Fiscal Sustainability of Health Systems in sub-Saharan Africa: An Analytical Framework and Evidence from Zambia

Over the past three decades, several countries worldwide have experienced a rapid and unsustainable increase in total health expenditures. In contrast, health financing in Africa has been diminishing due to reduced domestic revenue mobilisation, high public debt, and declining external financing. Persistent infectious disease outbreaks and natural disasters have also overwhelmed the already weak health systems in Africa. Increasing health care needs coupled with decreasing spending on health make it difficult to provide quality health care in low- and lower middle-income countries (LLMICs) in Africa. Despite the growing challenge of fiscal sustainability of health systems in LLMICs in Africa, there is no comprehensive study on the subject-matter. Motivated by knowledge and methodological gaps in the existing literature, this study assessed the main drivers of changes in total and public expenditure on health in Zambia by looking at macro-fiscal factors, funding sources, demographic, health, institutional, and social factors at national and sub-national levels. The study has addressed the following research question: To what extent is the Zambian health system financially sustainable? Given that Zambia's macro-fiscal, demographic, epidemiological, and health system profile are comparable to those in other LLMICs in Africa, the study was conducted in Zambia. To meet the first objective of the study, panel regression analysis and the Das Gupta decomposition method were used to assess the main determinants of total and public expenditures on health in Zambia at national level; and government health spending at sub-national level. Decomposition analysis made it possible to disintegrate and quantify changes in health expenditures by key factors. For the second objective of the study, an extensive literature review was undertaken to conceptualise and adapt an analytical framework for fiscal sustainability of health systems in LLMICs. To achieve this, reference was made to existing supply- and demand-side theories on the determinants of health expenditures; the general body of work on fiscal policy sustainability; and health-sector specific studies on fiscal sustainability and health system resilience. Thereafter, a predictive analysis of future financing needs and fiscal space for health was undertaken to gauge if the health system in Zambia was financially sustainable. The results show a substantial reduction in funding to the health sector in Zambia over the period 2013-2019, particularly for government domestic spending on health. This suggests a de-prioritisation of health spending by the Zambian government. Furthermore, the results show that expenditure per prevalent case was the main cause of the reduction in total health expenditures in Zambia. There was decreased spending on HIV/AIDS and sexually transmitted infections, followed by non-communicable diseases, and malaria and neglected tropical diseases. The reductions were predominant in the 15-49 age group. At the provincial level, there was low budget performance and a persistent decline in per capita government health expenditure. The main driver of the reduction in per capita government health spending was the number of TB notifications per 10,000 people, followed by GDP per capita. On the other hand, the number of health facilities per 10,000 people and the level of urbanization mitigated the overall reduction in per capita government health spending. However, each of these factors had distinct impacts on changes in the per capita government health expenditure across the provinces. The study predicts a total ‘effective’ health financing gap of US$77 to US$92 per capita over the period 2025-2030. This gap can be attributed to projected reductions in per capita spending on health by the government and external development partners. The study concludes that Zambia’s health system is financially unsustainable, with government health financing deprioritized from 2013-2019, and a significant financing gap projected for 2025-2030. The main determinants of total health spending are HIV/AIDS and sexually transmitted infections in the 15-49 age group. At the provincial level, key factors influencing per capita government health spending are TB notifications, GDP per capita, the number of health facilities, and the level of urbanization. To sustain the functionality of the health system in Zambia, the study advocates for sufficient government health funding, increased predictability of funding, and improved efficiency in resource allocation and use. The study also calls for regular monitoring and matching of available funds with the health care needs of the population. Future research could assess the effectiveness of health spending, determinants of health spending at the district level, sustainability of system-level interventions (i.e. the National Health Insurance Scheme), and rising number of specialized hospitals.