J._16_Health_Financing_Strategy_2016.pdf

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REPUBLIC OF UGANDA

HEALTH FINANCING

STRATEGY

2015/16 – 2024/25

A health financing system that responds to the dynamic aspirations of the health sector in

Uganda

February 2016 i | P a g e

Table of Contents ACRONYMS ........................................................................................................................................................................................ iii

Foreword ................................................................................................................................................................................................v

Preface .................................................................................................................................................................................................. vi

Acknowledgements ....................................................................................................................................................................... vii

1 INTRODUCTION

1.1 Background

1.2 Rationale for the Health Financing Strategy

1.3 Health Financing Strategy Development Process

1.4 Organisation of the remaining part of the document

2 SITUATION ANALYSIS (OF CURRENT HEALTH FINANCING SYSTEM)

2.1 Country context

2.1.1 Macro-economic and fiscal context

2.1.2 Organization of the health system in Uganda

2.2 Situation analysis for Uganda’s health financing

2.2.1 Sources of Health Financing

2.2.2 Pooling of resources

2.2.3 Purchasing

3 HEALTH FINANCING REFORM STRATEGIES

3.1 Strategic Agenda

3.2 Strategic Interventions

3.2.1 Strategic Intervention 1: Revenue Collection

3.2.2 Strategic Intervention 2: Effective Pooling

3.2.3 Strategic Intervention 3: Strategic Purchasing

4 INSTITUTIONAL ARRANGEMENTS FOR IMPLEMENTATION OF THE HFS

4.1 Sequencing of health financing reforms

4.2 Institutions for Implementation of HFS

4.3 Partnerships for Implementation of HFS

4.4 Communication Plan

5 MONITORING AND EVALUATION OF THE HFS

5.1 Approach to monitoring and evaluating

5.2 Key performance indicators

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List of Tables

Table 1: Total GOU Budget and Health Sector Budget (FY 2010/11-2015/16)

Table 2: Facility Ownership in Uganda (By Level of Care)

Table 3: Critical issues to be addressed within Uganda’s health financing system

Table 4: Strategic Priorities to Increase Revenue Collection

Table 5: Priority interventions for effective pooling

Table 6: Strategic priorities for strategic purchasing of health services

Table 7: Proposed sequencing of implementation of the financing reforms

Table 8: Health Financing Key Indicators

List of Figures

Figure 1: Proportion of the total budget allocated by sector (Includes on budget ODA)

Figure 2: Growth in Total GOU Budget and Health Budget

Figure 3: Percentage contribution of ODA to total budget and to the health budget (2010/11-2014/15) ... 8

Figure 4: Health Financing Functional Chart for Uganda (2014)

Figure 5: Trends in health financing for Uganda (billion-UGX) (2008/9 – 2011/12)

Figure 6: Percentage contribution to total health expenditure (THE) by source

Figure 7: Trend in per capita health expenditure and government budget allocation

Figure 8: Steps of the budget process at national and sub-national levels

Figure 9: Linkages of the strategic interventions

Figure 10: Illustration of Pooling Arrangements

Figure 11: Illustration of Implementation Arrangements of Pooling and Purchasing iii | P a g e

ACRONYMS

AHSPRs Annual Health Sector Performance Reports

ATF AIDS Trust Fund

BFP Budget Framework Paper

BoD Board of Directors

CBHI Community-Based Health Insurance

CSOs Civil Society Organizations

DAH Development Assistance for Health

DHIS District Health Information System

GAVI Global Vaccine Alliance

GDP Gross Development Product

GFATM Global Fund to Fight HIV/AID, Tuberculosis and Malaria

GNI Gross National Income

GOU Government Of Uganda

HDPs Health Development Partners

HFS Health Financing Strategy

HMIS Health Management Information System

HPAC Health Policy Advisory Committee

HSDs Health Sub Districts

HSDP Health Sector Development Plan

HSSIP Health Sector Strategic and Investment Plan

IHP+ International Health Partnership

IMF International Monetary Fund

IRA Insurance Regulatory Authority

JAF Joint Action Fund

JMS Joint Medical Stores

LGs Local Governments

M&E Monitoring and Evaluation

MDGs Millennium Development Goals

MOES Ministry of Education and Support

MOFPED Ministry of Finance Planning and Economic Development

MOGLSD Ministry of Gender Labor and Social Development

MOH Ministry Of Health

MoLG Ministry of Local Government

MoPS Ministry of Public Service

MOU Memorandum of Understanding

MTEF Medium Term Expenditure Framework

NDP National Development Plan

NGO Non-Government Organization

NHA National Health Accounts

NHIF National Health Insurance Fund

NHIS National health Insurance Scheme iv | P a g e

NHP National Health Policy

NMS National Medical Stores

OBT Output Budgeting Tool

ODA Official Development Assistance

OOP Out-of-Pocket

PBF Performance Based Financing

PER Public Expenditure Review

PETS Public Expenditure Tracking Survey

PFP Private for Profit

PHI Private Health Insurance

PHPs Private Health Providers

PNFP Private-Not-For-Profit

PPP Public Private Partnership

PPPH Public Private Partnership for Health

RBF Results Based Financing

SBWG Sector Budget Working Group

SDGs Sustainable Development Goals

SHI Social Health Insurance

SWAps Sector-Wide Approaches

TCMP Traditional and Complementary Medicine Practitioners

THE Total Health Expenditure

UDHS Uganda Demographic Health Survey

UHC Universal Health Coverage

UNHS Uganda National Household Survey

VAT Value-Added-Tax v | P a g e

Foreword

The health of the Ugandan population is central to the socio-economic transformation of the country. Along with increased literacy rates and vibrant economic growth, health outcomes are improving which translates to reduced mortality rates over the last 10 years. However, some of the millennium development goals are not on track due to numerous challenges in the health system.

