introduction: major challenges for health financing

Introduction: Major challenges for health financing

The Elements of Health System

Management

Resource Inputs(trained staff,drugs, knowledge,

facilities,etc.)

Organization(ministry, hospitals, etc.)

Financial support

Service Provision

Health Sector Reform:

• Civil service and public sector reform

• Development in financing the social sector

• Managed-market health care reforms

• Development in epidemiology and health economics

Health Sector Reform -2-

• HSR occurs as part of changes in public sector reforms.

• Changes in health financing: the need to assess the advantages and disadvantages of user fees, community financing, voucher systems and different forms of insurance

• Traditional bureaucratic structures do not necessarily sufficient incentives to guarantee cost-effective or user-friendly services, neither are unregulated private markets capable of achieving the mix of objectives that health systems seek to satisfy.

Need versus Demand

0

10

20

30

40

50

60

70

80

90

diarrhea

pneumonia

accident

heart disease

cancer

AIDSestimated

AIDSreported

Aging and Economic Growth

1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Year:Japan

Korea

Thailand / Sri Lanka

0

0.05

0.1

0.15

0.2

0.25

0.3

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

population 65+ (%) Japanpopulation 65+ (%) Koreapopulation 65+ (%) Thailandpopulation 65+ (%) Sri LankaGNP per capita, JapanGNP per capita, KoreaGNP per capita, ThailandGNP per capita, Sri Lanka

Low-income Countries HaveWeak Capacity to Raise Revenues

• Governments often raise less than 20% of GDP in public revenues;

• The tax structure in many low-income countries is often regressiveTota

l G

overn

men

t R

even

ues a

s %

GD

P

0

20

40

60

80

100

Per capita GDP $ (Log scale)

10,000 100,0001,000100

Source: IMF data 2000

Epidemiological Changes

Nature of health care (quantity + quality)

Not necessarily all public goods

Higher service costs

Less and less passive acceptance of service

( Customers’ satisfaction, better quality of service)

Accountability to be sought after

Major challenges for health financing

Epidemiological transition

Financial constraints

Allocative inefficiency of health sector resources

Lack of management capacity

Recurrent Costs Problems in Developing Countries

(1) Private foreign investment• foreign direct investment

• foreign portfolio investment (stocks, bonds and notes)

(2) Public and private development assistance• bilateral and multilateral donor agencies

(grants and loans)• nongovernmental organizations (NGOs)

The International Flow of Development Resources

Government Budget 1. Development (Capital) Budget 　（資本予算）– Domestic Financing

– External Financing (development assistance, etc.)

2. Recurrent Budget （経常予算）– Domestic resources (tax, user fees)

　　　　　　　　　　　　　 Absorptive capacity ( 援助 の吸収能

力 )　

Foreign currency portion

Local currency portion

Local currency portion

0

1

2

3

4

5

6

7

8

2000 2001 2002 2003 2004

Development(Capital ) Budget

Actual Recurrent Budget

Shortage in recurrent budget

User Fees

Recurrent Resource Gap

(by Y.Uchida)

Recurrent cost constraints threaten the productivity of past

investment

A mismatch between capital investment* and recurrent financial capacity

(*one-off investment)

“R”co-efficient: the ratio of recurrent expenditure to total investment outlay

District hospitals 0.33 every $1000 spent on the initial capital development of a district hospital results in $333 of expenditure per year

external assistance

・ Development (capital) budget + recurrent budget

・ Foreign currency portion + local currency 　　portion

A mismatch between capital investment*and recurrent financial capacity (*one-off investment)

Symptoms of the recurrent cost problems

New facilities unable to function because of recurrent resources

Faculties supplied with equipment but no qualified staff to operate

Poorly maintained buildings, equipment, facilities, etc.

Transportation difficulties and immobile vehicle fleets caused by lack of spares, fuel, etc.

A large number of unfilled posts

The consequences of these

problems Reduced efficiency Reduced service quality/quantity Reduced confidence in public sector facilities A shortened lifespan for capital investments Low morale among staff with high turnover

Causes for the recurrent cost problems

Poor project design Weak planning, budgeting and resource mechanisms

（ dual budgeting, PIP) Resource availability factors

(low per capita income, low growth rates, low savings rations, weak business sectors)

Weak management capacity

Balance Sheet: B/S

AssetsCurrent assets

(Short-term assets)

Fixed assets

(Long-term assets ）

LiabilitiesCurrent Liabilities

Long-term Liabilities

Stockholders’ Equity

Aid Coordination

and

Resource Management

Coordination of external resources is central to the development agenda in many countries.

The following growing recognitions:The following growing recognitions:

Unmanageable proliferation of Unmanageable proliferation of projects, policies and demands projects, policies and demands on sector ministrieson sector ministries

Unmanageable proliferation of projects, Unmanageable proliferation of projects, policies and demands on sector policies and demands on sector

ministriesministries

Fragmented (overlapped) sector activities Fragmented (overlapped) sector activities = = projectisationprojectisation

Little resource fungiblilityLittle resource fungiblility

Several technical specificationsSeveral technical specifications

Some disbursement rules and financial years among donorsSome disbursement rules and financial years among donors

Enormous works with donors’ missions – heavy administrative Enormous works with donors’ missions – heavy administrative burdenburden

Parallel management system Parallel management system

Parallel Management System Parallel Management System

Excessive separate systemsExcessive separate systems created great confusion. The disbursement and created great confusion. The disbursement and

accounting arrangements made financial control very difficult and accounting arrangements made financial control very difficult and

rendered it impossible to gain an overview of the resources employed or rendered it impossible to gain an overview of the resources employed or

to analyse expenditures.to analyse expenditures.

The fragmentation of control over civil works initiativesThe fragmentation of control over civil works initiatives hindered the hindered the

development of rational capital planning policies and paid inadequate development of rational capital planning policies and paid inadequate

attention to the aggregate recurrent cost consequences.attention to the aggregate recurrent cost consequences.

Unmanageable proliferation of projects, Unmanageable proliferation of projects, policies and demands on sector ministriespolicies and demands on sector ministries

Fragmented sector activitiesFragmented sector activities

Little resource fungiblilityLittle resource fungiblility

Several technical Several technical specificationsspecifications

A few different disbursement A few different disbursement rules and financial yearsrules and financial years

Enormous works with donors’ Enormous works with donors’ missionmission

Asymmetric power relationships

Informal networking between key policymakers /managers in both donor and recipient organizations

Ugandan national health plans since 1986

• National Relief Plan 1986• Rehabilitation and Development Plan

1987• Ten Year National Health Plan 1990• Three Year National Health Plan

1992• National Plan of Action for Children

1992

SWAps (sector-wide approaches):

The concept of coordination, best compressed in the SWAps.

SWAps represents a next generation approach to aid, and set out to provide a broad framework within which all resources are coordinated in a coherent and well-managed way .

Definition of SWAps (sector-wide approaches):

All significant public funding for the sector

supports a single sector policy and

expenditure program, under Government

leadership, adopting common approaches

across the sector, so as to disburse and

account for all public expenditure.

SWAP Arrangements

Coordination mechanism:A steering committee: 1) A Code of Conduct which establishes principles and

mechanisms on which SWAp is to be based

2) Formulating and sharing a sector policy(a set of medium and long term performance indicators)

3) Allocation of development resources and technical assistance Basket Fund (pooling arrangement)