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«HEALTH SYSTEMS FINANCING The path to universal coverage     © World Health Organization, 2010 All rights reserved. The designations employed and ...»

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Demand Side Financing in Health:

How far can it address the issue of

low utilization in developing countries?

Indrani Gupta, William Joe, Shalini Rudra

World Health Report (2010)

Background Paper, 27

HEALTH SYSTEMS FINANCING

The path to universal coverage

 

 

© World Health Organization, 2010

All rights reserved.

The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the World Health Organization concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. Dotted lines on maps represent approximate border lines for which there may not yet be full agreement. The mention of specific companies or of certain manufacturers' products does not imply that they are endorsed or recommended by the World Health Organization in preference to others of a similar nature that are not mentioned. Errors and omissions excepted, the names of proprietary products are distinguished by initial capital letters.

All reasonable precautions have been taken by the World Health Organization to verify the information contained in this publication. However, the published material is being distributed without warranty of any kind, either expressed or implied. The responsibility for the interpretation and use of the material lies with the reader. In no event shall the World Health Organization be liable for damages arising from its use. The findings, interpretations and conclusions expressed in this paper are entirely those of the author and should not be attributed in any manner whatsoever to the World Health Organization.

Demand Side Financing in Health:

How far can it address the issue of low utilization in developing countries?

World Health Report (2010) Background Paper, No 27     Indrani Gupta 1, William Joe1, Shalini Rudra1  

                                                            

1 Institute of Economic Growth, Delhi, India  2  

1. Introduction The concept of Demand Side Financing (DSF) in health originated in response to developing countries’ felt need to improve access to and utilization of health services, particularly among the poor.

Policymakers in developing countries have come to realize that public health services, interventions and innovations have not yielded the desired health outcomes due to serious issues concerning the efficiency, fairness and quality of the health systems that have been created and maintained through significant tax- based financing. In particular, the utilization and uptake of services has been very low among those who would benefit most from these services, that is to say the poor and vulnerable sections of the population.

This is especially true for services such as family planning, maternal and child health, immunization etc.

DSF was therefore seen as a tool that could improve the utilization of under-used services among the needy and under-serviced populations by placing purchasing power, as well as the choice of provider (where possible), directly in the hands of the recipients. The services considered most relevant in this context were those that qualified as merit goods, and had significant externalities (for example, immunization, maternal and child services, use of bed nets for malaria control).

Though not often stated explicitly, the main argument cited in favour of DSF is that beneficiaries face mainly financial barriers that prevent them from using a particular service or intervention. The financial barrier argument often extends to geographical distance, so that providing either funds for transport or providing transport itself is also seen as a way to overcome barriers to access.

An extensive literature exists and is still evolving from the wide range of country-specific experiences on DSF in the health as well as in the education sectors, which has been the original target of DSF in the world. However, there is still a good deal of confusion with regard to concepts and definitions, especially in the context of the plethora of health coverage schemes operated as community health insurance (CHI) or micro-insurance schemes that often use the same rationale of financial demand constraints among vulnerable populations for providing health coverage. At times it is not clear how best to classify different initiatives and schemes with multiple objectives and complex structures often defy easy classification.

The focus of this paper is twofold: first, based on a global literature review, it examines the definitional issues around DSF and presents a schematic that can be used to classify schemes; second, it attempts to fit selected case studies of health-care interventions in India into the proposed schematic to both test the 3   template’s usefulness and to enable a better understanding of what qualifies as a DSF initiative. Finally, based on a survey of literature on evaluation, the paper presents the main benefits and drawbacks of DSF, and provides some operational insights into where DSF stands as a financing tool for improved health seeking behavior in developing countries. The discussion focuses mostly on reproductive health, but additional examples have also been added, where relevant.





2. DSF: A brief overview

There have been some very comprehensive reviews and evaluations of DSF schemes (see, among others, Ensor 2004a, Handa and Davis 2006, LaGarde, Haines and Palmer 2007, Hatt et al 2010). In this paper it is not our intention to present that kind of overview, but rather to discuss some definitions, examples and findings to set the context for the next section, which will revisit the definitions of DSF from a purely operational perspective.

The global literature contains many examples of DSF, with different terminologies (output-based aid, conditional cash transfer, consumer-led DSF, provider-led DSF) used for slightly differentiated products.

The defining characteristic of DSF – what sets it apart from supply side financing – is the direct link between the subsidy, the beneficiary and the objective of the subsidy. DSF can be consumer-led (vouchers, cash transfers, tax rebates) or provider-led (capitation payment, referral vouchers), and can be provided before or after service utilization. This system of output-based remuneration for services rendered in principle can improve efficiency in service delivery through competition (Ensor 2004a, Standing 2004).

The most commonly implemented DSF mechanism is one that uses vouchers, defined here as “a token that can be used in exchange for a restricted range of goods or services. Vouchers tie the receipt of cash to particular goods, provided by particular vendors, at particular times. Health care vouchers are used in exchange for health services (such as medical consultations or laboratory tests) or health care consumables (such as drugs)” (World Bank 2005). Voucher schemes are designed to efficiently target population selected to benefit from the scheme. Health vouchers are seen as instruments that encourage the use of under-consumed services like family planning, treatment of infectious diseases, immunizations, mental health care, and maternal and child health services by subsidizing (fully or partially) health-care costs (Gorter et al 2003).

