In September 2015, all countries committed themselves to a new set of sustainable development goals (SDGs). One of the targets to achieve the health SDG is Universal Health Coverage (UHC), whereby everybody receives the health services they need without suffering financial hardship[i]. Across the world, countries are recognizing that achieving UHC requires a publicly financed health system to ensure risk pooling where healthy and wealthy members of society subsidize services for the sick and the poor[ii]. Conversely, a privately-financed, free market in health services has proven that it will never achieve UHC – a fact which has now been recognized by experts and agencies who previously promoted private health financing[iii].
Countries such as Thailand, Sri Lanka and Costa Rica have demonstrated that the key to achieving UHC is to replace private voluntary health financing (user fees and private insurance) with compulsory public financing (in particular tax financing). This not only improves people’s access to health services it also reduces the impoverishing burden of out-of-pocket (OOP) health expenditure[iv].
A country which learnt this lesson before many of its peers is Malawi. Despite only having a GDP per capita of around $350, Malawi was one of the few African countries to achieve MDG 4 in reducing child mortality. This achievement was celebrated in a Lancet Global Health paper[v] which highlighted Malawi’s success in increasing the utilization of a number of effective health interventions by children– for example immunizations and treatments for infectious diseases.
However, this analysis didn’t mention a key feature of Malawi’s health system which has made it unique within the continent of Africa: Malawi has been the only country in Sub-Saharan Africa to provide universal free health services throughout its public health system and never charge user fees – with the exception of some recent worrying user fee experiments I have written about here. Having not put in place this demand side barrier, utilization of services has been higher in Malawi which has enabled the country to make faster progress towards the MDGs and UHC[vi].
This is illustrated vividly in the following graph, from WHO Afro Region. The graph illustrates that with a relatively high level of public financing of 5.8% GDP (which includes aid financing) and a no user-fees policy in place in public facilities, Malawi records only a 12% share of total health expenditure in the form of out-of-pocket financing. This is a good proxy measure for the level of financial protection offered by the Malawian health system and it is at a level significantly below the 20% maximum level recommended by WHO.
Conversely in Nigeria, which only spends 0.9% of its GDP in the form of public health financing and where user fees are charged at all levels, private out-of-pocket health financing accounts for 72% of total health expenditure – one of the highest rates in the world. At these levels of OOP payments not only are millions of Nigerians being impoverished by health care costs or prevented from accessing vital healthcare altogether, considerable human rights violations are also resulting where many people are detained in health units because they can’t pay their hospital bills[vii]. This latter phenomenon is unheard of in Malawian public hospitals.
But perhaps the most stark illustration of the difference in performance between these two countries at the opposite ends of this curve, is that whereas Nigeria is 8 times richer than Malawi, Nigeria’s child mortality rate (109 deaths per 1000 live births) is 70% higher than Malawi ’s (64 deaths).
In reviewing these records, the obvious policy recommendation for Nigeria is that it too should increase its public health spending and abolish user fees in its public health system. And for Malawi, the lesson should be to build on this success and use further increases in public financing to improve the availability and quality of free services.
The Government of Malawi’s recent policy announcement to implement service level agreements which will fund selected CHAM facilities to provide free services will be an excellent way to fulfill this objective. Needless to say, if Malawi wants to stay ahead of the pack, it should scrap the hospital bypass fees that have been introduced recently, and certainly ignore the siren calls to introduce user fees more broadly in the public health system. This would simply take the country up the curve to join those where poor people don’t access health services because they can’t afford them, and where more children die before their fifth birthday.
