Out-of-pocket spending on health care continues to increase around the world – accounting for 50% of total health care spending in African countries and up to 80% in some South Asian nations. This spending pushes millions of people into poverty each year. For many families, choosing between their next meal and lifesaving health care remains a harsh and costly reality.
The movement toward Universal Health Coverage (UHC), well-captured in the Sustainable Development Goals (SDGs) and the World Health Organization’s ambitious new five-year General Programme of Work, is a main driver for health and well-being as well as the eradication of poverty and inequality.
UHC aims to provide affordable, high-quality health care to every man, woman, and child across the globe, regardless of income, racial ethnicity, or the stability of a country. Financial protection is also a key pillar of UHC to help ensure that no one is forced into poverty due to health care costs.
At the UN Foundation, we believe that bold thinking, new approaches to development, an multi-sector solutions are imperative to SDG progress. Along with Dr. Ariel Pablos-Mendez from Columbia University and Dr. Allyala Nandakumar from Brandeis University, we are exploring new ways that the public and private sectors can come together to invest in UHC at scale.
The Business for Sustainable Development Commission’s report, “Better Business, Better World,” made the case for why business leaders should seize upon sustainable development – noting a $12 trillion economic opportunity for businesses in areas such as health and well-being.
Given the cross-sector nature of the SDGs and the shared goal of “health for all,” we believe now is the time to create new intellectual space around how the public and private sectors can work together to deliver quality health care markets that reach even the most vulnerable.
We know UHC cannot be achieved without the private sector. The private sector is an important health care provider, investor, and stakeholder in low-income and middle-income countries, however, its role in supporting progress toward UHC varies and is currently not well documented. That is why we are working to spur new ideas and learnings on how to fully optimize the public and private sectors to achieve UHC.
Focusing on merit goods
We believe a systemic look at merit goods can provide an important lens to drive new, smart, and well-functioning markets that serve everyone, including people living in poverty.
In economic terms, the nature of goods produced in health markets fall into three distinct categories: public, merit, and private goods.
Public goods are those where consumption by one person does not reduce the quantity available to others, and it is either impossible or very expensive to restrict their use. Clean water, mosquito control, and road safety are some examples of public goods.
Private goods are those that exclusively benefit an individual, and services consumed by one individual cannot be consumed by another person. Curative medical care is an example of a private good.
Finally, and what we are most interested in, merit goods are those where the perceived benefit to society exceeds the perceived benefit to the individual or household. These are goods that produce positive externalities and where there can be a strong element of altruism. Family planning, vaccination, and providing services to marginalized populations fall into this merit goods category. Yet, quality health care is a right for all that we must meet.
Most of the services included in an essential package of health services – largely delivered through a country’s primary health care system – are merit goods. Merit goods are subsidized public health expenditures, and in some contexts, national health budgets for merit goods are heavily subsidized by development assistance. Still, national health budgets are not spending enough on merit goods to ensure quality and full access to all, especially the most vulnerable.
How do we optimize private sector contributions, not just to drive efficiencies and maximize effectiveness of the merit goods market (and get equitable, quality coverage for primary care to those who don’t have it in the first place), but also to reduce pressure on out-of-pocket expenses for consumers?
In the coming months, we aim to tap the thinking of a broad set of people and organizations from across sectors to stimulate a new conversation, with new voices and momentum.
We believe these efforts will trigger a new way of engaging the private sector – a way that is transformational rather than transactional – to envision equitable health systems and markets that leave no one behind.