Foreign aid for health care does not always achieve the intended effect

A study in Lancet (Public financing of health in developing countries: a cross-national systematic analysis) analyzes the impact that foreign development assistance for health (DAH) has on health care spending in developing countries.

At the country level, while shares of government expenditures to health increased in many regions, they decreased in many sub-Saharan African countries. The statistical analysis showed that DAH to government had a negative and significant effect on domestic government spending on health such that for every US$1 of DAH to government, government health expenditures from domestic resources were reduced by $0·43 (p=0) to $1·14 (p=0). However, DAH to the non-governmental sector had a positive and significant effect on domestic government health spending. Both results were robust to multiple specifications and subset analyses. Other factors, such as debt relief, had no detectable effect on domestic government health spending.

In other words, donors should be careful in providing DAH to governments. The authors suggest some remedies:

  • Standardized monitoring of government health expenditures
  • Establishment of collaborative targets to maintain or increase the share of government spending for health
  • Capacity building for developing countries to receive and use DAH effectively
  • Assessment of risks and benefits of expanded DAH to non-government sectors
  • Investigation of the use of global price subsidies or product transfers as DAH mechanisms

These ideas are good. There are two I favor:

  • Modifying the “collaborative targets” idea by providing matching funds based on the increase of government funding. For example, provide $5 for every $1 expansion in government spending
  • Providing DAH to the private sector
April 9, 2010

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