Policy incoherence in the ‘billions to trillions’ transformation

Picture credit: UN Financing for Sustainable Development, via Flickr

This week saw the Reality of Aid 2018 report launched during the OECD’s Private Finance for Sustainable Development Conference. Here Dr Benjamin Hunter picks out some points from his chapter in the report, arguing that use of development aid to support private investment in healthcare companies needs to stop unless clearer pro-poor impacts can be demonstrated.

The transition from Millennium Development Goals (2000-2015) to Sustainable Development Goals (2015-2030) has been accompanied by calls to dramatically increase financing for development, ‘from billions to trillions’. Private investors are expected to fill much of that gap, and we are seeing large loans and equity investments being made in the healthcare sector by commercial banks, pension funds, pharmaceutical companies and technology companies. This is supported by development organisations which since 2013 have committed US$ 3 billion in loans and investments to healthcare companies, with the World Bank’s IFC at the vanguard, and notable supporting roles from USA’s OPIC, the EBRD, Germany’s DEG, France’s PROPARCO and UK’s CDC. The development rationale for these healthcare investments has to date largely focused on job creation and economic growth, but closer inspection of the investments and the companies involved reveals some worrying recurrent themes…

Reinforcing inequality and poverty

Many of the companies receiving investment use a fee-based model. Few make appeals to the poor, instead targeting the wealthy with high fees and offers of boutique experiences. Maybe that seems fair enough: there is no problem if the wealthy have a separate system so long as they pay for it themselves, right? But what about the social segregation that this reinforces; inequality that we know is bad for health. And then there is the ‘brain drain’ of publicly trained health workers into high-end chains, undermining public healthcare provision.

Some companies do target the less wealthy; a ‘base of the pyramid’ business model that uses high-throughput services in order to reduce costs. A claim of ‘affordability’ is often attached to these companies, yet the poorest are nonetheless unlikely to be able to afford their fees. This point was in fact noted in one IFC report on ‘inclusive’ models for healthcare in India. The poor who buy healthcare services from these companies (through lack of alternative) may be pushed into poverty by doing so, and it is worth remembering the recent estimate by the World Bank Group and World Health Organization that almost 120 million people are pushed below the US$ 3.10 poverty line each year by health-related expenditure.

One way around the problem of using fee-based systems for the poorest has been for private hospitals themselves to use fees paid by the ‘non-poor’ to cross-subsidise free care for poorest users. But again this is not problem-free. Those ‘non-poor’ may not be particularly wealthy themselves, and may find themselves in a downward spiral towards poverty. The ‘free’ packages for the poor tend to be restricted to particular services, with limited follow-up, and are offered at the discretion of the administering hospital, offering little in the way of entitlements or a right to health.

Regressive redistributions

Suggestions that public subsidies, for example through government insurance schemes, could be used to expand access to some of the healthcare companies receiving investment raises another set of concerns. Without strong regulation of provider behaviours (and this is something many governments struggle to achieve), the healthcare providers’ imperative to generate profits can lead to serious cost inflation. There are growing concerns with how commercial motivations drive over-testing and over-treatment. See here for Dr Arun Gadre’s previous blog on this topic, or look at any news report on the cost of healthcare in the USA. My research has pointed to ‘cream-skimming’ behaviours in a very different setting – Uttar Pradesh in India – as cost-conscious providers focus on treating those from whom they can make the greatest profits, referring other users elsewhere, usually a government hospital.

The use of public funds to subsidise private provision also carries the risk of diverting finite public funds from more progressive health policies. This has been one of the key criticisms of national insurance schemes, particularly in settings where the increasingly expensive health needs of an ageing middle-class are given political priority over public health measures that would largely benefit the health of the poorest.

Pursuit of policy coherence

Our chapter points to a need for greater policy coherence in the ‘billions to trillions’ transformation, particularly when it comes to private finance in social sectors. There are some tentative signs of greater consideration of health equity, for example the inclusion of ‘access’ as a dimension in CDC Group’s evaluative framework for healthcare investments. But the risks for inequality and poverty outlined in the chapter and above are significant, and will undermine progress towards universal health coverage and sustainable development. We therefore use the chapter to call for development organisations to stop using aid to support private investments in healthcare, until and unless there is demonstrable pro-poor impact and positive system-wide effects.

This blogpost summarises key points from a chapter in the Reality of Aid 2018 report, co-authored with Anna Marriott. The full report can be found here (pages 33-40).