Health Aid, Public and Private Health spending in Sub Saharan Africa (SSA): New Evidence from Panel Data Analysis

Abstract

Background: Health aid plays a vital role in increasing the resources needed to finance the health care sector. Such inflow may reduce  public allocation to health regardless of its volatile nature. While findings exist for the effect of health aid on public spending, studies for  SSA are few, and not much is known about its effect on private spending particularly for SSA where health payments are mainly funded as  Out of Pocket (OOP). This is important because health aid is directed towards the eradication of diseases and targets specific medical  issues with the intent to reduce the burden of illness and spending by the poor. This study examines the effect of health aid on public and  private health spending for high aid recipient countries in SSA.

Methods: The study used panel data from the periods 2000 to 2015.  The Fixed and random effects models were fitted to the data set.

Findings:The results show that a 1% increase in health aid reduces  public and OOP health spending by approximately 1.5% and 0.49% respectively. Findings suggest stronger effects on public relative to  OOP health spending and overdependence on external finance. This is critical given existing volatility of aid. Aside from the effect of  health aid, an inverse relationship was observed between real aggregate income and government health spending.

Conclusion: This  suggests government consideration of health care as an inferior good. The results imply that external health financing exerts significant  effects on both public and OOP health spending in SSA. There is a need for governments in the region to reduce reliance on external  support due to the volatility of such form of spending. Governments of SSA economies should also consider health care as a necessity  given the role of health capital on overall economic performance.