Discussion Synopsis
The annual Ministerial Forum for Finance Ministers is a key component of the Ministerial Leadership in Health (MLIH) Program. Jointly organized by the Harvard School of Public Health (HSPH) and the African Development Bank (AfDB) with support from the Bill and Melinda Gates Foundation and the Norwegian Agency for Development and Cooperation (NORAD), the Ministerial Forum for Finance Ministers aims to:
• Provide a non-official environment for serving ministers of finance to reflect on their role and leadership priorities, constraints and opportunities;
• Enhance the role of the finance minister in shaping the national health and socio-economic development agenda;
• Inform ministers’ perspectives on affordable and sustainable health financing and value for money in health;
• Share international experience in leveraging investment in health for socio-economic development.
The second annual Ministerial Forum for Ministers of Finance took place at Harvard University in April 2014. The intensive four-day program covered topics focusing on the importance of transformational political leadership in improving prospects of health and socio-economic development; the correlation between investment in health and national economic development and poverty eradication; innovative health financing options and international experience with the aim of reducing dependence on external budgetary support and achieving universal access to quality health services; and strategies and instruments for improved value for money in healthcare spending.
In October 2014, a follow-up Ministerial Roundtable for Finance Ministers participating in the MLIH Program was held in Washington, DC to build on the discussions started in April. The Roundtable focused on risk mitigation in light of the West African Ebola epidemic; increasing efficiency in utilization of public sector resources; and leveraging private sector support for public sector programs.
The Roundtable discussions were off-the-record. What follows is a synopsis of the principal themes and points of discussion and do not reflect the views of any specific participant or the organizers.
Keeping the Ship Afloat: The Role of Finance Minister in Managing National Crises
A boating analogy was used to illustrate the discussion of the concept of risk mitigation. To stay afloat, a ship needs buoyancy and ballast. Buoyancy keeps the ship above water and ballast keeps the ship stable in the water. For a finance minister, buoyancy is akin to revenue, which can be obtained through taxes, debt, and outside donor assistance; ballast is similar to personnel, goods and services, administration, etc. In the same way that a boat cannot set sail without buoyancy and ballast, a Ministry of Finance cannot embark towards ambitious goals for economic growth and development without a functional, systemic approach towards spending decisions. Ministers of Finance must foster alliances across sectors, think beyond the short-term, leverage upstream and downstream partnerships, and innovate. However, these elements cannot be implemented in a time of crisis. They must be functional and operational beforehand so as to be effectively utilized to address any crisis that may arise.
Health shocks can cause significant losses to GDP. This was the case with SARS in China, with Dengue Fever in Cape Verde, and is the case now with Ebola in Guinea, Sierra Leone, and Liberia. The immediate impact of Ebola on the economies of the affected countries has been a 2-3% decline in GDP, with 15% of households falling back to the poverty level. It is impossible for Ministers of Finance to ignore the health system. Aside from the potential for health improvements to increase economic growth, potential health epidemics can drastically undo years of economic progress. In order to build health systems that can withstand such shocks to population health and economic progress, short term injections, medium term systems building, and long term capacity building and behavior change programs should all be considered.
Ministers of Finance are essentially the Chief Financial Officers of their countries. As such, they must be fully aware of any projected risks that can derail their objectives and prepare for them. From a risk management perspective, Ministers must consider AIDS, TB, malaria and others as critical risks that need to be managed. More and more countries are learning how to manage their risks and those that do not will be isolated in the future in terms of economic growth, trade, etc. It is a valuable exercise to calculate the total cost to eradicate any real threats, regardless of whether the amount is feasible. Knowing that total cost is uncomfortable and that discomfort will spur innovation to find money, leverage money, and spend money in the most cost effective way. We are in a unique period of global solidarity in the fight against pandemics, it is important to take advantage of the funding and leveraging opportunities that are available. Furthermore, putting money towards health should not be considered expenditure, but rather investment.
Generating sufficient funds for health is one issue but actually knowing where and how to allocate it is another equally daunting task, particularly with inefficient health systems. Putting money towards health should not be considered expenditure, but rather investment. There must be an ideological shift to expect a return. This can only be the case, however, if health systems are functional, able to respond, and resilient to shocks. The finance minister cannot outsource this responsibility to the health minister but must take a proactive role in transforming the efficiency and effectiveness of public health services.
Waste Not, Want Not: The Efficiency of Health Expenditure in Emerging and Developing Economies
While increased spending is one strategy towards improving health systems, increased efficiency is another, sometimes overlooked, approach. For developing countries, technical inefficiency is a critical issue facing many health systems. The relevant question facing many health and finance ministers is: “Could more output be generated with the same level of input?” Inefficiency is a worldwide problem in both developed and developing countries, with low-income countries mostly in Africa being the most inefficient. In most cases, spending has a significant impact on health outcomes. However, among countries with low levels of spending there is greater heterogeneity in outcomes. The literature finds that countries achieve higher efficiency in health spending when they have: 1) Better governance and fiscal institutions, especially bureaucratic quality; 2) Better education; 3) Lower prevalence of HIV/AIDS; 4) Lower income inequality; 5) Lower expenditure levels; and 6) Higher urbanization.
