Health Sector Mid-Year Review 2014-2015

Discussion Guide

Group: Health Fund

The Malawi healthcare system faces twin challenges of absolute and relative

inadequate of resources. Due to inadequate financial resources, the quality of health

service provision has not been effective. The Ministry of Health is therefore proposing for

the establishment of the Health Fund.

A Health Fund is an independent Fund, normally established by law that pools and

manage health resources for the purpose of purchasing health services and goods for

the entitled population of the country. Health Funds are established as alternative

mechanisms for raising additional financial resources, pooling and purchasing the

health services and goods more effectively and efficiently than traditional methods of

financing the healthcare.

A preliminary review of international experience on the implementation of health funds

suggests the following key findings on objectives, source of revenue, management

arrangement, uses, successes and challenges:

(i)Goal or objectives of Health Funds mainly fell into five categories:

To finance specific diseases -NCDs, by providing a subsidy for prescription

medication (Jamaica)

To finance a package provided to population (Poland, Kenya)

As a gap filler between free benefit and charged services (Australia)

As multi donor funds for delivery of essential health services(South Sudan,

Zimbabwe)

As community and health equity funds to protect the poor(Cambodia,

Vietnam, Tanzania)

(ii) Source of revenue

The health funds derived revenue mainly from levies on tobacco, alcohol,

consumption tax, Health insurance premiums, loans, investments, national budgets,

territory budgets and donor basket (pooled) funds

(iii) Management arrangement of the Health Funds is either through independent

organization established by Act of Parliament with Board of Management and CEO or

through consortium of donors.

(iv) Health Funds uses resources on specifics purposes such as:

Pay for (drugs) for the majority of NCDs and ART (Jamaica)

Pay for essential health package(Ghana)

Pay for health promotion and prevention (Jamaica)

Pay for health services for insured (Poland, Australia)

Medical gap cover between the Medicare benefit (free) and fees

charged for inpatients (Australia)

(v) There has been mix picture in terms of success of Health Fund in relation to

coverage, quality, access, equity, efficiency and sustainability:

Some health funds increased access, and coverage of health services

(Jamaica, Poland, Ghana, Australia and Kenya)

Some health funds increased quality of health services (Poland, Australia)

Some programs enhanced equity for the poor – Cambodia, Vietnam

High-level political commitment and visionary leadership (Botswana,

Zimbabwe) -regarded as regional best practice by SADC

Increased utilizations of health services (South Sudan, Zimbabwe)

(vi) Key challenges faced by the Health Funds are as follows:

Large informal sector – risk sustainability of the funds (Ghana, Jamaica,

Kenya)

Limited financing versus increasing coverage (Ghana, Kenya)

Insufficient financial management(Poland)

Poor access to specialized services(Poland)

Lack of mechanisms on provider payment methods(Poland)

Failure to close the gap between rich and poor people (Ghana)

Inequitable access to services especially remote and rural location

(Australia, Ghana, Kenya, Tanzania, Vietnam)

Weak regulatory and enforcement framework to comply with the

levy(Botswana, TEVETA)

No clear sustainability of donor health funds – (South Sudan, Zimbabwe)

In summary the following are key takeaways:

• Health funds are introduced either as health insurance – to cover households

from paying high cost of interventions through direct out-of-pocket payments; or

• As Donor pool or Donor/government pool to pay on behalf of the individuals

and the general for certain essential health interventions – curative, public

health and prevention etc;

• The objective of the Health Fund should be determined by specific health

problem or problems faced by the country;

• The key factors for success are - establish a clear goal and definite sources and

application/uses of funds;

• Separation of functions between financing and providing services;

• Commitment by leadership; and

• Strong governance and accountability structures to ensure independence from

political interference.

Proposed objectives of the Malawi Health Fund

Problems Rationale for section Underlying causes

Objective A: To bridge the resource gap for the Malawi EHP Inadequate resources

to fund the Malawi

EHP

Available resources are

inadequate to fund EHP (HSSP re-

costing estimates $62 per capita

per annum, Government spent

only $11.9 per capita per

annum) ~ Gap of $50.1 per

capita per annum

Declining of domestic revenue

Inefficient allocation and utilization

of health resources

Low government budget allocation

to the health sector seriously below

the Abuja target

Declining external funding and

increased earmarking of resources

with increased fragmentation of

the health system

Objective B: To fund specific conditions and health support systems

1. Rising incidences

of NCDs

In Malawi NCDs are increasingly

becoming significant causes of

morbidity and mortality in adults.

