Concept Paper. Macroeconomics and Health Strategy (MHS) Work. Section I. - Background and Environment

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1 Page 1 of 21 Concept Paper Macroeconomics and Health Strategy (MHS) Work Section I. - Background and Environment The CMH Report. Officials in many countries have seen value in the 2001 Commission on Macroeconomics and Health (CMH) Report 1 as they studied it in relation to the health and economic needs of their individual countries. There is much interest in further work not only on CMH topics but also on other priority areas in specific countries. This interest should make good use of the concepts of the report and strengthen the capability of countries to deal with the economic and health challenges that lay ahead of them. Changes resulting from the CMH Report and additional study should result, not only in better use of national funds, but also should help to attract the substantial additional foreign investment and grants that the Commission s Report declared necessary to meet health needs. The Macroeconomics and Health Strategy (MHS) is encouraging this country-level follow-up work. The secretariat of MHS is hosted in the WHO in Geneva. 2 The CMH Report concluded that extending the coverage of crucial health services, including a relatively small number of specific interventions, to the world's poor could save millions of lives each year, reduce poverty, spur economic development, and promote global security. The report offered a new strategy for investing in health based upon a global partnership of the developing and developed countries. Such an effort would require two important initiatives: a scaling up of the resources currently spent in the health sector by poor countries and donors alike; and tackling the non-financial obstacles that in the past have limited the capacity of poor countries to deliver health services. The report focused on a few conditions 3 that cause an overwhelming proportion of the disease burden for the poor and which cause or exacerbate poverty in the families and communities afflicted with these disease conditions. While the main disease conditions are important in both poor and middle income countries, differences among countries initially expressing interest in the MHS Work suggest that country MHS plans need not always be tightly linked to only the diseases that were analyzed in detail in the CMH report. It will be important for each country to include in its country level MHS work, any disease condition or risk that impacts its disease burden. This principle also applies to the many issues, discussed in the CMH 1 The Report of the Commission on Macroeconomics and Health, Presented by Professor Jeffrey D. Sachs, to Dr Gro Harlem Brundtland, Director-General of the World Health Organization, December The secretariat is officially designated as the Co-ordination of Macroeconomics and Health Support Unit (acronym CMH) and is supported by an external grant from the Bill and Melinda Gates Foundation. It will support country-level development of initiatives to pursue the issues and options in the CMH Report. This process, taken as a whole, is referred to in this Concept Paper as the MHS Work. 3 The main causes of avoidable death in the low-income countries are HIV/AIDS, malaria, tuberculosis, childhood infectious diseases, maternal and perinatal conditions, micronutrient deficiencies, and tobacco-related illnesses.

2 Page 2 of 21 Working Group Reports, 4 for which consequences and costs were described, but few operational solutions were defined. More money is needed but lifting of constraints on disbursement, and on the effectiveness of funds already available, is often equally important. A sustained effort at mobilization of global and national institutional capacity to improve technical and allocative efficiency will also be an important step to increase absorptive capacity and improve accountability. The CMH Report provides only indicative guidance on the specific measures needed to accomplish this, the investments required to prepare health systems and health personnel, and the sequence with which the needed policy reforms have to be blended with investments to ease the burden of disease. The MHS Work that each country will define for itself necessarily must deal with these crucial, complex issues in the context of the country. However, notwithstanding the heterogeneity of country conditions and occasional broadening of the issues agenda, the MHS Work needs to be consistent with the core values of the CMH Report conclusions namely, - It is paramount to address the health of the poor and of poor communities. - Much more investment in health is needed in nearly all countries. - Improved processes and transparency for using and deciding on the use of money is needed. - Progress must be achieved in ways that ensure sustainability - long-term commitments of society, and of donors, to achieve much better health outcomes and higher levels of investment. The efforts that bilateral and multilateral agencies have made to improve investments in health have been insufficient in both content and process to meet the needs of many countries. While improvements in development assistance can originate with donors, the advent of MHS Work provides an opportunity for countries themselves to catalyze the environment so that they take both ownership and leadership in improving health outcomes. The current global social environment 5 has stimulated a growing support for MHS Work at national level. Country officials are well aware of inadequate organizational and administrative capacity, weak mechanisms for strengthening their ownership and reducing transaction costs in health development and of the insufficient mechanisms in place for accountability. At the same time, there are no easy answers to allay these concerns and no single effective source to turn to for resolution or assistance. The global economic environment must be taken into account too. There is not necessarily a growing, bright resource picture on which countries can expect to make claims. Official development assistance has been stagnant or falling for over a decade. 4 There are six Working Group Reports, entitled, respectively: WG1, Health, Economic Growth, And Poverty Reduction; WG2, Global Public Goods For Health; WG3, Mobilization Of Domestic Resources For Health; WG4, Health And International Economy; WG5, Improving Health Outcomes Of The Poor; WG6, Development Assistance In Health. 5 The environment has been shaped by a number of key products and events of recent years: the World Health Organization s World Health Report, the World Bank s World Development Report series which have repeatedly featured health and social development issues, many thoughtful reports of bilateral development organizations, the UN Millenium Development Report and the MDG Goals set, the G-8 Summits in Japan, Mexico and elsewhere.

