Articles Tagged ‘policy brief - African Health Economics and Policy Association’
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.
While there is an absolute shortage of resources in African health systems, it is also possible to improve efficiency and equity in the use of existing resources to better meet the health needs of the population.
A key intervention in many African countries in recent years has been the introduction of performance based financing. More and more countries have been turning to performance based financing (PBF) to improve results in their health sectors due in part to growing recognition that African countries would not achieve the MDGs on current performance and progress, and that health sector financing strategies based on paying for inputs (numbers of personnel on the payroll and for their training, equipment costs, operational budgets, etc.) have not produced hoped-for results in the sector.
PBF can be implemented on the demand or the supply side. On the demand side, this includes conditional cash transfers and voucher schemes where the beneficiaries of priority health services (e.g. maternal and child care services) are provided with cash or vouchers to purchase the care needed from providers. On the supply side, this approach puts the emphasis not on paying for inputs, but rather on the results obtained (numbers of children vaccinated, numbers of assisted deliveries, numbers of women on family planning, etc.). It is premised on the notion that incentive payments to personnel will bring about behavioural and other practical changes that will lead to better productivity and quality health care. Financial incentives may be introduced at different levels of the health system although more often these are targeted at priority health services.
Experience shows that PBF implementation usually involves different actors (Ministries of Health, health facilities, NGOs, health personnel, etc.). It entails establishing either some agreed sets of rules or contracts between the different parties. The incentive payment to be paid to the provider is calculated on the basis of indicators of quantity of services performed, which may then be weighted by quality indicators. The total payments obtained from this process tend to be shared among the personnel in accordance with their contribution to the production of those services, but in some cases, part of the funds will go to investing in facility operational or capital costs to further improve quality.
The idea is that through this additional remuneration of health personnel and the stronger monitoring mechanisms this entails, other end results will include improvements in the organisation of services, in the production and use of data for decision making and also in the utilization of health services as well as greater efficiency and equity in resource utilization.
Like other reforms, PBF is not without challenges or even critics. Box 6 highlights some of the issues in the on-going debate on PBF.
|Box 6: PBF challenges and debates
Among the challenges of the PBF approach, mostly related to the supply side PBF reforms, are that:
- This approach may require prior institutional and organisational changes, particularly decentralization and local autonomy for health facilities, to make these reforms effective. The required changes may include purchaser-provider splits, putting in place effective and functioning verification systems, and creating a favourable legal/regulatory environment. The challenges here may also include existing trade union or collective bargaining agreements that may be inconsistent with the new incentives’ approach.
- Adequate and sustained funding is needed to back the new system. While some of these resources may come from redirecting existing input-based financing budgets, experience seems to show that significant amounts of new financing is often required, both during the demonstration and rolling out stages, including for new monitoring and evaluation systems and training of the personnel in the new systems, data collection methods, indicators that are monitored, etc.
- It is also argued that while PBF schemes may lead in the short term to desired changes and improvements, evidence also points to the fact that people eventually adjust to new incentive systems and then start to regard them as part of their regular remuneration or ‘asking price’ for their job, at which point these mechanisms may then lose their incentive effect. This argument highlights one key challenge in mainstreaming PBF reforms within the regular MOH systems. Current PBF schemes in Africa may not however have been in place long enough to test this hypothesis.
- Finally, there is also some debate as to whether the evidence emerging from countries where these reforms have been implemented is sufficiently robust and unambiguous enough to warrant widespread adoption elsewhere without some degree of caution. While Rwanda, and to some extent Burundi, have often been cited as success stories in this respect, it appears that some counter examples from other countries, e.g. Uganda and Cameroon, may also exist.
The debate seems to highlight, at least, the need for careful attention to the design, financial sustainability, the political, social and institutional environment, any necessary accompanying measures, as well as a health systems rather than a vertical approach, in pursuing the PBF approach.
