Karen Cavanaugh, Scott Stewart, Azada HafizMini-UniversityMarch 7, 2014

Economic Transition of Health: What is it and Who cares?

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1. What is a basic package of health services?

2. Can developing countries afford a basic package of health services?

3. What is the Economic Transition of Health (ETH)?

4. What are ETH implications for foreign assistance?

Outline

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WHAT IS A BASIC PACKAGE OF HEALTH SERVICES?

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World Development Report 1993

Commission onMacroeconomics and Health 2001

High Level Taskforce on International Innovative Financingfor Health Systems 2009

TB Treatment (short course) Treatment (DOTS) Diagnosis and Treatment

Child Health Management of sick childImmunization (EPI)Deworming

Treatment (IMCI) and immunizationDeworming

Oral rehydration therapyCase management of pneumonia

Newborn care Newborn care

Malaria Prevention (ITNs, IRS) and Treatment

Prevention and treatment

HIV PreventionTreatment of STDs

Prevention, Treatment (HAART), and Care

Prevention, treatment and carePrevention of mother to child transmission

Maternal Health Antenatal care and delivery Antenatal care,Treatment of complication during pregnancySkilled birth attendanceEmergency obstetric carePostpartum care

Antenatal careLabor and deliveryPostnatal careEmergency obstetric and neonatal care

Family Planning Family planning Included in Maternal Health as part of postpartum care

Family planning as part of Maternal Health

Nutrition Micronutrient supplementation Children: Micro nutritionVitamin A

Children: Vitamin supp. and fort.; Supp. food and counseling

Non-communicable diseases

Tobacco and alcohol control programs; School health including health education; information on health, nutrition, and family planning;

Smoking control policies as part of Maternal Health

Health promotion and early detection

Basic Package of Health Services

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Cost of Packages

World Development Report 1993

Commission onMacroeconomics and Health 2001

High Level Taskforce on International

Innovative Financingfor Health Systems

2009

Cost per person in 2010 US dollars

$18 Low-income$34 Middle-income

$46 for low-income and low-middle-income countries

$54* or $70* for low-income countries

*(depending on costing assumption)

Includes cost of Health Systems Scale up

No Yes Yes

USAID-assisted countries can now/soon buy essential package of health services

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Zimbabwe

CMH $38 as-suming 2.5% inflation

TFIF $54 as-suming 3.5% inflation

Year

Tota

l H

ealt

h E

xpendit

ure

per

Capit

a

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CAN DEVELOPING COUNTRIES AFFORD A BASIC PACKAGE OF HEALTH SERVICES?

USAID-assisted countries can now/soon buy essential package of health services

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20002001200220032004200520062007200820092010201120122013201420152016$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Projected THE per Capita assuming Income Elasticity = 1.0, com-pared to inflation-adjusted CMH target ($38 in 2002 prices) and TFIF

target ($54 in 2005 prices), Low Income CountriesBangladesh

Democratic Republic of Congo

Ethiopia

Kenya

Liberia

Madagascar

Malawi

Mali

Mozambique

Nepal

Rwanda

Tanzania

Uganda

Zimbabwe

CMH $38 assuming 2.5% inflation

TFIF $54 assuming 3.5% inflation

Year

Tota

l H

ealt

h E

xpendit

ure

per

Capit

a

Note: Solid lines indicate country crosses inflation-adjusted CMH target

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WHAT IS THE ECONOMIC TRANSITION OF HEALTH?

Unprecedented economic growth across the globe

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World per capita GDP 1990 dollars

MaddisonDeLong

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Extreme poverty is declining fast

Source: Frontiers in Development conference, 2012

Number of people living in poverty ($1/day) 1820 - 2008

Global distribution of countries by income group, 2000–2020

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WHO, 2012

Most low-income countries reaching middle income status

“The First Law of Health Economics”: Total health spending grows with GDP

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1

2

3

4

5

6

7

8

9

4 5 6 7 8 9 10 11 12

Log GDP/capita

Log Hea

lth E

xpen

ditures/ca

pita

Log

Tota

l Hea

lth E

xpen

ditu

res/

Capi

ta

Source: Jacques van der Gaag; WHO/IMF 2004

N = 178R2 = 94%

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Sen.

