Cost Recovery in the Health Care Sector Public Disclosure Authorized Selected Country Studies in West Africa

______WTP821 ______1988 rCAtL. May WORLD EANK 'F-ECHriNi -A' NM\f, B E8

Ronald J. Vogel Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

'62 FILE 0PuY .A358

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(List continues on the inside back cover) WORLDBANK TECHNICALPAPER NUMBER 82

Cost Recovery in the Health CareSector Selected Country Studies in West Africa

Ronald J. Vogel

SECfOPRAL LIBRARY INl ERNA iIONAI, BANK F-OR RECON SIR, Cl ON4 AND ODEVELOPMENT APR 2 1990

The World Bank Washington, D.C. Copyright C) 1988 The International Bank for Reconstruction and Development/THE WORLDBANK 1818 H Street, N.W Washington, D.C. 20433, U.S.A.

Technical Papers are not formal publications of the World Bank, and are circulated to encourage discussion and comment and to communicate the results of the Bank's work quickly to the development community; citation and the use of these papers should take account of their provisional character. The findings, interpretations, and condusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. Any maps that accompany the text have been prepared solely for the convenience of readers; the designations and presentation of material in them do not imply the expression of any opinion whatsoever on the part of the World Bank, its affiliates, or its Board or member countries concerning the legal status of any country, territory, city, or area or of the authorities thereof or concerning the delimitation of its boundaries or its national affiliation. Because of the informality and to present the results of research with the least possible delay, the typescript has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to Director, Publications Department at the address shown in the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to photocopy portions for classroom use is not required, though notification of such use having been made will be appreciated. The most recent World Bank publications are described in the catalog New Publications,a new edition of which is issued in the spring and fall of each year. The complete backlist of publications is shown in the annual Index of Publications,which contains an alphabetical title list and indexes of subjects, authors, and countries and regions; it is of value principally to libraries and institutional purchasers. The latest edition of each of these is available free of charge from the Publications Sales Unit, Department F, The World Bank, I8I8 H Street, N.W, Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'lkna, 75116 Paris, France.

Ronald J. Vogel, an associate professor of management and policy and of economics at the University of Arizona, was a consultant to the World Bank's Population, Health, and Nutrition Department and is currently a consultant to the Bank's Africa Technical Department.

Library of Congress Cataloging-in-Publication Data Vogel, Ronald J. Cost recovery in the health care sector : selected country studies in West Africa / Ronald J. Vogel. p. cm. -- (World Bank technical paper. ISSN 0253-7494 ; no. 82) Bibliography: p. ISBN 0-8213-1051-8 1. Public health--Africa, West--Finance. 2. Public health- -Africa, West--Cost effectiveness. I. Title. II. Series. RA552.W5V64 1988 338.4'33621'0966--dcl9 88e-12093 CIP - iii -

ABSTRACT

Despite the improvementsin health achieved in Sub-SaharanAfrica over the last twenty years, health status in the region remains the worst in the world. Many deaths are still attributableto causes which could have been avoided through the provision of simple appropriatecare. The recession and growing budget deficits,however, dictate against increased public spending to improve the quality and coverage of health services,and in fact, in many countries,health budgets are declining, in both real and relative terms. Additionally,supplies of drugs and equipment are diminishingdue to import restrictionsimposed in response to the economic difficulties. These problems, in conjunctionwith a longstanding inefficiencyin the allocationof health resources,posea serious resource challenge for Africa. Continuinggains will depend, in large part, on improvementsin the efficiency and equity of health systems and in developingnew ways of financingservices.

This study, in an effort to describe the status of health financingin West Africa, examines the health financingexperience in Senegal,Mali, Cote d'Ivoire and Ghana. In all four countries the examinationfocuses principallyon cost-recovery,resource allocation issues, and the status of health insuranceand other risk spreading mechanisms.

Cost-recovery,in the form of patient user charges, is seen as one means of solving some of the efficiencyand equity problems in the health sector, as well as a means for providingadditional resources. Analysis of the cost-recoveryexperience in all four countries reveals that: (i) payments for drugs and medicationsconstitute the bulk of cost-recovery revenue; (ii) people are willing to pay for health care, particularlyif they perceive improvementsin quality; (iii) cost-recovery,while having the potential for generatingmuch needed resources,is currentlynot well administered;as a result, significantrevenue is lost due to overly generous exemptionsfrom user charges and misappropriation. Examinationof the allocation of financialresources for health care reveals that, although progress has been made towards more cost-effectiveallocation, current public spending remains stronglybiased towards complex curative services delivered in urban hospitals, and towards salary over non-salary expenditures. Finally, while interest in establishinghealth insurance systems is growing in the countries studied,private health insurance,as yet, barely exists. The Francophonecountries operate limited public insurance schemeswithin their Social Security Systems, but these are poorly structuredand much work needs to be done on design and actuarial issues.

Recommendationswhich flow from the study findings include:(i) some financial autonomy,through cost-recovery,should accompanyprograms to decentralizegovernment health care systems; in all four countries, it appears that without this financial autonomy,administrative autonomy is difficult to achieve; (ii) as alluded to above, and as illustratedin the experiencesof the church missions, cost-recoverymust be preceded by improvementin the perceivedquality of services; (iii) experience in the countries studied reveals that to ensure equitableand efficient allocation of services,cost-recovery programs should be phased, beginning first with charges for drugs and tertiary level care. - iv -

ACKNOWLEDGEMENTS

The author thanks Ishrat Z. Husain for the generous support that she provided for facilitatingevery aspect of this study. Dennis Mahar originally conceived the idea for the study,andprovided advice and encouragementthroughout its course. Nancy Birdsall, Zafer Ecevit and Richard Skolnik read early drafts and gave comment. Howard Barnum, Lisa Collis, Charles Griffin, Eleanor English, Emmanuel Jimenez, Mead Over, Emmerich Schebeck, and Aubrey Williams read later drafts and contributednew insights. Bruce Carlson, Mead Over and Aubrey Williams helped point the way in these countries in which they acted previously as project officers. Fabiola Bishop, Karol McClelland,Catherine Purcell, and Helene Stephan typed the manuscriptwith dedicationand care. While credit must go to all of these persons, the author alone assumes full responsibilityfor what follows. PREFACE

In recent years, public health expendituresin many African countrieshave declined as a share of national governmentbudgets. In response to growing concern about this decline, this publicationaddresses the need to safeguardfunding for public health services through the mobilizationand efficient allocationof resources. Policies for achieving both of these objectives are considered,including policies to encourage the expansion of quality private health services,particularly within the non- profit segment of the private sector, and policies to implement equitable cost recovery.

This study is the result of work begun in January 1987. The purpose of the study was to examine the allocationof funds for health care, and the current status of health-carecost-recovery policies in the four West African countries of Senegal,Mali, Cote d'Ivoire and Ghana. In each country, extensive study was made of existing documentationpertaining to health-care finance and cost-recoverypolicies, in conjunctionwith lengthy field interviewsof key personnel in Ministries of Health and Ministries of Planning, and with health care personnel in the private sector. The countries selectedwere chosen to afford a broad range of experiencewith regard to health services development,and level of cost-recoveryactivity.

This study has been designed to help health planners and policymakersto devise more efficient resource allocationmechanisms within governmentalhealth systems, and to achieve greater efficiencyand equity, includingthe use of cost recoverymechanisms.

/Z /

Hans Wyss Director TechnicalDepartment Africa Region

- vii -

TABLE OF CONTENTS

EXECUTIVE SUMMARY ...... 1

I. GENERAL CONSIDERATIONS ABOUT THE ALLOCATION OF FINANCIAL RESOURCES FOR HEALTH CARE ...... 11

The Conceptual Framework ...... 11 The Economic Framework ...... 14

II. COST RECOVERY POLICY IN SENEGAL ...... 30

Background ...... 30 Data on the Status of Cost Recovery in Senegal: A Macroeconomic Perspective ...... 31 A Descriptive Analysis of the Evolution and Current Practice of User Charges in Senegal...... 34 Analysis ...... 48 Concluding Observations ...... 51 Health Insurance in Senegal...... 51 The Private Health Care Sector ...... 53 Decentralization of the Health Care System ...... 56

III. COST RECOVERY POLICY IN MALI ...... 57

Background ...... 57 A Descriptive Analysis of the Evolution and Current Practice of User Charges in Mali ...... 64 Cost Recovery in the National Hospitals ...... 64 Cost Recovery at the Regional and Local Level: Kita, Bafoulabe and Kenieba ...... 68 Medecins Sans Frontieres: The Magasins-Sante ...... 76 Analysis ...... 79 Concluding Observations ...... 82 Health Insurance in Mali ...... 83 The Private Health Care Sector ...... 84 Decentralization of the Health Care System ...... 84

IV. COST RECOVERY POLICY IN THE COTE D'IVOIRE ...... 87

Background ...... 87 The Administrative System in the Health Care Sector in COte d'Ivoire: Background for Cost Recovery ...... 93 - viii -

A Descriptive Analysis of the Evolution and Current Practice of User Charges in the C6te d'Ivoire ...... 97 Cost Recovery in 1986 and 1987...... 103 The National Public Entities (E.P.N.) ...... 103 The Antitubercular Centers (C.A.T.)...... 109 Analysis ...... 111 Concluding Observations ...... 114 Health Insurance in the Cete d'Ivoire ...... 115 The Private Health Care Sector...... 117 Decentralization of the Health Care System ...... 125

V. COST RECOVERY POLICY IN GHANA ...... 126

Background ...... 126 A Descriptive Analysis of the Evolution and Current Practice of Cost Recovery in Ghana ...... 134 Analysis ...... 145 Concluding Observations ...... 147 Health Insurance in Ghana ...... 149 The Private Health-Care Sector...... 151 Decentralization of the Health Care System ...... 156

VI. SUMMARY AND CONCLUSIONS: WHAT WE HAVE LEARNED AND POLICY RECOMMENDATIONS...... 159

The Allocation of Financial Resources for Health Care ...... 159 Cost Recovery Policy ...... 161 The Structure of Health Care Prices and Revenue Collected ... 162 Patient Reaction to Cost Recovery...... 171 Equity Aspects ...... 172 Administrative Problems and Collection Costs ...... 174 Health Insurance, the Private Sector and Decentralization ...... 177 Policy Recommendations ...... 181

ANNEX ...... 187

REFERENCES ...... 189 - ix -

Tables

I-1 Real Gross National Product ...... 16 I-2 Real Gross National Product Per Capita ...... 18 I-3 Consumer Price Indexes...... 19 I-4 Real Government Health Expenditures...... 21 I-5 Real Government Health Expenditures Per Capita ...... 22 I-6 Index of Constant Per Capita Government Health Expenditures...... 23 I-7 Government Health-Expenditure Effort Index ...... 24 I-8 The Allocation of Health-Care Resources...... 26 I-9 Basic Health-Status Indicators...... 28

II-1 National Budget, Ministry of Health Budget, and Composition of Ministry of Health Budget .32 II-2 Financial Participation of the Population in Health Activities, 1985 Balance Sheet...... 33 II-3 Operating Costs (Recurring Costs)...... 40 II-4 Breakdown of Operating Costs According to Origin of Funds, 1975-85.41 II-5 Breakdown of Operating Costs According to the Use of Funds, 1984.42 II-6 Rate Charged by Type of Service and by Type of Patient, St. Louis Hospital, 1987...... 44 II-7 1986 Budget Implementation, Hopital Principal ...... 54 II-8 Price List for the Hopital Principal in Dakar ...... 55

III-1 The National Budget and the Health Budget ...... 58 III-2 Breakdown of Actual Health Expenditures in 1985 By Source of Financing and By Spending Unit ...... 59 III-3 Budget Data for the MPHSW, 1981-1985...... 60 III-4 Data on Personnel Expenses as a Percent of the MPHSW Budget, 1981-1985.61 III-5 Health Care Prices in Effect in Health Centers of Kita, Bafoulabe and Kenieba .70 III-6 Health Financing Statistics for the Center at Kita .71 III-7 Health Financing Statistics for the Center at Kenieba .73 III-8 Health Financing Statistics for the Center at Bafoulabe .74 III-9 Organizational Table for the National Social Welfare Institute.85 IV-1 Government Recurrent Budget and Ministry of Health Recurrent Budget: Cote d'Ivoire...... 89 IV-2 Household Expenditures on Health Care: Cote d'Ivoire, 1985. 90 IV-3 Cote d'Ivoire: Units and Operations Subsidized by the Ministry of Public Health and Population ...... 102 IV-4 Cote d'Ivoire: Summary Budgets of National Public Entities, 1986 and 1987...... 104 IV-5 Public Health Pharmacy: Revenue Sources, 1987 ...... 105 IV-6 Activities of Insurance Companies in Cote d'Ivoire.118 IV-7 Imports of Medications and Other Pharmaceutical Products into Cote d'Ivoire ...... 119 IV-8 Public and Private Health Care Facilities, Cote d'Ivoire, 1987...... ------121 IV-9 Public and Private Health Care Physicians and Dental Providers in the Cote d'Ivoire . 122

V-1 Nominal and Real Total Government and Health Expenditures, and Average Monthly Government Salary, Soci4l Services. 127 V-2 Effects of Embargoes and 1986 Salary Increase on Wage and Non-Wage Components of Recurrent Expenditures, 1985-1986...... 129 V-3 Organizations Subsidized by the Ministry of Health ...... 131 V-4 Drug Supplies: Requirements vs. Foreign Currency Allocations ...... 132 V-s Cost Recovery ...... 135 V-6 Revenue Returns (Hospitals FY) Ministry of Health, 1986 . 137 V-7 Revenue Returns, Ministry of Health, Greater Accra Region .139 V-8 Revenue Returns for December 1986, Ministry of Health, Ashanti ...... --. 140 V-9 Revenue Returns, Korle Bu Hospital...... 142 V-10 Komfo Anokye Teaching Hospital, Comparative Schedule of Monthly Revenue Collections by Service Centers for 1986...... 143 V-ll Summary, Health Facilities by Region as of June 1985 ...... 152 V-12 Summary, Distribution of Bedstates by Ownership...... 153

VI-1 Price Structure, Government Health Sector ...... 163

Figures

I-1 Public Funds Available for Health Care Over Time...... 12 I-2 Basic Questions for Health Care Finance...... 15

III-1 Regional Government Organizational Chart ...... 69 - xi -

IV-l Public and Private Demand for Health Care in Periods Ti and T2...... 91 IV-2 OrganizationalChart of the Ministry of Public Health and Population,May 30, 1984.94 IV-3 Public Establishmentsof An AdministrativeNature .95 IV-4 Public Establishmentsof An Industrialand CommercialNature . 96 IV-5 Circular of the Ministry of Public Health and Population. 98 IV-6 The C.H.U., New Hospital Rates. 100 IV-7 Certificateof Ivoirien Citizenship. 110

V-1 OrganizationalChart of the Ministry of Health. 157

EXECUTIVE SUMMARY

Health has both consumptionand investment aspects that are highly importantwithin a developmentalcontext. Additional investments in producing a healthier population should generate a higher quality of human capital that should enhance the possibilityof further development. Equally, if developmentis defined in terms of increases in consumption,or in human welfare, then greater amounts of healthy time available to the population should enhance human welfare.

Although it has often been said that health does not have a price, governmentseverywhere have come to the painful recognitionthat health does have its costs. That is to say, that the inputs for producing better health are scarce economic resources that must be paid and financed. One major determinantof the amount of real resources available for government expendituresupon health care is the strength of the underlying economy.

THE CURRENTSTATE OF AFFAIRS IN THE ECONOMYAND IN THE HEALTHSECTOR

The deterioration of financial resources. Beginning in 1977, the data show that the economies of all four countries (Senegal,Mali, Ghana and the Cote d'Ivoire)have grown slightly,but that there have been some ups and downs during the nine-year period. In this respect, the experience in the Cote d'Ivoire has been the most striking. Real GNP rose from $5.7 billion in 1977 to $9.3 billion in 1980; it then steadily declined to $5.7 billion again in 1984, but rose slightly to $5.9 billion in 1985. GNP also tended to decline or level off in Senegal, Mali, and Ghana after 1980, but all four economies experiencedan upturn in 1985. The primary causes of these declines in the 1980s have been the slowdown in economic activity brought about by severe droughts in the region, the worldwide recession in the early 1980s, and the unfavorableterms of trade that these countries have had to face for their agriculturaland mining products. At the same time, the populations in these countries have continued to grow at rates of about 3 percent per year. Between 1977-85, GNP per capita actually declined in two cases (Mali and the Cote d'Ivoire), and rose slightly in Senegal and Ghana.

The deteriorationof resources available for government financing of health care. By 1985, the real value of Governmenthealth expenditures was less than in 1980. As with the GNP, as a result of high population growth rates, national per capita health expendituresdeclined at a more rapid rate than total health expendituresin many countries. In the case of the Francophonecountries, the decline has been rather steady. Between 1980-85, real per capita governmenthealth expendituresfell 49.4 percent in Senegal, 30.4 percent (1981-85)in Mali, 53.0 percent in the Cote d'Ivoire, and 33.7 percent in Ghana. Ghana shows a somewhat less stable pattern of decline due to changes in government and vacillationsin budgetary policy. Finally, data on the percentage of per capita GNP spent by the government on health (expenditureeffort) in each country show that, in 1985, Cote d'Ivoire made an expenditureeffort of 1.09 percent. Mali, which is the poorest of the four countries in terms of GNP per capita, made an - 2 -

expenditureeffort of 0.79 percent. Senegal spent 0.75 percent and Ghana spent the least at 0.70 percent.

THE ALLOCATION OF RESOURCES IN THE HEALTH CARE SECTOR

Data with respect to the allocation of financial resources for health care in each country show many similaritiesbetween the countries. With the exception of Ghana, health expendituresas a percent of total central government spending have fallen over the last few years. It is difficult to characterizea trend in Ghana's expenditures,as fluctuations have been so dramatic; health expendituresas a percent of total government spending fell in 1982 and 1983, but then increased significantlyin 1984.

In analyzing governmenthealth budgets, trends show that investmentexpenditures on health as a percent of the total annual health budget have increased. Part of this increase,no doubt, reflects growing donor interest in human capital projects in general, and in health in particular. Within the recurrentbudget, the percentage expended for drugs and supplies declined between 1980 and 1987, whereas, percentage expendituresfrom the recurrentbudget for salaries increased, except in Senegal where they have slightly declined; by the mid-1980's, they ranged from 67.4 - 76.0 percent of the recurrent budget. The best proxy measure that could be obtained for the allocation of financial resources between curative and preventive care was the percent of the health budget spent on hospital services. This percentage ranged around 50 percent for all four countries. The percentage of each country'spopulation living in urban areas ranged from 19.0 percent in Mali to 44.0-50.0 percent in the Cote d'Ivoire; the percent of public health expendituresin the urban areas ranged from 80 to 89 percent. Thus, in all four countries, there is a large discrepancybetween the percentage of the population living in urban and rural areas and the percentage of public health funds spent upon them. Estimates for private health expendituresas a percent of total health expendituresfor Mali and Senegal indicate that 54.0 percent of all health expendituresin Mali were private, while the percentage for Senegal was 38.9. In Mali, 42.0 percent of private expenditureswere for drugs and 12.0 percent were for "other;"the respectivepercentages in Senegal were 22.8 and 16.1.

COST RECOVERY POLICY

Due to equity concerns, all four countrieshave manifested a certain amount of ambiguity about the ultimate role of cost recovery in the government health care sector. But, it is becoming increasinglyclear to -3- most policy-makersthere that some amount of cost recovery is absolutely necessary if an acceptable level of health care provision is to be maintained in the public sector. It is also becoming clear that cost- recovery is practicable. With the exception of Mali, which only legalized the private for-profit practice of medicine in 1987, the private for-profit sector in these countries has had to practice cost recovery as a condition of existence. In all four countries, church missions seem to have been successful in covering a large percentage of their operating costs with user charges for a population similar to that served by the Government. In many quarters, the church mission experience provides a reasonablemodel for defining the poor who would be exempted from paying, and a model for a standard of quality to be maintained and nourished by the revenue available from user charges.

The major policy questionwhich remains in each of the four countries concerns the pace at which cost recovery ought to proceed. Associated issues of importance can be roughly grouped under the following four broad headings: (i) the structure of health-care prices and the amounts of revenue collected, (ii) patient reaction to cost recovery, (iii) equity aspects, and (iv) administrativeproblems and collection costs.

The structure of health care prices and revenue collected. Present price structures in the government health care sector reflect the prevailing political philosophiesin each country studied, and even in each region, if pricing decisions are made at the local level as in Senegal and in Mali. Each country has had a basic piece of enabling legislation that set the subsequent tone for the pricing structure in existence in mid-1987. Typically, the base legislationspecified prices (i) by service level (health post vs. health center, etc.), (ii) by treatment location (urban vs. rural), (iii) by age (childrenvs. adults), and (iv), in the case of hospitals, by service category (first class vs. second class, etc.). Ghana's law further differentiatesbetween Ghanaians and non-Ghanaians,with non-Ghanaiansgenerally paying three to five times the price paid by Ghanaians.

In all four countries, but particularlyin the Francophone countries, the laws, or amendments to them, contain relatively long lists of categories of persons who are fully or partially exempt from paying the mandated fees, the stated purpose of which is to preserve equity. However, one large identifiablegroup receivingpreferential treatment, whether that be in price reductions,or in who pays for them, is government employees. The stated purpose of the exemptions is to preserve equity. But, many of the exemptions, as in the case of those for governmentworkers, probably work against vertical equity. Furthermore,these exemptions have an important effect on total revenue. For example, due to the wide range of exemptions allowed under current legislation,the national Point G. Hospital in Mali had to provide 69 percent of all its 1986 patient days of hospitalizationwithout charge. User charges are usually collected by sellers of tickets at the entrance of health-care facilities,or at the entrance to well-defined services, in the case of hospitals.

Ghana is the only country of the four in which the cost-recovery program is systematicallyapplicable across all public health care facilities. In Senegal, cost recovery is mostly practiced at the primary -4- level of the system and governed by local committees;cost recovery has only recently begun at some regional hospitals, but at the large national hospitals,there is no cost recovery. The result of this policy in Senegal is that it gives the wrong signals from a systemic perspective. To illustrate,a person might not seek care at a health center in Pikine, a suburb of Dakar, where he/she must pay for that care, when he/she can easily take a bus into Dakar and receive free care from the Dantec Hospital.

Given this asymmetry in user charge policy, hospitals such as Dantec are operating at more than 100 percent of capacity, while local treatment facilitiesare underutilized. This, in turn, drives investment policy; almost half of the projects in Senegal's three-yearinvestment plan are for renovationsor additions to the Dantec Hospital. About 50 percent of the government recurrenthealth budget is spent on hospitals in Senegal. Given the dominance of hospitals in the Senegalesehealth care system, revenue and system-balanceconsiderations indicate that user charge policy should begin at the hospital level and work downward through the system rather than the way it has been done up to now.

Both Mali and the Cote d'Ivoire have begun cost recovery at targeted national hospitals,but have not pursued cost recovery at the local level, with the exception of a project in the Kayes region in Mali. Due to this selective applicationof cost recovery, total revenues have been low. Estimated cost recovery receipts, as a percentageof the recurrent health budget in 1986, were as follows: Senegal, 4.7 percent; Mali, 2.7 percent; Cote d'Ivoire, 3.1 percent; and Ghana, 7.9 percent.

Patient reaction to cost recovery. Ministry officials in all four countries believed that there would be some resistanceto price changes, particularlyfor non-emergencycare and care for the poor, and that is why these countries have been so cautious in their approach to cost recovery. Observers in all four countrieswere unanimous in their appreciationfor the interactionbetween price and the quality of care. In each country, the relatively long-standingexperience of the church-missionfacilities gives fairly conclusiveevidence that people will pay for quality health care. Governmentsalso recognize that, in general, the quality of care in government facilitiesis inferior to that in the private sector or mission facilities,and thus are concerned about raising the level of quality so that people will be willing to pay user charges at government facilities.

The question always arises as to which should come first, cost recovery or improvementsin quality. Given the constraintsimposed by the high costs of recurrent financingin these four countries,it is unreasonableto expect immediate improvementsin quality without cost recovery. Limited cost recovery,with the quality of care held constant, is made possible by the fact that the demand for many kinds of curative care is not very price sensitivewithin some range of prices. Observation also indicates,however, that if quality of care does not improve relatively rapidly, with an appropriateamount of publicity about these improvements, after the impositionof the cost recovery,the cost recovery/quality improvementeffort will quickly lose credibility. Long-standingexperience at the mission hospitals, such as at the ProtestantHospital at Dabou indicates that with a properly administeredcost-recovery program, one can expect a fairly rapid accumulationof funds. If the cost-recoveryfunds are - 5 -

then allocatedproperly, quality does improve and patients become more willing to pay user charges.

Equity aspects. It seems indeed ironic that almost every government official expressed concern for the poor in discussing changes in user charges, but at the same time freely admitted that the existing pattern of expenditurewas extremely inequitable. Much of the inequity in the situation is due to the fact that taxes in these countries are roughly proportional,or slightly regressive to income, while much health care has been, in effect, free to everyone and more accessible to upper-income groups. Moreover, one of the greatest obstacles to increased total user charge revenue is the large number of people who are exempt from the payment of user charges, at least in the Francophonecountries. If the pattern of exemptions varied inverselywith income, they could be overlooked,but it is precisely those groups who would seem to have the relativelyhigher and more stable sources of income, such as government employees, who are most often the beneficiariesof these exemptions.

Every society has its definition of who are the very poor, and, as they embark on user charges, the four countries in this study are trying to cope with that definition for purposes of charging for health care. They have all tried issuing certificatesof indigence,but any meaningful investigationsprior to the issue of the certificatesare mostly precluded because of the high cost involved. At the local rural level this has not been as severe a problem because everyone seems to know everyone else and their affairs. For example, even at a relatively large institution such as the ProtestantHospital at Dabou in the Cote d'Ivoire, administrators were fairly confident that they were making the right choices as to who was really poor and who was not, and charging accordingly. In large urban areas, the relative anonymity of the populationmakes identificationmore difficult, but area of residencewithin the urban metropolis may be one signal of indigence. In practice, then, this means that some public health care facilitieswithin urban areas will have a higher percentage of clients who will be exempted from payment than facilities in more wealthy areas.

Equity issues in cost recovery cannot be ignored. Medicus Mundi of Belgium recently reported on a study conducted by the health center in Kita, Mali. This report noted that the proportion of hospitalizationsfor children (O to 10 years) is small relative to the proportion of hospitalizationsfor adults in the age group 25-45 years old. Moreover, the average length of a hospital stay for a child was less than one day and nearly a third of the hospitalizedchildren died. It is thought that the majority of these deaths could probably have been prevented, if earlier care had been sought. One plausible explanationfor the delay in seeking care is that the cost of paying for the care may have been considered unaffordable by the childrens' families.

Administrativeproblems and collectioncosts. In the four countries studied, the amounts of revenue raised appear to be a function of the vigor with which cost recovery is pursued at the national and local level, and of the competence and commitment of local administratorsin charge of the health-care facilities. In each country, there were striking differencesbetween the amounts of revenue raised by weak administratorsand those raised by strong administrators. 6-

Some of the necessary conditions for successfulcollection appear to be: (1) well-defined entrance points, whether they be at the entry gate of the health care facilitiesthemselves, or at the entry point for each service at larger institutionssuch as hospitals; (2) the issuance of some paper instrument, such as a ticket,with duplicate copies, that serves both as a proof of payment and as a management control device; (3) a tightly controlledmechanism for ascertainingwho are the truly poor and who are not, and the elimination of exemptionson any other basis; (4) careful indoctrinationof the care-givingstaff ensuring that treatment is not rendered unless a ticket or certificateof indigence is produced by the patient; (5) spot checks by someone in an accountingor administrative capacity to ensure that steps (1) through (4) above are constantlybeing observed by all of the staff; and (6) periodic audit of all of the financial transactions. While these conditionsmight appear cumbersome,there is nothing in them which any, financiallysound, commercial enterprisewould not put into practice, except for step (3), the equity check.

Probably the most difficult administrativeproblem relates to collectionincentives. In the Cote d'Ivoire, all cost recovery revenue must be remitted to the Ministry of Finance. In Senegal, at the hospital level, revenue goes to the Ministry of Finance, with the exception of revenue collected from moderately poor patients, a group recently added into the cost-recoveryprogram. Revenues collected from this group is retained by the hospital. User-cost revenue in Mali is remitted to the Ministry of Health. Ghana's system allocates 50 percent of collected revenue to the Ministry of Finance, 25 percent to the Ministry of Health and 25 percent to the facility doing the collecting. The theory of public finance argues that all governmentrevenue should go to one central government authority such as the Ministry of Finance, and that central governmentexpenditure decisions, at the margin, should not be based upon sources of revenue, but upon areas where there is the highest social rate of return. The problem with the theory is that it ignores collection incentives,and is more aptly applied to tax revenues than to government sales.

If health care user fees are really prices that people pay, the area under the demand curve measures the private value (rate of return) that people place upon these services. If the private value is close to the social value, as in curative care, and that value is high, as expressed in willingness to pay, then the revenue from prices ought to be returned to the entity supplying the service for a price. Allocatory formulae for revenue collections,such as those used in the four countries,are conceptually similar to and have the same incentiveeffects as an income tax. In the Cote d'Ivoire, Mali, and for a portion of the revenues from hospitals in Senegal, this amounts to a 100 percent "tax' on the user charge income of the care-giving entity. In Ghana, the "tax" rate is 75 percent. These "taxes"have incentiveeffects on economic behavior. Incentivesdo matter, and if Ministry officials ignore incentives,they ignore them to the peril of revenue collection.

A final administrativeproblem relates to equity considerations. Within each country, different regions have different economic bases. Equity considerationsindicate that some form of cost-recoveryrevenue- sharing should probably pass between regions of differing economic strength. - 7 -

HEALTH INSURANCE, THE PRIVATE SECTOR, AND DECENTRALIZATION

Cost recovery is only one of the reforms that must be pursued, if the financing of health care is to be rationalizedin these countries. One illustrationof the limits of cost recovery is revealed by the fact that, in all four countries, in those hospitalswhere cost recovery was pursued vigorously, it was difficult to get people to pay for their hospital bills, particularlyif the hospital stay was protracted. Obviously, some form of risk sharing is needed.

In the four countries studied, private insurance, in the form of fire protection and maritime insurancehave slowly been developing. Except in the case of the Cote d'Ivoire, however, private health insurance does not exist. In part it does not exist because there was no demand for it, given that Government provided "free" health care, and in part because the provision of such insurance is actuariallyrisky in the African context, given the lack of reliable data on the incidence of illness and on treatment costs.

Ghana is looking into a form of National Health Insurance, in which the financial risk involved would be borne by private insurers, rather than by the government. The three Francophonecountries have each adopted their own version of the French Social Security System including a health insurance component that to varying degrees covers the formal labor market. But, in all three countries, the Social Security Systems are experiencing financial difficulties. These difficultiesarise primarily because the structuraldesign of these systems does not cope well with the financial asymmetry inherent in the African family structure,wherein one family member participatesin the labor force, paying the premium, but many members of the large extended family are insurance dependents.