Health professionals are the most important resource within the health sector and if efficiency is to be achieved, careful attention must be paid to the skills mix within health services. An initiative that is being implemented in many countries is that of task-shifting, whereby more mid-level health workers are being trained and tasks that used to be undertaken by more highly-skilled health professionals are being shifted to these mid-level workers. This promotes greater efficiency, in that each service is provided by the lowest skilled (and hence least expensive) health worker qualified to provide that service.
It is also critical to improve the procurement and distribution of drugs. Many countries have introduced essential drug lists, which focus on the use of a limited number of inexpensive generics that can treat the majority of diseases within that country. In terms of procurement, there is a need for policies that ensure that African countries are not charged prices for drugs produced overseas that are higher than are paid in other countries. This is because there is limited local production of drugs, with most drugs being imported. Some national policies do not promote the growth of local drug manufacture. For example, in Zimbabwe, while drugs that are imported are not subject to import duties, local drug manufacturers pay duties on imported raw materials.
It is not only important to use existing resources more efficiently, it is also critical to promote equity in the use of health care resources. A number of recent studies have once again highlighted that richer groups manage to secure a greater share of the benefits from using health services than poorer groups, despite the burden of ill health being heavier on those with lower socio-economic status. Those living in rural areas also receive a smaller relative share of health service benefits than their urban counterparts.
One strategy for addressing these inequities is to allocate health care resources (facilities, financial and human resources) across geographic areas such as regions or provinces and districts in line with the relative need for health services of each area. A growing number of African countries are using a needs-based formula to allocate government budget resources and pooled donor funds. Such formulae generally include indicators of the need for health services in a geographic area such as population size, demographic composition (given that young children, the elderly and women of childbearing age generally have a greater need for health care) and if possible, indicators of the burden of disease.
Recent studies have recommended that the level of poverty in each area also be taken into account, given that there is a strong relationship between poverty and ill-health and that poor households are most dependent on publicly funded health services.
However, equity in the use of health services will only be addressed if explicit steps are taken to address the range of access barriers that face individual patients. A number of studies have recently highlighted that the most severe access constraints include the following:
- The distance between communities and health facilities and the sometimes high costs of transport to facilities. There is particular concern about geographic access problems for referral services and in a medical emergency.
- Inadequate staffing, particularly at primary care facilities, forcing patients to seek care at hospitals at higher cost both to the state and the patient.
- Inadequate drug supplies, with frequent reports of drug stock-outs, again particularly at primary care facilities. This means that patients have to then go and purchase drugs from a private pharmacy or drug seller and that patients are reluctant to go to that facility in future.
- Poor staff attitudes towards patients, which is exacerbated by inadequate staffing levels and heavy workloads, but also by limited attention to motivating staff and recognising their efforts.
These access constraints highlight the importance of ensuring that there is an adequate allocation of resources to the primary care level and that sufficient attention is paid to improving the quality of primary care services. These are the services that are located closest to communities and much of the burden of disease in African countries, particularly communicable diseases, can be addressed at primary care level.
The ability of African countries to improve information and communication infrastructure in order to face the challenges associated with reforming health financing systems, including health insurance schemes, is likely to be the key determining factor of the pace of progress towards universal coverage in the region. Improved monitoring and evaluation mechanisms are necessary to support the reform of health delivery and health financing systems in line with universal coverage goals, within the specific political, social and economic conditions in individual countries. Monitoring and evaluation systems are critical for informing policy decisions and for assessing progress towards universal coverage, based on the goals, objectives and targets set in their country strategic frameworks. This requires setting an explicit, core set of indicators for monitoring and evaluation of progress towards universal coverage.
Strengthening monitoring and evaluation systems could be facilitated in the Africa region by the favourable environment associated with new information and communication technologies. These technologies open new opportunities for strengthening vital registration systems, health information and management systems, referral systems, identification systems, provider payment systems, financial and administrative management systems, and information-based decision-making in health care provider organizations, health insurance organisations, public health administrations and health insurance regulatory agencies. African countries could leverage opportunities provided by the improving information and communication infrastructure in individual countries, in combination with household surveys, facility surveys, public expenditure tracking surveys, actuarial studies and national health accounts to strengthen management capacities, transparency and accountability mechanisms, and monitoring and evaluation systems in the health sector.
