Potentials and Constraints to Mobilize Domestic Resources for Health

The calculations to initially determine, the expected capacity to finance the required health services by each country intend to bring together economic trends of the recent past, predicted growth rates of national economies, realistic expectations regarding efforts to increase government revenue and commitments to reach an established threshold of public spending on health in developing countries. The combination of these factors permits to develop an approximate calculation of the per capita expenditure for health that the public sector in developing countries will be able to fund with domestic resources by 2020. On the other hand, the model applies an updated estimate of the basic level of financing needs that is tailored to the country specific situation taking into account the HIV burden.

In detail, the model builds on the following assumptions and parameters:

Notwithstanding the well-known weaknesses of the concept gross domestic product (GDP) per capita constitutes the basic measure of economic capacity. Considering that a part of investments in health systems requires the importation of products such as medicines and diagnostic tools, whereas other elements can be bought on the domestic market the model uses a mixed calculation (50:50) of the amount expressed in power purchase parities (international dollars) and the value at average exchange rates (current US$). The WHO working group for the Taskforce on Innovative International Financing for Health Systems estimated that in 2015 about 34 % of the total incremental cost for expanding coverage of essential services would correspond to internationally traded goods that need to be purchased at global market prices. In addition, however, the levels of salaries of an increasingly mobile health workforce – accounting for 27% of total cost excluding community health workers - are influenced by the opportunities to earn money in economically better-off countries. Therefore, the proportion of the investments needed to enhance health systems that are determined by external economic relations may considerably go beyond 50%. The respective input data are derived from the World Economic Outlook published by IMF (go to the map on income trends and inequalities to view original data).

Government revenue as % of GDP refers to transfers or cash receipts for the central government (taxes, social contributions, and other revenues such as fines, fees, rent, and income from property or sales) for public purposes expressed as proportion of GDP. Grants from development cooperation or other flows from external sources are excluded here in order to determine the potential of domestic resource mobilization. The general rate of increase is obtained from the recent trend seen on average in low-income and lower middle-income countries. For countries, however, which at present show government revenue shares below 20 % an alternative projection applies with the aim of reducing the gap towards this level by a quarter at the end of the period, in line with the target to halve the gap by 2025. In these cases the model uses the target ratio that is resulting higher. Considering the exceptionally low level of 5 % reported for Nigeria the assumption is made that government revenue will double to 10 % by 2020. The respective data for recent years are available for the majority of countries from World Development Indicators, while in other cases these were calculated using figures published by the International Monetary Fund on total government revenue (including external sources) and deducting total amounts of ODA grants allocated to the public sector of the respective countries as reported to the DAC/OECD database on aid activities (creditor reporting system).

For health expenditure as % of total government expenditure the model assumes that all countries with spending proportions below the Abuja target of 15 % will reach this minimum, whereas those countries that exceed the target will maintain this higher level. Actual data are derived from WHO Global Health Expenditure Database.

The basic minimum level of resource needs is based on the technical recommendation made by McIntyre and Meheus that a figure of 86 US$ (expressed in 2012 terms) should be used as the estimated average of per capita resource requirements for providing a range of key services in low-income countries (Di McIntyre and Filip Meheus: Fiscal Space for Domestic Funding of Health and Other Social Services, March 2014). This updated estimate builds on the work of the High Level Taskforce on Innovative International Financing for Health Systems (HLTF), in particular the information provided through the normative approach of the respective WHO team with collaboration from UNFPA and UNAIDS. The range of interventions included the achievement of the health-specific MDGs, some interventions to address non-communicable diseases and essential drugs for chronic conditions, some cancers, neglected tropical diseases, mental health and general care as well as the medicines needed for the above-mentioned areas. This costing also took into account investments in order to enhance facility and equipment infrastructure, increasing staffing levels and other components of health system strengthening. The authors translated the original figure of 54 US$ in 2005 terms into 2012 terms adjusting for local currency exchange rates and annual inflation rates for the period for all low-income countries included in the costing exercise. In the model presented here this figure was converted in 2013 terms by applying the global inflation rate published by IMF. Due to the highly differentiated prevalence rates and the relatively high cost of life-long treatment and complex prevention programmes the HIV epidemic constitutes the single most important factor for differences regarding the country-specific resource needs. Moreover the implementation of the UNAIDS Fast Track Initiative proposes a rapid and massive acceleration of HIV prevention and treatment programmes for ending the AIDS epidemic by 2030 that requires a substantial increase of financial resources. Therefore, the model calculates the national minimum needs by adjusting the per capita cost of the HIV response (6 % of the total figure on average) according to the estimated number of people living with the virus in 2013 taking into account the required increase of resources towards 2020 and the respective distribution by income group.

See an Overview of Projected Reduction of Health Financing Gap