CSU 124/2010: RAISING SUFFICIENT RESOURCES FOR HEALTH

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CSU 124/2010: RAISING SUFFICIENT RESOURCES FOR HEALTH

I recently received two letters from an African government. The first letter stated that they could cofinance an upcoming vaccination campaign to the tune of >$500,000; the second letter told us, the baffled readers, to disregard the first.

This kind of thing is distressingly common. Until it changes, the health ministry will always be at the back of the line when budgets are prepared.

Recognizing the importance of this issue, WHO is devoting this year’s World Health Report to health care financing. The text is available in Arabic, Chinese, English, French, Portuguese, Russian and Spanish at http://www.who.int/whr/2010/en/index.html

The following excerpt is from the Executive Summary. I would point out one simple item from the list: higher taxes on tobacco. Any health minister who is cash shy should ask whether cigarettes (taxed at $10 per pack in New York City) are properly taxed in his/her country.

‘A 50% increase in tobacco excise taxes would generate US$ 1.42 billion in additional funds in 22 low-income countries for which data are available. If all of this were allocated to health, it would allow government health spending to increase by more than 25% in several countries, and at the extreme, by 50%. Raising taxes on alcohol to 40% of the retail price could have an even bigger impact.’

Good reading.

Raising sufficient resources for health

Although domestic financial support for universal coverage will be crucial to its sustainability, it is unrealistic to expect most low-income countries to achieve universal coverage without help in the short term. The international community will need to financially support domestic efforts in the poorest countries to rapidly expand access to services.

For this to happen, it is important to know the likely cost. Recent estimates of the money needed to reach the health Millennium Development Goals (MDGs) and to ensure access to critical interventions, including for noncommunicable diseases in 49 low-income countries, suggest that, on average (unweighted), these countries will need to spend a little more than US$ 60 per capita by 2015, considerably more than the US$ 32 they are currently spending. This 2015 figure includes the cost of expanding the health system so that they can deliver the specified mix of interventions.

The first step to universal coverage, therefore, is to ensure that the poorest countries have these funds and that funding increases consistently over the coming years to enable the necessary scale-up.

But even countries currently spending more than the estimated minimum required cannot relax. Achieving the health MDGs and ensuring access to critical interventions focusing on noncommunicable diseases – the interventions included in the cost estimates reported here – is just the beginning. As the system improves, demands for more services, greater quality and/or higher levels of financial risk protection will inevitably follow. High-income countries are continually seeking funds to satisfy growing demands and expectations from their populations and to pay for rapidly expanding technologies and options for improving health.

All countries have scope to raise more money for health domestically, provided governments and the people commit to doing so. There are three broad ways to do this, plus a fourth option for increasing development aid and making it work better for health.

1. Increase the efficiency of revenue collection. Even in some high-income countries, tax avoidance and inefficient tax and insurance premium collection can be serious problems. The practical difficulties in collecting tax and health insurance contributions, particularly in countries with a large informal sector, are well documented. Improving the efficiency of revenue collection will increase the funds that can be used to provide services or buy them on behalf of the population. Indonesia has totally revamped its tax system with substantial benefits for overall government spending, and spending on health in particular.

2. Reprioritize government budgets. Governments sometimes give health a relatively low priority when allocating their budgets. For example, few African countries reach the target, agreed to by their heads of state in the 2001 Abuja Declaration, to spend 15% of their government budget on health; 19 of the countries in the region who signed the declaration allocate less now than they did in 2001. The United Republic of Tanzania, however, allots 18.4% to health and Liberia 16.6% (figures that include the contributions of external partners channelled through government, which are difficult to isolate). Taken as a group, the 49 low-income countries could raise an additional US$ 15 billion per year for health from domestic sources by increasing health’s share of total government spending to 15%.

3. Innovative financing. Attention has until now focused largely on helping rich countries raise more funds for health in poor settings. The high-level Taskforce on Innovative International Financing for Health Systems included increasing taxes on air tickets, foreign exchange transactions and tobacco in its list of ways to raise an additional US$ 10 billion annually for global health. High-, middle- and low-income countries should all consider some of these mechanisms for domestic fundraising. A levy on foreign exchange transactions could raise substantial sums in some countries. India, for example, has a significant foreign exchange market, with daily turnover of US$ 34 billion. A currency transaction levy of 0.005% on this volume of trade could yield about US$ 370 million per year if India felt this path was appropriate. Other options include diaspora bonds (sold to expatriates) and solidarity levies on a range of products and services, such as mobile phone calls. Every tax has some type of distortionary effect on an economy and will be opposed by those with vested interests. Governments will need to implement those that best suit their economies and are likely to have political support. On the other hand, taxes on products that are harmful to health have the dual benefit of improving the health of the population through reduced consumption while raising more funds. A 50% increase in tobacco excise taxes would generate US$ 1.42 billion in additional funds in 22 low-income countries for which data are available. If all of this were allocated to health, it would allow government health spending to increase by more than 25% in several countries, and at the extreme, by 50%. Raising taxes on alcohol to 40% of the retail price could have an even bigger impact.Estimates for 12 low-income countries where data are available show that consumption levels would fall by more than 10%, while tax revenues would more than triple to a level amounting to 38% of total health spending in those countries. The potential to increase taxation on tobacco and alcohol exists in many countries. Even if only a portion of the proceeds were allocated to health, access to services would be greatly enhanced. Some countries are also considering taxes on other harmful products, such as sugary drinks and foods high in salt or transfats (7, 8).

4. Development assistance for health. While all countries, rich or poor, could do more to increase health funding or diversify their funding sources, only eight of the 49 low-income countries described earlier have any chance of generating from domestic sources alone the funds required to achieve the MDGs by 2015. Global solidarity is required. The funding shortfall faced by these low-income countries highlights the need for high-income countries to honour their commitments on official development assistance (ODA), and to back it up with greater effort to improve aid effectiveness. While innovative funding can supplement traditional ODA, if countries were to immediately keep their current international pledges, external funding for health in low-income countries would more than double overnight and the estimated shortfall in funds to reach the MDGs would be virtually eliminated.

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