Source: Enabling Sustainable Health Equity (ESHE) Project
With more than half of the world's population still not covered with essential health services, international donors are focused on building sustainability and moving away from government as the only source of financing and provider of affordable health services. For most low and middle-income countries, the investments required for healthcare are huge: infrastructure development, personnel recruitment, strengthening laboratory and diagnostic services, and improving access to high-quality health services. Governments with developing public health systems cannot realistically deliver healthcare for all through public facilities alone.
So who should step in?
The private sector is a large and growing provider of health services across the developing world that can complement public sector efforts. In Africa, according to the IFC and World Bank, the healthcare sector was valued at $35 billion in 2016 and estimated to reach $62 billion by 2024. The private sector can expand access to healthcare by designing and providing affordable health products, health insurance, and healthcare services.
Based on our experiences strengthening the private sector to create integrated health systems, we recommend three ways to align public and private sectors for sustainable health systems:
1. Take Advantage of the Private Sector’s Potential for Addressing Priority Health Issues
In many countries the state offers basic health services while the private sector offers alternative services. While the wealthiest can afford to pay for convenient care out of pocket or through employer-based schemes, many others face challenges accessing affordable healthcare. The poor are the most vulnerable, as they are usually the intended consumers of publicly provided services but frequently end up paying out of pocket for services like family planning, offered through the private sector. Public and donor resources should be better targeted, which will improve access for the poor and vulnerable as well as allow the private sector to address middle and upper-income segments.
In Kenya the government has committed to support the private sector to expand access overall as part of its Family Planning 2020 global commitments. The DFID-funded Enabling Sustainable Health Equity program partnered with local distributor Sai Pharmaceuticals, which invested funds to procure and import pharmaceutical products from India that were unsubsidised and targeted toward users with greater ability to pay. The commercial sector grew from an estimated 1% of the total market in 2016 to 23% in 2018, while sales of affordable, donor-subsidised products remained stable. Health system players must more regularly implement market-based solutions that can address inefficiencies while promoting equity and consumer choice.
2. Identify Win-Win Solutions That Open Private Markets
Ministries of health should be keen to develop partnerships with the private sector to introduce new products, expand the market for new and existing ones, and utilise public-private partnerships for efficiency of service delivery. Governments can begin by creating a business climate that offers fair competition, consumer protection, and quality health services. Finding creative ways to pull in the private sector in early planning efforts is key. Even when national policies attempt to incorporate the strengths of the private sector, seldom do these function effectively without high-level political backing and consistent alignment of key players around strategic priorities.
In Jordan, we're working with public and private insurance agencies to design a costed benefits package to support universal health coverage targets. Stakeholders across the healthcare system must understand the comparative strengths of public and private sector entities, secure buy-in to prevent stalled efforts, and co-create win-win solutions that open private sector markets, expand access to the underserved, and contribute to government priorities and ownership.
3. Utilise Innovative Finance Solutions to Mobilise Private Capital for Development Impact
Access to health products and services can be stimulated by crowding in private capital through blended finance mechanisms. Blended finance consists of the strategic use of donor finance for the mobilisation of additional finance towards sustainable development by adjusting the risk-return profile to a level that "crowds in" the private sector.
In India, the Utkrisht impact bond operates based on the deployment of private capital upfront to fund a maternal care intervention, with repayment linked to outcomes achieved. Paying for outcomes can establish systems that promote quality, efficiency, and accountability while decreasing dependency on donor funding over time.
The social impact of the program will be an estimated 10,384 lives saved over a five-year period, which is achieved cost-effectively by investing $650 per life saved. The Utkrisht impact bond's model improves capacity of private providers in more than 300 private healthcare facilities through achievement of accreditation standards and ultimately participation in the social health insurance scheme.
Governments are undoubtedly moving towards a future of international development that is enterprise-driven. Interventions to reach universal health coverage will be the same. As the private sector continues to fill key gaps in service provision, and the public sector improves efficiency by borrowing from private sector practices and introducing new co-financing models, together they can offer more accessible and affordable coverage for priority health issues.
Palladium manages the implementation of the USAID-funded Health Finance and Governance project in Jordan, the Utkrisht Impact Bond, and managed the Enabling Sustainable Health Equity program, funded with UK aid from the British people.