Making health markets work for the poor in Africa – How public-private partnerships can drive systemic change in healthcare

Public goods that may be taken for granted in high-income countries suffer from ineffective and inequitable distribution in many low and middle income countries (LMICs), for example electricity supply, road networks, public transport, education, or indeed healthcare. In contrast, the distribution of private goods such as soft drinks (Coca Cola!), cars, or cell-phone services does not appear to encounter major problems making them literally available everywhere.

This paradox can be better understood when we distinguish public and private sector roles. The creation and maintenance of public goods that are universally accessible is a complex and costly task. It requires institutions to function effectively, but also a government that is capable and competent to regulate, implement and administer such public functions. Clearly, in many developing countries, the government (for reasons that vary from one country to the other) is not able or hasn’t demonstrated enough will to provide these functions in the interest of the general public.

In such circumstances, vital public functions may be left to the private sector and market forces. Unfortunately, these markets are often plagued by market failures preventing them from flourishing, and benefiting only part of the population, for instance those who are better off. This also applies to healthcare in most African countries. So the question we must ask is: How can we make African health markets work for the poor?

Downward spiral in healthcare

Although African governments do provide health services, their capacity is often inadequate resulting in limited access to services – both geographically and financially. As a result, healthcare is de facto privatized and provided by numerous small healthcare facilities run by a doctor, a nurse, a midwife, or, in the case of larger facilities, by churches or other NGOs. In contrast with the Western world, where private clinics are used primarily by the rich, private healthcare facilities in LMICs, despite being small in size, often serve 50% of the population or even more in rural areas.

These small-scale markets do not always function properly. For markets to work well, reliable institutions are needed, since people need to be able to trust that their money and efforts are well invested. Where, for example, licensing regulations are non-existent or not properly enforced, the quality of medical services or medicines is neither clear nor guaranteed, and this affects patient safety. Investors, entrepreneurs and banks will then be reluctant to invest in quality improvement and upgrades, so patients continue to receive a low quality of care and generally have little faith in the system.

As a result, people’s willingness to pre-pay for health services through mechanisms like health insurance remains low. Without pre-payment mechanisms, even poor patients are left to fend for themselves and have no choice but to pay out-of-pocket for healthcare at the point of service. Thus they often become trapped in a downward spiral of high unexpected costs, paired with lost income when they fall ill. An added problem is that the lack of a pre-payment mechanism that provides financial protection also means that most people seek medical care too late. In sum, a badly functioning government means that people are trapped in badly functioning healthcare markets and stuck in a vicious cycle of high risk, low trust, low quality and low investments.

Strengthening the private health sector

The PharmAccess Group focuses on making health care markets work for the poor by reducing risks for all involved and building trust throughout the health system. On the supply side, our approach focuses on enabling quality improvement. PharmAccess established the first accredited quality rating system for resource-restricted settings (SafeCare), which creates transparency for patients and healthcare workers as well as investors. Using this system, local banks can now better evaluate the risk involved in lending in this sector. Through the Medical Credit Fund, which is another PharmAccess innovation, they are now providing loans to clinics. In combination with business training and technical assistance, this empowers healthcare providers to structurally improve the range and quality of their services. This in turn stimulates demand for healthcare from local patients. PharmAccess further strengthens this demand by decreasing financial barriers through health insurance and other forms of risk pooling. The vicious cycle becomes a virtuous cycle leading to better healthcare that is more affordable for a larger number of people.

This approach drives our results in many places in Africa, including Kwara, a small rural state in Nigeria. Kwara has remained largely off the radar of international donors. Over 60% of its population is poor, and access to care, let alone quality care, is extremely limited. Against this backdrop, the Kwara State government, local insurer Hygeia Community Health Care, the Health Insurance Fund, and PharmAccess formed a public-private partnership that United Nations Secretary-General Ban Ki-moon has described as ‘ground-breaking and innovative’.