3 Page 3 of 21 The new Global Fund Against AIDS, TB and Malaria remains weakly funded by its owners and has yet to prove its operational modalities and procedures. Other new initiatives, such as the Millennium Challenge Corporation, 6 may bring further new resources to the health effort but will have to deal with their own operational growth and prove their procedures are effective without ignoring the needs of the poorest countries, who may not meet eligibility criteria. Moreover, there will be continuing claims within the wealthy nations on public money for security purposes, from both the public sector and private sector alike. Within major OECD bureaucracies, this may be used as a convenient reason to constrain growth in development assistance. Economic downturn, weakness in the investment markets and future social welfare obligations will further constrain public sector budgets in many OECD countries and will similarly be used as justification for finance ministries to hold new development investments to modest levels, pending proof of performance. Preoccupation of G-8 leaders with security and the economy may also moderate the recent high political level attention to infectious diseases and to health, thus making it difficult to sustain the intensity of global attention generated by the CMH report. Even the Millenium Development Goals, of which health is only a small part, will be struggling for high level attention. Moreover, the global institutional environment has become significantly more complex in recent years with many new initiatives and partnership arrangements 7 that create multiple channels, impose significant, and sometimes duplicative, governance burdens on the donor community and add to the procedures, rules and systems that must be dealt with by officials of developing countries. Many of these new arrangements have added technical strength, responsiveness, and innovation, but they also have multiplied the complexities and demands facing poor countries. Collectively, all of these considerations make MHS Work particularly timely for countries wanting to take more leadership in improving their own future. Those countries that plan and prove ways to lift constraints and make investments in health more feasible and more productive will realize a double bonus -- a healthier, more productive, less dependent poor population able to create and sustain further social and economic growth, and improved international visibility and eligibility for the significant capital inflows required to further catalyze and accelerate this effort in the years ahead. Section II. - Analytical perspective of the MHS Work. The Report of the Commission on Macroeconomics and Health offers to national officials a different perspective from that prevalent in the last two decades of international health discussion. While it may be difficult to reach consensus exactly characterizing past perspectives, a synopsis 8 might look like the following: 6 A United States initiative to channel much increased development assistance flows to countries meeting certain preconditions. 7 Such as the Joint United Nations Programme on HIV/AIDS (UNAIDS), Global Alliance On Vaccines Initiative (GAVI), in the Global Alliance For New TB Drug Development, Stop TB Partnership, the Global TB Drug Facility, the International AIDS Vaccine Initiative (IAVI), the Childhood Vaccine Program, the Vaccine Fund, the Rollback Malaria Initiative (RBM), the Malaria Vaccine Initiative, the Medicines For Malaria Venture, and others. 8 WHO s Dr David Nabarro provided this synopsis in oral communications.

4 Page 4 of The rational approach. Analysis starts by linking data on the burden of disease with information on cost-effective interventions for high burden diseases. This analysis is used as the basis for strategies that highlight the interventions that represent best buys for improving health outcomes. Those who make decisions on health investments then give these strategies the highest priority. This approach helps national officials make rational investment choices as they assess and respond to national health needs. 2. The sector reform approach. This starts with a vision of the role that is expected of the health sector, and an analysis of the current roles and behaviors of the institutions that constitute the sector. The analysis concentrates on interactions between the institutions about high burden diseases and desirable responses. The analysis also focuses on the kinds of multi-sectoral response that are desirable, and effort is expended on establishing buy-in by different sectors to secure this response. This process calls for energetic leadership by champions who seek to establish incentives for focused and effective behavior of the different institutions involved in health action. 3. A politics-of-health approach. This work starts from an expressed political commitment to make health a political issue at each relevant jurisdictional level. The commitment serves as a primary lever for ensuring increased budgetary support for health outcomes, particularly among poor people. Typically, bureaucrats within health ministries have avoided this paradigm as the process of political debate and issue resolution is perceived as risky. However, civil society and a variety of other societal interests are using this paradigm to pursue their ends, including in health affairs. 4. A macroeconomics and health approach. Analysis starts from the recognition that those who make decisions about investing in health have to raise, and then find answers to, questions of choice. Put simply, given the resources available and the outcomes that need to be achieved, what are the best, and second-best, choices for using any marginal increase in available resources not just in health investments, but also in economic and systemic reforms to lift spending constraints and to achieve greater allocative and technical efficiency? How can outcomes be best assessed? What are the optimal strategies for raising these additional resources? The CMH Report gave depth and breadth to examination of the issues and options for the last set of perspectives. It added new thinking and made strong claims and conclusions about truly fundamental issues that required new approaches. It did not provide all of the answers to institutional or technical reform and change issues. Nor did it spell out all of the specific analytical approaches needed. However, it did provide a perspective that could be built upon and followed productively to ever-deeper practical detail by individual countries. This is the basis of the MHS Work, as interested countries examine issues for themselves and establish options for scaling up action and sequencing of the steps and reforms needed in order to achieve more equitable and better health outcomes.

