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Africa’s ‘wicked’ healthcare problems and how to fix them

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Ola Brown, Founder Flying Doctors


As a medical doctor, economist, finance expert, entrepreneur and investor with one of the leading healthcare technology & infrastructure (PPP) portfolios on the continent I have written extensively about healthcare on the continent. Learn about our $200m portfolio of healthcare assets on our website www.fdinvestmentcompany.com

This article will highlight some of the major challenges that healthcare provision faces as well as the solutions that can impact millions of lives across the continent.
I will begin this article by describing the three main reasons for why healthcare in Africa is overwhelmingly “the worst in the world” as described by the IFC.
1. Poverty 2. Poverty 3. Poverty

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There are many other secondary reasons that people give such as corruption, medical tourism, brain drain, lack of innovation, macroeconomic policy, low insurance coverage & political will; all which will be addressed in this article. But the most important reason is poverty. This article describes the impact of poverty as well as the other secondary factors contributing to poor healthcare in Africa before moving onto the more important issue of how to solve these problems.

On poverty
Poverty tends to increase the need for healthcare whilst simultaneously reducing the ability of African countries to pay for it. The wealthiest countries in the world struggle with healthcare. The entire government of Finland resigned due to issues with their healthcare system in 2019. The lack NHS funding is always a major issue during elections in the UK. In America, Obamacare vs Trump care Vs Medicare for all-type debates are aggressive and split people across and within the various political parties.

These are countries where the average amount of money generated per person (GDP per capita) is between $40,000 and $100,000. Whereas in Nigeria the GDP per capita is less than $2000, in countries like Malawi, it’s less than $500.
Prof Jon Guber from MIT points out that in 1950, the American government spent 5% of GDP on healthcare. In 2012, it spent almost 20% of GDP on healthcare. By 2075, its projected to be 40%.That means 40 cents out of every $1 generated in America will go to healthcare.

No country in the world has achieved universal healthcare without massive state support. Even in America, the spiritual home of capitalism. The government spends about $20,000 per capita on healthcare for each citizen, Norway spends about $7000, the UK spends about $4000. Nigeria spends $6 considering the Federal budget only. This rises to about $50- $80 when you add in the military and state spending. But much of this money is budgeted, but not disbursed for macroeconomic reasons, common to most African countries, that I will come back to in the sections below.

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Even in high income countries whose citizens are exponentially wealthier than their African counterparts, majority of those citizens would not be able to afford quality healthcare without state support.

Yet, as you can see from the graph above, most Africans live on less than $10 per day & are still expected to pay out of pocket for healthcare with little or no state support. These levels of poverty aren’t seen in other emerging markets such as Vietnam, India, Mexico and Brazil where there numbers of people that live on under $10 per day typically constitute 50% or less of their population.

And sadly there are more individuals in Ghana, living on more than $10 per day than there are in Nigeria. This is despite the fact that Nigeria has a population of 201m and Ghana just 30m. In other words, only 2% of Nigeria’s population, 16% of Ghana’s population, 0.8% of Congo DRC’s population live on more than $3,650 dollars per year or $300 monthly. This means even though Nigeria is many times larger population wise and economically, Ghana has a larger tax bracket.(more people able to pay tax). This leads us to another problem because many developed countries fund healthcare through taxation. But its difficult to tax people that can’t afford food.

This leaves a high number of people paying out of pocket unable to afford insurance premiums or receive state support.
Lack of political will is a factor, but the fact is that most African countries are heavily indebted, spending up to 90% of their revenue on debt servicing. You can’t say that a man that earns N20,000 monthly (About $40; minimum wage in Nigeria) and has to use N14,000 of it to pay back debts, lacks the will to send his 12 children to Harvard. Even if he had the will, he clearly doesn’t have the money!

The fiscal problems are worsened by currency devaluation, high inflation, overreliance on income from volatile commodities like oil, low tax to GDP ratios & lack of infrastructure/poor structural policy making it harder to start or scale businesses. African governments must be able to invest in healthcare. They need more fiscal space to do so I have discussed poverty extensively, as I think this is the primary issue. But briefly will touch on the secondary issues. Medical tourism is the most famous. Many people think that if only we could stop people travelling abroad for medical care; then automatically healthcare would improve in Africa. Nigeria is one of the wealthier countries in Africa. According to the statistics we have we lose $1bn yearly in medical tourism. But just over 1m-2m people leave Nigeria for international travel in total. Let’s say 1% leave for medical reasons that’s about 10,000..ish people. Out of 200m. The number is smaller in other African countries.

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However, many people across Africa have convinced themselves that providing better healthcare for a tiny rich elite will make healthcare better for everyone. If we can just get those +/-10,000 people to be treated in Nigeria, the remaining 200, 990m will somehow magically be better off.

The disparities in American healthcare however, tell us this isn’t true. The last time I was in Los Angeles in California, my uber driver told me how he was almost killed in Mexico seeking treatment for his knee injury. I wondered why with all the great hospitals including the advanced $1bn facility in Stanford University, why on earth he would go to Mexico for medical treatment.

He told me it’s because he couldn’t afford insurance and obviously couldn’t pay out of pocket. The story highlighted the fact that a country can have the most advanced medical facilities in the entire world; but they don’t benefit the poor, because the poor don’t have access to them without some form of state subsidy.

