Assessment of health financing options : Papua New Guinea

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This report examines three broad health financing options in PNG: (i) increasing the level of general revenue spending; (ii) introducing contributory, insurance-based health financing arrangements; and (iii) mobilizing additional resources through efficiency savings in the sector. While PNG might potentially increase its level of public health spending in the medium to long term, the Government’s first priority should be to address the inefficiencies in spending that currently undermine service delivery and key health system goals such as equity of access. Alternatives such as social health insurance are not viable options to finance any increase in health spending given low levels of formal employment and administrative challenges.
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92720 Knowledge Brief Health, Nutrition and Population Global Practice ASSESSMENT OF HEALTH FINANCING OPTIONS: PAPUA NEW GUINEA KEY MESSAGES This report examines three broad health financing options in PNG: (i) increasing the level of general revenue spending; (ii) introducing contributory, insurance-based health financing arrangements; and (iii) mobilizing additional resources through efficiency savings in the sector. While PNG might potentially increase its level of public health spending in the medium to long term, the Government’s first priority should be to address the inefficiencies in spending that currently undermine service delivery and key health system goals such as equity of access. Alternatives such as Social Health Insurance are not viable options to finance any increase in health spending given low levels of formal employment and administrative challenges. Papua New Guinea’s (PNG) health system is The current system of health financing has not characterised by low health inputs per capita, low delivered improved health outcomes; in fact, health health service contact rates and significant inequities outcomes in PNG have been stagnant in recent in health care use. Health spending relative to Gross decades despite economic growth. PNG is not on track National Income (GNI) per capita and as a revenue share to meet any of the health-related Millennium Development of Gross Domestic Product (GDP) is low. Government Goals (MDGs). Figure 1 and Figure 2 show the economic spending as a share of total health expenditure is, growth versus two important health indicators: (i) infant however, high and the financing system is dependent on mortality and (ii) stunting rate for children under 5. The a number of complex interactions between multiple health sector needs urgent attention to address the agencies, both at the national and subnational level. stagnant and in some cases declining health outcomes, Anecdotal evidence suggests that out-of-pocket (OOP) meet the health care demands of a rapidly growing spending is minimal. population and mobilize the necessary resources in a financially sustainable manner. Financial support for this work was received from the Australian Department of Foreign Affairs and Trade. HNPGP Knowledge Brief ã Figure 1. Infant Mortality and GDP Per Capita in In the medium to long term, there exists some scope PNG (1984-2012) for economic growth to mobilize additional general revenues for health, particularly with the 80 2500 GDP per capita (current US$) commencement of Liquefied Natural Gas (LNG) Mortality rate (per 1,000 live 2000 production in 2015 and a number of additional 60 extractive projects that are under active 1500 consideration. Based on past trends the Government of 40 1000 births) Papua New Guinea’s (GoPNG) health spending as a 20 500 share of GDP is likely to remain flat. Government revenue as a share of GDP is, however, projected to fall over the 0 0 medium term. Should GoPNG’s revenue base not 1984 1988 1992 1996 2000 2004 2008 2012 improve, budgetary financing gaps are expected to emerge through 2017. As such, in the short to medium term, significant increases in fiscal space for health are Mortality rate, infant (per 1,000 live births) unlikely. GDP per capita (current US$) Data source: GDP and infant mortality in 2005 are from Introduce contributory insurance-based World Development Indicators. health financing Figure 2. Stunting Rate and GDP Per Capita in PNG (2003 to 2013) In the current context, the introduction of comprehensive social health insurance (SHI) is not 60 2500 GDP per capita (current US$) Stunting ( height for age feasible or sustainable. The feasibility and sustainability ,% of children under 5) 50 2000 of SHI as a health financing mechanism depends on how 43.9 45.7 40 quickly it can be scaled up to cover the entire population. 1500 The informal sector accounts for over 67 percent of the 30 population in PNG. In this context, SHI is likely to be a 1000 20 further drain on GoPNG revenues as additional 500 government spending will be required to cover the 10 informal sector. It is not likely to bring in significant new 0 0 funding for health. Moreover, many of the prerequisites 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 needed for effective implementation are also not in place. Administrative and technical capacity to run a comprehensive SHI scheme is currently limited. There is Overall Male also limited regulatory capacity in the country. Female GDP per capita Data source: GDP and stunting rate in 2005 are from Mobilising resources through efficiency World Development Indicators; stunting rate in 2010 is calculated by authors from HIES 2009-2010. savings Continuing to rely on general revenue financing This report examines three broad health financing whilst mobilising additional resources through options in PNG: (i) increasing the level of general efficiency savings will be the most feasible and revenue spending; (ii) introducing contributory, sustainable option for PNG. There is significant scope insurance-based health financing arrangements; and to realise efficiency gains through: (i) allocating more (iii) mobilizing additional resources through efficiency resources to primary care vis-à-vis tertiary care; (ii) savings in the sector. The three options are not mutually improving the mix and productivity of inputs; (iii) exclusive. leveraging the resources allocated to vertical programs; (iv) continuing improvement in procurement reform; (v) Increase fiscal space by increasing general implementing improvements in planning and budgeting; revenue allocations to health and (vi) alternative financing modalities such as facility based budgeting and direct facility financing. These options will not only generate additional resources for health but will improve the sustainability of financing in the Page 2 HNPGP Knowledge Brief longer term. Improving the effectiveness and coordination of external donor resources will be equally important. Conclusion In conclusion, in the short to medium term, with total government revenues as a share of GDP expected to fall, there would be little additional fiscal space to allocate to health. In the medium to long term, assuming revenue and GDP prospects improve with the expansion of the LNG industry; PNG may well increase public health spending. However, a range of inefficiencies in health care may present a significant risk to the effectiveness of the public health spending. Increasing public spending on health in PNG is unlikely to substantially improve health outcomes until inefficiencies in the management, financing and delivery of health care are addressed. Thus, while PNG might potentially increase its level of public health spending in the medium to long term, the Government’s first priority should be to address the inefficiencies in spending that currently undermine service delivery and key health system goals such as equity of access. In addition, alternatives such as Social Health Insurance are not viable options to finance any increase in health spending given low levels of formal employment and administrative challenges. Please contact Xiaohui Hou at xhou@worldbank.org or Aparnaa Somanathan at asomanathan@worldbank.org for any inquiries on this work. The Health, Nutrition and Population Knowledge Briefs of the World Bank are quick reference on the essentials of specific HNP-related topics summarizing new findings and information. These may highlight an issue and key interventions proven to be effective in improving health or disseminate new findings and lessons learned from the regions. For more information on this topic, go to: www.worldbank.org/health Page 3
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