collaboration, policy dialogue, and global learn- ples and policies to their specific contexts. Broad agree- ing. These include, inter alia, the World Health Organi- ment exists on key options, including: improve the effi- zation (WHO)-led Global Action Plan for Healthy Lives ciency and equity of resource use, for example through and Well-being, including the financing accelerator; the prioritizing investments in good quality primary and P4H Network; UHC 2030; the Joint Learning Network community health services; increase resources for for UHC; various networks of budget officials (e.g., the health from general revenue, and, where appropriate OECD Joint Network of Senior Health and Budget Offi- and feasible, obligatory health insurance contributions cials and the Collaborative Africa Budget Reform Initia- from those with the ability to pay. tive); the African Union’s Africa Scorecard and Tracker • Focus on the “big picture”. Leaders can improve on Domestic Financing for Health as well as planned re- health-financing results by developing a “big-picture” gional health-financing hubs; Gavi, the Vaccine Alliance; perspective in two ways: first, by connecting health-fi- the Global Financing Facility for Women, Children and nancing policy across sectors in a whole-of-govern- Adolescents (GFF); and the Global Fund to fight AIDS, ment approach; second, by consistently adopting a Tuberculosis, and Malaria. Each of these partnerships medium-term timeframe and routinely assessing the and platforms plays a valuable role in helping countries likely future threats to revenue generation, health respond to today’s pressing health-financing problems. costs, efficiency, and equity, adjusting their health-fi- However, given the persistent challenges in overcom- nancing strategies before emerging problems become ing UHC financing shortcomings, new avenues for entrenched. Together, these two approaches will rein- international collaboration to support country UHC force health-financing resilience and sustainability. financing efforts are needed in two main areas: (1) • Strengthen health-financing leadership, governance, health-financing research and development that will and organizational capacity. Joint leadership between provide countries with new evidence on open questions ministries of finance and health can accelerate the and areas of controversy, new strategies to improve fi- development and implementation of health-financing nancial resilience and sustainability, and financing in- solutions, particularly in areas where, despite broad novations that might allow step changes in progress consensus about principles and policies, progress lags. toward UHC; and (2) a sizeable increase as well as a Often such slowdowns are due to political obstacles. strategic shift in DAH toward strengthening health-fi- Joint leadership between ministries of finance and nancing leadership, governance, and organizational ca- health is equally critical to strengthen health-financing pacity, improved domestic resource use and mobiliza- governance and organizational capacity. tion, and increased global health security. High-Performance health financing Universal Health Coverage | 7 G20 Finance Ministers panel comprised of former ministers of finance and health and globally recognized experts in health fi- and Central Bank Governors nancing, health, public finance, and fiscal policy. can champion a UHC 2) Sponsor a UHC financing grand challenge portfo- financing resilience and lio. The portfolio would target investments toward sustainability agenda solving the health-financing challenges identified in the G20 UHC financing resilience and sustainability dialogues, with a focus on those with the greatest po- G20 Finance Ministers and Central Bank Governors tential for global economic and health impact and en- can help countries seize the opportunities of high-per- abling step-change progress toward UHC. This could formance health financing by adopting and steering a take the form of an innovation fund dedicated to de- UHC financing resilience and sustainability agenda. veloping more effective health-financing solutions, Leadership by G20 Finance Ministers and Central Bank and/or G20 countries that invest in existing Grand Governors is critical, as core aspects of this agenda ex- Challenge funds choosing to direct more of those tend beyond the purview of health into public finance. portfolios toward relevant health-financing priorities. G20 Finance Ministers and Central Bank Governors can lead by example in demonstrating how finance and 3) Champion more and better DAH that catalyzes health authorities can successfully collaborate to build sustainable domestic resource mobilization to ac- and sustain strong health-financing systems that deliver celerate progress toward UHC by 2030. As noted better health services and financial protection. previously, substantial increases in DAH will be es- sential to help low- and lower middle-income coun- To advance this agenda, G20 Finance Ministers and tries close the financing gaps and reach their UHC Central Bank Governors can: targets. The next generation of DAH can also do more 1) Convene biennial UHC financing resilience and sus- to catalyze efficient and equitable use, pooling, and tainability dialogues between ministers of finance mobilization of domestic resources, and strengthen and health at future G20 meetings. The meetings country capacities in sustainable health financing, as would identify priorities for country and global action well as in pandemic prevention and response. The to detect and manage health-financing threats; define replenishments in 2019 and 2020 of the major glob- an innovation agenda; and foster political commit- al health funding mechanisms, including the Global ments for UHC financing. The meetings would offer a Fund, Gavi, and the WBG’s IDA provide near-term venue for dialogue between ministries of finance and opportunities to champion these shifts toward a lon- health on the forces driving health expenditures, op- ger term approach of more and better DAH to assist tions to improve efficiency and raise revenue, includ- countries in accelerating progress toward UHC. ing a new generation of DAH. The biennial dialogues would be grounded in a UHC financing resilience and sustainability assessment. The development of the an- alytical approach would be coordinated by the WBG working closely with WHO. Implementation would be facilitated by existing networks and partnerships that would connect financing experts from around the world to learn and hone their skills in assess- ing and responding to health-financing threats and opportunities. Development of the assessment and preparation of the dialogues could be overseen by a UHC financing resilience and sustainability advisory 8 | World Bank Group Conclusion Advancing UHC through high-performance health fi- nancing will generate more rapid, sustained, and inclu- sive growth. Yet global progress toward UHC remains slow because few developing countries have fully seized the opportunity to develop well-performing health fi- nancing. The good news is that a global consensus, based on country experience, is emerging on how countries can most effectively construct high-performance health financing for UHC and how countries and partners can collaborate to accelerate these efforts. This convergence in strategic thinking opens an unprecedented opportunity to realize the economic gains associated with progressive realization of UHC. As champions and stewards of a UHC financing resil- ience and sustainability agenda, G20 Finance Ministers and Central Bank Governors can play a critical role in supporting countries as they ready themselves to manage the emerging and intensifying threats that today place progress toward UHC and economic growth at risk. Eq- uitable stewardship from a group committed to the com- mon good is the catalyst required to turn risk into reso- lute action. Through these mechanisms, G20 leaders will help their partner countries advance toward prosperity based on fair opportunities for all, the surest foundation for global stability, prosperity, and peace. The World Bank 1818 H Street NW. Washington DC 20433 e-mail: pubrights@worldbank.org tel: +1 202 473 1000 fax: +1 202 522 2625 www.worldbank.org