Finance for Development

Michael Burinyuy Ayenika
Email:mayenika@gmail.com
Final Assignment
A proposed financing solution to a development problem you are aware of in your professional
or community context
Problem Area:
Primary Health Care Financing for Inclusive Policy reforms in Cameroon
Section 1-Problem Diagnosis
1.1. Introduction
Healthcare financing reforms has for the past decades been a common
place across the spectrum of high to low income countries. The post
independent health financing reform (The Bamako Initiative, adopted in
1988) in Sub Sahara Africa (SSA) requires individuals to pay for health
services out of their pockets (OOP) as a cost recovery strategy. This method of
health care financing is still disputable among policy makers (Daniel and
Valéry, 2014) as it has lead to inequality among the rich and the poor to access
health care services. The burden of such a policy lies on the poor or under
privileged household (Oluyele et al, 2013).
Household health financing in Cameroon is mostly done through out-of
pocket payment. Out-of-pocket payments for health services have cause
households to incur catastrophic expenditures (catastrophic when a
household must reduce its basic expenditure over a period of time to cope
with health cost) (Ke et al, 2003), which in turn push them into poverty. The
need to pay out-of pocket also mean that households do not seek care when
they need it. According to a study by Adam Leive and Xu Ke in 2008, the
system of financing health expenditure in Africa is too weak to protect
households against catastrophic expenses. The borrowing or selling assets to
finance health care is a common practice. The proportion of households who
have paid their health spending by borrowing or selling assets ranged from
23% in Zambia to 68% in Burkina Faso and so on.
Health system financing in Cameroon is carried out by both the public and
the private sectors. The public financing mechanism involves Social Health

Insurance (SHI), and Taxes (direct, indirect, general and earmarked). On the
other hand, apart from user charges, private health is finance by Community
Based Health Insurance (CBHI), Private Health Insurance (PHI), Mutual Health
Organizations (MHO) and Medical Saving Account (MSAs) (Nouria, n.d).
1.2-Socio-economic context
The economic crisis of the 1980 years drove Cameroon into recession.
Accentuated by the 60% decrease in salaries of civil servants in 1993 and the
devaluation of the CFA franc in 1994, this crisis has significantly changed the
structure of consumption and access to care. Thus, the decline in households’
financial capacity was accompanied by a decline in the state budget devoted to
health. The share of health expenditure in the household budget increased
from 4% in 1984 to 6% in 1996 and 7.2% in 2001. Between 1995 and 1996,
total health expenditure was 250 billion CFA francs, 72% financed by
households, 22% by the state and 6% partners (Commeyras et al., 2005).
In 1982, Cameroon adopted and implemented the primary health care
(health for all by the year 2000) to provide free care. In 1993, the country
adopted the Bamako Initiative through policy reorientation of primary health
care, through: the recovery of costs for care and medications, community
participation, and the organization of health districts (Sieleunou et al., 2010).
In addition, Cameroon has benefited from innovative financing of health after
numerous international initiatives aimed at achieving the Millennium
Development Goals (MDGs) by 2015. The Health Sector Wide Approach
(SWAP), adopted in 2010, emerges as a key instrument for mobilizing and
optimizing the use of resources for the implementation of the Health Sector
Strategy. Despite these measures, the “Average Propensity of Total Medical
Consumption” of households is high in Cameroon, where 51% of the
population lives on less than two dollars a day.
1.3-Statement of the problem
Since independence in 1960 a series of health policy reform have been out
carried by African countries to make health services more available and
accessible to the population. These reforms mostly concerned health systems
(organization, provision of services, resource allocation, financing, and so on).
In 1988 the international development community uniformly accepted the
introduction of user’s fee as a cost recovery strategy. The aim of such a policy