5 Page 5 of 21 Section III A Framework for the Macroeconomics and Health Strategy The Goal of the MHS Work is to catalyze the ability of collaborating governments and their interested partners 9 to achieve sustainable 10 and equitable health outcomes, in line with Report of the Commission on Macroeconomics and Health, the Millennium Development Goals and Poverty Reduction Strategies. MHS Work will help identify the most effective investments in health, while lifting the constraints that limit national capacity so that countries get better results from increased investments in health and thus more equitable economic growth. Achievement of this goal will create strong political leadership for sustainable investment in health, especially for the poor, a national consensus on targeted interventions and increased investments in health, and will meet demands from lower and middle income countries for more assistance for health. 11 The Objectives of the MHS Work are to create or facilitate the supporting environment, intellectual resources, avenues for financial and technical assistance and institutional framework for participating national governments and their partners to plan and implement investments to produce better health among poor people quickly and sustainably. MHS Work will help identify, investigate and respond to the range of constraints to the effectiveness of these investments within the national and local contexts, especially in the longer term. The general Products of the MHS Work will be: 1. a broad-based national consensus about the level and pattern of health investments that are needed for equitable health outcomes in line with MDGs and poverty reduction strategies; and, 2. a specific recognition of the needed accompanying policy and financial measures, and plan for their sequenced implementation and evaluation, that will lift constraints to good use of existing and new resources, including particularly, institutional and work-force capacities. Such products must respond to client (national and sub-national) demand and interest. This calls for the careful identification of client interests, perceptions and needs. Such identification, within the national context, is a critical precondition to the development of country specific products through MHS Work in a particular region, country or local government unit. Country-level MHS Work will thus also produce a variety of specific products. These can be planned, set against time-lines, budgets, and milestones to make the work practical and concrete. The MHS Work, while involving many processes such as preparations for meetings, implementation of studies and communicating to many interest groups for understanding and commitment, is not fundamentally about process. It is 9 The term partners means both domestic constituencies such as private sector production firms, civil society organizations and foreign constituencies such as international agencies, non-governmental organizations, foreign assistance donors, and foreign investors. 10 Sustainability is meant in a complete and systemic context see Annex A. 11 Central goals of MacroHealth as defined in WHO s paper, Supporting Global and Country Responses to the Commission on Macroeconomics and Health Report, undated.

6 Page 6 of 21 about products that lift capacity, make reforms, and increase investments in health, particularly of the poor. 12 Examples of products may include: - Formal creation of a country MHS commission or team to lead the development of linkages between economics and health. - Short-, and medium-term plans of work and events to enrich a dialogue within a country about the MHS Work. - A donor and partner coordination mechanism 13 for health sector investment and lifting of constraints, with participation by related core and sectoral ministries. Annex B provides a diagram of the significant issues that this host-country/donor-coordination mechanism must deal with. - Major meetings or seminars that launch, or bring to conclusion, clearly defined MHS processes ideally around strategic options and agreement on next steps. - Creation of time-limited working groups (often for defined research activities) to provide direction for further MHS policy work, and to empower those in positions of leadership. - Publication of reform agenda and investment plans for long-term scaling up of action to achieve equitable health outcomes, spelling out investments needed, increases in institutional capacity, and means to tackle the critical constraints. - Implementation of annual investment and evaluation plans that provide health priorities for the poor and lift capacity constraints. - Preparation and use of updated country briefs, describing the progress of MHS Work, issues, and options to be addressed and relevant indicators of what is being achieved. Activities to create this portfolio of MHS products might include, for example: - Phased marketing of the CMH Report and the concepts therein to a broad range of sectors, institutions and actors (this has begun). - Highly interactive country examination the CMH Report and its concepts, and further exploration of the issues and options (this is underway in at least 6 countries). - External advisory visits to enrich and broaden the context of country MHS Work. - Formation of country networks of health economics, health finance, epidemiological, and programmatic expertise to deepen and enrich the context of country MHS Work. - Situational analyses about current health investment patterns, sources and purposes. 12 While the use of the word product is likely to be important to dissuade multiple actors from becoming mired in concentration on process with no definable outcome, the exact nature of products will vary by country reality. Product definition and components will have to take account of differing country circumstances, the heterogeneity, realities of national capacity, or even national- or local-level understanding of the health situation. Products with similar titles or purposes may be rather different when developed in individual country settings. 13 Creation of this mechanism should include agreement on its functions, procedures and outputs.

7 Page 7 of 21 - Research to investigate options for different patterns, sources and purposes of health investment. - Analysis of data by cohort and time to sustain interest about health investments and impact on poverty and economic growth. - Training through which successively lower administrative levels of governmental authorities (health, planning and finance) are engaged in understanding MHS processes and issues. The MHS Implementation Process. Rollout and encouragement of MHS Work must emphasize country ownership and understanding. The planning and implementation process useful for any country will be iterative and dynamic, building from initial, relatively low level of understanding to high levels of familiarity both of the content of MHS Work, and of the leadership requirements necessary for results. The processes have to be undertaken by government officials from different sectors, particularly finance and health ministries, academics, private entities, consumer groups, and civil society, together with external bodies (bilateral and international agencies and funds). MHS Work will need to build on what is already happening and not be seen to displace other initiatives, especially if these are going well. The way MHS Work evolves will be determined by how each country exerts ownership. Products - such as studies, situation analyses, major meetings, and processes such as topic reviews, seminars and study tours - will help to inform national officials, catalyze further work and enhance political ownership. With strong country-level ownership, increased health investments and reforms to lift constraints are more likely to emerge concretely and quickly, pointing the way to fulfillment of national strategies, the Millenium Development Goals and measurable reductions in levels of poverty. Section IV Institutional Resources for MHS Work Host Country MHS Institutions. Each country interested in pursuing the broad vision of the Commission on MHS will need to establish a mechanism or body to do this. There is no necessarily correct form and membership. Logically, it would make sense if the agencies equivalent to a health ministry, a finance ministry, and a planning or development ministry were core members. Other ministries or specialized offices of government may also be members, depending on governmental structure and country issues. While the legal or statutory nature of the host country committee or body to deal with MHS Work may be initially experimental and temporary, it will, if productive, likely become a continuous effort lasting a decade or more as progress is made and benefits are perceived. Conversely, no specific organizational form or powers can per se ensure that MHS Work is appropriate, implemented or sustained. If results are achieved, the core ministries should take steps to make the institutional arrangements for effective national management of the MW work more formal and sustained, including appropriate evaluation processes. The CMH secretariat. The WHO-based secretariat will provide a coordinating role within the WHO, enabling its health guidance and policy development strengths in different technical areas to be available to countries engaged in MHS activities. It will communicate developments and issues about the MHS Work to all interested parties and