Currently, the principal mechanism of funding health services in Uganda is through government general revenue tax financing, however, out of pocket payments and contributions by Health

Development Partners contribute a substantial amount of financing for health care services. For various reasons, the out of pocket payments lead to financial hardships for many patients and their caretakers often leading to long term indebtedness or poverty. Poor and vulnerable population groups are to be protected from such hardships through introduction of social health insurance scheme and increasing government general revenue funding for health care.

The main objective of this Health Financing Strategy is to facilitate attainment of Universal Health

Coverage through making available the required resources for delivery of the essential package of services for Uganda in an efficient and equitable manner. The instruments to achieve universal health coverage are sound health financing mechanisms. The strategic interventions herein are revenue collection, risk pooling and strategic purchasing. Thus in the medium term, no person should face risk of impoverishment when accessing health care nor should anybody forego medical services because of financial reasons.

When carefully implemented, these proposed financing reforms will jointly result in optimal health financing practices that support the health sector to achieve its goal of universal health coverage, where the population will access to health services in a timely manner and without financial hardship. Universal health coverage will be the overarching development goal for the next 10 years.

I therefore call upon all stakeholders to join hands to ensure the implementation of this Health

Financing Strategy so that we can enable all citizens to have prosperity and jointly build a healthy and prosperous nation.

For God and my country.

Hon. Dr. Elioda Tumwesigye

Minister of Health vi | P a g e

Preface

The mandate of a health system is to deliver individual and population health services, respond to legitimate concerns and expectations of the population, ensure fairness in financing and financial risk protection for households, and given the interdependence of all sectors of the society, contribute to socio-economic goals. Fairness in financing is about funds availability, reduction of out of pocket expenditure and ensuring equity, effectiveness and efficiency in allocation and use of raised resources. The Government of Uganda has chosen health financing as a catalyst for health systems reform to address the following challenges:

Resource availability, efficiency, misapplication and wastage

Financial hardship and impoverishment from direct under or over the counter payments for health care

Inappropriate sector organization and management

Ineffective engagement of key social determinants of health and other health sector stakeholders

Money is a necessary but not sufficient measure to achieve the desired health sector objectives.

This Health Financing Strategy will serve as an instrument for resource mobilization at all levels, steer health systems investments in the correct direction, and provide the basis for aligning resources and creating opportunities for efficiency gains in the health sector.

Uganda has achieved remarkable success in health care service delivery though it has the lowest per capita health expenditure in the East African Community. However, it is now facing the challenge of increasing health care allocation due to the increasing population and health care costs. The country has unacceptably high out of pocket expenditure at the level of 50% of total health expenditure, government spending is around only 16%, and there are no mentionable social health insurance programs. These challenges call for focusing on deepening and broadening the resource base for health in Uganda. The country will require more than just increased financial resources for health; it will require improved ways of organizing resource mobilization, allocation and expenditure in order to obtain the maximum value for money to ensure equitable and sustainable financing and financial protection against health expenditures of the entire population.

The Health Financing Strategy provides an overview of the vision and goals followed by strategic objectives, each with their associated strategic interventions that respond to goals of health financing in Uganda. An action plan in the Health Sector Development Plan (HSDP) for possible implementation has been set out. Timely implementation of the HSDP following the strategy will strengthen the country’s health system to succeed in improving the health of its citizens.

Dr. Asuman Lukwago vii | P a g e

Permanent Secretary, Ministry of Health.

Acknowledgements

The Health Financing Strategy has been developed over a period of a year since the adoption of the Health Sector Strategic Plan (HSSIP 2010/11-2014/15). The development was through a participatory process, with inputs from a wide range of stakeholders.

The process has been led by the Planning and Development Directorate under the full support and proactive guidance of the Ministry of Health management structures. Since the beginning of the strategy development process, senior top management contributed to the drafting and carrying out of consultation processes.

The Ministry is thankful to Dr. Specioza Wandira Kazibwe the Special Senior Presidential Advisor on population Health, and The Planning and Development Directorate under the stewardship of

Dr. Isaac Ezaati Alidria for drawing up the roadmap for the development of the strategy. The

Health Financing Strategy Secretariat received technical support from the World Bank, World

Health Organization, Local Governments, Civil Society Organizations and Health Development partners that facilitated the strategic development process. Much benefit has been derived from comments and advice of other line Ministries and especially Ministry of Finance, Planning and

Economic Development. We acknowledge the critical guidance provided by international development partners who peer reviewed and provided comments on earlier drafts of this document, in particular Partners for Health (P4H).

