Macroeconomics and Health (CMH)

MacroHealth Newsletter

No. 11, November 2004


Technical work continues apace in countries pursuing Macroeconomics and Health activities. WHO consultant Catherine Michaud presents her work tracking the flow of external financial resources to the health sector in Indonesia. Louis J. Currat describes a framework for evaluating progress and identifying key tasks for national MH commissions. Meanwhile, missions to Malawi and Bolivia kicked off efforts to analyse each country's health situation and policies and propose fiscally sound strategies.

Indonesia: External resource flows to the health sector

The detailed review of external financial flows to the health sector in Indonesia, recently conducted as a part of MH work, is the first country study that applied the national health accounts (NHA) framework to track the flow of external financial resources. This approach ensures that the study complements NHA studies, which include external funds but do not track their allocation within the country separately from domestic sources of financing. The NHA framework traces how much is being spent; where it is being spent; what it is being spent on and for whom; how that has changed over time; and how that compares to spending in countries facing similar conditions1. The key question really is; “to what extent do external funds meet the most pressing health needs of the country?”

Indonesia is undergoing major political, economic and social transitions, which have direct implications for the health sector. Although steady progress has been achieved over the past decades, Indonesia still lags behind other countries with similar levels of development in the region in all major health indicators. It also invests much less than other countries in its health sector. About 18 % of the population is under the poverty line. The Asian economic crisis in 1997-98 exposed the vulnerability of the poor to abrupt changes in the macroeconomic situation of the country. Increases in malnutrition, soaring prices of drugs, including vaccines, and a decrease in already low public investments in the health sector opened the door for a large increase in communicable diseases. The share of external funding increased from 12% in 1997 to approximately one-third of total public health expenditures in 1999-2000, and subsequently decreased to about one-quarter of total public funds. External funds were specifically targeted to support family health, nutrition and communicable diseases. The Asian Development Bank spearheaded the effort to limit the health impact of the crisis among the poor and committed US$ 332.4 million in loans in 97-99. The World Bank committed an additional US$ 115 million. These commitments were subsequently reduced by 20%, and budget execution by 2002 was 75%, underscoring major difficulties in the implementation of planned activities during the economic crisis.

In January 2001, poverty levels and major health indicators were back to their pre-crisis levels, when the country underwent “big bang” decentralization in all sectors including health mandated by Presidential Decree. The devolution of decision-making to 400 districts transformed one of the most centralized systems to one of the most decentralized systems in the world. The decentralization process is still underway and many challenges to its successful implementation remain.

In 2002, all external donors spent a total of US$ 173 million. Multilateral sources (UN agencies and the development banks) provided 58%, bilateral agencies 39% and private non-profit sector about 3% of total expenditures. The Asian Development Bank, the World Bank and USAID each spent more than US$ 20 million, whereas all other donors spent less than $ 10 million each. The major needs in the country are to support and strengthen the decentralization of the health sector, while at the same time improving maternal and child health, and reducing the burden of major infectious diseases, all of which are important health MDG targets. Donors, the Government of Indonesia, and other stakeholders agree that these are the key priorities. Although many donors support several of these priorities, the development banks invest most in support of health sector decentralization, while UN agencies and bilateral agencies support specific health needs, both in the form of technical assistance and direct project support.

Commitment levels have been fairly stable over the past few years from all external donors. However, the Global Fund to fight AIDS, Tuberculosis and Malaria has recently approved US$ 70 million in the next two years and will likely fund the entire estimated financial gap required to meet national targets for tuberculosis (US$ 175 million over 5 years). It also approved two-year funding of US$ 6 million for HIV/AIDS and US$ 8.3 for malaria.

Funding from external and public sources is nevertheless woefully inadequate to strengthen the health system so that it can deliver essential interventions to meet MDG targets. The prevailing view is still that better health will follow economic growth, rather than being an important factor driving development. In this context, even modest increases in external and public sector expenditures for health resulting from the CMH country efforts, will represent a major step in the right direction.

Catherine Michaud, consultant, Coordination of Macroeconomics and Health, WHO and Senior Research Associate, Harvard Centre for Population and Development Studies

1 Guide to Producing national health accounts with special applications for low-income and middle-income countries, World Health Organization, Geneva 2003.

Assessing Macroeconomics and Health work: A Sri Lanka case study

Macroeconomics and Health in Sri Lanka has filled a number of gaps in country health and development planning, but several key tasks lie ahead for the National Commission on Macroeconomics and Health (NCMH), says a new report prepared by MH Consultant Louis J. Currat. The report, entitled "The Case of Sri Lanka: First Lessons and Framework for Comparing Progress Between Countries", reviews the Sri Lanka experience in Macroeconomics and Health and seeks to define a framework which would enable the identification of key tasks for national MH commissions, evaluation of progress and comparing of experiences across countries. Sri Lanka was one of the first countries to initiate MH work, setting up the NCMH in November 2002.

