Mobilizing the private sector for HIV and social health protection Joep M.A. Lange

Mobilizing the private sector for HIV

and social health protection

Joep M.A. Lange(acknowledging Onno Schellekens and Marianne Lindner)

PharmAccess FoundationAmsterdam Institute for Global Health & Development

How I (a physician) feel talking about financing (in 12+ slides)

4

750

5.703

PopulationX mio

Total health expenditure

x $ mio

Burden of communicable

diseasesDALYS

AfricaAfrica

Rest of the world

Rest of the world 265

345

38046

4.351.772Source, WHO 2008

Health systems in Africa Africa spends very little on health careHealth care in Africa is underfunded

Health Expenditure per Capita in Africa, 2005

0

50

100

150

200

250

300

350

400

450

500

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45

US

$

Public Health Expenditure Private Health Expenditure $34 CMH Spending Target

1.Congo Dem. Rep.2.Burundi3.Niger4.Ethiopia5.Sierra Leone6.Eritrea7.Liberia8.Guinea Bissau9.Comoros10.Madagascar11.Central Afr Rep.12.Tanzania13.Mozambique14.Chad15.Togo16.Guinea17.Mali18.Mauritania19.Burkina Faso20.Ghana21.Benin22.Nigeria23.Kenya

24.Sudan25. Cote d’Ivoire26.Rwanda27.Uganda28.Angola29.Malawi30.Congo Rep.31.Gambia32.Zimbabwe33.Zambia34.Senegal35.Lesotho36.Cameroon37.Sao T & Pr.38.Cape Verde39.Swaziland40.Equatorial Guinea41.Namibia42.Gabon43.Mauritius44.Botswana45.South Africa46.Seychelles

Health expenditure per capita in sub-Saharan Africa is far from sufficient

Ta

nza

nia

The AIDS response did create islands of sufficiency in a swamp of insufficiency (Gorik Ooms, MSF)

7

Health systems in Africa

0

25

50

75

100

Malawi

Rwan

da

Ugan

da

Keny

a

Nige

ria

Mozam

ique

Namibi

a

Zambi

a

Tanz

ania

Zimba

bwe

Public sector

Public sector

Private sector

Private sector

OtherOther

Source: National Health Accounts 1997-2002 (latest year available); McKinsey analysis

Donor funding goes mostly to the public sectorThe private (for-profit) health sector is underfunded

Public financing of health in developing countries

Lu C, et al. Lancet 2010;375:1375-87

Development assistance for health (DHA) to government had a negative and significant effect on domestic government spending on health (minus $ 0-43 to 1.14 for every $ of DAH).

DAH to the non-governmental sector had a positive and significant effect on domestic health spending.

9

Health systems in Africa

23%

36%34% 33%

15%

12%

16%

10%

primairy care outpatient inpatient total

highest quintile

lowest quintile

Source: Preker AS, Langenbrunner JC et al (2005)

Public services benefit the rich more than the poor The poor are often not reached

Percentage of lowest and highest quintile using public health services

10

51%

67%61%

48%

64%

53%

45% 44%

Nigeria Uganda Kenya Ethiopia

Highest income quintile

Lowest income quintile

Health systems in Africa

Percentage of lowest and highest quintile receiving care from private providers

The private-for-profit health sector is an important provider for the poor> 40% of lowest income quintile receive health care from private providers

Source: The business of health in Africa, IFC 2008

11

Health systems in Africa

Social security and private prepaid health care spending

0%

10%

20%

30%

40%

50%

Sout

h Afri

ca

Cape V

erde

Namibi

aMali

Zimba

bwe

Botsw

ana

Sene

gal

Swaz

iland

Rwan

daKe

nya

Côte d'

Ivoire To

go

Maurit

iusBe

nin

Nigeria

Niger

Tanz

ania

Madag

ascar

Seyc

helle

s

Gabon

Malawi

Guinea

-Biss

au

Burki

na Fa

so

Ethiop

ia

Guinea

Chad

Mozam

bique

Ugand

a

Camer

oon

China

Perc

ent

of t

otal

hea

lth

expe

ndit

ure

Only 4% of total health expenditure in Africa is financed through health insurance

Only 4% of total health expenditure in Africa is financed through health insurance

Source: WHO 2008

Risk pooling is very scarce Africans lack protection against medical costs; solidarity is limited

12

Health systems in Africa

0%

25%

50%

75%

100%

Sout

h Afri

ca

Sao To

me & Pr

inc.

