Strong health systems for all with better public spending

The text below discusses strategies to improve public health spending in low- and middle-income countries (LMICs) despite budget constraints and challenges.

Financing remains a key starting point for building strong public health systems. According to the World Bank, LMICs allocate only about half of the minimum benchmarks required for universal health coverage in terms of per capita public spending. The gap between health expenditures of LMICs and high-income countries has narrowed slightly from 2.05 percentage points in 2000 to 1.68 percentage points in 2023, measured as a share of GDP.

However, recent data from the World Health Organization shows this gap has actually widened more than three-fold in per capita terms during the same period.

Development assistance for health (DAH) has historically supplemented LMIC budgets, peaking at $1.4 billion in 2021 during the COVID-19 pandemic. However, aid trends reversed post-COVID, with the United States announcing a 67% cut to its foreign assistance program in early 2025. Other major contributors like the United Kingdom, France, and Germany also reduced their DAH.

Overall, global health funding could drop by up to 60% from its 2022 peak. At the same time, national budgets are strained by rising public debt. In 2024, developing countries paid a record $921 billion in net interest payments on their public debt, leaving less for other needs, including health. As public sources dry up, spending available money more effectively becomes crucial.

Three broad approaches can optimize public health spending in LMICs:

1) Better budget execution - Health budgets in LMICs are executed at around 85%-90%, which is lower than the general budget and education budgets. This suggests deprioritization of health during implementation. For example, only two-thirds of India's allocation for a flagship health infrastructure mission was spent in 2024-25, and just 26% of funds for disease control programs were utilized in the National Health Mission in 2024.

2) Spent on the right priorities - Budget execution varies across health categories. Wages and salaries are typically fully implemented, but there is often underspending on goods and services. Workers are not well-equipped, limiting quality healthcare delivery. There is a need to prioritize preventive, primary health care and classic public goods like infectious disease control and sanitation over curative services at higher tiers.

Evidence shows that public health spending is most effective when directed toward such interventions, despite potential market failures.

3) Improve governance and operational efficiency - Good governance, reduced corruption, and an improved bureaucratic quality enhance the positive impact of public health spending. Simply increasing spending without addressing governance is unlikely to improve outcomes. Decentralization of public service delivery calls for stronger governance at the subnational level.

Public finance management and budget implementation efficiency are crucial. Enhancing accountability, motivation, and procurement processes can maximize value for money in health resources. As the pandemic demonstrated, flexible budgets responsive to unforeseen circumstances are needed, but only if they are directed to where the health outcomes are poorest.

In summary, to make public health spending go further in LMICs, it is essential to spend what is allocated effectively, prioritize the right types of health care, and implement sound governance and operational practices. With public sources diminishing, strategic spending can help narrow health gaps across countries.