The Kwara state health insurance program

In 2007, the Kwara State health insurance programme was launched. It covers primary healthcare, maternal and child healthcare, and treatment for chronic diseases, malaria, tuberculosis and HIV/AIDS and related opportunistic infections. Over 110,000 people are currently enrolled and obtain health services at public or privately owned health centres and hospitals. Aishatu Atahiru, a small local seller of groundnuts and popcorn: ‘Before the programme, there never used to be any staff and hardly ever any drugs in the facility. This is the reason why there were many drug hawkers and medicine stores in the community. All that is now history, we now have staff at the facility and good drugs.‘

The Kwara programme addresses challenges on both the demand and the supply side of the health system. Due to the renovation of both public and private health facilities as well as the setting and raising of standards of care via SafeCare, patients gain faith that their money will be well spent. When quality improves, cross-subsidization and risk equalization in efficient state risk-pooling mechanisms can be introduced through insurance. Via subsidies of the premium, low-income groups gain access to insurance and healthcare.

The programme was set up using development aid funding from the Dutch Ministry of Foreign Affairs, and from the outset it has been driven by committed support from the local insurance company, healthcare providers, politicians and religious leaders. In 2014, the Kwara State government, which currently pays about 70% of the health insurance premium subsidy, committed to increasing their funding of the program to 7 billion Naira (USD 35 million). Over the next five years, local authorities will improve the quality of clinics and extend the program across the state, eventually giving 600,000 rural low-income Nigerians access to quality healthcare.

Investments have been made in administrative infrastructure to ensure transparency, accountability, efficient business practices, and quality control in the health system. To stimulate investments in the private sector, PharmAccess supported Hygeia by encouraging Dutch multinationals Shell and Unilever to insure their Nigerian staff through Hygeia’s corporate programme. The Investment Fund for Health in Africa, a private equity fund set up by PharmAccess, invested in Hygeia to support its expansion. Increasing health insurance coverage is an essential step to improving access to care in Africa, as it has been in the West.

Impact research

Bio-medical and socio-economic research is being carried out by the University of Ilorin Teaching Hospital, the Amsterdam Institute of Global Health and Development (AIGHD) and the Amsterdam Institute of International Development (AIID) to monitor the impact of the program and stimulate effective implementation. Studies are being conducted into the cost-effectiveness of maternal healthcare and the prevention of cardiovascular diseases, as well as household financial diaries so as to understand how financial constraints affect people’s ability to enrol in health insurance or renew their membership. The research partnership has resulted in significant research capacity building. More than 50 publications and peer-reviewed papers have been published in internationally renowned journals.

Impact evaluations have shown that the programme is making important contributions towards achieving the Millennium Development Goals of reducing child mortality, improving maternal health, and eradicating extreme poverty. There has been a 52% decline in out-of-pocket payments (including the premium), a 30% increase in hospital delivery, and a 580% increase in under-5 hospital visits. Utilization of higher quality healthcare providers has doubled and there has been a 90% increase overall in service utilization. Patients with hypertension have experienced a significant decrease in blood pressure, leading to a recommendation in one of the studies that health insurance programmes should be included in strategies to combat cardiovascular disease in sub-Saharan Africa. Also, new World Bank data show that, since the start of the programme, health statistics in Kwara State have improved drastically and Kwara is now the second best performing state in Nigeria in maternal and child care. ‘We have developed our infrastructure, our building, our machinery and even our staff. All my staff are better equipped now, intellectually, to handle the challenges that medical services demand,‘ says Dr. Jacob Kayode Agbede of Ogo Oluwa Hospital, Kwara.

Blueprint to reach universal health coverage

In March 2015, a National Council of Health memo emphasized the need for Nigerian states to adopt and implement state-supported health insurance schemes. It recognized the Kwara State health insurance programme as a model to achieve universal health coverage in Nigeria. As evidenced in Kwara, in situations where government health related institutions aren’t functioning properly, public-private partnerships can be a catalyst in driving systemic change and making health markets work for the poor.