> Posted by Amelia Kuklewicz, Bobbi Gray, Gabriela Salvador, Freedom from Hunger

It’s a scene many can identify with: rushing to an emergency room at 1 a.m. with a young child whose fever has spiked and cannot be controlled with over-the-counter medicine. We generally feel helpless and our mind leaps into worst-case scenarios.

While we’re considering the financial implications, they are secondary to ensuring our loved one receives immediate medical attention.

For many of us with health insurance, we already know what the visit is likely to cost us but we’re still mentally considering what financial resources we’re going to draw on to cover the emergency room co-pay.

Now imagine you are a mother that lives in Ecuador. Since neither you nor your spouse has formal employment with a consistent salary, you are ineligible for state health insurance. Private health insurance is out of the question with monthly premiums in the hundreds of dollars. To top it off, the first question you receive from the attending nurse in reception isn’t about your child’s condition but rather, “Cash or credit?” Many people are known to die during triage, simply from the requirement of having to show payment up front.

This is the reality and one of the challenges that families face in seeking and receiving adequate medical treatment, that of health financing. How do I pay for the treatment that I need when I need it?

In Ecuador, with the generous support of Visa-NetHope, we’ve been piloting a health credit card — basically a line of credit to cover health costs. Clients can use the card at a variety of qualified health establishments.

There are three key drivers in a product like this: speed, flexibility, and ease of access. Unlike traditional loan products that have a week-long application and lengthy approval process, the health credit card allows access to credit around the clock. When compared with microinsurance, it has the ability to help cover any type of medical bill, not just a pre-set number of interventions. In fact, the combination of a health credit card and health microinsurance seems to effectively satisfy health needs. At the same time, by putting a realistic cap on the amount of authorized expenses, it helps not only control the amount of debt one can accumulate, but also makes the credit card available for clients who otherwise would not qualify for a credit card, in general.

So far, 5,882 clients of the MFI Cooprogreso have an average credit line of $1000 to use at 586 health facilities across Ecuador. In two years, it’s estimated that slightly more than $180,000 in health payments using the credit card will have been made.

Freedom from Hunger, for the past decade, has been working with various financial service providers (FSPs) like Cooprogreso, insurance companies, and health providers to ensure the families we serve have options when it comes to meeting health costs. In 2012, we published a paper (gated here, un-gated here) that questioned whether FSPs could or should play a role in financing health costs. We found that health costs and lost time at work due to illness were substantial among our clients, with health expenses accounting for significant portions of household income and with medicines accounting for approximately 60-80 percent of the out-of-pocket health expenditures for families. This means important trade-offs are often made in food consumption and nutrition and education for children. We posited that the basic answer to whether FSPs could play a role in health financing was “yes,” while the remaining question to answer was how.

Since then, we’ve worked with partners to develop health loans, health savings, pre-paid healthcare packages, and linkages to national and private health insurance schemes. We’ve learned a lot about what is and isn’t working, but there is still much to learn, as experiences across the globe remain limited.

We’ve discovered through our research and experiences that in order to effectively address a health emergency or unplanned medical cost, financial instruments have to meet two criteria: they have to be timely (users have to be able to access the money quickly and easily) and the amount has to be enough to cover the need. If these criteria are not met, households will make negative trade-offs or spend more of their time piecing together funds from multiple sources to cover the upfront medical costs. Lives can be lost in this process. Other consequences of such actions can be reductions in food consumption, reliance on low-nutrition foods, or even forgoing healthcare, leading to continued cycles of vulnerability and further entrenchment in poverty.

We’re still learning about how well this approach is going to work, but one thing seems to be clear: if the financial sector does not take on the task of designing a portfolio of health financing tools that households can use for one of the greatest risks to an MFI’s entire portfolio—health—no one else is going to do it.

But first, we have to acknowledge two things:

  1. While health and a person’s productivity are intricately linked, financial tools for income generation do not work to directly address one’s health.
  2. As financial service practitioners, we must understand health sector needs better so that financial tools are designed to address health costs in the manner in which they are incurred. This requires actively reaching across to the health sector to help with product design and incorporating health actors in training processes so they equally can encourage and better support beneficiaries.

No matter what country we live in, as parents, we all aspire to keep our children healthy and happy. But, illness is inevitable for everyone, even our small children. Access to and use of financial tools may not necessarily predict or result in our children’s improved health, but lack of them shouldn’t be the difference between life and death, either, no matter what country we live in. This means we have to develop a portfolio of financial tools and strategies that can help people respond to inevitable health costs.

We are interested in other experiences around health financing. We would like to compare our experiences with others to determine whether there are similar lessons being learned to further practice in this area. Do you have additional insights or experiences you can share? What is the potential you see for these financial products in your market?

Image credit: 2016 Antonio Gallegos for Freedom from Hunger

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