8 Page 8 of 21 governments and development partners pursuing the MHS Work. It will coordinate with donors and external partners and will provide technical assistance to countries and for activities with partners. It may assist with the costs of some MHS processes in selected countries. For efficiency, the WHO/CMH secretariat may engage a variety of external consultants and contractors to perform these functions and help countries in the early phases of MHS implementation. The WHO and its regional and country offices. The regional offices and the country representatives of WHO will be the normal means of contact for the WHO/CMH secretariat with governments participating in the MHS Work. Their technical expertise, country knowledge, and relations with local offices of external partners will be essential and these WHO offices and representatives will aim to create synergies for government ownership and leadership of the MHS Work. Together with other partners, they will encourage the engagement of the strengths of the development assistance community and of the core ministries in the host country. International and Bilateral Agency Partners. The CMH work was sourced and orchestrated from the WHO. The follow-up MHS strategy work is based within the WHO. The normative and guidance functions of WHO, its convening authority and associated governance mechanisms give it a unique role in advocating, supporting and sustaining a global MHS effort. The structure of regional and country offices, accredited to the host governments, gives additional capacity and defined channels of external cooperation for the resources of the whole organization to be applied in assisting host countries with their MHS Work for many years. The core work of other agencies in the international system also relates to MHS Work. Very poor countries will be deeply engaged already with PRSPs. Both the World Bank and the IMF may be deeply engaged in the formulation and implementation of these. MHS plans and especially the reforms and investments within them must be synchronized with or embedded in that broader economic and financial framework being agreed and financed in the context of the PRSPs or other global financial crisis management work. The agencies engaged directly in health and development work, especially those with a focus on the poor or disadvantaged, also are natural partners. UNICEF, UNDP, and many bilateral development agencies will help country-level MHS Work through their ongoing programs, experience, and technical expertise. They must be included in the MHS preparations to garner their contributions for the decade or more of follow-up work to be effective. Conferences with these agencies in the host countries, early briefings of their headquarters as appropriate 14, and selective engagement of them by the national MHS teams should be considered as the MHS 1 st Implementation Phase proceeds. The 14 By the CMH secretariat, perhaps in partnership with representatives of selected host countries and other agency or academic partners.

9 Page 9 of 21 capacities required of the national MHS commissions or teams should be defined to permit active engagement of these international and bilateral agencies. 15 Non-Governmental and Academic Partners. Countries participating in the MHS Work should utilize the intellectual and policy research capacity available to them from both domestic and external institutes, universities and NGOs that have experience in appropriate fields and affected communities. 16 External academic institutions with expertise across a wide range of economic policy and health system topics exist in a variety of developed and developing countries. Harnessing some of this expertise to provide ready synthesis of past experience, quality analysis of the issues and options in the host country and validation of views on proposed MHS investments and their sequencing, will strengthen local wisdom and leadership. External review will also provide some degree of independent validation that may likely be useful as reassurance for external funding. Domestically, the engagement of research institutions, academic centers, and NGOs with experience in poverty areas will serve to inform important domestic constituencies and enhance long-term sustainability and transparency of work. Their engagement will substantially expand the breadth and continuity of thought and information that can help to formulate the MHS plan and assess its implementation. Synthesizing the implementation lessons, quantifying the benefits and costs of interventions and their sequence and examining options for next steps will be important contributions that these domestic partners can bring to the table, as MHS plans are formulated and carried out. The involvement of these partners does impose extra communications and process work on the national team or commission that leads and implements MHS Work. The budget and staff for these added liaison and managerial requirements must be taken into account. Section V - Strategy Elements Limited priorities. MHS approaches will necessarily be experimental. The problems being addressed are complex and not easily solved. Both content and process of MHS Work may not be universally understood in the multiple economic sectors 17 of host countries or by the core ministries, 18 local agencies and their managers and 15 Most governments will already have one or more units within the Finance, Planning or Health ministries with responsibilities for management of relationships with the international and bilateral agencies. The national MHS commission or team could include membership, or an operational link, to such existing units for the purposes of effective engagement of these international agencies. 16 Professor Jeffrey Sachs, Chair of the Commission on Macroeconomics and Health, and colleagues at the Columbia University Earth Institute and the Center for Health Policy Innovation in Developing Countries, will play a special role in providing such assistance as part of the MHS Work, through a contracted agreement with the CMH secretariat in WHO. 17 By economic sectors is meant the relevant technical or administrative fields whose substantive engagement may be necessary to accelerate investment, mobilize resources, or lift capacity constraints, including reforms needed to increase human resources and their productivity. Water borne diseases may require engagement of health, planning, and finance agencies at multiple levels. It may also require engagement of legislative or regulatory bodies, engineering and environmental standards agencies, and so forth. 18 By core ministries is meant those whose mandate and capacities are essential for any credible scaling up of health services for priority disease burdens particularly aimed at the poor or disadvantaged communities. These would