NCDs account for at least 12% of

the Total Disability Adjusted Life

Years in Malawi which is fourth

behind HIV/AIDS, other infections

and parasitic and respiratory

diseases. NCDs are thought to be

the second leading cause of

deaths in adults after HIV/AIDS in

Malawi

According to WHO, 80% of heart

disease, stroke and Type II diabetes

are caused by shared risk factors,

mainly tobacco use, unhealthy

diet, physical inactivity and the

harmful use of alcohol

2. Lack of

appropriate health

facility

infrastructure and

deteriorating of

existing

infrastructure

The current hospital infrastructure

is in bad shape and limited

space is available. Therefore

there is need to invest in

rehabilitation old structures and

building of new structures

There are few specialty health

facilities to deal with rising non-

communicable diseases leading

to government sending patients

abroad

Low domestic spending in hospital

infrastructure

Low partner spending in cross-

cutting infrastructure investments

3. Lack of medicines

and medical

supplies

The healthcare system constantly

experiences persistent shortages

of essential medicines and

medical supplies

High cost intervention for some

communicable diseases solely

funded by donors e.g. ART

Due to inadequate financial

resources

Due to serious Supply chain issues

4. Acute shortage of The human resources is critical Due to inadequate financial

Human Resources

for Health

component of health system and

is in short supply

resources to train required numbers

of healthcare workers

5. High Incidences of

preventable

diseases and

health conditions

In Malawi , many health

conditions and diseases are

preventable and if prevention

and promotive programs are

effectively carried out their

incidences could be reduced

e.g. Malaria, cholera, diarrhea,

cancer, diabetes, stroke etc.

Bad eating habits, poor diet and

poor lifestyles contributes to health

problems

Proposed Sources of Funds for the Health Fund

Revenue Source Justifications Advantages Disadvantages

Health levy on

Alcohol and

tobacco

Alcohol causes majority

of road accidents and

trauma, gender based

violence etc.

Heavy use of tobacco

products contributes a

lot of health problems

such as TB, Cancer etc.

Earmarked levy for

health is for

particular purpose

rather than general

health funding

Clear health

benefits if price

increases leads to

demand decreases1

Excise already exists

so no additional

infrastructure or

reporting systems

would be necessary

Potential economic

implications of decreased

demand

Health levy on

airtime

(telecommunic

ation)

Distractive driving such

as calling, texting on

phone while driving

causes road accidents

by three times

compared to others2

Little to no

administrative cost

Excise already exists

so no additional

infrastructure or

reporting systems

would be necessary

Price increases could

result, decreasing airtime

demand and inhibiting

economic growth

Airtime already constitutes

a big portion of spending

for the poorest; potentially

a regressive measure

Fuel levy Various fuel fumes/gas

cause emitted by cars

cause health and

environmental risks

Other existing levies

could be replaced or

shared with health levy

as the health system is

also in dire stress

Fuel is nearly demand-

inelastic nature and

revenue-generating

potential

Little to no

administrative cost

Other levies already

exists so no

additional

infrastructure or

reporting systems

would be necessary

Increased fuel prices could

result in reduced income

levels, inflation, and

decreased demand

1 International Agency for Research on Cancer (2011)

2 Study on the impact of hand-held and hands-free cell phone use on driving performance and safety-critical event

risk by National Highway Traffic Safety Administration (2013)

Visa health fees Visitors health charge

could act as an

insurance cover in a

predominantly free

public health system

Limited visa fees in

place (none for US

or EU citizens

Highly sustainable

once instituted

No adverse effects

to equity and

access

None (majority of travelers

to Malawi from EU or US or

far East are for

development work not

tourism per se)

Extractive

health levy

Mining sector3

contributes to health risks

since miners surrounding

communities are

exposed to various

potentially toxic or

harmful materials or

agents, including, but

not limited to, fuels,

reagents, solvents,

detergents, chemicals,

coal dust, silica dust,

diesel particulate matter

(DPM), asbestos, noise,

welding fumes,

poisonous plants,trona

dust, and metal dust

If mining companies

contributes to the

cost of health

effectively at the

national or in the

specific locations

where the mining

activities are being

carried out then

equity and access

will be improved

Levy would inhibit the

growth of the industry that

has been touted to have

great potential of

transforming the economy

of the country if fully

exploited

Health VAT levy Bad eating habits, diet

and poor lifestyles

contributes to health

problems – including

NCDs, Communicable

diseases such as

diabetes, cardio

vascular, cancer,

diarrhea, malaria,

cholera, ARI,

underweight4. Therefore

allocation of resources

for the health to treat

such conditions should

be made as result of ill-

consumption of the

goods and services

Majority of people are in

the inform economy

hence the only way for

them to directly

contribute to their own

health

Little to no

administrative cost

VAT already exists

so no additional

infrastructure or

reporting systems

would be necessary

Increased prices could

result in reduced demand

for basic goods and

services, and inflation;

potentially a regressive

measure

3 A Community guide to Environmental Health, 2012

4 HSSP 2011-2016

Suggested Discussion Questions

1. What should be the objective of the health fund?

a. To fill the Essential Health Package (EHP) gap?

b. Or to fill the gap of specific disease/condition or inventions (which

one/s)?

c. Or to fill another [health systems] gap?

d. To supplement another reform?

2. What could be the best uses or application of funds

a. Fill the Essential Health Package (EHP) (regardless)?

b. Fill specific areas (which one/s)?

3. What should be the management structure and financial management

accountability for the Health Fund?

4. What do you think should be the relationship (in terms of application and

management of funds) for the following:

a. Mandatory Health Insurance and Health Fund

b. Donor Common Funding mechanism and Health Fund

c. Mandatory Health Insurance, Donor Common Funding Mechanism

and Health Fund

d. Health Fund and Existing Government Budget funding for Health

and existing Donor funding for Health

5. Apart from the proposed sources of funds, what other sources of funds

should be considered?

Group output (10 minutes maximum for feedback)

Please pick a member of your group to present.