PHM-Exch> Challenges in Financing Healthcare

[Claudio Schuftan]

From: Ravi Duggal <rduggal57 at gmail.com>

COMMENTARY - Economic and Political Weekly Sept 1 2012 vol xlviI no 35

*Challenges in Financing Healthcare*

*Ravi Duggal*

(excerpts)

The Third People’s Health Assembly was held in July in Cape Town, South
Africa with its theme of “Health for All Now”. Developing countries which
transformed public health systems under the structural adjustment policies
into insurance-based health models have failed in providing healthcare to
the poor. Where does India stand in relation to the ruling United
Progressive Alliance’s commitment to take public health spending to 3% of
the GDP by 2012?

*Ravi Duggal (rduggal57 at gmail.com) is an independent health researcher and
is associated with the International Budget  Partnership and the People’s
Health Movement. *



The Third People’s Health Assembly (PHA 3), organised by the People’s
Health Movement (PHM), was held in July in Cape Town, South  Africa. The
theme of this third edition was “Health for All Now” and the debates were
around the issues of universal access and coverage. With over 800
participants from 90 countries a rich repertoire of experiences were shared
across 109 sessions of plenary, sub-plenary and workshops spread across six
days, ending with a rally on the streets of Cape Town on 11 July 2012 (
http://www.phmovement.org/en/pha3).

The assembly discussed a wide range of health and related issues, including
the political and economic context of health, comprehensive primary
healthcare, social determinants of health, universal coverage, mobilising
for health, etc. The universal access and financing of healthcare for such
access underpinned the discussions across the various sessions.

*Financing for Healthcare *

The discussion on financing for healthcare was contextualised within the
global architecture of finance capital which dominates the economics and
politics of our world. The learning from global experience presented at the
PHA 3 showed that to move closer towards universal access to healthcare
governments need to spend over 15% of their budget or at least 4% to 5% of
their gross domestic product (GDP) for healthcare. The Organisation for
Economic Co-operation and Development (OECD) countries, with the sole
exception of the US have universal access to healthcare accessible to all
at little or no direct cost at the time of accessing the care. These
governments spend between 5% and 8% of their GDP on health; the US
government spends nearly 9% of its GDP (its total expenditure on health is
a whopping 17% of GDP) and yet 50 million people do not have adequate
access to healthcare in that country. This is due to the way in which
healthcare is financed: it is predominantly insurance-based. In the last
two decades a number of middle-income countries and a few low-income
countries have also reached near universal access for their respective
populations and these include Brazil, Mexico, Venezuela, Costa Rica,
Thailand, Malaysia and Sri Lanka among others. Countries like Rwanda,
Ghana, Kenya, Uganda, and South Africa are rapidly moving in that direction
while India, China and Indonesia are also in queue debating their model and
approach.



We were told an interesting story at the assembly of why the two latter
groups may not realise universal access to healthcare. Mauricio
Torres-Tovar (Colombian Health Model: Exportable, Depending on the Interest
of the Market) spoke about the Colombia model that failed. Colombia had a
reasonable public health system which under the structural adjustment
policy of the World Bank was transformed into an insurance-based health
model that privatised the healthcare system in Colombia and destroyed the
public health system. The African and Asian countries mentioned above are
following precisely the Colombia model and their story is not likely to be
very different!

One of the key understandings that emerged from the discussions on
financing healthcare was about the fiscal space in public budgets to make
adequate budgetary commitments for healthcare. To make this possible the
following sets of postulates have to be realised:

• Tax: GDP ratio should be above 25%, preferably at least 30%, because such
a volume of revenues makes enough space to strengthen social sector
allocations like education, health and welfare.

• The taxation must be progressive, that is, most of it should come from
income and corporate tax.

• Financing of healthcare must be predominantly tax based.

• Governments have to commit close to 5% of GDP to realise universal access
to comprehensive primary healthcare.

• Healthcare should be recognised as a public or social good, and there
should be a constitutional and/or legal mandate guaranteeing right to
healthcare.

• The tax base needs to be expanded and collection of taxes should be
maximised by strengthening the mechanisms for tax collection.

• Tax evasions, including flow to tax havens, need to be strictly curbed so
as to maximise government revenues.

• Tax expenditures (or revenues forgone) should be minimised so that the
maximum potential of tax revenues is realised.

• All subsidies to the corporate sector need to be made transparent so that
accountability is possible.

• The huge volume of speculative transactions in foreign exchange,
commodities, shares and securities should be subject to a financial
transaction tax to generate additional revenues for social

sector budgets.

• Budget transparency and access to the entire range of budget information
is assured so that all financial transactions of the governments at
different levels can be held to account.

• Finally, a social movement to politicise healthcare would have to exert
the demand-side pressure for right to healthcare.

All of the above are linked to strong democratic functioning of governments
and the latter can only be assured if an active civil society exists and
demands accountability.

Most developing countries lack most of the above postulates and many of the
above are interdependent. For instance if a country has a tax-GDP ratio of
over 25% then it is most likely that it has a strong tax administration, is
curbing tax evasion, has a progressive tax regime, and a reasonably large
tax base.

*Reducing Out-of-Pocket Burdens *
In the last two years there has been a huge debate in India on universal
coverage(4), including the appointment of the High Level Expert Group
(HLEG), but both the Ministry of Health and the Planning Commission are
chewing over the recommendations of the report and trying to work out
“schemes” like universal access to medicines or universal healthcare
insurance, etc, instead of politically committing to accept the entire
package of recommendations of the HLEG and implementing it. It is precisely
this fragmented approach of converting comprehensive primary healthcare
into schemes or vertical programmes that has prevented most developing
countries from moving towards universal access to healthcare and this was
condemned across the board at the PHA 3. To change this scenario, the
fiscal space has to be expanded and appropriate political will demonstrated
to accomplish it.

 PHM has recognised these problems and is presently finalising a call to
action emerging from Cape Town which will include the need for this
movement to engage with health financing, taxation and budget issues in the
struggle for health for all people of this world. Another issue from the
resources point of view which was raised at the PHA 3 was the concern about
the huge South-North flows of doctors, nurses and other technicians.

A valuation of this shows that often such flows are more than the foreign
debt-burden of the concerned country and hence compensation for this or a
swap with debt needs to be advocated for. Further, there is also a
commitment from the PHM to advocate for changes in the global financial
architecture by pushing the international governance institutions to rein
in and regulate the transnational corporations and finance capital through
regulation of transfer pricing, and the establishment of the financial
transaction tax. All these efforts will certainly contribute to moving
closer to realise the dream of “Health for All Now”. To conclude, as Suwit
Wibulpolprasert, one of the key persons behind Thailand’s success story for
universal coverage, mentioned in one of the plenary sessions that one of
the main outcomes of universal access to healthcare is that it reduces
out-of-pocket burdens and consequently poverty.
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