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Karen Cavanaugh, Scott Stewart, Azada HafizMini-UniversityMarch 7, 2014
Economic Transition of Health: What is it and Who cares?
2
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
3
WHAT IS A BASIC PACKAGE OF HEALTH SERVICES?
4
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
7
CAN DEVELOPING COUNTRIES AFFORD A BASIC PACKAGE OF HEALTH SERVICES?
USAID-assisted countries can now/soon buy essential package of health services
8
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
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
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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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17
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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