From Aid Shock to Stability: How Nations Can Strengthen Health Financing for the Future

Global health systems face a severe financing shock as donor aid collapses, forcing countries to rapidly protect essential services, mobilize domestic resources and improve efficiency to avoid reversing gains toward universal health coverage. The WHO urges governments to use this crisis as an opportunity to restructure health financing systems for long-term sustainability, equity and resilience.

The World Health Organization’s 2025 guidance, drawing on research from the WHO Department of Performance, Financing and Delivery, the World Bank, the International Monetary Fund, the Alliance for Health Policy & Systems Research and regional WHO offices, captures a moment of unprecedented strain on global health financing. As countries were still grappling with high debt, inflation and weakened fiscal space after COVID-19, the sudden pause and dramatic reduction of foreign aid in early 2025 delivered a destabilizing blow. With the United States leading the cuts and several OECD donors following suit, global health assistance dropped by an estimated 30–40% compared with 2023. WHO’s survey of 108 countries reveals immediate disruptions to essential services, from immunization to HIV treatment, signalling a deeply concerning erosion of progress toward universal health coverage. The report warns that health systems long sustained by patchwork donor funding must now pivot rapidly toward models driven primarily by domestic resources.

The Urgent Need for Rapid, Protective Measures

Faced with disappearing external funding, WHO urges governments to take swift, protective action to prevent service collapse. Budget reallocations toward essential and lifesaving services are described as non-negotiable, supported where possible by supplementary budgets and emergency funds. Maintaining transfers to public coverage schemes becomes crucial, as does avoiding the introduction of user fees that would worsen inequities. Countries are encouraged to reinforce social protection mechanisms, including cash transfers, to shield vulnerable populations. Realistic domestic revenue strategies, tightening tax enforcement, reducing leakages, and designing effective health taxes are prioritized over creating new contributory insurance schemes that are unlikely to succeed in economies dominated by informal labour. Efficiency measures such as transitioning to generics, renegotiating medicine prices, strengthening referral pathways, and integrating donor-supported systems into national structures are presented as practical ways to stretch limited resources.

Analytics: The Backbone of Crisis Decision-Making

The guidance emphasizes that rapid, well-targeted analytics must underpin every immediate policy decision. Countries are encouraged to map all donor funding flows, on- and off-budget, to understand what has been lost and what remains. They should calculate the cost of absorbing donor-funded services formerly domestically and diagnose bottlenecks in public financial management that hinder budget execution. Rapid reviews of benefit packages and provider payment systems can help governments ensure resources flow to the highest-priority services while preventing inefficiencies. Strengthening expenditure tracking through financial management information systems and improving the design of subnational transfers are highlighted as essential steps to ensure that frontline providers receive timely and adequate funding.

Building Sustainable Domestic Financing for the Future

Beyond the emergency response, the document sets out a multi-year reform agenda to reshape health financing systems so they become more resilient, equitable and efficient. Strengthening domestic fiscal capacity, through broader tax bases, better enforcement, well-designed health taxes and careful engagement in debt relief mechanisms, is central to this transformation. WHO calls for modernizing public financial management by shifting from rigid line-item budgets to programme or output-based budgeting that better reflects service needs. Granting primary health care facilities greater financial autonomy and integrating donor funds into domestic budgeting structures are framed as reforms that can boost responsiveness and accountability.

Reducing fragmentation in health financing is another major priority. Many countries run multiple overlapping health insurance schemes and vertical programmes that dilute efficiency and equity. The guidance recommends harmonizing benefits and payment methods, merging schemes when possible and using risk-equalization mechanisms when merging is politically difficult. Importantly, the report cautions against relying on employment-based insurance expansion in countries with large informal sectors, emphasizing instead the need to strengthen unified government-funded coverage pools that include all population groups.

Reforming Purchasing, Priority Setting and Regulation

Strategic purchasing is presented as a powerful lever for improving efficiency and quality. Countries are encouraged to overhaul outdated provider payment systems, shifting toward output-based approaches supported by digital technologies such as electronic claims management and digital payments. Stronger contracting and regulatory oversight of private providers is emphasized to prevent overprovision, protect households from catastrophic spending, and ensure alignment with national health goals. Finally, the document underlines the need to institutionalize evidence-informed priority setting and health technology assessment so that benefit packages reflect cost-effectiveness, equity and financial protection principles. Engaging communities in these decisions, it notes, enhances legitimacy and responsiveness.

The report recognizes that countries face difficult fiscal and political realities. Yet it argues that the crisis offers a rare chance to reimagine and rebuild stronger health financing foundations. With the new WHO–World Bank UHC Knowledge Hub enabling global peer learning, the report positions this moment as a turning point, one where decisive, evidence-based reforms can help secure the future of equitable and resilient health systems worldwide.