Last, but not least, the participants in the different consultations deserve special mention for their contributions in making the strategy document focused to the real health care needs of the

Ugandan Population. It is the product of the collaborative effort by many professionals inside and outside of the planning and development directorate. All Ministry of Health staff deserve thanks for their respective contributions.

Dr. Jane Ruth Aceng

Director General of Health Services, Ministry of Health

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1 INTRODUCTION

1.1 Background

This is the second Health Financing Strategy for Uganda, and it comes at a time of global commitment towards Sustainable Development Goals (SDGs) and Universal Health Coverage

(UHC). It is anticipated that this strategy will serve as a critical element in Uganda’s pathway to achieving the health-related SDGs and attaining UHC. UHC emphasizes access to good quality health care according to need, while at the same time limiting exposure to financial risk for those who seek care. Achieving UHC is a cornerstone of the new set of SDGs, which have been defined as the new global development goals. Uganda is transitioning from the Millennium Development

Goals (MDGs) to the SDGs, in which UHC is the all-encompassing health goal. The attainment of the UHC goal in any country requires a well-functioning health financing system. In developing the HFS, the MOH recognizes that the implementation of the financing reforms in this strategy will rely on existing systems and structures, and progressively move towards building the required systems for UHC.

The development of the HFS is underpinned by the Constitution, Vision 2040 and the National

Development Plan (NDP II). Constitutionally, the Government of Uganda (GoU) has an obligation to provide basic health services to its people and to promote proper nutrition and healthy lifestyles. The Constitution further entitles all people in Uganda to enjoy rights and opportunities and to have access to education, health services and clean and safe water. Uganda’s Vision 2040 envisions “a transformed Ugandan society from a peasant to a modern and prosperous country within 30 years” and has been developed to shape Uganda’s long-term development strategy.

Vision 2040 acknowledges that good health is essential in ensuring socio-economic transformation and is critical if Uganda is to attain its long-term vision. The NDP II1 also places great emphasis on investing in the promotion of people’s health and nutrition, and the need to improve health and promote well-being. The MOH recognizes that strengthening human capital development is fundamental to accelerating the country‘s transformation. Indeed, human capital development is dependent on a healthy population, and it is needed to achieve Uganda’s economic aspirations of becoming a middle income country. A strong and adequately financed health system is critical in maintaining a healthy population.

Further, the HFS has been developed in line with sectoral policies and development plans, including the National Health Policy (NHP II) and the Health Sector Development Plan (HSDP)

2015/16 - 2019/20. The NHP II has a vision of attaining “a healthy and productive population that

1 National Development Plan 2015/16 - 2019/20

2 | P a g e contributes to economic growth and national development”. The goal is “to attain a good standard of health for all people in Uganda in order to promote a healthy and productive life”. The NHP II puts emphasis on ensuring that financial barriers do not prevent people from using the health services they need and also ensuring that people do not suffer severe financial catastrophe as a result of using the services. The HSDP provides the strategic direction for the implementation of the NHP and aims "to accelerate movement towards Universal Health Coverage with essential health and related services needed for promotion of a healthy and productive life". The HSDP also underscores the need to provide a quality package of essential health services, accessed by all, without suffering financial hardship.

1.2 Rationale for the Health Financing Strategy

Whereas health financing reforms can catalyze and trigger the transformation of the health system towards achieving its aspirations, they are not sufficient - on their own - to cause overall health system performance for the achievement of Government’s health policy objectives. The rationale for developing Uganda’s HFS is to provide a framework through which Uganda will finance its health sector to achieve its stated goals. The HFS is a document that will guide the country in equitably and sustainably mobilizing resources and efficiently utilizing them to implement sector plans. If well implemented, this HFS will serve as an instrument for resource mobilization; it will help Uganda in addressing the malfunctions of the current financing system; and, will provide the basis for aligning resources to the sector’s priorities and creating opportunities for efficiency gains in the health sector. In developing the HFS, the MOH is cognizant of the fact that no single actor or factor is solely sufficient to bring about the attainment of the national health goals. Indeed, the attainment of such goals shall be approached in a multi-sectoral manner.

1.3 Health Financing Strategy Development Process

The process of developing this strategy started after a health financing review was conducted in

2010. The development of the HFS has been guided by evidence generated through an extensive review of relevant documents, including but not limited to: the National Health Accounts (NHA) studies and the Mid-Term Review of the Health Sector Strategic and Investment Plan (HSSIP)

2010/11 - 2014/15, as well as a review of international evidence on best practices in health financing. The situation analysis (in chapter 2) and the proposed health financing reforms (in chapter 3) were guided by the framework of the core health financing functions namely; revenue collection, pooling, and strategic purchasing.

A Task Force for the HFS, chaired by the Director of the MOH Planning and Development unit, led the process of developing this strategy, under the guidance of the Sector Budget Working Group

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(SBWG). The strategy was developed through a consultative and participatory process that started in 2010 and included a series of wide-ranging consultative workshops with key stakeholders including Local Governments (LGs), Civil Society Organizations (CSOs), Health Development

Partners (HDPs), and other international partners. A preliminary draft of the strategy was prepared in August 2014. The draft HFS was peer reviewed by several people (locally and internationally)

The reviews done by local and international partners to ensure that the HFS document was in line with the country context, needs and aspirations, also in line with international and global frameworks, goals and best practices. The MOH is particularly grateful to the comments and guidance received from P4H Social Health Protection Network). P4H a global health partnership aiming at improving social health protection and strengthening health financing systems. In

October 2015, a draft HFS was presented to the Health Policy Advisory Committee (HPAC) and

Top Management Committee. Comments from these structures were used to revise and finalize the strategy.

