Expenditure management

and efficiency in the

health system

Health Dialogue

10 July 2012

Nairobi

Overview – hypotheses and

questions

1. Critical to improve health service delivery and outcomes in Africa

2. While more funding is required, efficiency of spending or value for money is the key issue

3. Budget reform (or improved expenditure management) is a key element for enhancing value for money

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key element for enhancing value for money

4. Despite widespread implementation of budget reform in Africa, success (especially if measured as sustained improvement in service delivery and social outcomes) seems to have been limited?

5. What are the blockages?

6. How can the dialogue between health and finance help with a way forward?

2. The need for efficiency

Some illustrations

2.1 Technical efficiency

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Source: Osei et al. (2005): “Technical efficiency …in Ghana”

“… 47% of [district] hospitals [in Ghana] were technically inefficient”; 56% of health centres in Kenya; 70% of PHC clinics in KZN, South Africa

Nine hypothetical hospitals

2.2 Need for efficiency: Aids Spending

5

Zeng, et al. (2012) How much can we gain from improved efficiency?

“there may be substantial room for improving HIV/AIDS services at

the country level with the existing resources … where the efficiency

of HIV/AIDS services is low, priority should be given to interventions

to overcome barriers … where performance is already high, efforts

should be geared towards mobilizing more resources”

2.3 Need for efficiency: Allocative

efficiency

� Are we spending on the right things

� THE as % of GDP/Government expenditure

� What are we spending on?

Function (National Health Account

classifications)

Ethiopia

07/08

Kenya

09/10

Tanzania

09/10

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classifications) 07/08 09/10 09/10

% % %

Inpatient care 6.6% 21.9% 19.8%

Outpatient care 35.4% 39.1% 44.3%

Ancillary care 0.1%

Pharmaceuticals (to oupatients) 2.7% 2.8% 2.2%

Prevention & public health 24.6% 22.8% 25.7%

Health Administration 7.9% 9.0% 5.9%

Capital formation 5.7% 3.6% 2.2%

Other 7.7% 0.8%

Not specified 9.1%

Total health expenditure 100% 100% 100%

Source: Tanzania Mainland NHA 2009/10; Ethiopia NHA 2007/08; Kenya NHA 2009/10

3. Expenditure management/ budget reform and efficiency

The promise

3.1 Value chain in health

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3.2 Accountability relationships

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3.3 Budget cycle

Problem Identification

Evaluation

Policy Formulation

Policy Cycle

Classification and

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Evaluation

Budget formulation &

approval

Budget Cycle

Monitoring /Reporting

Prioritisation &

planning

Implementation

Information required to assess

allocative and operational

efficiency

Classification and

information systems

3.4 Budget cycle and efficiency

Macroeconomic

framework/Macro-

expenditure control

Aggregate fiscal

discipline

Budget

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formulation/

expenditure

programming)

Allocative efficiency

Budget execution/

implementation &

monitoring

Operational

efficiency

Source: Shall 2010

4. Components of budget reform

The tools

4.1 The package?

� Change of classification systems & programme budgeting

� Use of performance information

� Medium-term budgeting/Multi-year perspective and costing

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� Relative autonomy of managers and units: incentives

� Execution aspects: management & control; tracking

� A focus on reporting & accountability through range of

mechanisms (audit institutions; Parliament; citizens)

4.2 Classification systems

� Different needs and different budget classifications:

� Historical analysis and policy analysis (international comparative) -

Functional classification such as COFOG

� Accountability and administering the budget – Organisational or

administrative classification

� Compliance controls and internal management - Line-item classification

Policy formulation and performance accountability/policy review -

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� Policy formulation and performance accountability/policy review -

Programme classification. (see Allen & Tomasi 2001/Shall 2010)

� Continue to need line-item for control but emphasis shifting from

“planning for inputs” to planning for outputs (and results and outcomes)

4.3 The Classification of Functions of Government (COFOG)

7 Health

7.1 Medical products, appliances and equipment

07.1.1 Pharmaceutical products

07.1.2 Other medical products

07.1.3 Therapeutic appliances and equipment (IS)

7.2 Outpatient services

07.2.1 General medical services (IS)

07.2.2 Specialized medical services (IS)

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07.2.2 Specialized medical services (IS)

