Macroeconomic Effects of Financing Universal Health Coverage in Armenia

Abstract

Armenia has made significant progress in improving population health outcomes over the past two decades. However, essential health care for non-communicable diseases (NCDs) is underutilized in part due to the cost of access. Armenia has also committed as a signatory to the Sustainable Development Goals, to making progress towards Universal Health Coverage (UHC). This commitment involves guaranteeing access to essential health care for all its citizens. The Ministry of Health (MoH) has developed a concept note for the introduction for Universal Health Insurance that proposes to mobilize additional revenue through payroll taxes or higher budgetary allocations to the sector. However, the Ministry of Finance (MoF) has noted that revenue mobilization options should ideally demonstrate positive returns in terms of economic growth and employment. Therefore, at the request of the MoH, the World Bank has modeled the macroeconomic impacts of options to increase domestic resource mobilization to finance universal access to essential health services in the basic benefits package. The analysis assumes that through UHC reforms that mobilize additional public spending, the government would cover the cost of ninety-five percent of household needs for health care from 2021 to 2050, and that the increase in the demand for care will be supported by improvements in supply-side efficiency. The results suggest that increasing direct taxes is better than increasing indirect taxes as the former are less distortionary and cause smaller allocative inefficiencies.