1.4 Organisation of the remaining part of the document

Chapter 2 summarizes a brief overview of Uganda’s macroeconomic and fiscal context, and describes the key highlights of the situation analysis of Uganda’s current health financing system.

At the end of chapter 2, a summary of the challenges and gaps in the financing system that need to be addressed is presented, and these form the basis for the financing reforms described in

Chapter 3. The reforms are discussed in detail under the different health financing functions of

(a) revenue collection, (b) pooling of resources and risk, and (c) strategic purchasing. In Chapter

4, the best way of sequencing the implementation of different reforms is briefly described, and the implementation arrangements for these reforms are articulated. In Chapter 5, the monitoring and evaluation framework for the HFS is briefly described.

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2 SITUATION ANALYSIS (OF CURRENT HEALTH FINANCING SYSTEM)

The purpose of this chapter is to provide the context relevant for understanding the rest of the information presented in the HFS. The macroeconomic and fiscal context sets the foundation for understanding the factors that have contributed to the current financing situation and the factors that will impact on the implementation of the financing reforms proposed. The situation analysis provides an evaluative assessment of the different aspects of Uganda’s health financing system, with the view to identify strengths, weakness, gaps, and opportunities. The situation analysis is intended to set the stage for identifying appropriate financing reforms for Uganda.

2.1 Country context

2.1.1 Macro-economic and fiscal context

Uganda’s economy remains rural and agrarian with a large proportion of the population still relying on low-paying jobs in the agriculture sector. Approximately three-quarters of Uganda’s adult population are employed, mainly in subsistence/peasant farming. Poverty levels remain relatively high, with recent estimates showing that about 19.7 per cent of all Ugandans are living below the national poverty line ($1.25/day), and that even a larger share of the population (43.3 percent) remains highly vulnerable to external shocks and to falling back into poverty. Uganda is a low income country with estimated Gross National Income (GNI) per capita of US$ 660 (2014).

Uganda’s economic growth rate has averaged about 5.5% per annum over the years of implementation of the NDP 1 (2010/11-2014/15). This represents a deceleration from growth rate of 8% that was observed in the period 2006-2010. Uganda’s economic growth rate, although commendable, is currently the least when compared to the other countries in the East African region. This state of affairs is attributed to domestic spending pressures and volatile external environment. Uganda’s weak external position is due to low regional trade and weaker global demand resulting from the relapses in the global economy, following the global financial crisis and civil unrest within the regional markets especially in Southern Sudan.

In the short term, Uganda’s economic outlook is characterized by a high level of uncertainty due to the current inflationary pressures. The mobilization of relatively low domestic revenue and the uncertainty regarding the date of commencement of oil production and subsequent flow of oil revenues, mean that Uganda’s capacity to mobilize additional domestic resources will remain weak in the short to medium term. Uganda’s tax revenues remain low compared to countries in the region. On average Uganda collects about 13.3 percent of GDP (2014) in taxes compared the average of 20% for SSA. The low tax collection has attributed to the low tax base and inefficiencies

5 | P a g e in tax collection. With regards to the latter, IMF estimates show that increasing tax compliance

(focused on VAT) in Uganda to 40% in line with the regional average efficiency would increase

VAT revenue by about 2.5% and would lead to an annual growth of tax revenue by about 0.5% as a percentage of GDP2. Increasing the productivity of the economy key in expanding the tax base.

The 2015 Uganda Economic Update by World Bank identified the issue of increase productivity of the economy through addressing land issues especially the challenges of land tenure security and inefficient markets3.

The country is operating in a deficit with expenditure estimated at about 21.7% (2014) of the GD

(having been able to only mobilize 13.3 per cent in taxes). This deficit has been mainly driven by the recent heavy investments in infrastructure (mainly energy and road construction sectors) which have been the key investment priorities of Government in the recent years. Figure 1 summarizes the trends in government budget allocation to the different sectors between 2009/10 and 2013/14. While the proportion of the budget allocated to the health sector has stagnated at around 8% of the total budget, the proportion of the budget allocated to roads and works and energy and minerals increased from 18.7% to 23% of total budget within the same period.

Although general government budget has been increasing over the years, allocations to the health sector have not matched with this increase. For instance, while the health budget has increased by 93 per cent over the 5 years (FY 2010/11-2015/16) from UGX 660 billion (FY 2010/11) to UGX1, 271 billion (2015/16), total government budget increased by 148 per cent from UGX 7,377 billion

(FY 2010/11) to UGX 18,311 billion (FY 2015/16). It is important to note that the growth in the health budget has been mainly driven by increased external resources (e.g. the share of donor support to the health budget increased from 14 %( FY 2010/11) to 42 % (FY 2014/15). The health sector budget as a percentage of total government budget has been declining in the last five years (Table 1 and Figure 2).

