AIDS Treatment as an International Entitlement: Are We Ready for a Global Welfare Paradigm?

September 28, 2007

On Wednesday, UNAIDS published "Financial Resources Required to Achieve Universal Access to HIV Prevention, Treatment, Care and Support" to present the world with a bottom line: $50 billion a year. While acknowledging that "some might ask if the goal of universal access is worth the effort that will be required," the report declares "the answer is a resounding yes." But as justification for this echoing affirmative, it just vaguely alludes to the potential benefits of this unprecedented level of spending on a single disease and totally ignores what $50 billion a year means in terms of foregone opportunities.

Because some of those who will influence how much of that $50 billion materializes are economists and budget geeks, perhaps it's worth a moment to take out the green eyeshade, and tote up the benefits and costs. On the benefit side, expanded expenditure on prevention will avert some of the future need for treatment and spending on orphans and vulnerable children will educate some of these kids. These can validly be thought of as investment expenditures, which promise to yield benefits to the future of the country.

Where treatment is concerned, however, the benefit side of the ledger is only very weakly supported by the evidence. The argument goes that AIDS treatment is worthwhile in economic terms because it maintains family units so that children can attend school, permits patients and caregivers to return to work, and in other ways - through its positive effects on the health of adults - yields economic returns. Whether that is the case is a matter where research can shed light, although not yet definitive answers. In one of the most relevant such studies, my former CGD colleague Harsha Thirumurthy and his co-authors Joshua Graff Zivin and Markus Goldstein have found that while treatment can indeed increase labor force participation from 60% to 90% and will generate additional non-market benefits in the form of patient happiness, additional schooling for his children, etc. However, they find that even their low estimate of the annual cost of treatment of $350 per year is enough to offset the incremental wages these workers would earn each year. And since their cost estimate omits the cost of eventual second-line treatment and of expatriate personnel and uses lower-than-usual drug prices, their results do not support the claim that AIDS treatment has a positive rate of social return. (In contrast, upper income Kenyans making US$5,000 a year or more would find it in their self-interest to purchase AIDS treatment out-of-pocket at US$350 per year. But only a small part of the proposed $50 billion a year will facilitate the access of middle income patients, and only as an incidental side effect.)

If AIDS treatment is not an investment, can it still be justified? There is obviously a human rights case to be made - and indeed it often is, sometimes as part of a broader concept of a "right to health." As it happens, the UN Special Rapporteur on the Right of Everyone to the Enjoyment of the Highest Attainable Standard of Physical and Mental Health has helpfully set out the components of such a right, which "includes freedoms (e.g. freedom from non-consensual treatment and non-consensual participation in clinical trials) and entitlements (e.g. to a system of health care and protection). For the most part, freedoms do not have budgetary implications, while entitlements do." As the Special Rapporteur suggests, an entitlement is much like a welfare payment; it is defined by Merriam-Webster as:

1 a : the state or condition of being entitled : RIGHT b : a right to benefits specified especially by law or contract; 2 : a government program providing benefits to members of a specified group; also : funds supporting or distributed by such a program and 3 : the belief that one is deserving of or entitled to certain privileges

Thus, as global AIDS treatment programs are currently being implemented, they look far less like an "investment" - contribution to the eventual sustainability of the recipients and their countries - and more like a transfer payment. We must learn to think about support for antiretroviral treatment in the same way we think about welfare payments at home - e.g. hoping that the recipients can use the support to free themselves from welfare dependency, yet knowing that a proportion of them will not succeed in doing so. Those who receive entitlements typically become dependent on them, and never more starkly than in the case of expensive life-giving drugs. Most of us support such payments anyway from a feeling of compassion and solidarity with the poor and unfortunate.

Those people whose lives currently are sustained by donor funding of their AIDS treatment probably feel that they are entitled to continuation of that treatment, that their donor has entered into an implicit contract to provide life-sustaining drugs in exchange for their adherence. Furthermore, international and domestic opinion will hold donors responsible for maintaining treatment subsidies to individuals who have already started treatment. However, as The Economist points out, "The problem with AIDS is that the more successful you are at treating it, the more you end up paying." As donors foot the bill for an ever-increasing number of patients, the proportion of the remaining discretionary spending in their AIDS budgets left for prevention and other activities will likely shrink accordingly - or will come out of other health and development pots.

With this in mind, then, what is the real meaning of US$50 billion a year, and what is its opportunity cost? One way of thinking about the cost is to compare it with other things the same money could buy. A 2002 World Bank study (.pdf) estimated that the cost of achieving all eight of the UN Millennium Development Goals by the year 2015 would be between $40 and $60 billion dollars a year. According to the authors, this would be the cost not only to reverse the spread of HIV through expanded prevention (part of goal 6) but also to (1) eradicate extreme poverty and hunger; (2) achieve universal primary education; (3) promote gender equality and empower women; (4) reduce child mortality; (5) improve maternal health; (6) combat malaria and other diseases; (7) ensure environmental sustainability; and (8) develop a global partnership for development - all of which are justified as investments in the future sustainable growth of the recipient countries. So one way of understanding the proposed annual expenditure of $50 billion is to consider whether we should forego all of these other efforts in order to single-mindedly focus on universal access to AIDS treatment and prevention and on the care of the orphaned children.

By effectively converting foreign assistance from discretionary to entitlement spending, the "success" of existing AIDS treatment programs has already locked us into a new aid paradigm. To the extent that the international community heeds the UNAIDS' call, entitlement spending will greatly increase in the next few years, both in absolute terms and, unless total assistance expands at the same phenomenal rate, as a percentage of total assistance. Are voting taxpayers of the OECD countries ready for this new entitlement paradigm? Growing funding for AIDS treatment suggests this possibility (including the latest Global Fund replenishment round this week in Berlin). But there is reason for concern: historically when budgets expand less quickly than planned, growing entitlements often squeeze out discretionary programs. And even if they do not, there may be negative repercussions from the extreme form of aid dependency that AIDS treatment represents. It's far past time to take a clear-eyed look at costs, benefits and long-term implications of the path that we've collectively chosen, so that foreign assistance continues to improve the well-being of all the poor and sick in developing countries while also sustaining their poorest AIDS patients.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.