clean and safe water1

Development Impact Bonds for safe water

A few months ago, I was working with a group that was considering using Social Impact Bonds to fund safe water in Africa.  This idea has gained a great deal of traction in Britain and in the US. A working group was established by the Center for Global Development and  Social Finance to apply the concept to building prevention programs that target a range of social ills in poor countries.  Initial ideas for these Development Impact Bonds would address issues like access to eliminating African Sleeping Sickness in Uganda, treating and preventing HIV in Swaziland, and improving access to high-quality low-fee private schools in South Asia.

Our group was asked to determine whether Development Impact Bonds should be used to fund safe water programs to reduce the burden of waterborne diseases.  In theory, investing in prevention would reduce the cost of treating these diseases.  The money would be transferred from treatment to prevention, and millions of people would benefit.  This concept is great in theory, but difficult in practice for the following reasons:

  • The  greatest cost savings from this idea will come from diseases that are most expensive to treat.  These include diseases like HIV (where ARVs cost thousands per year), cancer, and diabetes.  The ubiquity of low-cost oral rehydration therapy for diarrheal diseases means that it is relatively inexpensive to treat diarrhea if it is caught early enough.  This means that the primary issue isn’t a trade-off in costs between prevention and treatment.
  • One of the major challenges with preventing and treating this disease is that people do not recognize the danger of diarrhea for young children.  When adults get diarrhea, it usually causes at most a few days of inconvenience.  But when babies get diarrhea, it can cause severe dehydration, cognitive impairment, malnutrition, and even death.  The difficulty is convincing adults that their children face greater potential damage than they do and ask them to use safe water technologies to prevent diarrhea and seek early treatment when it does occur.
  • Health facilities are staffed based on decisions from the central government – reducing the burden of diarrheal diseases won’t mean fewer staff, it just means that staff members will spend their time treating other diseases.  Beds and equipment will likewise be reallocated to other diseases.  Prevention does not reduce the spending on treatment, it just shifts the spending to other priorities.
  • The Kenyan health system includes three difficult levels of care centers that each receive different packages of medication and supplies.  Dispensaries only get basic medication and can handle minor cases of diarrhea.  Health centres receive some antibiotics and can do handle moderate cases of diarrhea, and hospitals can handle the more severe and life-threatening cases of diarrhea.  But while most people in Kenya live within an hour of a health facility, few live within an hour of a hospital, and it’s likely that many people with a severely dehydrated child children will not visit a hospital for treatment.  This means that the sickest patients may never see a doctor or receive the care that they need in the health system.
  • Stock-outs are also a significant problem – health facilities receive drugs at the start of every month and use them until they’re gone.  This is often strategic because the government cannot afford to treat everyone at the subsidized price that they’re offering.  And it means that the health system would not see significant real cost-savings for health facilities if they reduced their waterborne disease caseload.  Instead, drugs would last for longer in a month.

The conundrum here is that prevention programs in safe water might actually increase the burden on the health system for treating diarrheal diseases.  If prevention programs teach people the role that diarrhea plays in mortality, stunting, malnutrition, and poor cognitive development, they will start seeking treatment for diarrhea.  This means that more cases of diarrhea will be treated by healthcare providers, reducing the burden of disease on the overall population.  But the system will not save money as it makes people healthier.

Development Impact Bonds are a fascinating idea for directing money towards prevention in cases where strong systems exist and treatment is more costly than prevention.  Safe water is likely not one of those areas.

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