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Value for Money: An Agenda for Global Health Funding Agencies
As international commitments become more ambitious and aid resources become increasingly constrained, global health funding agencies are seeking to improve the efficiency and impact of their investments. This growing “value for money” (VfM) agenda aims to reduce costs, increase impact per dollar spent and focus investments on the highest impact interventions among the most affected populations.
The Value for Money working group’s final report lays out a number of practical steps within each domain to improve value for money at the Global Fund to Fight AIDS, TB and Malaria. These recommendations are also of relevance to other bilateral and multilateral funders, such as the US President’s Emergency Plan for AIDS Relief and GAVI.
Members and Composition
The Value for Money working group was chaired by Amanda Glassman, director of Global Health Policy and research fellow at CGD. Members of the Working Group were invited to join in a personal capacity and on a voluntary basis, and include experts from the public health sectors in developing and developed countries, technical and funding agencies, advocacy organizations and academia.
Working Group Members
David Barr, Pangaea Global Aids Foundation
Joseph Brunet-Jailly, Institut de recherche pour le développement and Sciences-Po Paris
Kalipso Chalkidou, NICE International
Karl Dehne, UNAIDS
Alan Fairbank, Independent
Victoria Fan, CGD
Amanda Glassman, CGD, Working Group Chair
Kara Hanson, London School of Hygiene and Tropical Medicine
Iain Jones, DFID
Jason Lane, DFID
Bruno Meessen, Institute of Tropical Medicine
Mead Over, CGD
Nancy Padian, Independent
Mark Rilling, USAID
Josh Salomon, Harvard School of Public Health
Nalinee Sangrujee, CDC
Nina Schwalbe, GAVI Alliance
Bernard Schwartlander, UNAIDS
David Serwadda, Makerere University School of Public Health
The global health community has made great strides in addressing AIDS, tuberculosis and malaria: fewer people are contracting these diseases, fewer people are dying from them, and far more people are enrolled in life-saving treatments. Yet to sustain this progress and defeat these three diseases, the global community must find more efficient ways to allocate and structure funding.
This week, the Global Fund partnership will meet in Tokyo to plan for its fifth voluntary replenishment, covering the period 2017-2019. The stakes are high: in an austere budget climate, the Global Fund’s ability to raise the needed resources—and then to spend them effectively over the subsequent three years—will have outsize importance in determining the trajectory of the historic fight against AIDS, tuberculosis, and malaria.
Why are the next few years so important? First, the good news: the global community has made great strides in addressing all three diseases and saving lives. For HIV, fewer people are contracting the disease (down 35 percent since 2000), fewer people are dying (down 42 percent since 2004), and far more people are enrolled on antiretroviral treatment (up more than 100 percent since 2010). TB and TB/HIV interventions have saved an estimated 43.5 million lives since 2000. And just last week, the WHO released its most recent estimates, which suggest that malaria deaths have been almost cut it half over the same period. Yet global progress is threatened by growing drug and insecticide resistance; high rates of treatment dropout among ART and TB patients; and the ballooning cost of lifelong HIV treatment.
Creating a Bigger Tool Box: Next Generation Financing Models
To meet these challenges, the global community needs strategic thinking and a bigger tool box. Some of those tools will be new medicines and better technologies, emerging from the world’s best labs and biomedical researchers. But the fight against AIDS, TB, and malaria would also benefit from better ways to allocate and structure funding—the subject of our 2013 report on More Health for the Money. One important component of the More Health for the Money agenda: the introduction of new modalities that can marshal stakeholders, align their incentives, and ensure mutual accountability for achieving shared goals.
Specifically, many researchers and policymakers have hypothesized that models tying grant payments to achieved and verified results—what we refer to as next generation financing models—offer an opportunity for the Global Fund to push forward its strategic interests and accelerate the impact of its investments. And indeed, since its creation, the Global Fund has aspired to link funding to results achieved, has established routine internal processes toward that end, and is one of the few donors to do so across its entire portfolio.
Still, there is a perception that the Global Fund’s original performance-based financing (PBF) system has not fully succeeded in increasing programmatic performance, incentivizing innovation, or building sustainable country ownership, in part due to its complex and discretionary structure. The PBF process combined too many performance elements; did not include a direct link between results and payments; and relied largely on grantees’ self-reports, with only limited data verification—all of which limited the power of the incentive. And in the broader global health and development ecosystem, just a handful of true PBF projects have made the jump from concept to reality. A 2015 paper from Perakis and Savedoff found that “relatively few [results-based aid] programs are being piloted,” and those that exist “are relatively cautious adaptions of conventional approaches.”
