High-Performance Health Financing for Universal Health Coverage Inclusive Growth Driving Sustainable, in the 21st Century High-Performance Health Financing Universal Health Coverage Driving Sustainable, Inclusive Growth 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. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA. 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 CONTENTS Acronyms | 4 Acknowledgments | 5 Executive summary | 6 Introduction | 13 1. Part I: Time to act | 16 1.1 Health financing, UHC, and the economy | 17 1.2 Missed opportunities | 25 1.3 Emerging and intensifying challenges | 32 2. Part II: A roadmap for action | 38 2.1 Priorities for country action | 39 2.2 Priorities for country and partner collaboration | 48 2.3 UHC financing resilience and sustainability: An agenda for the G20 | 55 Conclusions | 57 Annex A | 59 Annex B | 61 Reference List | 66 4 | World Bank Group ACRONYMS AMR | Antimicrobial Resistance BEPS | Base Erosion and Profit Shifting BRICS | Brazil, Russia, India, China and South Africa CABRI | Collaborative Africa Budget Reform Initiative CEPI | Coalition for Epidemic Preparedness Innovations CFE | WHO’s Contingency Fund for Emergencies CPIA | Country Policy and Institutional Assessment DAH | Development Assistance for Health DFID | Department of Foreign and International Development DRC | Democratic Republic of Congo DRUM | Domestic Resource Use Mobilization GAP | WHO-led Global Action Plan for Healthy Lives and Wellbeing for All Gavi | Gavi, the Vaccine Alliance GDP | Gross Domestic Product GFF | Global Financing Facility for Women, Children and Adolescents GFTAM | Global Fund to Fight AIDS, Tuberculosis and Malaria GNI | Gross National Income GUFR | Global UHC Financing Report HIC | High-Income Country HTA | Health Technology Assessments IDA | International Development Association IHR | International Health Regulation ILO | International Labor Organization IMF | International Monetary Fund JEE | Joint External Evaluation LIC | Low-Income Country LMIC | Lower-Middle-Income Country LTC | Long-Term Care MIC | Middle-Income Country MTEF | Medium Term Expenditure Framework NCD | Non-communicable Disease OECD | Organization for Economic Co-operation and Development OOP | Out-Of-Pocket PEF | Pandemic Emergency Financing Facility PFM | Public Financial Management SDG | Sustainable Development Goal UHC | Universal Health Coverage UMIC | Upper-Middle-Income Country WHO | World Health Organization High-Performance health financing Universal Health Coverage | 5 ACKNOWLEDGMENTS This report was prepared by a team from the Health, Nutrition, and Population (HNP) Global Practice of the World Bank Group (WBG), under the overall guidance of HNP Senior Director Timothy Evans and Vice President for Human Development Annette Dixon. The core report team comprised Christoph Kurowski (Team Leader), David B. Evans and Alexander Irwin. The extended team included Alexandra Beith, Di Dong, Iryna Postolovska, Carolyn Reynolds, Mar- tin Schmidt, and Gulbin Yildirim. Production, management and logistics support was provided by Carmen Del Rio Paracolls, Mariko Fukao, Maria Jose Retana Palacio, Naoko Ohno, Panida Srithong, and Juliet Teodosio; and external communications by Anugraha Palan and Eno Isong. The team would like to express its gratitude to colleagues in the Japanese Ministry of Finance for their valuable guidance and support throughout the development of this report, as well as to all of the G20 member and guest countries for their extensive comments on previous versions. The team benefited at an early stage from consultations with WBG Executive Directors and their offices from the following countries: Argentina, Australia, Brazil, Canada, Chile, China, Egypt, France, Germany, India, Indonesia, Italy, Korea, Mexico, Saudi Arabia, South Africa, Spain, Switzerland, Singapore, Vietnam, Thailand, Turkey, the United Kingdom, and the United States. The team also would like to thank senior representatives from the IMF, OECD, and WHO for their detailed comments and advice during the preparation of this report. Experts from the Asian Development Bank, the Bill and Melinda Gates Foundation, the Center for Disease Dynamics, Economics and Policy, Civil Society Engagement Mechanism for UHC2030, Gavi, the Institute for Health Metrics and Evaluation, UNICEF, UNDP, USAID, and the World Economic Forum also provided key inputs to the report via written comments and/or consultations at various stages. The report was greatly enriched by the insights and expertise of the members of the UHC Financing Advisory Committee: Eddy van Doorslaer, Julio Frenk, Peter Heller, Ayako Honda, Donald Kaberuka, Diane McIntyre, Anne Mills, Takashi Oshio, Keizo Takemi, Jeanette Vega, Peter Smith, Larry Summers, Viroj Tangchoaroensathien, and Winnie Yip. The paper on Uni- versal Health Coverage: Lessons from Japan by Drs. Honda and Oshio was a pivotal contribu- tion to the report. Other outside experts who provided valuable contributions and feedback included: Indu Bhushan, Amit Chandra, Dov Chernichovsky, Elizabeth Costenbader, Oyebanji Filani, Eduardo González-Pier, Matthew Guilford, Maureen Lewis, Rachel Nugent, Luke Shors, and Michael Sinclair. The team is grateful for the inputs and support of the WBG’s HNP Global Practice Leader- ship Team, including Olusoji Adeyi, Sarah Alkenbrack, Enis Baris, Mickey Chopra, Mariam Claeson, Tania Dmytraczenko, Daniel Dultizky, Michele Gragnolati, Trina Haque, Magnus Lindelow, Ernest Massiah, Sameera Maziad A Tuwaijiri, Rekha Menon, Toomas Palu, E. Gail Richardson, Faadia Saadah, Andreas Seiter, Meera Shekar, Gaston Sorgho, Monique Vledder, and David Wilson, Many colleagues from across HNP and the WBG provided technical inputs, guidance, and feedback on the report, including the members of the Health Financing Global Solutions Group Strategic Advisory Panel, Francisca Ayodeji Akala, Gilles Alfandari, Maria Eu- genia Bonilla-Chacin, Edson Correia, Mukesh Chawla, Louise J. Cord, Edson Correian, Zelalem Yilma Debebe, Leslie Elder, Stefan Emblad, Roberta Gatti, Margaret Grosh, Srinivas Gurazada, Patrick Hoang-Vu Eozenou, Alaka Holla, Carlos Lara, Alexander Leipziger, Rui Lui, Patricio Marquez, Ahmadou Moustapha Ndiaye, Irina Nikolic, Adenike Sherifat Oyeyiola, Toomas Palu, Robert J. Palacios, Marvin Ploetz, Yoshini Naomi Rupasinghe, Elizabeth Ruppert, Michal Rutkowski, Jaime Saavedra, Miriam Schneidman, Renaud Seligmann, Owen K. Smith, Emily Sinnott, Ajay Tandon, Ellen Van De Poel, Marijn Verhoeven, and Ian Walker. The team regrets any individuals or organizations that may have been inadvertently omitted from these acknowledgments and expresses its gratitude to all who contributed to this report. 6 | World Bank Group 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 1.  Universal health coverage (UHC) is the goal that all people can use curative health services boost workers’ productivity the promotive, preventive, curative, rehabilitative and palliative health services they need, of sufficient quality to be effective, while also ensur- throughout their lifetimes, often with rapid impact. ing that the use of these services does not expose the user to financial hardship. UHC has two pillars: coverage with essential, quality health • Increasing skills and jobs, labor market mobility and services and financial protection. UHC embodies the commitment to giving priority to the worse off—the sickest, those with the lowest cover- formalization of the labor force. The changing nature age, and the poor—and to health as a human right. of work requires skills such as complex problem-solving, High-Performance health financing Universal Health Coverage | 7 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 8 | World Bank Group 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. High-Performance health financing Universal Health Coverage | 9 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. 10 | World Bank Group 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 High-Performance health financing Universal Health Coverage | 11 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. High-Performance health financing Universal Health Coverage | 13 Introduction We reaffirm the need for stronger health systems providing cost-effective and evidence-based intervention to achieve better access to health care and to improve its quality and affordability to move towards Universal Health Coverage (UHC) in line with their national contexts and priorities. G20 Leaders’ Declaration, Buenos Aires, November 2018 Unless they take urgent steps to strengthen health fi- THE UNIQUE ROLE OF THE G20 nancing, a foundational component of health systems, AND ITS FINANCE TRACK many developing countries 2 will fail to achieve their targets for Universal Health Coverage (UHC) and sev- G20 Finance Ministers and Central Bank Governors eral of the Sustainable Development Goals (SDGs). Just have identified strengthening financing for UHC in over a decade out from the SDG deadline of 2030, coun- developing countries as a priority for the G20 Finance tries face a tight window to raise the necessary revenues, Track. There are four main arguments for G20 and its ensure risk pooling, and improve the efficiency and eq- Finance Track leadership on this agenda: uity of their health spending. The evidence is strong that progress toward UHC will spur inclusive and sustain- • UHC financing fits squarely within the core mission of able economic growth, yet this will not happen unless the G20 to “achieve stable, sustainable world growth countries achieve high-performance health financing that benefits all” and to mitigate risks to the global (HPHF)—financing that accelerates coverage with af- economy. As this report will demonstrate, resilient and fordable, quality health services and financial protection sustainable health financing not only accelerates prog- while anticipating and tackling emerging threats to im- ress toward UHC but also spurs national and global eco- prove financing resilience and sustainability. nomic growth and reduces poverty and inequity, while enabling all countries to more effectively manage and mitigate future health and economic shocks. • The diversity and credibility of the G20 countries—em- bodying a wide range of experiences, coupled with their considerable economic influence—make them well- placed to facilitate sharing experiences and challenges that all countries are facing and in particular to speak 2. In line with Shared Understanding Document, the report uses the term "developing countries", meaning here low- and middle-income countries to the aspirations and concerns of emerging economies using the World Bank Group income classification. with regard to health financing, UHC, and growth. 14 | World Bank Group BOX 0.1 KEY TERMS AND DEFINITIONS Universal health coverage (UHC) is the goal that all peo- ple and communities can use the promotive, preventive, curative, rehabilitative, and palliative health services they need, of sufficient quality to be effective, while also en- suring that the use of these services does not expose the user to financial hardship (WHO 2010). UHC has two pil- lars: coverage with essential, quality health services and financial protection. UHC embodies the commitment to giving priority to the worse off—the sickest, those with UNIVERSAL the lowest coverage, and the poor—and to health as a hu- HEALTH COVERAGE (UHC) man right. Under SDG3, Target 3.8, countries have com- mitted to achieve UHC, “including financial risk protec- tion, access to quality, essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all.” Health financing is a core component of health sys- tems, concerned with the mobilization, pooling, and allocation of financial resources, including the purchas- ing of products and services. Good health-financing systems are a necessary, though not sufficient, condi- HEALTH FINANCING tion for progress toward UHC. High-performance health financing (HPHF) for UHC means that funding is adequate and sustainable, pool- ing sufficient to spread the financial risks of ill-health, and spending both efficient and equitable to assure the desired 3 levels of service coverage, quality, and financial protection for all people. An additional critical attribute of what we call HPHF for UHC is that the system regular- ly reassesses progress and risks and adjusts to challenges HIGH-PERFORMANCE HEALTH FINANCING (HPHF) FOR UHC 3.  This recognizes that financial and capacity constraints differ across countries. High-Performance health financing Universal Health Coverage | 15 • Anchoring the UHC Financing agenda in the G20 Fi- The present report and the initiatives it recommends nance Track provides the opportunity to break down for countries and partners, including the G20, aim to the silos that continue to block progress toward both identify specific unmet needs to which the G20 Finance UHC and sustainable financing. As this report will dis- Track can contribute, consistent with the guidance on cuss, joint leadership between ministries of finance and health financing for UHC emerging through the GAP. health will be vital to transform health financing. and opportunities. REPORT STRUCTURE • By working with nonmember developing countries to build strong, sustainable health financing, G20 nations Part 1 of this report, entitled “Time to Act,” aims to will also benefit: advancing efficiency gains in one of show why health financing for UHC matters and why the largest global industries frees productive resources now. Section 1.1 explains how robust health financing that can further contribute to global economic growth. and UHC gains together contribute to sustainable, inclu- At the same time, greater resilience and sustainability in sive economic growth. It also goes beyond well-estab- health financing will enable developing countries to con- lished arguments on health, productivity, and growth tribute as effective partners to global health security, re- to show how effective health financing can advance ducing the frequency and impacts of disease outbreaks, additional policy objectives important for finance min- forced population displacements, and other negative isters, including financial discipline, increased interna- cross-border effects with possible global impacts. tional competitiveness, and stronger health security, with its associated economic benefits. Sections 1.2 and 1.3 then show that downside risks are growing, in light of slow UHC progress to date, coupled with emerging ADDING VALUE TO EXISTING epidemiologic, demographic, and other threats that will EFFORTS AND ALLIANCES both intensify upward pressures on health expendi- tures and constrain countries’ capacity to generate reve- Work on health financing for UHC has progressed over nues for health. The net result is a strong case for action decades, and numerous partnerships and platforms to reinforce health-financing capacities and institutions contribute to this work and coordinate efforts. Bilater- in developing countries now. al and multilateral agencies and development banks, along with alliances, networks, and partnerships such Part 2, “A Roadmap for Action,” sets out an agenda as P4H, UHC 2030, the Joint Learning Network for for progress toward high-performance health financ- UHC, networks of budget officials, and the African ing. Section 2.1 presents an emerging consensus on key Union’s Scorecard and Tracker on Domestic Financing actions that countries can take to build robust health fi- for Health facilitate technical collaboration, policy dia- nancing for UHC. Section 2.2 shows how collaboration logue, and global learning, and supplement countries’ among countries and partners can accelerate gains. Fi- domestic resources. 4 Many international organizations nally, Section 2.3 explains how G20 Finance Ministers and partners have contributed to the development of and Central Bank Governors can make decisive contri- the WHO-led Global Action Plan (GAP) and financing butions to this agenda. accelerator to drive progress towards the health-related SDGs (WHO 2018). 4.  The organizations cited are examples highlighted by G20 leaders and other experts during the preparation and review of this report. Numer- ous other valuable global collaborative efforts in health finance could be cited. An exhaustive mapping of institutions and partners active in the space is beyond the scope of this report. This report follows the G20. /1 / Time to Act High-Performance health financing Universal Health Coverage | 17 TIME TO ACT / 1.1 / Health financing, UHC, and the economy Countries can use health financing for UHC to accelerate inclusive economic growth, make their economies more competitive, and advance other import- ant policy goals—including efficiency in public spending and global health security. In turn, growth reinforces sustainable health financing, which again speeds the advance toward UHC. The economic case for investing in health is strong. and its financing exert their own direct effects on the There is evidence accumulated over decades that, when economy. For example, the financial protection offered by certain basic macro- conditions such as well-function- UHC directly reduces the number of people living in pov- ing labor markets are met, population health gains can erty, stimulates economic growth, and boosts human se- boost growth, with positive effects on productivity espe- curity. Health-financing arrangements can stimulate im- cially well documented.5 Health spending is an invest- provements in sector efficiency and control cost escalation ment rather than purely consumption. People in all soci- in the health sector, as well as affect labor mobility and eties also value health and the associated availability of workforce formalization. These additional economic gains affordable health services for their own sake (Narayan can materialize with short-term benefits rapidly evident. et al. 2000a; Narayan et al. 2000b; Jamison et al. 2013). Pathways for action. High-performance health financ- Economic gains from high-performance health financ- ing drives progress toward UHC and benefits the econ- ing for UHC are wide-ranging—and they can happen omy through six main pathways (Figure 1): health and fast. A large and growing number of countries have adopt- human capital development; workforce and labor-mar- ed UHC as the goal of health systems development to ad- ket effects; poverty reduction and equity; increased effi- vance population health while ensuring financial protec- ciency and financial discipline; wider economic impacts tion. Robust health financing is indispensable to service that strengthen consumption and competitiveness; and delivery and financial protection under UHC. Both UHC greater health and human security. The remainder of this section traces each of these channels in detail. Mapping the pathways clarifies how specific policy op- 5. See e.g., Commission on Macroeconomics and Health 2001; World tions exert their effects, laying the groundwork for the Bank 1993; World Bank 2019c. recommendations to be presented later in this report. 18 | World Bank Group / 1.1.1 / HIV antiretroviral therapy improves people’s strength, endurance, and productivity (Thirumurthy, Zivin and HEALTH AND HUMAN CAPITAL Goldstein 2008; Baranov and Kohler 2018). Strengthening the foundations of human capital. A The World Bank has calculated the effect of childhood first key channel through which financing for UHC stunting on productivity as a proxy for measuring the improves economic results is by improving health and impact of human capital on economic growth. A me- thus strengthening human capital—the sum of peo- ta-analysis suggests that countries incur a penalty of ple’s health, education, capabilities, and skills (World 6 percent of GDP per capita, on average, for not hav- Bank 2018d). Effective financing for UHC enhances the ing eliminated stunting when today’s workers were health dimension of human capital by multiple means. children (Galasso and Wagstaff 2016). For its Human Here, the discussion focuses on two intervention areas Capital Initiative,6 the World Bank estimates that if a for which there is strong micro evidence that they in- country could increase its human capital index from 0.5 crease productivity (measured as earnings). Most of to the highest possible score of 1.0 through maximizing these interventions are widely classified as health “best the health, nutrition, and educational possibilities of its buys.” They yield strong population health gains for children, GDP per worker would double from current modest investment and can be delivered at low cost levels (World Bank 2018c, World Bank 2019c). through primary and community health services. By channeling investment to essential primary and community health services, such as maternal, neonatal, / 1.1.2 / and child health interventions, including childhood im- WORKFORCE AND munization and nutrition programs, high-performance LABOR MARKETS health financing supports the creation of irreplaceable human capital foundations during children’s early Skills and capacity to innovate. The nature of work is years. Deprivation and poor health in early childhood changing. New business models are emerging that stress, compromise children’s physical and cognitive develop- for example, teamwork, flexibility, and innovation, while ment and future earning potential, while interventions the use of technology and automation is increasing. This with components including prenatal care, immuniza- requires different skills, including cognitive capacities tion, micronutrients, breast-feeding and appropriate such as complex problem-solving, socio-behavioral skills complementary feeding, parental outreach, and pre- such as the ability to cooperate with others, and personal schooling redress the balance and create the basis for skills such as reasoning and self-reliance (World Bank higher productivity when today’s children reach adult 2019c). Together, these new skills increase a country’s life (Baird et al. 2016; Flabbi and Gatti 2018; Richter et capacity to innovate, which is critical to generating eco- al. 2018; Shekar et al. 2017; World Bank 2019c). nomic growth and jobs over time. Health is a prerequi- site to build and maintain these skills throughout the life A second intervention area provides benefits that work- course, and an important contributor to improved health ers and employers can see rapidly. By adequately fund- is high-performance financing for UHC. ing promotive and preventive services for adults, bal- anced with necessary treatment, high-performance Labor mobility. Other features of the changing nature health financing allows people to work more produc- of work include increasing contract employment, work- tively throughout their lifetimes. There is considerable ers holding multiple jobs simultaneously, and people evidence that workers’ productivity can rise swiftly switching jobs more often than in the past (e.g., Riv- when they receive low-cost essential health and nutri- ers 2018; World Bank 2019c). There is also increasing tion services, such as deworming, vitamin A and iron supplementation, and malaria treatment (Jamison et al. 2013; Thomas et al. 2004; World Bank 2019c). Similarly, 6. http://www.worldbank.org/en/publication/human-capital High-Performance health financing Universal Health Coverage | 19 HOW HIGH-PERFORMANCE HEALTH FINANCING FOR UHC DRIVES SUSTAINABLE, INCLUSIVE GROWTH FIGURE 1 HIGH-PERFORMANCE HEALTH FINANCING* Funding adequate and sustainable, risk pooling sufficient to spread financial risk of ill-health, and spending efficient and equitable for desired levels of coverage. 