From a global perspective, moving from the least efficient to most efficient quartile of countries can gain 5.1 years of Health-Adjusted Life Expectancy (HALE). For any African country below the regional average, reaching the regional average of public expenditures per capita (PPP), TB diffusion, and efficiency level could achieve 1.2, 6.5, and 1.5 years gain in HALE, respectively. Thus, a 10% increase in public health spending per capita would raise HALE by only 2 months whereas those countries in the bottom quartile of the efficiency distribution can increase HALE by approximately 5 years.
National accounting records operate on the assumption that the systems they report on are 100% efficient. Monies generated equal monies disbursed and inputs are fully and efficiently used. However, given that it is fair to assume that any given country’s efficiency score is less than 1, the real value of GDP is actually an overestimate. Furthermore, if the costs allocated to health are accurate, then the proportion of GDP allocated to health is actually an underestimate. Correcting GDP for wastage shows that inefficient countries are poorer than they appear by their national accounts.
Strengthening Public Sector Resource Utilization and Performance: Practical Ideas
Many Ministers of Finance focus on public financial management reforms as being critical moments that spur progress in the sectors that use them. However, there is significant variation in progress after reforms. There are two key reasons for this consistent inconsistency: 1) Budgets are consistently made better than they are executed; and 2) Deconcentrated implementers have much lower compliance with new systems. The spending that Ministers of Finance should focus on is not initial disbursements but rather ongoing execution. Data supports the fact that MTEF’s, IFMIS’s, and internal controls all deliver more in the Ministry of Finance itself rather than in the health sector on the ground. Thus, implemented reforms may not actually be delivering better public financial management or better use of finances.
Many currently implemented reforms are good but they do not have the reach needed or they are not complied with as intended. There are differential viewpoints between Ministry employees and the laws they try to enforce versus on-the-ground staff and their implementation challenges, even though their overarching goals may be the same. Reform issues are not often as straight forward as intentional lack of compliance, but rather related to logistic issues, viability, and perceptions of the value of new laws. Those whom the reforms are meant to help do not always see the reforms as feasible or useful but their views are seldom taken into account. This is particularly the case in health where external financing often insulates the sector from government-wide reforms.
Oftentimes there is no knowledge of lack of compliance or indifference at higher levels because reforms are not succeeded by follow up. There is no data collection on the use of systems and their influence on key outcomes. Reforms could be more successful if they were communicated as doing things that sectors care about, rather than as controlling forces from powers above. Follow up to build acceptance and engage with end users is also a critical part of the reform process. This can be done through participatory audits, joint monitoring teams, and more. Furthermore, allowing Ministry employees lateral autonomy to engage with other Ministry employees to find intersectoral solutions to intersectoral problems is integral. For example, computer based systems cannot run if the electricity supply cannot be relied on.
For the health sector specifically, there are some practical ideas that finance ministers can engage to improve resource use given existing public financial management reforms. With regards to procurement and medicines storage, have finance officials spend time with health sector officials examining the value chain, identifying risks and problems, and experimenting with simple solutions that they all buy into. For budgeting and planning, have finance officials work with health sector officials to scrutinize actual spending in specific areas, finding gaps and problems, and adjusting the planning and budgeting approach as needed. As for IFMIS and financial flows, have finance officials collaborate with health sector officials to assess compliance with the IFMIS system requirements – not as an accountability audit but rather as a learning exercise to identify and close gaps with solutions that commonly emerge.
The key themes of a practical approach to close gaps in resource usage include collaboration between the Ministry of Finance and other sectors to develop reforms that are commonly owned, practical, and useful. Look at specific areas rather than the whole budget to build solutions. Disparate interventions can build into a comprehensive solution. Finally, be prepared to see a reform fail but take it as a learning experience that can be built on for greater success in development and implementation in the future.
Leveraging the Private Sector for Improved Public Sector Delivery
The private sector includes for-profit, non-profit, and hybrid organizational structures – all of which can be leveraged for improved public sector delivery in different ways. Advantages of leveraging the private sector include an additional source of capital investment, knowledge, and management skills. The private sector is particularly skilled with regards to health insurance and health center operations. Despite the immense amount of potential associated with private sector engagement, there are also disadvantages. Private sector players are often better negotiators who charge high prices for capital and contracted services. Their providers demand higher profits which means higher prices for patients and greater potential for induced demand. Financial incentives for health workers often woo the best physicians and nurses from the public sector to the private sector. The public sector can leverage the private sector by purchasing and contracting health services, applying the concession model, or outsourcing elements such as the administration of social health insurance, selected specialized functions such as food or laundry, or management of health centers and hospitals.