PUBH6003 Health Systems and Economics : Health System Goals


Health care financing system as defined by Uzochukwu et al., (2015) is a process by which revenues are collected from primary and secondary sources, e.g., out‑of‑pocket payments (OOPs), indirect and direct taxes, donor funding, co‑payment, voluntary prepayments, mandatory prepayment, which are accumulated in fund pools so as to share risk across large population groups and using the revenues to purchase goods and services from public and private providers for identified needs of the population, e.g., fee for service, capitation, budgeting and salaries. An effective healthcare financing system is established through good financing strategies which mobilize resources for healthcare, achieve equity and efficiency in use of healthcare spending, and ensure quality and affordable healthcare as well as adequate provision of essential healthcare goods and services (Uzochukwu et al., 2015, p. 438). For the sake of delivering its goals, a proper healthcare system financing ensures adequate financial protection in order to prevent individuals/households from being impoverished because they accessed health services, and one way of ensuring a continual financial protection is through inducting a risk sharing plan in the system thereby making the risk of incurring unexpected health expenditure not to fall on one person (Uzochukwu et al., 2015, p. 438). Ensuring adequate access to one’s health needs without making without making significant Out of Pocket payment (OOP) at service point is one aim of Universal Health Coverage (UHC) which can be achieved through risk pooling either through tax funded or social health insurance (SHI) (Uzochukwu et al., 2015, p. 439) How a country finances its healthcare system plays a thematic role in attaining UHC because it determines whether health services exist and available as well as their affordability to people as the need arises. This is achievable through a well-planned combination of all healthcare financing mechanisms including; Taxation, OOPs, donor funding, health insurance, exemptions, deferrals and subsidies (Uzochukwu et al., 2015, p. 439)
Donor funding involves financial aid rendered to developing countries (which could be in form of loans or grants) to boost socio-economic or health developments (Uzochukwu et al., 2015, p. 442). Official Development Assistance (ODA) from developed nations in the region of 0.7% target of their gross national product. Just like many other developing countries. Firstly, low-income developing countries not meeting universal health coverage goals for essential health services as a result of inability to raise fund exclusively from domestic sources within a foreseeable future is usually what gives rise to international assistance and it may seem as though most countries in this category have pressing health needs (Cavagnero E et al., 2008, p. 864),hence increased international aid is needed to balance increased domestic fund, however there is usually a downside to a rapid arrival of foreign aid which could give rise to Dutch-disease (an adverse macroeconomic impact of foreign exchange on a country’s economy) (Cavagnero E et al., 2008, p. 864). 
According to Cavagnero et al., (2008), there are some general effects of increased donor funding as well as health aid risk factors, for example;
Domestic demand and prices: saving a windfall received through donor funding will have no adverse/direct economic impact but that is not what the aid is meant for. Spending of donor fund especially on non-traded goods and services is likely to lead to inflation. International competitiveness: According to experts, spending a large boon of foreign exchange is capable of making a country less competitive, either by raising inflation or by making the foreign currency appreciate over the country’s local currency i.e a depreciation of domestic prices in relation to foreign prices in the real exchange rate (RER). Donor aid to Africa has been associated with depreciation of RER.
Growth: While increased inflow of foreign aid may boost demand for non-tradable goods, it can also raise domestic prices and lower profits of export goods. Cavagnero et al., (2008) highlights reviews of cross-country studies that show evidences of general symptoms of aid-induced Dutch disease that are not related to health spending, for example, increased donor fund was associated with RER appreciation and weak performance of manufacturing sector was reported in Malawi, Pakistan and Sri lanka.
For specifics, Nigeria healthcare financing through donor funding does not promote health goals because, donor funding in Nigeria has been on a decline way before the switch to 1999 democratic governance as records show yearly official development assistance income from 1999 to 2007 was estimate at US$2.335 and US$4.674per capita respectively (Olakunde, 2012). These figure are still below the average of US$28 per capita mapped out for sub-Saharan Africa. Even though records show that donor funding is increasing, it still accounts for a small proportion of public health spending(Olakunde, 2012).the data from Global Health Expenditure Database still corroborates this as foreign aid contributes 7.8% of the sources of health expenditure; a figure that been on a steady decline since 2013 (Global Health Expenditure Database, n.d.).
Nigeria operates a dual healthcare delivery system (orthodox and traditional) and involves public, private and voluntary stakeholders with health service provision being the function of the three tiers of government- federal, state and local governments (Oyibocha et al., 2014, p. 30). The Nigerian public sector operates a decentralized health system which is run the Federal Ministry of Health (FMoH), state ministry of health (SMoH) and Local government Health Department (LGHD). Albeit, the responsibility of running PHC lies with the local government, all three tiers of government alongside various agencies all participate in the management of PHC which sometimes result in duplication, overlapping and confusion of roles (Olakunde, 2012). In Nigeria, the key challenges with donor funding remain coordination of funds and tracking donor resource flow as a result of the vast number of federal health agencies, stakeholders and other parastatals; the interrelatedness in the nature of their planning, coordination and systems (most of which are redundant) creates difficulty in linking responsibilities in areas of authority, policies, plans, programs etc (Swaziland & World Health Organization, 2015).

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