2 Hutton et al, Revenue Administration Gap Analysis Program—The Value-Added Tax Gap. 2014

3 World Bank. Searching for the “Grail”: Can Uganda’s Land Support its Prosperity Drive?. 2015

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Figure 1: Proportion of the total budget allocated by sector (Includes on budget ODA)

Source: MOFPED; Background to the Budget

Table 1: Total GOU Budget and Health Sector Budget (FY 2010/11-2015/16)

Year

Billions (UGX) Health as % of total budget Health Budget growth Total Government

Budget growth

2010/11 660 7,377 8.9

2011/12 799 21% 9,630 31% 8.3

2012/13 829 4% 10,711 11% 7.7

2013/14 1,128 36% 13,065 22% 8.6

2014/15 1,281 14% 14,986 15% 8.5

2015/16 1,271 -1% 18,311 22% 6.9

0% 20% 40% 60% 80% 100%

2009/10

2010/11

2011/12

2012/13

2013/14

% of budget allocated to each sector

Fi n an ci al Y e ar

Health Security Roads and Works

Education Public Sector Mgt & Public Admin Accountability

Energy and Minerals Others

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Figure 2: Growth in Total GOU Budget and Health Budget

In the short to medium term, external resources are expected to remain important for some sectors such as health (Error! Reference source not found.). These external resources include both grants and loans. With regards to the latter, Uganda debt is still at sustainable levels, as per the established benchmarks for debt sustainability. For instance, for FY 2013/14, Uganda’s total public debt as a percentage of GDP was estimated at 24.6%, which is less than macroeconomic convergence criteria (i.e. less than 50 percent of GDP). Better management of resources from both grants and loans will improve their effectiveness in contributing to the achievement of country goals as expressed in the National Development Plan. This is particularly important for the health sector.

An interesting factor to note is the fact that while ODA as a proportion of the total Government budget has been decreasing, the reverse has been observed in terms of donor resources as a proportion of total health expenditure. Specifically, while the contribution of ODA to total government budget has declined from 25% in FY 2010/11 to 18% in FY 2014/15, the proportion donor resources contributing to total health budget increased from 14% to 42% within the same period (Error! Reference source not found. The increase in this period is attributed to increased contribution of Global Health Initiatives specifically, Global Fund for HIV/AIDS, Tuberculosis and

Malaria (GFATM) and Global Alliance for Vaccines Initiative (GAVI). The most recent National

Health Accounts estimates show that external resources were the dominant source of health expenditure contributing 47% of total health expenditure (FY 2011/12).

-30%

-20%

-10%

0%

10%

20%

30%

40%

2 0 1 1 / 1 2 2 0 1 2 / 1 3 2 0 1 3 / 1 4 2 0 1 4 / 1 5 2 0 1 5 / 1 6

G

R O

W

TH

B U

D G

ET

/A

LL

O

C A

TI

O

N

Health Budget Total Budget % health budget as % total budget

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Figure 3: Percentage contribution of ODA to total budget and to the health budget (2010/11-2014/15)

In the medium term (by 2021), the country expects revenue from oil industry, which it hopes to utilize in high return public investments. However, in the initial stage, the mining industry requires heavy investment to set appropriate infrastructure and systems for oil mining. Allocating resources to the mining industry for these purposes has contributed to further tightening of the fiscal situation. Resources from foreign investors, which would have been helpful in boosting the preparatory phase of oil mining, are dependent on the global macro-economic outlook, which has also not been positive.

A very important issue to note with the expected oil revenue is that its expected contribution to

GDP (estimated 10%-13%) is almost equivalent to what is currently being provided by external resources to support oil mining. This means that for sectors like health, where donors contribute a significant proportion, oil manufacturing will provide additional revenue only if it supplements and not substitutes the existing sources. Furthermore, oil mining (once it has commenced) is likely to result in a shift in classification for Uganda, from “low income” to “middle income”. Such a shift in classification is likely to result in Uganda’s disqualification for some donor funds (such as GAVI) is tagged to its status as a low income country. This means that such donor funding would no longer be available for Uganda, and yet it is noted earlier that the estimated level of resources anticipated from oil are not very significant.

14%

26% 26%

37%

42%

0%

10%

20%

30%

40%

50%

0%

10%

20%

30%

40%

2010/11 2011/12 2012/13 2013/14 2014/15

D o n o r S h a re o f

H e a lt h B u d g e t

D o n o r S h a re o f

T o ta l G

O U

B u d g e t

Donor share of total budget (%) Donor share of health budget (%)

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Furthermore, as noted earlier, the elasticity of growth of health funding in Uganda is mostly dependent on growth in external funding and not increased domestic resources. While the elasticity of growth of health expenditure was estimated at 1.44 (implying that a 1% increase in

GDP would lead to a 1.44% increase in health spending), this elasticity decreases to 0.95 when one excludes external resources. This implies that an increase in domestic resources alone does not guarantee significantly increased resource availability for Uganda’s health sector. According to the fiscal space analysis in 2010, the health budget quadruples every ten years, but because of the high population growth rate per capita spending on health only about doubles.

Uganda has potential to increase its fiscal space lies in promoting prudent fiscal management and governance so as reduce inefficiencies and wastage that has plagued the health system.

