Chapter 4
Financing issues
There are two interrelated levels at which the financing of HIV/AIDS interventions, including delivery of antiretroviral therapy, needs to be considered. The first, which has received the most attention, is the international division of responsibility between recipient countries and donors. The second level refers to the methods used within countries to finance provision of services.
One of the key messages of this report is that success in containing and reversing the HIV/AIDS pandemic is contingent on a massive increase in resource transfers from rich to poor countries. The 3 by 5 initiative cannot be implemented in isolation from a regeneration of health systems; this cannot be financed from the slender resources available to the poorest countries. It has been estimated that US$ 35-40 per capita per annum is needed to finance a minimum health service package including antiretroviral therapy, but actual levels of expenditure fall far short of this (2). The average amount spent, per capita, on health services in low-income countries was US$ 23 in 2001, of which only US$ 6 was public spending.
Even supposing that the poorest countries were able to make the greatly increased domestic fiscal effort to raise an additional 1-2% of gross national product (GNP) for health - relative to the average of 14% for all public expenditures - the per capita amounts generated would still be inadequate. With per capita incomes below US$ 300 per annum, an additional 1% of GNP raised for public health expenditure still produces less than US$ 3 per capita, leaving a substantial gap between resources required and those available. The shortfall can be made good only by transfers from the rich world. One estimate of the amount required is US$ 22 billion annually by 2007 (1), against which current transfers, though supplemented by innovative mechanisms (see Box 4.4), remain inadequate.
This response would be attended by four important considerations:
- First is the need for ongoing work to maintain and enhance the recent substantial increases in donor assistance for HIV/AIDS. This will require the involvement of the donor community in broad planning and monitoring at the international level.
- Second, poor countries themselves need reassurance that that the aid flows linked to HIV/AIDS will not experience the volatility that has been known in some other areas in the past.
- Third, some donor funds need to be available to repair deficiencies in basic system capacity and, above all, in the vital areas of staff salaries and pre-service training. If an expansion of aid is to be constructively used to build basic system capacities, it will have to be in more flexible forms that allow a jointly agreed programme of work to be undertaken. There has been some limited experience with the sector-wide approach, with notable success in Uganda and the United Republic of Tanzania (23), and across all development areas with poverty reduction strategy implementation using the proceeds of debt relief, with positive results in Ghana, Mozambique and Uganda (24).
- Fourth, it must be recognized that there is a potential problem with a massive increase in external aid threatening to produce adverse effects on macroeconomic stability and development by inducing domestic inflation and appreciation of the exchange rate.
The potential adverse effects may be transitory and more than offset by the effective use of aid to improve national productivity.
There is an obvious link between the international and domestic financing of health programmes. Smaller contributions from external sources mean that poor countries have to provide more funding from their own resources, either through collective mechanisms such as taxation or insurance, or individually out of pocket. South Africa receives very little external aid for its health sector, but it has recently seen some important changes in its domestic financing arrangements for antiretroviral therapy. In November 2003, the government committed itself to spending more than US$ 1.73 billion over three years to combat HIV/AIDS, more than tripling the amount spent during the preceding three years. Of this, US$ 270 million will be set aside for antiretroviral drugs. These funds will be insufficient, however, to cover all people who need medication, and multiple funding sources will be required to provide ongoing treatment.
In low-income developing countries, which generally do not have extensive insurance mechanisms, most personal health services are financed by a mix of taxation and user fees in the public sector. With the exceptions of Botswana and Brazil (both middle-income countries which have decided to meet the cost from public sources), developing country governments have not been greatly involved in financing antiretroviral therapy, probably because of its high unit cost. Private providers have been financing antiretroviral therapy through user fees for some time; international nongovernmental organizations and research-funded sites have received substantial external funds and have been able to provide either free or heavily subsidized treatment. Private-sector employers have provided free access to antiretroviral therapy, either directly through occupational health services or indirectly through private insurance intermediaries. A mixture of public and private financing is desirable, but only if it ensures equal access. Thus, scaling up the provision of antiretroviral therapy with greater public provider involvement presents a considerable challenge to governments.
Some governments are not confident that the costs will be adequately met by donors, they do not expect to be able to afford free provision from domestic resources (even with the dramatically reduced drug prices now in prospect), and do not see a basis for discrimination between antiretroviral therapy and other life-saving treatments for which user fees are charged. It is the stated intention of some governments to apply to antiretroviral therapy the standard regime of partial cost recovery (that is, user fees meet some but not all costs of service provision, the balance being borne by taxation) in public facilities. Almost all governments that operate user fees have some system of fee waivers which, in theory at least, allows very poor people to be exempt from payment.
In other quarters, there is an expectation that antiretroviral therapy will be provided free or at only nominal cost to all who need it, financed by external aid or other solidarity mechanisms. Inability to pay should not be a barrier to access. There is now evidence that out-of-pocket payment has undermined adherence to treatment and increased the risk of drug resistance. There are precedents for free treatment, for example for tuberculosis, even in countries which otherwise charge user fees in public facilities.
In most countries a mixed regime in financing antiretroviral therapy will probably continue, the argument being that people who are able to pay should do so and free treatment should be reserved for when payment could undermine access and adherence to treatment. This is a critical matter, because out-of-pocket payments for health already result in a substantial number of households facing financial catastrophe and poverty in the countries most affected by HIV/AIDS. The attention given to 3 by 5 may drive health financing reforms designed to improve access to all health services for the poor, an endeavour actively supported by WHO. An example of such reform is the proposal to develop a social health insurance scheme in Kenya (see Box 4.5).
