Subsidising private insurance to strengthen health services in Africa

“If you look at the figures, the big problem is there just isn’t enough money for healthcare in Sub-Saharan Africa. And if you look at population versus burden of disease and then look at total health expenditure, there is something fundamentally wrong,” said Dr Joep Lange, Founder and Chairman of the PharmAccess Foundation.

Dr Lange, a well known HIV clinician and researcher, who was president of the International AIDS Society several years ago, was speaking at ‘Bridging The Divide: Interdisciplinary Partnerships For HIV And Health Systems, a meeting held from July 16-17 2010 just before the AIDS 2010 conference in Vienna, Austria.

“So the first issue is that we need more money and I know that in these times of economic crisis, everybody is looking at ways to spend less, but we are not going to get decent healthcare in the decades to come if we are not willing to spend more on healthcare.”

The meeting brought together HIV community thought leaders, experts from other health programs, health economists, and health systems specialists to look at data on the impact of the HIV scale-up on health systems; and to try to work together to make certain that HIV programming is better leveraged to strengthen health systems and improve care for other priority health conditions. (The next issue of HATIP will describe some of the highlights from that meeting and related reports on health systems strengthening at AIDS 2010).

One of the sessions of the meeting looked at how to better utilise the private sector for health.

In his current role, Dr Lange has put on the hat of a health economist in order to find creative financing solutions to help provide access to ART and other health services. According to Dr Lange, public health services often do not reach the poor — in fact, more than 40% of the lowest income quintile receives health care from private providers.

However, the most economically disadvantaged Africans do not have medical insurance so they must pay out of pocket for care. Consequently, private out-of pocket expenses are responsible for more than 50% of total health care costs in resource-limited countries — in fact, the lower the GDP of a country, the higher the percentage of its health care costs covered by out-of-pocket expenses. 

Paying out-of pocket for health care increases both poverty and the under-utilisation of health services.

“Health systems in Africa are actually stuck in a vicious circle: There is a low quality of the supply side because there’s simply too little money — but it also means that the demand is lagging because there’s too little money on the demand side,” said Dr Lange. “People only go to the doctor if there is an emergency and then they have to spend out-of-pocket expenses. And in a way this is a self-enforcing mechanism: the poor supply leads to less demand and the low demand leads to the lack of building up a decent supply side — and quality is often horribly low.”

One solution that Dr Lange and PharmAccess are advocating is getting donors to encourage the wider use of private health insurance schemes by helping to subsidise the participation of financially weak people. This is likely to strike many heathcare advocates as controversial — especially those working to expand public sector services.

“There’s contradictory conventional wisdom that prevails on the broader private sector involvement in health,” said Dr Pamela Rao, who is the Senior Advisor for Health System Strengthening in the Office of HIV/AIDS at USAID. “Many in the public health community still oppose the principle of the broader private sector [believing that] government services are the key to improve the health indicators of the country and to bring about/address some of the health inequity issues. Many believe that all of the efforts and all of the donor funds should be concentrated on the public health sector. That's one school of thought that says the private sector is just a side-show which is serving a small population with the least need, at a very high cost, and maybe questionable quality.”

But the other school of thought is that private markets could be used to supplement public health services or even resolve public health problems, particularly in the context of the overstretched public health healthcare systems. There are a number of settings where the private sector provides better quality services, and some argue that governments should promote a more pro-private sector policy environment to gain the full benefit of the private sector role.

“When we talk about the private sector it doesn’t mean that the governments don’t have a role in health care.  There are very good reasons to involve governments in health care delivery. There are efficiency concerns. There are also equity and social justice concerns: seeing health care as a human right,” said Dr Lange. “But to have a dominant role with government providing health care, you have to meet certain preconditions. And in most sub-Saharan African countries the preconditions for a state-led model to work are not met… So we need to do something else.”

In other words, most governments simply are not applying sufficient resources for the state-led model to work. Nor do most countries have the capacity to deliver services nationwide.

But how can donor funds be used more efficiently to increase access to health services to low-income people from the private sector? Any approach that relied on the public sector would need to reduce out-of-pocket expenses, pool risk, make sure that those who can pay do pay — increasing the demand for and, critically, boosting the reach of high quality services.

The alternative model that PharmAccess is exploring involved setting up a health insurance fund, which got a big initial injection from the Dutch government. This funding is subsidising health insurance for the poor — not for the poorest-of-the-poor but for people who could afford to pay a little bit of the insurance premium. 

“By doing this you actually increase access to decent health care for poor people; you give them ownership; you create solidarity within groups; and you decrease the out-of-pocket expenses,” said Dr Lange.

The insurance fund was piloted in Nigeria early 2007, targeting a group of 40,000 local market women and dependents in Lagos and a farmer community of 75,000 people in Kwara state. Now USAID is also guaranteeing up to $20 million in Tanzania, Kenya and other countries. The World Bank is also contributing in Nigeria, financing the subsidy for a particular risk group.

“By having this certain demand, you also make it attractive on the supply side. First of all, for suppliers to be involved in this programme, they need to be able to deliver a certain quality. They cannot participate if they don’t meet certain standards and are assessed every six months for the quality - both administrative and also medically - and are actually out if they don’t perform.  And that’s also one of the big advantages of working with the private sector,” said Dr Lange.

He noted that even though they also work with the public sector, they don’t see the same responsiveness.

“If you walk into a public hospital and you want to set quality standards they laugh at you. If you go to a private sector provider that doesn’t get money if he doesn’t perform, you have a totally different situation,” he said.

Another issue Dr Lange pointed out is that there’s virtually no private equity going into health care. So PharmAccess is setting up a so-called medical credit fund so that people in the health care sector can access loans against affordable rates, to improve their clinics.

“So you improve the amount of money in the system, you improve the capacity to deliver and the quality of delivering, you empower patients and then also hopefully - and this is being investigated - by delivering and getting high-quality care, you increase the willingness of people to pay for services. “

But could these approaches have a role in health systems strengthening? Dr Rao noted that during the first morning of the meeting, the private sector only came up once. So, at present, it seems that, “it is being considered in isolation and it’s not necessarily conceptualised within the broader health system framework,” she said.

Although not perhaps on the radar of most public health experts yet, this was one of several  presentations during the Bridging the Divide meeting, that presented alternative approaches to leveraging private sector health resources to expand the reach of health care in resource constrained settings. Others will be discussed in the upcoming HATIP on HIV and Health Systems Strengthening.

For more on PharmAccess and their work, go here: http://bit.ly/dnSiLM

Dr Lange’s talk and presentation, as well as other talkings on leveraging the private sector can be downloaded here: http://www.iasociety.org/Default.aspx?pageId=426

Visit the HATIP Archive.