10 Page 10 of 21 communities needed for any significant scaling up process. Multiple international initiatives in the last decade have tried to foster stronger local planning and ownership, engagement of additional players, partnership of national and international agencies from both civil society and from intergovernmental bodies. These efforts have left a myriad of processes, impressions, successes and failures, some of which may be confused at first glance with the MHS approach. In addition, the required country committees and groups for various international funding and commodity supply initiatives in recent years have given rise to multiple interagency groups 19 at the country level, with varied records of functionality. The MHS Work may build on these groups, or it may not, depending upon the past experience and current perceptions about them among the governmental leaders active in the MHS Work. The point is that the institutional landscape is complex and inevitably influenced with a variety of previous efforts of mixed experience. This requires the MHS Work to be both flexible to country perspectives and highly prioritized. Simplicity suggests that initial planning and implementation be restricted to a few carefully selected topics of evident priority and easy measurement of progress. Values for MHS supported work. MHS Work to be supported by the CMH secretariat must be based on values that set limits to the direction and content of work so that it does not degenerate into excess generality, finding that everything is relevant to everything else. At minimum, the values could include the following: 1. The MHS products are to support and catalyze progress by governments, not instruct or impose content. 2. The MHS products in their totality must be aimed at improving equity and enabling/empowering poor communities toward better health. 3. Governments participating in the MHS Work must have commitment to these values as demonstrated by some or all of the following: - Budget allocations to health of the poor - Borrowing or foreign assistance allocations for health of the poor - The existence or process of formulation for an MHS plan - Inclusiveness of all segments of civil society. 4. Public expenditures should be driven by externalities (public goods created or public bads prevented, not by private medical care benefits). Annex D provides conceptual elaboration of this principle. Capacity building and lifting of constraints. It is easy to understand that TB control, HIV prevention programs or child health interventions need to be expanded effectively for communities at the highest risk or with the greatest disease burden. It is include, at minimum, health or public health ministries, finance or treasury ministries, ministries of development or of planning, and depending on the circumstances others, such as education, internal affairs, water resources, information and so on. At the intermediate and local level, the equivalent local government function of such national ministries may also need to be engaged and understand much of the MHS Work. 19 These include inter-ministerial groups required by the Highly Indebted Poor Countries initiative (HIPC), the Poverty Reduction Strategy Process (PRSP), the Global Alliance for Vaccines Initiative (GAVI), by the Joint UN Programs on HIV/AIDS (UNAIDS), the Global TB Drug Facility, the Global Fund Against AIDS, TB and Malaria and many less prominent initiatives.

11 Page 11 of 21 easy to understand that more resources (funds) are needed to provide more health services to poor communities, or to undertake public health (preventative) programs for them. It will also be easily accepted that institutions or health service personnel may need to have greater funding for operational costs (fuel, transport, electricity, consumable supplies, medicines, vaccines, etc.). Similarly, in many countries it is widely understood that salaries for health workers are too low, causing them to seek income-supplementing opportunities both inside and outside of health service work or even to emigrate. 20 It is much less easy to understand what to do about the factors that limit effective capacity. Spending traps. Even when more money is available, health (and finance) systems in many countries are unable to spend it. Transfers of funds from higher to local levels of government can be slow. Disbursement of funds at the local level can be slow. Local planning capacity may be weak or insufficient to meet the requirements of higher administrative levels. Competing claims on local managerial capacity from sectors such as transportation, agriculture or urban development may fully absorb the review, approval and disbursement capabilities of the local civil service. Excessive medical service orientation of local health services may mean that public health initiatives are neither understood nor supported by health departments whose leaders have by training a different professional orientation. In addition, local elites are usually skilled at realizing their demands of the health services for medical care. Poor communities often have neither institutional representatives nor effective local advocates. Even when higher administrative levels mandate spending for equity goals and public health services, the demands made upon local leaders may skew spending toward interventions that address other challenges and income groups. In their totality, these factors constitute spending traps from which it is difficult to emerge. Pushing more money at spending problems will not necessarily alleviate them. Sequenced progress toward better health and better capacity. It is difficult to define an investment program for all the high priority expenditures that are required to: (i) meet identified health goals and (ii) simultaneously make the investments required to enable health service facilities and their supporting infrastructures to work, while (iii) also training, managing and raising the salaries of health workers for productivity. The complexities of implementation would be great and worries about the macro-fiscal impact 21 would surely incur the opposition of ministries of finance and the central bank in most countries without careful elaboration of both amounts of expenditure and linking of their sequence to expected improvements. There is no choice other than to define a longterm program of dual investments in illness prevention/treatment and in lifting of capacity of the health system and improving productivity of personnel. Each of these investment packages may require a decade or more to implement fully and each will require careful sequencing and regular evaluation and refinement. 20 The same factors inhibit capacity in other sectors (education, urban administration, and social welfare services for example. In many countries, the wage rates for the general civil service are also so low that public sector productivity is minimal and outside employment is common. Very difficult issues of intersectoral equity will have to be addressed and the fiscal/budgetary implications of the overall spending required will necessitate careful sequencing to be politically and socially acceptable. 21 Possible inflationary impact and budgetary imbalances that would threaten other productive sectors.