This policy brief is produced by AfHEA and draws on the proceedings of the Second AfHEA conference, held in Saly – Senegal from 15 to 17 March 2011. It is supplemented by relevant literature where necessary. It was compiled by Drs Irene Agyepong, Chris Atim, Francois Diop, Travor Mabugu, Diane McIntyre and Alice Soumare.
Achievements during the past decade in Ghana and Rwanda suggest that progress towards universal coverage could move quite rapidly in Africa if supported by strong political leadership. Ensuring access to quality health care and financial risk protection for all citizens is primarily the responsibility of the state. Translating the vision of universal coverage into reality requires political leadership and a greater role for the state in health care financing. African states should take greater fiscal responsibility for the health care of their citizens and strengthen policy measures to meet the Abuja target of 15% of government spending occurring in the health sector. Increased tax funding is critical for achieving universal coverage in Africa, whether this is used to directly purchase health care (in the case of tax-funded systems) or used to subsidise insurance contributions for those outside the formal sector to achieve an integrated insurance risk pool for the whole population. African states also need to strengthen their regulatory role and capacities to ensure not only the provision of quality health services by public and private health care providers, but also the solvency of health insurance organisations and the protection of citizens. The state should also play a role in promoting social responsibility within the private health sector and ensuring that private providers and insurance groups act in the public interest.
In addition to state actors, including those elected and appointed, politicians and civil servants in Ministries of Health and Finance, there are a range of other actors who will be interested and involved in universal coverage reforms. For example, depending on the extent of donor dependency and influence, international organisations, both multi-lateral and bi-lateral can become major actors. Technical analysts and researchers in academic institutions, private providers (particularly large commercial groups such as private hospitals and pharmaceutical manufacturers), existing voluntary health insurance schemes, front-line health care workers, formal sector employers and trade unions can also potentially be important stakeholders.
Individuals, households and communities are the principal beneficiaries of universal coverage reform. The poorest households often stand to gain the most from successful universal coverage reform. Unfortunately these groups do not always have a voice in universal coverage reform. Civil Society Organizations (CSO), as well as other forums for ensuring adequate participation by the poor, can play a role in making these actors more visible, and their voice better heard.
All reforms have social and economic costs and benefits. These costs and benefits are not evenly spread in society and do not necessarily affect the same groups to the same extent. A stakeholder analysis of actors potentially affected by the reform, the costs and benefits they will experience, their potential position in relation to the proposed reform (i.e. support or oppose) as well as their power in the reform process is therefore a critical part of managing universal coverage reforms. For example, a major source of controversy in the Ghana NHI reform was the proposal that formal sector employees who were members of the Social Security and National Insurance Trust (SSNIT) would have to contribute 2.5% of their SSNIT contribution the NHI fund. Almost all members of organised labour unions in the country contribute to this fund. The initial proposals did not make it clear what benefits would accrue to SSNIT contributors and they felt the deductions would threaten the viability of their pension payments. Therefore, trade unions mobilised to resist these proposals. They were able to secure a concession from policy-makers whereby their SSNIT contributions did not increase and were guaranteed that the 2.5% contribution to NHI would not affect their pension funds. In effect, policy-makers agreed that the SSNIT contributions to NHI would be a ‘loan’ that will have to be repaid from tax funds when current SSNIT members retire and expect full pension payouts. A more careful stakeholder analysis and the development of effective actor management strategies to inform the design of the reform proposals and the management of policy processes may have avoided some of these complications.
All major reform, such as universal coverage, is political as well as technical. It is essential to have politicians and technical actors engaged and well-informed for successful reform.