 And a very brief period in 1964, when a misguided expatriate advisor persuaded the government to introduce fees. However, following extensive public demonstrations President Banda soon reversed this policy to restore universal free services
 Christian Health Association of Malawi
[ii] Yates R Universal Health Coverage: progressive taxes are key
The Lancet , Volume 386 , Issue 9990 , 227 – 229 Available at: http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(15)60868-6/abstract accessed 28 July 2016
[iii] Lane R 2013 Dean Jamison – Putting economics at the heart of global health The Lancet Vol. 382, No. 9908 Available at: http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(13)62613-6/fulltext?rss=yes Accesed 28 July 2016
[iv] Evans TG et al Thailand’s Universal Coverage Scheme: Achievements and Challenges. An independent assessment of the first 10 years (2001-2010). Nonthaburi, Thailand: Health Insurance System
[v] Kanyuka, Mercy et al. Malawi and Millennium Development Goal 4: a Countdown to 2015 country case study The Lancet Global Health , Volume 4 , Issue 3 , e201 – e214 Available at: http://www.thelancet.com/journals/langlo/article/PIIS2214-109X(15)00294-6/abstract Accessed 28 July 2016
[vi] Yates R, Child mortality in Malawi The Lancet Global Health , Volume 4 , Issue 7 , e444 Available at http://www.thelancet.com/journals/langlo/article/PIIS2214-109X(16)30083-3/abstract Accessed 28 July 2016
[vii] Agbonkhese J FG urged to end detention of women in hospitals nationwide Vanguard online 2 February 2015 Available at http://www.vanguardngr.com/2015/02/fg-urged-end-detention-women-hospitals-nationwide/ Accessed 28 July 2016
This blog is made of short scenes because the woman’ story at the end is worth a thousand studies, statements, national or international policies.
Scene one 1986 DC
Economists do a lot of studies and extensive thinking on the critical issue of how to finance health care. They tell the world that governments cannot afford to pay for health care and that free care encourages overuse and therefore people must pay fee for services.
Scene two: October 2012 DC
Over the years mounting evidence demonstrates how user fees excludes poor people especially women from access to essential healthcare. Hundreds of NGOs send a letter to Jim Kim the president of the World Bank requesting the bank to support countries removing user fees.
Scene 3: Dec 2013 Tokyo
Jim Kim the president of the World bank says: “Even tiny out-of-pocket charges can drastically reduce [poor people’s] use of needed services. This is both unjust and un-necessary “
Scene 4: March 2016 Cameroon
Newspaper published a horrific story of a pregnant women dying at the hospital door in Cameron simply because she could not afford user fees. Her niece tried to deliver the twins but both died.
Scene 5: still to come
Governments abolish user fees. Donors including the World Bank work with the governments to fully finance essential health care for all that are free at the point of use. In Cameroon women deliver attended by trained health workers without paying for the service.
On 2nd July 2015 at the International Conference on Public Policy (ICPP), Oxfam, together with Dr. Anuj Kapilashrami of the Global Public Health Unit, University of Edinburgh, convened a session entitled ‘Private sector and Universal Health Coverage: Examining evidence and deconstructing rhetoric’.
As an earlier blog explained, the session aimed to look at new and existing evidence on the role of the private for-profit sector in health, and to critically evaluate this in the context of achieving UHC in low- and middle-income countries. The five papers presented at the session looked at a wide range of private sector actors in health care delivery but raised a number of common themes and challenges.
High costs, and continued challenges around out-of-pocket spending (OOPS), was a common theme across the papers. One paper presented by Asha Kilaru, examined state insurance schemes in Karnataka, India, and found that OOPS were prevalent across the schemes, even where all costs should be covered. The study found 93% of those insured by at least one government scheme sought care from a private hospital, but only 8% reported receiving completely free care. Where healthcare was provided for free, additional costs (such as multiple hospital referrals for different tests and treatment) meant OOPS still occurred. It seems that this was a problem particularly associated with private provision of healthcare, as evidenced by one respondents’ interview:
‘Only the operation [C-section] was free. At the government hospital, a C-section would be only Rs3-4000, but we went to a private hospital since we had insurance and wound up spending so much. It seems like government are agents that send us to a private hospital. In this yojana [Yeshasvini insurance scheme] the government spends and we also spend’.[i]
Difficulties faced in controlling the level of fees charged by private providers were also highlighted. In a paper by Jane Doherty examining the for-profit private healthcare sector in East and Southern Africa, it was noted that out of sixteen countries, ‘no country places a ceiling on the prices that its private hospitals may charge’ (although there may be some limitations to reimbursement payments made by insurers in two of the countries). The paper also explained that ‘there is little control of the fees charged by health professionals or limits placed on their total incomes, except in Kenya’.
