New funding tools

In recent years, there has been growing recognition of the scale of investment required to address global health and environmental issues. Action on funding for global health include renewed commitments to the 1970 target for official development assistance of 0.7 per cent of GDP/GNI, and the development of new instruments for financial and other forms of assistance. In general, these instruments recognize that health is a global concern affecting rich and poor countries, and that it represents an economic investment in future productivity as well as a humanitarian issue.

 

As such, instruments seek immediate sources of investment to address these long term issues. These include the Airline Solidarity Tax, the International Finance Facility for Immunisation, Advanced Market Commitments, MDG Contracts and IDA Buy Downs.

The discussion of financing for global health is usually dominated by a debate on funding for development and a call to donor countries to increase their support of - and make good on - commitments to developing countries. Lately, an additional debate on financing global public goods - such as global disease surveillance systems - has emerged, and UNDP is suggesting a new approach to global public finance. The neglected area of financing for global health is the financing of the regular budget of international organizations, such as WHO. There is a tendency to fund diseases, issues and programmes - as discussed below - but not governance structures. However, this has led to a significant weakening of a number of international organizations. Europe should be at the forefront of exploring new financing and governance mechanisms that ensure all three strategic priorities of global health: security, equity and good governance.

The most comprehensive study on resource needs for global health remains the report of the Commission on Macroeconomics and Health (CMH), which was commissioned by WHO and directed by Jeffrey Sachs, while other estimates tend to focus on the resource needs for single issues or diseases. The CMH report starts with the observation that "only a handful of diseases and conditions are responsible for most of the world's health deficit: HIV and AIDS; malaria; TB; diseases that kill mothers and their infants; tobacco-related illness; and childhood diseases". In order to improve health in the developing world, additional financing, especially in three areas, is required: the scaling-up of existing interventions, research and development, and global public goods.

The report states that effective interventions exist to prevent or cure most of the above-mentioned diseases. Both national and international spending, however, is insufficient to meet the challenges. While total spending on health per person per year amounts to nearly US$ 2,000 in rich countries, it is only US$ 11 in the least developed countries (with US$ 6 being public domestic spending, US$ 2.3 being donor assistance and the rest being out-of-pocket expenditure). In order to scale up the existing interventions and to prevent 8 million of the 16 million deaths per year from the above-mentioned diseases, spending of US$ 34 per person per year would be necessary. The CMH report therefore recommends that the developing countries should increase their budgetary spending on health by an additional 1 per cent of GNP by 2007 and 2 per cent by 2015; for their part, donor countries should help to close the gap by increasing spending from the current levels of health-related ODA of approximately US$ 6 billion per year to US$ 27 billion by 2007 and US$ 38 billion by 2015.

More recent studies do not focus exclusively on health but deal instead with the resource needs for the entire process of the Millennium Development Goals (MDGs). The study of the High-Level Panel on Financing for Development, which served as input for the 2002 International Conference on Financing for Development, was the first to specify the amount of ODA required to meet the MDGs. The study gives the often cited figure of US$ 50 billion per year, supplemented by US$ 3 billion per year for humanitarian aid and US$ 15 billion per year for the provision of global public goods, leading to a total of US$ 68 billion per year or a doubling of the current levels of aid. Other studies essentially confirm these figures, while NGOs like Oxfam (2002) assume a global need of around US$ 100 billion per year. The report of the Millennium Project (2005) estimates there source needs to be even higher and states that, in order to achieve the MDGs, ODA of US$ 135 billion per year (equal to 0.44 per cent of GNI) will be needed in 2006, and that international funding will have to rise to US$ 195 billion per year (equal to 0.54 per cent of GNI) by 2015.

This logically leads to the question of where the additional money should come from. The report of the Millennium Project does not say much in this respect; it only vaguely mentions the option to ‘frontload' ODA through capital markets via the International Finance Facility (IFF), as proposed by the then UK finance minister, Gordon Brown. Other studies go further on these issues and list other options like global taxes, for example, on currency transactions, carbon emissions, airline tickets, weapons sales or the profits of transnational corporations (TNCs), voluntary contributions (for example, a global lottery, donations) or further debt relief. They state that these possible financing mechanisms should be in addition to existing financing - and point to the danger of a crowding out of traditional ODA spending on health. They also claim it is necessary to balance between conditionality, on the one hand, and the need for sustainable and predictable financial flows on the other; and that issues of donor harmonization, governance and the participation of Southern actors should be addressed, and that possible new mechanisms should be discussed in the context of debt relief and trade reform.

A number of key issues are beginning to emerge, which bring into question some of the financing mechanism issues raised above; they would need to be part of an intensive discussion at European level and are, therefore, mentioned only in passing. They include the following:

  • the effectiveness of the foreign aid mechanism
  • the balance between funding development in health and global public goods for health, such as global disease surveillance systems
  • the need to fund good global governance infrastructures
  • the problematic approach to programme funding, which can reduce investments in health systems
  • the importance of direct private investments in countries as opposed to foreign aid
  • the role of debt relief in freeing up resources to support health within a country
  • the opening up of European markets, such as in agriculture, to allow poor countries to compete

In September 2008, a High Level Taskforce on Innovative International Financing for Health Systems was established to address some of these questions.

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