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Citations Publications citing this paper. Making the economic case for investing in health systems: What is the evidence that health systems advance economic and fiscal objectives? Jonathan Cylus , Govin Permanand , P. Christopher Smith. References Publications referenced by this paper. Health system efficiency: how to make measurement matter for policy and management Jonathan Cylus , Irene N Papanicolas , P. Efficiency and policy settings. Health care systems. Europe Health at a glance. No magic number. Jowett M et al. Spending targets for health.

Preferences are influenced by culture, knowledge of the potential benefits of health care, and the quality of the services available. Constraints on the demand for health care. The evidence reviewed in the section: Access to Effective Health Care in Developing Countries: Evidence shows a strong positive relationship between living standards and the utilization of health care. The relationship is not spurious.

It holds after controlling for a multitude of other determinants of health care demand see World Bank 3 for a summary of evidence. For example, the probabilities that a woman receives prenatal care and receives a medically supervised delivery rise with income 26,27,28,29, Similarly, the positive association between income and child immunization holds in multivariate analyses 31, In a market setting, a positive impact of income on consumption is expected.

Prices are less of a barrier to use for those with greater purchasing power. It is a little more surprising to find the relationship emerging for public care. This is understandable once it is recognized that charges are normally made for public care in the developing world. In addition, with long distances to travel to reach health services, the non-price costs can be substantial. Monetary costs of care ensure that income is an important determinant of health care utilization and its dispersion.

The nature of health financing in the developing world, with heavy reliance on out-of-pocket payments, strengthens the relationship between health care utilization and income. Risk pooling and cross-subsidization, possible with pre-payments systems, break the dependency of health care utilization on current income. With out-of-pocket financing and limited access to credit, which is the norm in many poor countries, current household income is the binding constraint on health care use.

Financing health care through out-of-pocket payments makes prices an important determinant of demand. In relative terms, the payments can be substantial. It would be surprising if such charges did not deter demand. The evidence confirms that they do 9. There is some difference in the estimated strength of the relationship. Most studies of developing countries find health care to be price inelastic; demand falls less than proportionately to price 34,35,36,37, A few obtain estimates of price elastic demand 39, There is strong empirical support for the proposition that the poor are more price sensitive than the better off 9,38,41, Increases in user charges will raise the share of health care consumed by the better off, unless effective mechanisms are implemented to shield the poor from these charges.

Unfortunately, the general experience with fee waivers, particularly in Africa, is not encouraging 43 see Strategies to Raise Utilization of Effective Interventions. User fees often effectively exclude the poor from essential services, while recovering only a fraction of costs Abolition of user fees in Uganda was associated with increase in utilization by the poor but this was not true in South Africa, where fees for maternal and child health services where removed The effect of price increases can be offset by quality improvements 9.

There is evidence from Africa that if increased user charges are combined with reductions in travel time and improvements in quality, utilization can increase, even for the poor Informal payments are substantial in many public health care systems. They are often greater than formal charges and may exist when official charges do not.

These payments are particularly prevalent in the former Soviet Union and Eastern Bloc But it is not an isolated phenomenon. In one region of rural India, the poor are paying almost as much to visit a "free" public health center as for a consultation with a private doctor In addition to charges made by the health care providers, travel costs and foregone earnings are important costs of consuming health care in the developing world.

In rural areas, the distances to health care facilities and the poor condition of roads mean that time, effort, and cost required to arrive at the point of delivery can be substantial. The evidence confirms the expected negative impact on health care utilization 26,47,48, Halving the distance to public health facilities in Ghana was estimated to almost double their utilization rate The demand of the poor has been found to be more sensitive to travel time that of the better off in Cote d'Ivoire Determinants of preferences for health care.

See a Problem?

Low demand for modern health interventions often derives from deep-rooted attitudes that reflect culture and social norms. One example are continued preferences for traditional over modern therapies. The fact that use of traditional therapies generally declines with income and education suggests that social norms are not inviolable.

Adherence to norms is influenced by the socioeconomic environment. Gender attitudes and roles are particularly important determinants of health seeking behavior. Raising access to maternal, reproductive, and child health interventions is a major challenge within societies that restrict the public lives of women. Again, the social is not completely divorced from the economic.

There is evidence from Indonesia that the utilization of prenatal care increases with the control a woman exercises over household finances Causality is a moot point. In Africa, women make more use of public health care than men in the highest income group but the gender bias is the opposite in the lowest income groups Recognition of illness and the potential benefits of treatment are prerequisites for health care demand.