Equity and access for the poorest
Challenges in controlling OOPS and the overall costs of private healthcare present significant obstacles to achieving UHC, and especially to ensuring access to healthcare for the poorest. Another recurring barrier to equitable access highlighted is the location of private services. A paper mapping India’s private healthcare provision by Mukhopadhyay et al highlighted that urban, metropolitan areas benefit from the majority of private hospitals, while in rural areas, disproportionately populated by poorer people, the private sector is largely comprised of individual practitioners. Moreover, almost half of India’s private hospitals were located in cities with a population of more than 5 million. Mumbai alone has 16% of all India’s private hospitals.
Poor quality and regulatory challenges
Usar’s paper investigating perceptions of shops selling medicines in Nigeria highlighted major concerns around their ‘pervasive regulatory infringements’ – and especially the selling of drugs beyond the scope of their licenses – as well as the lack of training of staff. The same paper pointed to the challenges of regulating medicine vendors in Nigeria in order to improve their quality, highlighting that regulation has been constrained by inadequate funding, weak institutional capacity, the often-remote location of the shops, and inter-regulatory agency conflicts.
Doherty’s research examining East and Southern Africa’s for-profit private providers pointed out that both an absence of regulation, and poor enforcement of regulation where it exists, contribute to problematic dynamics around private sector healthcare actors there. We have already heard how little legislation exists to control costs within the sector, but the study also found that that there is almost no regulation that guards against anti-competitive behaviour. Furthermore, ‘there is little monitoring by governments of quality and health outcomes, or attention to how the private health sector supports national health objectives’.
The same paper flags additional challenges to regulation, including patchy regulatory frameworks, the high cost of introducing new regulation, limited available information on the private sector, and the resistance of key stakeholders to regulation, or their “capture” of regulation to safeguard their own interests. In South Africa, for example, attempts to regulate dispensing fees for pharmacists have been resisted heavily.
Impact on the public system
Doherty concludes that ‘legislative gaps and enforcement problems, together with the fact that prices are not contained in any meaningful way, either through price controls or active reimbursement mechanisms, mean that for-profit private care in the region is likely to become increasingly unaffordable for any but the wealthiest’. Yet, if the for-profit private sector is poorly regulated and potentially growing, what impact could this have on the public health system left for the majority of the population?
Doherty points to South Africa as an example, where one impact of a strong private sector has been the ‘brain drain’ of human resources away from the public sector to much more lucrative private providers. The final paper by Jisha C. J., examining a state health insurance scheme in India (Kerala), highlights an additional worrying trend, where some private hospitals register in the state insurance scheme, only to de-register themselves once they have attracted some new patients to their facility. It can be assumed this trend will waste public resources spent on administration, as well as raising serious concerns about both equitable access and the behaviour of private providers.
The evidence presented at the Oxfam-University of Edinburgh session makes a further contribution to the debates over the role of the private sector in achieving UHC. While the papers can only shed light on the specific areas they analyse, it is clear that the wider themes they highlight chime with the findings of broader studies on the comparative roles of the public and private sectors.
Oxfam hopes to continue these discussions further, and will be hosting additional blogs on Global Health Check from the contributing authors and discussants exploring the details of the evidence presented in the coming months.
[i] The paper notes that ‘while it is claimed that [the] Yeshasvini [scheme] is self-funded, it received Rs. 40 crore as a government grant in 2012-13 and Rs. 45 crore in the 2013-14 budget’. Rs 40 crore is equivalent to more than USD 6 million while Rs 45 crore is equivalent to almost USD 7 million.
As the Financing for Development Conference in Addis Ababa ends, we present the case for financing health care in India. India is losing vast sums of potential tax money that could finance universal health coverage (UHC) while at the same time decreasing the health budget and promoting private finance and delivery of health services. A recent Oxfam India paper explores available evidence around financing healthcare for all in India and offers recommendations.
