Global Health Views: Donor Perspectives on Innovative Financing

On October 22, 2007, representatives of development aid agencies in the UK, France, Germany, Italy and the Netherlands were joined by ministry officials from Rwanda and Liberia at Brookings to discuss the role that innovative financing plays in donor health aid portfolios and how to assess whether new instruments add value in a crowded health aid landscape.

Innovative financing means different things to different people. For some, it is about raising new monies for global health work (like Debt2Health), while others consider the new mechanisms as tools to make existing aid spending more effective through various means, including: 1) changing the timing of disbursements to accelerate health results (like the International Finance Facility for Immunization); 2) increasing certainty to bring down prices of commonly-purchased medicines and goods (such as the Advance Market Commitment); and, 3) changing the incentives to recipients (through results-based aid such as the Global Fund and GAVI ISS). The political economy role of innovative financing is also crucial as an antidote to donor fatigue and as a mechanism to interact more effectively with the markets that supply key global health products and services.

The discussion at Brookings raised a number of key points and questions, such as:

• Innovative financing should not be seen as a way to bypass donor government budgetary systems, but rather as mechanisms to increase effectiveness.
• How can donors assure that funds mobilized through innovative financing are genuinely “additional” to existing aid funding? How could this “additionality” be measured?
• How to measure whether an innovative financing mechanism helps to align aid better with country priorities and reduce fragmentation of incoming health aid flows?
• Innovative financing to date has been focused on lowering the price of medicines and supplies to recipient countries. Delivery challenges related to human resources, infrastructure and other inputs have been less well addressed.
• Performance-based aid rewards good performers, but given that fighting infectious disease is a global public good, success depends on the performance of the worst performers. What is our model in these contexts?
• In spite of Paris rhetoric, donor fatigue, short-term, fragmented and unpredictable health aid flows remain the reality in recipient countries. As a policy response, coordination alone has its limits.

The discussion also raised other considerations, including:

Additionality, alignment and fragmentation represent measurable indicators of aid effectiveness as suggested by the OECD; a paper by the Brookings Global Health Financing Initiative released in July 2007 assessed health aid performance on these metrics, finding evidence of additionality (at least with respect to health aid) but of worsening performance on alignment (with respect to disease burden) and fragmentation. If existing bilateral operations are not scaled down, even well-designed innovative financing mechanisms will create more fragmentation at the country level.

Changing the timing of aid flows to maximize health gains – the “inter-temporal optimization of aid” mentioned by Owen Barder of DfID – and using timing as an input to donor aid allocation models is a critical innovation. However, although aid frontloading has benefits for certain interventions such as vaccinations, such benefits do not likely hold for other interventions, where sustained and predictable flows are comparatively more important. Further, the allocative efficiency trade-offs of existing and proposed innovative financing mechanisms are also little discussed. If the airline tax is directed to the purchase of second-line AIDS treatments, for example, there is a trade-off between shifting existing patients to second-line versus increasing the number of patients on first-line medications.

On next steps, Carlo Monticelli of Italy suggested the extension of “successful” mechanisms that are already devised. Yet which mechanism has been evaluated? And on what metrics? The analytical framework currently under development by Maria-Luisa Escobar and Charles Griffin at the Brookings Global Health Financing Initiative may help, but faces many challenges since the intended outcomes for each category of innovative financing mechanism are multi-dimensional and complex. More thinking on how health aid can become more effective through changing incentives facing input market actors is critical, particularly on where subsidies can be targeted to most cost-effectively and sustainably improve health at the country level – at manufacturers and suppliers? At governments and executing agencies? Or at providers and patients?