The WHO case - how financial engineering can help deliver a global healthcare system that is preventative, collective and inclusive.

Alternative financial engineering to fund our health – The WHO Case


A healthcare system that is preventative, collective and inclusive is far more resilient, and cheaper to run, than private for-profit schemes.  Such a preventative system will be much cheaper to invest in building now than waiting to repair our current frameworks after the next pandemic. However, we need a financial plan that is able to ensure this change.


The Tao of Finance initiative from the World Academy of Arts and Sciences proposes a new mode of finance to fund the WHO, delivering adaptive and targeted funding to the health care needed for today and tomorrow.

Read more about the Tao of Finance at the WAAS website, or read the books ‘Financing Our Future‘ and ‘Financing our Anthropocene’

Image Credit: Andy Dean Photography/Shutterstock




Hello, and welcome to ResearchPod. Today we’re talking about another spin-off of the initiative of the World Academy of Art and Science called the ‘TAO of Finance‘. With an international and interdisciplinary group of experts led by Stefan Brunnhuber, they tried to answer the question: How can we really finance the 17 UN-Sustainability-Development Goals within the next 15 years? In this third episode we face  the challenges of new alternative means of financial engineering to fund, manage and hedge our common and future health.


There is ample empirical evidence that a healthcare system that is preventive, collective, and inclusive is far more resilient, and cheaper to run, than private for-profit schemes. These institutions stand to make the most money from keeping customers ‘sick and alive’, whilst privatising public health care services and exacerbating inequality.


It’s not that we’re missing the evidence to support a change in our healthcare system, but rather that we need a financial regime that is able to ensure this change. In survey data from over 140 countries, public support for such a transition is high, with willingness to pay for it scoring 8 out of 10. Evidently, communities all over the world value common goods and are more than willing to pay for them. The question, however, remains: where is the money supposed to come from?


Traditionally, we are used to financing our healthcare system through private sector financing, mainly using private saving accounts or paying out-of-pocket; conventional public sector funding normally comes from public taxation and fees, or philanthropy.


These sources are important, but insufficient in terms of the scale and speed needed to meet today’s pressing healthcare challenges across the globe. We are so preoccupied with repairing, stabilising, and re-funding the existing healthcare system that we have lost perspective on the challenges ahead. Moreover, further privatisation of our health care system does not take into account the negative effects of privatisation itself. These include: cherry-picking the care provided or which patients will be covered, externalities that raise costs for patients without an equal improvement in their care, and higher administration costs, which the public sector is left to cope with alone.


Let’s take the WHO as a representative case study. With an annual budget of five billion US dollars, it is chronically underfunded. Just one billion dollars of that budget comes from fees that the member states pay, the rest is from voluntary and private philanthropic commitments. 70% of the budget is already committed to existing projects, leaving little leeway to respond to future challenges. Furthermore, a substantial amount of financial resources is spent on reporting, fundraising, and grant writing, which further diverts the WHO from its primary purpose: tackling global public healthcare issues for everyone on the planet.


Once we admit that we need additional financial resources – in the region of 10 to 15 billion US dollars annually according to the International Monetary Fund – it is obvious that a new and upgraded monetary and financial  regime is required. Not only do we need the financial adaptability to cope with doubling health care costs in rich OECD member countries by 2050, but we also need to allow financial provision for  future shocks, such as the climate crisis, serial pandemics, environmental degradation, and species loss. These crises are going to increase in frequency and impact, negatively affecting our health and causing additional costs.


No one is an island, and on planet Earth, everything is interconnected in a complex web. Our health is, directly or indirectly, connected to a healthy planet and the health of all living species. We have to strive for a new monetary regime that creates innovative, blended financial engineering between the private and the public sector, that adjusts for upcoming risks and uncertainties, and that encourages the public sector to provide a more inclusive, more collective, and a more preventative health care system for all of us. And finally such a new monetary and financial regime respects the fact that there can be no personal health without a healthy planet. This is why we should call it planetary health.


Let’s focus on the International Monetary Fund, or the IMF, for a moment. The IMF was founded in 1944, because the global community was experiencing a lack of liquidity among its member states. It introduced a new monetary mechanism, called special drawing rights (the so-called: SDR-XDR as a unit of account for international trading. This expanded the available liquidity beyond the dollar and pound sterling at that time. The currency is still in use today and was created to be non-interest bearing and to be evaluated based on a currency basket, according to the export ratio of each member. As a result, it provided additional liquidity to fund international trades.


The original mechanisms of the IMF-Special drawing rights are an important intermediary step, and one we can build upon, but it is not enough to tackle future challenges alone. The volume running through the SDR amounted to 650 Billion, nominated in this XDR currency in 2021.


If we were to take this mechanism one step further and peg the SDR in their nominal value with a green US Dollar or Euro issued by central banks and have all UN member states be eligible for such a currency, we could start funding and hedging our common health in a much more accurate and targeted way. Using the SDR would increase the mutual trust and stability of the given monetary system, and would expand and upgrade it at the same time.


The 2008 financial crisis demonstrated that there is a completely new game in town when it comes to financing and stabilising our current economic system. Alongside private and public agencies, central banks have come to play a significant role by implementing purchasing programmes to safeguard the banking system.


In fact, since 2008, central banks have worked on multiple purchasing and accounting programmes. These have included quantitative easing, pandemic emergency purchasing programmes , emergency liquidity assistance, , differential interest spreads between member states, and many more interventions besides. Despite the differences and overlaps of  all these programs, they mainly have one aspect in common: providing additional liquidity to tackle asymmetric shocks.


