Economic Burden, Economic Development, Government Policy, Health Insurance, Inequality, Poverty

Investing in Healthcare to Put a Dent in Poverty

~Written by Hussein Zandam (Contact:; Twitter: @zandamtique)


Poverty and Healthcare, Two halves. Photo credit: Our Africa

Health and poverty are intricately related. Evidence suggests that there is a positive correlation between health and poverty. People with limited resources in low- and middle-income countries (LMICs) are reported to have limited access to healthcare compared to their wealthier counterparts (Wagstaff, 2002). However, other evidence has shown that health expenditure can push households into poverty (Kruk et al, 2009). Tackling either is a priority for governments to improve the welfare of people. The poor are more likely to need healthcare for many reasons including a lack of safe drinking water, a balanced diet, adequate shelter, and protection against harsh environmental conditions. Because of the increased need for healthcare, the poor incur increased spending on already limited resources, and are likely to experience catastrophic expenditure. Reducing healthcare expenditure by the poor has the potential to be a viable mechanism against deepening of poverty.

Reducing extreme poverty is a major goal of the Millennium Development Goals (MDGs) and was also considered in the formulation of the post-2015 agenda. Countries all over the world are grappling with measures to reduce income inequality and poverty. In developing countries, this is more apparent through the increase of micro credit schemes, subsidies, and social safety nets for the most vulnerable. However, evidence has shown that in spite of efforts from nations and development partners, more needs to be done to eradicate extreme poverty (Laterveer et al. 2003). Poverty and access to healthcare have been subjects of research and policy. Poverty can be viewed not only as a conception of material and income deprivation (Deaton and Zaidi, 2002) but also as the lack of opportunities for an individual to lead a life he/she values (Sen, 1999). Using this concept, empowering people to live healthy lives can be seen as an initiative to overcome poverty. However, when poverty is viewed as a deprivation of income and assets, initiatives are channeled that directly improve household expenditure; when in relation to health, initiatives that lower expenditure on health to avoid catastrophic expenditure.

The World Health Organization (WHO; 2000) has advocated for health financing measures that provide financial protection from catastrophic health expenditure. Catastrophic expenditure is a leading cause of impoverishment in many countries. Efforts to prevent catastrophic expenditure oh health have been primarily through insurance. However, in many LMICs it is not effective and/or is beyond the reach of the poor either by being too costly or by not providing adequate coverage (McIntyre, 2006). Thus, the world health report (WHO, 2010) advocated for universal public finance (UPF) as a strategy to promote universal health coverage. UPF means that governments finance interventions for people regardless of who receives it and who provides it. UPF has been in practice in many high-income countries where many necessary interventions are covered. In LMICs however, UPF is limited by targeting a set of interventions tagged as the essential health package, which means many services are excluded and require user payments at the point of care.

For example, extended cost-effectiveness analysis (EECA) was used to assess the effectiveness and reduction in financial risk afforded by a public package of interventions initiated by the government of Ethiopia (Verguet et al, 2015). The interventions examined included services for vaccination, treatment of some conditions, caesarean section surgery, and tuberculosis DOTS. Their analysis focused on UPF where there is no out-of-pocket expenditure to cover costs incurred for each of the nine interventions. They estimated the annual number of deaths averted and the annual total financial protection afforded by the reduction in out-of-pocket expenditure associated with each intervention. The results for intervention costs, health gains and financial protection varied across the interventions but it was concluded that the interventions were cost-effective and prevented cases of poverty among those at lowest income level. Such evidence can be used to convince governments to increase funding of health services with the objective of improving health status of citizens and eradicating extreme poverty among the population.


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