*Global Health Aid:

Whats Ahead?David de Ferranti

Outline

Health aid and its architecture: where are we headed?

Will health aid do a better job of strengthening country institutional settings?*

Why East Asia countries might care aboutwhat is happening in global health aidAid and the aid dialogue are a source of:Financial supportIdeasExperience from other parts of the worldInitiatives and advocacy on new prioritiesAnd these can have implications for countriesHelp or hinder local effortsAbsorptive capacity concernsFragmentation, efficiency, other*

Health aid has increased and shifting to recurrent cost financing for communicable disease controlSource: Lane and Glassman 2007

Chart4

4.10.3258567530.9518120010

5.30.2865827780.643783.510.0916205889

6.61.2926627180.996654.90.3927471904

7.60.855248460.764935.40.7291824195

8.71.2042913080.70056.21.2379942998

20060.9821.6842320061.4381431289

Bilateral Commitments

GF/GAVI Commitments

World Bank Commitments

Bilateral Disbursements

GF/GAVI Disbursements

Billions of USD

commitments

4.10.3258567530.95181

5.30.2865827780.64378

6.61.2926627180.99665

7.60.855248460.76493

8.71.2042913080.7005

20060.0985438631.68423

Bilateral Commitments

GF/GAVI Commitments

World Bank Commitments

Billions of USD

Global Health Commitments

Sheet1

US Dollars, Billions

200120022003200420052006

Commitments/ApprovalsBilateral Commitments4.15.36.67.68.7

GF/GAVI Commitments0.3258567530.2865827781.2926627180.855248461.2042913080.982

World Bank Commitments0.951810.643780.996650.764930.70051.68423

DisbursementsBilateral Disbursements3.514.95.46.2

GF/GAVI Disbursements00.09162058890.39274719040.72918241951.23799429981.4381431289

World Bank

Sheet1

Bilateral Commitments

GF/GAVI Commitments

World Bank Commitments

Bilateral Disbursements

GF/GAVI Disbursements

Billions of USD

Sheet2

AIDS onlyTotal

Aid 20054.865410.6

Need 20073044

Need 20104580

Sheet2

AIDS only

Total

Billions of USD

Sheet3

and has gotten more complicated!International PhilanthropyMultilateral Banks

Volatilty unpredictable funding levels

*Changes are afootThe new players are still expanding. And changing.Gates and other new philanthropiesGlobal Fund, GAVI, and other disease-focused initiativesOthers (Media stars, wealthy individuals, the BRICs, )The traditional players are trying new ideasEuropean bilaterals (DfID, France, Nordics, )US assistance (USAID, MCC, State, PEPFAR, etc.)World Bank and regional multilateralsBINGOs, LNGOs, FBOs, private health providers Other (IMF, overall aid strategies, recipient governments)The global environment is worseningUS economy and the crisis from the north

*X years from now How will todays tensions have evolved?Vertical programs vs. health systemsCountry-driven vs. donor-drivenPerformance-based vs. input-focusedGeneral support vs. project-orientedPublic vs. private roles in healthThe trans-Atlantic divideHow will tomorrows trends have unfolded?Epidemics and pandemics old and newNew products, technology, and financial tools

*X years from now (continued)Will the global health architecture have changed radically?By default rather than by design?Will support (public, political) for aid have weakened?Impact of new generations of voters? Is a funding cliff coming?Will the new players have achieved results?Or changed the debate?Or foundered on unrealistic expectations?Or changed their own views of what is needed and what works? Will the traditional players have changed?Will aid be just IDA-type funding plus IFC-type support?Will there be enough money to meet the priority needs?

*The Great Money Gap DebateUNAIDS says $55.1 bn is needed for 2006 - 2008 for HIV/AIDSFunding gap: $6 bn in 2006 and $8.1 bn in 2007 1GAVI: $35 bn to immunize 27 mn children by 2015Funding gap: $11-15 bn 2StopTB: $56.1 bn over 10 yearsFunding gap: $30.8 bn 3Maternal and Neonatal Health and Child Survival: $9 - 16 bn/yrFunding gap: $5 bn/yrRoll Back Malaria: $3.4 bn/yrFunding gap: $2.7 bn/yr 41 Report on the Global Aids Epidemic. Geneva: Joint United Nations Programme on HIV/AIDS, 2006.2 Albright, Alice. "Innovative Financing for Global Health." The Brookings Institution, Washington. 26 July 2006.Lob-Levyt, Julian. "Progress & Phase 2." 3rd GAVI Partners' Meeting, New Delhi. 8 December 2006.3 Stop TB Partnership. Actions for Life: The Global Plan to Stop TB 2006-2015. Geneva: World Health Organization, 2006.4 WHO. "Who | Malaria". Geneva, 2006. World Health Organization. .