07.2.3 Dental services (IS)

07.2.4 Paramedical services (IS)

7.3 Hospital services

07.3.1 General hospital services (IS)

07.3.2 Specialized hospital services (IS)

07.3.3 Medical and maternity centre services (IS)

07.3.4 Nursing and convalescent home services (IS)

7.4 Public health services

7.5 R&D Health

7.6 Health n.e.c.

Source: http://unstats.un.org/unsd/cr/registry/regdnld.asp?Lg=1

4.4 Programme & economic

classification

Programme R billion % Economic classification R billion %

Administration 2.9 3% Compensation of employees 59.1 58%

District Health Services 43.6 43% Goods and services 30.8 30%

Emergency Medical Services 4.3 4% Transfers and subsidies 3.9 4%

Health spending - South Africa (Provincial depts.) - '2010/11

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Provincial Hospital Services 23.2 23% Payments for capital assets 8.1 8%

Central Hospitals 14.8 15%

Health Sciences and Training 3.4 3%

Health Care Support Services 1.6 2%

Health Facilities Management 8.3 8%

Total 102.0 100% Total 102.0 100%

Source: National Treasury, 2011 Provincia l database

4.5 Programme classification

Programme Million

Rupees%

Economic

classification

Million

Rupees%

Health Policy & Management 599.0 8% Compensation of employees 4,353.4 55%

Curative Serv ices 6,142.0 78% Goods and serv ices 2,012.4 26%

Primary care & public health 926.0 12% Interest - 0%

Health budget - Mauritius, Minstry of Health & Quality of Life 2012

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Primary care & public health 926.0 12% Interest - 0%

HIV and Aids 100.0 1% Subsidies - 0%

Promoting Quality of Life 117.0 1% Grants 197.3 3%

Social benefits 45.0 1%

Other expenses 22.0 0%

Acq. non-fin assets 1,254.0 16%

Acq. financial assets - 0%

Total 7,884.0 100% Total 7,884.0 100%

Source: Mauri tius , Minis try of Heal th & Qual i ty of Li fe - Budget 2012

4.6 Use of performance information

� Performance information needed for resource allocation and management

� Inputs, quantity (output), quality of services, outcome

� Different ways of using in budget process: background information versus actual

basis for allocation

� Challenge of developing useful performance measures – definitional and

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� Challenge of developing useful performance measures – definitional and

measurement issues

� Challenge of building systems to track – health information systems

� Substantial scrutiny through Health Metrics Network: assessment of no of countries on

resources, processes, outputs

� Need: “a policy, a comprehensive plan, coordination mechanisms, sufficient investment,

and a health information workforce”

4.7 Rwanda – performance framework

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4.8 Medium-term budgets

(MTEFs)

� “Multi-year perspective in fiscal planning, expenditure policy and budgeting”

� Predictability as key principle of sound budgeting

� MTEF provides 3 to 5-year forward estimates of expenditureGives more certainty in funding

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� Gives more certainty in funding

� “tool for improving allocation of resources to strategic priorities”

� Integrates policy-making, planning & budgeting� (Top-down) forward estimates of what is affordable (ceiling)

� (Bottom-up) costing of policy

� Process to prioritise and match – balance needs against availability

� Costing as key components. � Estimates of “demand” and cost drivers (population profile; disease patterns)

� Activities and costs going forward

4.9 Autonomy & decentralisation

� Let the manager manage & keep them accountable for outputs

� Local knowledge

� Incentive to innovate & save or extend services

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Incentive to innovate & save or extend services

� Risk of decentralisation and need for monitoring

� Both Rwanda & Ethiopia interesting cases� In both decentralisation identified as political imperative

� Needed public finance reform to ensure oversight

� Positive assessments of progress

• Ethiopia – high ranking in terms of PFM systems

• Rwanda – improvement in health service delivery and achievements – see case study

4.10 Execution aspects

22 From: Lawson et al. (2009) adaptation of PEFA criteria for Mozambique health

4.11 Accounting, recording &

reporting

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From: Lawson et al. (2009) adaptation of PEFA criteria for Mozambique health

5. The impact of reform

Some assessments

5.1 Measuring impact of reform

• Anticipated impact:

• Budget decisions and resource allocations

• Technical or operational efficiency

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• Technical or operational efficiency