1 6 HEALTH AND HUMAN HUMAN SECURITY CAPITAL Improved health security through Improved human capital and better preparedness and capacity productivity through better PROGRESS to respond to outbreaks; improved human security through greater health throughout the lifecycle. TOWARDS UHC social cohesion. Increased coverage and quality of needed services, improved 2 5 financial protection, and reduced inequities in service coverage, quality and WORKFORCE, EFFICIENCY, LABOR MARKETS financial protection. FINANCIAL DISCIPLINE Improved skills, including Improved financial discipline capacity to innovate through and sustainability through better health: increased labor improvements in efficiency of mobility and rate of labor revenue generation, pooling 3 4 market formalization. and purchasing. POVERTY, EQUITY WIDER BENEFITS Reduced impoverishment FOR THE ECONOMY and improved income redistribution Less need for precautionary savings, through greater equity increased consumption; greater in revenue generation, use international competitiveness of health resources, and human through human capital development capital development. and efficiency improvements. SU H STA T I NAB G R OW LE I N C LU S I V E * Other policies, such as development of human resources for health and multisectoral action, complement the health financing improvements. 20 | World Bank Group labor mobility within and between countries, includ- Colombia and Argentina—natural experiments suggest ing for health workers (Buchan, Dhillon and Campbell that, when payroll taxes have been reduced, more peo- 2017; WHO 2016a; OECD 2016b). Labor mobility can ple enter formal employment, and there is an increase be restricted by the lack of portability of health insur- in full-time as opposed to part-time employment (Bitran ance coverage. People without portable insurance who 2014; Garganta and Gasparini 2015; Kugler, Kugler and do move in response to labor market demands risk fi- Prada 2017). When formal-sector health insurance or nancial catastrophe and impoverishment from paying other forms of social protection funded by wage-based out-of-pocket (OOP) for health care (Chen et al. 2017; deductions exist alongside protection financed from Holzmann 2018; Tu 2019). This phenomenon can occur general government revenues for people without formal in settings where health insurance is provided for some employment, including the poor, this may further dis- of the population by employers or is geographically courage formalization (Bobba, Flabbi and Levy 2017). based, with respect either to enrollment or care deliv- ery sites. People tend to stay in their jobs longer with Development of high-performance health financing re- employer-based health insurance, so-called “job lock,” quires a thorough examination of the mix of revenue and are less likely to change their place of residence for sources and pooling. In many countries, careful ad- work because of the fear of losing their insurance (Bu- justment of financing instruments could increase the chmueller and Valleta 1996; Farooq and Kugler 2016; rate of workforce formalization, the number of people Milcent 2018; Rao 2019). in formal employment, and possibly the proportion of people in full-time work (Bitran 2014). Changing High-performance health financing guarantees finan- health-financing systems in this way can yield subse- cial protection regardless of where people live or their quent benefits for revenue generation as well. Moving employment status—as, for example, with the Euro- people out of precarious informal employment to the pean Union’s Cross-Border Directive—contributing to formal sector increases their capacity to pay taxes and labor mobility. The Cross-Border Directive ensures cov- health insurance contributions, while at the same time erage throughout the whole EU territory. Such a model making it easier to collect these revenues. Meanwhile, also ensures that people do not suffer catastrophic OOP the health sector itself is a large and growing source health payments, if they move in response to labor-mar- of high-quality, formal jobs in most countries (Box 1.1). ket demands and opportunities. Labor force formalization. On balance, payroll taxes to fund social protection, including social health insur- ance, tend to reduce the rate of labor market formaliza- tion, although it is still a matter of debate whether this occurs everywhere and whether it affects all sectors to the same extent (Wagstaff and Moreno-Serra 2009; An- gel-Urdinola, Barry and Guennouni 2016). The mecha- nism is that these taxes reduce the demand for labor by raising labor costs, while deterring small firms from de- claring their activities to avoid paying social insurance contributions for their employees. In 1999, the OECD recommended that its member coun- tries lower payroll taxes for this reason (OECD 1999), al- though the evidence of a subsequent increase in the rate of formalization and employment is mixed (OECD 2015b; Wagstaff 2010). Yet in other countries—for example, High-Performance health financing Universal Health Coverage | 21 / 1.1.3 / POVERTY AND INEQUITY BOX 1.1 THE HEALTH SECTOR One of the most important, and only more recently understood contributions of high-performance health AS A SOURCE OF JOBS financing for UHC is in its potential to reduce pover- ty and income inequalities. The impact on poverty and The health sector currently provides for- income distribution can be both rapid and lasting. mal, often well-paid employment for roughly 50 million people worldwide, dis- High-performance health financing achieves this proportionately women. Health’s share of through both components of UHC: service coverage the total workforce is growing fast in many countries. In OECD countries, employment and financial protection. Access to quality essential in health and social work grew by 42 per- health and nutrition services allows the poor to protect cent between 2000 and 2015, while jobs and maintain their health, to work more and more pro- in industry and agriculture declined. Many ductively, and to increase their earnings. It enhances developing countries are following simi- the cognitive capacities and educational attainment of lar patterns (WHO 2016a). The main chal- children in lower-income families, ultimately increas- lenge in developing countries remains un- der-staffing. ing their future income. As a result, income inequality falls over time (World Bank 2019c). Highly skilled health-sector jobs generate additional economic activity that spurs Expanding financial protection immediately reduces “knock-on” job growth for less-skilled labor. the chance that people will fall into poverty by paying For example, each professionally trained for health services out-of-pocket. Currently, 100 million health worker is supported by an estimat- people are pushed into poverty each year because they ed one to two other workers, although the ratio varies considerably across countries have to make out-of-pocket health payments (WHO and (WHO 2016a). For governments seeking World Bank 2017). This is equivalent to approximately to generate formal jobs, investment in the 15 percent of all people living in extreme poverty. Re- health sector creates such opportunities. ductions in out-of-pocket payments especially among the poor and vulnerable, would have a swift, substantial benefit for poverty reduction. Reductions in the reliance on out-of-pocket payments, through high-performance health financing have many other benefits. Increased / 1 .1.4 / prepayment and pooling result in efficiency gains, for ex- EFFICIENCY AND ample, from enhanced bargaining power of purchasers. FINANCIAL DISCIPLINE Moreover, people do not forego health care and no longer need to sell assets or borrow to meet health payments. Given the sector’s magnitude and growth, efficiency and This means they can cover health costs while continu- financial discipline in the health sector are critical for ing to spend and invest in other areas. This contributes a country’s overall fiscal outlook. Sources of inefficien- to reducing poverty and inequities, while also spurring cy and options for reducing it lie in all three functions economic growth (Box 1.2). of health financing: revenue generation, pooling, and purchasing. By creating structures that can keep health costs under control while progressively expanding ser- vice coverage and quality and financial protection, ro- bust health financing for UHC contributes to greater value for money while ensuring financial discipline and 22 | World Bank Group sustainability. And because health represents a signifi- however, than the ministry of health. On the other hand, cant share of government expenditures—averaging 11 health-financing policy can contribute to broader revenue percent in 2016, albeit with significant variation across generation by encouraging the optimal use of revenue mo- countries—efficiency improvements and cost contain- bilization instruments that shape healthy lifestyles, such as ment in the health sector can have a substantial impact taxes on products that are harmful to health. In addition, on overall government spending and fiscal discipline. health-financing policy can seek efficiency gains by ad- vancing multi-sector and whole-of-government approaches, Improvements in the efficiency of revenue generation are fundamental. On one hand, efficiency gains in revenue along with sector-wide, performance informed planning generation increase the resources available for health. In- and budgeting, enhanced budget execution, and stronger creasing the administrative efficiency and yield of revenue systems of public financial management more generally collection is more the role of the ministry of finance, (Barroy et al. 2018; Cashin et al. 2017; OECD 2015a). BOX 1.2 HEALTH FINANCING, GROWTH, AND ECONOMIC INCLUSION: JAPAN’S EXPERIENCE Japan’s Social Health Insurance (SHI) system was income equality achieved through deliberate pol- established in 1922. The country formally adopted icy action. Japan’s UHC gains allowed average life a UHC goal in the 1950s, and insurance coverage expectancy and other health and nutrition indica- gradually expanded until it reached 100 percent of tors to improve steadily for both men and women, the population in 1961. Japan’s experience shows while regional disparities declined. This has been how health-financing tools can accelerate national documented as one factor helping to consolidate economic development while improving population the country’s social stability. well-being and promoting equity. Health, jobs, and shared prosperity. Achieving UHC Leave no one behind. Foundational to Japan’s early in the country’s development process helped health-financing model was a commitment to in- Japan enhance social well-being through a positive clusiveness. The country’s SHI consists of a combi- economic growth feedback loop. Improved health, nation of employment-based and residence-based workforce participation, and labor productivity all insurance plans that cover the informal sector. Ja- contributed to Japan’s economic growth. As robust pan progressively expanded mandatory enrollment health financing promoted a more equitable distri- through these two types of insurance plans, while bution of income and opportunities within society, the financial burden on lower-income people enroll- it consolidated the foundations of shared prosperity ing with SHI was mitigated by public subsidies. and increased government revenue through taxation. In turn, higher public revenues enabled government Reductions in economic inequality, thanks to pub- to continuously improve health service packages lic financing of health. The power of UHC to pro- and financial protection. This pattern of mutually re- mote inclusion and social cohesion was reflected inforcing gains accelerated economic development in a large differential between Japan’s pre-tax and while strengthening socioeconomic inclusion. transfer versus post-tax and transfer Gini coeffi- cient in the 1960s and early 1970s—implying more Source: Oshio and Honda 2019. High-Performance health financing Universal Health Coverage | 23 / 1.1.5 / dimensions of human capital. By driving efficiency gains in the health sector, robust health-financing models also WIDER BENEFITS free productive resources for new strategic uses, support- FOR THE ECONOMY ing countries’ efforts to gain or keep a comparative advan- tage in international trade. As the multiple positive effects described above accu- mulate and reinforce each other over time, high-perfor- mance health financing for UHC yields broad benefits for a country’s economy: in particular by reducing the / 1.1.6 / need for precautionary savings in anticipation of health HEALTH AND emergencies and by strengthening countries’ interna- HUMAN SECURITY tional competitiveness through human capital and ef- Health security. Pandemics have caused considerable ficiency gains. damage to people, societies, and economies, so there is Precautionary savings. Where financial protection now a general understanding that pro-active risk reduc- systems are insufficient, people may feel obliged to set tion is more cost-effective than recovery efforts follow- aside relatively large portions of their income in the ing an event (Lee and McKibbin 2004; Huber, Finelli form of savings to guard against future health emergen- and Stevens 2018). Yet people and societies frequently cies. When it reaches high levels, such defensive saving underestimate the personal and societal risks and im- can weaken economies. In a number of economies—in- pacts of pandemics before they happen. This also leads cluding China, the USA, and Taiwan, China—studies to underinvestment in the capacities for preparedness have confirmed that the absence of health insurance and response—including the important components of combined with high out-of-pocket payments has led frontline health workers, supply chains (e.g., vaccines, households to set aside substantial savings against the micronutrients), public-health laboratories, and infor- unpredictable shock of future health expenses (Baldac- mation systems (WHO 2018). ci et al. 2010; Kuan and Chen 2013; Bai and Wu 2014; Pandemics leave lasting economic scars. Pandemics usu- Kopecky and Koreshkova 2014). This is similar to the ally start as a locally concentrated epidemic. When they effect that political or economic uncertainty has on pre- are not effectively contained, a window of opportunity cautionary saving, reducing consumption and the asso- closes, and a much larger problem develops. There is ciated economic growth (Aaberge, Liu and Zhu 2017). considerable evidence that pandemics such as the 2013- Steps taken to adjust health-financing strategies by 16 West African Ebola crisis absorb vast quantities of increasing financial protection have been shown to re- domestic resources that must be diverted from other duce precautionary savings in some settings (Kuan and uses to crisis response. Economic growth rates in the Chen 2013; Bai and Wu 2014; Cheung and Padieu 2015). affected countries suffer for many years (Huber, Finelli Expenditures on other types of goods and services then and Stevens 2018). For example, Liberia was growing at increased, providing a stimulus to economic growth. 8.7 percent in 2013, sank to negative growth by 2015, and only rebounded to 3 percent growth as of 2018— International competitiveness. The ability of a country’s largely, although not exclusively, due to the Ebola out- entrepreneurs, companies, and workers to continually break and its impact on businesses, new investment, adapt and innovate is paramount to future competitiveness and overall economic activity.7 (World Bank 2019c). Already, levels of “intellectual capital” have been shown to be highly correlated with a country’s Health financing is a crucial lever to improve health secu- competitiveness in international trade and its associated rity. Health financing that ensures appropriate funding for growth (Ogrean and Herciu 2015). Through the pathways discussed above, high-performance health financing for UHC strengthens both the health and cognitive-behavioral 7.  Annual growth data and forecasts at: https://data.worldbank.org 24 | World Bank Group preparedness reduces the risks of an outbreak occurring water and sanitation, transport, and others. There are in the first place. Appropriate financing for monitoring, several ways to preempt tensions and facilitate collab- preparedness, and response reduces the eventual impact oration across sectors. Some involve increasing overall of any epidemic and lessens the chance of it becoming a fiscal space: for example, by increasing general govern- pandemic. Many lower-income countries will be unable ment revenue or cutting ineffective expenditures (e.g., to fund all of the necessary activities from domestic re- fuel subsidies). Another strategy is to move toward a sources, and access to external sources of financing and whole-of-government approach. The latter option will technical support will be required. However, high-per- be discussed in Section 2.1. formance health financing at the domestic level is also critical. It not only reduces the risks of a major shock to human well-being and economic growth, but also con- tributes to increased social stability. Human security. The combined effect of many of the high-performance health-financing policies discussed so far is to drive swift increases in health-service cov- erage and financial protection, assuring the population that the services they might need to use are available, of good quality, and affordable. High-performance health-financing policies also reduce poverty and in- crease equity in health outcomes and in income distri- bution. The net result is that these changes foster social cohesion and preempt potential tensions as a society grows more affluent. Thus, countries can use robust health financing to advance multiple components of stability and human security (United Nations 2012). / 1.1.7 / TIMING AND LINKING EFFORTS The sooner the better. Countries reap the greatest eco- nomic and human-security rewards when they incor- porate robust UHC financing strategies early in their development process (Oshio and Honda 2019). Tim- ing matters, because the benefits of high-performance health finance are cumulative. Early health-financing policy decisions can put in place a process that multi- plies positive impacts over time. Linking efforts across sectors. While they may recog- nize the importance of investments in health, countries often face what appear to be tough trade-offs among sec- tors integral to human capital development and growth, including health, education, and social welfare, but also High-Performance health financing Universal Health Coverage | 25 TIME TO ACT / 1.2 / Missed opportunities Today, many developing countries have yet to fully seize the growth and de- velopment opportunities that high-performance health financing offers. This section describes the generally slow progress toward UHC targets, identi- fies underlying health financing shortcomings, and discusses the barriers that policy makers must address, if countries are to accelerate UHC gains. / 1.2.1 / lacked one or more of the most basic rapid diagnostic tests (Leslie et al. 2017). Meanwhile, poor quality is not TOO FEW PEOPLE only the result of under-provision of services and doing ARE GETTING THE HEALTH the wrong things at the wrong time, but can also result SERVICES AND FINANCIAL from the wasteful overprovision of services (WHO 2010). PROTECTION THEY NEED Global progress in financial protection also lags. Every In 2016, over 3.6 billion people, roughly half of the year, between 2000 and 2010, approximately 100 million world’s population, did not receive the essential health people were pushed into extreme poverty, and over 800 services they needed, because those services were un- million people suffered financial catastrophe, from pay- available, of low quality, or unaffordable (WHO and ing for health care out-of-pocket (WHO and World Bank World Bank 2017). Major coverage gaps for essential 2017). No major improvements were registered in these services persist mostly in developing countries. numbers over time in the countries where time series data are available. Many people facing financial catastro- For people who receive services, coverage is often in- phe sell assets, go into debt, or reduce their consumption effective, as the quality of services is low (Kruk et al. of other necessities (Saksena, Hsu and Evans 2014). To 2018). Shortfalls in quality of care, and especially in- avoid such consequences, others forego health services adequate compliance with clinical standards, are not from the outset. The impoverishing and welfare effects restricted to developing countries. In these countries, of inadequate financial protection are concentrated in de- however, inadequate provider knowledge and behavior veloping countries, but are by no means limited to them. are often compounded by lack of resources. For example, in 10 developing countries,8 98 percent of health facilities Coverage of quality services and financial protection is uneven within countries, to the detriment of the 8.  