4   Another often-mentioned phrase in the literature is Output-based Aid (OBA) which is a combination of consumer-led and provider-led DSF (Brooks and Smith 2001). These are perceived to be development aid strategies that link the delivery of services to targeted performance-related subsidies. The service providers can come from the private or public sector, or from community or non-governmental organizations. All OBA schemes must specify the outputs against which subsidies will be disbursed and consequently can identify the beneficiaries more clearly than traditional input-based schemes. Outputbased aid through vouchers is now an important strategy for donors striving to improve the effectiveness of aid (Brooks and Smith 2001). The World Bank has been the most active participant in OBA, and in 2003, along with the United Kingdom’s Department for International Development (DFID), it launched the Global Partnership for Output Based Aid (GPOBA).

These are also called “voucher and accreditation” 2 strategies for health services, which emphasize not only incentives for consumers, but attempt to ensure quality services by enforcing performance-based contracts with facilities. Such initiatives have been launched in Bangladesh, India, Kenya, Nicaragua, Taiwan Province of China and Uganda in the developing world. In this context, “competitive voucher” schemes are seen as sharper tools because they allow for competition among providers, rather than allow single-window provider access (Gorter et al 2003).

Other examples of recent initiatives on DSF are Conditional Cash Transfers (CCT) which aim to reduce poverty by making welfare programmes conditional upon the recipients' actions (Handa and Davis 2006, La Guarde et al 2007). The government transfers the money only to persons who meet certain criteria, which may include, for example, getting regular screening for cervical cancer or receiving vaccinations (Janani Suvidha Yojana in India or Nepal’s Safe Delivery Incentive Programme (SDIP)).

Well before the current spate of experiments with vouchers as a key mode of DSF in developing countries, they have been used to encourage vulnerable and special groups to seek medical care in other parts of the world. While one of the first instances of voucher use occurred in the Republic of Korea and in Taiwan Province of China in the 1960s 3, there have been a number of examples of voucher schemes in developed countries. For example, in Wisconsin, in the United States of America (USA), vouchers were used among migrant Spanish-speaking workers to encourage them to access health care (Slesinger and Ofstead 1996). Meanwhile a study in Minnesota, USA, on the effectiveness of vouchers for breast cancer

                                                            

2   http://www.popcouncil.org/projects/231_EvalVouchAccredRH.asp    3 KFW Entwicklungsbank, “Interview with Prof. Dr. Malcolm Potts with respect to Output-Based-Aid (OBA) voucher schemes as a means of promoting public health in developing countries.” Available from http://www.kfw-entwicklungsbank.de/EN_Home/Topics/Health/Interview_mit_Prof_Potts_Berkeley.pdf

–  –  –

With regard to developing countries, in Nicaragua, vouchers were introduced to tackle high rates of sexually transmitted infections (STI) among sex workers in Managua (Gorter et al 2000). There are additional examples of such schemes in Nicaragua, one for addressing adolescent health and the other for prevention of cervical cancer. 4 In Mexico, poor families received monthly income transfers equivalent to between 20% and 30% of income providing that (among other conditions) pregnant women visited clinics to obtain prenatal care, nutritional supplements and health education (Gertler 2004). In the United Republic of Tanzania, vouchers were used for malaria control, especially among women and children (Mushi et al 2003).

In South Asia, Bangladesh, India and Nepal all have DSF schemes, although the Bangladesh initiatives are relatively larger and more widely discussed. The Government of Bangladesh has launched a DSF scheme in 33 upazilas (sub-districts) with vouchers being distributed to pregnant women entitling them to access free antenatal, delivery, emergency referral, and postpartum care services, as well as providing cash stipends for transportation and cash and in-kind incentives for delivering with a qualified health provider. The program also introduces incentives to health-care providers to identify eligible women and provide maternal health services. The objective of the program is to increase the use of skilled birth attendants and to mitigate the financial costs of delivery, as part of Bangladesh’s efforts to reach MDG 5 and to achieve a 75% reduction in maternal mortality by 2015 (Hatt et al 2010). The DSF scheme in Nepal is a safe delivery incentive programme (SDIP) where cash is given to the eligible women after delivery at a health facility. Indian DSF schemes will be discussed in more detail in the subsequent sections.

The extremely varied character of DSF schemes (as well as schemes that are generally not labelled DSF but nevertheless have similar characteristics) makes it difficult to engage a cogent discussion on what the merits and demerits of such initiatives are or even to say with any certainty what comprises the set of schemes that can be called DSF. In the next section, we discuss some key definitional issues with DSF

                                                            

4 www.icas.net/.../Voucher%20schemes%203%20case%20studies%20WB%20KfW.doc  

–  –  –

3. Demand-side Financing: A Template Before presenting the schematic or template of DSF parameters, a review of the broad financial and administrative circuit of such financing schemes is discussed briefly below.

–  –  –



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