Analytical summary - Health financing system
The Government of Malawi and its development partners signed a Memorandum of Understanding to finance and support the sector-wide approach Programme of Work. The Memorandum of Understanding provides a common framework for health sector planning, budgeting, financing, financial management, reporting and monitoring and evaluation. Other donors operate by providing discrete funding through project support, but are still signatories under the sector-wide approach Programme of Work.
In 2004–2005, the total health expenditure was 12.8% of gross domestic product and in 2008–2009 this decreased to 9.7%. The Government's expenditure on health as a percentage of total expenditure falls short of the Abuja Declaration target of 15%.
Health care programmes are services delivered by providers, including curative and rehabilitative services, medical goods to outpatients and preventive health programmes. According to the Malawi national health accounts 2008, curative care is the largest health care function as a percentage of total health expenditure, accounting for 40% in 2003–2004 and 48.3% in 2005–2006. Preventive health services were the second biggest function, accounting for 27.3% in 2003–2004 and declining to 22.8% in 2005–2006.
There is no social health insurance system operating in Malawi. Private health insurance exists, but to a small degree largely due to the state provision of free health care and financing of health services, and in part due to the high levels of poverty. However, in recent years private health insurance has become an important element of health financing. Those currently covered by insurance schemes such as the Medical Aid Society of Malawi are employees of institutions that provide either full or partial medical insurance cover and international utilization of health insurance is almost negligible.
Government funding is the main source of health financing in Malawi. The majority of the people in Malawi are poor and cannot afford to pay for health care. As a result, the Government of Malawi provides free health care at its health facilities to all residents in Malawi, as well as free referrals for specialized treatment outside the country. In addition, public health finances are used to subsidize the cost of health services at Christian Health Association of Malawi facilities through payment of salaries and other personnel costs. In turn, Christian Health Association of Malawi providers charge a fee to clients that is less than the subsidized amount.
Malawi’s health system faces absolute and relative inadequacy of financing resources to adequately fund essential health package services. Despite the development of a resource allocation formula, there appears to be no criteria for allocation of resources between cost centres, regions and districts. The current resource allocation formula is based on population, number of facilities and existing resources and not on disease burden and prevailing poverty. There is a need to review the resource allocation formula in order to ensure transparency in the allocation of resources at different levels.
Although public health services are offered free of charge, it appears that household out-of-pocket payments increased rapidly during the sector-wide approach implementation period. This signals serious challenges with the quality of health care offered in the free public health care system. The capacity to regularly track health financing sources and their uses using national health accounts also appears to be weak.