12 Page 12 of 21 Illness prevention and treatment investments can be approached through specific assessments by multidisciplinary teams that evaluate the specific program situation. 22 This would identify the main issues, actions needed to deal with them, and a phased financing plan. 23 The assessment would have to include the specific reforms in health facility operations, management, staff capability, and service delivery policy and wage changes likely to be needed. Early progress would probably occur with the specific interventions while work proceeded on the capacity reforms that will necessarily take time to implement and create impact. Sequencing of the reforms will be key and the merits of the case (for disease control, for system change or health worker productivity) should not be allowed to overwhelm the orchestration of sequencing. The risk is that dissatisfaction with higher costs and poor initial outcomes could destroy any political/administrative consensus to continue the investment plans. To some extent, health system improvements, productivity of health work force and quality of disease prevention and control efforts will depend upon progress on the broader public administration agenda. An effective legal framework, responsive management culture and effective civil service pay and career systems will be important, related investments. More of the same in the health sector, in the form of increased spending on drugs, traditional disease specific programs and infrastructure investments will certainly be essential, but insufficient to catalyze a raised capacity and dramatically more effective response. All of the other factors that constrain efficiency, restrict output and bias services away from communities most in need will have to concurrently be dealt with. Offsetting these complexities and risks will be technological innovations that offer unprecedented opportunity. Today, millions of ill and at-risk persons can benefit from a broad range of preventive and curative interventions for managing diseases of poverty in ways that could never have been anticipated just a decade ago. Vaccines for many more illnesses, effective prevention of HIV, anti-retroviral therapies in selective settings for AIDS, effective curative programs for tuberculosis and community managed diarrhea and malaria control and treatment programs can literally save millions of lives and curtail countless illness episodes for a low or moderate cost. This is the promise and potential that makes pursuit of the CMH Report appealing. It is obvious that the entire process of increasing investment and undertaking capacity-lifting reforms will require years, if only because more money can be well used only when there is an adequate capacity to be responsive. The human resource-building steps needed for increased capacity require time. This time necessity suggests that early investment plans accept some verticality in disease-oriented expenditures and accompanying service delivery capacity while the preparations and early investments for broader reforms are being made. The advantages of this sequence will be avoidance of many deaths and illnesses, with the accompanying political and social benefits that will 22 For HIV/AIDS prevention and treatment, TB control, malaria or maternal and child health programs, for example. 23 The key would be to limit initiatives to a few priority things, not trying to cover all needs. The process would have to be open to considerable variability to suit country and local conditions.

13 Page 13 of 21 help sustain the process. At the same time, the seed investments in manpower, system reforms and health services capacity can be systematically made to lift further disease control efforts to a level of greater volume and impact. The sequence of investments to do this will be country-specific in both content and phasing and for this reason were not specified in the CMH Report and its supporting papers. Specificity of Investment Sequencing - Value-Added in the MHS Work. The value-added by MHS Work will be the expansion of resources for priority health goals for poor communities with the addition of a strategy that successfully sequences the policies and investment actions needed to sustainably lift the constraints currently plaguing health systems. The lifting of institutional capacity, systemic and human resource constraints so that technical inputs, health services, and health manpower can be managed for effective outcomes will make the fundamental difference in allowing the new, expanded financial resources to be used most effectively. This will happen through the definition of products from the MHS Work that can be implemented in each country. Each country s menu of investments, reforms and their sequence will be unique, adapted to their specific needs. The menu will be adjusted, as needs change, progress is made and lessons learned. Sequencing of reforms and capacity improvements will be a particularly critical area. Different aspects of the process may appeal to different partners. The MHS Work itself may evoke from some donors partial external funding to help early experiments with the proper approaches or the evaluation of specific policies. Capacity raising investments may rightly be tentative at first, as lessons are learned and progress is documented. Nevertheless, these can and should be coupled with significant life-saving and illness-avoiding expenditures in the first years to yield visible public benefit for the sake of the poor, the domestic agencies leading MHS Work and their external partners. Done transparently and publicly, MHS Work will benefit both governments doing the work and the donors who support them. Systematic Evaluation and Assessment. The framework evoked in the MHS Work provides the documentary basis (the products) and the network of national and external partners engaged to support government leadership for regular systematic evaluation and assessment. It will be up to each country MHS commission or team to manage the program, but with a clear follow-up obligation for the CMH secretariat and the WHO offices at each level to provide a regular (semi-annual) joint evaluation of products, activities underway, outcomes achieved and assessment of next steps. Such a mechanism, perhaps more intensive on alternating occasions, with roughly the same group of sectoral experts, will provide unique, consistent validation and guidance to the MHS leadership team and external partners. It should be as specifically focused as possible, based on health service and status indicators and health finance and accounts data. The evaluation should cover priority diseases and programs, constraints identified and the issues and options experienced in their alleviation, and all important human resource issues from planning of manpower needs, to training, managerial systems and compensation. CMH secretariat funding to stimulate and support these reviews will be considered. The CMH secretariat and its advisory groups within and outside the WHO will assess these country evaluations and overall progress on an annual basis. This product will provide the basis for validation of the MHS Work.

