Pandemic Financing: How the World is Funding the COVID-19 Response (Part 1)

Introduction

Many countries are scrambling to respond to the COVID-19 pandemic. The primary focus has been on strengthening health systems to improve surge capacity1,2. At the same time, countries are faced with the difficulty of balancing the demands of responding to the pandemic with the need to maintain the delivery of essential health services2. This increasing demand for health care can further strain health systems around the world. Thus, resulting in a dramatic increase in direct mortality from the outbreak and indirect mortality from preventable and treatable health conditions2.

A key challenge to the pandemic response is the struggle to reconcile scarce resources with many competing priorities. Many health systems, however, were already overwhelmed and underfunded even before the pandemic3. Unsurprisingly, the COVID-19 pandemic has caused a significant blow on the global economy, further constraining the fiscal capacities of economically-vulnerable countries3,4.

Timely policy actions are crucial to mitigate both the health and economic shocks brought about by the pandemic5. Therefore, governments must create a public finance environment that can provide sufficient funding to ensure a comprehensive pandemic response while also taking into account economic and fiscal constraints6.

How is the expression of health valuation and prioritization highlighted in the COVID-19 response?

Health financing policies are required to strengthen the pandemic response. Such policies should focus on (1) raising adequate revenues, (2) organizing these revenues to maximize risk-sharing across the entire population, and (3) mobilizing public funds so that they can be effectively translated into the provision of health services7.

Population-based services, such as comprehensive surveillance, data and information systems, and communication and information campaigns, take priority in the pandemic response. Funding these health services will help ensure that public health functions needed to respond to the crisis are all in place8. Unfortunately, in many countries, investment in the national capacity to prevent, detect, and respond to pandemics was not prioritized in recent years8. In some countries, a systematic financing response has not been established to help address these capacity gaps9.

Additional domestic spending can come from a mix of sources and is used to address different health system issues arising from the pandemic5. In Lithuania, the additional expenditure amounting to $386 purchasing power parity (PPP) per person was intended to cover equipment, salaries, and social security coverage10. In contrast, some countries, such as Bosnia and Latvia, have allocated less than $20 PPP per person from domestic resources for their pandemic response10. It is also interesting to note the variation of health spending across countries. Some countries have large additional budgets but have spent only a fraction so far. France and Croatia spend less than 2% of their regular health spending while Cyprus and Lithuania spend 12.4% and 27.2% of their regular health spending, respectively10.

The situation, then, begs us to ask the question, “How much additional funding should countries spend on their COVID-19 response?” Truth be told, it is difficult to determine the right amount of health spending for a pandemic response. The answer is probably context-specific and highly depends on the needs of the country. What is certain, however, is the fact that more additional funding will be required to meet the growing demand for non-essential health services together with the public health measures employed in the pandemic response. Undoubtedly, there will be higher health expenditure and more budget injections throughout the COVID-19 pandemic.

What are the challenges in financing the COVID-19 response?

In response to this, many countries have already reconfigured health service delivery to meet the immediate health care needs of their populations. However, a supportive health financing response is necessary to scale up both population-based and individual services, especially in countries that heavily rely on out-of-pocket payments1,8. Many of these countries were already experiencing significant gaps in health system coverage which can pose additional challenges to mitigating both health and economic shocks caused by the COVID-19 pandemic5.

1.  Inadequate sources of funding

Like previous public health emergencies (e.g. Ebola), the COVID-19 pandemic will again test public financial management systems in their capacity to support fiscal objectives. Challenges that these systems will face may come from (a) reassessing fiscal policy needs and identifying additional financial resources; (b) ensuring timely availability of funds to service delivery units; (c) tracking accounting for transparent reporting; and (d) ensuring business continuity11. Some countries will have an array of emergency response mechanisms at their disposal and most countries will utilize one or more of the available health financing tools to cope with emergency spending. Through public financial management systems, some governments have the capacity to activate contingency funds in emergency situations including pandemics5,6.

Arguably, major gaps in the health financing system are more challenging to address at the subnational level. In the Philippines, for example, funding level and spending capability vary substantially by local government unit. Some local government units have insufficient funds or sub-optimal budget allocation to implement an effective response to public health emergencies12. Thus, funding for a pandemic response may not always be allocated or readily available to support priority public health measures, especially at the subnational level.

Reprioritization through virements between government programs has been considered the primary action in securing budget funding for immediate pandemic response6. Private donations from individuals and local businesses have also been relied on as secondary sources of additional funding. Reallocating existing health budgets and private donations, however, may not be enough to fund health financing needs in the long run10. Conversely, many of the countries with low levels of an additional spending budget will eventually rely on funding from external donors such as the World Bank10.

