[Guest blog by Susann Roth and Aaron Batten]
When countries plan large infrastructure projects, they bring multiple investors together to optimize financing conditions. They structure the deal to ensure project results are achieved, the best available financing terms are reached, and the project is financially sustainable.
Similarly, in the health sector countries need to bring multiple funding sources together to finance their large, long-term health sector development plans. Financing from multiple sources is crucial to achieve results and impact, since health sector budgets are never large enough to meet the needs of increasing populations and national commitments to universal health coverage (UHC).
The days when ministries of health across developing Asia could rely exclusively on donor funds to cover funding gaps for communicable diseases, maternal and child health programs are long gone. As developing Asian economies move up the middle-income ladder their health agenda is expanding rapidly, and it is becoming more complex.
Aging populations, rising non-communicable diseases from lifestyle changes, and more expensive healthcare needs are quickly eating up health budgets across the region.
The last 15 years have seen the creation of generous targeted funding programs for vertical disease programs such as eliminating malaria, stopping tuberculosis and reducing HIV infections. These vertical programs have undoubtedly accelerated progress in combatting these diseases. However, it is now clear that we must look beyond target programs and towards upgrades in entire health systems to sustain progress while addressing a myriad of new healthcare needs.
Let’s look beyond targeted programs to upgrade whole health systems
For example, while countries still have grant funding for vertical disease programs, malaria cases and deaths in Myanmar have fallen dramatically (by almost 64%) since 2013, but case numbers have largely flatlined in Viet Nam. Moreover, Cambodia, Lao People’s Democratic Republic, and Thailand have all experienced setbacks, especially on drug-resistant malaria.
Only strong health systems can combat drug-resistant malaria. Last-mile health primary care services, quality medicine, and health information systems that can track patients are all required. Governments, development agencies and private investors must focus on building robust, responsive and resilient health systems to meet the new challenges of the 21st century.
Making these upgrades will be expensive, and countries are thus seeking new sources of financing for a broader UHC agenda to improve access to integrated health services, especially for vulnerable groups.
To achieve this, we need new kinds of financing, which moves away from silos and vertical programs toward structured health sector financing. Similar to large infrastructure projects, the health sector needs investors who look for impact, can bring together diverse partners who all add value and stay involved for a long period of time.
It also requires a dialogue with developing Asia countries about their willingness to borrow for the health sector. As countries have graduated to middle-income status, many have lost access to concessional lending and are now subject to more commercial financing terms. Currently, countries are often reluctant to borrow at commercial terms for complex, and often non-revenue generating, health system upgrades.
Asian governments want a one-stop blended finance shop for health
To address this bottleneck, countries need innovative instruments to optimize the use of budget financing, development loans, philanthropic grants, and private sector investment to catalyze country-led health sector investments.
Good examples are blending concessional loans with grants through large health sector programs, developing risk transfer products that limit potential borrowing capacity limits, or applying buydowns (like on a house mortgage) to make loans more affordable. Even health bonds can be considered.
For Asian governments and ministries of health to access these more complex financial modalities on attractive terms, they should work with a “one-stop blended finance shop” instead of approaching various development partners and funders. This is what we call “accessing structured financing.”
The Asian Development Bank (ADB), the Global Fund and APLMA are working together to set up a new regional health fund under the initiative Blended Finance for Impact, a partnership to enable and increase long-term integrated financing for health, including malaria. The new regional fund will help create and support integrated health sector financing solutions, targeting:
- Enhanced access to health services through primary care facilities and strengthening community and migrant health;
- Developing health infrastructure such as clinics, laboratory networks, hospitals, and digital health networks;
- Supporting regional and national health systems development such as UHC and insurance systems, and supply chains; and
- Policy development, regulatory and capacity, building activities, and public-private partnerships.
New regional fund to support integrated health financing solutions
The fund aims to support impactful national and regional goals such as malaria HIV/AIDS, and TB elimination through stronger health systems. It will also mobilize a range of donors, including philanthropies and private sector, which bring not only financial resources but also solutions.
Crucially, the fund will provide an easier way to combine and leverage various sources of funding through country-led programs. The fund can combine different financing modalities and establish a strong monitoring and evaluation system, while considering overall national financing capacities.
The fund aims to serve as a catalytic link between ministries of health, ministries of finance and diverse health funding sources, provide robust advice on optimal health sector financing models for public health best buys, especially related to malaria, TB, HIV and AIDS, streamline reporting needs, and mobilize implementers from civil society, private and public sector.
Through this process the fund will help create more options for developing Asia and the Pacific economies to access tailor-made financing for health system strengthening, while limiting duplication in reporting systems and stop wasting governments’ time to coordinate various funders and actors.
The new fund wants to lower the cost of health sector development financing while investing long-term for sustainable impact.
Susann Roth is Principal Knowledge Sharing and Services Specialist, Sustainable Development and Climate Change Department at the Asia Development Bank in Manila. Aaron Batten is Country Economist, at the ADB Viet Nam Resident Mission.
This post originally appeared on the ADB website: https://blogs.adb.org/blog/financing-impact-why-we-need-new-regional-health-fund