Many countries with emerging economies are considering health system financing transformation. Five no-regrets tips can help them build a strong foundation for their future health system.

countries around the world, healthcare expenditures are growing faster than GDP. Recent estimates suggest that global expenditures on health could rise from US $8 trillion in 2018 to over $18 trillion in 2040.1 The increased spending is forcing many governments to tighten their belts, use available financial resources more efficiently and, in some cases, prioritize which services are delivered. Although these challenges are present in most nations, they are especially acute in countries with emerging economies. (See the sidebar below as an example.

As Ethiopia’s example illustrates, the financing struggles countries with emerging economies face are easy to diagnose, but there is no readily available and implementable solution. In other words, there is no clear right path. If, however, a country did wish to transform its health system financing, many of the decisions it would need to make to define the future financing model are likely to lead to tough, country-specific, and ideologically charged debates. Among the issues that could be debated are these: What is the appropriate split between the public and private sectors in providing healthcare and health insurance? How much choice should patients have? Which health services should citizens be entitled to? How can out-of-pocket spending be lowered and families be protected from catastrophic financial expenditures? How can health system financing be provided sustainably?

Given the complexity of the questions and, often, the lack of consensus among policymakers and academics, it is hardly surprising that many countries become trapped in a state of paralysis, without a clear vision of how to move forward. An additional complication is that national health priorities may shift following elections if the political party in power changes. As priorities shift, it can become even more difficult to achieve broad consensus among policymakers and politicians about health system financing goals.

Nevertheless, our international experience has shown that the real challenge in health system financing transformation in countries with emerging economies is not finding the single right path—rather, it is putting together a set of building blocks to create a coherent system that delivers the greatest value for a country’s citizens. Different countries have made different systems work. For example,

the United Kingdom and Germany both provide universal health coverage with similar objectives but use very different financing models. Often, the financing design a country uses is tied to historical factors and regional trends. For example, the former Soviet Union and most Eastern European countries have transitioned to a centralized social health insurance model. By contrast, Latin American countries typically have a mix of social health insurance and a national health service, reflecting the historical agreements between political leaders and different social groups.3

The good news is that the basic building blocks are common to all health system financing transformations, regardless of the specific model being built (exhibit). Using these blocks is a no-regrets move that ministries of health—or other responsible health authorities—can take to build momentum for the transformation. By “no-regrets,” we do not mean that the steps are easy or uncontroversial, but rather that they are necessary irrespective of the model being built. These building blocks allow countries to accelerate health system transformation by creating tangible economic benefits and collecting new data to inform the ongoing policy debate.

Before you begin: Establish transformation leadership

Successful health system transformation requires strong and committed leadership. For example, dedicated leadership and political support were main drivers of Thailand’s success when it instituted universal coverage in 20014 and Zambia’s successful removal of user fees for primary care services in 2006.5

The first step is to set up a transformation office with a strong political mandate and a core team of three to ten people. This office should be led by someone with sufficient sector experience to be credible and who is not afraid to make changes. The office, which is typically housed at the ministry of health, should be empowered to track and support progress across all parts of the transformation, including the provider side.

Show me the money: Define the sources of funding

Whether the objective of financing transformation is to expand coverage, increase quality of care, or improve financial sustainability, additional sources of funding will likely be required, particularly if the health system is currently financed from general government revenues or donor funding.

To address this issue, the first step is to calculate the “fiscal space” for healthcare spending—that is, how much room there may be in the government’s budget to sustain or increase spending, both now and in the future. (This space may, in fact, be negative in the future under the current model.) The fiscal space analysis includes a projection of healthcare revenues and expenditures over the medium term (normally, five to ten years) based on the historical evolution and an understanding of cost drivers, including epidemiological and demographic trends. This analysis can be an important tool for moving healthcare up the government’s agenda.