How can additional resources be mobilised to support progress towards universal coverage in the health sector?

    There is a range of options for increasing domestic pre-payment funding of health services. A key focus in Africa in recent years has been on extending insurance scheme cover, whether through voluntary community-based schemes or through mandatory health insurance schemes. The two African countries that have made progress towards universal coverage (Ghana and Rwanda) have used a combination of these insurance scheme mechanisms. Mandatory health insurance can generate additional resources for health care through the payroll deductions for formal sector workers and the contributions of those outside the formal sector who are able to pay such contributions, as well as earmarked taxes that may be acceptable to the populace only because the extra tax burden is clearly targeted at improving everyone’s access to quality health care. Indeed, if universal coverage is to be achieved through mandatory health insurance that includes both those within and outside the formal employment sector, extra funding will be needed to pay for subsidies for those with limited or no ability to pay insurance contributions.  Therefore, health insurance contributions are complementary to, rather than a replacement for, tax funding. Indeed, the largest share of revenue for the Ghanaian National Health Insurance (NHI) Fund is from a dedicated tax (the NHI levy, which is an additional 2.5% on VAT).

    An issue that requires further debate within the African context is the most efficient way of generating revenue from those outside the formal sector. There is a widespread view that there are many people outside the formal employment sector who are in a position to contribute to the costs of health care and that the funding burden should not be placed largely on formal sector employees and employers. However, it is recognised that it is preferable to facilitate pre-payments as opposed to funding health services through out-of-pocket payments. One option is to legislate for those in the informal sector to join a health insurance scheme (usually through the equivalent of a community-based insurance scheme). This has proved to be an important way of generating resources for local health facilities to cover the costs of drugs and other medical supplies. However, revenue generation is relatively limited (i.e. accounts for a small amount relative to total health care expenditure requirements) and net revenue is even lower when the costs of collecting these insurance contributions are taken into account.
     
    Another option is to explore taxation mechanisms that capture revenue from those working in the informal sector, such as VAT and fuel levies (given that various forms of taxis are a key component of the informal sector in many countries). While net revenue from these sources will be far greater than community-based scheme contributions, the key challenge of this option is that many of these indirect taxes are regressive (i.e. the poor pay a greater percentage of their household income in such taxes than higher income households). However, the extent of regressivity can be limited with careful design, whereby goods that are used most by poorer households are exempt from these taxes. Recent research indicates that tax mechanisms have been used in preference to community-based insurance schemes to provide pre-payment cover for the informal sector in Asian countries. While the context differs between Asia and Africa, the Asian experience suggests that the alternatives for providing prepayment cover for those outside the formal sector, of either contributory (health insurance) mechanisms or tax funding, should be critically considered by African countries.

    Some attention has also been paid to increasing the allocations to the health sector from government budgets. In particular, African heads of state committed to devoting 15% of government funds to the health sector in the Abuja Declaration of 2001. This commitment was reaffirmed at the African Union meeting of heads of state in Kampala in July 2010. Despite these commitments, limited progress has been made towards the Abuja target in most African countries. Calling for the health sector to be awarded greater priority in the use of government budgets and holding heads of state to the Abuja target commitment is an important way of increasing domestic funding for health care.


    There have also been some developments in introducing taxes that are earmarked for the health sector. For example, Zimbabwe introduced an AIDS levy of 3% of personal and company income, with at least half of the revenue from this levy being used to purchase anti-retroviral drugs. The Ghanaian NHI levy, which is an additional 2.5% on VAT, is also a form of dedicated tax. However, these initiatives have been relatively limited in African countries, particularly in terms of introducing new taxes (as in Zimbabwe) or increasing existing ones (as in Ghana). Instead, there is much discussion of dedicating existing taxes (particularly ‘sin taxes’ such as excise on tobacco and alcohol) to the health sector. Where this approach is used, a frequent problem is that the dedicated tax simply displaces allocations from general tax revenue to the health sector so that there are no additional funds for the health sector. Dedicated taxes may only be worth pursuing if they relate to new taxes or increases in existing ones.
     
    A final way of increasing domestic funding for health care is what is termed ‘innovative financing’.  As the name suggests, this focuses on sources of funding that have not previously been considered and which would largely be borne by the richest in society, such as solidarity levies on airline tickets and currency transactions.  One country that has recently embarked on this path is Gabon. Box 5 describes these innovative ideas.

    Box 5: Gabon shows innovation in health financing

    Gabon has a population estimated at 1.5 million in 2011, and is highly urbanized (about 86% urban) with a literacy rate of just over 63%. Life expectancy is 52.5 years with an infant mortality rate of 49.9 deaths per 1,000 live births. It enjoys a per capita income four times that of most sub-Saharan African nations, but due to high income inequality, a large proportion of the population remains poor. Gabon is dependent on oil discovered offshore in the early 1970s. The oil sector now accounts for more than 50% of GDP although the industry is in decline as fields pass their peak production. Health spending accounted for 6% of the national budget and 4.3% of GDP in 2006, according to the 2008 World Health Statistics.

    The country introduced a social health insurance regime in recent years designed to combine funds derived from taxes with a contributory regime where additional resources are raised from workers, self-employed, employers and the state. In terms of implementation, Gabon decided on a phased approach starting with coverage for the most vulnerable first, before adding on the public sector, then the private sector and parastatals and finally the self-employed. Another distinctive feature of the Gabon approach is the funding mechanisms for the poor and vulnerable groups. They are funded by means of a new tax called the Compulsory Health Insurance Levy (“Redevance Obligatoire à l’Assurance Maladie (ROAM)”). This fund comes from 2 sources:

    • Mobile phone companies must pay 10% of their income into the fund;
    • Foreign exchange transactions are also taxed at 1.5% for the fund.

    Collection of the above taxes began in 2008. It is intended that formal sector employees will contribute 6.6% of salaries, of which 2.5% will be paid by the employee and 4.1% by the employer, while pensioners will contribute 1.5% of their pension. The self-employed will make flat contributions that are expected to be fixed according to ability to pay.
    Contributors will be entitled to 80% coverage for medical expenses (third party guarantee) with a co-payment of 20% of the costs except for long illnesses where the part paid by the patient falls to 10%. It is not only additional financial resources that are required, but also human resources (and other resources such as drugs). The scarcity of human resources (HR) is a well-recognised within African countries. A range of initiatives such as introducing mid-level workers has been introduced to address this challenge. The mal-distribution of HR, particularly between urban and rural areas, is also an ongoing problem. Recent research has highlighted the while financial incentives to work in rural areas are of some importance, other factors such as providing free housing and offering priority in educational opportunities are of even greater importance. In addition, this research has once again highlighted the importance of recruiting trainee health professionals from rural areas as they have a far greater likelihood of returning to work in rural areas than those recruited from urban areas. A number of countries, such as South Africa and Zimbabwe, have introduced a year of compulsory community service for health professional graduates, with an emphasis on this service being provided in rural areas. In Zimbabwe, if you choose to do your community service in an urban area, you are required to serve for two years instead of one year in a rural area.

    Tags: policy brief

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