Health Sector Mid-Year Review 2014-2015

Discussion Guide
Group: Health Fund
The Malawi healthcare system faces twin challenges of absolute and relative
inadequate of resources. Due to inadequate financial resources, the quality of health
service provision has not been effective. The Ministry of Health is therefore proposing for
the establishment of the Health Fund.
A Health Fund is an independent Fund, normally established by law that pools and
manage health resources for the purpose of purchasing health services and goods for
the entitled population of the country. Health Funds are established as alternative
mechanisms for raising additional financial resources, pooling and purchasing the
health services and goods more effectively and efficiently than traditional methods of
financing the healthcare.
A preliminary review of international experience on the implementation of health funds
suggests the following key findings on objectives, source of revenue, management
arrangement, uses, successes and challenges:

(i)Goal or objectives of Health Funds mainly fell into five categories:

(ii)

To finance specific diseases -NCDs, by providing a subsidy for prescription

medication (Jamaica)
To finance a package provided to population (Poland, Kenya)
As a gap filler between free benefit and charged services (Australia)
As multi donor funds for delivery of essential health services(South Sudan,
Zimbabwe)
As community and health equity funds to protect the poor(Cambodia,
Vietnam, Tanzania)

Source of revenue
The health funds derived revenue mainly from levies on tobacco, alcohol,
consumption tax, Health insurance premiums, loans, investments, national budgets,
territory budgets and donor basket (pooled) funds

(iii)
Management arrangement of the Health Funds is either through independent
organization established by Act of Parliament with Board of Management and CEO or
through consortium of donors.
(iv)

Health Funds uses resources on specifics purposes such as:

Pay for (drugs) for the majority of NCDs and ART (Jamaica)
Pay for essential health package(Ghana)
Pay for health promotion and prevention (Jamaica)
Pay for health services for insured (Poland, Australia)

Medical gap cover between the Medicare benefit (free) and fees
charged for inpatients (Australia)

(v)
There has been mix picture in terms of success of Health Fund in relation to
coverage, quality, access, equity, efficiency and sustainability:

(vi)

Some health funds increased access, and coverage of health services

(Jamaica, Poland, Ghana, Australia and Kenya)
Some health funds increased quality of health services (Poland, Australia)
Some programs enhanced equity for the poor Cambodia, Vietnam
High-level political commitment and visionary leadership (Botswana,
Zimbabwe) -regarded as regional best practice by SADC
Increased utilizations of health services (South Sudan, Zimbabwe)

Key challenges faced by the Health Funds are as follows:

Large informal sector risk sustainability of the funds (Ghana, Jamaica,

Kenya)
Limited financing versus increasing coverage (Ghana, Kenya)
Insufficient financial management(Poland)
Poor access to specialized services(Poland)
Lack of mechanisms on provider payment methods(Poland)
Failure to close the gap between rich and poor people (Ghana)
Inequitable access to services especially remote and rural location
(Australia, Ghana, Kenya, Tanzania, Vietnam)
Weak regulatory and enforcement framework to comply with the
levy(Botswana, TEVETA)
No clear sustainability of donor health funds (South Sudan, Zimbabwe)

In summary the following are key takeaways:

Health funds are introduced either as health insurance to cover households

from paying high cost of interventions through direct out-of-pocket payments; or

As Donor pool or Donor/government pool to pay on behalf of the individuals

and the general for certain essential health interventions curative, public
health and prevention etc;

The objective of the Health Fund should be determined by specific health

problem or problems faced by the country;

The key factors for success are - establish a clear goal and definite sources and
application/uses of funds;

Separation of functions between financing and providing services;

Commitment by leadership; and

Strong governance and accountability structures to ensure independence from

political interference.

Proposed objectives of the Malawi Health Fund

Problems

Rationale for section

Underlying causes

Objective A: To bridge the resource gap for the Malawi EHP

Inadequate resources Available resources are
inadequate to fund EHP (HSSP reto fund the Malawi
costing estimates $62 per capita
EHP
per annum, Government spent
only $11.9 per capita per
annum) ~ Gap of $50.1 per
capita per annum

Declining of domestic revenue

Inefficient allocation and utilization
of health resources
Low government budget allocation
to the health sector seriously below
the Abuja target
Declining external funding and
increased earmarking of resources
with increased fragmentation of
the health system

Objective B: To fund specific conditions and health support systems

1. Rising incidences In Malawi NCDs are increasingly
becoming significant causes of
of NCDs

According to WHO, 80% of heart

disease, stroke and Type II diabetes
are caused by shared risk factors,
mainly tobacco use, unhealthy
diet, physical inactivity and the
harmful use of alcohol

2. Lack
of
appropriate health
facility
infrastructure and
deteriorating
of
existing

infrastructure

Low domestic spending in hospital

infrastructure
Low partner spending in crosscutting infrastructure investments

3. Lack of medicines
and
medical
supplies

4. Acute shortage of

morbidity and mortality in adults.