In all four countries, government employees are more or less insured, either because their Ministry pays their health care bills, or because health care facilities do not succeed in collecting their bills from government employees, or because government employees are exempt from paying. As these four Governmentscontinue to pursue cost recovery, the demand for health insurance should expand. But, unless the quality of care in government health-care facilitiesappreciably improves, one development may be that the newly-insuredwill forsake seeking further care in government facilitiesand go to private-sectorfacilities, as seems to be happening in the Cote d'Ivoire.

With the exception of Mali, the private for-profithealth care sector has taken hold in the countries studied. This sector caters to the upper income groups that demand a quality of care that government does not, and possibly cannot, offer, given the financial constraints. The for-profit providers set an example to the Government for quality of care in their facilities,and, at the margin, provide competitionfor the Government, which is desirable on efficiency grounds.

The non-profit mission facilities provide more rural and preventive care than does the government. Because they tend to treat the same clientele as does the government,with respect to income status and to case-mix, the mission facilitiespresent a direct model for government - 8 - emulation. For the most part, they rival government facilities in the motivation of their personnel, in cleanliness,in quality of care, in efficiency of operation,and in their greater ability to self-financetheir work by the use of cost recovery. As with the for-profithealth care providers, the mission facilitiesare a source of diversityin health care provision, and present desirable competitionto the private for-profit and government facilities. Because of their managerial capabilitiesand because of the perceived trustworthinessafforded to them because of their non- profit status, perhaps the missions would be a good place to initiate experimentswith prepaid health insurancefor the rural population.

Efforts at administrativedecentralization have been made in all four countries studied. However, these efforts have not proven very successful,primarily because they have not been accompaniedby any financialautonomy. It would seem that cost recovery is the best means of fostering financialautonomy, if at least some of the proceeds of cost recovery are allowed to remain at the site of recovery. Central government authoritiescaution, however, that care be taken to ensure that individual facilities do not enjoy too much financialautonomy, as there is the fear that too much financialautonomy will lead to misallocationof cost recovery proceeds, i.e. hospitalswill spend too much upon "development",such as building new hospital wings, and too little upon recurrentcosts such as maintenance and medications.

POLICY RECOMMENDATIONSFOR COST RECOVERY

The Structure of Health Care Prices and Revenue Collected

1. It is clear that system imbalance in demand will occur if user- charge prices are not set in a fashion commensuratewith the hierarchicalsophistication of care provided. A corollary to this policy is that, if user charges, includingdrug charges, are not to be institutedat all levels of the system simultaneously,they should be institutedfirst at the hospital level, rather than at the base of the system.

2. A policy of revenuemaximization from user charges will recognize that hospitalsas a group will provide more revenue than lower level health-carefacilities as a group, simply because, as the system of health care provision is currentlystructured and financed in these four countries,hospitals treat the bulk of patients who have the financialmeans to pay, and provide more services per patient than do lower level facilities.

3. The schedule of health-careprices should be adjusted periodically in order to take into account increases in the general price level within the country, and in order to take account of price increasesof products, such as pharmaceuticalsbought on internationalmarkets. If such adjustmentsare not made, the real value of revenueswill decline and Ministry of Health budgets will again become relatively inadequatefor meeting levels of service need. -9-

4. The large majority of patients are neither well-to-do nor very poor, and the bulk of revenues, both at hospitals and at lower- level treatment facilities,will have to come from this majority.

5. Regulations for payment exemptions will have to be rationalized and tightened. The generous list of persons who are now exempt from payment in all four countries has a deleterious effect on revenue and cannot be justified on equity grounds.

6. Because of the size of many hospital bills, cost recovery for hospital charges will reach some upper limit until health insurance can be introduced. In this regard, it is recommended that efforts be made to institute some form of health insurance. A likely starting point would be with segments of the formal labor market, such as for government employees. It is particularly important that any such health insurancebe well-designed actuariallyand that it provide incentives for efficient consumption on the part of patients and efficient production on the part of care-givers.

7. Governments should undertake to improve their drug procurement and distributionpolicies. Drugs and pharmaceuticalsare in great demand, and have provided the bulk of revenue collection to date. They could provide even more revenue, if more efficient procurement and distributionpolicies were followed by Government.

8. In all four countries, the church missions provide an excellent model for cost recovery policy. Ministries of Health should undertake to learn from the experience of the missions in this area and, if practicableand relevant,emulate their practices.

Patient Reaction to Cost Recovery

1. To ensure patient support, cost recovery efforts must be accompaniedby visible and fairly immediate improvementsin the quality of care. Indeed, in all four countries,most government health care facilitieshave a tarnished reputation for quality care, and for their ability to provide wanted drugs. The experience of the church missions indicates that people are willing to pay for quality health care.

2. Appropriate measures must be taken to protect the very poor from from cost recovery. If protective measures are not instituted, the very poor will be driven out of the monetized health-care market and will not benefit from the additional health-care resources that cost recovery should make available for them.

Equity Aspects

1. More attentionmust be paid to cost-effectivemethods for screening the very poor out of paying user charges, and making sure that those who can pay do pay. In the latter regard, exemptions for governmentsemployees should be abolished. - 10 -

2. Emphasis should be given to spending the proceeds of cost recovery upon those health-care servicesmost in demand by the poor. This implies that the percentageof cost-recoveryrevenues passed on to Ministries of Health should be funneled downward to primary and secondaryhealth facilitiesand that the more wealthy regions cross-subsidizethe poorer regions in a country.

AdministrativeProblems and CollectionCosts

1. The major administrativechallenge is to enhance incentives for the collectionof user charges at the facility level and on the part of the care-giversthemselves. Governments should carefully consider the financial incentivesinvolved rather than command methods, because the former seem to produce better results. Collection costs will also decline, if appropriate incentivesfor the facilitiesand care-giverscan be devised.

2. To ensure financial accountability,appropriate accounting systems must be put into place.

3. Cost-recoveryefforts may precede improvementsin the quality of services;however, the quality of services must improve relatively rapidly after the impositionof user charges.

CONCLUSIONS

Cost recovery should increase the demand for health insurance in one form or another. But, the growth in demand will vary, depending upon the distributionof income in the country and upon the economic incentives that different forms of cost recovery provide. Given the evidence in the research literatureon the health care-efficiencyeffects that prepaid health insurance creates, it would seem desirable that this type of health insurancebe the one that eventuallyevolves. With regard to who provides the health insurance,more thought should be given to the appropriate respectiveroles of Governmentand the private sector in this area of activity.

In conclusion,further research needs to be done in Africa on many of the issues uncovered by this study. Not enough is known about the demand for different kinds of health-care service by different income groups, nor is enough known about the demand for differentproviders of health-care services by different income groups. Also, more focussed work needs to be done on the demand for drugs and pharmaceuticalsby income group. Detailed in-countryeconometric studies would fill this gap in current knowledge. More study must be made of cost-effectiveadministrative methods for screening the poor in cost-recoverysystems. Further, there is a large literatureon revenue-sharingbetween levels of government in developed countries,but little work has been done for developing countries on the kind of revenue-sharingbetween Ministriesof Health and health-care facilitiesand among regions that the developmentof efficient and equitable cost recovery systemswould need. Finally, more consideration must be given to design issues for health insurance in Africa; detailed analysis of the experienceto date of other countries in Africa or in other developingareas, where health insurancehas begun, would be the starting point for such an inquiry. - 11 -

I. GENERAL CONSIDERATIONS ABOUT THE ALLOCATION OF FINANCIAL RESOURCES FOR HEALTH CARE

Health, or "healthy time," has both consumptionand investment aspects.1 Both of these aspects are highly importantwithin a developmental context. Additionalinvestments in producing a healthier population should generate a higher quality of human capital that should enhance the possibilityof further development. Equally, if developmentis defined in terms of increases in consumption,or in human welfare, then, greater amounts of healthy time available to the population should enhance human welfare.

The interactionand the importanceof each of the inputs into the productionof healthy time are graduallybeginning to emerge from the research literature. Besides health care itself, three other major inputs are now generally recognizedas being important for the attainmentand maintenanceof good health; these are: (1) genetic factors, (2) the quality of the environmentin which the person lives; and (3) life-style factors. Every Ministry of Health in the world has ascribed to the World Health Organization's(WHO) goal of 'health for all by the year 2000." In order to arrive at this goal, all input resourcesmust be carefullymarshalled, so that the production of health might be done in a technicallyand economicallyefficient manner.

THE CONCEPTUAL FRAMEWORK

Although it has often been said that health does not have a price, governmentseverywhere have painfullybegun to recognizethat the production of health does have its costs (Fuchs and Zeckhauser,1988). That is to say, that the four major inputs for producingbetter health are scarce economic resourcesthat must be paid and financed. Figure 1 presents a generalized schema of the nature of the problem for countries in the process of economic development. In Figure I-1, the vertical axis measures the amount of public funds available for purchasing the four major inputs into the production of better health for the population. The horizontal axis provides a time- framework for these funds that can be available to the public sector. The line MOHB (Ministryof Health Budget) shows one possible growth pattern of budgetary funds available,starting at time T. In the simplifiedschema of Figure I-1, these funds can either be spent on wages (WB, or the wage bill), or on other inputs (R, or the residual). Over time, the wage bill can either be constant (WBC), or growing (WBG). The wage bill is a function of both governmenthiring policy (L), and of wages or salaries paid per person

1 The original coining of the term 'healthy time," as well as the theoreticalfoundations for the consumptionand investmentaspects of health can be found in Michael Grossman (1972). Cochrane, O'Hara and Leslie (1980) have investigatedthe reinforcing effects of education on health. - 12 -

Figure 1-1

PUBLIC FUNDSAVAILABLE FOR HEALTHCARE OVER TIME

PUBLIC R = MOHB - WB + pQ FUNDS AVAILABLE 0 N FOR EXAMPLES: R1 = MOHB - (WBG + WBG) = Worst Case at T1 (ResiduaL = AB) HEALTH 0 CARE R2 = MOHB - WBc + P2 Q2 Best Case at T1 (Residual = CD)

l ~~~~~~~~~~MOHeP2Q2

PFHCI C__._____

g § ~~~~~~~~~MOHB+p,Ql

PFHC2 A n N

R K- - W.BGf+WB G

I I I I l I I W

To T1 TIME(T)

R = RESIDUAL AVAILABLE FOR PURCHASE OF MEDICINES & MEDICAL EQUIPMENT WB WAGE BILL OF MINISTRY OF HEALTH (or LxW); W=AVERAGE WAGE, AND L = NUMBER OF EMPLOYEES OF MINISTRY SUPERSCRIPTS: 0 = CAPITAL (K), ALREADY IN PLACE N = CAPITAL (K), FROM NEW INVESTMENTS SUBSCRIPTS: C = WAGE BILL FROZEN G = WAGE BILL GROWING AT SOME RATE GREATER THAN ZERO L = MANPOWER (LABOR), WHICH IS A FUNCTION OF CAPITAL IN PLACE OF NEW CAPITAL MOHB = MINISTRY OF HEALTH RECURRENT BUDGET, WHICH IS A FUNCTION OF NATIONAL BUDGET PQ = COST RECOVERY (USER CHARGES): HEALTH CARE PRICES TIMES QUANTITY CONSUMED - 13 - on the governmenthealth payroll (w). To the extent that the WB grows at a more rapid rate than the MOHB, to that extent are there less budgetary funds available to pay for the residual health care inputs (the R). The intercept,LN= f (KN), at To, shows that there is a functional relationship between new investments (KN) in the health care sector, and the amount of health labor required,2 which raises the whole WB function. If the marginal rate of technical substitutionbetween L and R is constant,3 and if pr = w, then changes in the relative magnitudes of WB or R over time would be of no concern. If, on the other hand, the marginal rate of technical substitution between L and r rapidly approaches zero, then, given the MOHB function in Figure 1, rising WB functionspose a real concern about the level of output 4 of the public health care system. For example, at T1, with new health care investmenthaving been made at To, and with the level of the MOHB at T1, we see that funds available for the residual are only AB on the vertical axis (the distance R1).

Thus, up to this point in the analysis, Figure I-1 indicates that there are three crucial policy variables: (1) governmentgolicy with respect to the growth of the Ministry of Health Budget over time, (2) government policy with respect to hiring policies and with respect to the average wage or salary paid, and (3) governmentinvestment policy that could further exacerbate the wage-bill problem.

From the point of view of this study, another key policy variable for making funds available to the public health care sector is government user charge (or, cost recovery) policy. In Figure I-1, the p are the prices that the government charges for health services,and the Q are the quantity of health care services demanded by the public at those prices. The two lines MOHB + P1 Ql and MOHB + P2 Q2 show two possible scenarios for total funds available to the public sector for health care if the proceeds of

2 This functional relationshipis the basis for "Certificateof Need" legislationin the United States, the notion being that if one can impede capital expenditures,one can hold down health care variable costs.

3 r x p = R, and L x w = WB

4 In this respect, de Ferranti (1985) has observed, "...that relatively small budget cuts in the health sector's variable inputs - such as drugs - can have an enormous impact on the quality of service."

5 Governmentpopulation policy is also related to health budget policy, because if the real MOH budget is growing more slowly than the rate of population increase, then the MOH budget per capita is decreasing. We ignore the population factor for the time being, so as not to further complicatethe analysis in Figure I-1. Another extremely importantpolicy variable, that is beyond the scope of this study, is how the MOH budget is managed. For example, Foster (1988) estimates that the potential savings from rational drug use might even be greater than the amounts of revenue that could be collected from cost recovery for drugs. - 14 - either P1 Q1 or P2 Q2 could be added to the MOHB. At T1, the distance CD (or R2) on the vertical axis indicatesthe amount of funds that could be available to pay for the residual, if (1) the original rate of increase in the MOHB had been maintained, (2) the wage bill had remained constant, (3) no new investment had taken place, and (4) the total amount of user-charge revenue were P2 Q2. Obviously, the amount CD of the best-case revenue scenario is much greater than the amount AB of the worst-case revenue scenario.

This, then, is the conceptual framework from which the rest of this study will proceed. As has already been explained in the Preface, the purpose of this project was to analyze the allocation of financial resources for health care, and the current status of health care cost recovery policies in selected West African countries. Accordingly,the rest of this introductorychapter will review and analyze the general allocation of financial resources for health care in Senegal, in Mali, in the Cote d'Ivoire and in Ghana, and, in this regard, will endeavor to make some comparisons and contrastsbetween the four countries. The following four chapters will concentrateupon cost-recoveryactivities and results in each of these four countries, and the final and sixth chapter will summarizewhat has been thusfar learned as a result of this project.

Figure I-2 presents the English version of the questionnairethat was given to each person who was interviewedin each of the respective countries.6 The purpose of the questionnairewas not so much in order to gain precise quantitativeanswers to the questions posed, but in order to create a "frame" for the interview, and in order to gain some qualitative feel for the person's perception of the essence of each question. The questionnaireis divided into Parts A and B. Part A deals with the general allocatory problem, and Part B is concernedwith cost recovery per se. These interviewswere supplementedby extensive headquartersand field researchwith all of the documentationthat was available in both places for quantitativeanswers to Parts A and B. The answers to Part A will occupy the rest of this chapter; the progressionof cost recovery in each country and the answers to Part B will occupy Chapters II-V.

THE ECONOMICFRAMEWORK

One major determinant of the amount of real resources available for expendituresupon health care is the strength of the underlying economy (Newhouse,1976; Parkin, McGuire and Yule, 1987; Newhouse, 1987). Table I-1 gives comparativetimes-series estimates of the Gross National Products (GNP) of the four countries thusfar studied. Using 1977 as a base, the data show that the economies of all four countries have grown slightly,

6 Most of these questionswere originally set forth in Akin, Birdsall and de Ferranti (1987). - 15 -

Figure I-2 Basic Questionsfor HealthCare Finance

A. The Allocationof FinancialResources for HealthCare

1. Balancebetween investment and recurrentcosts?

2. Salariesas a percentageof other recurrentcosts?

3. Expendituresfor preventivecare versusexpenditures for curative care?

4. Expenditures in urban areas versus expenditures in rural areas? 5. The public health sectorversus the privatehealth sector.

B. Cost RecoveryPolicy: Points to Take into Consideration

1. What are presenttariff structures?

2. What levelsof cost recoveryresult from presenttariffs (revenues as a percentof recurrentcosts)?

3. What accessto servicesof what qualityis there now?

4. How much do peoplenow pay for key health-careservices?

5. How much can they afford? 6. How would utilizationof servicesbe affectedby changesin time and distancecosts?

7. How would utilizationof servicesbe affectedby changesin explicitprices that people pay out of their own pockets? 8. Would utilizationby the poor decline?

9. Would demand fall for servicesimportant from a long-runhealth point of view; would people put off care until their condition became seriousand they requiredhospitalization?

10. How much revenuecan be raised fromwhat size charges?

11. What is a reasonablelevel of chargesat differentlevels of the system,both from an allocatorypoint of view and from the perspectiveof peoples'willingness and abilityto pay?

12. What are collectionof fee costs likelyto be?

13. How equitableis the existingpattern of healthcare finance?

14. What groups now benefitfrom what services,at what cost to the Governmentpurse?

15. What are practicalmeans of identifyingand protectingthose unable to pay for healthcare? - 16 -

Table I-i

Real Gross National Product (U.S.$ Million)

Cote Senegal Mali d'Ivoire Ghana

1977 1,912.7 1,015.1 5,726.8 3,085.8

1978 2,115.3 1,193.5 7,137.5 3,525.8

1979 2,656.5 1,553.7 8,191.0 4,087.5

1980 2,870.3 1,681.2 9,297.7 4,297.4

1981 2,365.2 1,398.6 7,554.9 4,026.3

1982 2.471.9 1,253.6 6,582.7 4,024.2

1983 2,344.7 1,103.1 5,850.1 3,389.9

1984 2,180.5 1,065.6 5,724.3 4,376.4

1985 2,416.9 1,134.7 5,994.7 4,960.0

Source: World Bank data. - 17 - but that there have been some ups and downs during the nine-year period. In this respect, the experience in the Cote d'Ivoire has been the most striking. GNP rose from $5.7 billion in 1977 to $9.3 billion in 1980; it then steadily declined to $5.7 billion again in 1984, and then rose slightly to $5.9 billion in 1985.7 GNP also tended to decline or level off in Senegal, Mali, and Ghana after 1980, but all four economies were beginning an upturn in 1985. The primary causes of these declines in the 1980s have been the slow-down in economic activity that was brought about by severe droughts in the region, the worldwide recession in the early 1980s, and the unfavorable terms of trade that these countries have had to face for their agriculturaland mining products. At the same time, the populations in these countrieshave continued to grow at rates of about 3 percent per year. Table I-2 shows GNP data on a per capita basis. Changes in the per capita GNP data mirror the changes in the GNP data at the end of the 19709, but, because the populations are growing at a steady 3 percent rate, by 1985, GNP per capita actually declined in two cases (Mali and the Cote d'Ivoire), rose by slightly less than one percent in Senegal, and rose by 27.9 percent in Ghana.

Table I-3 contains the consumer price index for each country. Theoretically,the conversions from FCFA and Cedis into U.S. Dollars in Tables I-1 and I-2 already reflect the rates of inflation in each country, because changes in relative currency values on internationalmoney markets are reflectionsof changes in real economic and monetary activity.8 But, as will be seen in the country Chapters in this Study, the differing rates of price inflation in each country have adverse revenue-generatingimplications for fixed-fee schedules that are establishedfor cost recovery. For example, Table I-3 shows that the level of prices in Ghana increased by 800 percent between 1980-85. Unless the schedule of health care prices in

7 Part of these relativelylarge percentage changes in the GNP in the Ivory Coast are, no doubt, a function of economic policies in neighboring countries,which would also be reflected in percentage changes in their GNPs. For example, pricing policy by Ghana's Cocoa Board may have given incentivesto Ghanaian farmers to smuggle cocoa into the Ivory Coast in the late seventies. This would tend to increase the GNP statisticsof the Ivory Coast over and above what they would have been in the absence of the smuggling;conversely, the smugglingwould tend to decrease the GNP statisticsof Ghana.

8 However, in the case of the Francophonecountries, this reflection is not exact, because the FCFA is pegged to the French Franc. Thus, to a large extent, the FCFA/Dollarexchange rate reflects relative real economic activity between the United States and France. If relative real economic activity in the three Francophone countries is closely tied to that of France, then the FCFA/FF relationshipdoes not distort the FCFA/Dollar relationship over time. The differing Francophonerates of inflation in Table I-3 indicate that the FCFA/Dollarrelationship may be somewhat distorted among the three Francophonecountries in the Study. - 18 -

Table I-2

Real Gross National Product Per Capita (U.S. Dollars)

Cote Senezal Mali d'Ivoire Ghana

1977 365 164 779 305

1978 392 188 930 341

1979 479 238 1,023 386

1980 503 251 1,112 397

1981 403 204 871 360

1982 410 179 731 349

1983 378 154 626 284

1984 342 145 590 356

1985 368 151 590 390

Source: Annual population data come from, World Bank, Population, Health and Nutrition Department, Policy and Research Division - 19 -

Table I-3

Constuner Price Indexes (1980 = 100)

Cote Senegala Malib d'Ivoirea Ghana a

1977 81.1 75.6 66.2 24.9

1978 83.8 82.9 74.8 43.2

1979 92.0 91.9 87.2 66.6

1980 100.0 100.0 100.0 100.0

1981 105.9 112.1 108.8 216.5

1982 124.3 116.7 116.8 264.8

1983 138.7 123.4 123.7 590.1

1984 155.1 132.1 129.0 824.1

1985 175.2 142.2 131.4 909.1

Sources: a InternationalMonetary Fund, InternationalFinancial Statistics (Washington:IMF, 1986).

b World Bank Country Department; 1975-1979 is GDP deflator and 1980-86 is UNCTAD Consumer Price Index. - 20 -

Ghana's cost recovery law is changed each year to reflect price changes in the economy, the real amount of revenue captured by cost recovery will rapidly decline.

Table I-4 gives the available data on Government health expendituresconverted into U.S. Dollars, using InternationalMonetary Fund data on exchange rates. By 1985, the real value of these health expenditureswas less than in 1980. Table I-5 presents government health care expenditureson a per capita basis. As with the GNP data, the rates of population growth in each country have caused the per capita health expendituresdata to decline at an even faster rate than the decline in the annual totals data. In the case of the Francophonecountries, the decline has been rather steady. Between 1980-85, real per capita governmenthealth expendituresfell 49.4 percent in Senegal, 30.4 percent (1981-85) in Mali, and 53.0 percent in the Cote d'Ivoire. Ghana shows a somewhat different pattern, due to changes in government and vacillationsin budgetary policy, which will be more fully explained in Chapter V.

Tables I-6 and I-7 convert the data in Tables I-1 to I-5 into relative terms. Table I-6 shows indexes of constant per capita government health expenditures,which tells the same story as does Table I-5, and Table I-7 contains a time-seriesmeasure of health expenditure "effort" in each country.9 The data show that Mali, which is the poorest of the four countries in terms of GNP per capita, made an expenditureeffort of .79Z in 1985. Ghana's expenditureeffort at .70Z was lower than that of either the Cote d'Ivoire (1.09Z) or Senegal (.75Z). These results are somewhat difficult to explain, given only the general evidence on tax (or, expenditure)effort in the public finance literature. Using average tax/GNP ratios for the mid 1950's for forty countries,Musgrave found a positive relationshipbetween government tax revenue/GNPand per capita income.10 However, no significantrelationship was found when the low income countries were studied alone.11 Given the results, Musgrave concluded that there may be "...a more complex relationshipbetween the public sector share and per capita income." Of course, Musgrave was studying the total public sector share, and the data in Table I-7 reflect only the public health sector share. Because desegregateddata usually exhibit more statistical 'noise' than aggregated data, and because Table I-7 only contains a sample of four countries,perhaps it is not surprisingthat Table I-7 shows no clear pattern of relationshipbetween public health expendituresand per capita income. The implied co-efficientof variation in public health

9 The meaning of 'effort'here is exactly the same as the meaning of the 'tax effort' that is often used in the public finance literature. See Musgrave and Musgrave (1973).

10 Musgrave used tax revenue in the numerator as a proxy for government expenditures,because comparable government expenditure data were not available for all forty countries. See Musgrave (1969).

11 Indeed, when the high-income countrieswere studied alone, the relationshipappeared to be negative. - 21 -

Table I-4

Real Government Health Expenditures (U.S. Dollars, 000)

Cote Senegal Mali d'Ivoire Ghana

1977 21,357

1978 23,797 50,576

1979 28,836 39,630

1980 31,096 114,658 44,595

1981 24,649 11,743 107,287 29,151

1982 21,138 10,493 96,920 22,675

1983 21,729 9,442 86,873 12,932

1984 18,826 8,460 70,368 34,447

1985 18,119 8,952 64,925 34,690

Source: Ministry of Health budget documents. - 22 -

Table I-5

Real Government Health ExpendituresPer Capita (U.S. Dollars)

Cote Senekial Mali d'lvoire Ghana

1977 4.07

1978 4.41 4.89

1979 5.20 3.75

1980 5.45 13.72 4.12

1981 4.20 1.71 12.37 2.61

1982 3.50 1.50 10.76 1.96

1983 3.50 1.32 9.29 1.08

1984 2.95 1.15 7.25 2.80

1985 2.76 1.19 6.45 2.73 - 23 -

Table I-6

Index of Constant Per Capita Government Health Expenditures (1981 = 100)

Cote Senegal Mali d'Ivoire Ghana

1977

1978

1989

1980

1981 100.0 100.0 100.0 100.0

1982 83.3 87.7 87.0 75.1

1983 83.3 77.2 75.1 41.4

1984 70.2 67.3 58.6 107.3

1985 65.7 69.6 52.1 104.6 - 24 -

Table 1-7

Government Health-ExpenditureEffort Index *

Cote Senezal Mali d'Ivoire Ghana

1977 1.12

1978 1.13 1.43

1979 1.09 .97

1980 1.08 1.23 1.04

1981 1.04 .84 1.42 .73

1982 .93 .84 1.47 .56

1983 .93 .86 1.48 .38

1984 .86 .79 1.23 .79

1985 .75 .79 1.09 .70

* Government health expenditures/GNP - 25 - expendituresfor the four countries is high enough though, and one wonders what could explain it. One obvious explanationmay be that Ghana, for example, does not consider that health expendituresare as good an investment in human capital as does, for example, the Cote d'Ivoire. Another explanationmight be that there is more private-sectoror traditionalhealth care activity in some countries than in others. An equally plausible explanationmight be that the public health sector in one country might be more efficient than in others, in the sense that more health care is purchased per dollar spent. A final explanationmight be that people in one country may be healthier than in others, and thus require less health care expenditures. The best explanationis probably some combinationof all of these explanations. Ultimately, this is an empirical question, and, perhaps, later versions of this study will be able to model the causality and test the model statistically.

Table I-8 shows data that more specificallyanswer the five questions posed in Part A of the questionnairein Figure I-2; the data also attempt to throw some light on the questions posed in the previous paragraph.12 Some of the data in Table I-8 are also useful because they show changes over time. Although the data are, as yet, incomplete, they do give some insight into what has been happening in the health sector for the four countries in the study. These data show many similaritiesbetween the countries. With the exception of Ghana, health expendituresas a percent of total central government spending have fallen over the last few years. However, Ghana did have major financial difficultiesin the government health sector in 1982 and 1983. Salaries have increased as a percentage of the recurrenthealth care budget, except in Senegal where they have slightly declined: by the mid-1980's, they ranged from 67.4 to 75.0 percent of the recurrent budget. The best proxy measure that could be obtained for the allocation of financial resources between curative and preventive care was the percent of the health budget spent on hospital services. As can be seen in entry (3), this percentage ranged around 50 percent for all four countries. The percentage of each country's population living in urban areas went from 19.0 percent in Mali to 44.0-50.0 percent in the Cote d'Ivoire; the percent of public health expendituresin the urban areas ranged from 80 to 89 percent. Thus, in all four countries, there is a large discrepancybetween the percentage of the population living in urban and rural areas and the percentage of public health funds spent upon them. Estimates for private health expendituresas a percent of total health expendituresfor Mali and Senegal indicate that 54.0 percent of all health expendituresin Mali were private, while the percentage for Senegal was 38.9. In Mali, 42.0 percent of private expenditureswere for drugs and 12.0 percent were for 'other;' the respectivepercentages in Senegal were 22.8 and 16.1. Finally, trends show that government investmentexpenditures on

12 Some of these data will be shown in more detail in the Chapters on each specific country, in order to explain in more detail the evolution of user-charge systems. - 26 -

Table I-8

The Allocation of Health-Care Resources

Cote Indicators Ghana d'Ivoire Mali Senexal

1. Health Expenditures As Percent of Total Government Spending 8.8(1978)* 7.2(1980) 8.5(1968) 7.8(1974) 9.3(1984)+ 7.3(1986) 7.4(1985) 2.4(1987)

2. Salaries as a Percent of Ministry of Health Expenditures 62.0(1985) 67.5(1981) 68.0(1981) 68.0(1974) 76.0(1986) 69.8(1987) 73.0(1985) 68.6(1987)

3. Percent of Health Budget Spent on 40.0-51.0 50.0(1982) Hospital Services (1984)

4. Percent of Population In Urban Areas 39.0(1984) 44.0-51.0 19.0(1984) 35.0(1984) (1985)

5. Percent of Public Health Expenditures 80.0(1985) 89.0(1984) in Urban Areas

6. Estimated Private Health Expendituresas a Percent of Total Health Expenditures

- Drugs 42.0(1981) 22.8(1981) - Other 12.0(1981) 16.1(1981) Total 58.0(1985) 54.0(1981) 38.9(1981)

7. Government Investment Expenditureson Health as a percent of Total Annual Health Budget 9.7(1981) 1.8(1981) 4.0(1984) 6.2(1985)

Source: Ministry of Health documents and World Bank data. * Earliest year for which data available. + Latest year for which data available. -27 - health as a percent of the total annual health budget have increased. Part of this increase,no doubt, reflects growing donor interest in human capital projects in general, and in health in particular.

Akin, Birdsall and de Ferranti (1987) identified three main health policy problems that stem from governmentsin developing countries trying to fund the full costs of health care for everyone from general public revenues. These are: (1) insufficientspending on cost-effectivehealth activities, (2) the internal inefficiencyof public health programs, and (3) inequity in the distributionof benefits from health services. The reader is left to judge for him/herself the extent to which the contents of Table I-8 indicate that the four countries included in this study partake in these same three problems.