Maurit

ania

Seyc

helle

s

Botsw

ana

Madag

asca

r

Cong

o B.

Maurit

ius

Sierra L

eone Mal

i

Nige

r

Zambia

Benin

Burk

ina Fa

so

Eritr

eaSu

dan

Chad

Cent

ral A

frica

n Rep

.

Cote

d'Ivo

ire

Ugan

da

Camer

oon

Buru

ndi

Guin

ea

Out

-of-

pock

et h

ealt

h ex

pend

itur

e

(as

% o

f to

tal he

alth

exp

endi

ture

)

Source: WHO 2008

Private out-of-pocket expenses are ~50% of total health expenditureMany fall in a poverty trap; increased inequity

13

The second law of health economics

% Out of Pocket Expenses of Total Health Expenditure

versus GDP per capita

0%

20%

40%

60%

80%

100%

100 1.000 10.000 100.000

GDP/ Capita (log scale)

% O

ut

of

Po

cket

Africa versus developped countries (GDP/Capita>$15000)

Logaritmisch (Africa versus developped countries (GDP/Capita>$15000))

A

AGO

SLE

MRT

LSO

NAM

DZA

CP VCOG

SWZ

ZAF

GAB

BWA

MUS

SGP

TZA

NGA

ZMB

UGA

LUX

USA

FRA

Rich countries have a lower share of out-of-pocket expenses than poor countries

14

Health systems in Africa

Financi

ng

Deliv

ery

Demand

Medical care usage

Supply

Quality health care

low

low

low

low

African health systems are stuck in a vicious circle:low demand and low supply of health careAccess to quality basic health care among the poor is low

15

The need for an alternative approach

• There are good reasons to involve government in health care: • Efficiency concerns: market failures, externalities• Equity concerns/ social justice: health (care) as a human right

• However, preconditions for state-led model to work are not met in Africa:• Reasonable level GDP/capita: sufficient domestic government

resources• State capacity to enforce means-tested contributions for health

care and actually deliver services nation-wide

• Innovative approaches to healthcare development are needed

16

• How to use donor money in such a way that:

the total amount of financial resources in the health system increases, and

access to quality basic health care among low-income people is increased?

The role of donor funding

17

• Strategies that avoid crowding out effects and reduce out-of-pocket

expenses

• Set up voluntary risk pooling and prepayment for low-income groupsChannel private out-of-pocket payments into risk poolsThose who can pay do pay

• In tandem with boosting supply chainNo supply, no prepaymentTelecom industry: low-income people do prepay when the

service is good

The role of donor funding

18

Financing

Delivery

Alternative model: a virtuous circle of health care

Demand

• Out-of-pocket

• Access to health care

• Ownership

• Solidarity

Supply

• Quality

• Efficiency/ cost

• Risk/ investment

• Data

IFHA

50 mln

HIF

Dutch gov

100 mln

MCF

2 mln

User premium contributions

2-3 mln

Patient• Empowerment

• Willingness to pay

USAID

20 mln

World Bank

5 mln

19

Example Hygea (Nigeria)Supply side: Reduced risk and increased investment

• Reduced investment risk due to collateral arrangement consisting of long-term donor commitment through HIF.

• This made it possible for insurer to attract new debt and private equity investments:

Debt capital:

Reduction cost of debt capital by two-thirds FMO/IFC inserted significant new debt capital

Private equity: IFHA significant minority share in insurer Few years later significant capital from venture capital fund Mo Ibrahim

• Total amount of money in the value chain increased 10 times