Bangladesh, Haiti, Kenya, Malawi, Namibia, Nepal, Rwanda, Senegal, poor. In LICs and LMICs over the period 2005 to 2015, Uganda, and the United Republic of Tanzania. for example, only 17 percent of mother and child pairs 26 | World Bank Group in the poorest wealth quintiles received at least six out Another critical determinant is a governments’ ability of seven basic health interventions, compared to 74 per- to raise revenue. Developing countries raise on average cent in the richest income quintile (WHO and World 29.5 percent of gross domestic product as government Bank 2017). Studies have shown that improvements in revenue, compared to 41.2 percent in high-income coun- average service coverage may not necessarily yield re- tries. A critical component of a government’s capacity to ductions in inequities (World Bank 2018a). Health-ser- mobilize revenue is its ability to raise taxes. When coun- vice quality is also unequally distributed. Low quality tries manage to raise taxes consistently above 15 percent particularly afflicts services available to the poor and of gross domestic product, they tend to benefit from sus- people with low levels of education (Amo-Adjei et al. tained, inclusive growth (Gaspar et al. 2016). Currently, 2018). On the financial protection side, while out-of- only about half of developing countries have surpassed pocket spending can be catastrophic and impoverishing this threshold. Among those that fall short are 20 out of to people at all income levels depending on the country, 28 LICs, 17 out of 43 LMICs, and 16 out 39 UMICs, in- people living close to the poverty line can be pushed cluding three G20 countries. Health taxes can help coun- into poverty even by small expenditures (World Bank tries develop their tax capacity and move toward and 2018a; Wagstaff et al. 2018). ultimately beyond the 15 percent threshold. A third, important determinant of government health spending is the priority that governments give to / 1.2.2 / health in budget decisions. Developing countries on INADEQUATE FUNDING FOR average devote 10 percent of government expenditure HEALTH EXPLAINS PART OF to health, compared to 15 percent in high-income coun- THE GLOBAL UHC SHORTFALL tries.9 While in general the share grows with income, there are very large variations across developing coun- For coverage with quality essential services and fi- tries, from around 3 percent to close to 30 percent, and nancial protection, the overall level of health spend- some upper middle-income countries are those that give ing and the sources of revenue matter. Levels of health the lowest priority to health. spending rise as countries develop economically (Fan and Savedoff 2014). In 2016, total per capita health Progress in raising more government revenue as a spending averaged $40 in LICs, compared to $135 in share of GDP as well as giving greater priority to LMICs, $477 in UMICs and $3,135 in HICs. Similarly, health in budget decisions has been slow in many de- the share of prepaid and pooled funding, which is crit- veloping countries. In lower middle-income countries, ical for equitable coverage with quality services and economic growth has been a more important contributor financial protection, grows with national per-capita in- to increased health spending than the impact of im- come. The main source of prepaid and pooled resources provements in revenue generation and increasing priori- is government funding, whether it flows from alloca- ty to health (Tandon et al. 2018). tions of general revenue or direct contributions to social As a result of slow progress in raising more government health insurance. In 2016, domestic government spend- revenue for health, out-of-pocket payments continue to ing (excluding development assistance for health) as a constitute a large share of health expenditures in devel- share of current health expenditure was 25.9 percent oping countries, amounting to more than half a trillion on average in LICs, compared to 41.5 percent in LMICs, dollars or $80 per capita annually. As noted earlier, these 56.3 percent in UMICs, and 72.2 percent in HICs. payments deter some people from using needed health ser- vices, and push others into poverty or trap them once there. Economic growth is an important determinant of the capacity of governments to spend on health. It allows revenues to increase even if governments do not modify 9.  These averages include on-budget external funding in both numera- their fiscal policies. tor and denominator. High-Performance health financing Universal Health Coverage | 27 Notwithstanding these global trends, assessing the ad- disease programs. While infection rates started to fall, equacy of a country’s domestic government spending is international support needs to help catalyze similar ad- not a straightforward task. Most importantly, the varia- vancements in in other disease areas and increasingly tion in levels of domestic government spending on health strengthen country health systems to ensure that in- among countries of similar levels of economic development vestments are sustainable. In 2017, for example, only depends on social preferences for solidarity and equity. 11.3 percent of DAH was invested in health systems strengthening (IHME 2018). External assistance must Nevertheless, it is possible to gauge whether domestic also play a stronger role in supporting countries to ad- government per capita spending on health is sufficient dress low government revenue generation and strength- to ensure universal coverage with the most essential en capacities to carry out all health-financing functions health services. WHO (2017b) estimated that LICs will required to ensure accelerated towards UHC (Dieleman need to spend $112 per capita, while LMICs will need to and Hanlon 2014; Van de Maele, Evans and Tan- Torres spend $146 per capita to ensure access to essential health 2012; World Bank 2016a; World Bank 2018b).10 services. Assuming that governments need to finance between 80 percent and 100 percent of these amounts A further complexity is the transition toward self- to ensure sufficient levels of prepayment and pooling, reliance. As their economies grow, countries are increas- minimum per capita spending requirements are $90 for ingly transitioning from support mechanisms such as LICs and $117 for LMICs. It is important to note that Gavi, the Vaccine Alliance, and the Global Fund to Fight these benchmarks are indicative. Meeting them does not AIDS, Tuberculosis and Malaria (World Bank 2018b). necessarily mean attainment of universal coverage with When countries did not sufficiently invest their own pub- essential health services, as factors other than the level lic funds into health, it can become a significant prob- of spending are critical, for example, the efficient and lem for maintaining existing programs, let alone moving equitable use of resources. more rapidly toward UHC. At the same time, transition- ing can also present an opportunity to pro-actively plan In both LICs and LMICs, average amounts of domes- country efforts to increase domestic resource mobiliza- tic government spending fall short of these bench- tion and the efficiency with which resources are used. marks. In 2016, in LICs, levels of domestic government spending on health remained below $10 per capita, far short of the $90 target. And, while per capita domes- / 1.2.3 / tic government spending in LMICs has almost doubled INEFFICIENCIES since 2000, rising to $57 in 2016, it still stands at only AND INEQUITIES half of the $112 benchmark. ARE WIDESPREAD Countries with the lowest ability to raise funds benefit- Inefficiencies associated with health financing. The ed from large increases in development assistance for health sector is not immune to inefficiencies and waste health (DAH) starting in the early 2000s, but more re- in countries at all income levels. A recent report suggest- cently levels of DAH have stagnated. The large increases ed that 20 percent of all health expenditure in OECD contributed to important health gains during the Millen- countries was wasted and did not contribute to the nium Development Goal era. Since 2014, though, external desired health outcomes (OECD 2017b). The proportion receipts have fallen, most recently standing at $10.8 per of wasted health funds in developing countries may be capita in LICs, $7.2 in LMICs, and $3.9 in UMICs. even higher (WHO 2010). One recent estimate suggests that countries could save as much through efficiency DAH has enabled many improvements in health in efforts in health, education, and infrastructure as they developing countries and must evolve to effectively catalyze progress toward UHC. Over the last two de- cades, DAH has predominantly supported infectious 10.  Questions of absorptive capacity of DAH are considered in Section 2. 28 | World Bank Group could raise through tax reform (Gaspar et al. 2019). the education, health, and agricultural sectors (e.g., for nutrition), when coordinated action would be more ef- Only some efficiency gains save money—for example, fective and efficient. reducing corruption and leakages, or the prices paid for key inputs such as medicines. Others will not necessar- Inefficiencies in the health sector exacerbate the prob- ily save money, but will lead to higher levels of health lems of limited funding. Even with the funds currently for the available funds. available, most developing countries could achieve bet- ter UHC and health outcomes than they currently do. Inefficiencies are associated with each of the health-fi- nancing components. Revenue generation systems some- Inequities associated with health financing. Coun- times raise only a small proportion of the revenue that tries frequently raise, pool and use funds for health could potentially be mobilized from the taxes and charges inequitably. Inequities can be found in financial con- on the books. Pooling is frequently inefficient due to tributions: for example, the poor contribute a higher fragmentation into small pools that are able to offer proportion of their incomes than the rich, without sub- financial protection for only a very small package of sequent compensation through fiscal transfers. needed health services, and that often entail high ad- ministrative costs. Inequities in coverage and benefits derived from pooled funds commonly persist both across and within pools. Inefficiencies in purchasing are associated with the Where national pools are fragmented into different wrong services purchased or provided, or available at financing schemes, typically with different financing the wrong level of care. This includes wasteful clini- arrangements for civil servants and formal sector work- cal care (inappropriate and ineffective care), poor use ers compared to other population groups, or fragmenta- of resources that do not directly contribute to patient tion into subnational pools, some groups obtain fewer care (e.g., fragmented procurement, low use of gener- and lower-quality services than others, unless effec- ics), and governance-related waste. Adverse events in tive forms of risk equalization are implemented across hospitals, for example, add 13–16 percent to hospital pools. Even within pools with uniform entitlements, costs (Jackson 2009), and 28–72 percent of them are inequities can run deep. Typically, fewer services are considered avoidable (Rafter et al. 2017; OECD 2017b). available in areas where poor people live, so the rich Average losses due to fraud, largely associated with capture a disproportionate share of the benefits (Meng purchasing, in seven OECD countries were estimated et al. 2015; Kutzin, Yip and Cashin 2016). at 6.2 percent of total health spending (Gee and Button 2015). Payment methods can create or distort incen- Investments in primary and community health ser- tives for efficient and high-quality provision of care: vices are critical to ensure access to the most cost-effec- for example, fee-for-service payment in hospitals in a tive interventions. Yet in many countries, patients do set of European and Central Asian countries was asso- not seek help or bypass primary health care facilities ciated with 20 percent higher national health spending, due to poor accessibility (distance to facility and cost of and more inpatient admissions than patient-based pay- treatment), low quality (e.g., clinician competence), lack ments such as Diagnostic Related Groups (Moreno-Ser- of pharmaceuticals, and weak gatekeeping mechanisms ra and Wagstaff 2010). (Kruk et al. 2018). In India, for example, 67 percent of patients living in the vicinity of the PHC facility by- Inefficiencies can also result from the lack of coordina- passed it when seeking treatment, largely due to poor tion of health investments with other sectors—includ- clinical competence of the health care provider (Rao ing, for example, with transport, water, and sanitation. and Sheffel 2018). Low spending on primary and com- Early childhood development, critical to the future ed- munity health services is commonly perceived as one ucation and earnings of children and the future pro- of the major causes of both inequities and inefficien- ductivity of society, is frequently pursued separately by cy. The level of spending on primary and community High-Performance health financing Universal Health Coverage | 29 health services is difficult to gauge, as definitions vary tools to improve health (Task Force on Fiscal Policy for from country to country. Recent efforts to shed light on Health 2019; Marquez and Moreno-Dodson 2017). Excise the prioritization of these services show a wide range of tax increases that increase the prices of tobacco, alcohol, spending levels, and country comparisons will only be- and sugar-sweetened beverages by 50 percent could raise come possible as data improve over time (Van de Maele additional revenues of $20 trillion worldwide over the next et al. 2019). What is evident today, though, is that many 50 years (Task Force on Fiscal Policy for Health 2019). A countries identify the strengthening of PHC as a policy similar increase in retail prices could generate additional priority; however, this prioritization does not show in revenues of approximately $24.7 billion in 2030 in the 54 longitudinal spending data. countries that are unlikely to reach UMIC status by 203011. Of the $24.7 billion total revenue gain, approximately $5.9 billion would be generated in LICs and $18.8 billion in / 1.2.4 / LMICs. These excise tax increases would raise the tax-to- CLOSING UHC FINANCING GDP ratio on average by 0.7 percentage points in LICs and GAPS IN LOW- AND 0.7 percentage points in LMICs. If the additional revenues LOWER MIDDLE-INCOME were allocated to health according to the current levels of prioritization in government spending, the financing gap COUNTRIES BY 2030 for UHC would decrease by $0.5 billion in LICs and $0.8 The limited ability to raise domestic financing for UHC billion in LMICs. If allocated to health at a level of 50 per- in low- and lower middle-income countries poses a major cent, the excise tax increases would lower the financing threat to the attainment of their UHC targets Fifty-four gap by $2.9 billion in LICs and $6.6 billion in LMICs. The countries, home to approximately 1.5 billion people, are un- tax increase would have the additional advantage of reduc- likely to meet the gross national income (GNI) per capita ing future health care costs by curbing the growth of non- threshold for upper-middle-income status by 2030 (Annex communicable disease (NCD) burdens. A). In these countries, through economic growth alone, Fossil fuel subsidies impose large fiscal costs worldwide, domestic government spending on health will increase on but are highly inefficient as a means to provide support average to $13 per capita in LICs and $57 in LMICs by 2030. to low-income households, as rich households typically These amounts still fall far short of cost estimates for the capture the benefits (Coady et al. 2019). Potential fiscal provision of essential services, approximately $90 per capita revenue gains from this source are estimated at about in LICs and $118 per capita in LMICs. The result is a project- $3.2 trillion, or 4 percent of global GDP in 2017. Estimates ed UHC funding gap of $68 billion in LICs and $108 billion are limited to the effects of underpricing. The potential in LMICs in 2030. gains are lower than in the past, mostly due to the global In an optimistic scenario, domestic government revenue decline in international fuel prices. Fiscal benefits would mobilization efforts, such as improvements in the capaci- flow from both the removal of pre-tax subsidies—the ty to raise government revenue and prioritization of health difference between the price paid by consumers and the in budgets, could increase prepaid and pooled spending on cost of supplying energy—and post-tax subsidies—dif- health in these 54 countries to, on average, $22 in LICs and ferences between the price paid by consumers and the $85 in LMICs by 2030. These increases are large compared prices necessary to fully reflect supply plus environmen- to the growth-only scenario, yet all the countries, except for tal costs and foregone revenue in terms of general taxes. seven LMICs, would still fall substantially short of the re- Fiscal revenues from eliminating fossil fuel subsidies in spective health-spending thresholds. The anticipated fund- the 54 study countries would have amounted in 2015 to ing gaps in 2030 would still amount to $59 billion in LICs and $70 billion in LMICs. Excise taxes on health “bads” such as tobacco, alcohol, 11. Estimates are based on data provided by the Center for Disease and sugar-sweetened beverages remain underutilized as Dynamics, Economics and Policy (Annex A). 30 | World Bank Group $9.4 billion in LICs and $84.2 billion in LMICs 12. If coun- Additional funds to reduce the financing gap may tries were to eliminate these subsidies and allocate the come from the private commercial sector, but the pre-tax component of the additional fiscal revenue to so- amounts are likely to be limited. Foreign direct in- cial spending in 2030, UHC financing gaps would fall by vestment in health care has been increasing rapidly, $1.3 billion in LICs and $3.2 billion in LMICs. Additional but remains below $10 billion per year in developing benefits would include cuts in CO2 emissions and reduc- countries. Most of these funds go to middle-income tions in the NCD burden from air pollution. countries. Moreover, the private sector generally re- coups its investments, and its involvement, even in the NARROWING THE PROJECTED UHC FUNDING GAP IN 2030 FIGURE 2 context of public-private partnerships, is more likely to result in a front-loading of investments than in addi- tional revenues for health. Both domestic government funding and DAH could eventually have a role in lever- LICS LMICS aging increased commercial private sector investment $67.8 B $107.8 B through blended financing. Most recent evidence of the impact of DAH on private sector investment suggests a leverage ratio from $0.37 to $1.06 for each public dollar (Attridge and Engen 2019). $54.6 B $59.7 B The projections discussed in the preceding pages as- sume efficient practices in health financing and ser- $9.0 B $38.2 B vice delivery, such as reducing fraud and corruption, $2.9 B $6.6 B $1.3 B $3.2 B appropriate mix of interventions delivered in the right settings, and efficient use of human resources for GAP DRM HEALTH TAXES FOSSIL FUEL SUBSIDIES health, including task shifting. Weak health-financ- ing capacity in LICs and LMICs, though, could prevent Note: Analysis includes 54 LICs and LMICs that, based on growth projec- tions, will not transition to UMIC status by 2030. For details on definitions, countries from attaining these levels of efficiency. As dis- data and methods see text and Annex B. cussed in the previous section, inefficiencies in purchas- ing are found in most countries and can lead to signifi- cant wastage of resources. If current inefficient practices Combined, the fiscal measures described above, on persist, under the assumption that at least 20 percent of top of economic growth, could reduce the financing spending is wasted (WHO 2010), the financing gap in gap from a total of $176 billion to approximately $114- LICs and LMICs in 2030 would be $137 to $147 billion, 122 billion (depending on the assumptions about the al- despite growth and the described fiscal measures. location of excise taxes to health), with the gaps almost equally divided between LICs and LMICs. External financing in the form of DAH will further / 1.2.5 / reduce these domestic funding gaps. Currently, in the MANY OBSTACLES 54 study countries, external financing stands at approx- CONSTRAIN HEALTH- imately $5.4 billion in LICs and $5.0 billion in LMICs. FINANCING ADVANCES After stagnation in the growth of DAH over the past years, a substantial increase in DAH would be necessary The preceding discussion has demonstrated signif- if countries are to have a chance of reaching UHC goals. icant health-financing shortcomings. To overcome these constraints, developing countries will need to substantially reconfigure their health-financing pol- 12.  