What pre-payment mechanisms can be considered...

    What pre-payment mechanisms can be considered to support progress towards universal coverage in the African context?

    The main forms of pre-payment are tax revenue and insurance schemes. All African countries have some tax funding for health services, but there is wide variation in the magnitude of such funding. Tax funding is important not only because it is a visible demonstration of government’s commitment to providing financial protection against health care costs for its population, but also because all residents of the country contribute to tax funds. Although the focus is often only on those who pay personal income tax, it is important to recognise that everyone pays certain taxes such as VAT and fuel levies.


    Unfortunately, no comprehensive data are available on tax funding of health services in Africa. For example, the WHO National Health Accounts (NHA) database combines tax and donor funding which is directed through government channels in what is called ‘general government expenditure on health’. While the WHO NHA database also reports on donor funding as a percentage of total health care expenditure, only some of this is given to government while the rest is given to private providers. However, a combination of these two pieces of data (as indicated in Table 1) provides some indication of the extent of tax funding.


    About 45% have government spending (tax and donor funded) of 2% of GDP or less, which is quite low by international standards. Some of these countries (such as the DRC, Eritrea, Guinea-Bissau, Uganda and Sierra Leone – all of which are low-income countries) have quite high levels of donor funding, suggesting that tax funding levels in these countries are particularly low. Some of the low-income countries in which government spending is reported to be at the higher end of the scale also have very high levels of donor funding (particularly Niger, Malawi, Mozambique, Liberia, Rwanda, Tanzania, Ethiopia and Burundi), again suggesting somewhat limited health care spending from tax funds. The only African countries that have relatively high levels of government spending on health care, but limited donor funding, indicating that tax funding is quite high are Botswana, Swaziland, the Seychelles, South Africa, Lesotho and Djibouti (all of which are middle-income countries.

    Table 1: Indicators of tax and donor funding in African countries (2007)

    Country

    Tax plus donor funding as % GDP

    Donor as % of total health care expenditure

     

    Country

    Tax plus donor funding as % GDP

    Donor as % of total health care expenditure

    Low-income economies

     

    Lower middle-income economies

    Malawi

    5,9

    60

     

    Djibouti

    5,0

    13

    Rwanda

    4,7

    52

     

    Swaziland

    3,8

    8

    Burundi

    4,4

    40

     

    Lesotho

    3,6

    11

    Zimbabwe

    4,1

    18

     

    Namibia

    3,1

    11

    Zambia

    3,6

    33

     

    Algeria

    2,5

    0

    Mozambique

    3,5

    58

     

    Cape Verde

    2,4

    16

    Burkina Faso

    3,4

    28

     

    Angola

    2,0

    4

    Tanzania

    3,4

    50

     

    Egypt

    1,7

    1

    Senegal

    3,1

    9

     

    Tunisia

    1,7

    1

    Mali

    2,9

    20

     

    Congo

    1,7

    5

    Liberia

    2,8

    58

     

    Cameroon

    1,3

    5

    Niger

    2,8

    75

     

    Morocco

    1,2

    1

    Madagascar

    2,7

    18

     

    Sudan

    1,2

    10

    Chad

    2,7

    11

     

    Upper middle-income economies

    Gambia

    2,6

    24

     

    Botswana

    4,3

    4

    Benin

    2,5

    21

     

    Seychelles

    3,5

    2

    Ethiopia

    2,2

    44

     

    South Africa

    3,5

    1

    Ghana

    2,2

    10

     

    Gabon

    2,9

    2

    Comoros

    1,9

    21

     

    Mauritius

    2,0

    2

    Kenya

    1,8

    24

     

    Libya

    1,9

    0

    Nigeria

    1,7

    2

     

    High-income economies

    Uganda

    1,6

    32

     

    Equatorial Guinea

    1,7

    5

    Mauritania

    1,6

    13

     

     

    Guinea-Bissau

    1,5

    35

     

     

    Eritrea

    1,5

    46

     

     

    Central African Republic

    1,4

    26

     

     

    Sierra Leone

    1,4

    31

     

     

    Togo

    1,3

    10

     

     

    DRC

    1,2

    48

     

     

    Côte d'Ivoire

    1,0

    5

     

     

    Guinea

    0,6

    11

     

     

    Source: WHO National Health Accounts database

    For many years, the emphasis in Africa has been on introducing and expanding community-based health insurance (CBHI) (sometimes called mutual health organisations). CBHI schemes have been particularly important in trying to provide financial protection for those outside the formal employment sector. Some CBHI schemes have focused on those involved in informal sector activities in urban areas (such as TIKA in Tanzania which covers informal traders), but most have been developed in rural areas to serve subsistence farmers. However, the percentage of the population afforded financial protection through these schemes remains very low (less than 5%) in most countries. Box 4 summarises some of the challenges in relation to CBHI in Africa.