was to raise revenue for health system, reduce frivolous demand, and cost
containment. After implementation, it has been proven that this policy has
lead to inequality (accessed to health care), limited revenue raised, constrains
necessary demand (Frivolous demand not an issue in poor contexts), very
regressive (push people into poverty or debt), exemption mechanisms do not
work and discourage early care seeking
In 2002, a survey carried out by the Ministry of Public Health (MoH) shows
that 62% of Cameroonian lack access to quality health care and medications
due to lack of adequate finance. This was more peculiar among the rural
masses. The “Caisse Nationale de la Prévoyance Sociale” (CNPS), a public
social security organization covers only private and public sector formal
workers. On the other hand private social insurances subscription rates are
too high; this has resulted to a low enrolment rate of about 3 to 4% of the
population of Cameroonians (Fondo and Ibrahim, 2011). In a country where a
majority of the population lives less than two dollars a day, 32% of
households spend less than half of their income on health, while 16% of
households spend more than half of their income and 52% spend more than
the total income. This corresponds to a weight of 68% in health care spending.
Due to the high cost of quality health care, a large portion of the population
seems to relay on cheap counterfeited medication (road-side drugs) and
traditional healers for treatment resulting to large number of deaths.
The study will base at proposing a sustainable health care financing method
in Cameroon.
Literature review
2.1-The Notion of Key Concepts:
According WHO (2015), health policy refers to decisions, plans, and
actions that are undertaken to achieve specific health care goals within a
society. An explicit health policy can achieve several things: it defines a vision
for the future which in turn helps to establish targets and points of reference
for the short and medium term. It outlines priorities and the expected roles of
different groups; and it builds consensus and informs people. The aim of
health financing policy is to;
- promoting universal protection against financial risk;
-promoting a more equitable distribution of the burden of funding the system
(WHO, 2008). Equity-Efficiency Tradeoff refers to an economic situation in
which there is a perceived tradeoff between the equity and efficiency of a

given economy. This tradeoff is commonly viewed within the context of the
production possibility frontier, where any additional gains in production
efficiency must be offset by a reduction in the economy's equity (Arthur,
1975).
In the context of limited resources, the equity versus efficiency trade-off is a
major issue when prioritizing health care. There is no consensus on how to
balance equity with efficiency within the national health system (NHS),
leading Sassi and colleagues (2001) to argue that the trade-off has led to
inconsistent judgments in the development of health policy and to appeal for
guidance from the NHS when equity and efficiency conflict. On the other hand,
efficiency refers to the allocation of limited economic resources to meet the
healthcare needs of a society. It can be;
1-Technical efficiency: Achieving a specified health gain with the minimum
number of inputs.
2-Economic efficiency: Achieving a specified health gain at the least cost.
3-Allocative efficiency: Maximizing the health gain from a specified level of
resources (sometimes called social or Pareto efficiency). While Equity, is the
fair distribution of benefits across the population. It is important to note that
equity differs from equality. Equality is the equal distribution of benefits
across the population, and can be measured objectively. In the utilitarian
theory of social justice, equity = equality. This is called end state equity a
situation where there is an equal distribution of benefits. In the egalitarian

theory of social justice, equity is achieved when people have the same
opportunities to obtain benefits even if the outcomes are unequal. This is
called process equity. Equity may apply to public health in several ways. For
example:
 Equal health outcomes.
 Equal access to care for patients with equal need.
 Equal use of health care for equal need.
 Equal expenditure/resources of care for equal need.
 Equal costs (to the payer) for equal need.
There are two principles of equity in providing health care:
Horizontal equity: The equal treatment of individuals or groups who share
similar circumstances.
Vertical equity: Individuals with different (or unequal) health should be
treated differently (or unequally) in proportion to morally relevant factors.
Morally relevant factors include ability to benefit, autonomy, and desert.
Morally irrelevant factors include age, sex, socio-economic status, income,
education, ethnicity, disability, location, nationality. Achieving horizontal or
vertical equity may involve re-organization of services and redistribution of
resources (PHAST, 2011).
Health Expenditures: As defined by the World Bank, the total health
expenditure is the sum of expenditures on public and private health. It covers
the provision of health services (preventive and curative), family planning
activities, related to nutrition and reserved for emergency health assistance
but excludes the provision of water services and hygiene. Health expenditure,
recorded in the accounts of health, covering different types of services:
hospital charges, costs “outpatient” drug spending, the expenditure approach,
prostheses and small equipment medical, medical transportation costs
(IRDES, 2013). In this study, the health expenditure of households include
expenses related to medical care and goods (hospital care, outpatient care,
medical transportation and medical goods), as well as preventive medicine.
Health financing; According to WHO, health financing is the way financial
resources are generated, allocated and used in health systems. The following
issues relating to health financing, should be asked: how and from what
sources raise sufficient funds for health? How to overcome financial barriers