Estimates are based on data provided by the IMF (Annex A). icies, practices, and organizations. Many countries High-Performance health financing Universal Health Coverage | 31 have made strides in reforming components of their official policies seeking to increase government rev- health financing to raise more funds; give higher pri­ enues as a share of GDP, but that, even after several ority to health in budgets; provide greater incentives years, they have made little progress. Data from Public for efficiency; and raise, pool, and use funds more Expenditure and Financial Accountability assessments equitably; but few have managed to sustain compre­ in 65 countries indicate that, at the end of the budget hensive reforms (Gottret, Schieber and Waters 2008; cycle, ministries of health tend to lose out in terms of Cotlear et al. 2015). The constraints vary by country, the allocated budget versus actual expenditures in com- but several reasons are common. One is that many of parison to both the education ministry and the aggre- the necessary changes to health-financing policy have gate budget, indicating: (i) low prioritization of health political implications, opposed by powerful interest in the re-budgeting process, (ii) tighter constraints in groups. For example, raising taxes is never popular in the flow of funds, and (iii) greater bottlenecks in the the business community. spending of released funds (World Bank calculations). Indeed, budget execution rates are often much lower Health-financing reforms require strong leadership than optimal in ministries of health, sometimes lead- from ministries of finance and health in their own ing to funds having to be returned to the ministry of domains, and also strong collaboration between them. finance. Recent public expenditure reviews from six However, even in many OECD countries, ministries of African countries show that the approved budget un- finance consult with line ministries only for purposes derspending ranged from $10 to $120 million a year, of budget preparation (OECD 2015a). In addition, half of equivalent to lost per capita spending of between $1 and OECD countries report a lack of capacity at their min- $3.50 annually (WHO 2016b). Another obstacle to prog- istry of finance for assessing health policies. Different ress is that the health sector has traditionally been slow definitions and understanding of common terms can in adopting new technologies and other opportunities. create further confusion. For ministries of finance, it is often also challenging to reconcile short-term financing Many of these UHC financing challenges converge in pressures with the medium- and long-term nature of countries affected by fragility, conflict, and violence a health reform. Creating a common understanding of (FCV), where by definition governance and organiza- challenges and priorities between ministries of finance tional capacity is weak. FCV situations span the in- and health is therefore critical for ensuring that coun- come range of developing countries. FCV countries are tries move toward high-performance health financing. home to 2 billion people, and more than 50 percent of the world’s poor will live in them by 2030. The disease It is not easy to evaluate a country’s leadership, gover- burden is high in FCV-affected countries, compared to nance, and organizational management capacities specif- stable countries at the same income level. This is in part ically in health financing. There are a number of indexes because conflict and violence lead to a higher incidence of governance that cover much more than health financ- of injuries, mental health issues, and gender-based vio- ing per se, including the World Bank’s Country Policy lence (Graves, Haakenstad and Dieleman 2015). Govern- and Institutional Assessment (CPIA). It suggests that gov- ment revenue mobilization for health tends to be low ernance is less than optimal in many developing coun- and external financing high in FCV settings. Yet, com- tries. For example, an assessment of countries in Sub-Sa- pared to stable low-income countries, DAH per capita is haran Africa showed they scored, on average, 3.1 out of roughly one-third lower in FCV-affected LICs (Graves, the maximum possible score of 6. The lowest score was Haakenstad, and Dieleman 2015). DAH is highly frag- 1.6, the maximum score 4.0 (Chuhan-Pole et al. 2018). mented, and the transition from humanitarian to de- velopment assistance often results in high volatility of Three ways of considering the strength of governance health funding, threatening the sustainability of prior- and organizational capacity specifically in health fi- ity health programs. nancing suggest problems, at least in some countries. There is evidence that some countries have developed 32 | World Bank Group TIME TO ACT / 1.3 / Emerging and intensifying challenges The challenges described in the preceding section are—or soon will be— compounded by emerging and intensifying difficulties that will further test health financing. Pressures to increase health expenditures will rise, while it will become more difficult to generate revenues. Pressures to spend inefficiently and inequitably could also increase. While these challenges affect countries at all income / 1.3.1 / levels, the risk in developing countries is that the gap PRESSURES TO SPEND between the demands for health spending and avail- able public resources will widen, prolonging the re- MORE ON HEALTH liance on inefficient and inequitable out-of-pocket Rising expectations for more and better health services. health payments and impeding progress toward UHC. People tend to demand more and better health services as Similar pressures will put the same strains on the en- they get richer and more educated, increasing the pressure tire social security system, further tightening the fiscal for health spending (Ke, Saksena and Holly 2011; Fletch- space for health. er and Frisvold 2014; Amo-Adjei et al. 2018; Katyal 2018). This section analyzes the most pertinent of these pres- In addition, the globalization of information means that sure points in three groups: (i) pressures to spend more aspirations for living a long and healthy life are rising ev- on health, which also has implications for efficiency erywhere, among the poor and rich alike. People are in- and equity; (ii) constraints to raising revenue; and (iii) creasingly seeking health information online; in Europe, unanticipated shocks to the health system with possible the percentage almost doubled in less than a decade, rising spill-over effects on the economy. from 28 percent in 2008 to 51 percent in 2017 (Moreira High-Performance health financing Universal Health Coverage | 33 2018). With expanded mobile phone use and Internet ac- discussed below (Lee and Mason 2017). Projections of cess even in the poorest countries, more people around the public spending on health for 50 advanced and emerging world have access to health information and the benefits of economies from 2010–30 show that aging will account healthy living than ever before (World Bank, forthcoming). for approximately one-third of the spending increase in As people begin to search more for specific medical treat- advanced economies and half of the increase in emerg- ments or procedures, demand for high-cost secondary and ing economies (IMF 2010). Aging puts pressure on public tertiary care and access to the newest medical technologies finance in additional ways, particularly through pension is likely to continue to increase. schemes (Lee and Mason 2017). People living longer re- ceive pensions for longer, and there is growing recogni- Progress in medical technology. Some estimates sug- tion that pension systems in high-income settings need gest that technological advances have accounted for to be reformed as a result (e.g., Kitao 2018). between 25 and 75 percent of growth in health expen- ditures in high-income countries since 1960 (Smith, Ne- Some of the cost pressures related to aging can be off- whouse and Freeland 2009). In the future, some emerg- set through policies aimed at promoting more active and ing technological advancements may reduce the costs of healthier older populations, such that older people can care and health administration—through digitization continue to work if they wish (OECD 2017c; Beard et al. and advanced robotics, for example. However, the OECD 2016; WHO 2015; Oxley 2009). This also has implica- has argued that demographic and income determinants tions for health-financing strategies: funding is needed are likely to outgrow the potential cost-lowering effects for healthy aging policies to work, but until the impact of these technological innovations (OECD 2013). In re- of these policies starts to be felt, there will be a growing source-constrained environments, rising demand for need to fund treatment associated with chronic morbid- higher-cost technologies is likely to place investments ity and long-term care at the same time, putting even in more cost-effective primary and community health more pressure on public finance. services in jeopardy. From a UHC perspective, it will be Growing burden of NCDs. The NCD burden, including critical to prioritize the expenditures most likely to drive from diabetes, cardiovascular disease, cancer, and men- rapid progress toward coverage with essential quality tal health conditions, is growing rapidly in countries at services for all, together with financial protection. all income levels, yet in many developing countries pub- Aging populations. Once a concern mainly for high-in- lic policy and development assistance have focused on come countries, the share and number of older people is maternal, neonatal, and child health and control of com- rising in virtually all societies, linked to improvements municable diseases (Roth et al. 2017). In 2000, the share in health services and in social determinants of health of NCDs in developing countries in terms of healthy life (Braveman and Gottlieb 2014). The number of people years lost—that is, the cumulative number of years lost aged 60 years or more in developing countries increased due to ill-health, disability, and early death—was 43 per- from 273 million or 5.4 percent of the world’s population cent, or approximately 1 billion lost years. In 2017, this in 2000, to 405 million or 6.6 percent in 2015, and is share had grown to 59 percent, or more than 2 billion expected to reach 1.2 billion or 14.1 percent by 2050.13 years of healthy life lost (IHME 2019).14 Rising numbers of older people increase the need for health The rise in NCDs threatens health systems with rapid services, associated with the growing non-communicable cost increases, especially when people seek care late and/ disease (NCD) burden and the need for long-term care or from high-level providers. In OECD countries, NCDs accounted for 60 percent of health spending in 2011, and 13. World Population Prospects 2017 (database), United Nations Depart- ment of Economic and Social Affairs, Population Division, New York (ac- 14.  Global Burden of Disease 2017 (database), Institute for Health Met- cessed May 15, 2019), https://population.un.org/wpp/Download/Stan- rics and Evaluation (IHME), Seattle, WA (accessed May 15, 2019), http:// dard/Population/ ghdx.healthdata.org/gbd-results-tool 34 | World Bank Group spending in developing countries is likely to reach sim- and opinion polls highlight the rising expectations for ilar proportions without immediate and effective action governments to expand access (Glinskaya and Feng to curb the NCD epidemic (OECD 2016a). In developing 2018). In OECD countries, for example, LTC spending countries, households often bear the brunt of rising costs is projected to rise sharply, from on average 0.8 percent associated with NCDs. In India, for example, the share today to between 1.6 and 2.1 percent of GDP in 2060. of NCDs in total out-of-pocket health expenditures in- Some countries, such as Chile, Estonia, Korea, Mexico, creased over a decade from 31.6 percent to 47.3 percent, and Turkey are likely to experience even higher increas- while in Sri Lanka, people with NCDs were more likely es (Maisonneuve and Martins 2014). to incur catastrophic health expenditures despite the ex- istence of a national health system (Mahal, Karan and Engelgau 2010; Pallegedara 2018). / 1.3.2 / FISCAL CAPACITY As with aging, some of the increasing cost pressures from NCDs can be reduced by modifications to health-fi- CONSTRAINTS nancing strategies. Revenue generation strategies that The capacity of developing countries to increase tax tax products that are harmful to health, such as tobacco, revenues is fairly limited. Along with the aforemen- alcohol, and sugar-sweetened beverages, offer one ex- tioned rising cost pressures, many developing countries ample. Similarly, reducing fossil fuel subsidies not only also have fairly limited administrative capacity to man- reduces carbon emissions but also mobilizes additional age and enforce existing tax laws; as well as high levels of revenue. Increased funding for health promotion and income inequality which restrict the size of the popula- disease prevention services will also contribute to reduc- tion that can afford to pay taxes. Many developing coun- ing the NCD burden over time. To date, however, only a tries are also relatively susceptible to external economic few developing countries have modified their health-fi- shocks and terms-of-trade changes (Le, Moreno-Dodson nancing strategies to account for this growing threat. and Bayraktar 2012; Fenochietto and Pessino 2013; Mor- rissey et al. 2016). Corruption further reduces tax yields Demands for long-term care. As population aging and and fuels administrative costs; tax losses from corruption the rise in NCDs exert their combined effects, all coun- were recently estimated at $1 trillion annually (Imam and tries face a growing demand for long-term care (LTC), Jacobs 2014; IMF 2019). While some of these constraints including medical services, palliative care, and social to revenue generation may subside over time as countries and residential support (WHO 2015; Beard et al. 2016; develop their financing capacities, problems associated Yeung and Thang 2018). This is being compounded by with tax avoidance and evasion may prove to be stickier, societal changes in many developing countries, where unless action is taken at both at country and global levels. the predominant form of LTC is still provided by fami- lies or friends or so-called informal care (Lei, Feng and Critical issues that countries must address include: Wu 2016; Datta 2017; Yeung and Thang 2018; Hu 2018). This is changing as a result of factors such as higher • Tax avoidance and evasion (e.g., base erosion and profit rates of female labor market participation, divorce, and shifting, or BEPS) and capital flight transfer of wealth off- childlessness (e.g., Zhu 2015). shore, where it is not declared for tax purposes. Estimates from developing countries range from $70 billion to $420 The capacity to deliver formal LTC is still nascent in billion per year (UNCTAD 2009; Crivelli et al. 2015). most developing countries (Angel et al. 2016; Johnson et al. 2018). Some studies suggest that the supply of LTC • Tax exemptions, tax credits, preferential tax rates, and/ meets at best a small fraction of the needs, often with or deferred tax liability to attract foreign investors no services available in rural areas (Yeung and Thang (O’Hare 2015) are often popular policies, yet there is lim- 2018). Anecdotal evidence suggests that waiting lists ited evidence that they actually result in more foreign and times for beds in residential institutions are long, investment with a subsequent impact on growth. On the High-Performance health financing Universal Health Coverage | 35 other hand, eliminating these policies could help devel- Informality compromises countries’ ability to raise in- oping countries increase tax revenues by between 20 and come taxes or health insurance contributions because 30 percent (Mascagni, Moore, and McCluskey, 2014). economic activity is difficult to observe and measure accurately. The implication for health financing is that • Resource wealth displaces domestic taxation in many policymakers in developing countries cannot assume countries, particularly where there is low institution- that they will be able to rely on income-based con- al capacity. Large windfall resource revenues provide tributions (taxes, insurance) to increase their health low incentives for economic and tax diversification and spending in the short to medium term. They will need may increase rent-seeking and corruption (Mascagni, to adapt revenue generation systems to the reality of Moore, and McCluskey, 2014). a large and persistent informal sector, which generally implies broad-based taxes such as value-added taxes. The G20 Finance Track’s focus on BEPS, in collaboration with the OECD, as well as work on tax transparency, The changing nature of work is also restricting the tax certainty, and digitization are already contributing ability of countries at higher levels of income to mo- to alleviating some of these problems (OECD 2018c; EY bilize more domestic resources for health. In high-in- tax insights 2016). come countries and also in some upper middle-income countries such as Brazil, Mexico, and Turkey, the com- Labor market informality is persistent and in some position of the workforce is shifting away from tradi- countries increasing. In developing countries, informal tional full-time jobs, as alternative work models—such sector output on average accounts for about one-third of as self, part-time, and temporary employment and ze- GDP while employing 70 percent of the working popu- ro-hours contracts—have spread rapidly (Apella and lation (World Bank 2019b). In absolute numbers, 2 bil- Zunino 2018). This is partly because businesses have sought to avoid costs related to hiring full-time employ- lion workers, more than 61 percent of the world’s em- ees (including the costs of health insurance) by favoring ployed population, are in the informal economy (ILO flexible, short-term, or on-demand work arrangements 2018). Many governments have assumed, based on the (“gigs”) with contractors and freelancers. experiences of high-income countries, that economic development would rapidly increase employment in Increasing automation poses another threat to rev- the formal sector, but informal employment has actu- enue mobilization. Estimates of how automation will ally increased as national income has grown in some impact work suggest the impact will differ by country. countries, and where it has fallen, it has done so less Estimates for OECD countries suggest that about 14 per- rapidly than expected (World Bank 2019a). cent of all jobs are highly automatable, and 32 percent of jobs will experience a significant change in the way One contributor to slow formalization is the changing they are performed (OECD 2018b). Estimates for devel- pattern of economic growth. In high-income settings, oping countries suggest even higher shares. On average, growth was associated with a major expansion of in- approximately two-thirds of jobs, largely unskilled, may dustrial production, marked by increasing productivity, be automatable (World Bank 2016c). As a result, job loss- scale and firm size, and growing wage labor. Firms and es may rise, and unless workers are provided with the workers were easy to regulate, track, and tax. In emerg- necessary retraining and career services, unemployment ing economies, industrialization has intensified to a cer- could increase, with long-term effects on tax revenue tain point, but service sectors have become important at and social health insurance contributions and upward an earlier stage of the economic transition, particularly pressures on social assistance spending. services that do not require skilled labor (World Bank 2019a). These new patterns of economic transformation result in a duality of formal and informal activity with much slower rates of formalization. 36 | World Bank Group Dependency ratios are high.15 In developing countries, / 1.3.3 / the total dependency ratio—defined as the non-work- HEALTH SYSTEM ing-age population in relation to the working-age pop- AND ECONOMIC SHOCKS ulation—is on average almost twice as high as in HICs (85.7 versus 47.0 percent, 2015).16 This subsection highlights three major threats to health systems with possible spill-over effects for the economy: While dependency ratios tend to fall with increasing lev- two threats, epidemics and antimicrobial resistance, be- els of GNI per capita, there is substantial variation across long to the core ambit of the health system, while the third, countries at similar levels of development. In 20 countries, forced population displacement is the result of exogenous largely in Sub-Saharan Africa, the dependency ratio factors. Policymakers must prepare health financing to is considerably higher than predicted by GNI per capi- confront these and other shocks that can increase expen- ta—from 10 to over 40 percentage points (World Bank ditures and compromise revenue mobilization, efficiency, calculations). These high ratios are driven by unusually and equity in ways that are difficult to predict. Other pos- high fertility rates in the recent past. High dependen- sible shocks to the health system include civil wars and cy ratios mean that each worker needs to financially other armed conflicts, natural disasters such as adverse support more dependents, sometimes called the demo- weather events, and shocks originating in the economy, graphic burden (Matytsin, Moorty and Richter 2015). As from slowdowns in the global economy or the economy of a major trading partner, to financial crises, and drastic more young people enter the workforce each year, there fiscal and monetary policy changes. are also more dependents for them to support. Hence, while tax revenues will increase, tax rates might also Few hazards threaten greater loss of life, economic dis- need to increase to cover health and education costs of ruption, and costs to health systems than large-scale the increased number of children and adolescents. disease outbreaks that cross borders. To cite a histori- cal example, the 1918 Spanish Flu is estimated to have In low-fertility environments, increasing dependency ra- caused at least 50 million deaths globally and to have tios are a result of aging. The size of the working popu- reduced GDP in the United States alone by as much as lation can actually fall, as in some high-income settings, 11 percent (Johnson and Mueller 2002). A similar future and tax revenues and social security contributions also influenza pandemic could infect billions, take the lives of fall (Lee and Mason 2017). Taxes would have to increase millions, and cut billions of dollars from global economic to maintain existing levels of per capita social benefits, output—costing an estimated $500 billion in a year or which can strain fiscal social contracts and the willing- 0.6 percent of global income (Fan, Jamison and Summers ness of workers to contribute increasingly higher pro- 2018). The 2013–16 Ebola crisis in Guinea, Liberia, and Si- portions of their incomes to others. While this is not erra Leone claimed more than 11,000 lives and wiped out likely to affect low- and lower middle-income countries the economic gains from years of rapid economic growth for some time, it will affect some upper-middle coun- in these countries. In 2015 alone, the three countries are tries more rapidly (World Bank calculations). estimated to have lost $2.8 billion in GDP as a result of the pandemic (World Bank 2016b). Pandemics have an im- mediate impact on government revenues, while increas- 15. The dependency ratio is commonly defined as the ratio of people ing demands for health expenditures into the foreseeable younger than 15 and older than 64, to the population between 15 and 64. future and diverting health workers and money from oth- As increasing numbers of people continue to work beyond the age of 64 and children stay at school longer, this definition provides only a rough er health needs such as maternal and child health. The indication of the burden placed on workers to maintain non-workers. heavy financial losses resulting from pandemics also sug- 16. World Population Prospects 2017 (database), United Nations Depart- gest that countries which invest in pandemic and disaster ment of Economic and Social Affairs, Population Division, New York (ac- cessed May 15, 2019), https://population.un.org/wpp/Download/Stan- preparedness stand to gain benefits much greater than dard/Population/ the original investment (World Bank 2017). High-Performance health financing Universal Health Coverage | 37 Antimicrobial resistance (AMR) also poses a sig- Forced Displacement. Globally, there were more than nificant and growing health and financial threat to 28.5 million refugees and asylum seekers in 2017, and countries at all income levels. AMR occurs when bac- the numbers have been increasing over time (UNHCR teria and parasites cannot be treated by medicines that 2017, 2018). This type of forced displacement is a form were previously effective (Marquez 2014; Jonas et al. of economic and social shock, which increases the need 2017; WHO 2017a; OECD 2018c). In high-income set- for health spending in recipient countries, not just be- tings such as the United States, resistance to antibiot- cause of the increased numbers of people who need ics is estimated to cause more than 23,000 deaths each health services but also because displaced people are year, while hospital-acquired infections add another more at risk of exposure to communicable diseases and 90,000 deaths (Marquez 2014). In developing countries, psychosocial and mental distress (OECD 2018a). The the rise of AMR threatens the ability to treat diseas- costs can be substantial: for example, Jordan spent $2.1 es such as respiratory and urinary tract infections, TB, billion on health services for Syrian refugees between and HIV. If resistance continues to progress at cur- the beginning of the Syrian conflict and the end of 2016 rent rates, more than 2.4 million people could die by (The Jordan Times 2016). In the medium term, health systems in host countries need to adjust by fostering 2050 in Europe, North America, and Australia alone greater cooperation between the institutions that finance (OECD 2018c). The cost to the global economy could and provide short-term emergency care for displaced reach 3.8 percent of annual GDP, with a disproportion- people and those that finance and provide longer-term ate impact on low-income countries, where it could services for the population as a whole (OECD 2018a). exceed 5 percent (Adeyi et al. 2017). An estimated 28 million people would be pushed into poverty, most- The experience of countries such as Jordan, Lebanon, ly in developing countries, reducing those countries’ Turkey, and Uganda that have recently faced unexpected capacities to raise revenues and increasing demands on inflows of displaced people shows that the stress to do- social protection programs (Jonas et al. 2017). mestic systems extends beyond health to education and social protection systems, as well as labor markets—par- As with pandemic preparedness, however, all coun- ticularly in informal work, given that displaced people tries can take pre-emptive actions, including the nec- often do not have the right to work in the formal sector, essary changes to health financing to limit the spread with ramifications for the economy (ILO 2019). of AMR and mitigate its cost and health implications. Steps countries can take include creating financing in- At the same time, the countries from which recent mi- centives to encourage prudent use of antimicrobials (in gration waves originate (e.g., South Sudan, Syria) are humans, livestock, and fisheries) and developing new generally confronting multiple stressors, often includ- products. In hospital and health care settings, invest- ing state fragility or conflict, which pose substantial ment in improved infection control can reduce the challenges to health financing. Rising violence, chang- demand for antibiotics and the spread of disease and ing demographics, new technologies, illicit financial resistance. In addition to new treatments, investment flows, terrorism, and instability linked to extreme in diagnostics and vaccines to guide the appropriate weather events further contribute to a more complex use of antibiotics can also play a role, as can improved fragility landscape, and to spikes in forced displace- compliance and regulation to ensure that health care ment (Bousquet 2017). workers prescribe antibiotics appropriately. In agricul- tural and livestock settings, improving the infrastruc- ture around livestock management and limiting use of antimicrobials for growth promotion, as opposed to animal health, also stand to make a substantial impact. And as with pandemics, AMR is a threat that requires international collaboration. /2 / A Roadmap for action The preceding part of the report spelled out the economic growth, poverty reduction, and health security benefits countries can obtain from high-performance health financing for UHC, but also showed that many developing countries have not yet seized these opportu- nities, while emerging and escalating challenges will further strain countries’ health financing in the years ahead. Part 2 now maps an agenda for action by countries and their inter- national partners to achieve more efficient and sustainable health financing that will accelerate progress toward UHC, and proposes how leadership from the G20 Finance Track can catalyze progress at both country and global levels. High-Performance health financing Universal Health Coverage | 39 A ROADMAP FOR ACTION /2.1 / Priorities for country action What actions can countries prioritize as they work / 2 .1 .1 / to develop high-performance health financing for SCALE WHAT WORKS UHC that captures more of the benefits described in Part 1? This section proposes a three-pronged approach. Countries can make substantial progress toward UHC Countries can: by adapting to their own settings policies derived from • Adapt and implement proven principles and policies widely recognized health-financing principles.17 Here, to address core health-financing challenges; we set forth selected principles using the Domestic Re- source Use and Mobilization Plus (DRUM+) framework. • Broaden the vision of health financing to address both In DRUM+, pooling to increase access to needed services resilience and sustainability through a whole-of-gov- and financial protection is added to the Domestic Re- ernment approach and by making health financing source Use and Mobilization (DRUM) model developed future-fit; and in prior work (Kaboré et al. 2018; World Bank 2018b).18 • Strengthen health-financing leadership, governance, and organizational capacity. 17.  The principles set forth here have emerged from a research process that began with an extensive literature review on health-financing strategies, drawing on both peer-reviewed and grey literature, followed by inputs from a series of expert consultations and comments on earlier drafts of this report. The full body of literature reviewed is too extensive to reference exhaustive- ly, but included documents from WHO, the World Bank, OECD, and UNICEF, a number of bilateral agencies including DFID and USAID, academia, civil society organizations such as OXFAM and Save the Children, foundations, and consulting groups. Three Annual UHC Health Financing Forums began the process of review, covering revenue mobilization, efficiency, and equi- ty: https://www.worldbank.org/en/events/2017/10/20/third-annual-univer- sal-health-coverage-financing-forum. This exercise revealed considerable convergence in views on key principles of high-performance health financ- ing and on some, though not all, of the associated policies to implement the principles. The investigation also documented points where policymakers’ actual practice at the country level generally aligns with (or diverges from) approaches broadly endorsed in theory. In addition, areas of policy con- troversy and knowledge and solution gaps were identified. The research is ongoing, and this report briefly discusses the current findings on each topic. Additional details are found in Annex B, and a more complete description of methods and findings is available from the authors on request. 18.  The DRUM+ concept builds on a large body of previous work including the analysis of fiscal space for health (Tandon and Cashin 2010; Meheus and McIntyre 2017; Barroy et al. 2018; IMF 2016b). 40 | World Bank Group The DRUM+ framework has implications for how poli- cy measures can best be prioritized. The recommended BOX 2.1 approach is to proceed, unless low spending levels are the major cause of inefficiencies, with a focus on poli- SHIFTING RESOURCES cies that generate tangible efficiency and equity gains TOWARD PRIMARY to facilitate spending increases. AND COMMUNITY HEALTH SERVICES 1. Improve efficiency and equity Primary and community health services refer in the use of health resources. to the networks of health workers and pub- lic- or private-sector services or institutions This ensures that more rapid progress toward UHC can that serve as “first-touch” points with the be facilitated with the available resources and can help to health system. Providing services through generate higher priority for health in government spend- primary and community health services has been consistently shown to be effective, effi- ing decisions. Areas for countries to focus on include:19 cient, and equitable in countries at all income levels. Strong primary and community health • Prioritize investments in primary and community services including prevention, continuity health services, networks of frontline health workers of care, and early detection and treatment with appropriate referral systems, and other public or are associated with more effective and less private sector services or institutions that serve as “first- costly care, as well as lower rates of hospi- touch” points in the health system, for health promotion talization, avoidable admissions, and emer- gency department visits (WHO 2018; Fried- and disease prevention in addition to treatment. Primary berg et al. 2010). This is one of the reasons and community health services provide the most cost-ef- why health costs tend to grow more slowly in fective services to those most in need, at the most appro- countries with strong primary and communi- priate level of the service delivery system (Box 2.1). ty health services (Kringos et al. 2013). • Bolster public-health and health-security functions Examples of substantial recent increases in funding for primary and community health while defining a set of guaranteed health services, taking services come from countries like Brazil, into account efficiency and equity. This set of services Ethiopia, South Africa, Thailand, Turkey, and gives adequate weight to health promotion and disease Ukraine. Increased funding for primary and prevention, as well as core public-health and health-secu- community health services in these coun- rity functions, including disease surveillance, outbreak tries has been accompanied by supply-side improvements to the quality and accessibili- response, monitoring and evaluation, and governance.20 ty of services, through improvements of the infrastructure, worker training, management, changes to provider-payment mechanisms to encourage quality, and governance (Patel et al. 2015; Workie and Ramana 2013). At the same time, several countries have sought to increase demand for primary and community health services by reducing user fees for all or priority health services, such as for women 19.  While it is agreed that methods of paying for health services have an and children (Masiye et al. 2016; Meessen et impact on efficiency, there is less agreement on what is the best method, or best mix of methods, to ensure efficiency. This is considered in the al. 2011). Other countries have provided con- next section, which covers open questions and areas of controversy in ditional cash transfers to encourage use of health financing. selected primary and community health ser- 20.  Some countries have found it useful to “ringfence” funding for some vices (Lagarde et al. 2007). of the public health functions: for example, the Netherlands funds its vaccination program separately from other health services. High-Performance health financing Universal Health Coverage | 41 • Strengthen public financial management (PFM),21 taxes and charges; expansion of tax bases; and increases Strong PFM enables revenues to be directed more effi- in the range and level of taxes and charges. Removing ciently and equitably toward UHC goals through more ineffective subsidies (e.g., on fossil fuel) that dispropor- transparent and accountable government; greater tionately benefit the non-poor also allows spending on stability and reliability of health funding; and greater health or poverty alleviation to increase (see Box 2.2). financial discipline (e.g., budgets are realistic and exe- cuted in a timely fashion). This is discussed more fully • Boost the share allocated to health, and to activities in section 2.1.3. that improve health in other sectors, within overall government spending. The improvements in efficien- cy discussed above and strengthened PFM, including 2. Increase resource mobilization budgeting and planning, help make a case for investing from domestic sources, more in health to advance UHC. supplemented as appropriate • Raise taxes on health-damaging products, including by external funding. but not limited to tobacco. These measures improve health, increase revenues, and are also generally more Over time, sustainable funding for health will need to politically acceptable to the general population than come largely from domestic sources. The focus on do- other taxes—although there are also powerful interest mestic sources, underscored by the principle of nation- groups that oppose them. al ownership, was endorsed by all UN Member States with the 2015 Addis Ababa Financing for Development • Reduce reliance on wage-based deductions or volun- Framework, but in many developing countries will re- tary forms of insurance to bolster prepaid and pooled quire major reform efforts to attain sustainable financing funding. The former is due to slow formalization of the for UHC. Countries can increase domestic resource mo- workforce and changing work patterns, while the latter is bilization for health in several ways: because the poor and low-risk people do not enroll. Today, wealthier countries are also working to diversify revenue • Develop a mix of resource-generation instruments that assures stability in funding flows and allows for subse- sources in their social health insurance systems (Box 2.3). quent pooling to cover a set of universally guaranteed health services. This means raising resources largely from general government revenues, supplemented— 3. Improve financial protection by where appropriate and feasible—by obligatory health reducing reliance on out-of-pocket insurance contributions and reducing the reliance on out-of-pocket payments. payments for health through increased pre-payment and pooling.22 • Increase overall government revenue as a share of GDP, where feasible, at least some of which can flow to health. Ways in which countries can advance financial protec- A range of well-tested technical measures are available tion include: to do this, including more effective collection of existing • Draw on funds from prepaid and pooled sources, with subsidies for people who cannot afford to con- 21.  PFM is typically defined as the set of rules and processes that govern tribute, to ensure that financial protection for a set of how public resources are secured, allocated, spent, and accounted for. guaranteed services is universally available. The traditional definition has evolved over time, and the coverage of PFM has expanded from the narrowly defined central government bud- get to all levels of government and the broader public sector, including state agencies, enterprises, and public-private partnerships (Cangiano, 22.  Pooling is important for sharing the financial risks of ill-health: from Curristine and Lazare 2013). rich to poor and from healthy to sick 42 | World Bank Group BOX 2.2 REALLOCATING FOSSIL FUEL SUBSIDIES TO FINANCE HEALTH Fossil fuel subsidies (i) reduce the net cost of en- of the benefit accrues to richer households, energy ergy purchased; (ii) reduce the cost of production makes up a larger share of household budgets in or delivery of energy; or (iii) increase revenues the poorest populations, so subsidies are relatively retained by energy suppliers (Kojima and Koplow more important to them. Proven options for making 2015). They make fossil fuels more attractive than their reduction politically acceptable are to phase other energy sources and introduce economic, en- them in over time, and to incorporate compensating vironmental, and social distortions. These subsidies mechanisms to mitigate the negative impacts. represent an enormous public finance expenditure: The potential impact of subsidy reallocation to- They were estimated to total $4.7 trillion (6.3 per- ward public health and welfare can be substantial. cent of global GDP) in 2015 and were projected to Between 2013 and 2015, Indonesian government reach $5.2 trillion (6.5 percent of GDP) in 2017 (Co- spending on energy subsidies decreased from $29.8 ady et al. 2019). billion to $8.9 billion, and government health spend- Fossil fuel subsidies often fail to achieve any pos- ing increased from $4.4 billion to $5.6 billion (Min- itive social objectives—for example, subsidies istry of Energy and Mineral Resources and Ministry aimed at helping the poor frequently fail to do so. of Finance, Indonesia 2019). Indonesia reallocated a A study of 20 developing countries found that the portion of these proceeds to help finance infrastruc- lowest income quintile received on average 7 per- ture development (Pradiptyo et al. 2016), while Iran cent of the overall subsidy benefit, whereas the rich- chose to allocate more resources toward universal est quintile received almost 43 percent (Arze del health coverage (Gupta, Dhillon and Yates 2015) and Granado, Coady and Gillingham 2012). Eliminating Sudan to provide free medicines for children under these subsidies could lower global carbon emissions age five (Yates 2014). by 28 percent and deaths from fossil fuel air pollu- G20 leaders committed to phasing out these subsi- tion by 46 percent, while increasing government dies in 2009, but much more can be done globally. revenues by 3.8 percent of GDP (Coady et al. 2019). Doing so could substantially increase the capacity However, it can be politically challenging to reduce of governments to spend more toward achieving or eliminate fuel subsidies. Even though the bulk UHC and other national priorities. • Provide a guaranteed set of health services to all people / 2.1. 2 / at an affordable price, aiming toward zero or nominal out- BROADEN THE VISION of-pocket payments along with strong protection mecha- nisms for those who can least afford to pay (where co-pay- OF HEALTH FINANCING ments are levied with insurance, they need to be low or TO ACHIEVE RESILIENCE have an effective means of protecting the poorest and most AND SUSTAINABILITY vulnerable populations). Even if the package starts small, people should know how it will expand over time. As countries adapt and implement proven health-fi- nancing approaches to pressing problems in their • Ensure that pools covering the guaranteed package health sectors, they can further strengthen results by are large and diverse enough to be able to cover high consistently incorporating a big-picture perspective. health expenditures by some beneficiaries, unless risk First, policy makers can make health-financing policy equalization mechanisms are in place that ensure equi- choices from a whole-of-government perspective—one ty and financial viability. that captures how UHC financing can drive positive High-Performance health financing Universal Health Coverage | 43 outcomes in other sectors, as well as how investment Accelerate development gains through in other sectors can strengthen UHC. Second, they can a whole-of-government approach focus systematically on a medium-term timeframe in health financing, consistently anticipating future devel- As highlighted in Section 1.1, the potential of a whole-of-gov- opments and their impact on health financing. Togeth- ernment approach to improve health and financial protec- er, these two approaches will reinforce resilience and tion and the positive impact on other sectors is well estab- sustainability of financing. lished. A whole-of-government approach aims to overcome BOX 2.3 DIVERSIFICATION OF REVENUE SOURCES IN SOCIAL HEALTH INSURANCE SYSTEMS Many upper-middle- and high-income countries affectés) on enterprises, including taxes on phar- that have historically relied predominantly on maceutical companies and company cars, and wage contributions to finance their health sys- taxes on consumption or behavior (e.g., taxes on tems are diversifying funding sources in the face tobacco and alcohol) (Barroy et al. 2014), repre- of aging populations and shrinking labor forces. senting almost 13 percent of revenues for health. In many OECD countries with social health insur- ance (SHI) systems, governmental transfers from Increasing revenues through general govern- other earmarked taxes and levies and general rev- ment transfers. Estonia’s diversification of re- enue have gained importance as funding sources sources was primarily motivated by the Estonian (OECD 2015a). Three country examples illustrate Health Insurance Fund’s (EHIF) growing deficits, this trend. mostly due to a rapidly aging population, which threatened the sustainability of the health system. Increasing revenues through earmarked taxes In 2017, the government decided to expand the on non-wage products and activities. Although revenue base for EHIF—until then largely financed initially France’s SHI system was almost entirely from an earmarked social payroll tax. The govern- funded from wage-based contributions, today ment established state contributions on behalf of these contributions account for less than half of nonworking pensioners financed from the gen- the health system’s revenues. The government eral budget tax revenue. The additional revenue has taken steps to diversify the sources of financ- source was expected to represent initially around ing for the SHI to reduce reliance on payroll taxes 11 percent of EHIF’s budget, while contribution and lower labor costs, but is keeping the notion of rates would be gradually increased to match those an earmark and applying it to other products and activities. Since 1998, most employee payroll con- of employed people by 2022 (Habicht et al. 2018). tributions have come through the General Social Contribution (Contribution Sociale Generalisée or Increasing revenues through earmarked taxes CSG), which in addition to wages is also levied on and government transfers. Hungary significantly capital. The tax is now one of the main sources of increased the role of general government trans- statutory health insurance funding, accounting for fers in health financing. In 2015, transfers from the 36 percent of SHI revenues. The shift to a broader government budget represented almost 70 per- definition of taxable income has decreased ineq- cent of the Health Insurance Fund’s expenditure, uities in revenue generation, as wealthier individ- compared to only 11 percent in 1996 (Szigeti et al. uals have higher capital income and greater social 2019). In addition, in 2012, Hungary introduced an benefits at later life stages. Additional funding earmarked public-health tax on foods high in salt, sources include earmarked taxes (impôts et taxes sugar, and fat, including soft and energy drinks. 