NCDs account for at least 12% of
the Total Disability Adjusted Life
Years in Malawi which is fourth
behind HIV/AIDS, other infections
and parasitic and respiratory
diseases. NCDs are thought to be
the second leading cause of
deaths in adults after HIV/AIDS in
Malawi
The current hospital infrastructure
is in bad shape and limited
space is available. Therefore
there is need to invest in
rehabilitation old structures and
building of new structures
There are few specialty health
facilities to deal with rising noncommunicable diseases leading
to government sending patients
abroad
The healthcare system constantly
experiences persistent shortages
of essential medicines and
medical supplies
High cost intervention for some
communicable diseases solely
funded by donors e.g. ART
The human resources is critical

Due to inadequate financial

resources
Due to serious Supply chain issues

Due to inadequate financial

component of health system and

Human Resources
is in short supply
for Health
5. High Incidences of In Malawi , many health
conditions and diseases are
preventable
preventable and if prevention
diseases
and
and promotive programs are
health conditions

resources to train required numbers

of healthcare workers
Bad eating habits, poor diet and
poor lifestyles contributes to health
problems

effectively carried out their

incidences could be reduced
e.g. Malaria, cholera, diarrhea,
cancer, diabetes, stroke etc.

Proposed Sources of Funds for the Health Fund

Revenue Source
Health levy on
Alcohol and
tobacco

Justifications
Alcohol causes majority
of road accidents and
trauma, gender based
violence etc.
Heavy use of tobacco
products contributes a
lot of health problems
such as TB, Cancer etc.

Health levy on
airtime
(telecommunic
ation)

Distractive driving such

as calling, texting on
phone while driving
causes road accidents
by three times
compared to others2

Fuel levy

Various fuel fumes/gas

cause emitted by cars
cause health and
environmental risks
Other existing levies
could be replaced or
shared with health levy
as the health system is
also in dire stress
Fuel is nearly demandinelastic nature and
revenue-generating
potential

Advantages
Earmarked levy for
health is for
particular purpose
rather than general
health funding
Clear health
benefits if price
increases leads to
demand decreases1
Excise already exists
so no additional
infrastructure or
reporting systems
would be necessary
Little to no
administrative cost
Excise already exists
so no additional
infrastructure or
reporting systems
would be necessary
Little to no
administrative cost
Other levies already
exists so no
additional
infrastructure or
reporting systems
would be necessary

Disadvantages
Potential economic
implications of decreased
demand

Price increases could

result, decreasing airtime
demand and inhibiting
economic growth
Airtime already constitutes
a big portion of spending
for the poorest; potentially
a regressive measure
Increased fuel prices could
result in reduced income
levels, inflation, and
decreased demand

International Agency for Research on Cancer (2011)

Study on the impact of hand-held and hands-free cell phone use on driving performance and safety-critical event
risk by National Highway Traffic Safety Administration (2013)
2

Visa health fees

Visitors health charge

could act as an
insurance cover in a
predominantly free
public health system

Extractive
health levy

Mining sector3
contributes to health risks
since miners surrounding
communities are
exposed to various
potentially toxic or
harmful materials or
agents, including, but
not limited to, fuels,
reagents, solvents,
detergents, chemicals,
coal dust, silica dust,
diesel particulate matter
(DPM), asbestos, noise,
welding fumes,
poisonous plants,trona
dust, and metal dust
Bad eating habits, diet
and poor lifestyles
contributes to health
problems including
NCDs, Communicable
diseases such as
diabetes, cardio
vascular, cancer,
diarrhea, malaria,
cholera, ARI,
underweight4. Therefore
allocation of resources
for the health to treat
such conditions should
be made as result of illconsumption of the
goods and services
Majority of people are in
the inform economy
hence the only way for
them to directly
contribute to their own
health

Health VAT levy

3
4

A Community guide to Environmental Health, 2012

HSSP 2011-2016

Limited visa fees in

place (none for US
or EU citizens
Highly sustainable
once instituted
No adverse effects
to equity and
access
If mining companies
contributes to the
cost of health
effectively at the
national or in the
specific locations
where the mining
activities are being
carried out then
equity and access
will be improved

None (majority of travelers

to Malawi from EU or US or
far East are for
development work not
tourism per se)

Little to no
administrative cost
VAT already exists
so no additional
infrastructure or
reporting systems
would be necessary

Increased prices could

result in reduced demand
for basic goods and
services, and inflation;
potentially a regressive
measure

Levy would inhibit the

growth of the industry that
has been touted to have
great potential of
transforming the economy
of the country if fully
exploited

Suggested Discussion Questions

1. What should be the objective of the health fund?
a. To fill the Essential Health Package (EHP) gap?
b. Or to fill the gap of specific disease/condition or inventions (which
one/s)?
c. Or to fill another [health systems] gap?
d. To supplement another reform?
2. What could be the best uses or application of funds
a. Fill the Essential Health Package (EHP) (regardless)?
b. Fill specific areas (which one/s)?
3. What should be the management structure and financial management
accountability for the Health Fund?
4. What do you think should be the relationship (in terms of application and
management of funds) for the following:
a. Mandatory Health Insurance and Health Fund
b. Donor Common Funding mechanism and Health Fund
c. Mandatory Health Insurance, Donor Common Funding Mechanism
and Health Fund
d. Health Fund and Existing Government Budget funding for Health
and existing Donor funding for Health
5. Apart from the proposed sources of funds, what other sources of funds
should be considered?
Group output (10 minutes maximum for feedback)
Please pick a member of your group to present.