Managing Director & Senior Partner
When the twenty-fourth World Economic Forum on Africa convenes in Abuja on May 7, the future development of good-quality and sustainable health systems on the continent will be front and center. A key issue in the talks will be how to design, pay for, and implement those systems.
As emerging economies seek to catch up with more advanced health systems, they run the serious risk of maneuvering themselves into financially untenable situations if they try to replicate the path of developed economies. Nigeria, for example, has roughly 14 percent of the number of doctors per capita of OECD countries. To catch up, we estimate that Nigeria would need approximately 12 times as many doctors by 2030—requiring, under current training models, about $51 billion, or ten times what Nigeria currently spends on health care each year. This is not a feasible option.
Historically, emerging economies have underinvested in health. More recently, as evidence of the positive impact of health investments on economic growth has grown, emerging economies have increased their health spending. From 1995 to 2012, their health expenditures grew at an annual rate of 7.4 percent, driven by GDP growth as well as growing and aging populations. Spending is expected to rise to nearly 11 percent per year over the next eight years.
However, higher investments do not necessarily directly translate into better health outcomes. South Korea, for example, spends only 25 percent per capita (at $2,035 per capita adjusted for 2010 purchasing power parity) what the U.S. spends (at $8,200 per capita adjusted for 2010 purchasing power parity), yet South Korea achieves better health outcomes (in terms of health-adjusted life expectancy, which is meant to measure not just how long people live but the quality of their health throughout their lives). South Korea’s experience can give confidence to African economies that there are ways to achieve large gains in health outcomes without breaking the bank.
Emerging economies need to make the right investments now if they want to avoid the problems that developed economies encounter. The evolution of health systems is highly path-dependent: large-scale investments in infrastructure and workforce determine the course of development for decades to come.
Policymakers now stand at a fork in the road and face two paths: the familiar but long, expensive, and ultimately unsustainable path of developed economies and a shortcut that leapfrogs over the problems experienced by developed economies and results in a system that provides better health outcomes, financial sustainability, and individual satisfaction.
African economies are well-suited to, and would be better off taking, the second path. Compared with developed economies, they have fewer impediments to change—that is, fewer sunk costs of existing infrastructure and equipment and lower fixed costs from building overcapacity. And they have access to an array of innovations that did not previously exist.
In developed economies, highly expensive innovations that were created to meet previous needs have tended to remain embedded in systems, even when circumstances have changed or when new, more cost-effective innovations have become available.
In contrast, developing economies have the opportunity to bypass entire systems of obsolete innovations. A now-classic example is the introduction of mobile phones to remote areas of Africa. Those areas received the social and economic benefits of telephone networks without the sunk costs of massive landline infrastructure. They leapfrogged past an entire stage of development, going directly from little or no telephone service to the same, efficient technology used in developed countries.
Leapfrogging means applying innovation to accelerate the development of a system—or to skip over costly development stages that had been previously unavoidable. To be considered leapfrogging in health systems, in our view, a change must meet three distinct criteria: it must reduce the time needed to get results; it must achieve the same or better results at the same or lower costs than traditional methods; and it must accommodate expansion efficiently.
For emerging economies, especially those in Africa, the most valuable use of leapfrogging is not just to catch up with developed economies but to take shortcuts to reach a more advanced development stage without accumulating inefficiencies along the way. Emerging economies can assess the results—and question the underlying assumptions—of developed economies’ health systems, such as hospital-centric systems and a reliance on highly trained physicians to provide routine care. They can decide what they want to replicate and what they want to leap over.
The World Economic Forum, in collaboration with The Boston Consulting Group and with the support of many private- and public-sector stakeholders, launched an initiative to examine how the health systems of emerging economies can successfully leapfrog over pitfalls experienced in developed economies. In a newly published paper, we acknowledge the complexity of health systems and the challenges in leapfrogging an entire system quickly. We focus on identifying micro-level leapfrogging opportunities that can be collectively scaled up and integrated with each other to trigger a system-level transformation.
We have examined a number of successful innovations that have taken advantage of leapfrogging to strengthen the health systems of developing economies. For example, some health-care providers in South Asia have managed to cut prices for services drastically without compromising quality. They now perform a large number of interventions, ranging from maternal care to open-heart surgery, at as much as 95 percent below the prices charged at hospitals in the developed world.
As another example, Ethiopia’s Ministry of Health has responded to the country’s severe shortage of physicians and nurses by employing health extension workers. They function within rural communities—a team of two is responsible for between 500 and 1,000 households—and act as advanced community health workers assisted by community volunteers.
Our work is guided by the belief that leapfrogging can transform the health systems of African economies in ways that achieve better health outcomes while respecting the dignity of individuals and keeping costs under control for both individuals and the economy as a whole.
The upcoming meeting of the World Economic Forum on Africa provides a timely opportunity for policymakers and other stakeholders to consider how to take advantage of this initiative while the window is still open for key decisions that will shape their economies’ health systems for decades to come.
This commentary originally appeared in The Guardian Nigeria.