Elsevier

The Lancet

Volume 375, Issue 9723, 17–23 April 2010, Pages 1375-1387
The Lancet

Articles
Public financing of health in developing countries: a cross-national systematic analysis

https://doi.org/10.1016/S0140-6736(10)60233-4Get rights and content

Summary

Background

Government spending on health from domestic sources is an important indicator of a government's commitment to the health of its people, and is essential for the sustainability of health programmes. We aimed to systematically analyse all data sources available for government spending on health in developing countries; describe trends in public financing of health; and test the extent to which they were related to changes in gross domestic product (GDP), government size, HIV prevalence, debt relief, and development assistance for health (DAH) to governmental and non-governmental sectors.

Methods

We did a systematic analysis of all data sources available for government expenditures on health as agent (GHE-A) in developing countries, including government reports and databases from WHO and the International Monetary Fund (IMF). GHE-A consists of domestically and externally financed public health expenditures. We assessed the quality of these sources and used multiple imputation to generate a complete sequence of GHE-A. With these data and those for DAH to governments, we estimated government spending on health from domestic sources. We used panel-regression methods to estimate the association between government domestic spending on health and GDP, government size, HIV prevalence, debt relief, and DAH disbursed to governmental and non-governmental sectors. We tested the robustness of our conclusions using various models and subsets of countries.

Findings

In all developing countries, public financing of health in constant US$ from domestic sources increased by nearly 100% (IMF 120%; WHO 88%) from 1995 to 2006. Overall, this increase was the product of rising GDP, slight decreases in the share of GDP spent by government, and increases in the share of government spending on health. At the country level, while shares of government expenditures to health increased in many regions, they decreased in many sub-Saharan African countries. The statistical analysis showed that DAH to government had a negative and significant effect on domestic government spending on health such that for every US$1 of DAH to government, government health expenditures from domestic resources were reduced by $0·43 (p=0) to $1·14 (p=0). However, DAH to the non-governmental sector had a positive and significant effect on domestic government health spending. Both results were robust to multiple specifications and subset analyses. Other factors, such as debt relief, had no detectable effect on domestic government health spending.

Interpretation

To address the negative effect of DAH on domestic government health spending, we recommend strong standardised monitoring of government health expenditures and government spending in other health-related sectors; establishment of collaborative targets to maintain or increase the share of government expenditures going to health; investment in the capacity of developing countries to effectively receive and use DAH; careful assessment of the risks and benefits of expanded DAH to non-governmental sectors; and investigation of the use of global price subsidies or product transfers as mechanisms for DAH.

Funding

Bill & Melinda Gates Foundation.

Introduction

The global health community has recognised that public spending on health in developing countries is essential for meeting the Millennium Development Goals, reducing poverty, and fighting major diseases that kill, such as HIV/AIDS, tuberculosis, and malaria.1, 2, 3, 4 As a result, increasing amounts of international aid have been given to health sectors in developing countries. Development assistance for health (DAH) has risen steadily since 1995 from about US$8 billion (constant 2007 $) to nearly $19 billion in 2006.5 In addition to direct health aid from donors, debt relief to low-income and middle-income countries allows recipient governments to redirect funds from debt servicing to health spending.6 Certain debt relief initiatives—the Heavily Indebted Poor Countries and Multilateral Debt Relief initiatives—have conditioned debt relief on spending intended to benefit low-income populations in developing countries, especially government expenditures on health and education.6, 7, 8

Although these increased flows are important, most public spending on health in developing countries comes from domestic sources. Domestically financed health spending is vital for improving health in these countries,4 as African leaders acknowledged in Abuja, Nigeria, in 2001, by pledging to devote 15% or more of their yearly budgets to the health sector to fight HIV/AIDS and other infectious diseases.1 An increase in domestic public financing of health in low-income countries is also suggested to be crucial for the sustainability of health programmes.9 The WHO Commission on Macroeconomics and Health recommended that, in addition to urging donors to increase health aid, low-income countries should raise tax revenues by 2% of gross national product by 2015 to finance the health sector.4 Government spending on health from domestic sources is an important indicator of a government's commitment to the health of its people.