that exclude many poor accesses to health services? How to offer a range of
services of fair and effective health?
Household income: In economics, the primary income (primary income) of
household income that households derive from their contribution to economic
activity either directly (income from employment or self-employment) or
indirectly (income furniture placement or real estate). It does not include
social security benefits - this is income before redistribution. In national
accounts, the primary household income includes income directly or
indirectly related to household participation in the production process
(INSEE, 2013). In our study, the income mentioned here is imputed income to
the main activity of household members.
Average propensity of the total medical consumption: The average
propensity of medical consumption is the share of income spent on medical
consumption. The total medical consumption includes the consumption of
medical care and goods (CSBMs), as well as preventive medicine. It is hospital
care, outpatient care, medical transportation and medical goods.
2.2-General information on health financing in Africa
The key issue that arises in terms of health care spending is not how to
reduce but rather how we choose to finance (issue of receipts) and optimized
(question of the organization), with the goal of an inclusive health fair system.
So, thinking about the financial aspects of expenditure and revenue of the
health system cannot be achieved without addressing the problem of the
organization of this system. Indeed, whether it is able to bring new resources
to the system or to consider how spending facing the community versus
individual, any direction that is acceptable only if the financial effort is fair
and optimized what it will be used. However, three fundamental
developments appear to maintain”upstream” the dynamism of the expense.
These are: (i) changes in health (epidemiology and aging) that shape the
needs and demand for health care, (ii) the standard of living through the rise
in demand for health care driven by a higher income, and (iii) the progress of
medical knowledge (technical progress), allowing both to better diagnose
diseases and better treatment (Albouy et al, 2009.). Thus, knowledge of the
sheer scale of health spending by households is an avenue that should be
explored, given the importance of private health expenditure in development
planning. African leaders pledged at the Abuja conference in 2001, to mobilize
more financial resources for the achievement of the Millennium Development

Goals (MDGs) by allocating at least 15% of their national budgets to the sector
health, seem to have difficulty meeting their commitments, because of
weakness and fragmentation of health systems. These commitments were
renewed in Gaborone, Botswana in 2005 and in Ouagadougou, Burkina Faso
in 2006. Indeed, donor funding is still a large part of public health spending on
the continent. Thus, in some countries, 50% or more of their budgets come
from the private or foreign aid, according to the 2013 WHO report on global
health statistics. In nearly half of the African countries, the private health
financing is equal to or exceeds largely public funding, up more than 70% in
some states such as: Cameroon (70, 4%), the DRC (71.6%), Sao Tome and
principles (64.7%), the Chad (75%), Ivory Coast (75.5%), the Guinea (67.5%)
to Bissau (66.9%), Guinea, Liberia (81%), Nigeria (68.5%), Sierra Leone
(84.7%) in Burundi (65%),
2.3-A Summary table of health financing mechanism in Africa
Various Health financing Mechanisms
Private Public
Community Based Health Insurance (CBHI) Social Health Insurance (SHI)
Private Health Insurance (PHI) Taxation (direct, indirect, general,
earmarked)
Medical Savings Accounts (MSAs)
Informal payments
Pros and cons of each of the above methods of health financing
Pros cons
User fees/ charges
– Raise revenue for health
– Reduce frivolous demand
– Cost containment
– Exemption mechanisms can protect
vulnerable
– Limited revenue raised
– Constrains necessary
demand - Frivolous demand
not an issue in poor
contexts
– Very regressive – push
people into poverty or debt
– Exemption mechanisms do
not work
– Discourage early care
seeking
Community-Based Health Insurance
– potential ability to collect revenue
– pool funds
– reach population groups that
market based health financing
arrangements do not, such as
population in the informal sector
– small pool of funds/
fragmentation
– Limited financial protection
– Limited revenue collection
– Poorest excluded
– Difficult to transform into