Finally, Table I-9 provides some informationon health status progress in the four countries. The "output"of health care indicators of: (1) life expectancy at birth, (2) the infant mortality rate, and (3) the child death rate, all show improvementover the period 1965-1984,but Mali's percentage change in male and female life expectancy at birth was the highest at 18.9 and 23.1 percent respectively. Of all four countries, Ghana had the highest life expectancy for females by 1984, at 55 years, and equaled that of the Cote d'Ivoire for males, at 51 years. The Cote d'Ivoire had the largest percentage decline in infant mortality (39.9z), followed by Ghana (22.8%), Senegal (19.8X) and Mali (15.0x). Mali had the highest infant mortality rate in 1984, at 176 deaths per 1,000 live births, and Ghana had the lowest at 95. Given the relatively large difference in the respectiveper capita incomes, it is surprising that Ghana's infant mortality rate was 10.4 percent lower than that of the Cote d'Ivoire in 1984. For all the countries except Mali, the percentage change in the child death rate was the largest of all the three "output" indicators. The child death rate declined 59.5 percent in the Cote d'Ivoire, 56.0 percent in Ghana, 35.8 percent in Senegal, and 6.4 percent in Mali. In 1984, Ghana had the lowest child death rate at 11 per thousand in the age group 1-4, while Mali had the highest at 44. Again, Ghana did better than the Cote d'Ivoire in this measure of "output."

It would be more satisfying if we were able to explain fully why, at one and the same time, real governmenthealth expenditureshave declined on a per capita basis in all four countries,and yet, health status indicators have continued to show improvement. One explanationmay be that health status indicatorswould have improved even more rapidly had the public health effort remained at the level at which it had been in the 1970s. Another explanationmay be that there are lags between expenditures on health care and the manifestationof the results of that spending, in terms of improvementin health status indicators. If this is true, then the decrease in rates of government expenditureon health in the early 1980s may not show themselves in the output indicatorsuntil the latter part of the 1980s. A final explanationmay be that private and/or donor expenditures have filled the gap caused by decliningper capita governmenthealth expenditures,and have done so in a very cost-effectivemanner. For example, estimates of health expendituresin Mali in 1985 show that of the total 26.2 billion FCFA spent that year, the Ministry of Health and Social - 28 -

Table I-9

Basic Health-Status Indicators

Cote Indicators Ghana d'Ivoire Mali Senetal

1. Life Expectancy at Birth

- Male 1965 45 43 37 40 1984 51 51 44 45

- Female 1965 49 45 39 42 1984 55 54 48 48

2. Infant Mortality Rate

1965 123 176 207 172 1984 95 106 176 138

3. Child Death Rate (Age 1-4) 1965 25 37 47 42 1984 11 15 44 27

Source: World Bank, World Development Report, 1986 (New York: Oxford University Press, 1986). - 29 -

Welfare budget was only 4.3 billion FCFA, or 16.4 percent of the total. The Ministry was responsiblefor another 4.8 billion in donor funds for projects, and 10.0 billion was spent in the private sector. Because donor funds are frequently targeted toward primary health care and preventive forms of care, these expendituresmay be the ones that are driving the health status indicators in a positive direction.

By way of summary, this brief introductoryChapter lays the conceptual framework for the four country case studies that follow in Chapter II-V. Health care is not sought as an end in itself, but is seen as a means of achievingmore "healthy time" for individuals;more healthy time enhances investment and consumptionopportunities for these individuals,and for the conglomerationof individuals,which is the nation. Cost recovery is not an end in itself, but is a means of capturing additional voluntary real resources that can be used to enhance health care. Even though cost recovery,via user charges, is seen as a major policy reform for solving health sector problems in developing countries, cost recovery is only part of a reform package that would also include (1) the provision of insurance or other risk coverage, (2) the use of non-governmentresources effectively, and (3) the decentralizationof government health services. While the central focus of this study has been on cost recovery in Senegal, Mali, the Cote d'Ivoire and Ghana, the Study would have been incompletehad it not also examined progress in these countries in the other three reform areas listed above. Therefore, in a concluding section of each country Chapter, an effort is also made to describe and analyze progress in the other three reform areas as well. Chapter VI attempts a synthesis of the important lessons learned from this study to date, and tries to generalize these lessons for other countries now beginning to pursue cost recovery, and for the four countries studied, so that they might learn from each other. - 30 -

II. COST RECOVERY POLICY IN SENEGAL

This Chapter has as its basis site visits to Ziguinchor, Oussouye, Kaolack, Pikine, St. Louis, and to the Hopital Principal in Dakar, during March 1987. These visits involved talking to various officials of the Ministry of Health, in each geographicalarea, at health posts, at health centers, and at regional hospitals. Attendance was also made at a monthly meeting of the Health Committee at the Chinese Hospital in Ziguinchor;this meeting provided the opportunity to observe a Committee actually at work on its problems. During the approximatelythree hours of the evening meeting, the subjects under discussion ranged from the rendition and verification of the past three months' sales of cost recovery "tickets", to difficultiesin allocating responsibilitiesbetween the Chinese medical staff and the Senegalese administrativestaff, to leakages in the user fees that were being collected. Further data were collected on Senegal during a Mission on Planning at the end of May 1987.

BACKGROUND

The financial situation of the health-care sector in Senegal was the subject of extensive analyses during the Summer and Fall of 1986, and during part of 1987.1

The two pieces of work that resulted from that effort come to the following conclusions:

(i) the data then available showed that the Ministry of Health recurrentbudget had declined from 7.8 percent of the national recurrentbudget in 1973174 to 5.4 percent of the national budget in 1985/86;

(ii) the salary bill of the Ministry of Health (the average salary x the number of people employed there) declined, as a percentage of the health recurrentbudget, from 68.0 percent in 1973/74 to 60.0 percent in 1978/79 and in 1979/80, and then proceeded to increase again, as a percentage of the health budget, to 67.4 percent in 1985/86;

(iii) because the salary bill is a quasi fixed cost in the short-run, the percentage of the health budget available for the purchase of pharmaceuticalsand medications is again on the decline;

1 See Vogel (1986) and (1987a). - 31 -

(iv) pharmaceuticalsand medications are a key input in the production of efficacioushealth services,and a small percentage decline in their availabilityimplies a large percentage decline in the quality of health services (i.e. less health output); and

(v) the only possible way to ameliorate this situation in the short and intermediaterun is to institute cost recovery on a widespread basis, in order to have funds available for the purchase of pharmaceuticalsand medications,and in order to foster a more efficient utilization of the health care system, on the part of both providers and consumers.

Table II-1 provides a March 1987 update of the data contained in the two previously-citedresearch studies. The data in Table II-1 differ from previous data in that estimates of the absolute amounts in the national budget have increased for the last three years 1984/85, 1985/86 and 1986/87. The estimates of the absolute amounts in the Ministry of Health budget are the same as in the previous data which ran to 1985/86, and increased by 4.8 percent to 10.710 billion in FCFA in 1986/87.2 The wage bill of the Ministry was about the same percentage of the Health budget in 1986/87 as it was in 1985/86; about 68 percent. Thus, the new data for 1986/87 present no basis for altering the above analytical conclusions that were derived from data that ran up to 1985/86.

DATA ON THE STATUS OF COST RECOVERY IN SENEGAL: A MACROECONOMIC PERSPECTIVE

Table II-2 contains newly-availabledata on cost recovery in the ten administrativeregions of Senegal. The first column of Table II-2 shows liquid assets remaining at the end of 1984, after expenses for medications, collection expenses and other expenditureshad been made in that same year. The rest of the Table shows receipt and expendituredetails for the year 1985 (the latest available data). The first thing to note is that liquid assets in 1985 were 150.5 million FCFA, or 65 percent greater than liquid assets in 1984. Because liquid assets represent the difference between the amounts brought in via cost-recoveryefforts and the monies actually spent in any given year on medications,collection commissions,and miscellaneous, a legitimate question would be: why, in 1985 were liquid assets of 150.5 million FCFA almost as great as the 172.0 million FCFA spent on medications? The answer to that question seems largely institutional,but it is important, given the almost chronic shortage of pharmaceuticalsand medications in the health production process in developing countries. We will return to this question later in this chapter when we analytically describe the institutionalmechanisms that have evolved in Senegal for the purpose of cost-recovery.

2 The FCFA is the African Franc (Franc de la Communaute Financiere Africaine), and is usually denoted as FCFA, or CFA); it is pegged to the French Franc at 50 FCFA=lFF. Table II-I

NATIONAL BUDGET, MINISTRY OF HEALTH BUDGET. ANO COMPOSITION OF MINISTRY OF HEPLTH BUDGET

YEARS HEALTH NATIONAL HErLTH BUDGET/ PERSONNEL PERSONNELBUDGET/ EQUIPMENT EQUIPMENT BUDGEIT BUDGET BUDGET GOVERNMENTBUDGET BUDGET G09ERNMENTBUDGET BLCGET HEALTH BUDGET Mill. FCFA Mill. FCFA Mill. FCFA %

1973/74 3,657 47,000 7.8 2,482 68 1,175 32

1974/75 4.103 55,000 7.5 2.833 69 1,270 31

1975/76 5,067 71,000 7.1 3,597 71 1,440 29

1976/77 5,247 86.000 6.1 3,618 69 1,629 31

1977/78 5,370 89,000 6.0 3,699 69 1,671 31

1978/79 6,134 102,233 6.0 3,700 60 2.434 40

1979/80 6.570 106,000 6.2 3.970 60 2,600 40

1980/81 6,698 115.644 5.8 4.138 62 2.560 38

1981/82 6,946 130,104 5.3 4,316 62 2,630 38

1982/83 8,280 151.453 5.5 5,305 64 2,975 36

1983/84 8,226 164,789 5.0 5,265 64 2.961 36

1984/85 8.140 181,294 4.5 5,291 65 2,875 35

1985/86 10,220 316,868 3.2 6,892 67 3,328 33

1986/87 10,710 441,718 2.4 7,346 69 3,364 31

Source: Republic of Senegal, Ministry of Health, Situation Report on Primary Health Care in Senegal. Dakar-,July 1986, p.21 Table II-2

FINANCIAL PARTICIPATION OF THE POPULATION IN HEALTH ACTIVITIES 1985 BALANCE SHEET

REGIONS 1984 INCOVE IWEDICATICNS % COMIISSIDNS 6 MISCELLANEOUS 9 TOTPL LIQJID LIQUID ASSTS EXPENDITURES ASSETS 1985

Dakar 36.608.038 184.381.458 76,797.897 42% 28,952,213 16% 46,619,232 26% 150.369,342 70.471.017

Dicurbel 2.097.680 17.304,409 5,011.104 29% 2.403,395 14% 3.440,419 20% 10.854.918 8.547.177

Fatick 6.735.099 16.663,090 8,418,409 51% 3.708.156 22% 2,407.739 14% 14.534.304 8.863.885

Kaoiadc 7,437,523 25.633,953 15.796.920 62% 5,854,761 23% 5.216,989 20% 26,868.670 6-.02.80e

Kolda 2.167.191 10,504,734 5,361,157 51% 2,545.245 24% 1,603,411 15% 9.509,813 3.162,112

9 Louga 3,392.912 19,307,495 8,084.188 42% 4.844.590 25% 2.062.950 11% 14.992,728 7 708.t,7 1

St. Louis 17.890.939 25.764.274 12,966,400 50% 4.752.334 18% 6,811.004 26.% 24.529.738 19.125.475

Tanbacocinda 1.040,539 15.184.922 8,523.120 56% 4,547,740 30% 2,019,427 13% 15,090.,287 1.135.174

Thies 7,577.571 45.470.973 20,293,190 45% 10,500,335 23% o.371.206 1496 37.164,731 15.883.81J

Ziguinchor 4.530.332 25.419.625 10.775.298 42% 5.060,630 20% 4,724,325 19% 20.560.253 9.389.702

TOTPL 91,477.830 385.634,933 172,027,683 45% 73,169.389 19% 81,276,702 216 326,473,784 150.492,840

SOURCE: Republic of Senegal, Ministry of Health, Situation Report on Primary Health Care in Senegal, Dakar, July 1986. AnneX 6 - 34 -

For the present, it is informativeto contrast the contents of Tables II-1 and II-2. For comparativepurposes, we use the 1985 data, the latest year available in Table II-2. In 1985, the total Ministry of Health Budget was 8.140 billion FCFA (Table II-1), and of that amount, 65 percent paid the salary bill. In that same year, the total receipts from cost recovery activitieswere 385.6 million FCFA (Table II-2), or 4.7 percent of the Ministry of Health budget. Commissionspaid to collectorswere 73.2 million FCFA, or 19.0 percent of the total collections.If the 91.5 million FCFA liquid assets from 1984 were added into the 385.6 million FCFA, the total would amount to 477.1 million FCFA, or 5.9 percent of the Ministry of Health budget. As will be shown in more detail later in this Chapter, one estimate is that the leakage in cost recovery is about 50 percent.3 If the leakage could be stopped, the 4.7 percent of the Ministry of Health budget in user fees could conceivablyamount to 9.4 percent of the budget. There is also evidence (which will be presented later) that the level of scheduled user fees in Senegal has not changed much since its early inception in 1980. Making the bold assumptionthat the cost of living had roughly doubled between 1980-85, and that, therefore, the level of scheduleduser fees could have been doubled in 1985, the percentageof the health budget that could have been attained in 1985, via user fees for cost recovery, could have been about 18.8 percent.4 Such a percentage of the health budget in user fees would come very close to the recently recommendedWorld Bank percentage range of 20-30 percent described as a "good start' in cost recovery.5 However, the assumptionsmade about the recovery of leakages and the changes in the level of user fees made on the last pages, plus the disposition of the liquid assets in Table II-2 require a greater knowledge of the evolution and current practice of user fees in Senegal.

A DESCRIPTIVEANALYSIS OF THE EVOLUTIONAND CURRENT PRACTICE OF USER CHARGES IN SENEGAL

The so-called "Red Book' of July 1980, ParticipationDes Populations a L'Effort de Sante Publique: Principes et Directives Methodologigues,(see Annex) is at one and the same time, a broad policy statement of goals and objectives,and a general quasi-uniformdirective for the country as a whole on the user-chargemethods for achieving those goals and objectives. In this document, self-responsibilityand self- determinationat the local level, in the spirit of the World Health

3 Because of the way in which the revenue is collected from users, about 50 percent of patients escape paying any cost-recoveryfee. They literally slip through the entrance gate.

4 4.7 percent x 2 (assumingthe leakageswere eliminated) = 9.4 percent.

9.4 percent x 2 (assumingthe cost-recoveryschedule doubled its prices and that the demand schedulewas zero-priceelastic) = 18.8 percent.

5 See Akin, Birdsall and de Ferranti (1987). - 35 -

Organization'semphasis upon primary health care, are seen as being the financial and administrativemeans for achieving a status of good health for all. The financialmeans are to be used to pay for a four-dimensional approach to health problems: (1) curative, (2) preventive, (3) educational and (4) social service. The Health Committee is the fundamentaldemocratic administrativeunit for setting a schedule of user charges and seeing to it that the charges are collected,properly accounted for, and spent in a manner consistentwith the broadly-statedobjectives; in effect, each local Health Committee has complete financial control over those local finances that come from user charges and that are to be spent on the four dimensions of health care.

The "Red Book" is quite specific in delineatinghow the Committee is to be democraticallyelected at the local level, and gives suggestions about what the "ideal" compositionof the Committee would be. Organizationally,each village (or locale) sends six elected delegates to the health posts (or to any other peripheralhealth care entity like a health post that is directed by a health-careprofessional). The assembly of health delegates from each village constitutesthe body-generalof the Health Committee; this body general then elects a management committee that is directly responsiblefor the financialday-to-day affairs of the Health Committee. Delegates'are to be elected every two years.

The next administrativelevel for self-responsibilityand self- determinationoccurs at the health centers themselves;at that level, all of the Health Committees from the surroundinghealth posts form an Association for the Promotion of Health (APS) in the geographicarea of the center. To pay for the functions of the APS, each local Committee is required to contributea percentageof its receipts (the "Red Book" suggests that an appropriateamount might be 5 percent of each Committee's revenues).

At the center level, the administrativeand financial circle is complementedby the central governmentitself and by the municipalities themselves,both political entities intervening in a somewhat circuitous fashion from a political point of view, but in a very fundamentalsense from the financial perspective. In reading the 'Red Book", and all the while having cognizanceof the history of health care financing in Senegal since independence(with almost total financial reliance on the central government),it is obvious that the financial "participation"stemming from the inception of the Committeescould only be viewed as a marginal financial "add-on" to a health-carefinancing situation that was already becoming difficult by 1980. Therefore,major financial reliance still had to be placed upon the central governmentwith its much broader tax revenue base and upon municipal governmentsthat had already been collecting a head tax. The "Red Book" goes on to list the areas where financial efforts of the central governmentand the municipalitiesshould not cease, nor weaken:

1. the infrastructure,including buildings; 2. equipment; 3. transportation; 4. personnel; - 36 -

5. the recurrentbudget (medications,the functioning of other services, namely, electricity,water, and the telephone);6 6. personnel payments for supplementarywork, such as watchman service, etc.

Finally, at the regional level, there is a regional Union of Associations for the Promotion of Health, and at the national level, a national Union of APS.

Another important innovationintroduced in the "Red Book" is that it contained a listing of suggestedprices that the Committees might want to consider imposing on their populations,as the Committees pursued self- financing. This innovation is importantbecause it is the first national policy statement of what the range of health care prices should be in a country where all of the political rhetoric since independencehad been that health care should be free to the population.

This suggestedprice list is as follows:

1) at the village level, prices for the various forms of primary care would be set by the community;

2) at the level of peripheral care (dispensaries,etc).

a) In rural areas: - adult consultation 50 CFA - child (0-14 years old) 25 CFA - first prenatal consultation(and health card) 200 CFA - prenatal consultation 50 CFA - vaccination 50 CFA - birth 1,000 CFA

b) In urban areas: - adult consultation 100 CFA - child 50 CFA

3) At the health center level:

- consultationfor children, adult prenatal and breastfeedingchildren 100 CFA - laboratorywork 50 CFA - day of hospitalization 100 CFA - birth in the ward 1,500 CFA - birth in a room 2,000 CFA - endemic disease services 50 CFA

6 In actual practice, by March 1987, most of the receipts collected by the Committee were used to supplement the medications component of these portions of the central and municipal government responsibility for health care. - 37 -

Following this suggested price list is an enumerationof kinds of cases that the community itself might want to exempt from paying these prices:

- certain kinds of poor people, such as the physically or mentally handicapped;

- certain forms of chronic illness, such as tuberculosisor leprosy, where only the first visit would have to be paid;

- certain involuntarycircumstances, such as accidents or emergencies.

And then, 'specialcases" for personal and occupationalexemption from these suggestedprices are listed. These include: municipal employees and officials, members of the police force and primary and secondary students,when they visit a medical site where they live. If they are outside of the area where they usually live, when they need medical care, then they should pay the same prices as others. Members of the medical corps should also be exempted.'

Other innovative aspects of the"Red Bookw are that it stresses quality of management on the part of the Committee, by enumerating a 13- point list of possible failure-points,and it stresses that the members of the Committee are to serve on a voluntary basis.

Although the wRed Book" was officially promulgated in July of 1980, its major financial,administrative and organizationalantecedent goes back to February 28, 1975, when the Government of Senegal signed an agreementwith the Kingdom of Belgium to establisha basic health service in a part of Pikine, which is a suburb of Dakar; this part of Pikine then had a population of about 100,000 people.8 The Belgian project also sought to provide curative,preventive, educationaland social health care to as many people as possible. The four kinds of care would be provided under the three following rules-of-thumb:

1) they would be simple and efficacious,from the point of view of cost, technology and organization;

2) they would be easily accessible,geographically, economicallyand culturally;and

7 From the point of view of level of income, it is difficult to understandwhy any of these "specialcases" are special. Particularly in rural communities,these are the people who have the highest incomes (or in the case of students,whose families have relativelyhigh incomes), and who have the more stable money incomes throughout the agriculturalcycle of the year.

8 See Republique of Senegal (1985). - 38 -

3) they would be based on local material and human resourcesboth at the planning stage and during the actual delivery of services.

Given the complete lack of services in many parts of the delineatedarea, and given the impossibilityof any immediate financing from the government or from foreign aid in 1975, a group of local leaders proposed creating a health post that would be completely self-financed(with the exception of the salary of the head of the post who would be a nurse, and whose salary would come from the central government). At the same time, the house of the Chief of the Wakhenane area in Pikine was set up to serve as a dispensary, and another house was rented to be used as a central purchasingpoint and storeroom. Other areas within Pikine soon decided to follow this example and do the same thing. New Committeeswere formed and more posts were opened. Each post had a Health Committee that comprised about a dozen small areas within Pikine, and each Committeewas responsible for about 25,000 people. Each Committee consisted of about 15 members who were elected by three leaders from each area within the geographical purveyance of the Committee. In July of 1976, these Committee formed the non-profit organizationcalled (as later, in the "Red Book") the wAssociationfor the Promotion of Health' (A.P.S.). The Committees also began to supervise the daily collectionof receipts and made twice-weekly deposits of the receipts in a bank account; they purchased stocks for the posts, using bank checks that required two signaturesof members of the Committee.

This first official effort at successfulcost-recovery in Senegal had been made possible by a central governmentadministrative reform-ruling that explicitly recognizedthe experimentalcharacter of this joint Belgian- Senegaleseproject. On February 6, 1978, this experimentwas extended to include the entire suburb of Pikine. By May of 1980, this A.P.S. in Pikine was given legal recognitionby the Ministry of the Interior, with a Charter, under the law, Number 3.506/M.I.

In 1977, USAID also sponsoredan ambitious cost-recoveryprimary health care project in Sine Saloum, a rural area, south of Thies and Diourbel. This ambitious project called for the building of 600 health huts in the Sine Saloum region, each staffed by a health worker, a birth assistant, and a sanitaryworker. Initially,the project was financed by a USAID grant of US$3.3 million. The project had interestingpossibilities because it incorporatedwhat seemed to be the best thinking in the literature about how primary health care ought to be provided and financed. The huts were to be widely dispersed among the people and built by them; the health-care providerswere to come from the local population and work part- time as volunteers. Their curative and preventiveefforts would be directed by a local council from the village, and only indirectlyby the regional office of the Ministry of Health. The whole idea hinges strongly on community participationand on the financialviability of the health huts. Initial stocks of medicine and drugs were provided by USAID with the understandingthat they were to be replenishedby levying user charges. - 39 -

From its beginning, this project has been plagued by managerial problems. USAID sent a special appraisal team to Senegal in 1980 to evaluate the project, and its report was highly critical of the laissez- faire managerial attitude that the USAID-Senegalmission had adopted toward the project (Weber, et al., 1980). The report also scored the Government of Senegal (Ministryof Health) for not having done its share initially in managing the project. But the most disconcertingfinding was that most of the huts in the project had gone bankrupt by 1980. The local providers were not collecting sufficientuser fees to be able to replenish drugs and medicines, and very few financial accounts were being kept. The report attributes these two major problems to too little appreciationat all levels of the health-care system of the absolute necessity of collecting user fees, and to too little training for the local providers in keeping accounts. In 1987, this project still continues, and, according to the present USAID project officer, is making progress in correcting the problems uncovered by the team sent to Senegal in 1980.

We now turn to the financial results of the Pikine project. Tables II-3 and II-4 contain the financial results for the Pikine project between the years 1975-1985. According to Table II-3, the Pikine project had total recurrent costs of 219.2 million FCFA in 1985. Of that amount, 80.0 million and 35.0 million were the costs borne by the central government and by the municipal government respectively. Pikine reported that its wown' true total recurrent costs were only 104.2 CFA (Table II-4). Of that amount, the "participation"(cost recovery from patients in the covered population) paid 74.4 million (or 71Z), the government paid 23.0 million (or 22Z), and the project itself paid 6.8 million (or 7Z). However, the data in Table II-4 do not give a true picture of the real economic costs of operating the project. Unfortunately,Table II-3 does not give the breakdown for central and municipal salary payments separately for the years prior to 1985, nor does the TOTAL row at the bottom of the Table contain these salaries. But if the data on central, municipal, and auxiliary salaries are used as indicators of the economic costs of personnel for the project, then salaries amounted to 62.4 percent of Pikine's budget in 1985; by way of contrast, salaries at the national level were 65 percent of the national health budget in 1985. Table II-5 (only given in the Report for 1984) is also somewhat deceptive,because it gives expenditurepercentages on a base that does not include central and municipal salaries. Because of the shrunken base in 1984, the expendituresfor medicines and medical materials are greatly overstated as percentages of actual total recurrent costs in 1984. After all salaries are deducted from Pikine's 1984 totals in Table II-5, Pikine spent about 38Z of its adjusted budget on the residual. By way of contrast, the Ministry of Health budget in Table II-1 indicates that about 36Z of the national budget went for these purposes. The difference in the two percentagesis not very impressive,but there is not enough additional data to get around these base figures, and only impressionisticobservations allow one to arrive at any qualitative conclusionsbeyond the small differencesin the data (381 vs. 36Z). First of all, there was a noticeable difference in the cleanliness and attractivenessof the Roi Badouin Center versus the strictly government facilities that were visited. If this were due, for example, to the greater use of auxiliaryhelp (and salaries)to improve the quality of the TableII-3

OPERATINGCOSTS (RECURRING COSTS)

EXPENDITUREITEM 1975-77 1978 1979 1980 1981 1982 1983 1984 1985

Vehicles 1,500,000 510,000 650,000 1,186,764 992,130 1,100,000 1,440,400 2,042,500 5,762,250 PublicHealth Program 0 0 0 240,050 483,400 457,655 1,921,480 269,865 973,831 LOGISTICS 1,500,000 510,000 650,000 1,426,814 1,475,530 1,557,655 3,361,880 2,312,365 6,736,081 nedications 8,889,000 3,112,876 3,440,492 28,637,754 28,329,967 27,007,154 36,102,684 38,164,173 39,865,556 MedicalEquipeent 0 153,131 369,669 146,810 241,170 122,918 164,213 163,381 475,161 nEDICALSUPPLIES 8,889,000 3,266,007 3,810,161 28,784,564 28,571,137 27,130,072 36,266,897 38,327,554 40,340,717

MEDICALSUPPLIES & SERVIC 13,500,000 5,994,285 6,642,275 16,137,657 15,156,466 13,620,304 19,035,168 33,482.938 35,356,432

GovernmentPersonnel 80,000,000 MunicipalPersonnel 35,000,000 AuxiliaryPersonnel 0 3,500 0 10,358,050 13,743,970 13,944,905 16,474,500 17,453,959 21,751,845 Training 0 0 0 0 0 0 0 0 0 PERSONEL 0 3,500 0 10,358,050 13,743,970 13,944,905 16,474,500 17,453,959136,751,845

TOTAL 23,889,000 9,773,792 11,102,436 56,707,085 58,947,103 56,252,936 75,138,445 91,576,816 219,185,075

Source:Ministry of PublicHealth, Senegal BelgianTechnical Cooperation Associationfor the Promotion of Healthin Pikine PikineProject: Primary Health Care in an UrbanEnvironment VolumeV (Year1985), 1986 Table II-4

BREAKDOWN OF OPERATING COSTS ACCORDING TO ORIGIN OF FUNDS 1975-1985*

PROJECT GOVERNENT POPLLATION TOTAL

1975-77 0 0% 23,899,000 100% 0 0% 23,899,000

1978 1,810,792 19% 7,963,000 81% 0 0% 9,773,792

1979 3,139,436 28% 7,963,000 72% 0 0% 11,102,436

1980 3,759,138 7% 7.963,000 14% 44,984,947 79% 56,707,085

1981 1,643,883 3% 7,963,000 14% 49,340,220 84% 58,947,103 41

1982 2.981.379 5% 7.963,000 14% 45,308,557 81% 56,252,936

1983 6,334,994 8% 7,963,000 .11% 60,840,451 81% 75,138,445

1984 4,257,110 5% 22,963,000 25%* 64.356,706 70% 91,576,816

1985 6,821,144 7% 22,963,000 22% 74.400,931 71% 104,185,075

* Salaries of government employees not included.

Source: Ministry of Public Health, Senegal Belgian Technical Cooperation Association for the Promotion of Health in Pikine Pikine Project: Primary Health Care in llrban Developmenlt Volume V (Year ]985), 1986 rable II-5

BREAKDOWN OF OPERATING COSTS ACCORDING TO THE USE OF FUNDS 1984

PROJECT GOVERNYENT POPULATION TOTPL AS A % OF TOTPL

Vehicles 1,542.500 500.000 0 2.042,500 Public Health Program 269,865 0 0 269,865

LOGISTICS 1.812.365 78% 500,000 22% 0 0% 2.312,365 2.5%

Medicat lons 203.862 2,963.000 34.997,311 38.164.173 Medical Equipment 163,381 0 0 163.381

MEDI(AL StPPLIES 367.243 1% 2.963,000 8% 34,997,311 91% 38,327,554 41.7% SUPPLIES & VARIOIIS SERVICES 1,661,543 5% 19,500,000 58% 12,321,395 37% 33,482,938 36.6%

AUXiLIPRY PERSONNEL 415,959 2% 0 0% 17,038.000 98% 17,453.959 19.1%

TOTT 4.257,110 5% 22.963,000 25% eb4.35o,706 70% 91.576.816 100%

Source: Ministry of Public Health, Senegal Belgian Technical Corporation Association for the Promotion of Health in Pikine Pikine Project: Primary Health Care in Urban Environment Volume V (Year 1985), 1986 - 43 -

environment and thus attract a greater clientele, then the base of the ratio would be driven up at the Roi Badouin Center, and if the "participation" were kept close to actual average costs, it would be difficult to tell the difference between the quality of the Roi Badouin Center and the typical governmenthealth care facility. Thus, these ratios only serve a limited purpose in this regard. The ultimate test would be whether the quality of health in daily life were better, all other things being equal, after having been a patient at the Roi Badouin Center than at a typical government health care facility.

At this point, the background on cost recovery becomes somewhat difficult to narrate, simply because the number of actors and the kinds of prices charged become more heterogeneous. Moreover, the timing of the posting of charges, at the various levels of health care, and their serious applicationand enforcementbecomes somewhat muddled between the institutions.

Although the "Red Book, was a mile-stone in the history of cost- recovery in Senegal, an official price list for hospital charges had been on the legislativebooks since July 24, 1968. The problem is that this legislationnever seems to have been well-promulgated,nor enforced. As one example of this slippage,the then Director of the Hopital St. Louis was audited by the Inspector General of Senegal, and removed from office on February 23, 1980, for not having collected any user charges for the period 1968-1978. The Inspector General estimated that there had been a loss of about 463 million FCFA to the National Treasury because of this negligence.9 Table II-6 contains a copy of this official price list, as it exists today in 1987.10 These prices should be paid by anyone going as a patient to a National Hospital or a Regional Hospital, if that person is not classified as being indigent.1 1 The revenue from these charges is to be sent directly to the National Treasury (and not even to the Ministry of Health). Hence, the lack of incentives on the part of the hospitals to collect them, except for the fear of indictment,which happened to the former Director of the Hopital St. Louis, but which seems to have happened rarely, if ever, after that particular incident.

