Up-Front Costs for Health Investments Elusive: Nigerian Finance Minister
April 24, 2014
Nellie Bristol, Senior Fellow, and Brianna Backes, Research Intern
Global Health Policy Center, Center for Strategic and International Studies
While investments in health expenditures now have an updated economic rationale, thanks to The Lancet Commission on Investing in Health December report, finance ministers have another pressing question: where will the money come from?
“The point is clear: investing in health pays. But we’ve got to pay for that investment in health,” Nigerian Minister of Finance Ngozi Okonjo-Iweala said April 11 at the World Bank Group/IMF Spring meetings in Washington, D.C. She appeared with Lawrence Summers of Harvard University and former New York Mayor Michael Bloomberg at a session on universal health coverage.
Okonjo-Iweala pointed out that Ministers of Finance face pressure from multiple sectors that all need additional funding: education, water and sanitation, and infrastructure, among others. Some of those investments, like those in water and power, “may be the best thing that you can do for health,” she said.
In Nigeria, Okonjo-Iweala said, one-third of health services are paid for by the government with the remainder made up through private payments, 95 percent of which are paid for out-of-pocket. Without better data on how to ensure health investments are equitable and productive, she said, “throwing a lot of money at it right now may not be the answer.” Universal health coverage remains an aspirational goal for the country, one that will require determining the effectiveness of current spending and progressive improvements, she added.
Okonjo-Iweala was responding to a presentation from Summers, who co-chaired The Lancet Commission, a panel of 25 international health and economics experts. They concluded that smart investments in low-and middle-income countries, particularly in the areas of infectious disease control and child and maternal health, could result in health outcomes on par with those of the best performing middle- income countries by 2035.
While implementation of the commission’s recommendations in low-and lower-middle income countries would cost $60 billion a year in the first decade and $75 billion a year in the decade after, Summers argued that this is less than one percent of projected income growth for developing countries. The payoff in improved economic productivity and life expectancy would be 20:1 in low-income countries and 9:1 in middle-income countries and, he estimated.
Nonetheless, as Okonjo-Iweala pointed out, funds have to be made available for the initial investment. Raising taxes on tobacco and other harmful substances – a revenue generating mechanism suggested by Summers and Bloomberg – largely has been implemented in Nigeria, she said. Okonjo-Iweala suggested several other alternatives. Nigeria could, like Ghana, increase the value added tax and devote it to health. She also endorsed the idea of recovering funds now lost through illicit financial flows.
Okonjo-Iweala’s comments are a useful reality check on the complex challenges developing countries face in working toward improved health. Ensuring programs reach the right populations and have their intended effects is difficult in any setting. Further, health coverage expansion is an expensive proposition and an even greater challenge in countries with weak tax bases and high levels of corruption. Efforts are needed to provide sufficient data and technical capabilities to allow countries to make the best use of the resources they have. In addition, countries need help eliminating what Okonjo-Iweala termed the “asymmetry of knowledge” that allows bad actors to embezzle funds that could otherwise help achieve the “grand convergence” of global health outcomes envisioned by The Lancet Commission and move countries further toward universal health coverage.