“If you give a country a dollar…”: Subadditionality in Global Health Financing

Two themes in global health programming make the question of how countries change their spending on health in response to receiving donor funding (substitutability or subadditionality*, if you’re being fancy or technical) particularly important today.

  1. As global health budgets have become more uncertain in recent years (though, globally, have not decreased) contemplating how countries will respond if donor funding shrinks becomes more of a necessity than a fleeting consideration, and
  2. Emphasis on country ownership begs the question: how can countries respond with appropriate funds from their own coffers as donor budgets are drawn down over time and countries take responsibility for financing their own health programs.

Michael Herman addressed the issue of subadditionality at the recent Global Health Council event highlighting findings of the IHME Financing Global Health 2011 report.  Literature from the past 30 years conducted by economists has “concluded that sector-specific foreign assistance to governments.” More recent studies have also found that receiving sector-specific aid money (i.e. donor dollars tied to a specific area like health) causes recipient countries to shift their own spending away from the sector that receives the aid. But at what levels? How much spending shifts away for each dollar invested?

The research question to be tackled: Do governments replace grants for health at the same rate or a slower rate when assistance funding is lost?

The overall findings: Preliminary research indicates replacement happens at a slower rate. “Subadditionality persists,” said Herman. When countries receive development assistance for health (DAH) from donors, they spend less of their own financial resources on health.  The complete findings are fleshed out in Chapter 4 of the IHME report.

I think technical terms can be intimidating, so I’ve created an infographic of an example (with simple numbers) presented by Herman, highlighting three scenarios: no donor funding & funds increase as expected year by year, an injection of donor funding where the country decreases the amount it plans to spend on health, and an injection of donor funding where the country does not decrease the amount it plans to spend on health.

How this plays out in real terms varies by region, country, and DAH recipient. The report provides an example from East Africa, showing what happens in 2006-2007 and 2008-2009 in response to fluctuations in donor funding. First, we see that in 2006-07 DAH to the government (DAH-G) appears to have decreased government health expenditure as a source of funds (GHE-S), while DAH to NGOs (DAH-NG) appears to have sparked an increase in GHE-S by $57 million.

The following two year period (2008-09), a decrease in DAH-G sparked an increase in GHE-S though.

Because of the complexities of the financial flows, researchers found it difficult to understand how the different flows of DAH (government and NGO) ultimately affect health outcomes in a country. As such, you cannot generalize that giving to an NGO is more effective than giving to governments, and you need to ask the harder questions around what happens when you provide donor dollars to cover health expenditures. Do you increase the cost of doing business in a country due to rules and regulations? Provide investment to underscore the importance of spending on health? The list could go on.

What does all of this financial back-and-forth mean for populations living in developing countries, who often rely on health services funded jointly by the government and donor resources though? Herman suggested the following:

  • the impact on health outcomes remains important, and having resources available to finance health programs is essential improve outcomes;
  • don’t lose sight of the context in which all of the financial data is being crunched; just because on the surface it appears assistance to NGOs creates a positive response (more government spending on health) and assistance to governments creates a negative one (less government spending on health) does not mean it’s necessarily better to give money to NGOs;
  • in 2012, continued progress on the Millennium Development Goals for health depends on the trajectory of DAH growth and the response of Ministries of Finance in recipient countries;
  • And finally, from what we’ve seen in the past, when budgets are cut, child mortality ultimately increases, which is something none of us want to see.

*IHME’s quick summary of subadditionality: “Last year, we studied the relationship between DAH and public domestic health spending. We found that for every $1 of DAH channeled through government (DAH-G) that flowed to a country, governments on average took $0.43 to $1.14 of their own money away from the health sector. We call this phenomenon “subadditionality,” which occurs when DAH to government partially or fully substitutes for public domestic health spending. The opposite phenomenon, or “additionality,” happens when DAH-G fully supplements [government health expenditure as the source].”

More on the general findings of the report in this post  from last week. This post is the second of four on the IHME Financing Global Health in 2011 report and a related event at the Global Health Council.

3 thoughts on ““If you give a country a dollar…”: Subadditionality in Global Health Financing

  1. Thanks very much for this insight into a research findings that I was not aware of. I highlighted it on my blog as well–giving you attribution. Great infographic. (tolling.wordpress.com)

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