Where a large proportion of the population is in poor health, this becomes the norm and illness is not easily recognized. If treatment coverage is low, there is less opportunity to learn of its benefit. The unfortunate outcome can be the continued toleration of illness and disease.

In India, 2 in 5 children are not fully immunized, despite the fact that immunization, at least in principle, is free. A detailed study of a North Indian village demonstrates the importance of poor knowledge in diminishing demand for effective interventions Households are typically passive users of vaccines, accepting them when presented with them at doorstep but with little or no active demand.

There is very poor knowledge of the link between vaccine and disease and the pace of learning of the relationship is slow. To raise utilization, it is important for the community to develop trust in the provider. Given the link between immunization and health is not immediately observable, trust can be developed through observation of the effectiveness of other services provided. The poor quality of many of the services provided impedes the development of trust.

There is substantial evidence from developing countries that the socioeconomic environment influences concepts of illness. Reported rates of illness are often higher among the better off than the poor 16,54, Differences in knowledge are reflected in disparities in utilization. The better off are more likely to seek care for a child when sick, to take antimalarials and antibiotics for pneumonia, and to receive inpatient care.

Poor quality of health services is a major problem in many, but not all, developing countries 3,8. Facilities open and close irregularly 10 ; absenteeism rates of doctors and nurses can be very high 10,57,58,59 ; staff can be hostile, even violent to patients 60 ; misdiagnosis is not uncommon 3 ; medicines are all too often unavailable, sometimes due to staff pilfering for use in private practice 3,61 ; and there is inappropriate prescribing and treatment 3. Deficiencies in quality have direct implications for access to effective health care. Further, one expects that demand will diminish in response to the poor quality of the care offered.

The evidence confirms the hypothesis 9. Low quality of public primary health care can result in patients forgoing "bypassing" care at the nearest facility and seeking care at a higher-level public facility or in the private sector 8, In Sri Lanka, the lower the quality of the public primary care facilities, the more likely it is that patients will bypass them There is similar evidence from Pakistan, Indonesia, and El Salvador 8, Linked surveys of both health care utilization and facilities in a rural Rajasthan India find very low use of public health care, despite the fact that there are no formal charges The population is mainly using private care.

This is in response both to the informal charges levied for public care and its very low quality. Utilization is lower at centers that open less often. Low utilization of poor quality public care is wasteful of resources and imposes costs on patients that seek care further from home. From the perspective of patient health, individuals choosing to forgo low for higher quality care might not be considered a problem.

Unfortunately, the alternative care is often also of dubious quality. Demand is not as responsive to poor quality as one might expect. Expectations of health services are very low. Relying on demand side pressures to provoke improvements in quality of care would be a long and painful process. Health care demand of the poor is less sensitive to quality than that of the better off This suggests that public resources could be directed to the benefit of the poor by providing lower quality, but minimal standard, subsidized care alongside a private alternative.

This is not consistent with the evidence, presented in Access to Effective Health Care in Developing Countries: Evidence , which shows that the better off invariably get the largest share of the public health subsidy. One explanation is that the better off get better quality care, even within the public sector. In Africa, there is some confirmation of this proposition 16, Strategies to raise utilization of effective interventions.

Raising the utilization of effective health care in the developing world requires more money for health care. It requires that spending is directed to the most effective programs and interventions and that the geographic distribution of these programs does not grossly mismatch that of the population. It requires reforms to management, regulatory, and political mechanisms such that providers face strong incentives to deliver quality health care. These measures are necessary conditions for solving the access problem.

They will ensure that truly effective health care is available. This is not sufficient. Individuals must be willing to use effective preventive and treatment interventions and they must have the purchasing power to realize this desire. How can the demand for health care be increased within resource poor settings? Extending health insurance coverage.

Financing health care through out-of-pocket payments strengthens the constraining effects of current income and price on utilization.

Improving Health Care Efficiency

The constraint is further tightened by the lack of borrowing opportunities. Pre-payment mechanisms, which pool risks across individuals, and credit schemes, which allow risks to be smoothed across time, weaken the household budget constraints on health care demand. There have been repeated calls for a reduction in the reliance on out of pocket financing in developing countries 7, Unfortunately, the legal, tax, and labor market institutions of low-income countries are usually inconsistent with universal pre-payment financing mechanisms.

