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Fiscal Space Perspectives and Practices Fiscal Space Perspectives and Practices

Fiscal Space Perspectives and Practices - PowerPoint Presentation

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Fiscal Space Perspectives and Practices - PPT Presentation

Indrani Gupta Health Policy Research Unit Institute of Economic Growth Universal Health Coverage Day December 1112 2017 New Delhi Why emphasize on fiscal space for health Investments in health are essential for sustainable growth and development ID: 751988

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Slide1

Fiscal SpacePerspectives and Practices

Indrani

Gupta

Health Policy Research Unit

Institute of Economic Growth

Universal Health Coverage Day

December 11-12, 2017

New DelhiSlide2

Why emphasize on fiscal space for health?Investments in health are essential for sustainable growth and developmentInvestment in health is sound investment because it leads to more productive workersLack of sustained level of funding is seen as a critical bottleneck in the health sector, especially in low and middle-income countriesNeed to raise resources for the health sector if current resource envelope is not adequate

Fiscal space is the capacity of governments to provide additional budgetary resources for a desired purpose, without jeopardizing the fiscal stability of the economy.

How can a government feasibly increase expenditure in a way that is consistent with its macroeconomic fundamentalsSlide3

What are we aiming for?5% of GDP to be spent on health by government (WHR 2010, Chatham House report)4-5% of GDP on health can make countries move towards UHC (McIntyre and Meheus 2014)Abuja Declaration: African countries pledged to spend 15% of their national budgets on the health sectorSlide4

National spending on health by source for 184 countries between 2013 and 2040 Joseph L Dieleman, PhD, Tara Templin, BA, Nafis Sadat, MA, Patrick Reidy, BA, Abigail Chapin, BA, Kyle Foreman, PhD, Annie Haakenstad

, MA, Tim Evans, MD, Prof Christopher J L Murray, MD,

Christoph

Kurowski

, MD

 The Lancet Volume 387, Issue 10037, Pages 2521-2535 (June 2016) Slide5

National spending on health by source for 184 countries between 2013 and 2040, The Lancet > A major portion of health financing is expected to remain out-of-pocket. This finding is especially true in south Asia, where more than half of health spending is expected to be out of pocket in 2040.

>

Of 132 currently low-income and middle-income countries, only 37 are expected to reach the goal of 5% of GDP on health by 2040.

 Slide6

Sources of fiscal spaceDomestic revenue mobilizationTax reformsNewer revenue sources like earmarked taxes

Domestic and external borrowing

Development assistance for health (DAH)

Aid and debt relief

Increase efficiency of spending

Making better use of existing resources

Favourable macroeconomic conditions key for expanding fiscal space Slide7

1. Domestic revenue for healthDomestic revenues can be mobilized in 3 ways:Prioritising health within the overall government spending: improving the ratio of health expenditure-to-total government expenditureImproving the tax-to-GDP ratio: broadening tax base and improving tax administration

Earmarked taxes: sin taxes, Social Health InsuranceSlide8

Total expenditure on Health as a % of GDP (2014)

Source: WHO Global Health Observatory dataSlide9

Prioritizing HealthPublic Spending on Health as a % of GDP (2014)Source: WHO Global Health ObservatorySlide10

Prioritizing HealthHealth Expenditure in Total Government Expenditure (%) (2014)

Source: WHO Global Health Observatory dataSlide11

World Distribution of Tax-to-GDP Ratio, 2016IMF Fiscal Monitor, April 2017

Revenue mobilization remains limited in low-income developing countries.Slide12

Tax to GDP ratio (%) (2015) in selected countries

Source: All countries- World Bank, China-State Administration of taxation, Mexico, Ghana- OECD, India- Economic SurveySlide13

Earmarked taxes Earmarking involves separating a part of revenue – generally from a group of taxes – for specific purposes.Income/payroll taxes or general revenue

Denmark, Brazil, Indonesia, Vietnam

Consumption taxes: VAT, alcohol, tobacco

Chile, Ghana, Italy (VAT)

Thailand, Vietnam, Nepal (alcohol/tobacco)

Other

Gabon: (levy on foreign personal money transfers), Bolivia & Ghana (savings from debt relief)

Article 6 of WHO Framework Convention on Tobacco Control (WHO FCTC) : countries should dedicate revenue to fund tobacco control and other health promotion

programmes

. Slide14

Evidence…A WHO study on nine countries for earmarked tobacco taxes (WHO 2016) : Botswana, Egypt, Iceland, Panama, Philippines, Poland, Romania, Thailand, VietnamRequired legislative reformsFaced strong opposition

