A Novel Approach to Healthcare Financing in Developing Asia

The ADB’s health bond provides much-needed long-term funding for health initiatives throughout Asia and the Pacific.

A healthy population is the foundation of high labor productivity, which in turn promotes inclusive growth and long-term development. In recent decades, private and government sector efforts to promote economic growth and trade have resulted in enormous advantages for Asian and Pacific countries.

However, healthcare investments have fallen below those in other industries.

Almost every nation in the area has committed to achieving universal health coverage (UHC) and ensuring fair access to excellent treatment without undue financial burden as part of the Sustainable Development Goals.

To deliver on the UHC promise, governments must address inadequate social security systems, target persistent pockets of poverty and inequality, permit the private sector to provide inexpensive and high-quality health services and commodities, and minimize government spending.

Asia-Pacific development aid for health is quickly falling.

Aging populations predict rising health-care expenses in the near future, with communicable and non-communicable illnesses becoming more prevalent. New health hazards are also related to migration and the consequences of climate change.

Unfortunately, development aid that has previously supported health finance in Asia and the Pacific area is fast being reduced.

Countries lose their eligibility for donor financing when they leave their low-income status behind. Top funders and development partners, like the GAVI Alliance and the Global Fund to Fight AIDS, Tuberculosis, and Malaria, are focusing on low-income nations as well.

To make matters worse, bilateral grants and subsidised funding are also decreasing.

Investing in low-risk, high-impact health care

As a result, Asian governments are trying to find new ways to generate cash to cover the massive healthcare deficit.

Health may be a component of the “social” infrastructure. in step with the accounting company PwC, social infrastructure accounts for around 20% of the region’s overall infrastructure investment requirements, which are measured in trillions of dollars.

ADB has pledged to triple health sector investments to five of its overall portfolio by 2020 so as to help developing Asian nations in increasing health sector spending. This covers both private and public sector loans, with the bulk of this lending coming from ordinary capital resources, since many of ADB’s developing member nations have graduated or will shortly graduate from concessional and grant funding.

Investors desire low-risk, high-impact health investments.

Furthermore, non-concessional lending is being created as part of ADB’s new health sector portfolio by the Private Sector Operations Department.

Asia’s private health sector is rapidly expanding, with many corporations hoping to capitalize on rising markets. The fact that corporations and investors are seeking chances to invest in the health sector is reflected in ADB’s new health bond, the first ever issued by a multilateral development bank in this area, which was released last March.

The health bond demonstrates ADB’s dedication to the health sector. It also demonstrates that, in today’s highly turbulent financial world, investors prefer low-risk, high-impact health investments.

The health bond is aimed at both the public and private sectors.

The framework of the health bond is similar to that of ADB’s successful water and green bonds, which raise funds from financial markets for lending in priority sectors using regular capital resources. The health bond will initially raise around $100 million for health loans in ADB’s sovereign and non-sovereign operations.

The money obtained in the private sector will be used to invest in enterprises that aim to have a strong effect on the quality, cost, and accessibility of health services and commodities. To guarantee that private sector investments promote UHC, the ADB has established an ex-ante due diligence approach.

The health bond also focuses on the public sector, where the ADB is collaborating with numerous lower-middle-income countries to expand primary health care services, first by ensuring that they are available, and then by ensuring that they are ready to offer them.

The ADB bond will be used to boost long-term funding for health-care initiatives.

The extra funding will be welcomed in countries where the ADB is working to improve primary and integrated care, healthcare system management, and urban health, such as India, Kazakhstan, Papua New Guinea, and Uzbekistan.

This comprises primary and secondary care facilities, yet because the creation of an enabling environment for public-private partnerships, basic medical equipment, digital health infrastructure, staff capacity development, and skill development.

In other words, the health bond provides much-needed long-term funding for health-care developments. With financial market funding, ADB’s developing member countries may increase both public and personal health spending.

This is critical considering that Asia’s emerging middle-income countries are still within the process of developing. In truth, it’s far from over particularly in terms of health.

Source: Shaila Dione Amargo

Via: Shaila Dione Amargo