To help bridge this gap from theory to practice, CGD convened a working group on next generation financing models in global health, with the aim of providing global health funders with concrete, practical guidance for applying these new aid modalities to their grant portfolios. Drawing from an extensive literature base on incentives in health financing, coupled with previously underutilized experiences and literature on adaptive contracting and regulation for public sector utilities and other monopolistic industries, the working group adapted economic theory on optimal contract design to the real world context of agencies funding global health programs. The working group’s final report, the culmination of these efforts, offers a practical guide to the design and roll out of Next Generation grants.
We were delighted to collaborate closely with the Global Fund on this effort, and to co-chair the working group with Maria Kirova, a Global Fund Department Head. However, it is important to note that the Global Fund does not necessarily endorse the report’s findings, nor does the Global Fund commit itself to any policy actions through its participation in this working group.
Next Generation Financing Models: Getting to the “How”
The final report addresses the how of next generation financing models—that is, the concrete steps needed to change the basis of payment of its grants from expenses to outputs, outcomes, or impact. For example, when is changing the basis of payment a good idea? What are the right indicators and results to purchase from grantees? How much and how should grantees be remunerated for their achievements? How can the Global Fund verify that the basis of payment is sound and that the reported results are accurate, reliable, and represent real progress against disease control goals? And what is needed to ensure that these new incentives don’t drive unintended consequences?
The report starts with a conceptual framework that explains why traditional grantmaking often gets the incentives wrong, why that matters, and how next generation financing models might offer a way for the Global Fund and other health funders to increase the value for money of their investments. It also describes the growing use of incentives at the Global Fund and elsewhere, including the current incentives embedded within Global Fund grants. It then discusses contexts where a move to next generation grant models could drive faster impact or other benefits and describes the technical elements and design choices required to bring them to life. Illustrating how this would work in practice, the report offers four case studies across the Global Fund’s three disease areas.
To bring these new financing mechanisms from theory to practice, the report offers seven medium-term operational recommendations for the Global Fund Board and Secretariat:
Secure strong Board and Secretariat commitment through inclusion of next generation grants as a key priority within the next Global Fund Strategy (due to be presented to the Board for approval in April 2016).
Leave no room for ambiguity: ensure that next generation grant agreements stick to their agreed disbursement protocols—against progress on independently verified results.
Reflect the needs and requirements of next generation grants in relevant related policies, including the allocation formula, counterpart financing requirements, sustainability framework, and differentiation initiative.
Reflect the needs and requirements of next generation grants in the guidance and terms of reference given to key Global Fund bodies, including the Technical Review Panel, Country Coordinating Mechanisms, and operational divisions within the Secretariat.
Assure Global Fund and Principal Recipient access to needed expertise and resources to design and operationalize next generation grants, with particular attention to performance verification.
Revise Key Performance Indicators to accommodate differences in the management and evaluation of next generation grants.
Evolve financial management policies to accommodate less predictable cash flow and reduce restrictions on the use of funds.
Those who follow the Center for Global Development will be familiar with our branded meme: “Cash on Delivery” aid, or COD. As early as 2006, Owen Barder and Nancy Birdsall authored a working paper on the COD approach to foreign assistance, which was distinguished from “input-financing” and proposed as a mode of payment that would enhance efficiency and, by revealing government performance to local populations, improve the recipient government’s accountability to its own citizens. Subsequent work from CGD includes a book by Savedoff and Birdsall and most recently a paper by Savedoff and Perakis. Many are enthusiastic about COD’s potential to revolutionize aid effectiveness. Yet within some global development organizations, leadership and staff alike express common concerns: is COD practical in the real world? Have you thought about this problem, or that constraint? How would this work in the context of our organization? And if we decided to move forward, how would we design a COD grant?
To help answer these questions, our new report Aligning Incentives, Accelerating Impact differs from CGD’s past efforts in two important ways. First, due to the Global Fund’s engagement with our working group over many months, this report reflects and responds to the concerns raised by the staff of a single donor institution about the ways that cash on delivery could fail to improve results or could even create perverse incentives within their specific institutional context. As a result, the report avoids promoting COD as a panacea applicable to all of the Global Fund’s financing. Instead, it stresses the need for contractible, externally verifiable indicators and for a willing grant recipient that is able to pre-finance some aspects of service delivery in order to successfully implement a COD strategy. We therefore hope the report will prevent those with a more distal view of Global Fund activities, such as outside observers, board members, and even higher management within the fund, from pushing Global Fund staff to implement COD in situations where it is doomed to fail.