Overall moderately successful

Lessons learnt

Present evidence for decision makers

Clearly articulate financing mechanism, use of funds and implementation

Health and finance departments need to work in tandem

Need political championsSlide15

Earmarked taxes….A more recent review (WHO 2017) indicate the followingSuccess of earmarking depends on the contextEarmarking in some cases have advanced the UHC cause (ex. Ghana, Philippines)

More importantly, earmarking is unlikely to bring sustained and significant increase in priority placed on health because funds are fungible, and earmarking can result in offsets. Ex. Brazil

It can introduce rigidities in the budget process

Earmarking more successful in cases where the practices follow a standard budget process

Main question: do we need to earmark, if resource allocation decisions are taken based on sound planning and a process of prioritization within the current or expanded revenue envelopeSlide16

2. BorrowingDomestic and foreign borrowing must be serviced and repaidNeed careful evaluation of the costs and returns of the borrowed funds

Will the borrowed funds be used in a way that will increase future government revenues?

Government’s capacity to service interest and principal repayments?

Current debt-GDP ratio?

Terms of borrowing?

GDP growth, interest rates, composition of existing debt

etc

Different views on borrowing as a tool for creating fiscal space

In any case not advisable for countries with high debt-GDP ratio

Borrowing is not generally seen as a reasonable strategy or a sensible tool for recurrent payments and expenditures like those under UHCSlide17

Gross Debt to GDP Ratio (%) (2016)Source: IMF , Fiscal Monitor, 2017Slide18

3. External Resources or Development Assistance for HealthDeclining, uncertain, unsustainable.…

Development assistance for health: past trends, associations, and the future of international financial flows for health. The Lancet.

  June 2016 Slide19

4. Improving efficiency of spendingTechnical efficiency: maximum outcomes for a given level of inputsProductive efficiency: input costs are minimised for a given level of health outcomesAllocative efficiency: right mixture of healthcare programmesBetween 20 per cent and 40 per cent of health spending is wasted globally through inefficiency, pointing to substantial potential for savings.

When resources are scarce, any type of wastage needs to be urgently addressed

An important source of fiscal space that need to be discussed along with need for

higher spendingSlide20

Ten leading causes of health system inefficiency (WHO, 2010)

Category of inefficiency

Details

Medicines

Underuse of generics and higher than necessary prices for medicines

Use of substandard and counterfeit medicines

Inappropriate and ineffective use

Overuse or oversupply of equipment, investigations and procedures

Human resources

Inappropriate or costly staff mix, unmotivated workers

Health

services

Inappropriate hospital admissions and length of stay

Inappropriate hospital size (low use of infrastructure)

Medical errors and suboptimal quality of care

Health

system leakages

Waste, corruption and fraud

Intervention

mix

Inefficient mix/inappropriate level of strategiesSlide21

Efficiency…..Value for Money: a framework that can be used to spend wisely and cut down on inefficienciesRapid advances in technology requires evidence-based adoption of new interventionsHealth Technology Assessment (HTA) can be used to assess the relative costs and benefits of health technologies, and can aid decision-making, especially in the context of UHC.

At the same time, health sector reforms that change the way health care is financed and delivered (ex. reduce fragmentation in flow and pooling of funds) are essential alongside new cost-effective technologies

Ex: Tamil Nadu: reforms started early; public health cadre at district level; village level nurses; setting up of

Tamil

Nadu

Medical Services Corporation (TNMSC) in 1995, an autonomous body regulating the drug procurement and distribution alongside promoting the rational use of generic drugs at an affordable cost

Incremental and gradual reforms is the key to address many inefficiencies in the health sector Slide22

Whither fiscal space?In 2014 the 54 Member States of the African Union adopted Agenda 2063, a new vision that provides a common 50-year development framework for the continent. Agenda 2063 commits Member States to overcome “the dwindling and unpredictability of development assistance” by ‘looking inwards’ and ‘mobilising internal resources for the promotion of her health”. Mexico, Thailand, Chile, Turkey, and Brazil, more recently Ghana, Cambodia, Rwanda, China…shown the will to reform by prioritizing health and undertaking incremental reforms that address financing and efficiency issues  

For countries with low tax-GDP ratios and high debt-GDP ratios, revenue mobilization remains the most robust option for expanding fiscal space for health

Even with the current tax-GDP ratio, governments can prioritize social sector spending, including health

…you need to do all the systems reforms as well but at the end of the day I think that the two absolute foundations you need are genuine political commitment by the head of state and public financing…‘ (Robert Yates)Slide23

THANK YOU