9 From the records of the Hopital St. Louis.

10 From the records of the Hopital St. Louis.

11 Dantec, Fann and the psychiatrichospital at Thiaroye are examples of National Hospitals; the hospitals at Ziguinchor and St. Louis are examples of Regional Hospitals. One official in the Ministry of Health complained that the Administratorsat the National Hospitals think that, or classify, every patient as being indigent. Table 11-6

RATE CHARGED BY TYPE OF SERVICE AND BY TYPE OF PATIENT ST. LOUIS HOSPTTAL, 1987

PDILT HALF* ONE-QUARTER** TYPE Category Price Category Price Category Price Office Visits

Private Individuals, 1st 3,400 1st 1.700 ist 8SO at their own Expense 2nd 2,000 2nd 1,000 2nd 500 500 3rd 640 3rd 320 3rd 160

Civil Servants, Covered 1st 2,720 1st 1.350 1st 580 by Budget 2nd 1,500 2nd 800 2nd 400 100 I 3rd 540 3rd 320 3rd 160 41

Private Sector, Guaranteed 1st 3,400 1st 1,700 1st 80 I Letter 2nd 2,000 2nd 1,000 2nd 500 nil 3rd 640 3rd 320 3rd 160

Military Personnel 1st 2,720 1st 1.350 1st 580 2nd 1,0O 2nd 800 2nd 400 3rd 540 3rd 320 3rd 160

Indigents 5th 1,000 = Ten days + SOOF 1,500 until recovery

* Half = 7 to 12 years old ** Oe-quarter = 0 to 6 years old - 45 -

The history of real cost recovery at the hospital level in Senegal seems to be happening at the present, and is, without a doubt, the direct result of the successes that the Association for the Promotion of Health (A.P.S.) and the Committeeshave had in collectinguser charges. The time- sequence seems to have run as follows: when the Ministry of Health authoritiesperceived how well cost recovery had progressed at Pikine, and was beginning to progress at Sine Saloume, and they perceived how rapidly the Committeeswere forming at the center level, they decided to use three Regional Hospitals as experimentalsites for cost recovery, in the same manner that the Committeeswere doing at the center level. The three hospitals were Kaolack, Ndioum, and Ourossogui and the experiments started at the beginning of 1982. This time-periodalso marks the origins of the Association for the Promotion of the Hopital (A.P.H.)which is the hospitals' analogue of the A.P.S.

The natural progressionof this movement seems to have coincided with Ministry of Health budget realities, and, if one studies the compositionof the budget over time, one quickly notes why the progression of cost recovery activity would have moved upward from post to center to hospital. In Senegal, as in most developing countries, rural areas and primary health care activities are never financiallywell-endowed, despite all of the rhetoric to the contrary. Most of the budgetary resources go to urban hospitals, where all of the emphasis is upon curative care. If the Ministry of Health budget had been growing at a rapid rate during the late 1970's and on into the 1980's, there would have been less pressure for cost recovery, particularlyat the hospital level. As was shown earlier, the Ministry of Health budget has grown only slowly,has declined as a percentage of the national budget, and salaries have slowly commanded a larger percentage of this slowly growing budget. Given actual budget allocations (as opposed to rhetorical allocations),it would be the health posts and health centers that would particularlyfeel the acute pinch in medications at an earlier stage than the hospitals. Therefore, the posts and the centers would have felt the urgency to 'do something' in this regard much earlier than would have the hospitals. As a consequence,it is not surprising that cost recovery began in earnest in 1980 at many posts and centers.

The hospital at St. Louis began its cost-recoveryprogram in January 1987. The hospital at Fann began in November 1986, as did the hospital at Thies. Dantec (the large, 600-bed National Hospital in Dakar) has not yet begun. Two natural questions arise about these late beginnings: (1) If cost-recoveryat hospitals had already been on the legal books since 1968, what was the nature of this wnew' cost recovery program?; and (2) why did these hospitals begin the "new" cost recovery program so many years (6 years), after the first appearance of the 'Red Book'? The answer to the second question is more quickly and easily forthcomingthan the answer to the first question. Simply put, the "Red Book" was never meant for the hospitals, and it seems to have taken a full 6 years for the budget pinch to have worked its way up to the hospital level, in terms of a large lack of medications,etc. It would also seem that the Ministry of Health was only - 46 -

slowly making an iteration in this direction.12 The "new" cost recovery program at the hospital level representsan effort to further refine the definitionof indigence,in the face of the hospitals' financial difficulties.

As an example of this iterativeprocess, and of the dynamics involved,we use the hospital at St. Louis, which is a large (258 beds), regional hospital at the northwest border of Senegal. At the moment, the hospital at St. Louis is in the midst of an extensive four-year renovation that will cost a little more than 2 billion FCFA and that is being financed by Luxembourgand by the European Community. The Director's immediate perception of the financial condition of the hospital was that the Ministry of Health's annual recurrent budget allocation to the hospital was not at all sufficientto meet the medical demands of the growing patient load. Accordingly,by October 1, 1986, he had written a Financial Report (See Annex), had circulated it among the influentialmembers of the community in St. Louis, and had sent copies to the Ministry of Health. On October 11, 1986, he wrote to the Minister of Health, informing her that it was his intention to form an Association for the Promotion of the Hospital (A.P.H.),and asking her permissionto do so; by December 17, 1986, he had received an affirmativereply from the Minister (See Annex). Next, a Charter for the A.P.H. was establishedand a Committee elected; a set of operating procedureswas promulgatedfor the A.P.H., and two subcommittees of the A.P.H. came into being, one subcommitteein charge of medications and materials, and the other in charge of the daily cleaning of the hospital and of the *humanization"of the hospital environment (See Annex). After the A.P.H. had made an effort to publicize the fact of its existence,to inform the community that the quality of care at the hospital would improve, and that the A.P.H. intended to levy user charges on most of the people who had theretoforebeen classified as indigentsunder the old 1968 Ministry of Health price schedule, the hospital began collectingthe "participation"in mid-February 1987. By mid-March, the weekly "participation"for each of the three weeks of collection respectivelyhad amounted to 125,700; 131,500; and 135,800 FCFA.

Here, it is important to distinguishbetween the various classes of patients for payment purposes. The first group consists of the non- indigents,and just as during the time before the establishmentof the A.P.H., their payments for hospital care must be remitted to the National Treasury. This group is defined as: (1) upper-incomepersons, (2) government

12 The probable reason for this is that hospitals are more visible, and hence, capable of causing more political controversy. Within this context, it should always be rememberedthat the rhetoric since independencein most of the countries in West Africa had been that health has no price, and that therefore it should follow that health care should be free for the population. However, having finally realized that health care does have its costs, Ministries of Health now seem to be having some difficultyin reversing such modes of thought on the part of the population,particularly at the hospital level, where the condition of the patient may be more life-threatening. - 47 - functionaries,and (3) private individualswho carry a letter of guarantee of payment. The second group consists of 'indigents,'but this group is further subdivided into two groupings: (1) those persons who can be truly certified to be indigent by local government authorities (See Annex), and (2) those persons who, while not exactly middle-class,have some means of paying for health care, and thus cannot be certified as truly being indigent. It is this latter group that is now subject to pay cost recovery charges at St. Louis. Hopefully, this short history of the adoption of cost recovery at St. louis gives a flavor for the process that now seems to be ongoing in the hospitals throughout Senegal.

The financial results from the effort at St. Louis are thusfar encouraging. During the first six months, the hospital remitted 8,776,300 FCFA to the National Treasury from monetary payments that the non-indigent had made; on a monthly basis, this comes to 1,462,716 FCFA. If we extrapolatethe fourth week of the three weeks 'participation'already in hand at the hospital from user charges paid by the not-so-indigentindigents, we arrive at a monthly figure of about 600,000 FCFA. Thus, in the first month, the "participation'amounted to about 29.12 of the total of all monthly user charges collected at St. Louis. Because St. Louis can retain this portion of the user charges and spend it upon whatever the A.P.H. decides, St. Louis will now have a net increase in its budget.13 The proceeds from the 'participation'have thusfar been spent on the following items and in the following proportions:

Medications 401 Maintenance 202 Day-To-Day Functions 152 ProfessionalFormation 52 A.P.H. Expenses 102 'Participation' Collectors1 4 102

1002

13 Non-indigentsaccount for about 352 of the paying patient-loadat St. Louis; the not-so-indigentindigents account for the other 652. Therefore, 35Z of the paying patients paid 70.9Z of the total monthly user charge revenue (that goes to the National Treasury) and 652 of the paying patients paid 29.12 of the total monthly user-charge revenue (that goes to the A.P.H. at St. Louis). At Kaolack, the percentageswere respectivelyestimated to be, about 852 indigent,and 152 non-indigent.

14 The "participation'is actually collected through the sale of tickets at the entrance to each key hospital service, such as the maternity section or the dental section. The Analysis portion of this Chapter will discuss the mechanics of the collection system in general in more depth. - 48 -

ANALYSIS

As of this date, the progress that has been made in cost recovery in Senegal is encouraging;given the budgetary situation and the resilience of the Senegalese themselves,this progress is hardly surprising. However, it must be recognizedthat the present cost-recoverysystem, particularlyat the hospital level, is so new and subject to trial and error, that ultimate judgement upon it will probably need another five to ten years. The prognosis is good, because most officials are now convinced about the absolute necessity of cost recovery, if the health care system is to provide any reasonable level of quality care. And, a fair amount of user-charge revenue is already being collected and spent on the factor of health-care production that was heretofore badly lacking, i.e. medicine and drugs.

Nonetheless,it is already possible to make some observationsand come to some conclusionsabout the recent cost-recoveryexperience in Senegal. These observationsand conclusionsfollow the numerical order of the questions contained in Part B of Figure I-2 in Chapter 1.

1. Earlier pages and Table VI-1 give the structure of prices at the various levels of care in the public sector in Senegal. It should be emphasized that, although each Committee or A.P.S. or A.P.H. can set its own prices, the 'Red Book' structureof prices has served as the model. There are two other things worth noting as regards health care prices. One is that the price of medications has risen in recent years. Pikine has found that medicationprices rose 31 percent between 1981-84, and that it must resort to buying medications from the private sector when they are not available from the National Pharmacy (P.N.A.). Medications and pharmaceuticalsare very expensive,when bought from the private sector. The other thing worth noting is that the Committeeshave been reluctant to raise health care prices for consumers,even though there has been an increase in the price of medications,etc. The large amount of liquid assets in each Region shown earlier in Table II-2, indicates the somewhat conservativenature of the actions of the Committees. The discussion at the meeting of the Committee at Ziguinchor seemed to indicate that the members of the Committee took great satisfactionin the size of the bank account that they were accumulating. The Director of the hospital at St. Louis and the Director of the center at Kaolack also complainedabout how conservative their A.P.H. had been in setting the level of prices; nevertheless, the Director at St. Louis was able to persuade the A.P.H. to allow him to charge 2,500 FCFA for each indigent and 25,000 for each non-indigentwho used their X-ray scanner. This service had been free for all classes of patients, before cost recovery began at St. Louis in mid-February. Evidence indicates that user prices are much higher in the private modern sector, where most of the well-to-do receive their care.15

15 Also, see the concludingsection of this Chapter. - 49 -

2. The comparisonsmade between Tables II-1 and II-2 fairly well indicate what levels of revenue result from present health-care prices. Although the data are not broken down by level of care, it is reasonably certain that most of the user charge revenue comes from the A.P.S. given the late entry of the hospitals into serious cost-recoveryactivities.

3. At the hospital level, the distinctionmade between "real" indigence and "ordinary'indigence seems to have guaranteedfinancial access to the system for most people. Those interviewedat the A.P.S. level seemed to think that the present level of prices did not constitutea significant barrier to the entry of patients there. Also, people in the public sector now seem extremely aware that they must improve the quality of services provided, if they hope to continue to charge user prices and have them paid. The two subcommitteescharged with overseeing quality at St. Louis are one example of this awareness. At Ossouye, Zinginchor,and Kaolack, those persons interviewedwere also very much aware of the necessity of improving the quality of services, if cost-recoverywere to be successful.

4. Mention has already been made about the number of exemptions to the price schedule that the "Red Book" counsels,particularly given the higher presumed income of those who would be exempted. But, as with the other particularsof this story, the exemptions do vary. For example, at St. Louis, everyone except the true indigentsmust pay for the use of the X-ray scanner, and there are not (to use the term of the "Red Book") special cases, except students. With respect to students, the feeling at St. Louis was that students have to be viewed within the socio-economiccontext of Senegal: at the margin, everythingpossible is done to encourage students to stay in school. The Committee at Ziguinchorcomplained that the "Red Book" had been conceived and written by a single person (un-named)and that its counsels were thus open to broader interpretationin this regard.

5. The Director of the hospital at St. Louis explained that a certain amount of fatalism exists among the lower class in Africa. As income falls, the level of fatalism rises; likewise, if medical care user charges were to rise above some plateau, this too would serve to reinforce a sense of fatalism vis-a-vis access to medical care. However, slow iteration towards that point might avoid this problem; perhaps this also explains why the Committees have been somewhat conservativein their approach to the level of user charges.

6. Everyone interviewedcategorically stated that the use of the health care system and the willingness to pay user charges had to be negative functions of the distance travelled to the health care site and the amount of time spent waiting there. They thought that this was particularlytrue during the heavy work-periodsof the agriculturalcycle.

7. No one thought that questions about the effects of pricing on utilization could be answered without reference to the level of the person's income. Nevertheless,almost every empirical demand study that has been done has shown that some forms of health care are more price-elasticthan others, and that the demand for health care is income-elastic. Taking into account the interactionbetween price, income and the level of quality yields results - 50 - that are unequivocallypositive, if the improved quality causes outward shifts of the demand curve that are greater than the possibly negative results of combined income and price effects.

8. There is no doubt that the utilization of services by the poor will fall at some level of positive price. However, if care is taken to exempt those who really cannot afford to pay, or if subsidies are given for certain forms of preventive care, there need not necessarilybe a large diminution in the utilization of services. Again, this is an empirical question that needs more careful inquiry.

9. The answer to questions about a fall in the demand for services from a long-run health point of view must be explained in terms of the sociology and psychology of the typical poor person at the village level. If the very poor person faces a price and poor quality (lack of drugs, etc.) at public facilities,he/she will probably first go to a traditionalhealer, and may or may not eventuallybe cured.16 If the illness persists, he/she may eventuallygo to a modern health facility,but by then it may be too late, or the treatment may then have to assume extremely expensive proportions.

10. A common response to questionsabout the revenue potential of cost recovery (put here now in the terminologyof economics)was that it all depends upon price, income, and quality elasticitiesof demand.

11. Most respondents felt that prices ought to be a positive function of: (a) the level of technologyavailable, (viz the X-ray scanner at St. Louis), (b) the inverse of the income of the patient, and (c) the accessibilityof the service. Thus, hospitals in urban areas should charge more per service than health posts in rural areas. Certainly, the private hospitals in Senegal (HopitalPrincipal in Dakar and St. Jean de Dieu in Thies) have used these principles in setting their charges (see Concluding Observationsfor more on this point).

12. Collection costs seem to vary by type of facility. For example, although the A.P.H. charter of the hospital at St. Louis only makes allowance for a 5% of receipts allocationfor ticket sellers, it was quickly decided that a commissionof 10% would have to be paid in order to create greater incentives to sell the tickets, and in order to discouragecheating on the part of the ticket sellers. At Ziguinchor,for similar reasons, a floor was placed upon the monthly income of the ticket sellers. Another cost that can be considereda collection cost is the 10% of receipts, as continuing expenses of the A.P.H. at St. Louis or as 7% of receipts for the Committee at Ziguinchor. Thus, collection costs may be as high as 202 of receipts in total (also see Table II-2), but this figure is a considerablysmaller percentage of revenues than is true for most lotteries,which in many places around the world are used to finance social services, such as education.

16 It must also be rememberedthat many forms of illness are self limiting, in the sense that the person quickly dies, or the body quickly heals itself. - 51 -

13. Answers to questions about the equity of the existing pattern of health finance seemed to always be that it is a function of how well a cost recovery system can discriminatebetween income classes. Certainly, an effort is being made to do so in the study sites in Senegal. Most respondents felt that such discriminationwas easier at the village level, where everyone knew each other, than in urban areas. The certificate of indigence is another way of doing this in urban areas. However, no data were available on the costs of the social service investigationprior to the issuance of the certificate.

14. No doubt, higher income urban groups have better access to more sophisticatedforms of care. In theory, every citizen in Senegal has access to the new TraumatologyCenter in Dakar, but the probability is that a poor rural person in Tambacounda (many miles from Dakar), who has been hit by an automobile,will not have the same access as an upper-class citizen of Dakar who has suffered the same accident. Government facilities benefit from the revenue coming from their care and technology to the extent that they are able and willing to collect user charges.

15. The certificateof indigence seems to be the most practical way of protecting the poor particularlyat the rural level, where identification costs may be relatively low.

CONCLUDING OBSERVATIONS

The preceding section of this Chapter revolved around the qualitative (and sometimes quantitative)responses by Senegalese officials to questions about cost-recovery. This concluding section uses as its frame of reference the other three issues that are highly pertinent and essentially related to the problem of successful cost recovery.

Health Insurance in Senegal

To the extent that health care is provided free to the population by the government, to that extent does one have national health insurance. The main difference between national health insurance in many African countries and national health insurance in the social welfare states of Western Europe, for example, is that, in the latter countries, there is usually some form of ear-marked tax to pay for the insurance,whereas, in the former countries, it is financed from the general tax fund. Senegal itself has had a health insurance law since August 14, 1975, when the Social Security System (I.P.M.)was established. According to the law, every form of economic enterprise that has at least 100 employees is required to create its own I.P.M. that will pay most of the costs of outpatientmedical care and pharmaceuticalsand, generally, pay all of the costs of hospitalization, including child deliveries. Business firms that have less than 100 employees are allowed to group themselves,either by type of production or by geographic location, into their own separate I.P.M.s. At the moment, there are no data available on the number of workers (and their families)who are covered by this law. Employees and employers each contribute a 6Z share of an employee's monthly salary, but there is a ceiling on the contributionbase, that stops all contributionson any part of the monthly salary over and above 60,000 - 52 -

FCFA. The fundamental flaw in this arrangementis that any insurance mechanism relies upon what is called the 'law of large numbers". The law of large numbers refers to the fact that illness is a random event that can be predicted if there is a sufficientlylarge pool of people from which an average experienceof illness and its costs can be drawn. This allows the insurer to calculate a premium that reflects the average experienceand a standard deviation around the average, and then collect this premium from insured individuals;the total revenues from these premiums should then be sufficientto be able to pay the costs of illness in any given time period. By confining the separate actuarial bases of the I.P.M.s to such small numbers (because of the financial separabilityof each I.P.M.), the Senegaleselaw violates the basic insurance principle of the law of large numbers. Moreover, the financingmechanism is regressiveto income, because it exempts from its base any part of the monthly salary that exceeds 60,000 FCFA. Finally, the open-endedfeature of its health benefit payment provisions invites abuse on the part of both producers and consumers of health care.

It is no wonder then that the I.P.M. have had numerous financial difficultiesand these fall under four headings: (1) the 60,000 FCFA ceiling is not sufficientlyhigh enough for most firms to collect enough revenue to cover their health care costs. But, even if there were no contribution ceiling (and, no open-endedpayment provisionsfor health-care providers), roughly half of all business firms would have financial difficultiesin paying the health care costs of their employees,and roughly half would show a surplus, simply because the law of large numbers was violated at the initial design stage of the I.P.M. But (2) the payment mechanism is open- ended. The insured and their families usually seek care in the private health-care sector, where prices have been rising at a relatively rapid rate, and almost all forms of treatment are almost completelyfinancially covered by the I.P.M. (3) Each worker and the employer pay into the I.P.M fund, but because of large extended families and (related to it) because of polygamy, the number of beneficiariesof the health insurance is many times the number of those paying premiums into the insurance scheme. And, finally, (4) because all care is "free" to the beneficiaries,they overconsumehealth care, and providers overprovidehealth care. The solutions to all of these problems are well-known, and will not be pursued in depth here. It suffices to observe that the basic reform needs to take into account the law of large numbers, charge health insurancepremiums accordingly,and then have the insuring mechanism provide financial incentivesto both consumers and providers to consume and provide health care in an efficient fashion. Deductibles and coinsurance are usually used for this purpose, but some type of Health Maintenance Organization (HMO) structureof incentivesseems to more precisely focus these incentives. There would seem to be no reason why an HMO structure of health insurance and health care provision could not be designed for at least the formal labor market (includinggovernment employees) in Senegal. More research needs to be done with respect to health insurance for government employees in Senegal. - 53 -

The Private Health Care Sector

While the private health care sector in Senegal is not as large as the public health care sector, in terms of the number of people served, it does constitute a significantpercentage of the financial resources devoted to health care. There are two large private hospitals in Senegal, the Hopital Principal in Dakar, which began during colonial times as a French military hospital, is still used as a French and Senegalesemilitary hospital, but is increasinglybecoming a "civilian'hospital, and the Hopital de St. Jean de Dieu at Thies. As one example of the financial importance of these two hospitals, the user-charge receipts of the Hopital Principalwere 3.3 billion FCFA in 1984; that amount alone is equivalent to 78Z of the total budgets of all of the public hospitals in Senegal. The budget at St. Jean de Dieu almost equals the entire budget for all of the regional hospitals in Senegal.

Table II-7 contains a breakdown of the budget of the Hopital Principal for the years 1985 and 1986, and also, a preliminarybudget for 1987. What is most striking about this budget is its size, but also of significanceis its composition. The reader will recall that, in the public health care sector, salaries have consumed anywhere from 50 to 71Z of the budget in the last twelve years (See Table II-1). By way of sharp contrast, salaries have only consisted of 41 to 44 percent of the budget of the Hopital Principal in the last three years. And, during the course of a two- hour interviewwith the Director of the hospital, it became clear that he! not only administeredevery aspect of this hospital, but that he managed every aspect of it in detail as well.17 Of course, the size of this budget is made possible by the type of clientele that frequents the hospital, and by the known fact in Dakar that no one will be admitted either to inpatient or outpatient services,unless he/she can pay whatever the charge will be. Here, at this hospital, cost recovery is complete, although the Director did complain that they do sometimeshave difficulty collecting their bills, particularlyfrom the Senegalesegovernment, after government functionaries have been admitted and treated, with the understandingthat payment from the governmentwould follow later. Nevertheless,the Director believes that one of his more importantmanagement activities is to pursue these unpaid bills until they have been collected and he had on hand lists, percentages,and amounts of unpaid bills. Table II-8 contains the list of prices at the Hopital Principal. In contrast to the public sector prices discussed earlier in this Chapter, these prices at the Hopital Principal are a large multiple of those charged in the public sector. As the Director of the Hopital Principal readily admitted, the hospital is there for the care of the rich and privileged in Senegal.

17 As a case in point, all of the contents of Table II-7 and II-8 were given verbally, with no evidence of any 'prompting'papers being on the Director's desk. It was only at the conclusion of the interview that copies of the basic data that went into Tables II-7 and II-8 were produced from a file taken out of a drawer of the Director's desk. 54 -

Table II-7

1986 BUDGET IMPLEMENTATION, HOPITAI. PRINCIPAL

BUDGET CHAPTERS 1985 BUDGET 1986 BUDGET 1967 BUDGET IMvPLEMENTATION ESTIMATE IMPLEMENTATION ESTIMATE

- Investment 3.82% 4.75% 5 .17% 5.55% - Personnnel 44.38% 41.79% 41.61% 40.05% - Maintenance. Work Projects, Supplies 13.55% 26.31% 16. 25% 17.06% & Field Services - Transportation 3.83% 3.37% 3.36% 3.82% - Upkeep Costs 1.83% 1.52% 1.49%4 1.64% - Losses and Profits 0.31% 1.69%° 1.68% 0.29% Supplies 32.30% 30.57% 30.45% 31.59%

100.OO% 100.00% 100.00% 100.00%

Including

- Pharmacy & Medical Supplies 16.95% 16.25% 16.67% 17.25% - Food 7.9% 6.98-o 6.9% 7.25% -House Supplies 1.46% 1.92% 1.64%o 1.76% .Workshops. Fuel, Lubricants 5.98%o 5.43% 5.18% 5.32%

Total Supplies 32.30% 30.577% 30.45% 31.59%

Total Expenditures 3.3 FCFA 3.4 FCFA 3.4 FCFA (billion FCFA) - 55 -

Table II-8

Price List for the Hopital Principal in Dakar (FCFA)

RegularIbspital Stay First Secmd Third (perday) Class Class Class

G6vt.Functionaries 11,500 8,300 4,800 Others 14,500 10,500 6,000

Eeerg Careand PostowerativeCare (per day)

Govt.Functionaries 20,000 27,C00 9,600 Others 24,000 21,000 12,000

Births$ Routine 28,500 Difficit 35,0

OutpatientServices Govt.Functionaries Others (pervisit)

Chiefof Service s,o0 6,000 Assistants 2,200 4,200 X-rs 9,000 12,500 Laboratory 5,000 6,000

t Thisis the feefor thebirth itself. If, for exaple, a an hada routinebirth and then spent three days in the hospitalin first classaccoudatimns, herbill woldbe: 28,5004 3 (14,500):72,000 FCFA - 56 -

A final note about the internal financingof this hospital is that cross-subsidizationseems to be done almost in the same manner as is done in hospitals in the United States. The Hopital Principal loses about 4,000 FCFA per day per hospital bed for inpatientcare, but manages to "subsidize" these losses through large gains on outpatientcare and on laboratoryand radiologyservices. The separate servicesprovided by the hospital are priced according to the hospital's estimationof the price elasticity of demand for each service,which is how a profit-maximizingmonopolist would price his services.

Decentralizationof the Health Care System

Decentralization-Centralizationseems to be moving in two differentdirections in Senegal at the present time. At the level of the health posts and centers, the A.P.S. are turning the financialand managerial focus towards the Committeesthat manage the A.P.S. To the extent that user charges constitute a larger and larger percentage of the budget of the A.P.S., to that extent will they become autonomous from the Ministry of Health in Dakar. On the other hand, the posts will probably lose the autonomy that they had in the past, but that autonomymay not have been that extensiveanyway, given the lack of money at the post level. And, by having the A.P.S. at the Committee (or, health center) level, there is probably a greater chance for fiscal accountability,given the greater probabilityof literacy and greater financialand managerial sophistication at that level.

At the hospital level, a hospital such as St. Louis could become extremely independentfrom the central Ministry of Health if its user charge revenues from the "indigents"were to continue to increase,and if it were not forced to remit to the National Treasury its revenues from the non- indigents. Hospitals such as Dantec and Fann seem to be presently not engaged in cost recovery. Certainly,hospitals such as those at Zinguinchor and St. Louis ought to be regarded as pioneeringexperiments in financial and administrativedecentralization, and ought to be allowed to go as far, in this regard,as the ambition,hopes and abilities of their A.P.H. and their Directorswould take them. - 57 -

III. COST RECOVERY POLICY IN MALI

This Chapter has its basis in sites visits in Bamako and Kita. In Bamako, all three national hospitalswere visited and various members of their staffs were interviewed; also, interviewswere held with members of the staff of the World Bank's project (the Projet de DeveloppementSanitaire au Mali (PDS)) in Bamako, with various officialsof the Ministry of Public Health and Social Welfare (MSPAS)and with representativesof Medecins Sans Frontieres. In Kita, visits and conferenceswere held at the health center, at a local health dispensaryand at a local drug depository (both of the latter, at the village of Djidian, about 18 kilometers from Kita). Most of the persons interviewedfurnished documents on the laws relevant to health care and to cost recovery,and also furnished statisticson price lists and on the latest developmentsin the cost-recoveryeffort.

BACKGROUND

Table III-1 contains a time-seriesof the health budget relative to the national budget for the years 1968-1981. (Page 43 and 153 of Plan Decennal.) Table III-2 gives World Bank data estimates for a 1985 update of some of the data contained in Table III-1, and also presents estimates of the total amount spent for health care (both public and private). There are several interestingaspects about Table III-2. One is that for the totality of health care expenditures(recurrent and investment)in Mali, only about 16.4 percent came directly from the Ministry of Public Health and Social Welfare budget; on the other hand, external aid that was spent by the Ministry was slightly greater than the Ministry'sown budget (4.8 billion FCPA vs. 4.3 billion FCFA). Thus, the MSPAS (at both the national and regional levels) spent 9.3 billion FCFA, or 35.4 percent of the grand total of 26.2 billion FCFA spent in 1985. It is estimatedthat about 10.0 billion FCFA (or 38.2% of the total) was spent on traditionalmedicine, which is 1081 of the total amount that the MSPAS spent. The Peoples' Pharmacy of Mali (PPM) accounts for 16.7 percent of total health care expenditures. Tables III-3 and III-4 give estimatesof MSPAS budgets between 1981-1985and estimatesof the amounts spent on personnel, as a percent of total MSPAS recurrentbudgets at both the national and regional level. In recent years, the MSPAS budget has fluctuatedbetween 7.4 and 8.0 percent of the national budget. In 1985, personnel expenditureswere 64 percent of the MSPAS budget at the central level, and 97 percent at the regional level, which results in a weighted average of 73 percent of the total MSPAS budget.

The health care sector in Mali has all of the problems that are found in the typical very poor country. Its health needs for both preventive and curative care are extremely large relative to its economic base. Public health care expendituresgo mainly to curative care in

1 The three hospitalswere: Hopital du Point G, Hopital Gabriel Toure, and the Hopital de Kati. - 58 -

Table III-1 The National Budget and the Health Budget (Billions of FCFA)

Health Budget National Health as a Percent of Budret Budget National Budget

1968 23.5 2.0 8.5% 1969 24.2 2.1 8.7 1970 23.7 2.1 8.9 1971 24.1 2.1 8.7 1972 25.8 2.3 8.9 1973 28.1 2.5 8.9 1974 31.8 2.7 8.5 1975 38.1 3.0 7.8 1976 50.2 3.8 7.6 1977 56.4 3.8 6.7 1978 64.5 3.9 6.0 1979 76.6 5.2 6.8 1980 83.7 4.8 5.7 1981 85.2 5.3 6.2

SOURCE: Ministry of Health Documents. Table III-2

Breakdown of Actual Health Expenditures in 1985 By Source of Financing and By Spending Unit (Millions of FCFA)

1 2 3 4 5 6 7 % SLPPLIER MPHSW* 0th. Min. NSWI** PPM AID Private Private TOTAL SOLRCE BN+BR Modern Traditional

1 MPHSW 4,290 4.290 16.4 2.0 2 Other Ministries 130 391 9 530 5.7 3 NSWI** 23 1,327 1,350 19.6 4 AID 4,828 302 5,130

5 PRIVATE 4,376 23 454 10,000 14,853 56.8

TOTAL 9,271 391 1,327 4,376 334 454 10,000 26,153 100.0

% 35.4 1.5 5.1 16.7 1.3 1.7 38.2 100.0

SOURCE: World Bank data.