1. The potential for tax funding
Free services like healthcare and education are vital to fight poverty and inequality yet India is being denied the resources to fund them. The International Monetary Fund (IMF) estimates that developing countries are three times more vulnerable to base erosion and profit shifting activities of multinational companies- they lose 0.84% of GDP in the short run, compared to 0.23% lost by OECD countries. Recent research covering 1500 Multi-National Companies (MNCs) in India showed that those with links to tax havens reported 1.5 % less profit than those with no such links – a strong indication that the former are engaged in profit shifting (a global euphemism for cheating) more intensively than those with no tax haven links.
A study in 2013 showed that according to official sources, the amounts involved in mispricing –manipulation by over-invoicing of imports and under-invoicing of exports- in India ran at US$8.1bn in 2010-11, escalating to US$12.6bn in 2011-12. Corporation tax of 33% on these amounts would have provided US$6.9bn that could have helped fund free quality public services for all in India.
The Indian government can raise funds to invest in public services from a better tax system. The latest report from Global Financial Integrity lists India among the top five countries in the world with almost half a trillion dollars lost in illicit outflows in the past decade alone. Just to compare, India’s annual central expenditure on health and rural housing put together is $ 5.4billion.
India’s tax to GDP ratio is among the lowest of all G20 countries- far below other BRICS countries (Brazil, Russia, India, China and South Africa). Moreover, the revenue foregone due to tax exemptions by the central government is estimated to be 43.2% of total tax revenue for the year 2014-15, or nearly 5% of India’s GDP. This shows that there indeed are alternative sources that can generate more resources for health.
2. Current financing model and the impact on service use
Out of pocket (OOP) expenditures push an estimated 60 million Indians into poverty every year. User charges still remain in the public healthcare system. The overall public spending hovers at about 1% of GDP – the corresponding figures are around 4.5% for Brazil and 8% for the United Kingdom. During 1986-87, about 60% of the hospitalised cases were treated by the government institutions in urban and rural areas. In 2004, this figure fell to about 40%, reflecting the poor public spending on health. Fortunately, the following decade saw focused attention on rural areas through increased health spending on improving infrastructure in rural India, which is slowly yielding results. Most deliveries across urban and rural areas are now taking place in government hospitals as the following chart shows.
This is a remarkable result given that government funded schemes across the country offered incentives to deliveries in private sector facilities. It shows that people’ trust in the public sector has improved.
The shift towards demand side financing was based on a rationale from survey findings during 1987-2004. The argument that even the poor preferred the private sector by 2004 however ignores the fact that this was a period when the public sector was systematically starved of resources and market principles were introduced into the system. Forgone care due to financial reasons had doubled between 1986-87 and 2004, from 15% in rural and 10% in urban areas to 28% and 20% respectively. Data for more recent years will be available by next year.
The spending cuts on public services in the central budget of 2015-16 are deeply concerning. Not only was the total allocations for health cut by about $945 million, but other budget cuts would affect peoples’ health too. For example the allocation to the child nutrition scheme was cut by half. At the same time, according to latest available estimates, 48% of children under the age of five are stunted due to chronic under-nutrition, with 70% being anaemic.
3. Where the money should be spent: The privatisation trend
Unfortunately, there seems to be a trend against expansion of public sector provision of service especially from influential think tanks such as Niti Aayog, which just replaced India’s Planning Commission. A recent book co-authored by Niti Aayog Vice Chairperson advises against any further expansion of free primary, secondary, and tertiary health care services in the public sector. Instead, it advises the government to focus on providing financial resources to the poor so that they can buy services. It even calls for the government to insist on full cost recovery.
Niti Aayog’s latest Working Paper on financing healthcare too veers dangerously towards privatised financing for health care which excludes poor people; unsustainable programs based on Corporate Social Responsibility and Public Private Partnerships (PPPs) without examining the evidence of effectiveness or problems of any of these approaches.
 according to the OECD the term refers to tax planning strategies that exploit gaps and mismatches in tax rules to make profits ’disappear’ for tax purposes or to shift profits to locations where there is little or no real activity but the taxes are low, resulting in little or no overall corporate tax being paid.
 Still, 60% of all people from the bottom 20% were getting hospitalised in the public sector in 2004.
 The Planning Commission was an institution in the Government of India which formulated India’s Five-Year Plans, among other functions.