Employment based social insurance is limited to the formal sector, which can be relatively small and excludes the less well off. Tax finance is limited by the narrowness of the tax base. The process of economic development regulates the movement to universal coverage. Policy initiatives can accelerate the process, however. Thailand introduced universal coverage in , extending coverage to those outside the formal sector for a minimal charge of 30 Baht 70 US cents per visit This is funded from general tax revenues. The impact on utilization is not yet known.

Extending coverage to the whole population outside of the contributory schemes of the formal sector is expensive. A more feasible route for many low-income countries is to use the available tax revenues to extend coverage to the poor. This imposes a lower financial burden but is administratively more demanding, requiring that the poor be identified through a means test. In Colombia, the poor are covered against the costs of primary care and catastrophic events under a scheme funded by all levels of government and through cross-subsidization from contributory schemes Insurance in Vietnam started, in , with compulsory coverage of formal sector employees and voluntary cover targeted at school children and students.

Insurance cover raised the service contact rate and shifted utilization toward care in hospitals and health centers that are covered by the scheme Recently, provinces have been mandated to enroll the poor in the health insurance scheme. Rather than extend insurance cover to the poor directly, this might be achieved indirectly by granting cover based on some characteristic, such as age, that is correlated with poverty. This has the advantage of being administratively easier to implement than a means test, while respecting financial constraints that rule out full population coverage.

Amongst the poor, ill health is concentrated on children. Rich-poor disparities in health are greatest among the young. This suggests that an age-targeted poor oriented health policy should focus on the young Egypt, even more than Vietnam, has targeted health insurance coverage on school children. The policy has raised utilization and reduced rich-poor disparities in use among school children One significant problem is that inequalities in utilization between children attending and not attending school increased. Those not attending school tend to be poorer.

Pooling of risks at lower levels, such as the community, is less constrained by the structure of the economy. There is increasing interest in community financing schemes that are now operating in parts of Africa and Asia These are managed by community groups or nongovernmental organizations NGOs , and essentially pool health expenditure risks at the community level.


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Households pay premiums or these are taken from cooperatives sales. In a few cases, the government contributes a subsidy. Besides administrative capacity, the existence and development of community solidarity is an essential ingredient of success 3,71, The Commission on Macroeconomics and Health recommends that out-of-pocket payments be channeled into community financing schemes to cover community-based delivery of basic curative care, not essential services that are to be universally available and financed centrally 7.

This is to be promoted through co-financing from the national government, backed by donors. Examples of successful community financing schemes suggest these ideas should be given serious consideration. However, experience of application is still rather limited. Evaluations need to be conducted to better identify the ingredients of success, the consequences for health care use and household living standards, and the long-term viability of the schemes Pro-poor price subsides. The extension of health insurance cover is a long-term goal.

At low levels of development, a more feasible policy is to maintain reliance on out-of-pocket payments but to grant exemptions to groups, principally the poor, for which price is a major deterrent to use. Interventions that generate external benefits, such as immunization against infectious disease, should also be exempted. In principle, this approach allows the public expenditure subsidy to be concentrated on those most in need financially, but also medically to the extent that poverty and ill health coincide, rather than being dissipated across the whole population, or even concentrated on the better off as is indicated by the evidence reviewed in Access to Effective Health Care in Developing Countries: Evidence.

The challenges lie in the identification of the poor and the provision of appropriate incentives to providers. Criteria for exemptions must be decided. In addition to the currently poor, those vulnerable to falling into poverty through ill health may be targeted. For example, exemptions might be offered to the poorest quintile, indigenous people, migrants, adolescents, refugees, and the socially excluded e.

Verification of eligibility based on such criteria is a considerable administrative task. There are many examples of fee waiver schemes that have failed to protect the poor and to ensure their access to health care 69, Exemption criteria are often vague, entitlement based on income is difficult to assess, little direction is given on implementation, and potential beneficiaries have poor knowledge of entitlement The result is that local administrators, often the providers of care, have much discretion and little or no incentive to grant exemptions.

In fact, where providers are not compensated for forgone fee revenue, there is an incentive to reject claims for exemptions. Africa, in particular, provides many examples of dysfunctional fee waiver schemes 69,75, One study found one in four of those using care in Zambia were incorrectly denied an exemption Not all the news is bad. Successful fee waiver schemes have solved the difficulties of verification of entitlement and provider incentives.