14 Page 14 of 21 Annex A Sustainability. The concept of sustainability requires clarification in the context of MHS Work. It does not mean simple financial self-sufficiency - a situation in which the governments participating should anticipate, and press themselves to finance needed new investments in health or costs of lifting absorptive constraints, from their own public revenues after a defined period of time. For the poorest countries engaging successfully in the MHS Work, the concept of sustainability should be understood to include public policies demonstrating such sound governance, macroeconomic policy and overall development effort with appropriate attention to equity, that external sources of grant or low cost financing are consistently willing over many years to provide external resources to compensate for low domestic savings capacity. For less poor countries sustainability should be understood to mean public policies, effectively implemented by government, that balance growing investments in health with appropriate attention to equity and any market failures in service provision so that a combination of domestic fiscal measures and external deficits appropriate to the economy allow health investments and related reforms to continue in a stable way for many years. External shocks (price of commodities, interest rates, etc.) may affect sustainability and necessitate adjustment in levels of health investment or delay or reorient the menu of reforms to lift capacity. Domestic factors of employment trends, productivity, savings rate, technology change and efficiency may also necessitate adjustments. Neither external shocks nor domestic factors provide reasons (excuses) why MHS Work at the Country-level should fail. The content of the work may need to be adjusted, reforms and investments may need to be sequenced differently, or reshaped for effectiveness, but the product to be created will remain valid.

15 Page 15 of 21 An MHS Work product to blend donor coordination with capacity lifting Annex B Working Group Six of the Commission on Macroeconomics and Health found that donors procedures and practices pose significant constraints exist. The great number of donor agencies and donor-funded projects risk overtaxing weak and limited institutional and human capacities in some countries. Each of the 22 bilateral agencies and 10 major multilateral agencies active in the health sector have their own policy mandates, operational procedures and reporting requirements. Sheer numbers alone can create administrative problems that reduce effectiveness compared to funds managed under more coherent and coordinated government leadership. Sector wide approaches have encouraged a common policy framework to guide country and donor decisions but have been less successful in overcoming specific implementation constraints. Systematic collaboration by donors to harmonize procedures for policy and program review, procurement, supply chain management and financial management are still largely lacking. Working Group Six highlighted these and other issues related to donor activities and financing in the health sector. Emerging from this analysis were three messages for the Development Community: Significant additional resources are needed to respond to today s major public health challenges and the diseases of the poor. Providing additional resources without an explicit focus on the factors that constrain the disbursement and effectiveness of funds already available or that lead to the diversion or leakage of funds will ultimately result in frustration and backlash. Donor agencies and countries must find ways to accelerate the development of intellectual capital in sectoral management. The mobilization of global and national institutional capacity to improve technical and allocative efficiency would be an important step in easing absorptive capacity constraints and improving accountability in the health sector. At the same time Working Group Six summarized the frustrations emanating from constraints originating at the Country-level and only resolvable by the host government. It noted three broad types of constraints: Organizational and administrative capacity is weak: - The institutional and organizational requirements of implementation should be a target of policy reform, not accepted as a constraint. - Additional funds can improve health status quickly only to the extent that workable delivery systems can be created or are in place. - The feasibility of delivering services varies immensely by country and within countries for many reasons, including differences in availability of skilled personnel, physical infrastructure, transport and communications facilities, legal and regulatory framework, and many other factors. - Effectiveness is determined by institutional as well as technical variables.

16 Page 16 of 21 Mechanisms for strengthening ownership and reducing transaction costs remain inadequate. National ownership and leadership of health sector development would include the following: - Ministry of health leadership of a broad-based consultation process on health policy development. - Ministry of health chairmanship of major sectoral and subsectoral meetings with national and external development partners. - Ministry of health control of drafting and finalization of major policy documents. - Ministry of health leadership of donor coordination processes. - National government budgetary appropriation of domestic financial and other resources for health development. Mechanisms for accountability are inadequate: - Measurement systems and accountability systems are needed that are transparent, responsive to programmatic goals and adaptable to national and local decision making. - Development assistance for health is most effective in supportive policy environments where there is evidence of strong political commitment to health policy goals. Burden of disease is usually highest in countries without supportive environments. What donors should attempt to do and how they should do it where policy and institutional environments are not propitious are questions that must be addressed in the context of specific country conditions. An MHS Product. Taken together the issues listed above suggest a product for MHS Work in countries that wish to avail themselves of greater donor support while developing greater ownership and leadership of the process. While complex in detail to develop, and highly specific to the individual country situation, the product could be represented as shown in the attachment. Each of the improved capacity modules and the capacity constraints could be the subject of detailed planning to work out investments and specific reforms needed over 5-15 years, with more specific focus on the near term and systematic evaluation and adjustment as capacities improve. Country-specific adjustments to the product concepts and to the activities mentioned, as examples, should be made in light of intimate country and cultural knowledge. A subgroup of the host country MHS Work team or MHS National Commission would be in the best position to further define and elaborate such a product, together with the external and domestic (civil society) partners who can be mobilized for support. External and national funding could be required to create such a product over several years. Defined intermediate outputs and milestones related to elimination of important constraints and any resultant reforms should be identified. The cost of inputs should be elaborated with a preliminary annual and medium term plan. Such a project investmentlike approach based on a clear situational analysis of the issues to be addressed and the inputs and activities to be conducted, with continuing evaluation and adjustment, may yield the lowest risk path for moving forward in these complex areas. Joint external and domestic review teams could provide regular validation of both the process and the evaluation choices being made.