*The Great Money Gap Debate (continued)Adding it all up:

From World Bank for health-related MDG gap$25 - 70 bn/yr (0.08 0.21% of global GDP)From Commission on Macroeconomics and Health, WHO:$40 - 52 bn/yr (0.08 0.12% of GDP)From summing selected disease/intervention-specific estimates:$30 - 50 bn/yr (0.10 0.15% of GDP)From Copenhagen consensus estimate of WDR 1993 package$337 bn/yr (1% of GDP)

*The Great Money Gap Debate (concluded)$25 to $50 bn/yr is small compared to:Total health spending worldwide: $3,198 bn/yr1Global military spending: $1,118 bn in 20052Global corporate net profits: Exxon/Mobile alone earned $36 bn in 2005Total capital in global financial markets: $118,000 bn (a stock, not a flow)3But large compared to:Total current development aid for health: over $11.4 bn/yr (IMF/WB, 2004)Total current ODA for all purposes: $80 bn/yr (OECD, 2004)Total current health spending in recipient countries: $350 bn/yr1And would be needed for a very long timeSo this is too big to solve by aid and philanthropy alone1 Gottret, P. and George Schieber. 2006. Health Financing Revisited: A Practitioners Guide. Washington, DC: IBRD/World Bank.2 Stockholm International Peace Research Institute, 2006 3 McKinsey Global Institute, 2005

Strengthening Country Institutional SettingsWhat is it?Strengthening institutions such asLaws and regulatory regimeHealth workforce talent pool and incentivesManagement systemsTransparency, governanceSimilar to enabling environment and investment climate concepts in macro policy?Not the same as:Capacity buildingTraditional technical assistance*

Prospects for Improving Aid EffectivenessAnd Its Impact on Country Institutional SettingsWhat to expect from the new initiatives that promote:Greater strategic coherence (IHP++, etc.)Harmonization and alignment (Paris, Rome, etc.)Results-based aid (Norway, etc.)Pooling of aid (budget support, SWAps, etc.)Better use of traditional tools (e.g., technical assistance)Strengthening health systemsAnd from new efforts to:Strengthen incentives and institutionsAttack demand and supply side constraints simultaneously*

Why East Asia countries might care aboutwhat is happening in global health aid:REVISITED

Aid and the aid dialogue are a source of:Financial support: RECENT INCREASES COULD BE IMPORTANT FOR A FEW COUNTRIES BUT NOT FOR MANY. RISKS OF FUTURE DECLINES?Ideas: MUCH FERMENT. HOW USEFUL???Experience from other parts of the world: A LOT TO LEARN FROM NOW. MORE COMING.Initiatives and advocacy on new priorities: MANY NEW EFFORTS. THEIR VALUE STILL UNCLEAR*

Why East Asia countries might care aboutwhat is happening in global health aid:REVISITED (continued)And these can have implications for countriesHelp or hinder local efforts:CHOOSE CAREFULLY WHICH GLOBAL INITIATIVESTO PARTICIPATE IN AND WHICH NOT.Absorptive capacity, fragmentation, efficiency, other:PUSH BACK TAKE CHARGE WHEN DEALING WITH DONORS. MAKE COUNTRY-DRIVEN A REALITY.EVEN WITH THE WORLD BANK!*

*End

*Other Money Problems Within CountriesSource: WHO National Health Accounts, updated 2002.

*

Source: Gottret, P. and G. Schieber. 2006. Health Financing Revisited. World Bank.

Volatile revenue flows Average absolute percentage deviation from trend 1996-2005 US$ per capita data for 59 countries. Excludes micro states, countries where health aid < 10 percent of govt. spending. Source WHO.Trend: Hodrick-Prescott filter; Source: Lane and Glassman 2007

*Options for ChangeAccelerate efforts to Help countries move toward stronger health systems Based on more effective built-in incentives for better performanceDevelop powerful new interventions Cost-effective vaccines, programs, financing strategies, etc.Improve uptake of existing interventions (new or neglected)Requires focus on country health systemsGet more impact fromSuccess stories from innovative country programs Bridging divides between leaders and ideasEvaluation of experiencePress key players (WB, WHO) to do betterNew initiatives should add valueNew initiatives should be active constituents holding main players accountable, not competitors

