Development Assistance for Health: A Tale of Two Accounts

by Jeremiah Norris – Senior Fellow, Hudson Institute

The Institute for Health Metrics and Evaluation (IHME) at the University of Washington measures development assistance for health (DAH), while the Index of Global Philanthropy & Remittances at Hudson Institute publishes annual data on the total U. S. Economic Engagement with Developing Countries.  There are distinct differences in the methodology employed by both groups in the determination of resource flows.

On February 1, the IFC hosted an event  on the subject of “Development Assistance for Health During Economic Crisis”. The key note speaker was Dr. Christopher Murray, Director of IHME.  In November, his unit published Financing Global Health 2010: Development Assistance and Country Spending in Economic Uncertainty. This was another of Dr. Murray’s landmark contributions to the literature of health in the developing world, beginning in 1996 with the ten volume Global Burden of Disease, published in collaboration with WHO, the World Bank, and the Harvard School of Public Health.  Now in its second year, Financing Global Health is a core part of IHME’s mission to measure health and the impact of health policies and interventions.

Dr. Murray presented several significant findings from the 2010 study on development assistance for health (DAH) to the IFC audience:

  1. The global economic slowdown appears to be contributing to a diminishing growth of DAH.  While estimates show continued growth through 2010 to a total of $26.87 billion by year’s end, the rate of growth was cut by more than half from an annual average of 13% between 2004 – 2008 to 6% between 2008 – 2010.
  2. Donor governments made up 72% of total DAH flowing to developing countries in 2008, up from $4.41 billion in 1990.  The remainder is from private citizens, corporations, and U. S. registered NGOs and foundations.
  3. Cumulatively, the U. S. government contributed $51.94 billion in DAH between 1990 – 2008. It made up nearly one-third of all DAH donor funding in 2008.
  4. In countries whose governments receive significant DAH, health aid appears to be partially replacing domestic health spending instead of fully supplementing it. Conversely, in countries that receive health aid mainly through NGOs, government health spending appears to increase.
  5. Put another way for item (4), the countries that have seen the most substantial increases in DAH are also the countries that have seen declines in domestic spending on health programs.
  6. Private sources of funding have been responsible for a growing share of total DAH, rising from 8% in 1990 to 19% in 2008.
  7. Non-communicable diseases received the lowest percentage of DAH at 0.12% against 6.16% for HIV/AIDS and 3.17% for MCH in 2008.

As comprehensive as the IHME study is on DAH, a reasonable question to pose is: does it cover all resource flows into health sectors of the developing world?  As a panelist, I presented a power point slide, drawn from the Index, on the total U. S. economic engagement with the developing world,  beginning with Official Development Assistance (ODA), in addition to: corporations, foundations, religious organizations, private and voluntary organizations, volunteerism, universities and colleges, remittances, and private capital flows. For 2008, the total U. S. net economic engagement with the developing world, including health, came to $132.3 billion.

A major difference between Hudson’s figures and DAH is in the calculation for private funding through NGOs. DAH relies on data provided from tax filings by NGOs and the USAID Report on Voluntary Agencies. It isn’t clear from the DAH study how much of DAH was sourced from either account.  In 2008, USAID reported a total of $17 billion from these agencies to the OECD, while the Index found a total of $37.1 billion from private philanthropy.  USAID draws its data from voluntary surveys of NGOs, while the Index uses data exclusively from IRS tax filings from thousands of non-profits as reported by the Urban Institute and the Product Medicines Donations Program (PQMD).

Another difference is the manner in which DAH treats in-kind contributions. DAH records only the wholesale value of product donations; the Index includes that value, as well as the cost of transport, insurance, taxes, duties and tariffs as an expense in moving donated products to patients.  The importance of this can be seen in a WHO study which found that “taxes and duties levied on medicines, as well as the mark-up applied, frequently contribute more to the final price than the actual manufacturers’ prices”. Some governments tax pharmaceutical donations on their retail rather than wholesale values.

Taxes, duties and tariffs contribute a windfall of foreign exchange to ministries of finance in the developing world, which the IHME has been unable to record, whereas the Index applies a fixed percentage of 18% on the value of donated products.   Either NGOs or the companies making the donation, pay all the ancillary expenses involved in moving products to patients, including in-country storage, transport and pharmacists’ expenses.

IHME doesn’t count the resource flows from religious organizations and remittances. The Index estimates that approximately 26% of the $8.2 billion in contributions from religious organizations were health related in 2008. U. S. remittances were $96.8 billion in that same year. While the Index hasn’t been able to drill down into this account to determine its health component, there is limited information. For instance, Mexico, which receives the largest amount of remittances, offers to migrant home town associations in the U. S. a 3:1 program. For every remitted dollar that is designated for a health clinic, farm to market road, or school, the Federal government matches it with one dollar, and the municipal and local governments follow suit.

The IHME study provides an excellent foundation for tracking DAH. Still, when viewed by the Index’s supplementary findings, it becomes obvious that for 2010 the total of $26.87 billion as recorded by IHME can be greatly enhanced by adding the value of health contributions from religious organizations and possibly even remittances, as well as NGOs which lie outside of the USAID survey. Also, the considerable fees paid through taxes, duties and tariffs by companies which donate products to the developing world should be counted as DAH.

Dr. Murray’s apt recommendation for the next step is “to study the impact of DAH on health to see whether donors and recipients are getting value for the health money invested.  More spending does not necessarily improve population health”.

The Index could not agree more with his recommendation.


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