Ensuring access: health insurance schemes and HIV

Ensuring access: health insurance schemes and HIV Joep M.A. Lange Academic Medical Center, University of Amsterdam Amsterdam Institute for Global Health & Development With great help from: Onno Schellekens and Marianne Lindner PharmAccess Foundation

How I (a physician) feel talking about financing (in 20 slides)

The current situation 5 million HIV-infected people in resource-poor settings are receiving antiretroviral therapy through unprecedented activism and mobilization of resources Yet, increasing pressure on AIDS exceptionalism, while resources are being capped

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

The current situation We need to move from AIDS exceptionalism to health exceptionalism And yes, resources need to be increased massively! But we should also explore new models of health care financing

Health systems in Africa Africa spends very little on health care Health care in Africa is underfunded Population X mio Burden of communicable diseases DALYS Total health expenditure x $ mio Africa Africa 750 38046 Rest Rest of of 265 the the world world 345 5.703 Source, WHO 2008 4.351.772 7

Gross Health expenditures/capita low income (GDP/c < $935), SSA Average Health Exp/capita: $17,30 8

We need to drastically increase ODA for health: Average External Resources for Health/capita: $4,00 Average Health Exp/capita: $17,30 9

Health systems in Africa Investments in the private health care sector in Africa are virtually non existent Private providers cannot obtain financing as the risk is considered too high Amount of IFC s private investments in health (loans and equity 1997-2007) 266 Amount invested (in US$ million) 109 98 95 12 Asia Lat Am Eur Middle E SSAfrica Source: Improving effectiveness and outcomes for the poor in health, nutrition & population, World Bank 2009 10

The current situation We need to move from AIDS exceptionalism to health exceptionalism And yes, resources need to be increased massively! But we should also explore new models of health care financing

How can health care be financed? (apart from out-of-pocket ) Donor funding Taxation Risk pooling (health insurance)

The risk of relying on donor funding Donor funding is subject to: fluctuations of the global economy fashions special interests Donor funding may lead to crowding out ( fungibility )

Health systems in Africa Donor funding goes mostly to the public sector The private (for-profit) health sector is underfunded 100 Other Other Private Private sector sector 75 50 Public Public sector sector 25 0 Malawi Rwanda Uganda Kenya Nigeria Mozamique Namibia Zambia Tanzania Zimbabwe Source: National Health Accounts 1997-2002 (latest year available); McKinsey analysis 14

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.

Health systems in Africa 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 36% 34% 33% 23% 15% 16% highest quintile lowest quintile 12% 10% primairy care outpatient inpatient total Source: Preker AS, Langenbrunner JC et al (2005) 16

Health systems in Africa The private-for-profit health sector is an important provider for the poor > 40% of lowest income quintile receive health care from private providers Percentage of lowest and highest quintile receiving care from private providers 67% 64% 61% 51% 53% 48% 45% 44% Highest income quintile Lowest income quintile Nigeria Uganda Kenya Ethiopia Source: The business of health in Africa, IFC 2008 17

The role of donor funding 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? 19

How can health care be financed? Donor funding Taxation Risk pooling (health insurance)

Taxation (apart from out-of-pocket ) Most sub-saharan African countries do not have a solid tax base: not a reasonable level GDP/capita administrative weakness Ghana: 2.5% VAT surplus flowing directly to national health insurance program Rising costs; administrative issues

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 22

How can health care be financed? (apart from out-of-pocket ) Donor funding Taxation Risk pooling (health insurance)

Health systems in Africa Risk pooling is very scarce Africans lack protection against medical costs; solidarity is limited Social security and private prepaid health care spending 50% 40% 30% 20% 10% 0% Only Only 4% 4% of of total total health health expenditure expenditure in in Africa Africa is is financed financed through through health health insurance insurance Percent of total health expenditure South Africa Cape Verde Namibia Mali Zimbabwe Botswana Senegal Swaziland Rwanda Kenya Côte d'ivoire Togo Mauritius Benin Nigeria Niger Tanzania Madagascar Seychelles Gabon Malawi Guinea-Bissau Burkina Faso Ethiopia Guinea Chad Mozambique Uganda Cameroon China Source: WHO 2008 24

Guinea Health systems in Africa Private out-of-pocket expenses are ~50% of total health expenditure Many fall in a poverty trap; increased inequity 100% 75% 50% 25% 0% South Africa Sao Tome & Princ. Mauritania Seychelles Botswana Madagascar Congo B. Mauritius Sierra Leone Mali Niger Zambia Benin Burkina Faso Eritrea Sudan Chad Central African Rep. Cote d'ivoire Uganda Cameroon Burundi 25 Out-of-pocket health expenditure (as % of total health expenditure) Source: WHO 2008

The second law of health economics Rich countries have a lower share of out-of-pocket expenses than poor countries % Out of Pocket Expenses of Total Health Expenditure versus GDP per capita % Out of Pocket 0% 20% 40% 60% LSO MRT SLE ZMB TZA NGA AGO COG NAM DZA CPV SWZ ZAF GAB BWA MUS FRA SGP USA LUX 80% 100% UGA 100 1.000 10.000 100.000 GDP/ Capita (log scale) A Africa versus developped countries (GDP/Capita>$15000) Logaritmisch (Africa versus developped countries (GDP/Capita>$15000)) 26

Historical development Introducing health insurances to communities was the first critical step Typical development of healthcare systems in OECD countries National policies Dominance of out-of-pocket costs Donor policies Evidence-based advocacy Disconnection of contribution from utilization Community* health insurance/ risk-pooling Capacity-building and technical support Increased regulation Framework for pool management and interactions Inter-pool subsidies and consolidation policies Established insurance pools Insurance pool consolidation Set up funding and reinsurance Advocacy, consumer protection funding, and reinsurance Optimized subsidy of low income by high-income households Universal insurance coverage Group-based, private risk-pooling schemes are crucial for the development of health systems and access to quality health care * Including private insurance Source: Arhin-Tenkorang, 2001

Health systems in Africa African health systems are stuck in a vicious circle: low demand and low supply of health care Access to quality basic health care among the poor is low low Demand Medical care usage Financing Delivery low low low Supply Quality health care 28

Alternative model: a virtuous circle of health care HIF Dutch gov 100 mln USAID 20 mln World Bank 5 mln MCF 2 mln IFHA 50 mln Demand Out-of-pocket Access to health care Ownership Solidarity Financing Delivery Supply Quality Efficiency/ cost Risk/ investment Data User premium contributions 2-3 mln Patient Empowerment Willingness to pay 29

Example Hygea (Nigeria) 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 30

Conclusions From AIDS exceptionalism to health exceptionalism! More not less money is needed: Countries need to increase their own contributions to health care! Donor money should be spent more efficiently: avoidance of crowding out; those who can pay should pay; involvement of private sector; performance-based financing Decrease out of pocket expenses of the poor with subsidized health insurance