Heathcare Financing and Health Outcomes in the Global Context

During Week XI we discussed healthcare financing and health outcomes in the global context. I presented on performance based financing in health care based on the article Making Health Care Accountable: Why performance based funding of health services in developing countries is getting more attention by Hecht, Batson & Brenzel, published in 2004 in Finance & Development. The article discusses the increasing importance of performance based financing, which refers to efforts to link international aid money for health to concrete, measurable results on the ground. PB financing was pioneered by Global Alliance for Vaccine & Development GAVI, The Asian Development Bank, and USAID.

Governments in developing countries and their international partners are increasingly becoming more interested in performance-based health financing for three reasons: including Achieving the MDGs, increasing the effectiveness of aid resources, and increasing accountability.
Achieving the health MDG's: governments and donors are interested in funding programs that have measurable results toward health MDG’s & results are closely tracked for MDG achievement, for instance if immunization & fast treatment of pneumonia decreases # of child deaths (a health MDG) programs that combat respiratory disease are more likely to get funded.
Increasing Effectiveness of Aid Resources: Donor agencies want to increase effectiveness of aid money by allocating them to countries/programs that can demonstrate progress as measured by performance indicators
Accountability: If financing is dependent on performance results, providers are more likely to produce results.

Types of Performance-based financing in health include:
Performance-based contracts with NGO’s where governments in Low Income Countries fund NGO’s to deliver basic-health services on a performance basis. NGO's performance is measured against various indicators, i.e. immunization coverage, % of families using ORT and bonus structures are in place to reward NGO's for performance beyond the negotiated budget. Guatemala presents a success story in large scale contracting with 80 NGO's to provide basic health services to 3.7 million indigenous people, which resulted in a rise in immunization rates from 69% in 1997 to 87% in 2001.

Another type of PB Financing is accomplished when the central government makes per capita transfers of funds to local municipalities based on the municipality's performance in strengthening the health system.

The third type of PB financing is done through the mechanism of direct donor disbursements to national governments based on performance results. GAVI provides an excellent illustration of this type of PB financing. GAVI provides commodity assistance to countries in the form of new & underused vaccines and safe injection supplies. GAVI further allocates grant funds to countries that increase coverage rates for vaccinations. For instance, in 2004 GAVI gave $15 million each to 10 different countries for achievements in increasing immunizations particularly for DPT3 vaccine. The way this mechanism works is low income countries apply to GAVI, specifying current immunization coverage levels & at the end of the year countries receive $20 for each additional child immunized above the baseline level. GAVI verifies the country's performance based on externally audited data.

Performance based financing can help stimulate countries/providers to expand their coverage to reach poor people who lack access to health care and help enhance the quality of service delivery. PB financing is also helpful in focusing all parties on services produced, rather than inputs such as drugs, number of hospital beds etc.

There are a number of challenges that developing countries face in implementing PB financing, including difficulty of measuring performance quickly & accurately, quality & comprehensiveness of national monitoring systems to track health performance, and lack of Ministry of Health capacity to design, negotiate, and enforce performance contracts with NGO's.

Performance based financing, if designed and executed properly can result in accountability for international aid money and change in health status of people in developing countries and will become the standard in health care financing.