Macroeconomics and Health in Sri Lanka has helped build a consensus among members of Government and the public on the importance of investing in health for economic development and poverty reduction. The NCMH has instigated new research, provided an institutional mechanism for bringing together key actors at all levels of Government, and supported international partnerships, as well as translating this knowledge into a Health Investment Plan and monitoring its impact. Contributing to this success appear to be the traditional importance given to health and human development in Sri Lanka, high-level Government support, support from partners, regular meetings of the NCMH Planning Committee and Working Groups, effective advocacy and a dedicated NCMH Secretariat.

Using Sri Lanka as an example, Currat's report then proposes a matrix which gives an overview of economic and institutional factors affecting population health. The matrix serves to suggest priority future work for the Sri Lanka NCMH, including areas for further research, definition of new national targets for reducing the disease burden, and improved monitoring of health strategies and programmes and financial resources invested in health.

A look at macroeconomics and health in Malawi

A mission to Malawi by WHO Consultant Alessandro Conticini, carried out between August and September 2004, conducted a preliminary analysis of the health, poverty and macroeconomic situation in Malawi and identified strategies for increasing access for the poor. The analysis found that health indicators in Malawi are poor, with maternal mortality one of the highest in the world. Poverty and inequality are significant, and high economic instability persists. Although government expenditure on health is low, evidence suggests that resources are not being used optimally. The Government has shown interest in pursuing Macroeconomics and Health work to address these issues.

Several areas were identified to increase the efficiency of resources for health. At the community level, trust and community involvement in health services should be built, as well as strengthening communication between health workers and patients, promoting preventive practices, and using the already high percentage of antenatal visits as an entry point to reach poor populations with other services. Within the health sector, more resources should be allocated to primary care and decentralization improved to ensure that resources reach the front-line health centres. In addition, a comprehensive policy on human resources development within the health sector is needed and the public drug supply system is inadequate. Finally, the mission recommended better coordination among the Ministry of Health, the Ministry of Finance, and the Ministry of Economic Planning and Development.

While increased donor funding is needed, the mission suggested refining and focusing the National Health Plan to offer a smaller, more achievable package of essential health services. Improving health insurance reimbursement and drug-revolving funds were also proposed as potential options.

Malawi's SWAp plan of action is currently being defined and Macroeconomics and Health recommendations will inform health sector planning. Priority areas for work include research, policy guidance and implementation, and monitoring and evaluation.

This assessment mission was made possible thanks to a collaboration with the WHO Italian Expertise Fund.

Joint WHO/PAHO mission to Bolivia examines health challenges and opportunities

Representatives from WHO and the Pan-American Health Organization (PAHO) undertook a joint mission to Bolivia in September 2004, which resulted in preliminary work for the drafting of the health sector policy and identified short-, medium- and long-term activities that should be pursued. The mission included a member of WHO's MDGs, Health and Development Policy (HDP) programme.

Principal determinants of health in Bolivia include poverty; social exclusion; malnutrition; geographical characteristics of the country, including dispersion of the population; migration phenomenon; and urbanization. In Bolivia, 77 % of the population has limited access to health goods and services. However, as the birth rate has fallen, a larger percentage of the population is of working age, which constitutes an enormous demographic comparative advantage. Bolivia now faces important strategic decisions to promote economic development and improve living standards for its population.

To increase economic productivity and meet the Millennium Development Goals (MDGs), Bolivia should place health centrally in development planning. Challenges highlighted by the mission include weak leadership in the health sector; fragmentation of the health system; weak management capacity; inadequate human resources capacity; and segmentation, resulting in a significant amount of out-of-pocket spending which disproportionately affects the poor. Finally, more attention needs to be paid to integrate the needs and culture of the indigenous populations in health services provision. In terms of financing, lack of absorption capacity, in particular in the context of current imperfect decentralization, is a problem, as well as donor-driven priorities which often result from the lack of a clear strategy on the part of health authorities.

Six strategic orientations were proposed by the mission: extend social protection for health; strengthen leadership, regulation and social control in health; address human resources issues; improve financial management for more efficient and equitable use of resources; align external resources with strategic priorities in the health sector; and ensure that health is placed centrally in sustainable development.

More Country Updates in the next issue of the MacroHealth Newsletter…