EARMARKING MORE RESOURCE FOR THE HEALTH SECTOR DANIEL OSEI MINISTRY OF HEALTH, GHANA

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1 EARMARKING MORE RESOURCE FOR THE HEALTH SECTOR DANIEL OSEI MINISTRY OF HEALTH, GHANA

2 THE STORY AROUND EARMARKING FUNDS IN THE HEALTH SECTOR IN GHANA Earmarking revenues has been practiced since the health sector reforms (1980s) in Ghana when it was embodied in the resource allocation criteria Earmarking was used as an instrument in health sector resource allocation Earmarking funds for vaccines and other health commodities However this did not happen with the objective of raising revenues or increasing the financing of healthcare services in the health sector but rather managing revenues available to the health sector

3 Over the years the financing strategies of sector budget (Pooled Donor Funding) and Multi-Donor Budget Support reduced the focus on earmarking of revenues especially for donor funds In 2012, when Ghana was classified as a lower middle income country (rebased to 2010), and begun transition from donor support to domestic financing, many donors in the health sector began to move away from sector budget support to earmarked or targeted funding This reduced the amount of flexible funds available to fund the annual programme of work The health sector responded by going back to earmarking of funds (both available SBS and GoG) to cater for critical needs

4 WHY EARMARK REVENUES Earmarking of funds (as statutory) has a success story in the financing architecture in Ghana. Examples such as the District Assemblies Common Fund (DACF) Ghana Education Trust Fund (GETFund) Petroleum-Related Funds Road Fund Ghana Petroleum Funds (from oil revenue) Ghana Stabilization Fund Ghana Heritage Fund Earmarked Transfers to the Ghana National Petroleum Corporation (GNPC) Ghana Infrastructure Investment Fund (GIIF)

5 Generally some of the arguments in favour of revenue earmarking are Guarantees sustainable funding, leading to better planning Addresses opposing issues to equity in taxation from the perspective of the beneficiaries of the earmarked revenues

6 OBJECTIVES OF EARMARKING REVENUES FOR HEALTH: PUBLIC HEALTH AND HEALTH FINANCING OBJECTIVES Similar arguments can be made for earmarking of revenues in the health sector The experience in Ghana for earmarking REVENUES for health has been more from the perspective of health financing policy though it may address an inherent public health objective of prevention A social responsibility of government to make healthcare affordable and reduce catastrophic out of pocket expenditure on health

7 THE EVIDENCE FOR EARMARKING AS AN INSTRUMENT FOR REVENUES IN HEALTH The National Health Insurance Act, 2003 (Act 650) Established a National Health Insurance levy A National Health Insurance Fund A levy of 2.5 percentage points on 17.5% VAT is earmarked for health and paid into the NHIF 2.5 percentage point of 17.5% Social Security Contribution by formal sector workers earmarked for health Other sources are premium and investment income

8 POLITICAL VALUE FOR EARMARKING REVENUES IN GHANA Earmarking of revenues for accelerated development and achievement of a government political ambition (manifesto) has become very popular in Ghana Since 1992, the government of Ghana have passed laws to institute about 10 earmarking arrangements. It has been targeted to social goods to reduce the resistance to tax increases It provides a secure source of funds Predictability with the source o funds Sustainable source of revenue When it is used for a social good (examples from health & education sectors in Ghana)

9 CONSIDERATIONS IN THE DESIGNING INSTRUMENTS FOR EARMARKING REVENUES FOR HEALTH Who are the beneficiaries of the product Coverage With the aim to address equity in access to health services Targeting Special targeting (population in need without compromising on the high value clients -the upper class who may be paying more, directly or indirectly to contribute to the earmarked revenues))

10 OPPORTUNITIES AND CHALLENGES IN IMPLEMENTING EARMARKING POLICIES Opportunities The extent to which there is equity in the benefits of the social intervention programmes being funded from earmarked revenues Predictability, reliability and sustainability of funding Overcomes resistance to tax increases

11 Challenges Revenue shortfalls could defeat the intended purpose (e.g. delays in reimbursement of providers in the NHIS in Ghana) Potential inefficiencies in the administration and management of earmarked revenues Prudent management of expenditure In some instances, earmarked revenues affect allocation of descretionary budget to the sector When counted as part of budget allocation to the sector

12 CONCLUDING REMARKS When managed well, earmarking revenues for health has provided a strong platform for financing healthcare Earmarking revenues must be preceded with a broader financing strategy Policy objective of earmarking revenues must be well defined not in isolation but within a broader health financing architecture There are always the danger of expanding the benefit package financed by earmarked revenues when discretionary budget to the sector is constrained Rationalization of statutory funds in annual budgets : rigidities in annual budget

13 REFERENCES REVENUE EARMARKING IN GHANA: MANAGEMENT AND PERFORMANCE ISSUES, Leslie Dwight Mensah, Institute for Fiscal Studies February, 2017 Health Financing Paper No. 5. Earmarking for Health, Cheryl Cashin, Susan Spikes, Danielle Bloom, WHO, Results for Development 2017 Budget Statement and Economic policy, Ministry of Finance, Ghana