Working Group Paper

Author: 

Di McIntyre and Filip Meheus

Shared Responsibilities for Health: A Coherent Global Framework for Health FinancingPhoto by EdStock/iStock.

There is a need to increase government expenditure on health and other social services in many countries in order to achieve universal health coverage (UHC) and promote inclusive social and economic development.

Individual governments have an obligation to allocate the maximum available resources from domestic sources, and not simply rely on international assistance, in order to achieve the progressive realization of fundamental human rights. Ultimately, this requires adequate levels of government expenditure on a range of social services.

While government expenditure as a percentage of GDP is on average higher in ‘advanced economies’ than in other countries, there is no strong correlation between levels of government spending and economic development across individual countries (i.e., the size of a country’s GDP does not ‘predetermine’ or dictate government spending levels).

Government revenue generation is the strongest determinant of government expenditure levels within individual countries; hence, emphasis should be on increasing government revenue.

While government revenue generation is influenced by a wide range of factors, there are mechanisms whereby each country can seek to increase revenue and push the envelope of maximum available resources for meeting fundamental human rights. The emphasis should be on increasing revenue through the most progressive means possible; the purpose of raising government spending on social services to meet human rights obligations would be defeated if that spending were funded by increasing the relative tax burden of those who are meant to benefit. Options for boosting government revenue include:

  • In the case of countries that are rich in mineral and other natural resources, ensuring that government revenue from this source is maximized and not exploited by private or foreign groups (e.g., through extraction by state-owned entities or levying appropriate royalty payments if resources are extracted by private companies);
     
  • Ensuring good tax compliance by taking steps to reduce tax avoidance and evasion, particularly by high net worth individuals, high-profit companies and transnationals (such steps require global cooperation and improved transparency); and
     
  • Assessing whether tax rates on personal income and company profits can be raised (global cooperation is also required in relation to corporate tax, given international tax competition to attract investment).

Conducted from the perspective of providing both financial protection and access to needed health services, an analysis of the relationship between government spending on health and various indicators related to the goal of UHC supports a target of domestic government spending on health of at least 5% of GDP. Moving towards this target should not be at the expense of government spending on other social services – hence the emphasis on exploring ways of increasing government revenue in countries where total government expenditure as a percentage of GDP remains relatively low.

Achieving this target is an aspirational goal for many low-income countries and, even if achieved, would translate into insufficient resources to fund universal primary health care (PHC) services, which we estimate requires a minimum of $86 per capita (in 2012 terms). Therefore, the target of domestic public funding for health care of at least 5% of GDP should be supplemented with a target of $86 per capita in low-income countries. Considerable development assistance for health (DAH) is required to supplement domestic public spending in low-income countries to meet this minimum per capita spending target.

It would be unethical to argue for increased government funding of the health sector if those resources were used neither efficiently nor equitably. The pace of increasing funding allocations must align with absorptive capacity and strategic purchasing reforms.