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

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

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

2

WHAT IS A BASIC PACKAGE OF

HEALTH SERVICES?

3

4

World Development Report 1993 Commission on

Macroeconomics and Health

2001

High Level Taskforce on

International Innovative

Financing

for Health Systems 2009

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

Child Health Management of sick child

Immunization (EPI)

Deworming

Treatment (IMCI) and immunization

Deworming

Oral rehydration therapy

Case management of

pneumonia

Newborn care Newborn care

Malaria Prevention (ITNs, IRS) and

Treatment

Prevention and treatment

HIV Prevention

Treatment of STDs

Prevention, Treatment (HAART), and

Care

Prevention, treatment and care

Prevention of mother to child

transmission

Maternal Health Antenatal care and delivery Antenatal care,

Treatment of complication during

pregnancy

Skilled birth attendance

Emergency obstetric care

Postpartum care

Antenatal care

Labor and delivery

Postnatal care

Emergency 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 nutrition

Vitamin 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

Cost of Packages

World Development Report

1993

Commission on

Macroeconomics and

Health 2001

High Level Taskforce

on International

Innovative Financing

for 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

5

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

6

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

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

To

tal H

ealt

h E

xp

en

dit

ure

per

Cap

ita

Year

Zimbabwe

CMH $38assuming2.5% inflation

TFIF $54assuming3.5% inflation

CAN DEVELOPING COUNTRIES

AFFORD A BASIC PACKAGE OF

HEALTH SERVICES?

7

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

8

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

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

To

tal H

ealt

h E

xp

en

dit

ure

per

Cap

ita

Year

Projected THE per Capita assuming Income Elasticity = 1.0, compared 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

Note: Solid lines indicate country

crosses inflation-adjusted CMH

WHAT IS THE ECONOMIC

TRANSITION OF HEALTH?

9

Unprecedented economic growth across the globe

10

World per capita GDP

1990 dollars

Maddison

DeLong

11

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

12

WHO, 2012

Most low-income countries reaching middle income status

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

13

1

2

3

4

5

6

7

8

9

4 5 6 7 8 9 10 11 12

Log GDP/capita

Log

Heal

th E

xpen

ditu

res/

capi

taLo

g To

tal H

ealt

h E

xpen

dit

ure

s/C

apit

a

Source: Jacques van der Gaag; WHO/IMF 2004

N = 178

R2 = 94%

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

THE

pe

r ca

pit

a

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.

14

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

ODA

Private

• 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.

16

WHAT ARE ETH IMPLICATIONS

FOR FOREIGN ASSISTANCE?

17

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

and subsequent impoverishment

18

19

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

What is Universal Health Coverage (UHC)?

20

Source: WHO

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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%

21

Health financing improvements work in low-income countries

USAID has track record of effective support.

22

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

24

What are the challenges?

In conclusion…

25

• 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.

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

26

THANK YOU!Karen Cavanaugh

Scott StewartAzada Hafiz

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