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18 Page 18 of 21 Annex C Summary Extracts of Issues and Options for Consideration CMH Working Group 3 Mobilization of Domestic Resources for Health Countries rely on many methods of financing health. The best mix will depend on a country's income level, taxation capacity, and culture. The combination of sources used affects the amount of resources that can be mobilized, patterns of equity, efficiency, and cost of health care. Not every financing method can be used for every population group. - Social insurance is possible only for workers in the formal sector. - Private insurance is affordable only by affluent households. - Community financing is most feasible for closely-knit rural communities. Countries have to match methods of financing to their population groups, using general budgetary revenue to fill the gaps or compensate for the limits of different methods. Policymakers should review critically how health is financed and then prepare a coherent and realistic financing strategy. It should value horizontal and vertical equity and be realistic about government s capacity to collect taxes. General budgetary revenue as the most equitable and flexible source of financing would be used to correct shortcomings left by other financing methods, would fund public goods and essential health care, and would subsidize the poor. A coherent strategy to integrate health care for various population groups can increase spending on health, facilitate the pooling of risks, improve equity, and achieve gains inefficiency and quality, while providing the framework for discussion with civil society, the medical professions, NGOs, and donors. It is recommended that countries promote increased prepayment and limits for out-of-pocket spending to what households might be expected to afford. This will increase financial protection, reduce the risk of impoverishment, and allow for greater and more equitable access to health care. Because it is difficult for the poor to increase private prepayment, any increase in their prepayment will have to come from public sources. Strategies for revenue collection should rely upon those taxes that can raise substantial additional amounts of revenue with relatively low administrative cost. Essentially, these will be excise taxes and truly broad-based general sales taxes. Equity can often be best served through well-targeted expenditures including public health care for the poor. Additional revenue for health should be sought by eliminating badly targeted and wasteful tax incentives and subsidies (for any sector). Public funding for

19 Page 19 of 21 health can be increased, in part, by reducing the level of public expenditure on items best left to the private sector and by better targeted subsidies and transfers. Policymakers in low and middle-income countries should encourage and provide support to expand community-financing schemes (see box) that cover rural and other excluded population groups in parallel with national mechanisms of health care Policies for community financing schemes. The environment to be overcome in establishing community health financing schemes in poor countries and in impoverished regions of lower and middle income countries is often characterized by severe economic constraint, political instability, and lack of good governance. Government taxation capacity often is weak. Formal mechanisms of social protection for vulnerable populations are frequently absent. Government oversight of the informal health sector may be lacking. Community involvement provides one step towards improved financial protection against the cost of illnesses and improved access to priority health services Five key policies are available to governments to improve the effectiveness and sustainability of community involvement in the financing of health care for the rural and informal sector poor. These are: 1. increased and well targeted subsidies to pay for the insurance premiums of low income populations; 2. the use of insurance to protect against expenditure fluctuations and the use of reinsurance to enlarge the effective size of small risk pools; 3. the use of effective prevention and case management techniques to limit expenditure fluctuations; 4. technical support to strengthen the management capacity of local schemes; 5. establishment and strengthening of links with the formal financing and provider networks. financing. 24 Potential disagreements between central and local policymakers in this area of health financing may arise and should be examined in light of experience. Policymakers in middle income and emerging market economies should avoid excessive reliance on direct user charges for health care. Policymakers should also expand the use of incentive-based approaches to enhance efficiency in the supply services. Public reimbursements should be available to private suppliers so that there is a level playing field for provision of essential packages of services. Even if service provision remains in the public sector, competitive tendering for inputs can reduce costs and enhance quality. Policymakers in low-income countries should learn from the experiences of the PRSPs as they emerge. They should ensure that significant external resources gained 24 In collaboration with governments, or independently, donors and NGOs should try to seek out local communities willing to cooperate and expand coverage under community financing schemes.

20 Page 20 of 21 through debt relief or other sources are used to promote health care that is accessible to the poor. Policymakers should scrutinize health expenditures and practices to learn from the best practices both within their own systems and from systems outside their countries. Substantial savings are almost certainly available through improvements in technical as well as allocative efficiency. Governments should consider establishing funds to act as counterpart financing to health care aid, phasing in programs for aid, and, in the longer run, mobilizing domestic revenue to replace aid. Framework to consider direct economic impact of the health system Health finance policy Direct economic consequences Revenue generation options user fees and private voluntary insurance universal mandatory finance (through payroll or general revenue taxation) Provider compensation options fee for service vs. salary vs. capitation Supply-side measures to contain costs (for example, hard budget constraints) Demand-side instruments for cost control and revenue generation (for example, co-payments) Source: adapted from Rueger, Jamison and Bloom (2001, p. 636), and Report Of Working Group Three Of The Commission On Macroeconomics And Health, p A. Total resources withdrawn from household (or the economy) for: valuable health services inappropriate health services administrative costs B. Welfare gains from risk pooling C. Protection from poverty induced by medical expenses or ill health D. Altered economic incentives implications of alternative taxation instruments moral hazard; supplier-induced demand reduced labor mobility (for example, from "job lock associated with employer-based private insurance) reduced incentives for employment resulting (perhaps) from payroll taxes or means-tested subsidies for health insurance impact of user fees/charges on welfare of poor

21 Page 21 of 21 Annex D -21-