*Four inter-linked initiativesProject on Innovative FinancingIFFIm, airline tax, advance market commitmentPrivate sector: their role and investmentTask Force on Health FinancingMary Robinson, Julio Frenk, Ngozi Okonjo, etc.Within-country and aid-flow issuesPrograms on Improving ImplementationFocus on governance, corruption, transparency, accountabilityPrivate sector risk-pooling in AfricaDutch government support

Country Health Aid and Spending Volatility 96-05High/Low Threshold: 12 percent avg. deviation from trend.Post conflict & other fragile statesTypical health aid dependent countryDeveloping countries that experience high aid volatility tend to be those that are most dependent on aid and aid dependency is growing

****In 2002, about 10% of global GDP was spent on health care world wide, of that amount only 12% is spent in developing countries, which account for 90% of the global disease burden.Health aid disbursements around $9 billion a year and rising. Top line in blue is commitments, light blue disbursements. Largest proportion financed by developed country governments referred to as bilateral aid, includes the European CommunityBig individual donors: World Bank, Global Fund, Gates @ US $1 billion + per yearGAVI here just GAVI fundAnother important change is the shift to recurrent cost financing meaning medicines, health workers and the like. The changing nature of aid is an important part of the story well tell about volatility its one thing to provide irregular financing for capital projects (though that also has its costs, unfinished hospitals and the like), but another to have to interrupt treatment for HIV/AIDS, for example.

*This frightening picture gives an idea of the complex structure that accompanies flows from developed to developing countries in the health sector. Wealthy country governments channel their aid through multilaterals like the World Bank, global health partnerships like GAVI and their own bilateral programs with countries.Flows are very fragmented and their terms and timing depend on each government or agencys budget cycle and norms.*Solid line represents aid-financed spending on health over a decade in Rwanda, one of the poorest countries in the world still recovering from the genocide in 1994. Very volatile.Dotted line represents public spending on health over the same period. Although public spending is smooth in this case, it is very low, about $4.60 per person. So aid is financing almost half of the pie if you put aid and public spending together. A highly aid dependent country is one where more than 10% of its public spending is financed by aid.Countries are not able to smooth. Gemmell and McGillivray 48 countries shortfalls in aid are followed most frequently by reductions in government spending.; typical aid-receiving countries are unable to offset an unexpected nondisbursement of aid by borrowing (when they have access to markets) and has to resort to costly, swift and possibly inefficient adjustment.

Aid is increasing but complicated Difficult to judge how new instruments are adding value Critical shift to financing recurrent costs associated with communicable diseases such as AIDS, TB and malaria*The new players are still expanding. And changing.Gates and other new philanthropiesSource of verticalization. Now seeing the light?Global Fund, GAVI, and other disease-focused initiativesDitto. But how far can they go?Others (Media stars, wealthy individuals, the BRICs, )China in Africa?The traditional players are trying new ideasEuropean bilaterals (DfID, France, Nordics, )IHP++ and moreUS assistance (USAID, MCC, State, PEPFAR, etc.)Still 25% of all aidWorld Bank and regional multilateralsresults-based, preformance-based, evidence-basedBINGOs, LNGOs, FBOs, private health providersbig push to get private investment into healthOther (IMF, overall aid strategies, recipient governments)IMF historic shift to expansionary fiscal.The global environment is worseningUS economy and the crisis from the north

According to OECD data, in 2006, GAVI and Global Fund only represented 12% of total commitments for health. Much less for total disbursements. The bulk of ODA is still running through traditional channels.

Biggest increases are European Community and US both sources of aid that are heavily tied to national purchases.

**Aid effectiveness issues in generalResearch conducted by the Global Health Financing Initiative finds that the Paris/OECD aid effectiveness tracer indicators are worsening in the health sector (see Lane et al paper).Fragmentation worsening and much worse than other development sectorsTransaction costs presumably large though unquantified in the majority, based on one McKinsey study that everyone cites, based on interviews (see Homi paper)But are the new actors to blame? Growing bilateral programs may be driving the worst behavior. Cite PEPFAR study by IOM in 2007 finds that prices paid for drugs are much higher than those purchased by Global Fund, that national health systems routinely bypassed, disbursement patterns heavily backloaded in the fiscal year, measuring outputs with a distal relationship to funds spent (and outcomes). Global Fund looks good by comparison regular and predictable disbursements, rolling continuation channel allows the possibility for almost 15 years of assistance, results accountabilityWorld Bank looks good by comparison regular and predictable disbursements over the life of a projectEvidence suggests that the new actors are not to blame. That perhaps it is the traditional donors that are the problem.*It is important to note that there is no standardized time frame or methodology for estimating these disease-specific estimates. As a result, it is very difficult to compare or aggregate them in any useful way.