44 | World Bank Group the problem of fragmentation of the public sector and ser- become critical. The capacity to analyze and adjust fiscal vices and thus enable governments to address complex policies to possible financial risks is often limited in min- challenges such as UHC, human capital development, istries of finance (IMF 2016a), and capacities and mecha- and poverty reduction. It can also strengthen a preven- nisms to assess and respond to threats to health financing tive focus by tackling emerging and intensifying issues are commonly also not well developed. The development like those identified in section 1.3 before they become en- and testing of approaches and strategies to make health fi- trenched (Colgan, Kennedy and Nuala 2014). nancing future-fit would benefit greatly from collective ac- tion across countries. In the following, we focus on two ar- From a UHC financing perspective, the promise of a eas where countries do have strong, evidence-based policy whole-of-government approach is two-fold. First, it can options to improve the future-fitness of health financing.23 help strengthen health-financing policies in a bound- ary-spanning process between ministries of health and Leverage health-finance tools to mitigate NCD burdens: finance, as well as other relevant ministries and agencies bolstering sustainability while saving lives. Section 1.3 (e.g., the ministry of labor). Second, it has the potential to described the impact that the growing burden of NCDs reap efficiencies through a whole-of-government approach is likely to have on future health costs in many countries. to budgeting. Such a budgeting approach is commonly One way of mitigating this is to ensure adequate funding one of the central processes of a whole-of-government for health promotion and disease prevention as part of model and may involve a wide range of ministries and healthy aging policies, as discussed earlier. Another im- agencies, depending on the objectives being pursued. The portant contribution of health financing is to reduce pop- approach fosters budget and expenditure decisions based ulation risks of developing NCDs through health taxes on on how each sector can contribute to one or a set of agreed products that cause them. These taxes reduce consump- national goals. This encourages ministries and agencies tion of health-damaging products, improve population to focus budgeting processes on results and to reinforce health and individual productivity, and cut future treat- coordination and collaboration with other ministries. ment costs—making health financing more sustainable in the medium term. They can also substantially boost The rationale for adopting a whole-of-government ap- government revenues (Junquera-Varela et al. 2017; Mar- proach is strong and sound, even though conclusive ev- quez and Moreno-Dodson 2017; Task Force on Fiscal Pol- idence that such approaches work remains limited, and icy for Health 2019). Importantly, because of their health multisectoral strategies have often proven difficult to im- benefits, these taxes are generally more acceptable to the plement (Colgan, Kennedy and Nuala 2014; Rasanathan population than other forms of taxation, though often et al. 2017). Countries continue to develop and experi- opposed by powerful interest groups. Examples that ment with the approach. One prominent recent example have been applied in different countries include taxes on is New Zealand, which has moved to a Well-being Budget, tobacco, alcohol, sugar-sweetened beverages, salt in pro- with all ministries asked to make their cases based on cessed food, and carbon. how they can, singly and in collaboration, improve inter- generational well-being (Box 2.4). A similar approach, but Increase investments in outbreak preparedness and re- focusing on a narrower goal, is the use of gender budget- sponse. Health financing must be able to flexibly absorb ing to address the problem of gender inequalities in many and rapidly respond to shocks, a quality captured in the OECD countries. concept of “resilience.” Infectious disease outbreaks are Make health financing “future-fit” 23.  Not all future challenges will apply to each country with the same To achieve and maintain high performance in health fi- force. Countries need to be able to assess which of the possible chal- nancing, countries need robust capacities to anticipate lenges will affect them, when, and with what intensity. Forecasting and risk-assessment capacity is therefore crucial to creating sustainable the future challenges they may face and create appropri- health financing. Today, the capacity to assess new challenges and iden- ate policies and management strategies before problems tify appropriate responses varies widely across countries. High-Performance health financing Universal Health Coverage | 45 BOX 2.4 WHOLE-OF-GOVERNMENT APPROACHES TO BUDGETING New Zealand has broken ground in adopting a are generally required. Each ministry prepares a comprehensive whole-of-government budgeting budget outlining the impact it plans to have on the approach to improve efficiency and results across national priority using agreed impact indicators, sectors. New Zealand set intergenerational well-be- and budgets are then allocated to improve impact. ing as a national priority and adopted its first Well-being Budget in 2019. Meanwhile, a number of The rules for evidence-based budget decisions need countries have implemented whole-of-government to be clearly defined. For example, in New Zealand, approaches to ensure progress on a more narrow- a Living Standards Framework (LSF) was devel- ly defined priority. An example is gender budget- oped by the Treasury to measure impacts across a ing, currently applied in about half of OECD coun- broad range of factors that affect well-being. Min- tries with the goal of reducing gender disparities istries and agencies have been required to provide (Downes, Von Trapp and Nicol 2017). well-being analysis based on this framework in sup- port of each new budget initiative, an approach that In both examples, a first step is to integrate strategic shifted the historical focus on inputs that need to be priorities into the budget cycle, with a collaborative funded to the results that would be produced. This budget process that shifts the perspective of sector also implies the need for impact monitoring and ministries on how they can contribute to the priority evaluation using a standard reporting framework. In both individually and in collaboration with others. Ev- New Zealand, the LSF provided the basis for this ex idence-based budgeting rules backed by legislation post evaluation of results. a prime example of such shocks, which can strike any From these JEE assessments, more than 5,000 critical country at any time. gaps in capacity have been identified. However, few of these have been addressed as yet, partly because the Following the 2013–16 Ebola outbreak in West Africa, funding has not been available. WHO launched the Joint External Evaluation (JEE) tool, a transparent, external evaluation of a country’s ability to The investments required to fill preparedness gaps find, stop, and prevent disease threats. The uptake of the against infectious threats vary significantly across coun- JEE has been encouraging, and 49 low-income countries tries, but recent JEE costings suggest that most would have used the JEE to assess their national capacities.24,25 need to spend between $0.50 and $2 per person per year to get to an acceptable level of preparedness. This is less than 2 percent of current levels of health spending in 24.  The Joint External Evaluation (JEE) assesses capacities across 19 ar- these countries.26 This requires, however, changing the eas of epidemic preparedness and response that are scored, first by a mindset where pandemic preparedness is frequently group of domestic experts and then by an external group of internation- al experts. The assessment is voluntary, conducted every five years, and seen as separate from mainstream health system devel- the results are reported by the World Health Organization. opment, so it is often not part of routine budgeting and 25.  The International Health Regulations (IHR) assist countries to detect, planning exercises. assess, and respond to all events that may constitute public health emer- gencies that might cross borders, including reporting outbreaks to the World Health Organization. Other notable efforts include the updating of WHO’s Global Influenza Preparedness Plan; “One Health” approaches 26.  A detailed analysis of 43 lower and middle-income countries without to tackle AMR across the human health, animal health, food production, the foundations for emergency preparedness capacity—low-income and and agriculture sectors; and the Global Health Security Agenda being fragile states—showed resource needs in the range of $15-$30 per capita undertaken in several countries. per year (Soucat et al. 2017). 46 | World Bank Group Outbreak response requires different approaches to fi- of improving governance, through strengthened public nancing, because the required funding is so much great- financial management (PFM). Again, options for global er. Sometimes, normal budget rules and allocations are collaboration are discussed in the next section. sufficient: some countries (and subnational government units such as states) have created contingency funds through their constitutional or legal structures. Exam- Joint leadership of finance ples are India, Spain, and the United Kingdom. A second and health ministries option is to create a special fund for emergencies—such as the National Disaster Funds of Mexico and India— A strong partnership between ministries of finance which could be triggered by health emergencies as well and health is essential to attain high-performance as other types of disasters. A third option is borrowing, health financing. Joint leadership between ministries which is under the mandate of the ministry of finance. of finance and health involves shared responsibility in areas such as the development of good practices in Countries are jointly exploring forms of insurance for PFM for health; setting taxes on health-damaging prod- pandemics, similar to the Caribbean Catastrophic Risk ucts to improve population health while boosting reve- Insurance Facility, where countries contribute a small nues; identifying expenditure priorities in sectors oth- amount every year in return for access to larger amounts er than health that contribute to health and financial of funding to respond to any future pandemics. The protection; and identifying which activities in health poorest countries, however, are unlikely to be able to should be funded to contribute to broader national raise the funding they need for either preparedness or priorities as part of a whole-of-government approach. response purely from domestic funding. Options for the Ministries of finance and health also need to develop global community to contribute are considered in the a shared understanding and agreement on priorities next section. for action within health, including efficiency improve- ments, medium-term spending needs and expected re- sults, and future threats to costs and revenues. As they / 2.1.3 / collaborate, ministries of finance and health will each still have to take a distinct lead in certain domains of STRENGTHENING expertise: for example, ministries of finance typically LEADERSHIP, GOVERNANCE, on questions of overall resource mobilization, and min- AND ORGANIZATIONAL istries of health on questions of purchasing care or how CAPACITY future health needs will influence spending. There is widespread consensus that failures in leader- Joint leadership between ministries of finance and health ship, governance, and/or organizational capacity con- can powerfully accelerate countries’ adaptation and appli- strain progress in health financing in many countries cation of known health-financing solutions (“scaling what (World Bank 2017). How to turn the tide remains a works”), particularly in the areas where, despite broad key area for future learning. For example, evidence consensus about health-financing principles and policies, exists across countries of a consistent relationship be- progress remains slow. Often such slowdowns are due to tween aggregate governance measures and outcomes political obstacles that joint leadership can best resolve. such as economic growth or population health status. Yet evidence is mixed regarding which components Japan offers an instructive example of collaborative of governance in health and health financing should leadership in health financing. The country’s Health be improved to most effectively boost UHC outcomes Insurance Law of 1953 defined the amount of govern- (Fryatt et al. 2017; Hone et al. 2017; Piatti-Fünfkirch- ment subsidization to complement citizens’ contribu- en and Smets 2019). Here, we focus first on the key tions. Since then, the Ministry of Finance and the Min- issue of leadership. Then we examine one proven way istry of Health, Labor and Welfare have collaborated High-Performance health financing Universal Health Coverage | 47 closely to ensure the system’s viability. The Ministry Part of the explanation is that the quality of PFM in- of Finance examines the national fiscal space, periodi- terventions and the commitment with which they were cally revising fees and billing conditions. The Ministry implemented have varied. Sometimes, PFM compo- of Health, Labor and Welfare maintains the country’s nents have been introduced without a clear assessment uniform payment system, which has been instrumen- of what the problems are that they seek to address, em- tal in containing health expenditures. Both ministries phasizing that the details of a PFM system need to be continuously share information about the need for adapted to a country’s specific problems and capacities health services and fiscal allocations. (Andrews, Pritchett and Woolcock 2015). For example, more advanced reforms such as shifting from line item budgets to program/output budgets, or fiscal decentral- Success in strengthening ization, need to be accompanied by strengthening the governance: the example of PFM PFM foundations, including the predictability of budget releases; elimination of cash rationing and introduction Better PFM can improve public spending efficien- of “principles of accrual” into the accounting system, cy and reduce leakages; ensure greater reliability of which often is on a cash basis; and alignment of de- health funding; and encourage greater financial disci- cision-making and implementation structures to units pline. Strong PFM directs public budget revenues effi- with the level at which cash is made available under ciently and equitably toward UHC goals through more the budget. transparent and accountable government. Strong PFM also supports greater stability and reliability of health Where designed and implemented appropriately, how- funding, as well as greater financial discipline, where ever, strengthening PFM certainly has a positive impact budgets are realistic and executed in a timely fashion on the capacity of health financing to achieve the de- (WHO 2017). There is evidence that countries with sired goals (Goryakin et al. 2017). greater budget transparency and less corruption allo- cate higher shares of the budget to health (Sarr 2015; Simson 2014; Robinson 2006; Mauro 1998). The results of attempts to improve PFM are, of course, not always as great as expected, and reforms sometimes work in one setting but not in another. Sometimes they have a short-term impact, which is not sustained (Al- len et al. 2017). These mixed results have been shown, for example, for the introduction of Medium Term Ex- penditure Frameworks (MTEFs) to align planning and budgets with available funds (e.g., many Sub-Saharan African countries, including Kenya and Uganda); ex- penditure rules limiting the growth of nominal or real expenditure over time (e.g., 11 developing countries in 2013); performance-based budgeting where budgets are linked to desired results (e.g., in 11 Asian countries); fiscal decentralization (e.g., China, Indonesia, and Iran); and improvements in budget transparency—assess- ing the impact on social sector allocations (e.g., Brazil, India, Mexico, South Africa, and Uganda) (Cashin et al. 2017; Goryakin et al. 2017; Brumby and Hemming 2013; Srithongrung 2018; Cordes et al. 2015). 48 | World Bank Group A ROADMAP FOR ACTION / 2.2 / Priorities for country and partner collaboration Section 2.1 mapped priority actions for countries seek- partners have contributed to the development of the WHO- ing to develop high-performance health financing. This led Global Action Plan (GAP) to accelerate progress toward section sketches an agenda for reinforced international the health-related SDGs. The GAP works to align and po- collaboration to help countries make more rapid prog- tentiate efforts, including through its sustainable financing ress on issues they cannot solve alone. It considers accelerator. Other platforms include P4H, UHC 2030, the two main areas of action: (1) health-financing research Joint Learning Network for UHC (JLN), various networks and development that will provide countries with ad- of budget officials (e.g., the Collaborative Africa Budget Re- ditional evidence on open questions and areas of con- form Initiative [CABRI], and the OECD Joint Network of troversy, strategies to improve financing resilience and Senior Health and Budget Officials), the African Union’s sustainability, and innovations that might allow step Africa Scorecard and Tracker on Domestic Financing for changes in progress towards financing UHC; and (2) a Health, as well as planned regional health-financing hubs.27 sizeable increase as well as strategic shift in DAH to- ward strengthening health-financing leadership, gover- This section discusses three interrelated opportunities nance, and organizational capacity; improved domestic for countries and partners to build on and intensify these resource use and mobilization; and increased global existing collaborations: expanding the health-financing health security. evidence base; creating new reform approaches that can strengthen health-financing resilience and sustainabili- ty; and driving step-changes in health-financing policy. / 2.2.1 / The first opportunity builds on “scaling what works,” the second on nurturing resilience and sustainability DEVELOP THE HEALTH- through whole-of-government and “future-fitness” ap- FINANCING KNOWLEDGE proaches, and the third on the need to tackle some of the BASE, STRATEGIES FOR most stubborn health-financing challenges. Importantly, RESILIENCE AND these lines of action also offer a chance to include key in- SUSTAINABILITY, AND stitutional partners that are not part of the GAP but that POLICY STEP-CHANGES can contribute decisively to health-financing solutions: for example, the IMF and OECD. Today, collaboration is expanding across countries and agencies on health financing. Alliances, networks, and partnerships are making important contributions to fa- 27.  The collaborative mechanisms mentioned in this report are illustrative cilitate policy dialogue, technical collaboration, and glob- and include those that G20 leaders and other experts have recommended al learning. Numerous international organizations and to the report authors. This in no way constitutes an exhaustive inventory. High-Performance health financing Universal Health Coverage | 49 Expand the evidence base on what works (and what doesn’t) BOX 2.5 Critical gaps in the evidence base for health financing SPEARHEADING hamper action and constrain results. There are many BLENDED FINANCE IN widely recognized principles of health financing, yet there THE SOCIAL SECTORS: is often little definitive evidence on how to implement the THE GLOBAL HEALTH principles and, at times, disagreement among experts (An- INVESTMENT FUND nex B). A case in point is the area of provider payment, con- tracting, and monitoring. For example, the principle to pay The Global Health Investment Fund (GHIF) for value rather than volume or inputs is widely endorsed is an $108 million social impact investment (WHO 2019 28; Patcharanarumol et al. 2018); furthermore, fund that provides financing to support the the impact of individual provider payment methods on development of late-stage drugs, vaccines, efficiency and quality is well established, including their diagnostics, and other technologies for dis- strengths and weaknesses (Cashin et al. 2015; Phuong et eases that affect LMICs, such as malaria, al. 2015). Many countries are now moving toward blended cholera, pre-eclampsia, and river blindness. GHIF targets investments that have a high payment methods, but it is not yet clear what mixes pro- probability of being launched within two to duce the best value for money for which types of provid- three years, as well as products that can be ers and contexts. Table 2.1 identifies several key areas of impactful in both LMICs and high-income inconclusive evidence within the DRUM framework. The countries. The Fund draws on a variety of specific question of the role of the private sector in health instruments and combinations thereof, such as mezzanine and convertible debt. The av- financing is then explored in more detail. erage investment size is approximately $10 million. Investors include the Bill and Melinda Among the areas of debate is the role of the private sector Gates Foundation, The Government of Swe- as a source of funding. The private sector is an important den, the Children’s Investment Fund Founda- provider of health services in most countries, yet experts tion, the IFC, and JP Morgan Chase. debate its role as a source of funding for universal access to a guaranteed package of health services at an affordable price. Data suggest that the private sector’s contribution on this front has not yet been substantial. However, the Addis Ababa Financing for Development Action Agenda recog- Along with providing additionality, blended financing nized the potential of private investment for sustainable aims to secure development impacts that would otherwise development and the catalytic potential of international not have materialized through commercial investment public financing, including official development assistance (Pereira 2015; Carter et al. 2018). Development Impact (ODA), to mobilize private finance in developing coun- Bonds (DIBs) are the latest addition to blended financing tries (UNDESA 2015). Today, governments, bilateral and instruments, transferring the financial and programmatic development finance institutions, and philanthropists are risk from the development partners to the investor. Several increasingly exploring the use of concessional funds and DIBs are now under design and implementation (Box 2.6). other financing instruments (e.g., guarantees, insurance DIBs can demonstrate development impact that may trig- and risk management tools) in blended finance models to ger follow-on funding from government. Similarly, they reduce risks and create attractive opportunities for private may offer an opportunity to transition performance-based commercial investment in developing countries (Box 2.5) partner funding to governments. Despite the flurry of activity, blended finance mod- 28. https://www.who.int/health_financing/topics/purchasing/pas- els still face several challenges as a reliable pathway sive-to-strategic-purchasing/en/ toward UHC. To date, for instance, blended finance 50 | World Bank Group EXAMPLES OF OPEN QUESTIONS IN HEALTH-FINANCING POLICY (SEE ANNEX B) AREA OF DRUM+ POLICIES TABLE 2.1 • Financing arrangements and minimum funding needs for promotion and prevention, preparedness, and public health functions. EFFICIENCY • Composition of universally available benefits packages, including the role of health AND EQUITY technology assessment. (RESOURCE USE) • Active purchasing and what capacities are needed. • Provider payment methods for efficiency and quality. • Provider contracting and monitoring, including quality of care. • Appropriate mix of funding sources dependent on the level of system development. DOMESTIC REVENUE • Whole-of-government approaches to financing. MOBILIZATION • Earmarking of taxes and levies. • Private sector as a source of funding for a guaranteed package of services. POOLING • Number of pools, possible diseconomies of scale. • Co-payment systems, including mechanisms to exempt the poor and vulnerable. remains concentrated in MICs and in the infrastruc- to routinely evaluate their own policies, aimed at open ture, banking, finance, and productive sectors due to questions; (2) incentives and platforms for countries to the poor investment climate in and the limited large- share results widely; and (3) facilitation and frameworks scale investment opportunities in the social sectors. to analyze the multiple attempts that have been made to Similarly, leverage ratios are higher in MICs, typically tackle common problems, extracting lessons from which around or below a dollar of private financing, and more countries can jointly benefit.29 As highlighted earlier, than half of the costs are borne by the public sector. some global and regional learning platforms are already Additional challenges include establishing strong reg- active in this space, including the JLN for UHC, budget ulatory and policy frameworks, maintaining the trans- officials networks, and others. Additional coordinating structures are being developed, for example, the African parency and accountability of transactions, and ensur- Union regional knowledge platforms. The institutional ing that investments have a positive impact on equity. arrangements that can best meet these needs may in- Meanwhile, early experiences with DIBs point to the volve reinforcing existing platforms, linking existing in- challenges of agreeing on common impact metrics. stitutions to form stronger, more extensive networks, or some new arrangements. The needs are clear; the most Countries can most efficiently fill these types of knowl- appropriate solutions need to be defined. edge gaps in health-financing policy by working to- gether. Gains can be further accelerated when the inter- national community provides funding and expertise to 29.  