* Ministry of Public Health and Social Welfare ** National Social Welfare Institute Table III-3

Budget Data for the MPHSW* 1981-1985 (Millions of FCFA)

1981 1982 1983 1984 1985

NATIONAL BUDGET

OPERATING BUDGET Public Health 2,335 2,392 2.477 2,509 2,731 Social Welfare 154 186 157 157 151 Total 2,489 2.578 2,634 2,666 2,882

INVESTMENT 57 103 183 254 266

TOTAL 2,546 2.681 2,817 2,920 3,148

REGIONAL BUDGETS

OPERATING BUDGET Medical Care S93 747 781 770 851 Medicosocial Services 30 33 44 99 109 Social Welfare 79 90 139 162 180 Total 702 870 964 1,031 1.140

TOTAL 3,248 3.551 3,781 3,951 4,288

As a % of Government Budget 7.8 8.0 8.0 7.4 7.4

SOURCE: World Bank data. * Ministry of Public Health and Social Welfare Table III-4

Data on Personnel Expenses as a Percent of the MPHSW* Budget 1981-1985

1981 1982 1983 1984 1985

NATIONAL BUDGET

OPERATING BUDGET Public Health 59 59 59 58 63 Social Welfare 93 94 92 92 90 Total 61 62 61 60 64

REGIONAL BLOGETS

OPERATING BUDGET Medical Care 95 97 97 97 97 Medicosocial Services 87 83 82 91 92 Social Welfare 93 93 96 96 97 Total 94 9c % 96 97

TOTAL 68 70 70 70 -13

SOURCE: World Bank data. * Ministry of Public Health and Social Welfare - 62 - hospitals in urban areas, and there are never enough funds available for the public-sectorpurchase of medications.2 Given the economic difficulties that Mali has experienced,and the salary-billdilemma that every Ministry of Health faces, health-budgetallocations for material and medicationshave remained constant in nominal franc terms since 1981; in the meantime, it has been estimated that world drug prices have increasedby about 31 percent.3 Mali also has a small pharmaceuticalfactory that produces basic medical commoditiessuch as aspirin and medicinal alcohol. Compoundingthe budget and price-increasedifficulties with regard to medicationsis the fact that the Peoples' Pharmacy of Mali (PPM) seems to have become a relatively inert institution.

The PPM was founded during the 1960-68 SocialistRegime in Mali, and continues to this day to exercise a completemonopoly on the MSPAS importationof medicationsand pharmaceuticalsinto Mali. Prior to the creation of the PPM, the MSPAS had pursued a policy of importingdrugs and distributingthem free of charge throughoutits health-carefacilities. Given the chronic shortage of drugs that this lack of pricing policy entailed,the governmentauthorized the Ministry of State Enterprisesto establishthe PPM as a parastatal that would import and sell drugs. Until about 1983, the PPM was one of the few parastatalsin Mali that was earning profits. Despite its inefficientpurchasing polices that consistedof (a) not using competitivebidding processes, and (b) buying many differentkinds of drugs in relativelysmall quantities,the PPM apparentlywas still able to realize a profit because the demand for drugs on the part of the populationwas strong. However, the PPM was chronicallyundercapitalized, due to the fact that the governmentsiphoned off its profits in order to supportother sectorsof the economy.4

During a National Workshop on pharmaceuticalpolicy, held during the week of January 12-17, 1987, in Bamako, and attended by representatives of the government,international organizations, and private aid-giving organizations,such as Medecins Sans Frontieresand the Union Nationale des

2 As just one example of many of the inequitiesfound in the public health care system, it is estimatedthat about 25 percent of all hospitalizationsare for government functionariesand their families;this same group of people (all functionariesand families)only comprise about 5 percent of the population of Mali.

3 See Chapter II, ANALYSISsection, concerningincreasing prices for medicines.

4 Perhaps one indicationof the undercapitalization(and/or the inefficiency)of the PPM is that in 1985, it imported 210.2 million FCFA of drugs and pharmaceuticalsinto Mali. The next largest importerswere the foreignembassies accredited to Mali, with 119.1 million FCFA in drug and pharmaceuticalimports. The third largest importerwas the Social Security System (INPS)with 100.8 million FCFA. 63 -

Religieusesdu Mali, the PPM was criticizedas follows:5

1. Certain kinds of drugs are unavailable,and those that are available are too expensive. On December 31, 1985, the inventory of the PPM had been valued at 4 billion FCFA. By the date of the conference,the PPM had no furtheraccess to bank credit.

2. The criteria that the PPM uses for the purchases of pharmaceuticalsare not at all evident. It would appear that the PPM keeps its own counsel, and has no real appreciationfor consumer or physicianneeds.

3. The PPM has too many sales outlets (100), too many depots (400) and sells too many products (2,000).

4. Management at the PPM has been lax:

(a) after 20 years of operation,the PPM still does not have a standard inventorylist

(b) only 6 of its 98 outletshave pharmacistsas managers.

Many of the participantsat the Workshop had suggestionsfor improvingthe management and operationsof the PPM.6 But the solution to this problem, that seems to have evolved from the Malien Chief of State's visit to China in June of 1986, will probably be the establishmentof comanagementof the PPM and the Malien pharmacy factorywith the Chinese. Many of the details of this arrangementhave yet to be resolved for both Mali and China, but it would appear that the present Malien Director General, the Malien Sales Manager, and the Malien FinancialManager will be replacedby Chinese.

A reading of the 10-page Proceedingsof the Workshop indicates that many of the participantsand respondentsdo not really understandthe basic economicsof the situation. These are: (1) that the lowest possible purchase prices can only be achieved by competitivebidding; (2) that monopoliesare never efficient,because they have no competitionthat forces them to be efficient;and (3) that a local pharmacy factory only makes economic sense, if it can produce pharmaceuticalsat a cheaper price than can be achieved through competitivebidding on the outside.' There was also some discussionat the Workshop about allowing the private sector to enter

5 See World Bank, ResidentMission (1987).

6 For example, the Deputy Director General of the PPM thought that the central governmentought to create a budget subsidy for the PPM so that it could lower its prices.

7 One of the participantsat the Workshop evoked the so-called "infant industry"argument, but this argumenthas been discreditedfor some time now. - 64 - the pharmaceuticalmarket in Mali.8 The best that can be hoped on the pharmaceuticalfront in Mali is that the Chinese will be able to introduce some degree of economic rationality into the purchase and distributionof pharmaceuticals. All of the evidence seems to indicate that the economic demand for pharmaceuticalsis strong on both the part of the providers and the consumers of health care. The June 29, 1985 legalizationof the private practice of medicine, for the first time since independence,is a good first step for establishingthe necessary conditions for rationality in the health care market, but the newly-establishedprice controls indicate a lack of sufficiencyof conditions.

A DESCRIPTIVEANALYSIS OF THE EVOLUTION AND CURRENT PRACTICE OF USER CHARGES IN MALI

Cost recovery in Mali is not yet geographicallywidespread, 9 but, as the earlier parts of the previous section of this Chapter indicate, the budgetary conditions for forcing cost recovery have existed during the 1980s and have become more acute in the last two or three years. The greatest obstacle to widespread cost recovery is the consuming public's perception of the unavailabilityof drugs. It makes little sense to go to a physician or caregiver and pay them a user charge, if one knows that they will not have pharmaceuticals,or that they will give a prescriptionfor a pharmaceutical that cannot be filled at the local PPM outlet at any price.10

Cost Recovery in The National Hospitals

Official cost-recoveryin Mali dates from December 13, 1983 in Decree N. 245/PG-RM.11 It is signed by the President, by the Minister of Finance, and by the Minister of Health. This document contains a 38-page price list for outpatient and inpatient treatment, and goes into great detail as to the exact price for each kind of treatment. Although a reading of the Decree indicates that it is to hold for all of the hospitals

8 The level of prices in the newly-establishedprice controls for the practice of private medicine do not presently augur well for private-sectorinvolvement in health-care in Mali (See Annex).

9 As will be shown later in this Chapter, however, cost recovery activities could become a relatively important part of the public sector health budget, simply because the National Hospitals that are attempting it consume such a large part of the budget.

10 One of the physicians at Kita pointed out, however, that the psychology of the typical patient that they treat is that the cost of a visit is a known given before the visit. The prospective patient does not know what the cost of any medicine will be until he/she receives the prescription. The price of the first step is certain, but the price of the second step is uncertain, and this will have an effect on the demand for medical care.

11 This document may be found in the project file. - 65 -

in Mali, its main intent was for the three national hospitals: (1) Gabriel Toure, (2) Hopital Point G, and (3) Kati. Cost recoverywas first tested at Gabriel Toure Hopital during 1984 and 1985, and was fully applied to all three hospitals in 1986. The health economist at Gabriel Toure indicated that the Minister of Health is very serious about cost recovery in these three hospitals with the goal of eventually making them financially autonomous, and by 1987, there was a great effort to evaluate and analyze the whole initial cost recovery program, by type of service, in each of the three hospitals. However, the goal of financial autonomy for the three hospitals must be viewed within the economic,political, and social context of Mali. For example, the Georgetown University Hospital in Washington, D.C. is financiallyautonomous because almost 100 percent of its clientele is insured either by private sector health insurance or by governmenthealth insurance; losses on the treatmentof the uninsured poor or unemployed are covered by cross-subsidiesfrom surchargeson the hospital bills of those who are insured. In the Malien context, it is clear from what government officials have said that 'financialautonomy" for them means a hospital's ability to generate enough funds to cover most of its recurrent costs, especially those for medications,equipment, and maintenance;again, within this context, personnel costs are really not seen as 'recurrentcosts', but as 'fixed costs". Complete financial autonomy (in the sense that Georgetown University Hospital is financiallyautonomous) could not be achieved, except in the far long-run, because of the large percentage of the truly indigent who are treated in these three hospitals, and because of the prevailing Malien attitude that 'the State should do its part'.

The 1986 reports of the Hopital Point G and the Hopital Gabriel Toure (see Annex) were available for study at the time of the mission.12 A summary document,Rapport Annuel Sur L' Autonomie De Gestion Des Hopitaux Nationaux Du Mali (see Annex) was released by the Minister of Health on March 9, 1987, and reflects the financial experience of the three national hospitals for the calendar year 1986. Here, we will present only the highlights from the latter document. The budgetary format of the Rapport Annuel is somewhat deceptive, because it only presents the results of the Malien concept of 'recurrent costs", i.e. personnel costs are excluded. Moreover, if we compare the data in the annual report of each hospital with the data in the Rapport Annuel, they are not consistent. For example, if we take the annual report of the Hopital Point G, we see that pages 11 and 14 state that 31.7 million FCFA were collected in user charges in 1986. With a total operatingbudget of 424.8 million FCFA (includinga 23.0 million subsidy from the FAC), the Hopital Point G collected about 7.5 percent of its total budget (includingsalaries) in user charges.13 Page 14 of the annual report of the Hopital Point G states that 38.4 million FCFA were collected in user charges in 1986 (exceedingits target amount of 30.0 million FCFA) and that figure is roughly consistentwith the 37.9 million

12 The annual report for the third national hospital, the Hopital de Kati, was unavailable at the time of the mission.

13 Salaries were 202.8 million FCFA, or 47.7 percent of the total of 424.8 million FCFA. - 66 -

FCFA in user charges reported in the Rapport Annuel (Table 2.2.4). Using only the figures in Table 2.2.4 (which exclude salaries),we find that, of the total of 175.5 million FCFA in 'recurrentcosts" for the Hopital Point G, the national governmentcontributed 137.5 million and user charge revenues covered 37.9 million, or 21.6 percent of total "recurrent"costs. The Rapport Annuel decries this 'small' percentageof total "recurrent" costs garnered by user charges, and goes on to ask rhetorically, "...when will management (and financial)autonomy become a reality at the Hopital Point G?"

Using the Rapport Annuel's definition of "recurrentcosts" the cost recovery experienceat the Hopital Gabriel Toure was somewhat better. Of a total "recurrent"budget of 127.2 million FCFA, cost recovery efforts brought in 37.8 million FCFA, or 29.7 percent. The Hopital de Kati had the best cost recovery experienceof all three hospitals. Its total "recurrent" budget was 34.9 million FCFA, and cost recovery efforts produced 18.9 million FCFA, or 54.2 percent of the total.

If salaries are assumed to roughly double the operating costs given in the reports for these three hospitals, then their true cost recovery ratios as a percent of total operating costs would be 7.5 percent, 14.9 percent and, 27.1 percent respectively.

These differing results give some pause for thought. The Hopital Gabriel Toure has had prior learning experiencebecause it was the first test site for hospital cost recovery at the national level, so one would expect it to be further out on the learning curve than the other two hospitals. On the other hand, the Hopital de Kati had the best results, and it started cost recovery at the same time as did the Hopital Point G. One possible explanationof the anomaly could be that there may be diseconomies of scale in the management and collectionof user charges: the total "recurrent"budget of the Hopital Point G is five times that of the Hopital de Kati (175.5 million versus 34.9 million).

The more plausible explanation for the relatively large difference in cost recovery percentagesbetween the hospital at Kati and the other two national hospitals may simply be the force of personality and the position within the governmentalhierarchy of the Director of the hospital. He is an army colonel in a governmentthat is basically a military government. He is a vigorous, self-confidentman, who wears paratroopers'wings on his uniform, and who has studied hospital administrationin France and visited hospitals in Germany and in seven States in the United States. He himself also verbally makes the distinctionbetween the administrationand the management of a hospital.

Given his position in governmentand given his background, it comes as no surprise that he has institutedprecise management and financial control within the national hospital at Kati. In order to physically enter the hospital grounds, one must pass through a single entrance gate. This is the point at which entrance tickets are sold for outpatient and inpatient treatment. The Director himself does a daily bed-check and goes over the records for each of the 78 beds in the hospital. He also takes it upon - 67 - himself to personally visit the large public institutionsthat owe money to the hospital and demand payment for the care that the hospital has given to its officials or their families. For example, he exhibited a payment and a cancelled receipt for 551,000 FCFA that he had just collected from the Ministry of Defense for treatment that the hospital had given to some of Defense's personnel and their families. In the last year, he has made similar sorties to the Railroad and to the Ministry of Agriculture. He makes the point that, in 1985, with about the same case-load, the previous Director had only collected 8 million FCFA in user charges, whereas he himself had been able to collect 20 million FCFA in user charges in 1986. The irony is that the Ministry of Health had considered closing this hospital in 1985, because it was beginning to become too large a burden on Ministry of Health financial resources; in his office on the wall, he has a collage of photographs of the before 1986 and the after 1986 physical condition of the hospital, and the improvementis striking.

The single most difficult operationalproblem at Kati has been in dealing with the PPM for medications and X-ray film, but Kati now uses the parallel market for some medications and for practicallyall of their X-ray film, because the PPM usually has the wrong sizes and types of film in stock, when it does have stock. One way of using the parallel market is to ask persons going outside the country, to Dakar for example, on other business to buy the film, or to telex to outlets in Dakar to send film. They are particularlycareful about having the right kinds and amounts of medications for their emergency services, and they do strict inventory control over their emergency supplies.

The Rapport Annuel concludeswith its own evaluation of the cost recovery activities at the three hospitals in 1986. It bases its evaluation on progress made toward two objectives that had been set for the three hospitals engaged in cost recovery: (1) the capacity to generate their own financial resources and to use these resources to better the provision of health care, and (2) to implement better management of state-provided budgets and a rational allocation of the additionalbudget revenues brought in by user charges. With regard to the first objective, user-charge receipts did increase each quarter and the Ministry predicts that user charges will increase further. Analysis of the 1986 experience reveals the following roadblocks to cost recovery in the coming years: (i) the prices set by the 1983 legislationdo not adequately reflect the current level of prices in Mali; (ii) other public organizationsare not paying the hospital bills of their functionariesand families who have been hospitalized; (iii) a high incidenceof indigents among the hospital patient-load;and (iv) not enough effort being made to make sure that everyone pays who can pay.14

14 As just one example for these four problem areas, the Hopital du Point G had 176,190 patient days of hospitalizationin 1986; of that number, 121,218 patient days (or 68.8Z) had to be provided free, under current legislation. It would appear that, just as in Senegal, there are too many "special cases", or exceptions to the rule of who should and who should not pay. - 68 - With regard to the second objective,the Ministry believes that resources are now being more rationallyand efficientlymanaged.

Cost Recovery at the Regional and Local Level: Kita, Bafoulabe and Kenieba

In order to better understand the financingof health services at the regional and local level, it is first necessary to understand the organizationalapparatus at these levels, and the methods of public finance. Figure III-1 shows an organizationalchart of the administrativesystem. Mali is organized into 8 regions, includingthe Region of Bamako, and then downwards through the Circle, the District and the village. Each level has its own administrativehead and a Council or Committee,and, as regards the provision of health care, each Council or Committeehas a health subcommittee. Central government finance consists of a head tax (the 'minimumfiscal") on all adults aged 15-55 that averages 300 FCFA, but varies according to the income of the Region; the revenues from this tax go directly to the national Treasury. Regional governmentsmay add on a supplementarytax to this "minimum fiscal" that usually varies from 100-150 FCFA and that is used for local needs. Each lower level of government receives a portion of this supplementarytax, and each level decides how it will proportion its percentage as between say, health, education, and other services.

The most intensiveand studied experimentationin cost recovery at the local level thusfar in Mali has been at the three Circles of Kita, Bafoulabe and Kenieba in the Kayes Region. This experimentis the direct result of a World Bank project in the Kayes Region that was begun in 1983, the Health DevelopmentProject in Mali (PDS). The basic purpose of the project was to provide quality primary health care to a population that had been heretofore underserved,given the emphasis in the government health care budget upon the national hospital system, and particularlyon the urban region of Bamako. One of the purposes of the project was also to test the possibilitiesof cost-recoveryas a furthermeans of enhancingthe quality of health care by providing financialresources over and above those that the government (at all levels) had been able to provide in the past, or could be expected to be able to provide in the future, given the financial difficultiesthat it was beginning to experience. The experiment in cost recovery began in June of 1985 at Kita and Bafoulabe and in July of 1985 at Kenieba.

Table III-5 begins by presenting the current price lists at each of the three health centers. The prices differ for each center because, even though all three centers are part of the same project, the local Council for each center decideswhat its price structurewill be (refer to Figure III-1). Table III-6 describes the financialexperience at Kita between June 1985 and December 1986. The first seven months of the experimentat Kita produced a cumulativedeficit of 6,845 FCFA. The latest twelve months of experience (Januaryto December 1986) show a positively accumulatingtotal, so that by December 1986, there was a positive balance of 1,082,310FCFA. Average monthly receiptswere 453,736 FCFA, and average monthly expenses were 396,772; the average monthly "profit"was 56,964, so - 69 -

Figure 111-1

Reglonal Government Organizational Chart

Administrative CooperatIve Cooperative Organizations Divisions Development Specializing In Health Organizations Management

Governor |Regon | Reglona| Council

Clrcle jCIrcle 14 > Circle Clrcle Health Commander Development 4 - Center Management Committee Council

District District I-| District stric Health Chief Development 4 Center Management Committee Council

Village Village *--A Villagee 4 j|Health Committee Chief Committee - 70-

Table III-5

Health Care Prices in Effect in Health Centers of Kita, Bafoulabe and Kenieba (in FCFA)

Service Kita Bafoulabe Kenieba

Delivery 1,000 1.750 1,000

HosDital-Medicine 5,000 2,500 5,000

Surgery 10.000 10,000 10,000

Injection/Bandage 50

Consultation 100 100 100

Laboratory 300 500 300

Caesarean 3,500

Minor Surgery 5,000

Urinanalysis 100 Table 111-6

Health FInancIng Statistics for the Center at Kita (FCFA)

Inventory Expenditures Income Direct Medica- Supplies Mainte- Monthly Annual Expenditures tions nance Result Result

June 85 479.700 99.175 266.375 110.000 9.880 - 5.730 July 325.550 104.335 180.518 92.700 24.645 - 76.648 - 82.378 August 447.350 85.045 190.913 113.500 23.450 + 34.442 _ 47.936

September 415.050 69.300 235.569 124.735 15.575 - 30.129 - 78.065 October 416.950 109.225 233.736 110.585 17.700 - 54.296 - 132.361

November 453.500 54.150 268.111 69.960 5.500 + 55.779 - 76.582 December 439.025 43.330 295.453 30.505 -- + 69.737 - 6.845

January 86 467.950 58.400 301.928 13.250 -- + 94.372 + 87.527 February 512.700 56.000 313.892 59.655 -- + 83.153 + 170.680 March 543.950 42.950 307.828 32.210 -- +160.962 + 331.642 April 633.150 75.400 378.225 48.530 -- +130.995 + 462.637 May 574.150 76.610 252.256 64.630 13.200 +167.454 + 630.091 June 424.750 124.935 194.485 48.780 -- + 56.550 + 686.641 July 467.800 130.085 216.396 29.385 18.660 + 73.274 + 759.915 August 334.450 71.105 239.446 19.325 -- + 4.574 + 764.489 September 479.650 69.495 186.141 29.090 6.500 +188.424 + 952.913 October 475.750 67.870 263.248 28.370 2.950 +113.312 +1.066.225 November 381.750 57.150 286.140 37.375 - + 1.085 +1.067.310 December 86 347.800 52.275 253.545 20.605 6.375 + 15.000 +1.082.310

Total 8.620.975 1.446.835 4.864.205 1.083.190 144.435

Average: Income 453.736 Direct Expenditures 76.149 InventoryExpenditures 320.623 - 72 - that the average monthly return on "sales'was 12.6Z. Expenditureson medications totalled 256,011 FCFA, or 64.5 of total expenses. A "break- even" analysis reveals that Kita has now gotten beyond the 'break-even" point.

Initial Inventory of Medications,etc. (6/85) 4,826,130 FCFA

Depletion of Initial Inventory 6,091,830 New Purchases of Inventory 2,358,030 Net Depletion 3,733,800 FCFA

Inventory as of 12/86 3,733,800FCFA in sales & capital Cumulative Profits 1,082,310 Cash on Hand as of 5/85 41,405 Final Balance as of 12/86 4,857,515

Its final balance of 4,857,515FCFA is 31,385 FCFA greater than its initial balance of 4,826,130 FCFA. The charts listed in the Annex indicate the seasonal fluctuations,net profits, direct expenses, the use of medications as a percent of receipts, and gross receipts.

Up to this point in time, the cost recovery experienceat Kenieba has not gone as well as it has at Kita. Table III-7 shows a time series for the operating results at Kenieba. Average monthly receipts have been 223,650 FCFA, and average monthly expenditureshave been 228,058 FCFA; the result has been an average monthly loss of 4,408 FCFA. Analysis of the charts listed in the Annex reveals one of the reasons for the losses. One chart shows the consumptionof medications as a percent of monthly revenues. In June and July of 1985, these percentageswere 132.1Z and 154.4Z respectively;by April and May of 1986, they had dropped to 35.7 and 48.4Z. Initially,Kenieba had pursued a policy of giving free medications to the health-care personnelwho worked there; that practice has now been terminated, and the results of the terminationcan be seen in the increase in revenue and the decline in the use of medications over time. As with Kita, the plotted time series data in the charts shows a seasonal variation, with receipts declining during the harvest, when people are working in the fields, and an increase over the winter months. Financial book results for Kenieba show an initial balance of 3,577,543 FCFA and a final balance, as of December 14, 1986, of 1,418,980 FCFA. Clearly, if Kenieba does not soon increase its revenues and/or decrease its expenses, it will end up with a zero balance, and, if it is to continue to give quality health care, it will require another subsidy for medications from the PDS or from the government.

Table III-8 contains the financial results that were available for Bafoulabe. These results are not encouraging,particularly because the average monthly expenditurefor drugs and medications alone exceeded the average monthly revenue for the eight months of data that were available.

On-site discussionsat Kita revolved around the problems and hopes that the key managerial personnel had. The most difficult problem to date - 73 -

Table 111-7

Health Financing Statistics for the Center at Kenleba (FCFA)

InventoryExpenditures Direct Medlca- Malnte- Monthly Annual RevenueExpenditures tlons Suppiles nance Results Results

Juin 85 154,200 73,635 203,6% 4,000 0 -127,131 - Juillet 166,400 120,250 256,881 12,690 0 -223,421 -350,552 Aout 236,200 46,500 183,709 10,250 0 -4,259 -354,811 Sept 238,500 81,395 160,411 11,690 0 -14,996 -369,807 Oct 194,100 39,150 204,520 12,250 0 -61,820 -431,627 Nov. 197,800 46,325 165,725 119,930 6,950 -141,130 -572,757 Dec. 111,900 13,850 88,976 21,540 10,800 -23,266 -596,023 Jan.86 199,200 14,375 165,63 12,565 1,375 45,250 -590,773 Fev. 294,600 17,175 164,045 23,860 2,050 487,470 -503,303 Mars. 246,200 0 150,880 27,765 1,250 466,305 -436,998 Avril 376,500 16,240 134,275 21,710 7,725 +196,550 -240.448 Mar. 273,800 19,750 132,605 49,865 5,900 +65,680 -174,768 Juin 261,700 14,100 18.740 +48,860 -125,908 Juiliet 180,800 55,08s 172,270 -46,555 -172.463 Aout 1280300 47,250 222,113 +10,937 -161,526 Sept. 175,200 15,645 109,862 449,693 -111,833 Oct. 227,300 7,950 130.764 +88,586 -23,247 NDV. 2110 ._ 226.327 -56,082 -79,329 Total 4,025,700 669,430 3,435,599

Average: income 223,650 Direct Expenditures37,191 InventoryExpenditures 190,867 - 74 -

Table 111-8

Health Financing Statistics for the Center at Bafoulabe

Expenditures Main- Total Monthly Revenue Medications tenance Fuel Material Expend. Results

Jan/86 171,350 218,069 3,850 34,000 22,350 278,269 -106,919 Feb/ 174,350 218,634 2,929 18,000 15,550 255,063 - 80,713 Mar/ 292,600 360,684 4,583 19,800 38,090 423,157 -130,557 Apr/ 288,800 262,651 3,475 22,000 19,995 308,121 - 19,321 May/ 211,150 230,420 3,800 10,800 13,340 258,533 - 47,210 Jun/ 181,400 124,070 3,188 11,800 14,475 153,533 + 27,867 Jtul/ Aug/ Sep/ Oct/ Nov/ 190,400 316,535 10,500 10,000 9,480 346,515 -156,115 Dec/ 178,450 9,400 10,000 2,000 21,400 +157,050

211,063 217,558 255,552 - 75 - has been the unreliabilityof the drug supply from the PPM and the cost of those supplies. Kita estimates that, if the drug supply were rationalized and bought on the competitive internationalmarket, it would only have to spend about half of what it presently spends on its drug and medication supply. Medications are included as a part of the hospital price and are bought from the PPM depot. Kita itself devotes a considerableamount of attention to informing the PPM depot of its basic drug needs, and, in general, petitioning the PPM depot to try to procure the proper drugs at the times when they are needed. Management costs are also still considered to be too high and Kita is making an effort to resolve this problem. Also, now that the government has perceived that Kita is recovering its costs, it has cut back on the amount of subsidies that it had been giving; the center sees this in a positive light, however, because the loss of subsidies has forced the center to be more efficient in its use of medicines and drugs. Management felt that the key ingredient to success was to have a large inventory of essential drugs at the beginning of a cost-recoveryproject, in order to get off to a good start.15 Kita also emphasized that the cost recovery system was never meant (in their view) to recover more than the costs of medications,maintenance, and management. Yet, their experience over the last year has made them so confident about the efficiency of their system and the willingness of the local population to pay for quality care, that they are already speculatingabout what to do with the "profits"that cost-recoveryis beginning to generate. One physician argued that the 'profits' came from the sick, particularlyfrom hospitalizations,and should, therefore, be spent in the hospital part of Kita's operation. Others argued that the "profits" should be used for preventive purposes, as a form of social insurance. But, there is also a question of law: can they legally make a profit? Related to the profitabilityissue is the issue of further government substitutioneffects. If the government has already cut back on the subsidies to the center at Kita, because of its early financial success, it is not inconceivablethat the governmentmight eventually expect Kita to pay a portion of the health workers' salaries that governmentnow pays. Management at Kita firmly rejects this possibility,because they strongly believe that government has a basic responsibilityfor providing a large percentage of the resourcesneeded for giving adequate health care. Management continually stressed that cost-recoverywas a means of providing health care, and not an end in itself.

Perhaps one of the key ingredientsto Kita's financial success to date has been the fact that only about 4Z of the people treated at the center hospital at Kita do not pay something; on the other hand, the health personnel at Kita only pay half the going rate for any health care that they receive. For outpatient care there are still some 'special cases" but everybodymust pay for the medications that they receive. In Kita, local government officials have been reluctant to issue certificatesof indigence, because they fear that the center will then bring the health care bill for

15 If similar centers were to try cost recovery, someone would have to be willing to supply this initial stock. Given the present state of government finances, the initial inventory stock would probably have to come from outside sources. - 76 -

an indigent person back to the local government officials and demand payment from the local government that issued the certificate of indigence.The previous chief physician at Kita, who was both aggressiveand popular with the local people, used to bring the certificateof indigence back to the local governmentas a matter of course. Finally, management at Kita believed that Bafoulabe's financial difficultiesstemmed from the fact that the demand for health care at Bafoulabe is not as strong as it is at Kita and at Kenieba; this observation remains to be seen, but the lack of sufficient financialdata from Bafoulabe for analysis also indicates that management practices there may not be as advanced as at Kita.

The centers at Kita, Bafoulabe and Kenieba are also experimenting (as are the other Circles in the rest of the country) with a form of "free enterprise"distribution of drugs and medications at the village level, in village drug depots (See Annex). An individualin the village is selected as a depot-keeperfor drugs. He/she is given an initial stock of drugs for sale at a 15Z markup (profit) and is expected to replenish this initial stock from sales.16 The depot keepers are largely retired people who have had some previous experiencewith the health care system and are literate.17 Thusfar, receipts in the Kita area have been lower than the costs of the medications, and the stocks have begun to diminish; Kita management thinks that stricter supervisionof the depot-keepersis necessary. Another problem in distributionat this depot level is that many of the villages are too small and too separated for a depot-keeperto make any money from them. There has been some talk of recruitinglocal village merchants for this purpose, because they already have business experience, but there is always the problem that they might use the revenue from drug sales to build up their own business inventoriesrather than to replenish the drug inventory.

Medecins Sans Frontieres: The Magasins-Sante

Medecins Sans Frontieres (MSF) began the Magasins-Santeas an emergencymeasure to provide free health care to the impoverishedpopulation in the north of Mali in the Timbuctu and Dire Regions during the drought in 1984. Because of the weather and economic situation,this group of people was completelywithout medications and medical equipment. In March of 1986 the Magasins-Santewere integratedinto the rest of the Malien health care system. An effort had been initiated in July of the previous year to recover the costs of medications from the people who received them.

Medecins Sans Frontieresbuy the medications either from UNICEF or through negotiationswith preferred manufacturers (consultationrestraint); regional Magasins have their inventory replenishedtwice a year and the Circle and the peripheralMagasins are replenishedevery three months.