Inefficiencies have been shown to consume up to 13% of total health expenditure4. Key areas of inefficiencies that have been identified are: human resources, pharmaceuticals and health supplies and procurement and management infrastructure and equipment. These are elaborated below:

a) Human resources for health: There are two main inefficiencies in human resource for health. First, the issue of health worker absenteeism has been widely documented in

Uganda5. Absenteeism was estimated to result to a loss of about UGX 26 billion per year6.

The second issue is that of “ghost workers”. Ghost health workers are those who erroneously appear on the payroll despite having resigned, retired, absconded or even died. This is as a result of fraud or poor payroll management systems. Ghost workers also result into a loss of about UGX 1 billion. These inefficiencies were attributed to inadequate personnel management practices which demotivated health workers. This include:

recruitment and incorporation of the payroll, confirmation and promotion, lack of appraisals and limited opportunities for additional training and refresher trainings.

b) Pharmaceuticals and health supplies: The inefficiencies in the pharmaceutical sector result from poor procurement and supply chain management practices and also through direct drug leakages. Although the centralization of procurement of medicines through establishment of Vote 116 and strengthening of quantification unit has addressed some procurement and supply chain related inefficiencies, key area of inefficiency is the “push” system at lower levels of care that results into expiries at facility level. There is also potential to reduce inefficiencies through encouraging rationale pricing, more appropriate prescription practices and use of medicines including encouraging use of generic drugs.

4 Okwero et al. Fiscal Space for Health in Uganda. 2010 5 J. Svensson and M. Bjorkman, Efficiency and Demand for Health Services: Survey Evidence on Public and Private

Providers of Primary Health Care in Uganda. Washington, DC. The World Bank, 2009 6 Chaudhury et al. Missing in Action: Teacher and Health Worker Absence in Developing Countries; Journal of

Economic Perspectives, Volume 20 (2006), Pages 91–116.

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With regards to direct drug leakages, there is still a challenge of loss of drugs at health facilities which has resulted into stock-outs at the health facilities.

c) Procurement of Equipment and Infrastructure: The Public Procurement and Disposal of

Public Assets Authorities has documented considerable risk resulting into financial loss7.

These losses was attributed to challenges in procurement planning, monitoring and contract performance. The area where these challenges has been most documented is in the area of procurement of equipment and construction of infrastructure. With regards to equipment, there has been a challenge of purchase of equipment to facilities which do not have personnel to use them resulting to wastage. Similarly, the practice of construction of health facilities based on administrative units as opposed to population is an indicator of waste. The process of planning for infrastructure development for health facilities needs also to put into consideration the availability of other key inputs.

In addition to the areas of inefficiency identified above, there is need to address issues of inadequate accountability, fraud and misappropriation of funds. Issues of corruption and embezzlement have been regularly identified in the media and in the Auditor General’s annual reports. Addressing these challenges would also save the sector from financial loss and would enable the government to implement its fiscal space.

2.1.2 Organization of the health system in Uganda

The health care system of Uganda is organized under a decentralized arrangement. At the top is the Ministry of Health, which is responsible for policy and standards formulation, quality assurance, and resource mobilization. The districts and local governments are responsible for managing all health care providers under their jurisdiction. The districts are further divided into health sub districts (HSDs), which are administered at the health center IV level. The districts and

HSDs are responsible for leadership in the planning and management of health services, supervision and quality assurance, procurement and supply of drugs, and provision of technical, logistic and capacity development support. One of the core aims of decentralization was to ensure that districts are able to direct resources to funding health services in line with local priorities.

The health care system is made up of public, private-not-for-profit, and private-for-profit providers as well as traditional and complementary practitioners. For the public facilities, the national and regional referral hospitals report to the central government; while general hospitals and health centers (types II—IV) report to the local governments. The private-not-for-profit providers are predominantly faith-based and are administratively coordinated nationally by the respective bureaus and locally by the diocesan boards. The private-for-profit providers

7 Okwero et al. Fiscal Space for Health in Uganda. 2010

11 | P a g e predominantly comprise clinics, but also include drug shops and vendors operating informally. In terms of overall numbers of health facilities, excluding clinics, the public sector dominates: 55 percent of all hospitals, health centers II, III, and IV are government-managed, and the rest of the health facilities which are private and NGO-managed. Private-for-profit health facilities receive a subsidy from government using an input-based payment approach with no incentive for efficiency and equity. A summary of health facilities in Uganda by ownership and by level is shown in Table

2.

Table 2: Facility Ownership in Uganda (By Level of Care)

Level Ownership Percentage

(Level) Public PNFP/ NGO PFP Total

Hospital 63 64 20 147 3%

Health Centre IV 170 15 8 193 4%

Health Centre III 916 264 70 1,250 24%

Health Centre II 1,695 520 1,395 3,610 69%

Total 2,844 863 1,493 5,200 100%

Percentage

(Ownership) 55% 17% 29% 100%

Source: Health Facility Inventory 2012

The recent proliferation in the number of districts has been a challenge on decentralized health service delivery. This has aggravated the challenges faced at district level which include: low levels of local revenue in the district, limited flexibility in planning as most of the central funds are earmarked, inadequate financial and human resource capacity. Furthermore, with regards to the

Health Sub Districts, while notable progress has been made, the majority of the 214 HSDs have also encountered bottlenecks in meeting policy expectations because of inadequate funding and lack of human resources including managers at this level.