Because of the importance of these funds, tracking public financing for health in developing countries should in theory be simple. Since 1998, the WHO National Health Accounts programme has been reporting public spending on health with a 2–3-year lag.10, 11 The International Monetary Fund (IMF) also tracks public spending on health with a time lag similar to that of WHO.6 Trends in public financing of health, nevertheless, remain difficult to assess. WHO and IMF track government spending as agent. In principle, this spending includes DAH from government accounts and government health spending from domestic resources. Alternatively, government as source only includes domestically financed public spending on health. The distinction between government as agent and government as source is not clearly provided in some studies.12 In addition to this difficulty, WHO is forced to estimate missing data for a substantial proportion of the country years. The actual data and estimates are not always distinguished in the published tables, and detailed information about imputation methods and components is not available to the public.

Results from studies have suggested that a country's gross domestic product (GDP), government size, and external health resources might affect government health financing.12, 13, 14, 15, 16, 17 Understanding the factors that contribute to trends in public financing of health is a sensitive topic, particularly the role of ministries of finance. Whereas ministries of health are committed to increasing the size of health budgets, ministries of finance have at times reduced financing of health in the presence of substantial DAH to government.15, 17, 18 The purposes of DAH go beyond relaxing budget constraints in the public sector, and include changing the composition of public expenditures on health and improving the technical quality of those expenditures. That said, if DAH has reduced domestic public expenditures, there might be implications for how DAH is planned and spent through efforts such as the Paris Declaration,19 the International Health Partnership and Related Initiatives,20 and others. Fungibility of foreign aid, which occurs when aid substitutes for domestic government spending, has been reported at the aggregate, country, and sector levels.14, 21, 22, 23, 24, 25 Cross-country quantitative studies of health-aid fungibility are few and have provided mixed findings, which are hampered by incomplete and low-quality data for health aid and government spending on health.12, 15, 17, 18

Enhancement of public financing of health is important for the long-term financial sustainability of the health sector. If donor funding declines or stops, continuation of aid-funded health programmes would be difficult without the financial support of the domestic government. Countries that treat health aid as a substitution for, rather than as an addition to, government health spending might weaken their health systems. Furthermore, households might be forced to pay more from their own pockets and be pushed below the poverty line by catastrophic health payments.26, 27, 28, 29, 30, 31 Reduction of government spending on health from domestic sources in response to DAH is inconsistent with many goals of international donors and domestic policy makers such as the ministries of health.

We therefore did a systematic analysis of all data sources available for government spending on health in developing countries. We used these sources to describe trends in public financing for health, and tested to what extent they are related to changes in GDP, government size, HIV prevalence, debt relief, and DAH to governmental and non-governmental sectors.

Section snippets

Data sources

Data for government health spending were from data reported to WHO, IMF, and publicly available country reports from ministries of health or finance. WHO published National Health Accounts from 1995 to 2006 for its 193 country members;10 reported government health expenditures as agent (GHE-A), consisting of tax-funded health expenditures, social security for health, and DAH captured in government accounts;11 and gathered data from sources such as countries' National Health Accounts reports,

Results

Figure 1 shows the trend in constant 2006 US$ for GHE-S, based on our fully imputed databases of WHO and IMF. In all developing countries, there was a substantial increase in public financing for health from domestic sources—nearly 100% (IMF 120%, WHO 88%) from 1995 to 2006. Figure 1 also shows the trends according to GBD developing regions, with substantial growth in north Africa and the Middle East, Latin America, and especially east Asia (largely in China). The amount of resources committed

Discussion

For low-income and middle-income countries in most regions of the world, GHE-S is increasing in absolute terms. DAH is a key factor leading to a decline in government spending on health from domestic sources in some countries. The increase in GHE-S is not simply due to increases in GDP but is also attributed to rising GGE devoted to health, even as overall size of the government in most regions is shrinking. If this trend continues, we can expect that the share of GDP spent by governments on

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