July 22, 2024

Health Minds

Nourishing Minds, Elevating Health

Innovative financing models for sustainable healthcare

5 min read

The healthcare landscape across Africa is as diverse as its people, yet many countries share common challenges in funding and delivering healthcare services. Over time on the continent, healthcare financing has been marked by inadequate government investment, high out-of-pocket expenses by individuals, and low insurance penetration. According to the World Health Organisation, out-of-pocket expenses make up over 40 per cent of total health expenditures in many African countries. Also, recent data from the World Bank shows that the current annual healthcare expenditure per capita in sub-Saharan Africa stands at $83.35 per person compared to that of the European Union and United States which are $4,215.43 and $12,473.79 respectively.

The heavy financial burden has led to immense healthcare spending for households, thereby increasing poverty and health inequalities coupled with rising costs of drugs, brain drain in the health sector, and increased maternal mortality rate. This issue has become imperative because achieving the health-related Sustainable Development Goals by 2030 requires urgent attention to the economic challenges of healthcare financing in Africa, most especially for policymakers and healthcare leaders. The SDGs emphasise universal health coverage and equitable access to quality health services. But with the current economic landscape in Africa, progress towards these goals is being hindered.

While some governments are making strides towards better health financing, others are lagging due to various political, economic, and social challenges. Recently, some countries across the continent have shown strong political will with significant budget allocations to improve health by implementing financing models through Health Savings Accounts, which are tax-advantaged savings accounts linked to high-deductible health insurance plans (South Africa and Kenya); community-based health insurance schemes, which are voluntary, non-profit health insurance programmes organised at the community level (Rwanda, Ethiopia, and Ghana); Public-Private Partnerships  (Nigeria and Kenya); Social Health Insurance systems, which collect contributions from employees, employers, and government subsidies to provide health coverage (Ghana, Kenya, and Tanzania); micro-insurance schemes, which provide low-cost health insurance products tailored to low-income populations (Kenya, Tanzania, and  Uganda), and mobile health financing solutions that use mobile technology to facilitate health savings, insurance enrollment, and claims processing (Tanzania, Kenya, and Uganda).

 However, despite showing political will, they still face challenges such as a lack of regulatory frameworks, implementation for large informal sectors (like HSAs), financial sustainability due to rising healthcare costs, low enrollment (micro-insurance schemes), limited financial risk pooling (CBHI), potential conflicts between public health goals and private profit motives (like PPPs), difficulty in scaling up to achieve significant population coverage, and low penetrance in smartphone usage. According to 2023 data from Statista, 51 per cent of people in sub-Saharan Africa own smartphones, the highest rate of adoption globally. However, this region still has the largest usage gap globally, with 59 per cent of the population, or 680 million people unconnected. These challenges coupled with inadequate health policies have the potential to hinder progress and access to quality healthcare.

To mitigate these challenges, there is a need for Africa to adopt strategic innovation for these models tailored to its unique socio-economic landscape. For instance, towards improving PPPs in Kenya, the Managed Equipment Services project has seen private entities supply, install, and maintain medical equipment in public hospitals, significantly improving service quality and availability. Hence, expanding such models across Africa can bridge funding gaps and improve healthcare outcomes. In addition, exploring hybrid models that combine HSAs with social health insurance, government subsidies for low-income HSA contributions, and developing mobile-based HSA platforms to reach informal sector workers would lead to potential benefits to extend coverage beyond middle and high-income earners to low-income populations.

Likewise, the adoption of Performance-Based Financing, which ties funding to the achievement of specific health outcomes, can help enhance accountability. This model incentivises healthcare providers to improve service quality and efficiency as seen in Burundi which led to notable improvements in maternal and child health services. Furthermore, introducing health bonds, which are promising means for raising funds specifically for health initiatives by focusing on measurable improvements, such as reduced maternal mortality or increased vaccination rates, can ensure accountability and drive significant health advancements. Social impact bonds can attract investment by linking returns to health outcomes as part of CSR.

Also, the CBHI scheme has shown promise in Rwanda and has reduced the financial burden on individuals and increased access to essential health services. Therefore, scaling CBHI across more regions, integrating CBHI with the NHIS, using mobile technology for premium collections and claims processing, and bundling health insurance with other microfinance products can promote equity and sustainability in health financing. In addition, the proliferation of mobile phones in Africa provides a unique opportunity to leverage mobile health solutions for healthcare financing. As regards this, mobile money platforms can help facilitate micro-insurance payments, remittances for health expenses, and even direct health-related crowdfunding by integrating with popular mobile money platforms. For example, in Tanzania, the Wazazi Nipendeni initiative uses SMS to educate pregnant women while integrating mobile money for healthcare savings.

Lastly, placing a special levy on large profitable companies can support the enrollment of the low-income population in national health insurance and social security schemes. As done in Gabon, introduced taxes in 2009 raised additional funds to subsidise healthcare for low-income groups. One such tax was on money transfers, whereby a 1.5 per cent levy on the post-tax profits was imposed on companies that handle remittances. The second was a 10 per cent tax on mobile phone operators in the country. The two taxes raised an equivalent of $30 million for health in 2009. Innovative taxes in some countries include those associated with tobacco (British American Tobacco in Nigeria), alcohol, environmental pollution, petroleum products, community support, and risky behaviour such as drunken driving. Many of these taxes and levies target behaviour and products that negatively affect health.

Even though these innovative models show promise in addressing some of Africa’s healthcare challenges, their success depends on careful adaptation to local contexts, strong governance, and continuous innovation. Policymakers must consider the unique challenges and opportunities in their countries when implementing these models. The key considerations for successful implementation across the board include ensuring equity and inclusivity, particularly for low-income and informal sector workers, building robust regulatory frameworks and governance structures, investing in technology infrastructure and digital literacy, fostering partnerships between governments, the private sector, and communities, and implementing rigorous monitoring and evaluation systems to guide ongoing improvements. By addressing these factors, African countries can work towards developing more effective, equitable, and sustainable healthcare financing systems, ultimately improving health outcomes for their populations.

  • Dr Oluwaseyi Atoyebi is a Health Sector Management Fellow at the Fuqua School of Business, Duke University; Sharon Karbo is a public health professional at the Johns Hopkins University


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