Lastly, it is worth noting that although the health infrastructure has expanded, a vast majority of health facilities are not fully functional, lack equipment, staff, and are poorly maintained. There is also inequity in the distribution of the functional health service providers with these located mainly in urban and peri-urban areas.

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2.2 Situation analysis for Uganda’s health financing

For this analysis, we have taken into consideration the framework by the World Health

Organization.8 To achieve financial protection and equitable access to health services, health revenues must be collected fairly, should be effectively pooled and managed, and should be used to purchase services strategically and efficiently. In the remaining sections of this chapter, a brief exposition of the performance of Uganda’s health financing system is presented in terms of (a) revenue collection, (b) pooling of resources and (c) purchasing of services.

Figure 4 is a functional chart that summarizes the landscape of Uganda’s health financing system.

It shows the contribution of the various revenue sources, the entities responsible for pooling and purchasing (by proportion) and lastly the organization of health service provision. In sections 2.2.1

– 2.2.3, each of the functional areas is unpacked in detail.

Figure 4: Health Financing Functional Chart for Uganda (2014)

Source: Data from Uganda’s National Health Accounts

8 Kutzin J. A descriptive framework for country-level analysis of health care financing arrangements. Health Policy, 2001, 56: 171-204.

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2.2.1 Sources of Health Financing

Uganda’s National Health Accounts show that total health expenditure (THE) was UGX 4.8 trillion in FY 2011/12. The sources of health financing are public, private funds (mainly household out-of-pocket expenditure), development partners (ODA) and voluntary health insurance. In 2011/12, public funds contributed 15.3%, private funds 38.4% and development partner funds 46.5%. The pattern of contribution to THE has been the same in the past years (Figure 5). The trends in the proportion contribution by each financing sources shows that there is a heavy reliance on direct out-of-pocket expenses and on external resources. These are explored in more detail below.

Figure 5: Trends in health financing for Uganda (billion-UGX) (2008/9 – 2011/12)

Figure 6: Percentage contribution to total health expenditure (THE) by source

3,050

3,424

4,677 4,830

1,000

2,000

3,000

4,000

5,000

2 0 0 8 / 0 9 2 0 0 9 / 1 0 2 0 1 0 / 1 1 2 0 1 1 / 1 2

'0

'0

U

G X

General Government Health Expenditure

Household Expenditure on Health Other Private Expenditure

Development Partners

0%

20%

40%

60%

80%

100%

2008/09 2009/10 2010/11 2011/12 c o n tr ib u ti o n t o

T H

E

Public funds Private funds Development Partners

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While the estimated total per capita health expenditure reported by the NHA (2011/12) was $50.1, the per capita public expenditure was only $9 (in 2012/13). Previous reviews of health financing in

Uganda have shown that there are still challenges in aligning revenue from other sources towards providing the essential minimum health care package9. The low per capita public expenditure when compared to the health spending estimates levels of up to $86 per capita(2012), as recommended by High Level Task force on Innovative International Financing for Health10, shows that resources for financing Uganda’s essential here care package are currently inadequate. Resource inadequacy for Uganda’s health sector has been made worse by failure to organize all the available resources towards providing the essential health care package. Inefficient use of ODA resources in the past, which included big scandals of corruption, resulted in mistrust between the government and its development partners. This has largely fueled the current challenge of effective coordination and harmonization of ODA. OOP payments are still very dominant in

Uganda, contributing a significant proportion to total health sector expenditure (Figure 6). Figure

7 presents the trend in public per capita health expenditure and the government budget allocated to the health sector.

Figure 7: Trend in per capita health expenditure and government budget allocation

According to current fiscal space projections, Uganda’s health budget will continue to grow at a modest rate. The challenge facing the health sector is the shift in government spending priorities, 9 MOH. Health Financing Review.2010.

10 McIntyre D and Meheus F. Fiscal Space for Health and Other Social Services. 2014

1,000

1,200

2010/11 2011/12 2012/13 2013/14 2014/15 P u b lic p e r C ap it a H e al th E xp e n d it u re (U

S$

To ta l h e al th b u d ge t (U

G X b ill io n

Health budget (UGX) Per capita public health expenditure (USD)

15 | P a g e with focus of government funding shifting towards the energy and infrastructure sectors in the recent years. The percentage of government budget (which includes on budget ODA) allocated to the health sector has stagnated at about 8.5% in the period 2010/11-2014/15 and it fell substantially to 6.9% in 2015/16.

According to the UNHS, OOP spending on health has continued to increase, with over 50 percent of total OOP health expenditure being spent on drugs11. OOP spending on health is associated with high financial risk. Specifically, over 20% of the population spend more than 10% of their total household consumption expenditure on health care. As such, this level of OOP health spending compromises households’ consumption of other basic needs, and more than 4% of the population have been pushed below the poverty line ($1.25/day) due to these health care payments12. Studies have shown that households in Uganda cope with these OOP expenditures through depletion of savings and selling of assets, including some households being driven into debt13. OOP payments for health care also increase socio-economic inequality across the population.