To minimize repetition of mistakes, sharing should include information evaluate the many health-financing experiments under on approaches that failed to achieve expected results. To date, relatively few countries have regularly applied this approach. However, the G20 has way in countries at any given moment. Stronger action modeled good practice in this area, with members candidly sharing both is needed now in three areas: (1) support to countries shortfalls and successes in financing policy design and implementation. High-Performance health financing Universal Health Coverage | 51 Improve health-financing BOX 2.6 resilience and sustainability DEVELOPMENT To build resilient, sustainable health financing, re- IMPACT BONDS AND forms need to systematically consider future threats REPRODUCTIVE, and opportunities. For this to happen, countries must MATERNAL, reliably forecast the impact of demographic, epidemi- NEWBORN, CHILD ological, technological, social, and economic changes AND ADOLESCENT on performance. In turn, countries need to assess how current financing arrangements and planned reforms HEALTH (RMNCAH) may exacerbate or mitigate these effects, and determine how current health financing can evolve and adapt to Globally, nine DIBs are under design or shocks. Currently, however, few countries at any income implementation with five launched more level routinely and comprehensively assess the resilience recently to boost RMNCAH results. One and sustainability of their health-financing systems. As of them is the Utkrisht Development Im- noted earlier, country capacity to assess future risks pact Bond, which aims to improve the to overall resource mobilization is also limited (IMF quality of care in private health facilities 2016a). Foundational work to enable countries to adopt in Rajasthan, India, to reduce maternal and child mortality. Private capital from a “big-picture” view would include the development of the UBS Optimus Foundation (the inves- a common methodology across countries to support: (a) tor) covers the up-front costs of improv- the compilation and sharing of data from health-financ- ing the quality of care in health facilities ing resilience and sustainability assessments; and (b) of two private health care providers, the policy evaluation and sharing of lessons on mitigation, Hindustan Latex Family Planning Promo- response, and adaptation, as a collaboration between the tion Trust and Population Services Inter- ministry of finance and ministry of health. national. USAID and Merck for Mothers will repay the UBS Optimus Foundation The possible benefits from broadening the perspec- their investment, if the outcomes are tive of health-financing strategies are far reaching. A met, as determined by Mathematica, the independent verifier. Palladium is the cross-sector and future-oriented approach promises to overall manager for service delivery and spark improvements in the design of health financing program administration. and other data systems. It will strengthen transition planning from DAH toward sustainable domestic health The program has the potential to reach financing. At the same time, forward-looking evalu- up to 600,000 pregnant women and ations will allow countries to better assess the macro- newborns with improved care during de- criticality of the sector and generate critical inputs for livery. The target metric is that a facility is ready for accreditation under a joint medium-term national fiscal frameworks. Beyond the quality standard (JQS) administered by needs of individual countries, learning on resilience two partners: (1) the Manyata initiative, a and sustainability could also constitute the basis for a new national certification and quality im- global alert system for problems which have potential provement system designed to recognize cross-border impacts. private facilities that consistently deliver quality care to women; and (2) the Na- tional Accreditation Board for Hospitals (NABH) Small Health Care Organisation entry-level certification. 52 | World Bank Group Generate step-changes products combines financial technology innovations in health-financing policy with insights in behavioral economics to circumvent tra- ditional demand barriers. For example, some programs Over the past decades, health financing has expe- are experimenting with automated deductions from rienced major paradigm shifts but no major break- unrelated financial flows (e.g., mobile phone payments, throughs in tackling some of the most stubborn chal- remittances) and bundling of insurance with other lenges. Today, the importance of health financing is products and services that offer immediate benefits to widely recognized. Policy makers and thought leaders consumers. Programs also aim to drastically lower op- have also shown growing concern and responded to the erational costs, both in insurance administration and challenge of financial protection. At the same time, re- health service delivery (e.g., via mHealth and telemed- cent high-profile breakthroughs in health have mostly icine), to offer affordable premiums. Many questions concerned drugs and medical technologies, not health and challenges remain, most importantly, the role and systems and health financing. Innovation in health fi- integration of such programs into health systems. The nancing is critical if countries are to drive more rapid flows of funds that these innovations could tap point to progress toward UHC at scale. potentially outstanding returns on investment, for ex- ample, the roughly half trillion dollars of out-of-pocket The increasing digitization of financial flows cre- payments or the approximately half trillion dollars of ates opportunities to accelerate progress. This digital remittance flows to developing countries. transformation generates vast quantities of data about provider and patient behaviors. When systems are in- Many innovation funds already exist in biomedicine teroperable and connected, data can be harnessed to and related fields, but there is little support for re- detect fraud and corruption, enhance transparency and search and development in health financing. Promi- accountability, and improve the design of pooling and nent innovation funds include the Global Grand Chal- especially purchasing policies. To maximize gains, how- lenges—a family of initiatives fostering innovations to ever, research and development streams need to connect solve key global health and development problems—fi- across fields of knowledge. These include technology nanced by a consortium of partners including several domains, but also the organizational, governance, and G20 countries (Brazil, Canada, India, Norway, South Af- social dimensions that affect health financing. Such rica, the United Kingdom, and the United States) and the boundary-crossing approaches hold the greatest promise Bill and Melinda Gates Foundation. Such funds could to generate new solutions to the most stubborn health-fi- expand their portfolios to tackle health-financing chal- nancing challenges. lenges, funding for which is currently nascent. Today, health financing–related initiatives represent less than 1 Programs are emerging that take advantage of ad- percent of the grand challenges and exploratory grants, vancements in technology and science to tackle one of and focus primarily on demand-side incentives for uti- the most critical health-financing questions—wheth- lization of health services (e.g., conditional cash trans- er it is possible to mobilize voluntary direct contri- fers and vouchers). Health-financing research portfolios butions to prepaid and pooled funding from people would help mobilize a diverse community of investiga- working in the informal economy. To date, contribu- tors and policy innovators to explore fresh solutions to tions to voluntary private health insurance represent a both long-standing and emergent health-financing chal- small fraction of current health expenditure in develop- lenges for countries at all income levels. ing countries. However, in some settings, programs have begun to explore new entry points (World Bank, forth- coming). These programs take advantage of the high penetration of mobile phone technology even in the poorest countries to overcome impediments to financial inclusion. The design of the mobile-based insurance High-Performance health financing Universal Health Coverage | 53 / 2.2.2 / across countries. At the same time, existing financing mechanisms for innovations in health care and public INCREASE THE policy suggest that a small share of the funds needed for QUANTUM AND YIELD OF governance and capacity development could generate a DEVELOPMENT ASSISTANCE promising innovation portfolio of exploratory and trans- FOR HEALTH (DAH) lational projects. The potential returns on investment are noteworthy, as emerging solutions have the potential to Another key area for international action to advance impact not only health but public finance more broadly. UHC will be to return to a growth path for DAH. With even the most optimistic scenarios for domestic New international investments are also critical to resource mobilization (DRM) pointing to a significant advance global health security. Given the global eco- UHC financing gap, robust progress toward UHC tar- nomic, health, and security threats posed by pandem- gets in LICs and LMICs by 2030 will hinge on having ics, global investments to support country preparedness a strong combination of DRM and substantial increases and internationally coordinated interventions to stop in DAH. As domestic and external resource envelopes outbreaks at their source are warranted. Investments in grow, it is imperative that external funds be increasing- primary health care can already bring substantial gains ly targeted to cover gaps across countries and support in health promotion and disease prevention, strength- countries on their journeys to self-reliance. ening health security. Additional opportunities for the international community to leverage health financing Shifts in DAH should seek to yield greater dividends in in support of health security include: domestic health financing. While recognizing the imper- ative of country leadership, the Global Action Plan financ- • Support countries in harnessing health-financing solu- ing accelerator highlights several critical features of a next tions to durably build their preparedness and rapid-re- generation of DAH (WHO 2018). Most importantly, these sponse capabilities, particularly in terms of improved include enhanced support for fiscal, public financial man- surveillance, health information systems, and trained agement, and efficiency reforms, as well as advocacy plat- personnel; forms. To secure the sustainability of reform efforts that • Promote investments that offer scale and scope efficiency scale what works, external support must focus more than for countries versus financing them alone, such as region- in the past on the development of health-financing gover- al laboratories meeting the highest levels of bio-safety; nance and organizational capacity. World Bank data sug- • Strengthen regional and global collaboration to enhance gest that the necessary investments will require a resource preparedness and response, by ensuring sufficient sup- envelope equivalent to some 3 to 5 percent of current DAH port for mechanisms such as the WHO Global Emergen- in LICs and LMICs annually. Sustained over the medium cies Programme; the African Centers for Disease Control; term, these investments will also ensure that countries and the IDA Crisis Response Window (Box 2.7); and have the capacity to absorb and efficiently use higher levels of DAH. In parallel, recipient countries and donors must • Support global and regional efforts in research and work together to improve aid effectiveness and facilitate development on pandemic diseases, such as the Coali- better domestic resource use and mobilization. tion for Epidemic Preparedness Innovations (CEPI). DAH investments should also shift to capture research Adopting a broadened vision of health financing, as and development opportunities in resource use and proposed earlier for country action, countries and mobilization for health. Concerted efforts to resolve partners can craft DAH to promote a spectrum of key open questions and blind spots in health financing goals that include and extend beyond health security. can rapidly yield benefits. The international communi- For example, health-programming support might en- ty could support the evaluation of country strategies in courage whole-of-government approaches across food these areas and the sharing of results for joint learning and agriculture; water and sanitation; housing; urban 54 | World Bank Group BOX 2.7 GLOBAL FINANCING SOLUTIONS FOR HEALTH SECURITY: CFE, PEF AND IDA New global financing solutions are showing promise recipient countries to invest in preparedness with in mobilizing faster international response to out- the benefit of reducing premiums. Efforts are under breaks, but further investments are needed. WHO’s way to design a “PEF 2.0” that will address these Contingency Fund for Emergencies (CFE) now plays gaps, and this is an opportunity to bring in addition- an important role in mobilizing technical expertise al funders. There is also an opportunity to extend to help countries detect outbreaks early and inform the delivery of parametric insurance to the private the global community, while IDA’s Crisis Response sector. Broader uptake of business interruption in- Window (CRW) provides funding to countries con- surance covering infectious disease risks would fronting economic crises, natural disasters of excep- simultaneously increase economic resilience and tional severity, or public-health emergencies. The create greater awareness of infectious disease risks among private sector leaders. CFE and CRW deliver critical support to countries for emergency outbreak response, but both require A critical financing gap exists for National Health regular replenishment from donors. As outbreaks Security Action Plans in the poorest countries. As escalate in severity and spread, there are strong ar- of May 2019, more than 50 IDA-eligible countries guments for leveraging insurance to accelerate pan- have produced these action plans on the basis of demic financing, including through the Pandemic their JEEs and at the urging of international part- Emergency Financing Facility (PEF). The PEF has ners, yet they are unable to finance these plans been established to make funds available rapidly to with domestic resources alone. New financing countries and global responders. A parametric in- mechanisms are needed to incentivize and sup- surance fund for IDA countries, PEF provides emer- port investments in preparedness. Proposals un- gency financing across a set of the most likely pan- der discussion in the IDA19 Replenishment, such as demic disease threats, with premiums being funded expanding the scope and envelope of IDA’s CRW by donor nations. The PEF has proven to be an in- to go beyond emergency response and including valuable tool in the response to the previous and funding for preparedness, could be a significant current Ebola outbreaks in the Democratic Republic step forward in prioritizing preparedness that of Congo (DRC), but it is still a pilot mechanism with could save lives and help mitigate the need for a small number of funders and lacking incentives for much more costly emergency interventions. planning (design of physical spaces); and other areas inefficient parallel structures. Greater harmonization and that connect infectious disease preparedness with alignment of DAH with national priorities will also low- broader conditions of population well-being. er capacity requirements and administrative costs. Key opportunities lie ahead to translate these principles into The next generation of DAH must also harmonize, practice. Replenishments for the major global health-fi- consolidate, and align funding across instruments and nancing platforms are under way and/or slated for 2019 partners to provide a critical mass of funding for the and 2020—including for GFF, IDA, GFATM, and Gavi. most important activities. The next generation of DAH These provide near-term opportunities for development to improve DRUM+ starts with applying agreed princi- partners, including G20 members, to align and leverage ples of aid effectiveness. These include aligning DAH DAH in ways that will advance country actions toward with national priorities and reducing fragmentation and more sustainable, inclusive health financing for UHC. High-Performance health financing Universal Health Coverage | 55 A ROADMAP FOR ACTION /2.3 / UHC financing resilience and sustainability: An agenda for the G20 In addition to the proposed areas for action by indi- of experiences across countries at different stages of facing vidual countries and their international partners, G20 the emerging and intensifying threats to health financing. Finance Ministers and Central Bank Governors can foster international collaboration to promote high-per- To advance the UHC financing resilience and sustain- formance health financing for UHC in all countries by ability agenda, G20 Finance Ministers and Central Bank adopting and steering a UHC financing resilience and Governors can: sustainability agenda. This agenda is fully consistent with the G20 mission of protecting economies from shocks and 1. Convene biennial UHC financing resilience and sus- promoting global economic stability and growth, and ev- tainability dialogues between Ministers of Finance and ery country in the world stands to benefit, regardless of Health at future G20 meetings. These meetings would income level. By enabling all countries to build greater re- identify priorities for country and global action to detect silience and sustainability in health financing, G20 mem- and manage health-financing threats; define research and ber countries will grow the circle of effective partners to development priorities; and foster political commitment promote global health security, other global public goods, for sustainable UHC financing. They would offer a venue and inclusive economic growth. This will help reduce the for dialogue between ministries of finance and health on impacts of disease outbreaks, forced displacement, and the forces driving health expenditures, options to improve other negative cross-border spillover effects. Meanwhile, efficiency, and revenue-raising strategies, including a new strong, sustainable health financing will help drive both generation of DAH. They would facilitate the exchange of quality and efficiency gains in one of the largest global experiences across countries at all levels of income, many of industries, freeing productive resources that can further which have faced the same problems. While the focus of the contribute to global stability and growth. dialogues may shift from meeting to meeting, a first session in 2020 could look at the prospects of attaining sustainable Leadership by G20 Finance Ministers and Central Bank UHC financing by 2030 and priorities for action. Preparato- Governors is critical, as core aspects of this agenda extend ry work for the dialogues would be coordinated by the WBG beyond the purview of health into public finance. G20 working closely with WHO . The preparatory work would Finance Ministers and Central Bank Governors can lead expand on progress reports such as the WHO-World Bank by example in demonstrating how finance and health au- Global Monitoring Report on UHC, WHO annual reports on thorities can successfully collaborate to build and sustain public spending on health, the African Union Health Financ- strong health-financing systems that deliver better health ing Scorecard and Tracker, the work of budget officials’ net- services and financial protection, facilitating the sharing works, and the Joint External Evaluations of health security. 