2.  The need for timely and appropriate fund disbursement

More than the availability of funds, a financing mechanism is essential for the timely response to public health emergencies. Timely and appropriate financial decision-making requires a coordinated and harmonized governance structure across government agencies. The speed by which a country can respond to a public health emergency may depend on its public financial management system which establishes the rules and regulations for budget allocation and spending. In Australia and France, these rules are flexible which allowed for the rapid reallocation of program-based budgets and the immediate release of such funds to health care providers13.

An accelerated disbursement process will allow advance appropriation and fast-track payments to meet the spending needs of health systems. Several countries have explored different approaches to accelerate the release of public funds to government agencies and/or health service providers both in national and subnational levels14. In India, for example, procedures for fiscal transfers to subnational levels have been accelerated by authorizing emergency spending transactions without the approval of the Minister of Finance15.

In the Philippines, a quick response fund of the Department of Health is available and can be accessed when needed during times of emergencies and disasters. However, there is limited coordination and flexibility to reallocate or transfer the quick response fund to other key government agencies to support the response to public health emergencies12. The total turn-around time for the release of this fund takes about one to three weeks. When the disbursement of the fund is anticipated to last more than one week, the requesting office is asked to initially utilize their regular funds12. Hence, there is a need to enhance the capacity to optimize resource allocation by instituting innovative financing mechanisms that can hasten the disbursement of funds where they are needed most.

References:

  1. World Health Organization. How to purchase health services during a pandemic ? Purchasing priorities to support the. 2020;(April). https://www.uhc2030.org/blog-news-events/uhc2030-blog/how-to-purchase-health-services-during-a-pandemic-purchasing-priorities-to-support-the-covid-19-response-555353/.
  2. World Health Organization. Maintaining essential health services : operational guidance for the COVID-19 context. 2020;(June). https://www.who.int/publications/i/item/covid-19-operational-guidance-for-maintaining-essential-health-services-during-an-outbreak.
  3. Kurowski C, Evans D, Irwin A, Postolovska I. COVID-19 (coronavirus) and the future of health financing: from resilience to sustainability. Investing in Health. https://blogs.worldbank.org/health/covid-19-coronavirus-and-future-health-financing-resilience-sustainability. Published 2020. Accessed June 13, 2020.
  4. Development Aid. Financing of pandemic response: where does the money come from? https://www.developmentaid.org/#!/news-stream/post/62753/financing-of-pandemic-response-where-does-the-money-come-from. Published 2020. Accessed June 13, 2020.
  5. Thomson S, Habicht T, Evetovits T. Strengthening the health financing response to COVID-19 in Europe. 2020.
  6. Barroy H, Wang D, Pescetto C, Kutzin J. How to budget for COVID-19 response? 2020;(March):1-5. https://www.who.int/who-documents-detail/how-to-budget-for-covid-19-response.
  7. World Health Organization. Health systems governance and financing & COVID-19. https://www.who.int/teams/health-financing/covid-19. Published 2020. Accessed June 14, 2020.
  8. World Health Organization. Priorities for the Health Financing Response to COVID-19. DOI:10.1596/33738
  9. Glassman A, Datema B, McClelland A. Financing Outbreak Preparedness: Where Are We and What Next? Cent Glob Dev. 2018. https://www.cgdev.org/blog/financing-outbreak-preparedness-where-are-we-and-what-next.
  10. Cylus J. HOW MUCH ADDITIONAL MONEY ARE COUNTRIES ALLOCATING TO HEALTH FROM THEIR DOMESTIC RESOURCES? https://analysis.covid19healthsystem.org/index.php/2020/05/07/how-much-additional-money-are-countries-putting-towards-health/. Published 2020. Accessed June 18, 2020.
  11. Stone M, Saxena S. Special Series on Fiscal Policies to Respond to COVID-19 Preparing Public Financial Management Systems for Emergency Response Challenges 1. https://blog-pfm.imf.org/pfmblog/2020/03/preparing-public-financial-management-systems-to-meet-covid-19-challenges.html.
  12. World Health Organization. Joint External Evaluation of IHR Core Capacities of the Republic of the Philippines. Geneva, Switzerland; 2019. DOI:10.1142/9789812817945_0010
  13. Gupta S, Barroy H. The COVID-19 Crisis and Budgetary Space for Health in Developing Countries. https://blog-pfm.imf.org/pfmblog/2020/03/preparing-public-financial-management-systems-to-meet-covid-19-challenges.html. Published 2020. Accessed June 21, 2020.
  14. Barroy H. No calm after the storm: time to retool country PFM systems in the health sector. https://p4h.world/en/who-wb-no-calm-after-the-storm-time-to-retool-country-pfm-systems-in-health-sector. Published 2020. Accessed June 21, 2020.
  15. Verma A, Raj A. PFM Solutions in India to Combat the COVID-19 Pandemic.

 

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