Biomed Analysis: Time to reform healthcare funding

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Governments need innovative financing and efficiency reforms to strengthen healthcare, argues Priya Shetty.

The WHO is starting to push, rather ambitiously, towards universal health coverage. But when the United States, the richest country in the world, falls so far short of universal healthcare, what hope is there for the world's poorest countries? Expecting to rally governments' focus on healthcare financing may seem even more optimistic in the aftermath of a global financial crisis.

Yet, setting achievability aside, the fact that the WHO's latest world health report offers governments guidance on ways to finance healthcare is especially timely and appropriate.

Healthcare systems can easily become inefficient because of inbuilt bureaucracy, complex supply and demand chains, and frequent lack of oversight. The extent of this inefficiency is staggering — the WHO report estimates that up to 40 per cent of all healthcare spending is wasted.

Now that budgets are tighter than ever, the time is right to focus on making healthcare financing more efficient as well as identifying crucial gaps so resources can be directed where they are most needed. This is not just about telling impoverished governments to dig deeper into their pockets, but more importantly about asking them to spend more wisely.

Fluctuating funds

Funding for global healthcare is often unpredictable. Experts' differing opinions and priorities are part of the reason. One malaria expert may believe it foolish to allocate funds to new drug research at the expense of preventive measures such as bednets. Another may argue the threat of drug resistance is strong enough to warrant investing millions in new antimalarials.

The varying agendas of major global health organisations affect funding levels too. When the UN gets behind efforts to improve maternal and child health, donors mobilise millions of dollars. And the Bill and Melinda Gates Foundation sets its own agenda, tending to focus on technological fixes such as drugs or vaccines, rather than more nebulous goals such as bolstering health systems.

Rich countries have a vital role in shoring up and sustaining health systems in the developing world. Yet many have still not met the UN target of allocating 0.7 per cent of gross domestic product to overseas aid — as the credit crunch hit, international aid budgets were cut or kept the same.

Financing through tax

While donor countries should step up global funding, developing nations can also look for ways to increase their spending on healthcare.

The Taskforce on Innovative International Financing for Health Systems was launched in 2008 to help strengthen healthcare systems in poor countries. The WHO director-general Margaret Chan is a board member, and the latest world health report draws on many of the innovative mechanisms for financing outlined by the taskforce.

One proposal is to levy taxes on foods high in fat, salt or sugar — unhealthy foods that are increasingly available in middle-income countries. Imposing a luxury tax on them would increase their price, discouraging their consumption and going a long way towards preventing chronic illnesses such as diabetes and heart disease. Alcohol and tobacco are already taxed, but the WHO suggests raising these taxes considerably.

Many developing nations are popular tourist destinations, and the world health report also suggests raising money for health by taxing activities linked to tourism from richer nations.

Countries' banking and finance systems themselves could produce more money for healthcare through taxation. For example, India's foreign exchange market has a daily turnover of US$ 34 billion. A currency transaction levy of 0.005 per cent could yield about US$ 370 million per year.

Funds from extra taxation on food or tourism could also subsidise cheap health insurance schemes for the poor. In many developing countries, out-of-pocket payments make up half of all expenses for those who use the healthcare system, so paying for a serious illness can bankrupt people already struggling to make ends meet.

Efficiency is crucial

Ultimately, whether the extra money for global healthcare systems is raised from rich donors or poor countries, it needs to be spent far more efficiently.

Policies that discourage overprescription of antibiotics, ensure that medicines are stored properly, or make it easier to buy generic drugs would all make drug procurement more efficient. Hospital systems need to be overhauled too, with resources allocated in a clear and transparent way.

And ensuring better dialogue between donor and recipient countries would slash inefficiencies. For example, all too often high-tech medical equipment, whether donated or bought, languishes in warehouses or in laboratories because there are no appropriate clinical facilities or even skilled technicians to use them.

The call for more investment in healthcare is increasingly unlikely to be answered while governments focus on other economic priorities. Governments, both rich and poor, need to find novel financing mechanisms and start spending healthcare budgets far more judiciously.


Journalist Priya Shetty specialises in developing world issues including health, climate change and human rights. She writes a blog, Science Safari, on these issues. She has worked as an editor at New Scientist, The Lancet and SciDev.Net.