56 | World Bank Group The biennial dialogues would be grounded in a UHC fi- G20 countries who are already investing in existing Grand nancial resilience and sustainability assessment. The de- Challenge funds could choose to direct more of those proj- velopment of the analytic approach would be coordinated ects toward health-financing priorities. by the World Bank Group working with WHO. Implemen- tation would be facilitated by existing partnerships and 3. Champion more and better DAH that catalyzes sus- networks and connect financing experts from around the tainable domestic resource mobilization to accelerate world to learn and hone their skills in assessing and re- progress toward UHC by 2030. Substantial increases in sponding to health-financing threats and opportunities. DAH will be required to help low- and lower middle-in- The development of the approach and dialogues could be come countries begin to close the financing gap and reach overseen by a UHC financing resilience and sustainability their UHC targets. The next generation of DAH also can advisory panel comprised of former ministers of finance and should do much more to catalyze efficient and equita- and health and global experts in health financing, health, ble mobilization, pooling, and use of domestic resources, public finance, and fiscal policy. and to strengthen country governance and capacities in sustainable health financing, as well as in pandemic pre- 2. Sponsor a UHC financing grand challenge portfo- lio. The portfolio would target investments toward solving vention and response. The replenishments in 2019 and the health-financing challenges identified in the G20 UHC 2020 of the major global health funding mechanisms, financing resilience and sustainability reviews, with a fo- including the Global Fund, Gavi, and the WBG’s Inter- cus on those with the greatest potential for global health, national Development Association provide near-term op- financial protection, and economic impact. The portfolio portunities to champion these shifts toward a longer term could take the form of an innovation fund dedicated to approach of more and better DAH to assist countries in developing more effective health-financing solutions, or accelerating progress toward UHC. UHC FINANCING RESILIENCE AND SUSTAINABILITY: AN AGENDA FOR THE G20 FIGURE 3 Sponsor a UHC financing grand challenge portfolio. Convene biennial UHC financing resilience and 2 Champion more and better DAH that sustainability dialogues catalyzes sustainable 1 3 between ministers domestic resource G20 FINANCE of finance and health at mobilization. MINISTERS AND future G20 meetings. CENTRAL BANK GOVERNORS High-Performance Financing for Universal Health Coverage | 57 Conclusions Advancing UHC through robust health financing will G20 Finance Ministers and Central Bank Governors can generate more rapid and sustained growth and pover- act catalytically to realize the promise of high-perfor- ty reduction in developing countries. Yet, progress to mance health financing for UHC in developing coun- date is slower than it might be, because few developing tries. The G20 Finance Track can spearhead the col- countries have yet to fully seize the opportunity to build laboration that will be necessary to accelerate progress high-performance health financing for UHC. toward high-performance health financing, providing knowledge and tools that help make health financing The good news is that a global consensus, based on coun- more resilient and sustainable. Individually and collec- try experience, is emerging on how developing countries can most effectively construct high-performance health tively, G20 Finance Ministers and Central Bank Gover- financing for UHC and how countries and international nors can also help shape a new generation of DAH to partners can best collaborate in tackling health-financing accelerate UHC progress and bolster global health secu- challenges. This convergence in strategic thinking opens rity. Through these mechanisms, G20 leaders will help an unprecedented opportunity to realize the economic advance global prosperity based on fair opportunities gains associated with the progressive realization of UHC. for all, the surest foundation for stability and peace. High-Performance health financing Universal Health Coverage | 59 ANNEX A GAP ANALYSIS METHOD Section 1.2.4 of this report presents 2030 estimates of Expenditure Database (GHED) and projections of GDP the UHC financing gap in LICs and LMICs for different growth rates (2017–2024) from the IMF World Eco- policy scenarios. This annex explains the underlying nomic Outlook (WEO) database. For the period 2025 to methods, data sources, and assumptions. Policy scenar- 2030, the model adopts country-specific average 2019– ios are generally optimistic, yet realistic, consequently, 2024 growth rates. the presented estimates for the financing gap in 2030 are at the lower bound. The population data series was constructed with histor- ic population data (2005–2016) from the WHO GHED The analysis included 54 countries whose GDP per cap- and projections of population growth rates (2017–2024) ita in 2030 is expected to remain below $3895—the from the IMF WEO database. UN projections of popu- World Bank’s current GNI threshold for UMICs, and lation growth rates complemented the data series (2025 for which health expenditure, GDP, and population data to 2030). have been available for the years 2005 to 2016.30,31 The analysis used the 2018 World Bank income classifica- The series of DGHE-to-GDP ratios differentiates the pol- tion to distinguish between LICs and LMICs. Unless icy scenarios. The data series for the different scenari- indicated otherwise, all numbers are presented in US os use historic data (2005–2016) from the WHO GHED dollars 2016. database and different assumptions about future rates. As WHO’s DGHE-to-GDP ratios exclude capital health The estimates are based on domestic government spend- expenditures, the data series was adjusted upward by 5 ing targets of $89.6 per capita for LICs and $117.6 for percent using the average share of capital expenditures LMICs. Following WHO recommendations on out-of- in the WHO GHED database. pocket payments as a share of total health expenditure, these targets correspond to 80 percent of the Stenberg The first scenario assumes that changes in future lev- et al. (2017) cost estimates for an efficient provision of els of health expenditures are exclusively driven by essential health services that would allow countries to changes in GDP and population. DGHE-to-GDP ratios meet SDG3 by 2030. The spending targets contain cur- are held constant at the 2014–2016 average. Using GDP, rent and capital health expenditures. They are applied population, and DGHE-to-GDP ratios we projected fu- according to a country's income status in 2018. ture health expenditures, comparing these to spending targets to estimate the financing gap in 2030. Estimates of health expenditures in 2030 derived from The second scenario considers not only changes to GDP projections of GDP, population, and the ratio of domes- and population growth, but also makes optimistic, yet tic government health expenditure (DGHE) relative to realistic assumptions about a country's ability to mo- GDP. The GDP data series was constructed with histor- bilize domestic resources for health and increase the ic GDP data (2005–2016) from the WHO Global Health DGHE-to-GDP ratio. Such increases reflect a country’s ability to raise revenue and/or prioritize health in do- 30.  Fifteen countries are projected to cross the UMIC threshold before mestic government expenditures. Country specific pro- 2030. These include Bhutan, Bolivia, Egypt, El Salvador, Georgia, India, jection are based on the comparison of historic trends Indonesia, Lao PDR, Mongolia, Morocco, Philippines, Sri Lanka, Tunisia, Uzbekistan, and Vietnam. versus trends that reflect increases in the DGHE-to-GDP 31. Data were missing for Cuba, Libya, Kosovo, North Korea, Palestine, ratio to attain levels commensurate with the 80th per- Somalia, South Sudan, Syria, and Zimbabwe. centile in the respective income group (2.1 percent in 60 | World Bank Group LICs and of 3.4 percent in LMICs). Calculations of the The fourth supplements the third scenario with esti- 80th percentile included the 15 current LMICs whose mates of additional revenue from a complete elimination GDP per capita in 2030 has been forecasted to exceed of post-tax energy subsidies (coal, petroleum, natural the current UMIC threshold. The country specific pro- gas, and electricity). Country specific estimates of the ad- jections adopt the more favorable of the two trends in ditional revenue from post-tax energy subsidies in 2015 the DGHE-to-GDP ratio (historic versus attaining per- have been made available by the IMF. A post-tax energy centile 80 levels) with annual change rates of DGHE-to- subsidy amounts to the difference between the energy GDP capped at 0.1 percentage points. The rational for price consumers pay and the optimal price that includes this cap is two-fold: First, countries rarely sustain annu- supply opportunity cost, environmental externalities, and foregone value-added taxes. The IMF dataset includ- al increases in their tax-to-GDP ratio of 0.5 percentage ed estimates of additional revenue for 30 pre-tax subsi- points (e.g., Gaspar et al. 2019) and, correspondingly, dies for 31 out of the 54 study countries. For countries annual increases in their DGHE-to-GDP ratio of 0.05 lacking IMF estimates, estimates rest on extrapolations percentage points (using the average share of health in taking into account average per capita estimates for pre- domestic government expenditure). Second, among the tax subsidies, population size, and income group averag- 54 countries, only two out of 29 LICs and five out of es of electricity subsidies’ contribution to additional rev- 25 LMICs have been able to sustain increases in their enues. Because of the large uncertainty surrounding the DGHE-to-GDP ratios of more than 0.1 percentage points future size of energy subsidies—mostly due to changes in the past.32 in fossil fuel prices—the 2030 estimates for additional revenue reflect levels in 2015. Estimates of the additional The third scenario builds on the second and assumes revenue for health rest on three additional assumptions. additional revenues from increases in taxes on tobac- First, additional revenue for spending on health is limit- co, alcohol, and sugar-sweetened beverages. Estimates ed to the pre-tax component. A pre-tax subsidy amounts have been made available by the Center for Disease only to the difference between the price consumers pay Dynamics, Economics and Policy (CDDEP, 2019)—for and the supply opportunity cost. Second, the pre-tax 34 countries for tobacco, for 25 countries for alcohol, component is made available for social sector spending and for all 54 countries for sugar-sweetened beverag- (to compensate lower-income households for the elimi- es. The estimates assume tax increases resulting in a nation of fossil fuel subsidies, a prerequisite also for the 50 percent increase in the retail price and have been feasibility of subsidy reform). Third, the share of health produced cumulatively for the period 2018 and 2028. among social spending is 20 percent—in line with the For countries for which tax revenue estimates have not cross-country average in the 54 countries (ASPIRE, been available from CDDEP, data rest on extrapolations World Bank). taking into account average per capita tax revenue and population size. To obtain a 2030 estimate, cumulative additional tax revenue estimates have been annualized. The model makes two different assumptions about the allocation of the additional tax revenues to health. In the first scenario, additional revenues are allocated according to prevailing levels of health prioritization in domestic government expenditures; in the second scenario, 50 percent of the additional revenues are al- located to health. 32.  The two LICs are Malawi and Tajikistan, and the five LMICs are Con- go, Lesotho, Nicaragua, Eswatini (Swaziland), and Timor-Leste. High-Performance health financing Universal Health Coverage | 61 ANNEX B SCALING WHAT WORKS: AREAS OF CONVERGENCE ON HEALTH-FINANCING POLICY IN DEVELOPING COUNTRIES Introduction services at the front line (by shifting funds where po- litically possible, or by giving them a higher share of Section 2.1 of the main report outlined the principal additional funding) will improve both equity and effi- areas of convergence on health-financing policies that ciency. This will need to be accompanied by improve- will ensure faster progress toward UHC. This annex ments to other inputs to front line services including provides more details of how the principles of Section health workers, medicines, etc. 2.1 were derived. It also outlines some areas of contro- • Although there has been agreement in principle for versy, and where country actions do not match agreed some time, there has been little progress in developing principles. Those parts are in italics. countries. What prevents change and how to overcome obstacles need to be understood—another example of This annex uses the Domestic Resource Use Mobiliza- convergence in theory but not convergence in practice. tion Plus (DRUM+) framework as an organizer, as in the main report, starting with equity and efficiency in the use of resources, moving to resource mobilization and What to purchase then to pooling for financial protection. Principle 2: Define a core set of services to be guaran- teed to everyone. A. Improve efficiency and equity • The composition of the set of health services should in resource use (purchasing) be selected to take into account cost-effectiveness, im- pact on financial protection, and equity. Purchasing strategies can help to ensure efficient, equitable • Ensuring efficiency and equity requires increased fund- delivery of the set of quality services while keeping costs ing for prevention and promotion in most settings. manageable. Efficiency and equity are determined by a set of interrelated decisions about where services are available, • Efficiency also required sufficient funding for other what services are available, and how they are paid for. core public health functions, such as pandemic pre- paredness and response should also be assured. • There has been convergence in principle for some time, Where guaranteed services but little convergence in practice as the political demands should be available for more treatment frequently outweigh the logic of more Principle 1: Prioritize primary health services (at the prevention. There is also some dispute about how much frontline, the first point of contact between people and funding should be available for prevention and promo- the health system), getting the most cost-effective ser- tion, and whether it should be ringfenced to protect it vices to those most in need at the most appropriate lev- from the encroachment of treatment. el of the service delivery system. • In many developing countries, primary health ser- vices—the level of first contact between people and the health system—are underfunded and of poor qual- ity compared to other levels of care. Improving PHC 62 | World Bank Group How to purchase • There is no agreement to what level out-of-pocket pay- ments should be reduced and, if they are still levied on Principle 3: Purchasing should ensure that the guar- the guaranteed package, how to exempt the poor with- anteed services are available with quality and at the out leakages to the rich, and high administrative costs. lowest possible cost. Ideally this means paying for out- comes rather than inputs and purchasing strategically. Principle 6: Most developing countries need to raise additional government revenue as a share of GDP. • While the various ways of paying providers are known to have different effects on efficiency and quality, and • A range of well-tested technical measures are available general agreement that a blend of payment options is to increase government revenue, including more effec- preferable to a single method, there is no agreement on tive collection of existing taxes and charges, expan- what blend works best. Moreover, it is not yet clear how sion of tax bases, and increases in the range and level forms of strategic purchasing can be institutionalized in of taxes and charges. countries with limited technical capacities. • Different developing countries have implemented differ- Principle 4: Spending on ineffective or inequitable pub- ent parts of this agenda, but many still lag behind in lic programs (e.g., fuel subsidies that disproportionally terms of government revenues as a share of GDP. How- benefit the middle class) should be repurposed, with at ever, in many implementation is lacking, as countries least some of the savings made available for health and struggle to overcome the political obstacles particularly social sectors. in increasing the efficiency of the public finance system. • While there is agreement in principle, it has proved polit- Principle 7: Boost the overall share of government rev- ically difficult to reduce fuel subsidies. enues allocated to health. • Many developing countries allocate a relatively low share of total government spending to health. Improv- B. Raise sufficient resources to move ing efficiency in health spending and showing results closer to UHC (revenue mobilization) in a way the ministry of finance can understand is one way of increasing the share. To guarantee access to a set of health services, financial resources must be sufficient to pay for these services and • There is no agreement, however, on what share is appro- the necessary investment in service delivery capacity, core priate. public health functions, and system governance. The areas Principle 8: Raise taxes on products harmful to of general agreement follow. health—including but not limited to tobacco. • There is agreement that these taxes improve health, Where revenues should/are raise revenue, and are more politically acceptable to likely to come from the general population than other taxes. Principle 5: Develop a mix of resource generation in- • There is always strong political opposition from vested struments that assures stability in funding flows and interests, while where they are implemented, there is then allows for subsequent pooling to cover the universal dispute about whether they should be hypothecated for package of health services. health, or for some part of health such as prevention. • Countries should primarily raise resources from general government revenues supplemented as they consider ap- propriate by obligatory insurance contributions. Within this, relying on wage-based contributions to fund health does not ensure sustainability over time. This also means out-of-pocket payments should be minimized. High-Performance health financing Universal Health Coverage | 63 Principle 9: The equity (i.e., progressivity or regressivi- C. Pool funds to efficiently share the ty) of revenue generation should always be considered, financial risks of ill-health and allow but by assessing the balance contributions to the sys- people to use a guaranteed set of health tem with transfers people receive in cash or kind. services at an affordable cost (pooling) • The equity of any individual revenue generation instru- ment is only one factor to consider in this calculus. The areas of policy consensus on how to pool funds so that a guaranteed set of health services is available at • Some systems do not, in fact, compensate for inequity an affordable cost follow. in revenue generation by increased equity in transfers, even if there is agreement in principle. Principle 10: Entitlement to access guaranteed services from pooled funds should not be linked to employ- Where major revenues for UHC are unlikely ment status but should be universal. to come from in developing countries • Some countries still link health insurance to employ- ment status or give different benefits to different people. While these are not principles, the following sources of revenue will not, by themselves, get countries sufficient Principle 11: Financial protection for a set of guaran- funding for UHC. teed services can only be universally available if they • Developing countries cannot assume that they can are backed by funds from prepaid and pooled sources rely on wage-based deductions to finance health in the with subsidies for the indigent. short to medium term, particularly where informal • This also requires service delivery capacity and the employment is rampant and the rate of formalization health system inputs necessary to insure this, such as is slow. Even high-income countries that have in the medicines and health workers. past relied predominantly on wage-based social health • In practice, the set of services officially guaranteed is fre- insurance contributions (employer and/or employee) quently too large to be supported by the available funds, are increasingly needing to widen the mix of sources or the service delivery system does not have the capacity of funding. This is in recognition that aging popula- to deliver it, resulting in forms of implicit rationing. tions mean that wage-based deductions will be insuf- ficient to cover the entire population, high wage-based Principle 12: Pools covering the guaranteed package deductions might reduce the rate of formalization of should be large enough and diverse enough to resist the labour force, and they can impose high operating unpredictable high expenditures of some beneficiaries. costs on the private sector. • Large and diverse pools can be created physically or • Voluntary health insurance by itself will not attain virtually—through forms of risk equalization across UHC. Low-risk people opt out and the poor cannot af- pools (see below). ford to pay. • The private commercial sector is not yet a signifi- cant source of funding for a guaranteed package of services. There have been some experiments in using DAH to leverage private sector funding in developing countries, mostly with DAH, but experience suggests the amount that can be leveraged is, at the moment, small (Attridge and Engen 2019). 64 | World Bank Group Principle 13: If countries already have multiple pools with different risk profiles for the guaranteed set of services, equalization mechanisms across pools are critical to ensure equity and financial viability. • There are many formulae available to do this, though they require strong information systems. • There is no agreement on the relative merits of single and multiple pools. Benefits of a single pool include greater efficiency in the form of lower administration costs and no need to equalize risks across pools. Pos- sible problems include lower responsiveness to people, diseconomies of scale in large countries, and capture of the benefits by the rich and educated where the poor have access to no or only low quality services. • Many developing countries maintain multiple small pools with no or limited risk equalization. D. Cross-cutting issues: health-financing governance To ensure that the above principles can be applied, many developing countries government need to strengthen their capacities to develop and support the regulatory framework for health financing, and the in- stitutions and organizational arrangements required to do so. Much of this requires leadership of a ministry of finance in collaboration with the ministry of health. 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