Ghana

Moz.

Rwanda

y = 0.8298x - 1.805R² = 0.6962

0

1

2

3

4

5

6

5 5.5 6 6.5 7 7.5 8 8.5 9

Log

of T

HE

per

capi

ta

Log of GDP per capita

lnTHEk

Linear(lnTHEk)

Strong positive correlation between total health expenditure (THE) per capita and gross domestic product (GDP) per capita.

Expect a greater role of private investment

15Source: OECD database: http://stats.oecd.org*Private includes private flows at market terms and net private grants

ODAPrivate

• Private capital flows dwarfing ODA• OECD countries project slower growth• BRICS, TIMBIs, Korea, others will have a larger role• Window of opportunity to influence agendas of new

actors

Summary: What is the economic transition in health?

• Many developing country economies are growing rapidly.

• As they grow, they will spend more on health.• How can we know this? Because of the tight and

consistent relationship between income and total health spending.

• This means countries can transition away from donor dependence. They can achieve greater health impact. But whether they will depends on policy decisions by both donors and countries.

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WHAT ARE ETH IMPLICATIONS FOR FOREIGN ASSISTANCE?

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Default scenario: high out-of-pocket associated with poor health outcomes and subsequent impoverishment

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Implications for our work in foreign assistance

Shift from direct delivery of services to technical assistance for health systems strengthening

Help countries to reorganize their health financing systems to avoid excessive reliance on out of pocket spending and provide financial protection

Promote coverage of a package of services that meets the needs of poor, marginalized and otherwise underserved populations

Ensure equitable access to high quality, responsive services

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What is Universal Health Coverage (UHC)?

Source: WHO

Formal Health Coverage:

95-100%

70-95%

40-70%

10-40%

0-10%

No data

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UNIVERSAL COVERAGE: a new frontier for global health

Positive

Negative

Source: Lancet 2009 (ILO data 2008; map by R4D.)

# countries THE as % GDP

Median formal coverage

High income 65 11.2% 100%

Middle income 95 5.4% 82%

Low income 49 4.3% 5%

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Health financing improvements work in low-income countries USAID has track record of effective support.

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Year Universal Health Coverage Introduced

GDP/k PPP (current international $)

Philippines 1995 2,056

Ghana 2004 1,131

Vietnam 1992 766

Reorganizing Domestic Financing: Ghana’s NHIS 10th Anniversary

• Ghana has transitioned from a low income to a lower middle income country• NHIS enrolls over 50% of the population with a benefits package that covers 80% of the

disease burden• Financed through a progressive VAT (~70%), Social Security and National Insurance Trust

contributions (~23%), and premiums (~5%)• OOPs as a share of THE have decreased from 32% to 29% between 2002 and 2011

Source: Joint Learning Network; WHO NHA; Ghana NHIS website23

Health financing improvements work in low-income countries, but there are challenges...

• Pooling funds in economies with large informal sectors• Prioritizing cost-effective health services• Mobilizing public and private providers• Ensuring quality of care• Targeting the poor• Managing information• Aligning provider incentives with social objectives

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What are the challenges?

In conclusion…

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• The context of our work is changing, through what we are calling the “Economic Transition of Health”

• Implies new ways of working in the context of the ETH

…to achieve a decisive turn-around in the fate of the less-

developed world, looking toward the ultimate day when all

nations can be self-reliant and when foreign aid will no

longer be needed. President Kennedy, 1961.

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Discussion

1. For countries that are not going to have their own money to pay for the basic package of health services, what is the solution?

a. Donor community subsidizes package

b. Cut back on interventions in package

2. If countries can afford a basic package of health services but choose not to, what should the donor community do?

a. Pick up the costs for poor people

b. Provide technical assistance to encourage countries to provide package

THANK YOU!Karen Cavanaugh

Scott StewartAzada Hafiz

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