    Box 4: CBHI challenges
    • The poorest are often excluded from CBHI schemes. CBHI schemes often state that those who cannot afford the contributions will be exempted.  However, in reality this seldom happens, partly due to difficulties in identifying the poor and partly due to lack of subsidies to cover the costs of membership for exempted groups.
    • CBHI schemes sometimes only cover primary care services; those that do this do not therefore provide financial protection against the costs of inpatient care, where the potential for catastrophic spending is great. Some CBHI schemes however, tend to begin life by offering coverage for catastrophic care.
    • CBHI schemes tend to charge a flat contribution to all members. Recent studies have highlighted that CBHI scheme contributions are regressive (i.e. CBHI contributions as a percentage of household income is greater for poorer than wealthier groups).
    • CBHI schemes tend not to generate much net revenue – contributions need to be kept low to ensure affordability to those outside the formal sector, but the costs of collecting these contributions on an annual basis are quite high.
    • As enrolment in CBHI schemes is generally voluntary, membership levels are influenced by the perceived benefits of the scheme (e.g. whether the services covered by the scheme are regarded as important, if the facilities covered are regarded as providing high quality care and are physically accessible, etc.).

    Despite these challenges, CBHI has played a key role in reforms in both Rwanda and Ghana, the two countries that have taken the boldest steps towards universal coverage. Prior to the introduction of CBHI schemes, or Mutual Health Organisations (MHOs), the focus in relation to health insurance had purely been on covering formal sector employees, a small minority of the population, either through social security type schemes or private commercial schemes. The introduction of MHOs raised the possibility of introducing pre-payment funding mechanisms (other than tax funding) for the rural population and others outside the formal sector and focused attention on the needs of the majority of the population. Ghana in particular, by requiring formal sector workers and those outside the formal sector to register with the same district MHO, drew on its experience with MHOs before the introduction of NHI to pool funds and risks across the entire population. There is also some evidence that both Mali and Burkina Faso intend to draw largely from their MHO experiences in building their proposed universal coverage programs.

    If CBHI schemes or MHOs are to play a role in moving to universal coverage in more African countries, there is consensus that tax (and donor) funding is required to subsidise contributions for low-income groups and to fully pay the contributions of the poor (as is being done in Ghana and Rwanda – see Boxes 2 and 3). Unless such resources are made available, it will not be possible to cover all community members for a reasonably comprehensive basic package of care through CBHI schemes. Making subsidy resources available is not sufficient; the target beneficiaries of these subsidies need to be identified. While demographic or similar targeting (e.g. exemptions for children under 5, pregnant women, etc.) can lead to a significant portion of the poor receiving needed care, evidence shows that a considerable number of the very poor still tend to remain uncovered under such schemes. It is now generally accepted that traditional methods of means testing (attempting to estimate and verify household income) are ineffective. A number of frameworks and tools have been developed that use reliable proxy measures of a household’s socio-economic status (i.e. instead of relying on reported income, verifiable indicators such as the type of materials from which a house is built, ownership of assets etc. can be used as a proxy).

    Another approach is geographic targeting of subsidies, by evaluating poverty levels in small areas (such as enumerator areas or villages) and providing subsidies for entire communities that have very high poverty levels.

    Other than CBHI, there are also some voluntary private health insurance schemes that cater for formal sector employees. These are extremely limited in most African countries, primarily serving a small elite. However, these types of schemes are more prevalent in certain Southern African countries, particularly South Africa, Namibia and Zimbabwe where, according to the WHO’s National Health Accounts database, private insurance schemes account for 39%, 37% and 16% of total health care expenditure respectively.


    Mandatory health insurance, i.e. where there is legislation requiring certain groups or the entire population to belong to an insurance scheme, is quite limited in Africa at present. Those with the highest level of health care expenditure funded through mandatory insurance (called social security funding in the WHO NHA database) are located in North and West Africa: Algeria and Ghana (where mandatory insurance accounts for 25% of total health care expenditure); Tunisia (22%) and Cape Verde (21%). However, there is growing interest in mandatory health insurance in Africa. Some countries (such as Tanzania and Nigeria) have started such schemes by covering civil servants. While the intention is to gradually extend mandatory insurance to other sectors of the population, a concern about prioritising coverage of civil servants is that limited tax funding is used to secure financial protection for a relatively privileged section of the population. Others, such as Ghana and Rwanda, have legislated from the outset that all citizens should become members of mandatory insurance. As indicated previously, the key challenge in making universal coverage through mandatory insurance a reality is to make available sufficient tax (and donor) funding to provide financial protection for those who are unable to pay mandatory insurance contributions.


    The final form of funding that can provide financial protection from the costs of health care is donor funding. As indicated in Table 1, there is a heavy reliance on donor funding in many African countries. About 20% of African countries have donor funding which is equivalent to 40% of total health care expenditure or more, while over 40% of African countries have donor funding levels of 20% or more of total health care expenditure. While donor funding will continue to play an important role in funding health services in African countries, there is a growing awareness of the importance of increasing domestic pre-payment funding for health care, given concerns about the possible lack of stability and long-term sustainability of donor funding.

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