The capital flight argument doesn’t really stand up to scrutiny either. Nigerian dollars that go on medical bills , actually don’t take up a significant proportion of forex. We spend over twice as much on foreign education as we do on medical care.

The second erroneous belief is around the role of insurance as a magic bullet that will solve all African healthcare problems. There is no doubt that risk pooling decreases the out of pocket costs for healthcare. This fact is supported by practically irrefutable evidence.

However, in a rich, high income, capitalist country like America, the state still covers the health expenses of 1 in 3 citizens directly. Employers cover the cost of 50% and 16% are uninsured. For most Americans, private health insurance is dependent on employment. Insurance would be unaffordable if paid out of pocket. However, most Africans are unemployed, underemployed or work in the informal sector where such benefits do not exist.

My health insurance in Nigeria costs my household of N500, 000 (about $1,300) per year. It is mediocre and doesn’t cover most of my basic medical needs.

In a country where the average citizen spends over 65% of their income on food…the numbers don’t quite add up.
Some suggest the cross subsidy models in India would work in Nigeria/Africa. This is possible. But I must point out that India has a much larger middle class than most African countries. To cross subsidize you need enough wealthy people to cross subsidize with. There are about 12,000 millionaires in Nigeria, compared to nearly 1m in India. And just 2m households earning over $9000 per year in Nigeria compared to 100m in India. There are 40m Indians living above $10 per day compared to just 3m in Nigeria & 500m in Zambia as the chart above shows. This makes cross subsidization in Africa difficult, but not impossible.

The solutions
So now I have laid out the problems. What are the solutions? The NHS budget is about $250bn for 65 million people, Nigeria is $1bn for 200m we need to do not just more with less, but better with less. By increasing the money that goes into the healthcare budget income and reduce what goes out.

1. Creative income generation
In 2018, Cuba made $11bn dollars from contracting its doctors to work abroad. This was almost as much as Nigeria made from oil in the same year.

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Cuba operates a managed migration system where doctors are placed in countries across the world and remit part of their salary back to the country that trained them free of charge.

Nigerian doctors receive grossly subsidised training. Approximately 20,000 Nigerian medical doctors are currently working outside the country. A survey by NOIPolls found that about eight out of 10 doctors who remained in Nigeria were looking for jobs overseas. There is currently no plan to monetise African doctors in any type of outsourcing program. Perhaps this is something to consider.

Nigeria could potentially make $10-$30bn in annual income from a similar type of outsourcing scheme, which isn’t just more stable than earnings from commodities like oil. But it could also be ringfenced to open up more medical training facilities, improve hospitals and provide funding for free/subsidized income to public sector patients.

2. Public Private Partnership (PPP’s)
To create the fiscal space. Nigeria spends nearly 70% of its budgeting servicing debt and an additional 20% of recurring expenses such as salaries. This leaves little room for infrastructure projects, medical equipment & other elements that contribute to the cost of care for patients.

PPP’s can provide lump sums to governments that can finance healthcare projects. These instruments can then be paid back over time, reducing the upfront cost that needs to be taken on by government.

Last year, my company, the Flying Doctors Healthcare Investment Company participated (funding/construction/operation/equipment supply) in two hospital projects, 3 laboratory projects, one digital health project and 12 other diagnostic projects using the PPP model.

3. Technology
I have been investing in technology since 2014 and have seen first-hand the transformative power of technology in healthcare. Technology can help African countries leapfrog over some of the more traditional expensive ways of delivering care employed in developed countries whilst reducing the cost of care. Learn how some of our portfolio companies have done this on our website www.fdinvestmentcompany.com

4. Family planning
Improved access will increase economic productivity and reduce uncontrolled population growth.

5. Diaspora funding
This is a potential source of income that remains largely untapped. Increased engagement with the African diaspora holds the potential to bring both investment and expertise

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6. Task shifting
Reduces cost of care and effect of brain drain by training healthcare workers that are not doctors to perform tasks that doctors would traditionally do. Download my book, ‘Fixing healthcare in Nigeria’ for an in-depth review of the evidence on task shifting.

7. Focus on primary care
The proportion of healthcare spending that goes on tertiary care in hospitals for the catastrophically unwell is too high. Increasing the quality of primary healthcare will reduce costs.

8. Less magpie-ism
Many African governments feel that our hospitals should have the same aesthetic with exactly the same type of equipment as hospitals. However, shiny things won’t necessarily solve our healthcare issues, functional things will. There is nothing wrong with being poor, the problem is when poor countries begin to spend like are rich.

9. Our Donors
Working with our donor communities in a more effective and transparent way can encourage more donations as well as improve outcomes

10. Learn from the exemplars
There are examples of countries across the world that have improve healthcare outcomes on very low budgets. We can learn from them.

Conclusion
My company, the Flying Doctors Investment Company invests and operates companies across the healthcare value chain in Africa. We invest in both public private partnerships and the technologies that enable them resulting in a virtuous cycle of transformative impact for healthcare across the continent.
• Dr Ola Brown is Founder, Flying Doctors Healthcare Investment Company. investor.relations@fdinvestmentcompany.com

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