Exploring the Means to Achieve Universal Health Coverage: Five lessons on contributory and non-contributory means of financing health care
Many African countries are committed to pursuing Universal Health Coverage (UHC) by ensuring that their citizens can access high quality health services without suffering financial hardship. This commitment has been a driver for reform initiatives across Africa, but to what extent do health policies really reflect this objective?
Several African countries have opted to increase population and financial coverage through contributory health insurance schemes that link entitlements to health services, to pre-payment in the form of insurance contributions or premiums. Governments may use budgetary funds to cover specific population groups, but fundamentally, coverage is linked to contribution. Non-contributory coverage programs determine entitlement to services according to some other criteria, such as citizenship, residence or income level. Such schemes are funded from the government’s budget.
The challenge that many African countries face as they pursue contributory health insurance is that many intended beneficiaries lack the capacity to pay the premium and their governments do not have sufficient funds to cover the contribution for these populations. Given high levels of informality in the labor market, collecting mandatory contributions through payroll taxes only works with a minority of the population. Both economic theory and evidence has proven the inherent weakness of de facto voluntary participation by the majority of the population in these schemes.
While some African countries have contributory insurance schemes just for salaried workers and other contributors (e.g., Tanzania and Zambia), others use government funds to extend the scheme to low-income groups (e.g., Ethiopia, Gabon, Ghana, Kenya, Morrocco and Rwanda). Even so, health insurance coverage in Africa remains low (7.9%) and pro-rich as shown by a recent review of 36 countries in sub-Saharan Africa.
It is also well documented that contributory insurance schemes in low- and lower-middle-income countries have not increased revenues for the health sector, and have instead exacerbated fragmentation of the health financing landscape creating inequities in access and inefficiencies. In this way, they have not helped these countries progress towards UHC. Instead, countries are advised to move towards reliance on predominantly public revenue resources, i.e. compulsory and pre-paid, through some form of taxation. In Africa, public financing channeled through the government budget remains the largest pool of funds that has the potential to facilitate strategic purchasing.
Based on these considerations, it seems African countries should review the penchant for new contributory insurance schemes and develop context-appropriate means to achieve UHC. But what does this look like?
To explore this question, the Strategic Purchasing Africa Resource Center (SPARC), Results for Development (R4D), ThinkWell and the World Health Organization (WHO) brought together researchers and practitioners at the 15th IHEA World Congress in Cape Town in July 2023. During a half-day session, speakers from Argentina, Burkina Faso, India, Indonesia, Kenya and Tanzania shared their latest research and opinions on contributory versus non-contributory, government-financed schemes. The panelists also discussed the factors that enhance or limit the success of both approaches to achieve the objectives of UHC.
A recording of the full session is available below.
In this blog, we summarize the key take-away messages that are relevant for practitioners working in Africa, who are considering design options to progress towards UHC in their countries.
1. You cannot spend your way to UHC
More public financing from tax and non-tax revenue is undoubtedly needed to cover large vulnerable and informal sector populations. However, African countries can achieve a lot more within current levels of resources by being more efficient.
Tanzania’s Health Basket Fund pools resources from donor funding for the health sector. Through the Direct Health Facility Financing (DHFF) mechanism, Tanzania channels existing health resources directly to primary health care facilities’ bank accounts, improving the flow of funds to the district level. Through DHFF, providers can use an integrated platform to plan, budget and report for all resources and use these funds according to locally set priorities that are approved through their health facility management committees. These committees include community representation to ensure accountability at the local level, even as facilities account for these public funds through the government hierarchy.
In Argentina, Programa Nacer – which was later called Programa Sumar – introduced conditional grants from the national government to the subnational governments, and results-based financing from the latter to health facilities. The program accounted for only 1% of provincial budgets but created system effects by improving how benefits are defined and paid for by purchasers. From an economic perspective, this experience suggests that the mechanism used for this relatively small injection of funds had a large marginal productivity impact.
2. Start by setting clear, measurable objectives
Getting the policy objective and results we want to achieve right is the first step in designing the means for achieving UHC. If we focus the objective of increasing coverage for the most vulnerable and raising more resources to cover the informal sector through insurance contributions, we narrow our policy options to one means of achieving it and designing health insurance schemes that may not be viable. Whereas if we focus the objective on increasing access to services without financial barriers, it widens the options to include non-contributory means through the government budget.
Noting the objective of achieving UHC is a long-term journey, creating a clear strategy and goals is an important first step. The objective of Argentina’s Program Nacer program set in 2004 was to improve maternal and neonatal health in regions with poorer health outcomes. This was achieved through well-designed incentives used by the national government in the transfer of funds to the provinces, with clear targets to be achieved, complemented by technical support and sufficient local autonomy. Incremental progress over 19 years has led to expansion into Programa Sumar, which reinforces public coverage to the whole population.