• Service delivery outcomes

• Transparency and accountability

5.2 How far have countries gone?L

ES

S C

OM

MO

N M

OS

T C

OM

MO

N

• Different types of performance oriented budgeting

• Performance-reported budgeting

• Presentational performance budgeting

• Performance information is presented in budget documents

• Information on targets or results is included as background information

• Information does not play role in decision making

• Performance-informed budgeting

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LE

SS

CO

MM

ON

M

OS

T C

OM

MO

N

• Performance-informed budgeting

• Resources are indirectly related to future or past performance

• Performance information is taken into account in budget decision-making

process but doesn’t determine the amount

• Performance information is used along other information

• Performance-based budgeting

• Performance-information plays an important role in budget decision-making

• Other information is taken into account

• Performance-information not necessarily determines the budget amounts

• Performance-determined budgeting

• Resources are allocated based on results achieved

From Lievens 2011

5.3 Ranking expenditure management (PEFA): scores for out-turn against approved budget

Ethiopia

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Kenya

Botswana

DRC

http://www.pefa.org/en/dashboard/charts/multicountry

5.4 Impact? the state of health information

28Health Metrics Network (2012) …Current situation & trends

5.5 Assessments of impact

� Lievens (2011)

� Government-wide• Little hard evidence / mostly qualitative evidence

• Empirical focus mostly in OECD

• Mixed results

• Picture emerging: hypothesis is not rejected that if investments are made it can enhance …

efficiency

� Perhaps more sector-specific evidence but impact depends on mechanism & � Perhaps more sector-specific evidence but impact depends on mechanism &

context/Attribution an issues

� Peterson (2010) on Ethiopia:

� Hails Ethiopian success but argues that “”successful public reform is rare in

Africa … Reform of PFM has los its way”

� Andrews (2010) on Africa� “Budgets are made better than they are executed … & practice lags behind

the creation of processes and laws … an implementation deficit”

� The case of South Africa?

� Top the Open Budget Index 2010 (92%)

� Health service delivery and outcomes struggling (for some time)

5.6 Assessments of impact

� Fölscher (6 mini case studies for CABRI 2012):� Burkina Faso: impact “seen by many authors as limited”/”low impact in the first

ten years …”

� Ghana: “ … weak performance budgeting”/ “slow progress to a performance

orientation”

� Mali: by end of the decade “impact of programme budgeting was still seen as

limited”/”monitoring and evaluation remained weak”/”capacity in Supreme

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limited”/”monitoring and evaluation remained weak”/”capacity in Supreme

Audit Institution … poor”

� Mauritius: “need for further work (costing of baselines …)” but “more

collaborative relationships between finance and line”/”budget submissions

have improved”/”budgets more transparent”

� Morocco: improved “quality of budget negotiations” and “particular cases of

service delivery improvement”/in some cases “improved discussions with the

finance ministry in terms of technical content and tenor” – “… ensured that the

focus was on the improvement of service delivery”

� Mozambique: Finance/Planning split “perpetuates weak linkages between

priorities”/ “Warren-Rodriguez identified “weak coordination and weak

planning”

5.7 Assessment of health information systems

� Heath Metrics Network 2011:

� “The findings … on country health information systems are not unexpected.

But they are nevertheless shocking.”

� “We are … realizing that our information systems are not equipped for

accurately tracking to what extent we are on course.”

� “… the basic foundations of a good health information system, i.e.

are inadequate in many countries.”

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are inadequate in many countries.”

6. Identifying blockages and the way forward

How to structure the dialogue between health & finance going forward

6.1 What are the blockages?

� Suggestions form the literature

� Too much focus on change (& too many cooks)

(Peterson)

� Too little focus on support and training (Peterson?)

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� Technique over context/too much similarity

(Andrews)

� Too much “concentration”/focus on the centre

(Andrews)

� Needs of the centre/centralisation

6.2 Way forward?

� Is the assessment correct?

� Is the assessment useful?

� Do we need to do things differently going forward?

� How?

� Some possible suggestions:

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� Some possible suggestions:

� Working country and sectoral context into reform (recognise/improve/sustain – sometimes change - Peterson)

OR “addressing a locally defined problem” (USAID 2010)

� Respond to the needs of providers

� (An absolute commitment to decentralisation)?

� Focus on political imperatives & respond to those

� Start with the basics

� Not going far enough? RBF or P4P – Case study focus on Rwanda