Health care systems: efficiency and policy settings - OECD

Entitlement cards, issued on the basis of income and granting exemption from user charges at public facilities, separate responsibility for verification of entitlement from that for provision of care. Thailand operated such a scheme prior to the introduction of universal coverage. Crucially, providers were compensated from a special budget. A similar scheme has operated in Indonesia since In this case, providers receive lump sum compensation based on the expectation of induced demand, rather than in relation to actual utilization of cardholders.

The distribution and utilization of health cards is concentrated on the poor, although there is leakage The cards raise utilization of outpatient care by the poor and cause both the poor and non-poor to substitute public for private care. Utilization rises because of the price effect on cardholders, but the supply response to the budget supplement and the consequent improvement in quality has the largest impact on utilization.

Services on Demand

The non-poor largely capture this effect. Tying provider budgets more closely to the utilization of cardholders would increase target efficiency. A health card gives entitlement to care. An alternative is to issue vouchers for the purchase of medical goods and services. In southern Tanzania, pregnant women and mothers of young children are given vouchers that can be exchanged for a discount on the price of a treated mosquito net.

Combined with social marketing, the vouchers help raise the average level and reduce the rich-poor disparities in use of nets In Managua, Nicaragua, female sex workers are issued vouchers that can be exchanged for consultations at private, NGO, and public clinics As these examples suggest, vouchers are most feasible where demand is predictable.

Nevertheless, potential applicability is much wider than is currently realized. Vouchers not only give providers a financial incentive to respond to demand, they can be used to promote competition and enhance quality. Increased use of vouchers is consistent with the switch in the role of the state from provider to steward in the health care sector 7, Government need not administer targeting schemes.

Responsibility can be given to the community and NGOs In a region of Cambodia, hospital care for the poor is paid for from a fund that is financed by aid organizations and administered by a local NGO The NGO verifies eligibility. Hospital fees of eligible patients are covered from the fund and their travel expenses are reimbursed. A key point that emerges from the fee waiver literature is that it is very important to pay attention to the supply side. Providers must be given incentives to meet the demand created by price subsidies.

A fund must be designated and financed to pay suppliers, including those within the public sector, for the care of exempted groups. Using cash rewards to raise utilization. Insurance and price subsidies weaken financial deterrents to health care use. The potency of this strategy is dependent upon the importance of price in determining health care utilization. If poor knowledge, education, or cultural factors are mainly responsible for low utilization, removing price barriers will have little impact on use.

But economic incentives may still be a potent means of overcoming non-economic barriers to utilization. Financial rewards can be used to induce changes in health seeking behavior. In Latin America, there has been increasing use of policies that offer households cash conditional on participation in programs that develop human capital. In relation to health, the approach is practical for preventive interventions, such as immunization, child growth monitoring, and antenatal care 3. Cash payments can be paid directly to women. This increases the financial autonomy of women, which may be exploited to direct household spending toward services, such as maternal and child health care, to which women attach greater priority.

Micro-credit schemes may be expected to have a similar effect, although the evidence in support of this is ambiguous Evidence from evaluations of conditional cash transfers confirms positive effects on utilization 3.

High Performing Health Systems: Key People

Immunization rates have been raised in Nicaragua and Honduras. Health service use, e. In Honduras and Nicaragua, the largest impacts were on the utilization by the poorest households. These are encouraging results and suggest that experimentation with and evaluation of conditional cash transfers ought to be extended to other parts of the world. As with fee waivers, attention needs to be paid to the incentives for providers to respond to the induced demand with quality care. To secure the permanence of changes in health seeking behavior, financial incentives should be combined with information on the benefits of care.

This is a promising area of policy activity. Its potential is, however, limited to preventive care interventions, the need for which is homogeneous or at least can be easily verifiable through observable demographics. Lowering the barrier of distance. Lowering the barrier of distance requires either taking people to services or services to people. Improved transport systems reduce the cost of reaching health care and raise the ratio of facilities to catchment area population 3. Road building is expensive and is not under the control of health sector policymakers. More feasible are schemes that lower the price of travel for health care or provide credit to cover travel expenses.

In Africa, community administered and financed funds facilitate travel for emergency obstetric care and provide emergency interest free loans to cover the cost 83, There is evidence of a positive impact on emergency referral rates 3. The close-to-the-client system proposed by the Commission on Macroeconomics and Health is founded on the logic of bringing services closer to populations. Provision at the level of the community requires either raising finance at this level or allocating funds down to this level.