In its seminal World Health Report of 2010, WHO argued that all countries can make progress towards Universal Health Coverage (UHC) by expanding the number of people covered by effective health services and giving them financial protection from the costs of these services. The report also highlighted the pivotal role of equitable health financing reforms in achieving this objective. These processes ought to be easier in wealthy countries, but even in the world’s biggest economy, due to an inequitable financing system, tens of millions of people still lack effective health coverage.
In Malawi (with a GDP per capita 1/226 of the United States) the health financing situation is particularly challenging. This is especially the case following the suspension of considerable sums of aid financing after the “Cashgate” corruption scandal that brought down the former government. So, faced with a high burden of unmet health needs, a heavily constrained government budget and uncertain levels of external funding, how should Malawi take its next steps towards UHC?
With the public financing situation looking bleak, a knee-jerk reaction might be to look for alternative financing sources and in particular to raise health funds directly from the population – in the form of user fees. But evidence from across the continent over the last thirty years shows that this would be a mistake. Charging patient fees would raise very little revenue, would incur high administration costs and most worryingly would exclude millions of poor Malawians from receiving healthcare. Also with the world looking to build resilient health systems in the aftermath of the Ebola epidemic it would be extremely unwise to suddenly create new access barriers to essential health services.
While concerns around fee-paying wards and bypass fees remain, fortunately, the government recently made clear statements to the effect that the majority of services will remain free at the point of delivery.. Not only is this good news for the health and welfare of the population, it is a smart political move by the Government, who may have remembered the last time they introduced health fees following advice from ex-pat advisers. This was soon after independence when new health charges were met with extensive hostility from the population. This triggered a political crisis and resulted in some ministers losing their jobs. Following this lesson of people power, Malawi was one of the few African countries not to bow to donor pressure to introduce fees in the 1980s, when it continued to provide universal free health care. This undoubtedly contributed to Malawi outperforming some of its neighbours in making progress towards the health-related MDGs. With many other African countries now learning that they too should remove user fees, it would be a tragedy for Malawi to move in the opposite direction.
But if user fees aren’t the answer and with private voluntary insurance also proving an ineffective route to UHC, what steps could the Government of Malawi (GoM) take towards reforming its health financing system? As the 2010 World Health Report and subsequent influential reports have shown, the key to achieving UHC lies in public financing reforms. In particular, it requires increasing levels of pooled public financing and in maximizing the efficiency and equitable allocation of these funds. In terms of raising higher amounts of domestic funding, broader public financing reforms could increase the size of the overall government’ budget and a political choice could be made to increase the health share from 8.6 % towards the Abuja target of 15%. Also, it is to be hoped that aid financing will increase again in the near future because external assistance will be essential for Malawi for at least the medium term if it is to reach adequate levels of public health financing.
But to secure this additional funding, perhaps the best strategy for the health sector will to demonstrate to its domestic and external financing sources that it can deliver rapid results with incremental allocations in funding. This will involve investing additional funds in cost-effective interventions that extend health coverage to more people in Malawi – and especially to the poor and vulnerable.
One immediate “quick-win” along these lines, could be to ensure that people relying on NGO facilities in remote areas also receive free services. This would require increasing government grants to these facilities. In fact this is already a policy priority for the new Government. Fast-tracking this reform would bring health and economic benefits to the communities concerned and political benefits to the government. Looking at UHC success stories in other countries, the government of Malawi and donor partners could also achieve rapid progress by implementing extensive supply-side reforms. For example Rwanda and Ethiopia have made spectacular progress in extending coverage through scaling up services provided through publicly-funded community health workers. Also implementing extensive reforms of medicines supply systems to ensure the provision of free generic medicines and health commodities has proved a very effective way to increase coverage of essential services. Furthermore these types of pro-poor initiatives could prove an attractive proposition for donors wanting to re-engage in Malawi’s health system.
Therefore even though the health financing situation may appear daunting in Malawi, this doesn’t mean that a completely new strategy based on private financing will be the solution. International evidence shows that this would probably result in a deterioration in health coverage – particularly for the poor. Instead Malawi would be better advised to learn from its own history and re-invigorate its publicly financed health system, which as the world has learnt is the proven route to achieve universal health coverage.
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