and socially excluded groups national level system
Private Health Insurance
– enable the healthcare of the
relatively affluent to be self-
financed,
– free up public resources
– encourage innovation and
efficiency
– discriminates in favour of
healthy and young adults
who use little care
– lead to market
segmentation, cream
skimming and exclusion of
vulnerable groups (such as
the poor, ill and elderly)
– Creates a two-tier health
system, where those with
private health insurance
can access better quality
services.
– When subsidised by the
state, it can prove to be very
expensive for the
government.
Social Health Insurance
• Relate initial payment to income rather
than risk,
• Increase financial accessibility
• Potentially large risk pooling that is
subsidisation/ redistribution
• Increase transparency - politically
acceptable
• Tax on payroll: can increase overall
production cost
• Focuses on formal sector
• Can create two tier health system
• Tends to exclude those in greatest
need
• Feasibility issues in SSA
Tax financed systems
• Payment related to income
• Progressive
• Potentially very large risk pool
• Still largely untapped in SSA
 Feasibility issues: administrative
capacity, tax avoidance
 Lack of transparency
General or hypothecated tax
• Draws on broad revenue base
• Allows trade-offs between health care and
other areas of public expenditure
• Lack of transparency
• Linked to economic growth
• Feasibility issues: administrative
capacity
Direct or indirect tax
• Usually progressive
• Administratively simple when records of
income etc exists
• if informal market is large then
need strong institutional capacity
• can create horizontal inequity:
– When income tax rates vary
geographically
– When some form of income
are exempt from income tax
– When some forms of
expenditure are tax

deductible
Direct or indirect tax
• highly visible
• can promote heath if tax on health
damaging goods
• Indirect taxes are overall regressive
as related to consumption not
overall income. In particular:
– People with higher income
save more and savings are
not subject to indirect taxes
– People with lower income
spend proportionately more
of their income on heavily
taxed goods (that is food)
– Many indirect taxes are set
as lump-sum amounts (for
example vehicle licenses)
Conclusion
 Health financing key to governance
 Health financing sits within health system
 No method is perfect
 Universal coverage/ equity
 User fees to be removed
 CBHI limited scope/ success
 Public financing mechanisms best
in principle
Nouria (n.d) Domestic health financing in sub-Saharan Africa Save the Children UK
2.3-Out-of Pocket Health Financing (OOP)
Out-of-pocket (OOP) payment is the major health financing mechanisms
across Sub-Saharan African countries and developing countries in general
(Swadhin et al, 2010). According to OECD (2011), “Out-of-pocket payments
are expenditures borne directly by a patient where insurance does not cover
the full cost of the health good or service”. They include cost-sharing, self-
medication and other expenditure paid directly by private households. Some
households face very high out‐of-pocket payments. Catastrophic health
expenditure is commonly defined as “payments for health services exceeding
40% of household disposable income after subsistence needs are met” (WHO,
2014). The World Bank uses a more recent definition of financial catastrophe,
where out-of-pocket payments exceed 10 percent of total household income.
This approach is simpler to estimate and the results are similar to those
derived by the WHO method. This indicator is calculated as :( Household out-
of-pocket expenditure for health during the past 12 months / Total household
income (or total income - subsistence needs in past 12 months) x 100 (WHO,
2010). According to WHO (2014) OOP household expenses for health services