16 The idea is similar to that of the Sine Saloum project in Senegal.

17 For example, the depot visited at the village of Djidian was run by an old man, who had been a nurse before retirement. His mud house was the depot, and his bedroom was the store-room. - 77 -

Careful inventorycontrol measures are used at each level. Patients buy a ticket that allows them to have a medical consultationand the necessary medicationsover a seven-dayperiod of illness. The prices charged for the ticket in the entire Timbuctu region are 150 FCFA for a visit to a nurse and 200 FCFA for a visit to a physician.A portion of the revenues received are used for the maintenanceand operationof the health facilities;30 FCFA per visit go to the health center at the Circle level and 20 FCFA go to the health centers at the District level. The remainderof the revenues are collectedby the Head Physician of each Circle and put into the Circle's bank account. Each Circle bank account is audited at the Regional level. The money in the bank accounts is used to purchase a portion of needed medications,with the goal of graduallylowering the percentageof medicationsbought with internationalaid funds. The major goal of the Magasins-Santeis to arrive as quickly as possible at complete recovery of costs for medicationsand medical equipmentand increasethe quality of care provided. For the month of July, 1986 (one year after the beginning of cost recovery) user-cost revenueshad reached the point where they were paying for 47.3X of the medicationsused.

In order to improve the rate of cost recovery in the future, the strategy of MSF will be (a) to minimize costs and (b) to maximize the amount of revenues taken in. On both fronts,the followingsteps have been and will continue to be taken:

(a) The Minimizationof Costs

1. Medication Costs

i. promote the use of basic drugs

ii. use negotiationswith preferredmanufacturers of drugs, and eventuallyengage in international competitivebidding for drugs and medications

2. TransportationCosts

i. use surfacemethods of transportation,such as ships and railways,rather than air freight for medications

ii. have a regularand rational distributionsystem that would involveone shipment a year from Bamako to the two Regions, and then four shipmentsa year from the regionalcenters to outlying areas. These local shipmentswould take place during the quarterly supervisoryvisits of the Regional Director to the Circles and during the supervisory visits of the Head Physicianto the Districts - 78 -

3. Inventory and DistributionCosts

i. use already-existinghealth care facilities

ii. use already-hiredhealth personnel

4. Costs per Patient: make sure that the treatment fits the diagnosis, by having refresher courses based upon the analysis of previous medical records

5. Minimize Average Fixed Costs

i. achieve economies of scale by increasingthe number of patient-encountersat the health centers, using,

o publicity about prices charged and about the nature and quality of services offered, through the following channels:

- members of the managing councils

- traditionalcommunication methods (radio, newspapers, etc.)

- official publication of prices charged in all public places

o a greater effort to improve the quality of services offered

o making sure that the medication inventory is always available at every level of the system

o making sure that appropriateprices are charged and that they are scaled to the socio- economic conditions of the people being served

(b) The Maximizationof Revenues

1. Drastically reduce the number of non-paying patients, by

(i) demanding to see certificatesof indigence

(ii) limiting access to free medications only to certain segments of the population that are well-defined during regionalmeetings

2. Improve the level and structure of prices charged

(i) set similar base prices in all of the Regions and inform the population - 79 -

(ii) have a price structurethat recognizes that certain forms of medical interventionare more costly than others

(iii) gradually increase the base prices to reflect the level of sophisticationof the type of care availableas one moves up from the health center at the Arrondissementlevel to the health center at the Regional level

This then is the agenda that the Medecins Sans Frontiereshave set for themselves. The MSF headquartersoperation in Bamako is remarkably efficientand sophisticated. They have brought in a Belgian health economistwho has a computer at his disposal in Bamako, and each facet of costs and revenues is subject to minute scrutiny in a series of reports that break down monthly operationsby type of diagnosis,by type of medication used, by care-giver,by patient, and by price. Because MSF have collected so much data and have the computer,almost any type of analysis can be done on the data. The work that is being done in this regard can set an example in cost recovery for the Ministry of Health and Social Affairs, about the kinds of data that should be collectedin its health care facilitiesin the future, about the kinds of analysis that should be done on the data, and about the kind of management control that can and should be exercised.

ANALYSIS

Mali is differentfrom Senegal in that, ever since independence, Senegalhas had a fairly strong capitalisttradition, despite the proliferationof Ministries and despite its initial effort to provide 'free" health care and education. Mali had a socialistgovernment during its first eight years of independence,and that form of government seems to have had a lasting impact upon the way people perceive the nature of and the solution to problems. As just one case in point, in the health sector, independent Senegal has always allowed the private practice of medicine,whereas, in Mali, the private practice of medicine was not permitted until 1985, twenty- five years after independence,and only with price controls.

Nevertheless,the present economic situationin Mali, ever since the drought of 1984, has caused the MSPAS a great deal of difficulty and attitudes are quickly changing there about how health care should be provided and about who should pay for it. As was the case in Senegal, each person interviewedwas presentedwith the questionnaire(See Figure I-2 in Chapter I), as a frame of referencefor topics discussed. The Administra- tive Director of the Hopital Point G was particularlyinterested in Part B of the questionnaire,the "Cost Recovery Policy: Points to Take Into Consideration.* He encouraged a return visit for the followingweek, when he would provide written responsesto the questions and would discuss his answers. The following is a summary of his written and oral comments to the fifteen questions. - 80 -

1. At the Hopital Point G, there are three levels of inpatient charges. First class is 2,500 FCFA per day, and the charges for second and third class accommodationsare, respectively,1,500 and 375 FCFA. Outpatient charges are 500 FCFA per visit. The Director emphasized that these charges were now out of date. He and the Medical Director thought that the new price schedule for the three inpatient classes should be 10,000, 4,000 and 1,500 FCFA respectivelyand that the outpatient charge should probably be doubled.

2. They estimate that they recouped 1OZ of their total budget in user charges last year (The Ministry of Health Rapport Annuel estimates that they recouped about 7.5Z). They think that they should be able to eventually collect from 15 to 20Z of their total budget in user charges, but said that they certainly could not go beyond 15Z, unless they were allowed to raise their price schedule by a change in the hospital price law.

3. Because of their difficult financial situation,the level of technical quality is not good at the hospital, but that is slowly changing. Access to the services of the hospital is constrainedby the limited income of the population that they serve. However, they think that an improvement in quality, together with informationamong the physician community and within the population, ought to overcome some of the financial barrier; people will simply be willing to spend more of their limited income, if they perceive or are informed about quality improvements.

4. It is extremely difficult to calculate the total cost of an illness. By the time many people arrive at the hospital, they usually have already consulted a traditionalpractitioner or two, and have already spent a fair amount of money. They think that the law has too many exemptions from payment for services. These exemptions are for "social" reasons (for soldiers,for students in primary and secondary schools, and for the poor), and there are exemptions for pathologicalreasons (tuberculosis,leprosy, and psychiatric cases); people work their way around these exemptions. Again, they noted (as on a previous page) that 70Z of all hospital admissions in 1986 were exempt by law from payment, under the social and pathologicalexemptions. They are now lobbying to have the law changed, in order to narrow or eliminate the list of exempt types of care.

5. The answer to how much people can afford to pay is difficult because it depends upon the social class of the patients. The upper class is willing to spend quite a bit of money for quality health care,18 but the immense majority of patients could probably never spend more than 20,000 FCFA for a hospitalization,and even then, their large, extended family would have to contribute something to this 20,000 FCFA.

6. A large increase in user costs might have two temporal effects. At first, it might decrease access to care, but then access might increase, on the condition that the additionalrevenues were used to increase the

18 This coincides with what two Malien gentlemen said in an impromptu discussion in the train on the return trip from Kita. - 81 - quality of care offered by the hospital. Again, they stressed their estimation that people in Mali are basically interested in quality care and that they are willing to pay for it. Given the size of the hospital and the populationdensity from which they draw their clientele (the greater Bamako metropolitanarea), they do not think that distance is a factor here.

7. People will pay out-of-pocketcosts if they are sure of finding at the hospital the kind and quality of care that they seek. There is a limit to the price that can be charged (see, again, the answer to question 5 above), but if people perceive that they are not "treated like dogs" they will willingly come and pay.

8. They do not think that the poor will stop coming if prices are raised and some of the poor are not exempted. At the present time at the hospital, the poor do not receivemedications, nor laundry services and they get very little food. Their families are alreadyused to augmentingfood, etc. and to coming to their financialaid. Therefore,they already pay more than the official price for a hospital stay (thosewho are not exempted). A change in price, accompaniedby an improvementin conditions (such as food, for example) would probably be perfectly acceptableto many of the relativelypoor patients.

9. Again, if there is a quality improvement,relative to the rise in user charges, people will continue to come. Quality has to improve along three dimensions: technical quality, quality of the surroundings,and quality in the way that the patients are handled.

10. They think that most of the additionalrevenue will have to come from those who are relativelypoor, simply because there are so many of them, relative to people who have higher incomes. For example, at the Hopital Point G, at any given time, one will find 10-15 people in first class accommodations,and 350 or so people in third class and two-thirdsof the latter are exempt from payment under present law.

11. Referring back to the answer to question 1 above, they think that the optimal price schedule for the three classes of treatmentand accommodationshould now be, respectively,10,000, 4,000, and 1,500 FCFA per day.

12. The marginal costs of additionalcollection would be very small, given the existing collectionapparatus of the hospital. For example, in 1986, they collected 38 million FCFA in user charges for the same collection costs as they had in 1985, when they only had 20 million FCFA in user charge revenues. There might be some additionalprinting costs, and possibly some small increase in policing costs, if prices were raised and if most of the exemptionswere eliminated.

13. In their estimation the present system is extremely inequitable, particularlybecause of all of the exemptions. For example, a well-to-do person pays nothing if he/she has cancer or any psychiatricproblems. The legislationon exemptionsneeds to be changed. No treatment for illness should be completely free of charge, but, they stressed that payments for - 82 - all care should be graded accordingto the financialmeans of the person involved. In discussingthis point, they also said that they estimate that they could buy three times the amount of drugs, medications,and x-ray film that they now buy from the PPM, if they could buy these items on the competitiveinternational market. In frustration,they are now experimentingwith the parallel market to procure some of these items.

14. The government supplies the essential revenues for recurringcosts such as personnel salaries. The primary beneficiariesof the hospital system are governmentofficials and the relativelywell-to-do segment of the population,because they pay so little in first or second class. The truly poor do not pay anything at the hospital, but they do not receive much care or attention either. In their estimation,the poor do not benefit at all.

15. The primary protection for the poor in Mali is the extended family, because the system of insurance (the Social Security System) does not exist for them. Governmentofficials are the real beneficiariesof the system because the State pays 80Z of all of their health care costs (when it does pay). In the Bamako metropolitanarea, the certificatesof indigence are not used much. Last year, the Hopital Point G only received 17 of these certificates;they try to do their own identificationprocess about who is really poor, and who is not.

CONCLUDINGOBSERVATIONS

Although cost recovery is not yet widespread in Mali, the fact that the national hospitalshave adopted it in a seeminglywhole-hearted fashion bodes well for its future widespread adoption in the country. The national medical school is located on the grounds of the Hopital Point G, and its studentsuse the hospital for their training. To the extent that these medical studentsbecome accustomedto the idea that people should and do pay for the cost of their medical treatment,according to their ability to pay, to that extent should we expect a cost-recoveryattitude to grow and permeate the higher echelons of the medical establishmentin the future. Hopefully, if such attitudesdo become established,they will filter down throughoutthe public health care system. If the Chinese comanagers of the PPM can rationalizethe system of drug and medication procurementand distribution,we can also expect a diminutionin the price of drugs and medications,and their wider availabilityto the population. Failing that, we would expect the frustrationsof the present drug system to encouragean expansionof the parallel market. Wider availabilityof drugs and medications,at lower prices, should, in turn, make the people more willing to pay for the health care that they receive. Of course, the whole scenario above assumes that economic growth will resume. If Mali's amortization burden becomes too great, now that the grace period for its IMF credits and World Bank loans has ended, and/or world market prices for cotton fall, the foreign currency needed for the purchase of drugs, medications,and medical equipmentwill no longer be available;the health care system will not be able to improve the quality of care provided, and people will no longer be willing or able to pay for health care. - 83 -

The remainderof this concludingsection on Mali will address those issues that are highly pertinentand essentiallyrelated to the problem of successfulcost recovery.

Health Insurancein Mali

Governmentofficials are "insured"by their respectiveMinistries, because, in theory, the Ministriespay 80S of the cost of health care for them and their families. As has been seen in earlier parts of this Chapter, the Ministries rarely pay (except,for example,when a strong hospital administratorsuch as the one at Kati goes and demands payment). But, the governmentemployee is, nonetheless,"insured", because he/she does not pay the 802; in most cases, it is the health care providersthemselves who absorb the loss. The National Social Welfare Institute (INPS) covers about 55,000 salaried employeesin the formal labor market in Mali and the INPS itself had 1,777 employees in 1986. However, the INPS is more than merely a health insurancemechanism; it is at one and the same time: (1) a family welfare fund, (2) a retirementfund, (3) an accident fund, and (4) a health insurancefund. The employer contributes2.41 of the employee'ssalary for retirementand accidentsand 2S of the employee'ssalary for health insurance;the employee contributes1.62 of his/her salary for retirement and accidents. There is no upper limit on the amount of salary from which these contributionsare made. Administrativecosts consume about 33Z of all monies collected.19 The INPS in Mali does not suffer from the same structuraldeficiency as the Social Security System in Senegal, in that there is only one common risk pool in Mali, so that the law of large numbers for insurancepurposes can be operative. However, Mali does have the same problem as Senegal, at least for the health insuranceprovisions of the INPS, because Maliens also have large extended families that are all beneficiariesof the contributionpercentage of single salaries. The problem of multiple beneficiaries,together with the large administrative costs of the INPS means that the funds available for health care are severely restricted. In fact, the INPS in Mali is not a conventionalhealth insurer (in the third-partypayer sense of that term), but is a provider of "free" health care for its "insurees". This health care is provided through a series of industrialmedical centers and dispensaries,652 of whose personnel are located in the Bamako Region. All four insurance funds draw from a common pool, but the problem within the health area is that, while health contributionsconstitute 112 of the common fund's contributions, health costs represent25Z of the expendituresfrom the common fund. This happens because of the large extended familieswho use the INPS health services and because many people who use the services are not even contributingmembers of the INPS. Pharmaceuticalsare either bought from the U.M.P.P. (the Usine Malienne de Produits Pharmaceutiques),or from companies in France; since 1985 all economic relationsbetween the INPS and the Peoples' Pharmacy of Mali have been suspended.

19 By way of contrast,the Social SecurityAdministration in the United States administersthe Social Securityprogram at about 1.52 of contributions. - 84 -

Table III-9 is included in this Chapter in order to show an organizationalmapping of the INPS, but also in order to give the reader some idea of the bureaucraticmaze that exists there. Careful study of its Annual Report for 1986 does not allow one to understandthe state of its finances;in this regard, the Report is incomprehensible.Two visits to the central headquartersof the INPS, in order to finally obtain the Report, gave an impressionof general disarray there.

The Private Health Care Sector

As has already been noted, the private practice of modern medicine was only legalizedin Mali in 1985. To the extent that the public sector does not improve the quality of care provided,as it attempts cost recovery, and to the extent that private capital is available for this purpose, one would expect a private modern health care sector to eventuallyemerge. Certainly,the latent demand for it exists, and the only impedimentsto its growth would be both the strength of that demand and the availabilityof private capital.

It will also be interestingto see what will happen in the pharmaceuticalmarket. If the Chinese cannot manage the PPM, and if the PPM continuesto retain its present legal monopoly on the importationand distributionof pharmaceuticals(except for the autonomy that the INPS enjoys), the parallel market should continue to grow. Of course, rational economic policy would dictate that pharmaceuticalsbe left to a free market, and that governmentbuy its pharmaceuticalsfor the truly indigent from this free market, but it is not clear that Mali is yet ready to accept this kind of solution for its pharmaceuticalproblem.

Decentralizationof the Health Care System

Mali's general form of governmenthas already provided for a fair amount of decentralizationin the health care system. Given what can be made of the state of the financesof the INPS from its Report, the INPS must almost surely collapse eventually,or have to be subsidizedby the government. Because the governmentis in no financialcondition to subsidizethe INPS, its skilledhealth care employeesand its facilities would probably be absorbed by the Ministry of Health. As in Senegal, successfulcost recovery at the health-carefacility level should lead to greater autonomy on the part of the health care facilities. The hospital at Kati, for example, is well on the way to autonomy except for its dependence on the State to pay its salaries and less than half of its operatingbudget; it is almost as if the Ministry of Health is glad to be done with its financialresponsibility for this hospital. -85 -

Table III-9

OrganizationalTable for the National Social Welfare Institute

1. Under the Management of AdministrativeAffairs

1. Administrative and Personnel Services In Charge of the training of professlonals

2. Central Typing Service

3. Statistics and Data Processing Services

a. Data Processing Dlvislon b. Statistics Division c. Printing Division

II. Under themanagement of General Affairs

1. Archives Service 2. General Services 3. Pubilc Relations Services 4. Legal Services

111. Under theManagement of the Medical and Social Health Action

1. Medical Service (medical centers, Inter-enterprisesmedical centers, nurses of enterprises,mother and child care)

2. Mother and Child Care Services

3. Soclal Services

4. PharmaceuticalConsumption Service

(a) Pharmacy Dlvislon

(I) Central InventoryWarehouse (11) PrescriptionSection for the Personnel of the Institute (111) lnfirmaryproviding daily care to Management Personnel and their familles

(b) Travel and Customs Division

5. Children's Dental Center (table continueson following page) - 86 -

Table 111-9(ctd)

IV. Under the District Management

1. Family Benefits'Service 2. Old-Age InsuranceService

V. Under the Old-Age BenefitsAdministratlon

VI. Under the Managementof Recoveryof Contributionsand Employer Supervision

1. ContributionsRecovery Service

a. ClearanceSection - Identification b. SupervisorySection c. Pubilc FinanceSection d. Recovery Section e. PreliminaryLegal InvestigationSection f. TransportationSection

2. Employer SupervislonService

VII. Under the Managementof ForeignRelations and ProfessionalRisks 1. ProfessionalRlsks PreventionService

2. Works AccidentsService

3. ForeignRelations Service

a. InternatlonalConventions Dlvision b. Family BenefitsDivision c. Work Accidents,Sickness and Old-AgeDivision

Vil. Under the Managementof General Inspection - 87 -

IV. COST RECOVERY POLICY IN THE COTE D'IVOIRE

This Chapter has its basis in site visits in the greater metropolitanarea of Abidjan and at Dabou. Other site visits had been planned, but the Easter holiday and the May Day holiday shortenedthe number of governmentalwork days in the two-weekmission, so that it seemed inadvisableto spend too much time in travel within the Cote d'Ivoire. Visits were made to seven key cost-recoveryinstitutions in the Abidjan metropolitanarea: (1) The CardiologyInstitute of Abidjan (Institutde Cardiologied'Abidjan), (2) the National Instituteof Public Health (InstituteNational de Sante Publique), (3) the The Raoul Fallereau Institute (InstitutRaoul Fallereau),(4) the EmergencyMedical Service (Serviced'Aide Medicale d'Urgence),(5) the UniversityHospital Center at Cocody (CentreHospitalier Universitaire de Cocody), (6) the University Hospital Center at Treichville(Centre Hospitalier Universitaire de Treichville),and (7) the Public Health Pharmacy (Pharmaciede la Sante Publique) (all of which have been designatedas "NationalPublic Entities," or E.P.N.). In addition,visits were made to the headquartersof the AntitubercularCenters (CentresAnti-Tuberculeux-C.A.T.), where cost- recoveryhas been pursuedwith vigor, to the Hygiene Institute (Institute d'Hygiene),to private clinics and to a private hospital, and to health insurers. Interviewswere held with key persons within the Ministry of Public Health and Population (MSPP),and general guidance and information was provided by the Office of Organizationand Management (Bureau d'Organizationet de Gestion-B.O.G.)that is part of the World Bank Health and PopulationProject within the MSPP. Most of the persons interviewed furnisheddocuments on the laws relevantto health care and cost recovery, and also furnished statisticson price lists and on the latest developments in cost recovery. Further data on the Cote d'Ivoire were collected during a Public ExpenditureReview mission in July 1986. All of these documents that are not included in this Chapter may be found in the project file.

BACKGROUND

The Cote d'Ivoire differs from the other countriesin this cost- recovery study in that its 1984 per capita income of $610 was 61Z higher than that of Senegal ($380),74Z higher than that of Ghana ($350) and 336Z higher than that of Mali ($140).1 As a consequenceof this relative prosperity,its public per capita health care expendituresare greater than in the other three countries. Despite such higher per capita health care expenditures,its 1983 infant mortality rate was greater than that of Ghana (121 versus 97 per thousand live births), and its life expectancyat birth was less than that of Ghana (52 years versus 59 years). Indeed, in the Cote d'Ivoire,health status and trends are little better than those prevailing in neighboringWest African countriesthat have significantlylower per capita incomes and fewer financialresources than the Cote d'Ivoire.

1 See World Bank (1986). - 88 -

Table IV-1 summarizes the status of health-care finance in the Cote d'Ivoire between the years 1980-1987. Between 1980-87, the total government recurrentbudget grew at an average annual rate of 5.3 percent per year, while that of the Ministry of Health and Population grew at about 5.2 percent per year. However, the growth has been uneven. In 1981, the MSPP budget was 7.8 percent of total recurrent government expenditures, whereas in 1986, it was 7.1 percent. The data on the internal disposition of the MSPP budget also show some fluctuation. Personnel expenditureshave been as high as 75.1 percent of the budget, (1984) and they have been as low as 67.5 percent (1981). Expenditureson medicines have fallen, while expenditureson materials and other items have fluctuated somewhat. The expenditurepattern for 1987 is roughly similar to that of 1983. The last column in Table IV-1 indicates that public health care expendituresper capita declined from a high of 118 in 1982 (1980 = 100) to 90 in 1986.

Table IV-2 provides a basis for estimatingtotal health care expenditures (public and private) in the Cote d'Ivoire in 1985. The weighted total private health care expenditureper household was 31,182 FCFA. In 1985, the total populationwas 10.3 million persons, and the MSPP estimates that there were about 8 persons per household,which means that there were approximately1,287,500 households in the Cote d'Ivoire. Multiplying the number of households times the weighted average total private expenditure on health care yields an estimate that 40,146,725,000 FCFA was privately spent on health care in 1985. In the same year, the MSPP spent 29,168,100 FCFA in public funds. Therefore total (public and private) expenditureswere 69,314,825,100FCFA, with public expenditurescomprising 42 percent of the total and private expenditurescomprising 58 percent.

It is impossibleto make a judgement either on whether the percentages represent an "optimal"mix, or on whether the total amount spent representssome optimum. Consider Figure IV-1. In Figure IV-1, there are two time periods, T1 and T2. During T1, governmentpurchases QG1 of health care for the population and the population itself purchases Qpl. The total (public and private) health care expenditurein T1 is thus P.QT1. In T2, government demand for health care declines to the quantity QG2, but private demand for health increases to QP2, exactly offsettingthe decline in governmentdemand, so that total demand for both time periods is QT2 - QTI. In this case, the only thing that can be said is that the mix of expenditureshas changed, and, because Figure IV-1 implicitly assumes that the public sector is as efficient as the private sector, no welfare implicationscan be drawn. If, on the other hand, the total amount of health care that is "needed" is QN, then both private and public expendituresare too low in both T1 and T2. On the basis of the health indicators given for the Cote d'Ivoire, such as the infant mortality rate, compared to other countrieswith a similar level of per capita income, or even with a lower level of per capita income (such as Ghana), one could say that the total of health care expendituresin the Cote d'Ivoire, is "too low," and should be pushed out to QN. QN could be the sum of private demand and an MSPP demand that came from a MSPP budget that was 14 percent of the total national budget (as was the fact in the 1960s). However, such an assertionwould be too global because it assumes that health care - 89 -

Table IV-1

GovernmentRecurrent Budget and Ministry of HealthRecurrent Budget COTED'IVOIRE (Millions of Francs FCFA)

Governmt MSPP MSPPBudget as PercentRecurrent Health Budget Indexof PublicHealth Budget a Percentof Personnel MedicinesMaterials and Expendituresper Capita Govt.Budget Others (1980 100)

1980 330,400 24,255 7.2 100 1981 3,6,0Q0 29,153 7.8 67.5 10.4 22.1 114 1982 420,700 31,849 7.6 68.7 9.5 21.8 li1 l983 435,250 33,104 7.6 70.5 7.3 22.2 111 1984 428,850 30,748 7.2 75.1 8.4 15.7 97 198S 418,130 29,168 7.0 O8 1986 433,620 31,532 7.3 9o 1987 480,980 34,276 7.1 72.4 7.0 20.6 SOURCE: Government Budget Documents. - 90 -

Table IV-2

HOUSEHOLD* EXPENDITURES ON HEALTH CARE COTE D'IVOIRE, 1985 (FCFA)

Abidjan Other Cities Villages Total

Medications 40,882 32,105 16,511 25,352

Medical Services 15,340 5,196 2,306 5,831

Total 56,222 37,301 18,817 31,183

* 902 households

SOURCE: Objective of 1987 Draft Budget, Bureau of Organization and Management, Ministry of Public Health and Population, memo. - 91 -

Figure IV-1

Public and Private Demand for Health Care in Periods T1 and T2

DP D DT(D + D)

p G~~

P + P ------__a-

QG2 QGl 1 P2 QT1+2 QN Q

TOTAL EEALTH CARE EXrENDIITRES -PXQT PRIVATE - PPXQP

PU8BLIC- PG x C°S

T2 : QG4 QPi, * BUTQT1 . QT2 - 92 -

expendituresdo change health indicators;it would also ignore the distinctionbetween expendituresupon preventivecare versus curative care and ignore the income distributionalconsequences of where the expenditures were made (urban versus rural, for example).

As regards the role of government,the politicalphilosophy in the Cote d'Ivoire, since independence,has been less 'socialist'oriented than in most of the other countriesin West Africa. The Ivorien point of view is that governmentdoes have a role to play in many sectorsof the economy, but that role should be primarily as an initiator;once an enterpriseor a sector has been well-initiated,and there is a legitimaterole for the private sector to play, governmentmakes an effort to withdraw as much as it possibly can do so. In practice, this has meant that the government in the Cote d'Ivoire has now privatized,or is in the process of privatizing,many economic activitiesthat continue to remain in the public sector as parastatalsin many of the other West African countries. (For a concrete example of this practice, see the newspaperclippings listed in the Annex). As will be soon seen in this Chapter, the government'sattitude and policy in the health care sector has been somewhat paradoxicalin this regard. On the one hand, many governmentofficials in the MSPP express little concern about the fact that the medicines proportionof the MSPP budget has declined in recent years, because they say that private-sectorpharmacies have expanded in recent years in the Cote d'Ivoire and that medicines and drugs are widely available for purchase from the private sector by the population.2 Indeed, in the Cote d'Ivoire , (at least in Abidjan), one does not hear the widespread complaintsthat are heard in Senegal, and especially in Mali, about the unavailabilityand/or shortagesof medicines and drugs. In a similarvein, the two largest public hospitals, the UniversityHospital Center at Cocody and the UniversityHospital Center at Treichville(the two C.H.U.), and the Public Health Pharmacy have been designated 'Public Establishmentsof an Industrialand CommercialNature.* (E.P.I.C.: see the enabling legislationlisted in the Annex), and have been told by the government to become financiallyautonomous. On the other hand, it will soon be seen in this Chapter that these two C.H.U. continue to enjoy and need massive government operatingsubsidies, because cost-recoveryhas only been pursued in a somewhat lukewarm fashion in the last two years since the enabling legislationfor financialself autonomywas enacted. And, with the exceptionof the autonomoushealth-care entities that will be analyzed in this Chapter, cost-recoveryis not in widespreadpractice in the public health care sector in the Cote d'Ivoire. The explanationprovided by MSPP officialsfor this anomaly, in a countrywith such a relativelyhigh per capita income,where commercialmarkets are relativelywell-developed, and where there is a politicalphilosophy of privatization,is that cost- recovery in the public health-caresector is still a 'delicatesubject". One working hypothesisof this study of the Cote d'Ivoirewill be that,

2 Thus, Figure IV-1 may be a useful characterizationof what seems to be happening in the pharmaceuticalmarket in the Cote d'Ivoire. For more detailed informationon the subject of pharmaceuticals, see the section on the private health care sector in this Chapter. - 93 - because of the country's relativeprosperity, the health care sector has not been under as much pressure as seems to have been the case in Senegal and Mali, so that there is less financialincentive for a cost recovery effort.

Summary health care statisticsindicate that:

(1) per capita public health-careexpenditures declined from 3,653 FCFA in 1981 to 2,893 FCFA in 1986 (also see the last column in Table IV-1).

(2) per capita public expendituresthat directly relate to health care (includingmedications and medical evacuations)declined from 839 FCFA in 1981 to 627 FCFA in 1986.

(3) excluding the budgets of the seven E.P.N. institutions,one finds that all of the other public health care institutionsin the Cote d'Ivoire only received 32 percent of the total MSPP budget in 1986.

(4) although the provisionalbudget for 1986 allocated54 percent of the budget for curative care and 46 percent for preventive care, the actual effective allocationof budgetary resourceswas 71 percent for curative care and 29 percent for preventive care.

(5) the growth in the 1986 recurrentbudget mainly went to fixed items, such as for salaries and utilities (electricity,water, etc.) and to the 7 subsidizedE.P.N. entities and not to variable items such as those used for primary health care.

