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Winter 2017

Gathering the Evidence to Mobilize Domestic Resources for Health Care

Two key areas of development assistance have been merging quickly: health care and domestic resource mobilization. The goal is to help developing countries afford to invest in their national health systems and institutions and do so wisely. Many countries want to do more to fund their own development, and donors are on board to assist. But there is little evidence on how to do so effectively in the pursuit of greater health security.

This knowledge gap prompted the Health Finance and Governance (HFG) project to conduct a four-part study, “Marshalling the Evidence for Health Governance,” funded by the U.S. Agency for International Development (USAID). Our technical working group analyzed data on how public financial management (PFM) affects health governance and produced a report of our findings. Our HFG colleagues concurrently produced reports on the evidence as it applies to policy and regulation, uses of knowledge in health systems, and accountability.

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DAI’s experience in El Salvador confirms that donor assistance in PFM can enable a country to provide more health services. Our HFG technical working group—which includes representatives from the World Health Organization, World Bank, Abt Associates, and DAI—set out to gather more evidence of what works, or not, in helping countries improve their health services; increase patients’ demand for, access to, and utilization of services; increase adoption of healthy behaviors; and protect people from debilitating health costs. In compiling this report, we also learned more about how health governance is evolving at the country level.

Here are the key implications from the HFG report:

Three Ways to Increase Domestic Funding for Health

Country policymakers can increase funding for health by 1) increasing tax revenues, 2) prioritizing health funding, and 3) increasing efficiency in health spending:

Increasing tax revenues through improved tax policy and collection is a proven winner among donor-funded programs. Our review of the evidence found that, as a proportion of gross domestic product, government tax revenue was significantly below its potential in many low- and middle-income countries. But that is a fixable state of affairs. USAID programs implemented by DAI, for instance, have increased domestic revenues in El Salvador, the Philippines, and elsewhere. In these countries, PFM assistance led to reducing the cost and increasing the ease of tax compliance, reducing corruption by automating financial systems, and the adoption of enforcement approaches based on targeting areas at high risk for cheating.

However, we found not all tax revenues to be equal when it comes to benefitting health funding. One multi-country study showed pro-poor taxes—such as on profits and capital gains—seemed to support expanding health coverage, while consumption taxes—such as on goods and services—reduced the ability of the poor to afford essential health care and were associated with increased rates of post-neonatal, infant, and under-5 mortality.

Prioritizing health funding helps ensure that increased government revenues lead to improved health care. Policy makers can champion this cause by:

  • Advocating for policies that make the economic case for health in terms of impact on educational attainment, employment, and economic growth.
  • Producing budget planning and justifications that prioritize health financing.
  • Creating a tax fund specifically for health, such as dedicating a portion of tax revenues to health services.
  • Introducing taxes or fees earmarked for health, such as taxes on mobile phone calls, financial transactions, alcoholic beverages, and tobacco.
  • Decentralizing health spending to increase local pressure and accountability to fund health.

In the five emerging “BRICS” economies (Brazil, Russia, India, China and South Africa), total government spending on health is markedly less—from 8.1 to 12.7 percent—than in many countries in the Organization for Economic Cooperation and Development, which in 2016. The United States, for example, spent 17.2 percent.

Evidence is mixed in some areas of health reform—for example, in decentralization. In Ghana, a survey concluded that only 20 percent of the treasury’s non-wage public health expenditure reached frontline facilities. In Senegal, Health Decentralization Funds took 10 months on average to be at the disposal of providers. This suggests great vulnerability for leakage, but current data is woefully slim—the Ghana and Senegal surveys were from 2000 and 2004, respectively, highlighting the need to capture more—and more current—insights on how assistance would be best targeted.

Increasing efficiency in health spending requires planning, control, and oversight. The HFG report suggests fiscal reform actions that could help:

  • Medium-term expenditure frameworks or multi-year sector budgeting plans can improve predictability in health funding and, consequently, the health sector’s ability to spend more productively and achieve results more predictably. Countries may also consider better yearly planning—looking at gaps in processes for collating and prioritizing health needs and allocating health funding.

  • Automated systems have been shown to improve control of expenditures. By introducing two interventions—an integrated financial management information system (IFMIS) and e-procurement—countries can reduce waste and fraud by increasing transparency and accountability.

Procurement is often a source of corruption and ineffective political spending. E-procurement can reduce fraud and waste and save money by reducing transaction costs as well as the cost of drugs, medical supplies, and other commodities. An IFMIS introduces greater control, transparency, and accountability into the expenditure process, reducing human error and corruption through a series of automated checks and controls enforced for all transactions. Although no research has been conducted on IFMIS’ effect on the health sector and health outcomes, it is a proven PFM intervention that raises the budget process to higher levels of transparency and accountability and expedites government operations.

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Making Health Spending More Accountable and Responsive

As stewards of health systems and representatives of civil society, policy makers should take steps to improve oversight and accountability in health spending. To do so, they may also consider:

  • Improving the analysis, visualization, and communication of health financing data to enhance understanding and use of that data.
  • Automating reports to increase transparency and accountability.
  • Increasing oversight via audit and reporting for better accountability within health systems.
  • Decentralizing control of health procurement, services, and funding to local authorities to increase local accountability and responsiveness and create a tighter feedback loop for oversight.

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Knowledge Gaps That Need to be Filled

Members of our technical working group searched 16 databases, websites, and organizations for articles and studies on the role of PFM in health systems and outcomes. We uncovered 165 articles, 46 of which were found to be fully relevant. Team members dissected the articles and extracted useful data for input into a database.

Research on PFM for health outcomes—especially current research—is lacking in several areas. For example, the team found no data on the role and effects on health systems of parliamentary oversight and the policy environment, of a Supreme Audit Institution, or of budget classification—such as removing duplicate line items, miscoding, and reducing the number of line items and off-budget transactions. More research is also needed on the effects of e-procurement, such as the procure-to-pay tool used in Kenya. As seen in one study, this tool is a good option for health system managers and procurement agencies to improve PFM and health outcomes simultaneously by increasing transparency and reducing corruption-enabling time lag.

When developing countries make improved health outcomes a domestic development priority, they take the first necessary step toward affording to pursue this goal. The next step—welcoming assistance in health and fiscal reform—puts the onus on the donor and implementer to get the assistance right. Looking ahead, we believe findings from this report and the others from “Marshalling the Evidence for Health Governance” mark a significant step forward in optimizing activities—and results—in health governance assistance.


Photo of Annie Baldridge and Elizabeth Elfman Photo of Annie Baldridge and Elizabeth Elfman

DAI’s Annie Baldridge, left, is a senior global practice specialist in public financial management; DAI’s Elizabeth Elfman is a global practice specialist in health.