With community financing, risk pooling is inevitably limited. On the other hand, distribution of funds in relation to the geographic distribution of health needs is a difficult administrative and political exercise. It is demanding of data and vulnerable to distortion through political interference.

Bolivia provides a model of decentralization that has been successful in directing resources toward the poor and improving health outcomes 3. The literature convincingly demonstrates the existence of an access problem. Causes of the problem are also identified: insufficient system resources; inappropriate allocation of resources across levels of care, programs, and regions; inadequate quality; insufficient household incomes; lack of access to credit; prohibitive charges formal and informal ; travel costs; cultural barriers to the acceptability of services; and misperceptions of illness and the effectiveness of care.

Solutions, at a very general level, must address one or more of these causes. The difficulty lies in the design of detailed policy initiatives that tackle root problems within usually severe economic, institutional, and political constraints. Solutions to the access problem need to be further developed at a general strategic level, but more crucially at the level of detailed policy measures. There is consensus support for universal access to essential services, priority to services close to the community but with measures to improve the quality of care, reduced role for the state in the provision of care and strengthening of its stewardship role, targeting of diseases of poverty, and more effective protection of the poor from user charges.

These are really recommendations of policy goals rather than policy instruments. While there is some consensus on the general lines of a strategy for improving access to health care, details of the precise policy measures required to implement such a strategy are more difficult to identify. This is understandable. A general strategy can be defined at the global level, while policy measures should be heterogeneous, varying with the local conditions in which they are implemented. This said, there is scope for more precision in the advocacy of policies to raise health care utilization and to narrow disparities in its distribution.

This precision requires strengthening of the evidence base. Recent initiatives in health financing, price subsidies, and poverty alleviation programs are promising. Community financing, micro-credit schemes, entitlement cards, vouchers, and conditional cash transfers have all been demonstrated to raise health care utilization see Strategies to Raise Utilization of Effective Interventions. But their application is still very limited, both geographically and with respect to the services covered. The common characteristic of these initiatives is that they work through demand side economic incentives.

Community financing and fee waivers implemented through health cards remove, or at least reduce, the constraints of income and price. Micro-credit schemes relax the income constraint from current to lifetime income.


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  • Vouchers reduce the price constraint on demand. Conditional cash transfers provide a positive financial incentive to consume health care interventions. Community financing, micro-credit, and fee waivers provide different degrees of insurance against unforeseen expenditures, although the nature of the risk pooling is different in each case. Health cards and targeted health insurance are financed at the national level and can cover such risks.

    Vouchers and conditional cash transfers are essentially price incentives to induce demand for preventive care for which there is a predictable, easily verifiable need. There may be scope for extending the use of vouchers to low cost, high frequency curative care, such as primary care for small children. Further consideration should be given to the combination of these instruments to cover different needs for preventive and curative, predictable and unpredictable, and high and low cost care.

    Advocacy of these initiatives is necessarily tentative while the evidence base on their effectives remains so thin. Implementation should be accompanied by evaluation for two main reasons. First, post-evaluation, the design of a scheme can be modified to improve effectiveness. Second, the evaluation provides lessons for implementation elsewhere.

    The impact on the average utilization of health services should be identified and differential effects with socioeconomic characteristics tested. Penchansky R, Thomas JW. The concept of access: definition and relationship to consumer satisfaction. Med Care ; Beyond access and utilization: defining and measuring health-system coverage. Health systems performance assessment: debates, methods and empiricism.

    Health care systems: efficiency and policies

    Geneva: World Health Organization; World Bank. The millennium development goals for health: rising to the challenges. Washington DC: World Bank; How many child deaths can we prevent this year? Lancet ; Family and community practices that promote child survival, growth and development. Mortality survey in Bolivia: the final report. Investigating and identifying the causes of death for children under five. Technical Report. Commission on Macroeconomics and Health. Macroeconomics and Health: investing in health for economic development. Weak links in the chain: a diagnosis of health policy in poor countries.

    World Bank Res Obs ; Alderman H, Lavy V. Household responses to public health services: cost and quality tradeoff. Health care delivery in rural Rajasthan. Econ Polit Wkly ; Gwatkin DR. Overcoming the inverse care law: designing health care programs to serve disadvantaged population groups in developing countries.


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