THE ADMINISTRATIVESYSTEM IN THE HEALTH CARE SECTOR IN THE COTE D'IVOIRE: BACKGROUNDFOR COST RECOVERY

Figure IV-2 is an organizationalchart of the Ministry of Public Health and Population (MSPP) in 1984. As the story of cost recovery in the Cote d'Ivoire unfolds in this Chapter,we will see that the institutionsof immediate interestwill be those in the southeastcorner of Figure IV-2. In Figure IV-2, these seven institutionsare shown as National Public Entities, or E.P.N. (EtablissementsPubliques Nationaux). Figures IV-3 and IV-4 are relevant to this sectionof the Chapter, because they place the seven health E.P.N. within the broader context of all of the E.P.N. in the Cote d'Ivoire. In this respect, the reader may gain an appreciationfor the variety and types of E.P.N. and the size of the budgets of the health E.P.N. relative to the budgets of the other E.P.N. The Ministry of the Budget further subdividesthe E.P.N. into "PublicEstablishments of An Administrative Nature" (E.P.A.) and into 'PublicEstablishments of an Industrial and CommercialNature' (E.P.I.C.). Four of the seven health care entities are consideredE.P.A.: (1) Institut de Cardiologied'Abidjan, (2) Institut National de Sante Publique, (3) Institut Raoul Follereauand (4) Service d'Aide Medicale d'Urgence. Three of the seven are classifiedas E.P.I.C.: (5) Centre Hospitalo - Universitairede Cocody, (6) Centre Hospitalo - Universitairede Treichville,and (7) Pharmacie de la Sante Publique. Thus, Fipr IV-2

lri_ltioe Out if th wll OfPlic luMt ad PIW*i w 3a,1i1

I i

a a : lutiaml mitt au Ablic haiti

a a mteaP&NW I~dm

______i____j__ Cmis forw riy

elpcte lSmraihor m ai lth _ Sith wAcil

______

public I U ad N: lpitals ' Plm aida ,'FinsciAla I C tive aw ' hl ica s pollbim Divisions Divisia StatisticsDivisiu Mt irsDivisim lstiratimal Disius 'f 9Sgicys A IL -_atiams I I I Oivisim ! I Divisie , , . ~~~~~~~~~~~~~~~~__ _ _ 1__. _ I __

hcitr&lizd kFial Nltimalltlic Entities kvices : Divisiuis: _ _

ma_th 'htimal Irstituto of PublicNoaltheuIU ------, l Folls Intitute Wmi_ satiaal ideatry L Irstitt o -- -- _ __ Ciolaw bmtitute-----

Ibiwrsity NompitalCtwr at ivrty No1--'-thNapital btr at Treidwville

BtudTrinfsm PtblicSmith Phiru- -- Emcy Nedi Servicm(NU) ' ler Figure IV-3

PUBLIC ESTABLISHMENTS OF AN ADMINISTRATIVE NATURE

AMOUNT AMOUNT CODE ESTABLISHMENT ACRONYMS OF FUNDS OF FUNDS 1986 1987

AC 04 CENTRE IVOIRIEN DE RECHERCHES TECHNOLOGIQUES C.I.R.T. 178.850 229.100 AD 05 DIRECTION ET CONTROLE DES GRANDS TRAVAUX D.C.G.Tx 4.532.000 6.058.000 AE 06 ECOLE IVOIRiNME DE BI3OUTERIE E.i.S. 36.500 52.430 AF 07 ECOLE NATIONALE DE STATISTIQUE ET DCECONOMIE APPLIQUEE E.N.S.E.A. 186.100 196.000 AG 08 ECOLE NORMALE SUPERIEURE E.N.S. 1.097.000 1.160.200 AH 11 ECOLE NATIONALE SUPERIEURE DES POSTES ET TELECOMMUNICATIONS E.N.S.P.T. 903.100 1.270.200 A3 12 FONDS D'ENTRETIEN ET DE RENOUVELLEHENT DU PALMIER A HUILE F.E.R.-P. _ 2.739.280 n.c. AK 13 FONDS NATIONAL D'INVESTISSEMENTS F.N.I. 1.024.119 1.100.000 AL 14 INSTITUT AGRICOLE DE BOUAKE I.A.B. 398.900 420.400 AN 15 INSTITUT DE CARDIOLOGIE D'ABIDJAN I.C.A. 978.240 983.900 AN 17 INSTITUT GEOGRAPHIQUE DE COTE D'IVOIRE I.G.C.I. 345.000 358.000 AP 18 INSTITUT NATIONAL DE LA 3EUNESSE ET DES SPORTS I.N.J.S. 659.686 742.510 AQ 19 INSTITUT NATIONAL DE PERFECTIONNEHENT PERMANENT I.N.P.P. 945.800 1.041.300 AR 21 INSTITUT PASTEUR DE COTE DIVOIRE - I.P.C.I. 339.500 345.750 Ln AS 22 INSTITUT PEDAGOGIQUE NATIONAL DE L'ENSEIGNEMENT TECH. ET PROF. I.P.N.E.T.P. 430.300 558.150 AU 26 OFFICE IVOIRIEN DES SPORTS SCOLAIRES ET UNIVERSITAIRES O.I.S.S.U. 210.735 250.759 AV 27 OFFICE DE LA MAIN D'OEUVRE DE COTE D'IVOIRE O.N.O.C.I. 386.188 437.396 AV 28 OFFICE NATIONAL DE FORMATION PROFESSIONNELLE O.N.F.P. 3.211.900 3.608.900 AZ 30 OFFICE NATIONAL DES SPORTS O.N.S. 664.625 661.276 B8 32 OFFICE DE SECURITE ROUTIERE O.S.E.R- 88.600 143.000 BC 34 SOCIETE DE DEVELOPPEMENT DES PLANTATIONS FORESTIEAES SO.DE.FOR. 6.835.280 7.475.030 80 36 INSTITUT NATIONAL DE SANTE PUBLIQUE I.N.S.P. 770.100 896.996 BE 37 CENTRE D'ASSISTANCE ET DE PROMOTIOb DE L'ENTREPRISE NATIONALE C.A.P.E.N. 554.600 552.450 DC 39 INSTITUT RAOUL FOLLEREAU I.R.F. 178.530 229.300 SN 42 OFFICE D'AIDE A LA COMMERCIALISATION DES PRODUITS VIVRIERS O.C.P.V. 295.500 309.000 BU 45 SERVICE D'AIDE MEDICALE D'URCENCE S.A.N.U. 311.050 329.350 BV 46 FONDS DE PREVOYANCE MILITAIRE F-P. 706.000 632.500 BL 61 OFFICE NATIONAL DES ANCIENS COMABATTANTS O.N.A.C. 35.850 38.720 SM 63 ECOLE NATIONALE SUPERIEURE D'AGRONOMIE. E.N.S.A. 536.230 623.100 ON 64 ECOLE NATIONALE SUPERIEURE DES TRAVAUX PUBLICS E.N.S.T.P. 2.043.450 .2.279.500 BP 81 OFFICE CENTRAL DE MECANOGRAPHIE O.C.M. 3.519.920 3.930.530 BQ 82 UNIVERSITE NATIONALE DE COTE D'IVOIRE - U.N-C.I. 4.189.600 5.007.5gO SR 83 CENTRE NATIONAL DES OEUVRES UNIVERSITAIRES C.N.O.U. 5.543.650 5.989.400 85 85 INSTITUT NATIONAL SUPERIEUR DE L'ENSEIGCNEMENT TECHNIQUE I.N.S.E.T. 2.771.500 3.426.000 ST 86 CAISSE GENERALE DE RETRAITE DES AGENTS DE L'ETAT C.C.R.A.E. 11.851.500 12.191.543

Source: Ministry of the Budget FiRure IV-4

PUBLIC ESTABLISHMENTS OF AN INDUSTRIAL AND COMMERCIAT. NATUFE

AMOUNT AMOUNT CODE ESTABLISHMENT ACRONYMS OF FUNDS OF FUNDS 1 9R6 1 987 Fo 03 CENTRE DU COMMERCE INTERNATIONAL C.C.I. 1.375.736 1.400.000 rA 54 CENTRE HOSPITALO-UNIVERSITAIRE DE COCOuY C.H.U. Cnc. 3.726.281 4.025.300 re 55 CENTRE HOSPIlALO-UNIVERSITAIRE DE lREICHVILLE C.H.U. Treich 3.709.000 4.094.400 CA 66 OFFICE IVOIRIEN DES CHARGEURS O.I.C. 751.000 1.502.000 EB 67 OFFICE NATIONAL DES TELECOMMUNICATIONS O.N.T. 64.954.262 n.c. EC 68 PORT AUTONOHE D'ABIOJAN P.A.A. 11.765.746 13.616.999 ED 69 PORT AUTONOHE DE SAN PEDRO P.A.S.P. 1.823.513 1.627.842 EN 77 INSTITUT DE DOCUMENTATION ET DE RECHERCHES MARITIMES I.D.R.E.M. 225.391 251.000 EN 78 AGENCE NATIONALE DES AERODROHES ET DE LA METEOROLOGIE A.N.A.M. 2.985.700 3.820.000 EP 79 OFFICE NATIONAL DES POSTES O.N.P. 10.829.500 10.916.800 EQ 80 LABORATOIRE DU BATIMENT ET DES TRAVAUX PUBLICS L.B.T.P. 1.691.700 1.680,.700 ER 91 BOURSE DES VALEURS B.V. 276.600 430.200 ES 92 CAISSE AUTONOME DOAHORTISSEHENT. C.A.A. 794.224.918 576.336.200 ET 93 CAISSE GLE DE PEREQUATION DES PRIX DES PRODUITS DE GDE CONSOM. C.G.P.P.P.G.C. 87.873.000 81.760.000 EU 94 CAISSE NATIONALE DE PREVOYANCE SOCIALE C.N.P.S. 50.010.833 46.414.422 EV 95 LOTERIE NATIONALE DE COTE -DIVOIRE LO.NA.C.I. 1.285.000 2.266.00W EY 96 INS7lIUT DES SAVANES IDESSA 973.678 1.072.100 FE 98 PHARMACIE DE LA SANTE PUBLIQUE P.S.P. 2.968.500 3.137.500

Source: Ministry of the Budget - 97 - these seven are seen as "different"from the other branches of the Ministry of Public Health and Population, as shown in Figure IV-2, but they are heavily dependent upon the MSPP for subsidizationof their budgets (even though they are supposed to be "autonomous"),because their cost recovery results are so negligible relative to their expenses.

A DESCRIPTIVE ANALYSIS OF THE EVOLUTION AND CURRENT PRACTICE OF USER CHARGES IN THE COTE D'IVOIRE

The mandate for cost recovery in the Cote d'Ivoire dates back twenty-sevenyears to January 12, 1960 (See Figure IV-5). Figure IV-5 itself is a copy of the Circular issued by the Minister of the MSPP on January 14, 1960 informingall public health care institutionsof: (1) the establishmentof three classes of hospital service, (2) the percentage of beds to be devoted to each class of service, (3) the charges to be made for each class of service, (4) who has access to hospital outpatient services, and (5) the price of medical or surgical treatment. Figure IV-6 is a June 1977 update of the hospital prices that were first mandated in 1960. These 1977 hospital prices for each class of service are still in effect in 1987. Articles 2 and 3 of the June 1977 decree also give a listing of those persons who are to be exempted from paying the prices. It is difficult to find historic time-seriesdata on cost-recoveryin the Cote d'Ivoire but Table IV-3 gives some indication of the level of effort in the major health care institutionsfor the years 1980-84; in Table IV-3, R refers to receipts from cost recovery; S refers to general recurrentbudget subsidies from the MSPP, and T refers to the total recurrentbudget for each institution. The two large CHU (Cocodywith 638 beds, and Treichvillewith 892 beds) had progressivelybetter cost recovery experience over the five-year period, although Treichville seems to have done consistentlybetter than Cocody. Both CHU only collected 4.9 percent (Cocody) and 3.8 percent (Treichville) of their total budget in cost recovery in 1980, but, by 1984, the two managed to collect, respectively,9.3 and 10.3 percent. On the other hand, the Institut de Cardiologiebegan the period by collecting 30.8 percent of its total budget in receipts and ended the period with 35.7 percent, even managing to collect more than 40 percent in 1981 and 1982. The Institut National de Sante Publique seems not to have begun cost recovery until 1983 when it collected 49.6 percent of its budget in user fees and collected 52.3 percent in 1984. The Protestant Hospital in Dabou has averaged about 50 percent of its budget in user charges throughout the entire time period. There are no historical user charge data for the other public health-care institutionsin the Cote d'Ivoire, but anecdotal evidence from interviews with officials in the MSPP indicatesthat, despite the decrees of 1960 and 1977, no user charge effort has been made at these institutions. - 98 -

Figure IV-5

CirCular of the Minist ry of Pu-blic Heallii and Pou:)ulation

on the irrplementation of the provisions of Decree no. 60-29, dated January 12, 1960, concerning regulation of the operation of hospitals and public health training facilities

The implementationof Decree No. 60-29, dated January 12, 1960, as indicatedabove, led to major changes in the system in force up to this date.

This circular is designed to call attention to several special points:

(1) The number of catecioriesof hospitalizationin public hospitals is reduced from 6 to 3:

(a) Private rooms .o...... 1 or st category (b) Wards requiring payment .or .2nd category (c) Welfare wards .or ...... 3rd category

(2) the percentage distribution of beds among the 3 categories is set as follows:

- Private rooms ...... 5% - Wards requiring payment ...... 30% - Welfare wards ...... 65%

(3) The hospitalizationrates. determinedby decree, are based on the following schedule:

- Daily rate in private room...... 1,200 F - Daily rate in ward requiringpayment ...... 600 F - Hospitalizationin welfare wards is free

Special rates are scheduled for children:

- Children over the age of 12 = Adult rates - Children between 5 and 12 = Half of adult rate - Children under the age of 5 = One-quarterof adult rate

(4) Office visits in public hospitals are set aside only for specialists which means that office visits are available to the following:

(a) Patients with an office visit voucher issued by a dispensary or any other public health facility;

(b) Work accidents victims provided with an office visit voucher issued by the establishment physician or, in absence of the doctor, by the employer; - 99 -

Figure IV-5 (cont'd)

(d) Medical and surgical emergencies. Office visits are free except for patients who have a voucher ...... issued by a private physician; in this case, the office rate is set at 400 Francs.

Office visits are handled on a roster basis by ali health professionals of one and the same service in the only consultation assigned to each service.

However, chief physicians are authorized to provide consultations everyday.

(5) Medico-surgical services are free

A subsequent decree will provide the list of services that may require a waiver to this regulation.

The provisions of this circular must be implemented as of January 15, 1960.

ABIWDJAN,January 14. 1960

Ministry of Public Health and Population

Dr. Amadou KONE

Certified True Copy Treichville, January 20, 1060 The Director of the Abidjan Hospital Center: J.H. LANGOT - 100 -

Figure IV-6

The C..H.U

NEWHOSPITAL RATES

Decree No. 77-347 dated June 3, 1977, establishing hospitalization rates in public health training centers and special provisions for civil servants, Cooperation personnel and to certain social medicine services.

(J.O.C.I (OfficialGazette of Cote d'Ivoire]), page 1234.

Article 1. Hospital rates applicable in 1st category and 2nd category hospitals,departmental hospitals and hospital centers under the authority of the Ministry of Public Health are established as follows:

- 1st category rooms ...... 10,000 francs - 2nd category rooms ...... 6,000 francs - 3rd category rooms ...... 2,000 francs

Article 2. Active and retired civil servants as well as members of their families (spouse and minor children), civil servants trainees, temporary employees, and Cooperation personnel are entitled to free office visits and dental care provided by the public health training centers under the Ministry of Health, as well as the free issue of medications of current use issued by said facilities.

On the basis of a certificate issued by the medical authority, they are admitted and treated in hospitals under the Ministry of Health. For the diration of their hospitalization,a daily amount will be withheld in advance from their salary or their pension. Civil servants who are hospitalizedfor injuries received on official duty and Cooperation personnelare exempt from the deductionof the withholdingamount.

Article 3. To promote the developmentof preventive medicine and the fight against communicable diseases and cancer, hospital admissions required by doctors assigned to the social medicine services are free in the lower category of each establishment. Hospitalization in a higher category is subject to the provisions of this decree.

Article 4. Decree No. 72 MSP, DG 3 B, dated July 13, 1977, concerning the establishmentof hospitalizationand office visit rates at the Institut de Cardiologied'Abidjan.

(J.O.C.I. 1977, PAGE 1 511)

Article 1. Daily hospitalization rates at the Institut de Cardiologie d'Abidjanare establishedas follows: - 101 -

FiguJre IV-6 (cont'd)

1st category rooms ...... 15,000 Francs 2nd category rooms ...... 13,500 Francs 3rd category rooms ...... 12.000 Francs

Article 2. Costs for artificial limbs given to patients after surgery are added to the daily hospitalizationrate and will be billed at cost.

Article 3. The office rate is 3,000 francs. For indigents, it is 100 francs.

Article 4. Costs of medical analyses, X-ray examinationand other specific examinationsare added to office visit costs and will be billed in accordance with the correspondingexisting rates, in hospitals and public health training centers in Cote d'lIvoire. Table IV-3

Coto d'livolre: Units and Operations Subsidized by the Ministry of Public Health and Population

(FCFA Millions)

Year 1980 1981 1982 1983 1984

DESIGNATION R S T R S S R T s T R S T

Chu Cocody 30,0 595,1 615,2 20,0 603,5 623,2 20,0 617,8 637,8 18,0 697,3 715,3 70,0 683,6 753,6 2 4.9 95.1 100.0 3.2 96.8 100.0 3.1 96.9 100.0 2.5 97.5 100.0 9.3 90.7 100.0

Chu Treichville 35,0 888,7 923,7 45,0 908,5 953,5 53,5 887,8 941,3 100.0 830,7 930,7 89,9 785,8 875,7 1 3.8 96.2 100.0 4.7 95.3 100.0 5.7 94.3 100.0 10.7 89.3 100.0 10.3 89.1 100.0

TOTAL 65,0 1483,9 1548,9 65,0 1512,0 1577,0 33,5 1505,6 1579,0 1,18 1528,0 1646,0 159,9 1469,4 1629,3 1 4.2 95.8 100.0 4.1 95.9 100.0 2.1 97.9 100.0 7.2 92.7 100.0 9.8 90.2 100.0

Inst. Cardiologie 100,0 224,7 324,7 100,0 142,5 242,5 100,0 125,0 225,0 100,0 247,4 347,4 150,0 270,7 420,7 1 30.8 69.2 100.0 41.2 58.8 100.0 44.8 55.2 100.0 28.8 71.2 100.0 35.7 64.3 100.0 0

I.N.S.P. - 100,0 100,0 - 125,0 125,0 - 131,8 131,8 139,3 141,8 281,1 168,0 153,0 321,0 1 49.6 50.4 100.0 52.3 47.7 100.0

Institut Pasteur - 126,0 126,0 - 133,5 133,5 - 145,5 145,5 - 217,7 217,7 - 236,4 246,4

Institut Ondoto- stoatologie - 18,4 18,4 - 18,4 18,4 - 10,7 20,7 - (19,6) (19,6) (16,2) (16,2)

Hopital Protestant de Dabou 102,6 115,0 217,6 120,5 115,0 235,5 164,0 121,8 285,8 182,9 177,4 360,3 200,0 2 47.2 52.8 100.0 51.2 48.8 100.0 57.4 42.6 100.0 50.8 49.1 100.0

Sanitary Evacuation - 370,0 370,0 - 350,0 350,0 - 500,0 500,0 - 329,0 329,0 - 329,0 329,0

Blue Cross - 9,5 9,5 - 8,0 8,0 - 9,5 9,5 - 8,9 8,9 - 10,5 10,5

Source: Bureau of Organization and Management, Financing the Health System, mOl-o, undated. - 103 -

COST RECOVERY IN 1986 AND 1987

The National Public Entities (E.P.N.).

On June 6, 1984, two laws were passed to create the two C.H.U. at Cocody and at Treichvilleas 'industrialand commercial entities, possessing their own administrativeand financial autonomy." (See Annex; other available documents contain timetables showing when the other E.P.N. became autonomous,give the compositionof their ruling bodies, and describe their general operating characteristics).

Fortunately,for the purposes of this Study, good data were available for 1986 and 1987 for the budgets and the price lists of the seven E.P.N. The data for these E.P.N. will be presented in the same order as the E.P.N. appear in Figures IV-3 and IV-4. Table IV-4 contains a summary of the budgetary data (see Annex). Table IV-4 should also be read in conjunctionwith Table IV-5, which gives the sources of the revenue that the Pharmacie de la Sante Publique (P.S.P.) receives.3 The reason that Table IV-4 is deceptive, if taken at face value, is that the budgets from which the data came give the financialtransactions that do occur accurately enough, but they do not adequately reflect the kinds of transfers that take place among the various governmentalentities in the health care sector. For example, contrast the 1987 data in Table IV-4 for the last two entities, the C.H.U. at Treichvilleand the Pharmacie de la Sante Publique (P.S.P.). In 1987, the C.H.U. at Treichvillehad a budget of 4,094,400,000FCFA, and had user charge revenues of 70,000,000 FCFA; at the same time the P.S.P had a budget of 3,137,500,000and had user charge revenues of 1,035,000,000 FCFA. Thus, on the face of it, the C.H.U. at Treichvilleonly collected 1.7 percent of its budget in user fees, whereas the P.S.P collected 33.0Z. On the basis of these data, one is tempted to conclude that the P.S.P. is more efficient at cost recovery than is the C.H.U. at Treichville. However, both entities belong to the MSPP, and both entities are subsidized by the MSPP. If, by "cost recovery"we mean the transfer of economic resources from the private sector to the public sector via the use of prices paid for services rendered by the public sector,4 then the transactionsthat are shown in Table IV-4 involved some double-countingwithin the public sector. Table IV-5 indicates that the C.H.U. at Treichvillepaid the P.S.P. 338,000,000 FCFA for drugs and medications in 1987. To adequately reflect public cost recovery then, only the 70,000,000FCFA taken in by the C.H.U. at

3 The P.S.P. sells drugs and medications to the other six autonomous institutions,that are, nevertheless,still subsidized by the MSPP in other respects. The other six autonomous entities try to pay for the drugs and medications from their own receipts. The P.S.P. buys the drugs and medications (only the WHO essential drug list) on the open market all over the world and gives them to all of the other public health care entities.

4 Likewise, for private health-careproviders, "cost recovery"would mean the transfer of economic resources from individualsto the health-careprovider via the price mechanism. - 104 -

Table IV-4

Cote d'Ivoire: Summary Budgets of National Public Entities, 1986 and 1987

1986 1986 PERCENT 1987 1987 PERCENT INSTITUTION Budget Cost Cost Budget Cost Cost RecoveryRecovery RecoveryRecovery

1. Institut deCardiologie 978,240 228,000 22.51 983,900 240,000 24.4Z d'Abidjan

2. Institut Nationalde 741,000 115,000 15.55 850,500 115,000 13.5% Sante'Publique

3. Institut RaoulFollereau 178,530 10,000 5.6% 189,300 7,000 3.7%

4. Serviced' AideMedicale 311,050 70,000 22.5Z 329,350 70,000 21.35 d'Urgence

5. CentreHspitalp 3,630,781 118,782* 3.3%4,025,300 100,000 2.51 Ukiversitairede Cocody (400,000)

6. CentreHospitalo 3,613,500 37,660e 1.0%4,094,400 70,000 1.7% thiiversitairede (350,000) Treichville

7. Pharmaciedela Sante 2,968,500 986,000 33.253,137,500 1,035,000 33.05 Publique

EPNTotal 12,421,6011,557,442 12.5113,610,250 1,637,024 12.0%

ISPPBudget 31,532,000 35,800,000

EPNas Z of MSPP 39.41 38.0%

GrossEPH subsidy 10,864,159 11,973,250

GrossEPH as 1 of MSPP 35.5% 33.4%

* Althoughthe 1986 budget had a forcastof usercharge revenuesof 400,000.000 and350,000.000 FCFA for theC.H.U. of Cocodyand Treichville respectively, actural revenues collectedonly amounted to 118,782.000 and37,600.000 for the two C.H.U. SeeAnnex 3 for aoredetails.

SOURCE: Ministry of the Budget - 105 -

Table IV-5

Public Health Pharmacy Revenue Sources, 1987 (FCFA 000)

Revised with Cost Recover-, Data in Table 4 (column 5 of Table 4) Total Budget 3.137.500… ------3137.500 EPN Subsidy to P.S.P.: Saies of Drugs

(1) Institutde Cardiologied'Abidjan 135,000 0 135,000 (2) InstitutNational de Sant6 Publique 40,000 , 0 40,000 (3) InstitutRaoul Follereau 10,000 3,000 7,000 (4) Serviced'Aide Medicaled'Urgence 159,000 89,000 70,000 (5) C.H.U.de Cocody 274,000 174,000 100,000 (6) C.H.U. de Treichville 338,000 268,000 70,000 (7) OrganismesExterieurs 79.000 0 79.000

1,035,000 534,000 501,000 I I Subsidyfrom B.G.F. (MSPP) 2.102.500 +1 534.000 2.636.500 …------% Cost Recovery 38%* 16.0%'

AAlternative Computation

(A) (B) (C) (D) C-ost Cost Recovery or Revised Recovery Negative Cost Recovery 1987 Ratio 1987 Budgets After Pavment to P.S.P. Budget (B)/(C)

(1) I.C.A. 983,900 (240,000- 135,000)= +105,000 983,900 10.6% (2) I.N.S.P. 850,500 (115,000- 40,000) +75,000 850,500 8.8% (3) I.R.F. 139,300 (7,000- 10,000)= -3,000 136,300** 0 (4) S.A.M.U. 329,350 (70,000- 159,000)= -89,000 240,350** 0 (5) C.H.U. Cocody 4,025,300 (100,000- 274,0001= -174,000 3,851,300** 0 (6) C.H.U. Treichville4,094,400 (70,000 - 338,000)= -268,000 3,826,400** 0 (7) O.E. --

**"revised"budget totallysubsidized by B.G.F. (MSPP) SOURCE. Ministryof the Budget - 106 - Treichvillein user charges should be consideredsales "income" to the C.H.U. at Treichvilleand/or to the P.S.P., and the remaining268,000,000 FCFA (or, 338,000,000minus 70,000,000)paid by the CHU at Treichvilleto the P.S.P. should be consideredeither as a "subsidy"to the P.S.P. from the MSPP, or as a 'subsidy"to the C.H.U. at Treichville. Similar subtractions should be made from the P.S.P. sales revenues in Table IV-5 for the Institut Raoul Follereau, for the Service d'Aide Medicale d'Urgence,and for the C.H.U. at Cocody. Once this has been done (see 'revised"column in Table IV-5), cost recovery for the P.S.P. falls from 33.0 percent of its budget to 16.0 percent of this budget, and the "real" subsidyto the P.S.P. from the budget of the MSPP increasesfrom 2,102,500,000FCFA to 2,636,500,000FCFA.

Alternatively,one could take the differencebetween a C.H.U.'s (for example) user charge revenues and its medicationsbill to the P.S.P., subtract that difference from the C.H.U.'s total budget and assign it to the P.S.P. The final accountingwould then still leave the P.S.P. with a 33.0 percent cost-recoveryratio, but would decrease the C.H.U. cost recovery ratio, or make it 0 (becausethe divisor for the C.H.U. would have declined - see lower portion of Table IV-5). However, because the C.H.U. collects the user charge for the medication from the patient (which is included in the hospital charge) and is the final user of the medications,the methodologyas used in the "revised"column of Table IV-5 seems to be the more appropriateone.

Even without these transactionsadjustments, Table IV-4 yields some useful gross informationfor 1986 and 1987 on the extent of the cost recovery effort in the Cote d'Ivoire, and on the amount of MSPP subsidizationof the health care institutionsthat are supposed to be administrativelyand financiallyautonomous. First of all, during the first full year of financialautonomy, (1986) neither C.H.U. collectednearly as much user charge revenueas had been forecastby the Ministry of the Budget. The C.H.U. at Cocody only collected29.6 percent of projected revenues (118,782/400,000),and the C.H.U. at Treichvillecollected even less, 10.8 percent (37,660/350,000).The explanationsfor this problem in 1986, and in 1987 fall under two headings. One explanationoffered by people at the MSPP is that the present tariff structurefor hospitalizationat the two C.H.U. is too high. Examinationof the tariff structurefor the two C.H.U. (See Figure IV-6) indicatesthat the daily charge for hospitalizationis for three classes of service: (1) first class, 10,000 FCFA, (2) second class, 6,000 FCFA, and (3) third class 2,000. Figure IV-5 indicates that the percentageof beds in each C.H.U., for each class of service, ought to be the following: (1) first class, 5Z, (2) second class, 30Z, and (3) third class, 651. The chief accountantat Cocody explainedthat the average lower-incomefamily in the Abidjan area needs about 1,500 FCFA per day for the purchase of the bare essentialsof living; in his estimation,the 2,000 FCFA for third class accommodations,and the 6,000 for FCFA for second class accommodationsare simply too high relativeto the basic 1,500 FCFA for daily living. His view was that, if the whole tariff structurewere adjusted downward,many more people would be willing and able to pay for a day of hospitalization. A second explanationfor why user charge revenues are so low at the two C.H.U., even after two years of experiencewith user - 107 - charges, is that they seem not to be collectedwith any consistencyor vigor. There may be a lack of convictionon the part of the hospital administrationabout the propriety or the necessity of having user charges. For example, many poor people and many other people are admitted to the hospital at Cocody under emergency conditions. Although the official policy of the hospital is supposed to be to collect a fifteen days' deposit from anyone admitted to the hospital, ostensiblypoor people or emergency cases are not required to pay this deposit.5 This arrangementposes some financialproblems for governmentemployees, who have 70Z drug insurance through their own insurance scheme that does not cover hospital costs, but none for people employed in the private sector in the formal labor market, when they have private health insurance.The head accountantat Cocody said that both of the C.H.U. admit many poor people and also admit many people under emergency conditions. The hospital administrationdoes not press these latter two categoriesfor payment while they are in the hospital, but tries to get their families to either pay the deposit or to pay something after the sick person has left the hospital. This effort is made by sending numerous letters to the families,but usually no payment comes forth.

The C.H.U. at Treichvilleuses almost all of the same administrativeprocedures as are used at Cocody, but those who say that they cannot pay are put into dormitories,where there are 40 to 50 beds, where there is no air-conditioning,and where the standardsof cleanlinessand sterilityare less than optimal. The authoritiesat Treichvillebelieve that the differencein quality between this 'fourth'class of hospitalizationand the other three classes is so great that those who can pay, will pay, because they certainlydo not want to end up in the 'fourth' class accommodations.

These two kinds of explanationfor the low level of cost recovery at the C.H.U. lack credibilityfor a number of reasons. First of all, it is a known fact that Treichvillehas had grave administrativedifficulties. Secondly, the 'fourth'class strategy at Treichvilledoes not seem to have worked. In 1986, Treichvilleonly collected 10.8 percent of its projected user-charge revenues,and the 70,000,000FCFA figure given for 1987 remains a projection;at the end of 1987, it will be interestingto see if it will have collected only 10.8 percent of this 70,000,000FCFA projection. The final reason why the explanationsfor low levels of cost recovery at the C.H.U. lack credibilityis the experienceat the ProtestantHospital at Dabou (fiftykilometers west of Abidjan). Although the situationat Dabou will be described and analyzed more fully in a later section of this Chapter on the private health care sector in the Cote d'Ivoire, it should be pointed out here, in the context of the lack of cost recovery at the C.H.U., that the 125 bed hospital at Dabou has: (i) been practicingcost recovery since 1968; (ii) always covered about 40-45 percent of its operating costs (includingall local Ivoirien salaries)with user charges, (iii) probably serves a poorer populationthan do the C.H.U., because of its location in a

5 For first class, the deposit is 150,000 FCFA; for second class, it is 90,000 FCFA, and for third class it is 30,000 FCFA. - 108 - rural agriculturalarea, (iv) taken a very firm stance about the necessity of cost recovery, if quality care is going to be maintained, and (v) has raised its user-cost prices almost every year, in order to maintain a 40-50 percent recovery ratio. Indeed, although there is a local public hospital available to the local population, the reputationfor quality care at the Protestant Hosgital is such that its bed-occupancyratio is usually about 90-95 percent. Also, the user prices at the Protestant Hospital are high relative to those at the C.H.U. That is why it is difficult to accept the head accountantat Cocody's assertion that people cannot pay the C.H.U., because the tariff structure there is too high. What seemed apparent from visits to Cocody and to Treichvillewas that the political will did not yet exist to uniformly impose the stated user charges and enforce their imposition.7 The most encouraging results for cost recovery in Table IV-4- are those for the Institut de Cardiologied' Abidjan (I.C.A.) and the Institut National de Sante Publique (I.N.S.P.),which is more of a dispensary and public health clinic than anything else. Without the adjustment for financial transactionsfor drugs and medications from the P.S.P. (as in Tables IV-4 and IV-5), the I.C.A. and the I.N.S.P. had cost recovery ratios of 24.4 and 13.5 percent respectively. The gross cost recovery ratio for the I.N.S.P. is not as high as the gross cost recovery ratio of 21.3 percent for the Institut Raoul Follerau (I.R.F.),but after having taken into account the inter-institutionaltransfers with the P.S.P. (see bottom portion of Table IV-5, along the last column), only the I.C.A. and the I.N.S.P. had positive cost recovery ratios.