With Uganda’s health sector relying heavily on external resources, ensuring aid effectiveness remains a challenge for Uganda14. This is in addition to the other limitations associated with DAH such as the lack of predictability and making this financing source unsustainable in the long term15.

As presented earlier, Government expects the coming of oil revenues, in the medium term, to most likely drive Uganda to “middle income” status. This will be associated with reduced external funding in general, and increased cost of borrowing and is likely to result in the following challenges:

a) The revenue expected from oil (10% of GDP) is nearly equivalent to external resources currently raised, implying that oil revenue may not translate to increase resource availability if a large proportion of external support is withdrawn as a result of the oil revenue;

b) Uganda’s qualification to receive some of the external resources such as GAVI funding is dependent on income classification. If Uganda is classified as a low-to-middle income country, as a result of the oil mining and revenue, it will be disqualified from receiving GAVI support, 11 Orem et al. 2013. Health care seeking patterns and determinants of out-of-pocket expenditure for Malaria for the children under-five in Uganda. Malaria Journal 2013, 12:175 12 Kwesiga B, Zikusooka CM, Ataguba JE. Assessing catastrophic and impoverishing effects of health care payments in Uganda. BMC Health Serv Res.

13 Leive A, Xu K: Coping with out-of-pocket health payments: empirical evidence from 15 African countries.

Bulletin of the World Health Organization 2008, 86(11):817-908 14 Oliveira Cruz V, McPake B. 2011. Global Health Initiatives and aid effectiveness: insights from a Ugandan case study. Globalization and Health; 7(1): 20.

15ibid http://www.ncbi.nlm.nih.gov/pubmed/25608482 http://www.ncbi.nlm.nih.gov/pubmed/25608482

16 | P a g e and yet it may not be able to generate enough revenue to replace such external support

(particularly for a very sensitive health service area of vaccines and immunization of children).

The insurance sector in Uganda is still under-developed and it contributes very little as a source of health financing. There is a generally very low insurance market penetration with insurance contributing less than 1% of Gross Domestic Product.16 The health insurance market is faced with challenges of sustainability due to the very low membership numbers and high dropout rates17,18’19. This scenario is unlikely to change in the short term. While there are current efforts to establish a National Health Insurance Fund (NHIF), in the short term the focus will be on institutional capacity building before NHIF is implemented. While there are suggestions for earmarking taxes as an option to raise resources for the health sector, this option maybe challenging because it may be seen to interfere with the power and roles of other key stakeholders such as MOFPED and Parliament.

In the face of low funding, Uganda is also under considerable pressure to increase spending for health. This is driven primarily by the rapidly growing population and the need to adopt for more effective—and expensive—health technologies and service standards to combat the high disease burden. Besides, continuing resource mobilization and reducing waste, Uganda needs to take proactive steps to mitigate growing pressure to increase health spending.

Budgeting Process

Figure 8 presents the steps in the budget process at national and sub-national levels. The national budget plays a central role in the GoU’s economic and political functions. It is used as an economic policy tool to allocate public financial resources in accordance with policy priorities and to ensure effective resource use to achieve government goals. The Ministry of Finance, Planning and

Economic Development (MoFPED) leads the budget process, in consultation with legislature/parliament and Bank of Uganda (BOU).

16 World Bank Estimates 17 Cordaid 2007.

18 Kyomugisha, E., Buregyeya, E., Ekirapa, E., Mugisha, F. & Bazeyo, W. 2008. Building strategies for sustainability and equity of pre-payment schemes in Uganda: Bridging gaps. . Harare.: Regional Network for Equity in Southern Africa 19 Basaza, R., Pariyo, G. & Criel, B. 2009. What are the emerging features of community health insurance schemes in east Africa? Risk Management and Healthcare Policy. 2, 47-53.

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Figure 8: Steps of the budget process at national and sub-national levels

National Sub-national

The resource envelope for the medium-term is derived from projected domestic revenues and anticipated external funds (grants and loans). Once the total resource envelope has been determined, broad allocations to sectors are determined based on: (a) priorities which have a direct bearing on poverty and growth; (b) the ruling party manifesto; and, (c) constraints faced during implementation.

Sector ceilings are set as follows: (a) the current financial year is used as a base; (b) all one-off expenditures undertaken in the previous year are deducted from the sector ceiling and made available for reallocation to identified priorities; and, (c) the projected additional resources over and above the current year’s resource envelope are then allocated among the policy priorities, with the higher priority areas and commitments receiving the first call on these resources. This then becomes the basis for the preparation of the indicative medium-term expenditure framework

(MTEF), which details the respective sector ceilings. These indicative ceilings are then given to the sectors under a Budget Call Circular. These are subsequently revised after the submission of

Sector Budget Framework Papers (BFPs), then again after receiving comments from Parliament on the National BFP, and finally just before reading the budget.

Uganda’s budget process is characterized by relative transparency and openness and broad participation. Important components of this process are the Sector Budget Framework Papers which are prepared at the national, sectoral and local government levels. BFPs are three-year rolling frameworks used to streamline and guide the budget process, setting out planned outputs and their associated expenditures in the medium term.