remain too high in Cameroon. This rate varies from 94.6% in 2009, 94.6%
(2010), 94.3% (2011), and 94.2% in 2012.
In sub-Saharan African countries the burden of OOP are shifted towards
those who use services more, possibly from high to low income earners,
where health care needs are higher (OECD,2011). Health system financing in
Africa and other developing countries are predominately funded by OOP.
Household health financing have a lot of impact on household poverty. A
majority of studies to assess the impact of household health expenditure on
household poverty have been carried out in Asia and Latin America. A survey
carried in 11 Asian countries reveille that poverty level increased by 14% due
to OOP health expenditure and about 78 million people are pushed into
poverty due to heath care costs. Another survey of 89 countries found that
catastrophic expenditure was reported by 3%, 1.8% and 0.6% of households
in low, middle and high income countries respectively. Even though few
studies have been documented about the levels of catastrophic health
expenditures in Africa; in Burkina Faso, about 15% of households reporting
illness incurred costs greater than 40% of their non-food consumption
expenditure; in Uganda, 2.9% of households incurred catastrophic
expenditure in 2003, and in Nigeria, 40.2% of households incurred costs
greater than 10% of their consumption expenditure. Poor household were
mostly affected (Jane and Thomas, 2012).
2.5-Can Health Insurance replaces OOP in Sub-Sahara Africa
Since 1990s, health care insurance is one of the ways used by
developing countries to improve access to health care. This is to avoids
catastrophic OOP by patients and spreads the financial risk among all the
insured. This has been done through the creation of mutual health
organization and national health insurance schemes. These organizations are
of great importance in the payment of premium, and when the insured need to
use health care services. However, even with the existence of these
organizations, the rate of catastrophic OOP is too high in Africa with low
subscription rate in Mutual Health Organizations (MHO). The low subscription
is as a result of ignorance of the existence and rule play by MHO or insurance
schemes; lack of adequate premium (subscription fee), and traditional
believes. The Table below shows the effect of premium on the subscription
rate in mutual health organizations in Africa (Florence and Valéry, 2009).

Table 2.2: The effect of subsidizing premium on health care insurance
subscription among the poor in some countries
Measure Examples Does it increase
membership
among the poor?
To remember
a. Premium
subsidized 100%
by third parties
Rwanda,
Ghana,
Tanzania
Yes, when the
subsidy is really
applied.
Sufficient funds must be available to
compensate for premiums not paid by
the poor.
The population must be informed of the
subsidy
b. Premium
partially
subsidized by
third parties
Burkina Faso,
Ghana
Yes, for some of
them.
Even “minimum” premiums that
households must still pay are obstacles
for the poorest.
c. Premium
varies based on
income
Bangladesh Yes, if the level of
premium is well
established
Premium levels must accurately reflect
the levels of wealth in the population
d. Premium paid
in
kind or by work
Ethiopia,
India
Indications that
this is acceptable
for the poor
The “amount” of the payment in kind or
in work must be clearly defined to
avoid exploitation.
e. Loans to help
pay the
premium
Rwanda Yes, for the
moderately poor
Institutional support is important to
facilitate access to loans for moderately
poor households.
f. Dividing the
premium into
smaller payments
Uganda, Mali,
Senegal,
Tanzania
Yes, for the
moderately
poor
g. Payment of
the premium at
harvest time
Burkina Faso,
Guinea-
Conakry
Indications that it
can work for the
moderately poor
It is important to know the annual
periods of resource availability.
Source: Measures to promote health insurance membership among the poor,
(Florence and Valéry, 2009)
Section 2-Solution to Health Financing in Cameroon (Conclusion)
From the above problem diagnosis and literature receive; it can be
observed that at the moment, the best policy for health financing that
completely protects the poor does not exist either in Cameroon or Africa.
However developed countries and other donor organizations can help to
reduce the financial burden or outpatient bills in Cameroon and other less
developed countries. These can be done through;
2. Providing free financial assistants to cover some common health diseases
such as free HIV/AIDS medicine.
3. Provide financial assistant to cover or reduce the minimum premium
allocated by health social insurance schemes in Cameroon.

4. Provide free financial assistants to health units and patients as is the case
with the World Bank Project with “Result Based Financing” (demand and
supply side).
Through these methods we can ensure that the poor are protected against
catastrophic payment and save lives.
Referencing
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