3. Take a “bird’s eye” systems perspective
Practitioners are encouraged to take a system-wide view on how each policy reform builds on progress to achieve UHC, rather than the narrow perspective of the scheme that may result in patchy coverage. Programa Nacer was designed with consideration to the overall health system architecture, which included national and provincial health insurance funds, to create greater coherence across health sector actors in the pursuit of clear objectives for UHC. Indonesia overhauled its social health insurance by merging existing health insurance schemes to reduce fragmentation across multiple schemes through the Jaminan Kesehatan Nasional (JKN), which has achieved 80% health insurance coverage and reduced out-of-pocket spending. Registered JKN members, which include inactive members, is higher at 93% of the population. Non-contributing members, who benefit from government subsidies, make up 60% of the scheme’s membership.
Reducing fragmentation in the system was also a goal for India’s Pradhan Mantri Jan Arogya Yojana (PM-JAY) under the Ayushman Bharat reform agenda initiated in 2017. The program builds on the government’s digital transformation agenda and the civic registration database to create a health insurance platform that allows seamless beneficiary registration, claims processing, provider empanelment and management of fraud and abuse within and across states. Modifications to the system are currently being piloted to improve access to medical records regardless of the purchaser (public or private). This gives a “bird’s eye” systems view that can enable further changes to the benefit package design or purchasing arrangements to complement schemes and resolve beneficiaries’ health care access challenges.
A systems perspective can also extend beyond the health sector to service delivery and public finance more broadly. In Tanzania, the DHFF mechanism was unique in that it was designed for both the health and education sectors, to improve equity in resource allocation and remove obstacles to the flow of funds to health facilities and schools respectively. This mechanism is used for planning, budgeting, and reporting of public funds, giving all levels of government — district, regional and national — a full view of resources being allocated and used by providers.
4. Focus on clear results and desired health outcomes
In a post-Covid environment, countries will need to maintain even greater focus on achieving UHC and showing clear results as health sector funding decreases and UHC indicators stagnate.
Burkina Faso’s free health care program Gratuité that targets maternal and child health services has created a system of prepayment to health providers, with clear rules on how providers could spend these funds. An evaluation of Gratuité has revealed an increase in access to delivery by a skilled health attendant and consultation visits by children. Gratuité, a non-contributory scheme financed through the Ministry of Health’s budget increased resources flowing to the provider, although over time claims have outstripped available resources, resulting in significant deficits in funding and arrears that are hampering service delivery. Sustaining Gratuité and the gains achieved will require review of the provider payment mechanism, harmonizing clinical care and medicine dispensing practices, digitizing claims, and an increase in the financial commitment of the Burkinabé government and its partners.
5. Decisions you make now can be difficult to reverse in the future
Practitioners should heed a message of caution as they consider design choices, since past decisions limit the options available in the present and present decisions will constrain options in the future. In Kenya and Tanzania, the contributory social health insurance is a legacy system that has been very difficult to change despite changes in administration. Decisions to expand the benefit package may be popular but may be financially hard to sustain and become very difficult to reverse. In Kenya, the informal sector scheme of the national health insurance fund has a broad benefit package but still suffers from adverse selection due to voluntary enrollment, which has led to a 300% claims ratio (i.e. many of the people who joined the health insurance program had higher health costs, which caused the program to pay out three times more in claims than it collected in premiums, and made it financially unsustainable). In Tanzania, having three fragmented public schemes may prove challenging to harmonize in the future as envisioned in the new UHC bill.
Politics matters, and interest groups can derail a well-designed policy process — such as the design of a benefits package. Undue influence of formal sector workers or government worker lobby groups can result in the inclusion of services that threaten the financial viability of insurance schemes. For example, Indonesia is facing pressure to separate the formal and informal sector groups, offering broader benefits to formal sector members who contribute more to the scheme.
Parting thoughts: Decolonizing the health financing agenda?
For African countries, who have inherited systems and ideologies from the global north through technical advice and support from global partners, a new paradigm is needed for country driven solutions. This may create new innovations in how government systems purchase services and expand coverage that is fit for purpose. Rather than get stuck in definitions and semantics on Bismark versus Beveridge health care models, or contributory versus non-contributory health financing, we need approaches that recognize the context and challenges rather than imposing solutions to achieve UHC. What is clear is that universal insurance coverage is not synonymous with universal health coverage. UHC can be achieved through different “means”, and not only through health insurance.
In summary, the journey to UHC is context-specific, and there are no “one-size fits all” solutions, but there are important lessons to consider from both theory and practice. Whatever the approach, one thing is clear: general revenue funding needs to be at the core of the agenda. African countries considering introducing contributory insurance schemes — such as Burkina Faso, Eswatini, Senegal, Uganda and Zimbabwe – would be well served by leveraging lessons from other countries on what works and what doesn’t and contextualizing them to their context.
Practitioners may choose to place a greater focus on addressing health inequities in a more challenging post-COVID environment, as they prioritize services and population groups for public funding, while continuing to advocate for more public resources for the health sector. Furthermore, additional policy levers such as integrated health information systems can provide useful entry points for addressing challenges in the health sector, such as fragmentation, inequities and inefficiencies.
Finally, tracking progress over time and creating a culture of data use to understand the impact of implemented reforms can support advocacy efforts. It can also align all stakeholders on the goals of achieving UHC and strengthening health systems that are more resilient and adaptable for growing, and changing population health needs.