Note also that this is a partial listing; financing gap estimates are also available for family planning and reproductive health (PAI) as a large missing category here, as well as specific components of future programs that are not included here, i.e., microbicides for prevention of HIV infection, etc. In addition, there is overlap between what is included in costing estimates of MCH and what is included in family planning/RH, among others. In many cases, it is not clear if the financing gap really reflects the incremental financing required as there are poor estimates of the distribution of existing expenditure on health.

To truly be useful, estimates should be calculated at the country level using the specific costs and interventions associated with a given locale.

[Reference for MCH figures Costello and Osrin 2005, The Lancet]*Gaps represent the investment and operating costs for the provision of a given set of services, not necessarily what current external aid finances (TA, etc.)

Devarajan, Shantayanan, Margaret J. Miller, and Eric V. Swanson. Goals for Development: History, Prospects, and Costs. Washington: The World Bank, 2002.

Preker, A. S., E. Suzuki, F. Bustero, A. Soucat, and J. Langenbrunner. 2003. "Costing the Millennium Development Goals." Background paper to The Millennium Development Goals for Health: Rising to the Challenges. Washington, DC: World Bank.

Commission on Macroeconomics and Health. 2001. Macroeconomics and Health: Investing in Health for Economic Development Report of the Commission on Macroeconomics and Health. Geneva: World Health Organization.

Millennium Project source: UN Millennium Project. Investing in Development: A Practical Plan to Meet the Millennium Development Goals. New York: UNDP, 2005 David there is no recent health MDG-specific gap estimates from the UN Mill. Project.*12% spent where 90% of global disease burden

David On the bottom line, if you look at the Millennium Projects estimates for health in the four countries that they studied in depth (the only ones for which there are gap estimates that are disaggregated by sector of investment), the health MDG financing gap was between $30-48 billion annually in 2015 in EACH country (Tanzania, Uganda, Cambodia, Ghana, Bangladesh). Not sure how to incorporate that, as these are supposed to be the most accurate estimates and they are so high (and this is after the MP simulated albeit poorly some domestic revenue increases and assumed that all of existing expenditure was allocated towards MDG-related health!!).

*Strengthening institutional capacityScale and proportion of money to technical assistance (will find this out and get back to you)TA may or may not be appropriate, difficult to judge as evaluation data is scarceHowever, some promise in changing the incentives associated with aid and public financing for health, in a way that will strengthen institutional capacity.Use the example of insurance, conditional cash transfers, contracting, new payment systems, etc.Help audience to understand that financing choices (and not so much how much financing) is at the heart of strengthening capacity Ideas and initiatives to improve aid effectiveness, do they have promise?IHP, results-based financing, harmonization, alignment, Paris, etc.Need to incorporate financing into the aid effectiveness agenda. Donor coordination initiatives abound, but unless funding is pooled within or outside of the country, donors will continue to support their own piece of the pie. In 2006, X number of years after Paris, only 12% of health aid was pooled in a SWAp or channeled through budget support.World Bank could do much more: (i) helping countries to create on-budget but accountable financing instruments that promote coverage and quality (like Cambodias health equity funds, but owned by government); (ii) see our donor swing facility suggestion for IDA in the aid smoothing paper, among other ideas floated as part of the IDA replenishment.Countries must do much more. Offer MLI as an option for support. Well have one-pagers available for you.

*******What is true at country level is true on average as well.Look at bar on your right shows the average percentage deviation from a trend of health aid financed spending over the past decade 20% deviation on average, double that of government spending which is shown to your left.Health aid is also highly pro-cyclical with the economic cycle as is public spending spending more during booms and less during busts.

Split each series into trend and cycle components using Hodrick-Prescott filter. Express absolute value of cyclical component as a percentage of the average of the trend for the period for each year, and take average of all these percentage deviations.Govt spending volatility includes volatility due to exchange rate changes (much lower for aid as much aid is dollar denominated to start with)

***Table shows poor countries divided up between high and low aid volatility, defined as a 12 percent deviation from trend over past decade. Upper right hand quadrant 44 countries with high aid volatility in common, highly dependent on external aid to finance spending. (countries that have low volatility just mean that they dont have that particular problem, but they are still poor) Lower right hand have high volatility and high own spending volatility tend to be post-conflict or other fragile states.

AID DEPENDENT COUNTRIES (where aid at least 10 percent of govt. spending on health) NO MICRO STATES,

i.e. if the average deviation of spending from trend over the period 96-05 is more than 12 percent you get put in a high category for aid or govt. spending