Public health investment is key to reducing healthcare burden in Africa

Increasing government health expenditure (GHE) is the most effective long-term solution to reducing out-of-pocket health expenditure (OOPHE) in Sub-Saharan Africa (SSA), says a new study published in Economies. Titled “Out-of-Pocket Health Expenditure in Sub-Saharan Africa: The Role of Government and External Health Expenditures”, the research uses advanced econometric modeling to examine the short- and long-term impacts of public and external health financing on OOPHE across 30 SSA countries from 1995 to 2021.

The study underscores that while external health aid provides short-term relief, sustainable progress toward universal health coverage (UHC) depends on strengthened domestic public investment in healthcare. The findings are timely for policymakers across SSA who face mounting pressure to meet Sustainable Development Goals (SDG) 3 and 1, which target good health and poverty reduction, respectively.

Is government health spending more effective than foreign aid?

The study uses the CS-ARDL and DCCE econometric frameworks to assess causality and long-term cointegration. It found that government health expenditure has a statistically significant and larger effect in reducing OOPHE over the long run compared to external health aid. This suggests that increased domestic allocation to healthcare, particularly for primary health services, leads to more resilient and inclusive financial protection for households.

In the short run, however, government expenditure initially correlates with a rise in OOPHE. This effect is attributed to possible lag times in institutional capacity, delays in fund deployment, or misalignment between budgeted and actual health service delivery. Over time, though, as systems mature and funds are better allocated, the impact turns negative, meaning OOPHE begins to decline as GHE expands.

Conversely, external health expenditure (EHE), defined as financial support from donors and international organizations, was found to reduce OOPHE in the short term but exerted less influence over the long term. This reveals a key policy tradeoff: while external support helps immediately alleviate healthcare costs for vulnerable populations, it is insufficient as a standalone long-term solution to achieving universal coverage.

What drives persistently high out-of-pocket health costs?

OOPHE remains a major barrier to accessing healthcare in SSA. It represents a disproportionately high share of total health expenditure, often forcing households to forgo care or incur catastrophic spending that pushes them into poverty. The study points to weak domestic financing systems, over-reliance on donor funds, and inadequate risk pooling mechanisms as structural issues that perpetuate high OOPHE.

Moreover, the fragmented nature of donor aid, often earmarked for vertical programs like HIV/AIDS or maternal health, limits its reach and consistency. The authors argue that such fragmentation can lead to inefficiencies and unpredictable funding flows that weaken health systems in the long term. This reinforces the need for governments to build more comprehensive and coherent health financing strategies.

Notably, the study spans 30 countries over 26 years, making it one of the most robust and regionally inclusive assessments of its kind. The researchers controlled for multiple variables and cross-sectional dependencies, allowing for a nuanced understanding of how fiscal health policy shapes individual healthcare burdens over time.

What are the policy recommendations for reducing OOPHE?

The research provides actionable guidance for governments and development partners. First, it urges increased and sustained investment in public healthcare to create long-term reductions in OOPHE. This includes not just boosting GHE as a percentage of GDP, but also enhancing fund utilization, transparency, and targeting toward underserved populations.

Second, it encourages the use of external health financing as a complementary tool, especially during periods of fiscal constraint or public health crises. However, it emphasizes that aid should be coordinated and aligned with national health strategies rather than donor-driven agendas.

Third, the study calls for broader reforms in health financing governance, including improved accountability, strategic purchasing mechanisms, and stronger health information systems. These elements are essential to maximize the efficiency of both domestic and foreign health investments.

Finally, the authors advocate for regional cooperation and shared learning across SSA. Countries with successful experiences in reducing OOPHE, through innovations in insurance schemes or performance-based financing, can serve as models for others seeking to transition from aid-dependence to domestic sustainability.