Second, more than any of its predecessors, this report explicitly adopts the “principal-agent” framework for understanding the relationship between the Global Fund (“principal”) and its counterpart in the recipient country called the Principal Recipient (“agent”). This framework comes from the fields of contract theory and mechanism design—which were recognized by the Swedish Nobel Prize committee in 2014 when they awarded the prize in economics to Jean Tirole, one of their most important contributors. (For a more technical presentation see here.) Importantly, the framework allows us to acknowledge that the Global Fund will always have less information than the Principal Recipient about the cost of service delivery—and especially about alternative ways personnel could be managed to reduce costs. Our report, therefore, proposes contract designs that will better align the Principal Recipient’s financial interests with its efficient expansion of health service delivery. In addition, forthcoming background papers by Liam Wren-Lewis and Han Ye suggest how specific examples of efficient contracts, drawn from the extensive literature and practice on industrial regulation and contracting, can be adapted to improve the efficiency of Global Fund expenditure. For instance, a particularly promising contract, the “Fixed Price/Cost Reimbursement” design, allows the Principal Recipient to choose the most advantageous option from a menu of contracts. This clever design could improve health service output per dollar of Global Fund financing.
We hope our new report will be useful not only to the Global Fund, but also to other donors in the global health arena. (PEPFAR, are you listening?) However, we caution that any other donor’s application of COD deserves the same detailed attention to their own institutional capabilities and constraints as the Global Fund received for this report. The last sentence of the Nobel Committee’s summary of Jean Tirole’s contributions warns that "desirable [mechanism designs] are different from market to market.” Similarly, we warn that desirable results-based contract designs differ from donor to donor—and, for any given donor, from recipient to recipient. Worst case scenario: failure from an inappropriate application of a COD approach could lead critics to reject incentives altogether, simply because a poorly designed project proved unworkable.
So please: say no to a cookie-cutter approach! And say yes to the careful, thoughtful, and tailored application of incentives as a strategy to improve the efficiency and effectiveness of global health investments.
More than ever, global health funding agencies must get better value for money from their investment portfolios; to do so, each agency must know the interventions it supports and the sub-populations targeted by those interventions in each country. In this study we examine the interventions supported by two major international AIDS funders: the Global Fund to Fight AIDS, Tuberculosis, and Malaria (‘Global Fund’) and the President’s Emergency Plan for AIDS Relief (PEPFAR).
This report offers a strategy for the Global Fund to get more health for the money by focusing more on results, maximizing cost-effectiveness, and systematically measuring performance throughout its operations.
Little is known about the President’s Emergency Plan for AIDS Relief (PEPFAR) financial flows within the United States (US) government, to its contractors, and to countries. We track the financial flows of PEPFAR – from donor agencies via intermediaries and finally to prime partners. We reviewed and analyzed publicly available government documents; a Center for Global Development dataset on 477 prime partners receiving PEPFAR funding in FY2008; and a cross-country dataset to predict PEPFAR outlays at the country level. We present patterns in Congressional appropriations to US government implementing agencies; the landscape of prime partners and contractors; and the allocation of PEPFAR funding by disease burden as a measure of country need.
Through our Value for Money working group, we’ve spent much of the past year immersed in the world of global health funding agencies. With so many new agencies, particularly in the last quarter century (Figure 1), understanding the intricacies of the global health family can be daunting, even for the most devoted observers.
Figure 1: Timeline of Selected Entrants to the Global Health Family, 1902 – 2006
For our own reference (and yours), we thought it would be useful to compile a “cheat sheet” on global health funding agencies. We used the public websites of global health funders shown in Figure 1 (supplemented by IHME’s Financing Global Health) to compile key “stats” for large global health players. Our compilation is available online as a background brief. We include:
Table 1: The basics: who, what, when, where, how
Table 2: Who gives, and how much (contributions)?
Table 3: Who’s in charge (governance)?
Table 4: The ABCs of global health agencies
We hope that this resource provides a useful overview for novices and veterans alike who are trying to make sense of the complicated global health landscape and architecture. Let us know if you have any feedback or suggestions – either below as a comment or by email – to make this resource more useful or accurate!
Victoria Fan (@fanvictoria) is a research fellow and Rachel Silverman (@rasiiii) is a research assistant at the Center for Global Development.
This paper examines opportunities for improved efficiency in malaria control, analyzing the effectiveness of interventions and current trends in spending. Overall, it appears that resources for malaria control are well spent—however, there remain areas for improved efficiency, including (i) improving procurement procedures for bed nets, (ii) developing efficient ways to replace bed nets as they wear out, (iii) reducing overlap of spraying and bed net programs, (iv) expanding the use of rapid diagnostics, and (v) scaling up intermittent presumptive treatment for pregnant women and infants.