Over the past two decades, health sector reforms in Ghana have transformed how health care is financed and delivered in the country. The most significant of these reforms was the introduction of health sector cost recovery and liberalisation in 1980s and, more recently, the National Health Insurance (NHI), which was introduced in 2004. A key objective of the NHI is to ensure equitable access to healthcare services for all Ghanaians. I was recently involved in a study which considered the issue of equity in relation to the financing and delivery of health services in Ghana.
The study examined the current range of health financing mechanisms in Ghana including general tax revenue, national health insurance contributions and out-of-pocket payments (OOP), as well as the distribution of healthcare benefits among various socio-economic groups in the country. We found that while general tax revenue is a progressive source of financing, insurance contributions by informal sector workers and out-of-pocket payments are regressive. We also found that the benefit incidence from using services in Ghana is largely pro-rich.
General tax revenue is the second major source of healthcare financing in Ghana, contributing around 40% of total healthcare financing. There are five main streams of general tax revenue (personal income tax, corporate tax, VAT, import duty, and fuel levy) and our study findings showed these to be mainly progressive, with the exception of a levy on fuel to which poor people contribute relatively more than the rich.
We found that while the National Health Insurance contributions are mildly progressive overall, this is only true when these are considered collectively. Contributions made by informal sector workers alone were very regressive. This was partly because while contributions by formal sector workers were graduated according to their income level, informal sector workers paid a flat-rate premium. Though the NHI premiums paid by informal sector workers are highly subsidised, a substantial number of people (about 40% of the population) can still not enrol due to poverty. This is not surprising given that around one-quarter of the population of Ghana still lives below the poverty line and 18.5% in extreme poverty. The informal economy employs over 80% of the working population in Ghana, but only around 35% of those registered for the NHIS belong to this group. There have also been numerous practical challenges, just as in many other low income countries, at targeting the poor for premium exemptions, including errors of inclusion and exclusion and high transaction costs.
Although the National Health Insurance (NHI) was introduced to reduce reliance on out-pocket payments (OOPs) for health services, our research found that OOPs are still very substantial, and constitute almost half (45%) of the total healthcare financing in Ghana. The high incidence of OOPs was mainly due to the inability of informal sector workers to afford NHI premiums, as well as the continuous reliance of NHI members on private providers for services not provided under the NHI.
Out-of-pocket spending was found to be the most regressive because the majority of the burden of payment fell on the poor. If Ghana is to achieve Universal Health Coverage it is essential to reduce out-of-pocket payments. Evidence from other countries has shown repeatedly that not only do direct payments for health care deny poor people access to essential services, they also push them into deeper levels of poverty. A 2008 ILO Briefing paper reported that in countries such as Kenya, Senegal and South Africa, between 1.5 and 5.4 per cent of households fall below the poverty line as a direct result of paying for health services. For 2005 alone this amounted to over 100,000 households in Kenya and Senegal, and about 290,000 households in South Africa.
In addition to equity issues relating to how health care is paid for, our study pointed to huge inequities in the distribution of benefits of health services in Ghana. The rich enjoyed double the health benefits of the poor, although the latter had greater healthcare needs. These inequities were found to have been driven largely by unaffordability, inaccessibility and unavailability of healthcare services for poor people and rural populations. However, lower level public health facilities (and services) such as community health centres and district hospitals were found to promote equity and benefited poor people more than higher level facilities.
The inequities in the distribution of healthcare benefits suggest the need to increase investment to improve the availability of healthcare services, especially at the grassroots level. More specifically, efforts ought to be directed at removing geographical barriers, increasing staff and equipment capacity, and addressing operational inefficiencies in health facilities. In doing this, the government can leverage the NHI provider payment system to ensure equitable distribution of healthcare services and personnel across the country.
Our study demonstrates that while financing from general taxation is progressive, OOP spending on health and insurance contributions from the informal sector are regressive. Policy makers, thus, need to direct more attention at general tax financing if they are to make real progress at achieving equitable and universal health coverage. The ultimate aim for policy makers should be to create a health system that guarantees equitable access to adequate essential health services for everybody in Ghana.
James Akazili (PhD) is a Health Economist at the Navrongo Health Research Centre in Ghana. This blog is drawn from the article, “Progressivity of health care financing and incidence of service benefits in Ghana”, which was published in the Journal of Health Policy and Planning.