A functional financial system can now be regarded as a common public good. We could apply a similar risk-adjusted monetary policy for the purpose of financing healthcare as a public good.


Technically speaking, it requires central bank digital currencies (CBDCs) which are digital currencies triggered by a distributive ledger technology with a smart contract, enabling and conditioning new avenues in funding, managing, and hedging future challenges. Such a CBDC can generate targeted additional liquidity, provide for public banks and developing financial institutions like the World Bank, the IMF, or regional developing banks, which then start to fund our common healthcare challenges. This can allow almost unlimited additional financial engineering to hedge and fund future healthcare risks.


Given that common goods are different from private ones and require a different financial framework, how  can we ensure that we can all access and maintain them? This needs to be true for both horizontal healthcare approaches, like universal healthcare for all, or more vertical approaches addressing more specialised interventions, like dealing with pandemics or providing psychiatric treatment.


For example, if we had invested 50 billion US dollars to vaccinate everybody around the world against COVID-19, the overall saving  worldwide would have been up to nine trillion USD. But instead of financing our common health adequately, we end up with a 16 trillion US dollar bill, and hundred of thousands of people losing their jobs unnecessarily or being pushed below the poverty line.


The Human Development Index, an alternative measure to the GDP, has demonstrated that the world community has lost 10 years’ of human development due to the pandemic: for every human being saved, treated, or healed during the pandemic, we created the equivalent collateral damage of 10 people suffering more harm or even dying.


We have to be clear that financing health for all is an investment, not a consumption pattern. In order to achieve it, we need more and better liquidity, and that liquidity needs to be conditioned. Instead of austerity, we need an adjusted monetary policy.


In other words, finance should not drive healthcare provision; it should be the other way round. Health for all, with all its requirements, should drive finance. As long as the least developed countries spend over 5%  of their GDP on repaying debts and over 7% on the military but only 4% on health, Health for All will forever remain a pipe dream. At the same time, the US, with only 4% of the global population, accounts for 42% of global healthcare spending. In absolute terms: low-income countries spend 40 US dollars per capita, while high-income countries spend 3,135 US dollars per capita, or nearly 80 times as much.


Meanwhile, further privatisation of the healthcare sector will create undesirable, expensive incentives and lead to soaring costs and lower-quality care. For example, one study demonstrated 10% higher mortality in a privatised care system, accompanied by an 11% rise in public expenditure. In addition, major pharmaceutical companies have spent substantial sums to repurchase their own shares instead of investing in R&D – between two to three times as much money was spent on repurchasing programs than went into additional research.


The aim here is not to blame the private sector for trying to maximise its return on investment. Rather, our argument is that Health for All is a public good that should be managed, accounted for, and financed differently. It should be funded as an investment in our future, rather than being regarded as a cost, and it should function counter-cyclically and preventatively to limit the damage of future shocks.


We could take this argument one step further by considering the monetary mechanism applied to the 2008 financial crisis. Instead of relying solely on taxpayers’ money, member state fees and philanthropic commitments, we could give leading central banks the mandate to generate this additional liquidity to preload funding for the WHO’s main purpose: as mentioned before, addressing global public healthcare issues.


If the WHO’s main purpose is to ensure global public health for all, we have to provide the WHO with the necessary resources to do so. This implies, first and foremost, a green, digital Quantitative Easing, where central banks create additional liquidity managed through Development Finance Institutions to fund the WHO upfront.


Wouldn’t future generations be better off with central banks extending their balance sheets to adequately finance our common health and future shocks than they would be in a situation where the central banks maintain their traditional mandate of neutrality and have a clean balance sheet, but the planet and our health is destroyed? Wouldn’t you?


Additional blended finance between the private and public sector can then adequately address potential loss ratios and expected private revenues, as well as active state interventions, like equity shares, funds, or credit lines. State guarantees, where the additional money is used to hedge potential risks for Venture Capital Private Equity investments in common goods such as hospitals or can also be implemented.


In all cases, the projected risks remain private, while the systemic risk is partly absorbed by a green quantitative easing. In addition, direct digital transfer of cash could then be sent straight to low income citizens facing hunger and poverty in order to overcome inefficient out-of-pocket payments.


And finally, implementing an advanced commitment strategy, where the public sector guarantees a certain amount of,  or price for, a necessary good, such as for a vaccine, upfront, means that private investors could operate in a safer environment in which to be engaged. This has the net result of stimulating the regional economy at the same time. It sounds complicated, but it isn’t.


None of the financial tools we’ve just covered operate as stand-alone measures. However, an informed and tailored combination of these monetary tools would allow us to tackle, hedge, and fund most of the healthcare challenges that lie ahead of us. Part of the funding would need to be front-loaded with additional, conditioned liquidity created by regulators and managed by national public development banks. Tailored swaps (so-called Collateral debt obligations  among others) could provide the necessary hedging of associated risks. The potential return on investment of fifteen to one for the stakeholder community far exceeds any expenditure that might be expected from private investments only. In short, the costs of inaction far exceed the costs of an adjusted monetary regime.


The monetary and financial system is not neutral when it comes to dealing with healthcare issues. Traditionally, finance drives healthcare. It should be the other way round: healthcare should drive finance, and supporting and investing in a preventive mechanism of this sort will be much cheaper than waiting to repair the system after the next pandemic.


More from the World Academy of Arts and Science can be found on their website, or in the books by Prof Stefan Brunnhuber : Financing our Future, and the upcoming book in press ‘Financing Our Anthropocene‘.  All of those are linked to in the show notes for this episode.


That’s all we’ve got time for. Don’t forget to stay subscribed to ResearchPod for more of the latest science. See you again soon.

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