The welfare implications of public healthcare financing: A Macro-Micro simulation analysis of Uganda

Studies on global health and development suggest that there is a strong correlation between the burden of disease and a country’s level of income. Poorer countries tend to suffer more deaths from preventable causes such as communicable, maternal, perinatal and nutritional conditions, compared to high-income countries. In low-income countries the government health expenditure share in the general government budget is low and out-of-pocket payments for healthcare relatively high. They also rely heavily on external resources for health funding, yet sustainability of external resource flows is not guaranteed. This paper explores increasing public healthcare funding from domestic resources mobilisation, and evaluates the impact of measures to achieve this on sectoral growth and poverty reduction rates in Uganda using a dynamic computable general equilibrium model. The paper shows that increasing the government health budget share, facilitates expanded healthcare services, improved population health, higher sectoral growth and reduced poverty. The agricultural sector is predicted to post the highest growth when compared to services and industry sectors under both domestic taxation and aid funding scenarios, while national poverty is predicted to decline from 31% to 12% of the population by 2020. The paper demonstrates that the most effective measure is to frontload investment in healthcare and generate additional domestic funding for health from a household tax earmarked for health.