6 However, the economic tradeoffs for the populationare somewhat uncertain. The ProtestantHospital charges for outpatientvisits and for hospitalization,but the charges for drugs and medications are included in the visit price or the hospitalizationprice. Thus, the marginal cost of drugs and medications there is zero. On the other hand, at the local public hospital, outpatientvisits and hospitalizationare almost always free, but most drugs and medications for use there must be obtained by the patient, with a prescription,at the local private pharmacy, and these drug and medication prices are high. Thus, the economicallyrational person who anticipatesa large use of drugs and medicines for his/her illness would prefer to go to the Protestant Hospital rather than to the local public hospital.

7 Certainly,unlike for some of the hospitals in Senegal and Mali, the physical conditionsfor using the exclusion principle are more appropriateat both of the C.H.U. in the Cote d'Ivoire. For example, in order to enter and leave the confines of the C.H.U. at Cocody, one must pass through a turnstile that is guarded by two men. However, during the two visits there, people passed through the turnstile but there was no evidence that it acted as any form of financial barrier to almost anyone who wished to enter or leave. - 109 -

Table IV-4 also shows that gross cost recovery for all seven entities was about 12.0 percent, that the seven EPN combined had budgets equal to 39.4 percent and 38.0 percent of the budget of the MSPP in 1986 and 1987, and that their combined gross subsidiesamounted to 34.5 percent and 33.4 percent of the MSPP budget in 1986 and in 1987.

As a final note on these seven entities, the reader might well ask why these seven entities are the only public ones that are presently engaged in cost recovery in the Cote d'Ivoire despite legislationthat mandates cost recovery for all public institutions. Again, the explanationgiven was that cost recovery is a delicate subject and that cost recovery must be pursued slowly. These seven entities are seen as pilot efforts in cost recovery, and, because of their specializednature, in most cases, their cost recovery efforts will only affect certain segments of the Ivoirien population, rather than the population as a whole. The strategy, then, is to proceed slowly at first, and only after, to try to impose cost recovery at all public institutions.

The AntitubercularCenters (C.A.T.)

These centers are another aspect of the same strategy,but their success to this point in time, both as care-giving institutions,and in the cost-recoveryeffort seem to be due largely to the energy and force of the personalityof one man, and his physicianwife, who have worked in the Cote d'Ivoire over the last thirty years. The Doctors R. and G. Bretton seem to be the driving force behind the eight C.A.T. that provide prevention and care; two of the C.A.T. are in Abidjan, and the other six are in the interior of the country. Data on the prices charged at the C.A.T., and other materials pertaining to their operation are available for study (See Annex). In 1986, the C.A.T. had a total budget of 350,000,000FCFA. Revenues from the sale of stamps that allowed patients admittance to treatment amounted to 150,000,000FCFA, and the operating subsidy from the Ministry of Public Health and Population totaled 200,000,000FCFA. Thus the cost recovery ratio for the C.A.T. was 42.9 percent, which, by far is the best that any public health-care institutionin the Cote d'Ivoire has been able to achieve.

An extended interviewwith Dr. R. Bretton, the Head Physician of the C.A.T., revealed that he had decided long ago that the resources that he was receiving from the Ministry were insufficientto meet the antitubercular needs of the country. He therefore decided that people were going to have to pay for the treatment that they received,and he also recognized that people would not pay if they did not perceive that they were receiving quality care for their money. The price list that he establisheddoes take into account the needs of the poor (See Annex), and it also employs other methods. For example, there are now some 65,000 Lebanese who live in the Cote d'Ivoire and other immigrantswho have come there to take advantage of its relative economic prosperity. As a safeguard for their property, many of these immigrants apply for citizenshipin the Cote d'Ivoire. However, before they can receive citizenshippapers, they must be certified as not having tuberculosis,at one of the C.A.T. Figure IV-7 shows the price - 110 -

Figure IV-7

Certificate of Ivoirien Citizenship

Always in the form of the purchase of anti-tuberculosis fee stamps which must be glued on the X-ray application form and which must be cancelled by the secretary herself.

The X-ray machine operator must reject any request for an X-ray by a citizen or national presenting non-cancelled stamps.

Young and lower-level employees, or any small-scale merchants: 2 stamps at 1,000 F.

Wealthy individuals: 2 stamps at 5,000 F or the equivalent of 10,000 francs (middle level merchants, Director, etc.)

'Wholesalers:4 stamps at 5,000 francs or the equivalent of 20,000 francs.

General- Manager of large enterprises, French or other nationals: see chief physician.

'Womenand children: 2 stamps at 1,000 francs or the equivalent of 2,000 francs.

The contribution we ask is graduated according to the type of service provided, be it medical or administrative, depending on the funds of the individuals concerned.

We need this contribution in view of the current economic situation. It enables us to process your administrative papers easily and enables patients to get the proper care.

In case of dispute, see the chief physician, assistant secretary of the committee.

Naturalization records may be signed only by the chief physician or the deputy chief physician appointed in case of absence.

ABIDJAN, July 21, 1983 DR. RAYMOND BRETTON Chief Physician of C.A.T.A. (Anti-tuberculosisCenter of Abidjan) - 111 - structure for these examinations;the structure is steep and highly progressiveto presumed income. The management of the central C.A.T. in Abidjan is assiduous, particularlyin the ticket-sellingsystem used and in the accounting procedures employed. No one is admitted for treatment unless he/she has first passed through the scrutiny of the ticket-seller;large amounts of records are kept on the patients and on the financial situation of the C.A.T. The X-ray machine and the film development apparatus are twenty years old and continue to function,because they are regularly maintained. The C.A.T. is clean and is as pleasant as an institutionof this sort could be.

ANALYSIS

As was done in Senegal and Mali, each person or group of persons interviewedreceived a copy of the questionnaire(See Figure I-2) as a frame of reference for the mission, the interview, and the tour of the institution that followed. Again, future empirical research will be needed in order to have statisticalverification of the answers given, but the answers do give some qualitativefeel of the perceptionsof knowledgeablepersons in the Cote d'Ivoire. The numbered responses given here correspond to the numbered questions in Part B of the questionnaire. They represent a summary of the views of the persons interviewedwho chose to respond specificallyto the questions.

1. The present structureof user charges varies according to the type of health care institution (See Annex). In general, the private health care institutionsare the ones that consistentlypractice cost recovery, and cover most, if not all, of their costs. On the other hand, in the public health-care sector, cost-recoveryis not pursued at all in most public hospital institutionseven though a law has been enacted to that effect ever since 1977. The tariff structure in the specializedE.P.N. has been judged to be too high by some observers, particularlyat the C.H.U., but when one compares the public price structureto the private price structure, the public price structure does not appear to be too high. Perhaps this judgementwould be reversed, if it were possible to make some quality adjustment for the prices charged by the E.P.N. for the services that they render.

2. Estimates (and see Tables IV-4 and IV-5) indicate that the seven E.P.N. that consume about 39 percent of the MSPP budget have a net cost- recovery ratio of about 8.1 percent. Therefore, the net national public cost recover ratio is about 3.1 percent. This net cost recovery ratio is less, because it takes into account the financialtransfers that occur between the MSPP, the Pharmacie de la Sante Publique, and the other six E.P.N. Cost recovery in the private sector is complete in some institutions and partial in others. For example, the private PolycliniqueInternationale Sainte Anne Marie uses 80 percent of its user charge receipts to pay all of the expenses of operating its outpatient facilities and its 220 bed hospital and 20 percent of the receipts as a return on capital, and in order to amortize the initial 23,000,000,000FCFA spent on the facility. The Protestant Hospital at Dabou has consistentlycollected 40 to 45 percent of - 112 -

its expenses in user charges ever since its foundation in 1968, but it must be rememberedthat its clientele is much, much poorer than the clientele of the PolycliniqueInternationale Sainte Anne Marie (P.I.S.A.M.).

3. Access to health services depends upon the socio-economic situation of each group within the population. At a place like the P.I.S.A.M.which is extremely expensive,one finds that the quality of care rivals that of any institutionin Europe or in the United States. However, financial access to the P.I.S.A.M.is limited to the upper classes and to employees of business firms that have contractedservices with the P.I.S.A.M. The middle class also has access to good care in the many private clinics that are mostly located in the Abidjan area (See Table IV-8). Access to care in institutionsthat have moderate prices does not seem to pose problems for most people. For example, the C.A.T. charge everyone that they can, and the clientele continues to come. At the Protestant Hospital at Dabou, there were 130,000 outpatientvisits last year, despite the application of user charges to all but the very poor; the pediatric departmentthere now operates at what it judges to be 120 percent of its real capacity; surgery and medicine operate at 80 percent and 75 percent of their respectivecapacities. Physical access to public institutionsis good, at least in Abidjan, but physicians interviewed at both the C.H.U. in Cocody and in Treichville felt that the quality of care left a great deal to be desired, particularlyas regards the purchase and maintenance of equipment,and the cleanlinessof the two hospitals. The physicians there also felt that user charges were not high enough, and that they were not being systematicallyand consistentlycollected.

4. As the 1977 hospital law indicates (See the "Enabling laws for C.H.U." listed in the Annex), there are widespread exemptions from payment for hospital care, but, because the law is so little applied for cost recovery,most people, in effect, are exempted from paying for their hospitalization. In this regard, it is important to note that the ProtestantHospital at Dabou, which seems to have an economic class of clientele that is comparable,if not poorer, than the clientele of the C.H.U., estimates that only about 2 percent of its patients end up paying nothing for their care because they are too poor.

5. Most people thought that moderate charges of between 1,000 and 2,000 FCFA for outpatientvisits and light medical interventionwould be the most appropriate. For most specializedtreatment, caution needs to be taken in setting prices, because potential patients may be scared off by too high prices. The chief accountant at Cocody thought the tariff structure of 10,000, 6,000, and 2,000 FCFA for a day of hospitalizationwas too high. On the other hand, the ProtestantHospital at Dabou does not seem to have any financial difficulty,nor difficulty in attractinga clientele, even though it uses a pricing structure that might be too high, according to the opinion of the chief accountantat Cocody.

6. The utilization of serviceswill change, if price changes are effected without improving the quality of care provided and the physical environmentin which the care takes place. Therefore,more significantcost - 113 - recovery cannot take place, unless potential patients believe that they are receiving their money's worth in care and physical surroundings.

7. To the extent that public user-chargeprices begin to approach those of the P.I.S.A.M. and those of other private institutions,that do not even charge as much as the P.I.S.A.M.,to that extent will poorer people be excluded from the health-caremarket. In setting health-care prices, it must not be forgotten that the minimum monthly professionalsalary in the Cote d'Ivoire is now considered low at around 50,000 FCFA. Also, any change in public sector user charges ought to be made with reference to some reasonablepercentage of the monthly income of each socio-economicclass.

8. At the margin, higher user charge rates probably would affect health care utilization. Some administrativemeans must be found to screen out those poor who could not pay higher levels of user charges, but who still require care.

9. Expectationsfor the health care system become greater and greater as developmentoccurs. For example, even in developed countries,where life expectancy becomes ever longer, people are dissatisfiedwith the level of infant mortality rates, even though the number of physicians per capita is high. But, even if expectationsfor health care results are high in developing countries, even among poor people, they will simply lessen their use of the health care system if user charges become too high relative t:o their incomes.

10. The ideal situationwould be one where people could pay for all of their health-care needs, and then the public sector would no longer have an obligation to provide free, or almost free, health care. Most people interviewedthought that the country had to take a slow and cautious stance with respect to user charges, and apply increases in user charges in the public health-care sector commensuratewith rates of growth in economic development.

11. Current thought is that health care expenses in any modern country should not exceed 15 percent of its gross national product. It therefore follows that people should never have to pay more for health care than 15 percent of their income. This being the case, the price structure for health care ought to reflect the income structureof the society in which it is imposed. Another aspect of this strategy is to constantly make an effort to produce, or buy on the open market, medications and drugs as cheaply as possible, and to provide equipment that is less costly to maintain.

12. Collection costs are extremely low in the Cote d'Ivoire. Better management and supervisionof the collectorsof user charges would produce greater revenues,but would not cost more, because the collectors' salaries are already paid, and are, therefore fixed costs to the MSPP.

13. Fifteen percent of family income would be the absolute maximum that one could hope to collect in user charges. Because the dispersion of income is so great in a country like the Cote d'Ivoire, special care must be - 114 - taken in establishingthe structureof user charges.

14. At the present time, upper-incomegroups are the ones who benefit the most from public and private health-careprovision. If a user charge system were established and enforced in such a manner that it was progressive to income, upper-incomegroups would lose some of their present advantagesvis-a-vis the public health care system. The poor will always be dependent upon the public sector for their health care, although the experienceof the ProtestantHospital at Dabou indicatesthat many of the poor can pay something and that they can get better care from well-managed institutions.

15. A census of the population, followed by a study of standards of living would be the most practicalway of identifyingthose groups in the populationwho are unable to pay for their own primary health care. Once these people have been identified,it would not be difficult to provide them with certificatesof indigence. Another possibilitywould be to enact a small surtax on incomes (.75Z to 1.OZ) that would be earmarked for financing primary health care for the poor.

This summary of responses to each question does not meet the rigor of the economist's criteria. The responses do, however, well indicate the "politicalwsituation of cost-recoveryin the Cote d'Ivoire at the present time.

CONCLUDINGOBSERVATIONS

Given the Cote d'Ivoire'srelatively high per capita income, and given the sophisticationof many of its institutions(such as in accounting, for example) relative to those that have developed since independencein other African countries, it is surprisingthat cost recovery seems to have made such little progress in the public health care institutionsthere. As has been noted earlier in this Chapter, one hypothesiswhy cost recovery has not taken hold and evolved in the public sector as rapidly as one might have thought is that health care was probably viewed as a "merit' good by all of the newly independentAfrican countries. As time went on and development did not occur as rapidly as had been thought possible, the real resources available to the State did not meet anticipatedexpectations, and, in the case of the sub-Saharancountries actually leveled off or declined during the 1980s. Where the decline did occur, many countrieswere forced to reevaluatewithin their own councils,what they consideredto be immediately 'productive"expenditures, such as for agricultureand transport,and to somewhat obliquely classify other expendituresas a form of "consumption." However, some notions take a long and hard time to die politically. If the general populationhas become convinced that expendituressuch as for health care are, indeed, "merit"goods, then, with dwindling public economic resources devoted to it, the quality of public health care services must diminish. There comes a point where either some type of user charges must be put in place, or the provision of health care services merely becomes a process of paying the salaries of public health care workers who work in slowly decaying buildings,but who have no drugs and medications to produce - 115 -

'cures' or prevention. Perhaps the Cote d'Ivoire has not yet reached such a point, and believes that it never will, and thereforehas less interest in cost recovery, and, even sees some political risk in trying to change the 'merit" good orientationof the general population toward health care. Such a stance would still be perfectly consistentwith the prevailing social philosophy in the Cote d'Ivoire that the private sector should do what it does best, and that the public sector should be present where the private sector will not go. Thus, it is not at all surprising that the Polyclinique InternationaleSainte Anne Marie, with a price structurecomparable to European hospitals, can thrive, and that the C.H.U. barely charge for their services,while all the other public hospitals charge nothing.

As was done in the Chapters on Senegal and Mali, the remainder of this Chapter will concentrateon those issues that are highly pertinent and essentially related to cost recovery.

Health Insurance in the Cote d'Ivoire

As was true in Senegal and Mali, the Cote d'Ivoire has a social security system for people in the formal labor market; it is called the The National Fund for Social Security (CaisseNationale de la Prevoyance Sociale-C.N.P.S.). Out of the 1987 budget of 38.0 billion FCFA, the C.N.P.S. provides three different kinds of benefits (alongwith paying its operating expense): (1) old-age pensions, (2) insurancepayments for worker accidents, and (3) curative and preventive health care, and family assistance (all under (3) being called 'prestationsfamiliales'). Workers in the formal labor market pay percentage contributionsfrom their wages and salaries for (2) and (3) above, and both employers and employees pay an equal percentage contributionfor old-age pensions. Expendituresfor (3) above, the health care component, break down as follows:

All Expenditures Health Expenditures (ActionGlobale-A.G.) (Action Sanitaire-A.S.)

1985 2,720,570,713FCFA 353,749,999FCFA 1986 3,509,791,573FCFA 413,236,783FCFA 1987 1,632,203,321FCFA 463,290,663FCFA

The distinctionthat the C.N.P.S. makes between *A.G.r and "A.S." is somewhat confusing, because some of the "A.G." consists of many of the kinds of maternal and infant preventive types of service that occur at the Protestant Hospital at Dabou (see below). The "A.S.* is strictly curative care provided by the eight Medical Social Centers (CentresMedico Social- C.M.S.) that the C.N.P.S. maintain in the country. These C.M.S. are unlike the Centers found in many other places in Africa, because they do not have hospital beds, but are, rather,more like dispensaries. The reader will note that the sums above, allocated for 'A.G.' have fallen from 2.7 billion to 1.6 billion FCFA between 1985 and 1987, while the sums allocated for 'A.S.' have increased from 354 million to 463 million FCFA. These changes have occurred for two reasons. The first reason is that the C.N.P.S. has - 116 - decided that family assistance 'in cash" may not end up reaching the family, if the father comes to the C.N.P.S. to receive the money; therefore, the C.N.P.S. is now leaningmore towards providingbenefits "in kind,' such as with the 'A.S." The second reason is that all care at the C.M.S., including drugs and medications is provided without charge. Moreover, it would appear that the C.N.P.S. in the Cote d'Ivoire has the same problem as the Social Security System in Senegal and Mali, with only one contributor from each family,but with many claimants for medical care from the same family. In addition,officials in the C.N.P.S. estimate that about 75 percent of the people who use the C.M.S. facilities for their health care are not even subscribersto the C.N.P.S.,but are people who have borrowed friends' or relatives'C.N.P.S. health cards. Indeed, the C.M.S. are so popular (either because of their zero price policy, or because of the quality of care), that they are overcrowdedwith patients. The increase in costs and the large amount of demand have led officialsat the C.N.P.S. to begin to seriously consider user charges, both as a rationingdevice and as a way to expand their financial resources. Drugs and medications for the C.M.S. used to be bought from wholesalers in Abidjan, but are now imported directly by the C.N.P.S.,which is even now exploringmore efficientmethods of drug and medication procurement. One person stated that they think that they should be able to save 100 million FCFA by being more efficient in drug and medication purchasing. No doubt the sum-totalof funds for both the 'AG." and the RA.S." suffered a large decline between 1985-87, because of lower employee and employer contributionsdue to the recession in the Cote d'Ivoire.

Government employees and their families have two sources of health insurance,and even three, if they buy health insurance in the private sector. The 'Mutuelle"is a public insuranceinstitution that covers 70 percent of the cost of medicines and drugs, but does not cover hospitalization. The 'Mutuelle"also conducts a dispensary in downtown Abidjan. In principle,when governmentemployees are treated at a public hospital, a certain withholding (to be remitted to the hospitals) ought to be taken out of their salariesby the Ministry of Finance. The amount of this withholding is not indicatedin the 1977 law, nor did anyone seem to know how much it was, which gives another indicationthat government employeesdo indeed have full hospital 'insurance'coverage, because they seem to pay nothing when they or their families go into a public hospital.

In order to obtain better hospital care, such as at the PolycliniqueInternationale Sainte Anne Marie, some governmentemployees, through professionalassociations, have now purchased group health insurance in the private sector. One physicianat Cocody said that his group hospital insurance costs him 156,000 FCFA per year; he also indicated that lawyers and army officers have obtained similar insurance,and that now the teachers'union is making an effort to obtain such insurance for its members. Individualprivate health insurancecan cost from 250,000 to 300,000 FCFA per year. - 117 -

Table IV-6 provides some informationon the extent of private insurance activity in the Cote d'Ivoire. Unfortunately,data for health insurance are not kept separatelyby the Insurance Department at the Ministry of Economy and Finance, but the Ministry estimates that about 5 percent of the insurance data are for health insurance. Relating 5 percent of the 'premiums sold" data in Table IV-6 to the estimates on total health care expendituresderived from Table IV-2 yields an estimate that approximately1.4 percent of total private health expenditureswere covered by health insurance sold by insurance firms doing business in the Cote d'Ivoire in 1985.8

As a form of self-insurance,many commercial enterprises and factories conduct their own dispensariesfor their manual laborers. Higher level employees are insured by the private insurance companies and often have their health insurance costs paid by their employers. The usual procedure for insurancepayment, before elective forms of hospital care, is for the individual to go to the insurer and receive a payment guarantee which is then presented to the hospital; the hospital later bills the insurer directly. In cases of accident or emergency, the person's family is obliged to go to the insurer and obtain the payment guarantee. Apparently, some private insurers have also had actuarial problems with the extended family structure. Moreover, private health insurers are becoming much more interested in the level of health care prices in the private health care sector.

The Private Health Care Sector

Table IV-7 contains a times-seriesbreakdown of data on.medication and pharmaceuticalimports into the Cote d'Ivoire. In Table IV-7, the imports are divided into three general categories: (A) medications imported by the MSPP or by the Pharmacy Division; (B) medications imported with the authorizationof the two aforementionedpublic entities, and (C) other imports. In 1977, there was a grand total of 5.4 billion FCFA in medication and pharmaceuticalimports, and the total reached 24.2 billion FCFA by 1985. The composition of the purchasers of these imports has changed dramatically in the ten-year period. In 1977, purchasers (A), (B) and (C) imported 20.8, 79.2 and .01 percent of the total respectively;by 1985, the respective percentageswere 3.2, 96.7, and .09. The MSPP and the Pharmacy Division had their share of imports drop from 20.8 percent of the total to 3.2 percent. The Pharmacie de a Sante Publique (PSP) had a total budget of about 3.0 billion FCFA in 1986 (see Table IV-4). If the PSP had the same budget in 1985 as in 1986 and is subtractedout of the subset of (B) above, even then, the growth of the private sector in drug and medication imports, and presumably also in distribution,has shown dramatic growth in the ten-year period.

8 The calculationused to derive this estimate was as follows: (.05 x 10.9)/40.1. - 118 -

Table IV-6

Activities of InsuranceCompanies in COte d'Ivoire (in millions of CFAF)

Activity I Year 1983 1984 1985

Premiums Sold 9,394 11,451 10,859

Contingencies- Current Risks 31 - 12 Previous 2,919 3,174 4,252 31 - 12 Fiscal Year 3,174 4,252 3,788

Benefits and Fees Paid Expenses 5,803 5,458 6,147

Advanced payments for Victims 31 - 12 Previous 7,413 6,579 8,615 31 - 12 Fiscal Year 6,579 8,615 8,757

Charges Paid by Victims ------

Commissions 1,208 952 911

General Expenses 2,307 2,582 2,636

FinancialYield 756 778 848

Share of Reinsurance in Charges 2,670 2,383 2,090

Premium Acquired Under Reinsurance Policies 3,607 4,088 3,770

Source: Insurance Department, Abidjan, July 1987.

NS: 1/The health risks account for 5% of the premiums paid, contingencies, account rlsks, benefits and costs paid, share of relnsurance out of charges, and premiums acquired under reinsurance policies.

2/The figures are separate - there Is no need to provide a total for each column. Table IV-7

Iports of Hedications and other Pharmaceutical Products into Cote d lvoire (PCFA) Year t Produec 1976 1977 1978 1979 1980 1981 1982 1983 1984 1s8s

A) Medication* imported by the Ministry of Public Health or by the Division of Pharmacy

Medications for human or veterinary medicine Medication not packaged for 4 retall sale P78)95 2W3,1?24 315,40,47 30ip1pZ0 391iZ36 70,1139 261,9656317

UedicRtion Packaged 72 7214 for retal I *ale 109945261 15lS981,7 1,7S9t773V97 1826.439V78 1,7 4 8 v3V3613p3 S169osm63

MedicatiSampI* 12o44"4 40;s4PW 651,341 "45 3,P07pM 51iq57 94262t8

A. Total - 1,113.8 Million A. Total- 781.5 milliorl 9) igporied with prior authorizationof the Ministry of Pubilic Health or of theDivislon of PharmaCy Medicat ion not packaged for retalI

53,743,512 9Z081s 79Z76033 7z9ss 72 122a23)59 11 Z1 411 1&809631

Medication Packaged I- for retail atl126e)3,76 6P187%8326 11,949641,467 N488021,7SB 17483?53644 16,370V24 22,51W

Medlcal saple 62,371781 1042S41 21V432769 275W*319 299J71,150 437}33197 273,p3;,759

C)Othtr imports B. Total - 4,242.1 million B. Total . 23,357,5 million

Medieation not packaged for retail ai* goo 739 162793 "lo41o 241pD s,31W 4p35e6

Med[cationPackaged for ratail sale 70s,aso 1l5p78 %13,v 79 149Z70 8994O 14,WM7 12,5m19

medical saimplos El= 35fzs 30o,50 & 9 253g999 2,70W4 964 97

C. Total - .8 0dllion C. Total - 72X9 aill2on Total aplB,77.08lD,p4k 1A,337?3B,7f%B33 17,7,534#99 l,722633fp 18,IGj3L2P2L 2h16p21383

SOWSRC: Division of Pharmacy, ninlatrY of Public Health and Population. - 120 -

Table IV-8 shows the distributionof public and private health- care institutionsin the Cote d'Ivoire and Table IV-9 shows the distribution of public and private physicians. While there are a number of private health-care facilities scatteredthroughout the country, the most important concentrationof private and public hospital beds is in the Abidjan area. Table IV-8 also contains a more detailed listing of the public and private hospitals in Abidjan, and gives the number of beds for each. In Abidjan itself, private sector hospital beds comprise 18.0 percent of the total, if the not-yet-builthospital of Yopougon,with a projected total of 508 beds, is included. 9 If Yopougon is not included in the total, private-sector beds increase to 22.2 percent of the total. Although there were enough hospital bed data available to calculatethe percentage of private beds in the eastern region (3.9 percent) and in the northcentralregions (3.3 percent),bed data in the other regions,where there are private hospitals or clinics, was not available. The remainderof this section of this Chapter describesthe pricing structuresand the modus operandi of the PolycliniqueInternationale Sainte Anne Marie (P.I.S.A.M.)and the ProtestantHospital at Dabou.

The P.I.S.A.M.,in Abidjan, like the Hopital Principal in Dakar, is, first and foremost,a hospital and outpatient facility for the well-to- do.10 The Annex refers to informationon the prices charged for inpatient and outpatient care, on a breakdown of the number of physicianswho practice there and their medical specialties,on their billing system, and on other informationabout the kinds of supplementaryservices available there. In general, the prices charged for the 213 beds and services at the P.I.S.A.M. are high, and everyone in Abidjan understandsthat they will not be admitted to the hospital unless they can pay. Like private hospitals in the U.S., the P.I.S.A.M.will treat emergency cases brought to the door, but if the patient cannot pay, he/she is immediatelysent off to a public hospital, after basic emergency treatmenthas been given. A hospital room, with double occupancy, costs 25,000 FCFA a day; a private room costs 45,000 FCFA per day, and a suite, with sitting room and refrigerator,costs 80,000 FCFA per day. There is an initial charge of 30,000 FCFA for the first half hour's use of the operating room for major surgery, and a charge of 1,000 FCFA per minute after the initialhalf-hour. A four-day stay for the birth of a child costs 385,000 FCFA, for the room and the birth, if a woman chooses a room with double occupancy;a suite costs 625,000 for the same procedure. Unlike in the public hospitals,each procedure at the P.I.S.A.M has a price tag. The hospital also accepts payment from the French Social Security system. The specialtiesof the physicianswho practice there range from plastic surgery to all of the usual specialtiesthat one would find in any European hospital. (See the Annex for referenceto informationon (a) a detailed copy of a bill for a woman who had a five-nightstay at the P.I.S.A.M.;the five-nightstay, with treatmentamounted to a cost of

9 In the government listing of total public beds, the 508 Yopougon beds are included.

10 The majority of its clienteleis expatriate. - 121 -

Table IV-8 Public and Private Health Care Facilities COte dltvoire, 1987

Type of Facility and Number of Beds '- 14 4 REGION Hospital 2:" 1.4

014.4

A- 44 4i 4 * ', 0 4 4 > Is 0 4 S0 .4*~ U tH g oN 9 X W 04.4. 8 > z z4

Eestern 2S01Region 1 204 3 274 2 134 3 9X 3 0 S 34 0 0 Ai4 4 * W4 stern 1.egion 1750 3 243 5 5 450 0

m 0 0 0~~~4 A0

W st-Cntraleglon ' 1 251 3 37 7 1 4 8 4 EasternRegion I 25 1 204 3 274 2134 3.9% 3 0 5 3 0 0 0 West-CentralRegion 2& 1 251 3 378 7 414 3 2 4 8 0 0 0

WesternRegion 0 1 175 3 243 5258 5 1 3 6 0 0 0

South-Western Region 0 1 132 2 218 5 250 2 0 1 3 0 0 0

Northern Region lb 1 457 2 292 5 181 4 1 4 6 0 0 0

North-Central Region 5c 40 1 540 2 174 6 472 3.3% 3 1 7 6 1 0 0

South-Central Region 3c 1 204 2 273 7 392 2 1 2 3 0 0 0

South-Eastern Region

Abidjan 21d 487 49 2,097 0 0 1 116 18.0Xf 1 2 36 0 10 429 Other Cities 3 132 0 0 4 315 14 1062 4 0 4 8 0 0 0

Totals 1f 6R4 11 4,060 21 2,167 52 3,277 6.4% 27 8 30 79 1 10 429

a. Clinics - no bed numbers given b. No bed numbers given c. Clinics d. 3 of these clinics have no beds *. 2 C.H.U., Insitute de Cardiologie, and Hopital de Yopougon (508 beds not yet built) f. 22.2Z if Yopougon not included

SOURCE: Ministry of Public Health and Population Table IV-9

Public and Private Health Care Physicians & Dental Providers in the COte d'Ivoire

P.rsonnng Number Percent

Private Sector

(1) Doctors authorized to practice for private clientele 79 9.8

(2) Dental-Surgeons authorized to practice for private clientele 42 5.2

Public Sector

(1) Doctors 654 80.7

(2) Dental-Surgeons 35 4.3 TOTAL 810 100.0

Source: Ministry of Public Health and Population - 123 -

472,500 FCFA (or $1,687.50 at current exchange rates),and (b) an example of one of the additional services that the hospital offers: the annual physical check-up for businessmen,modeled after the American practice).

As its letterhead indicates, the P.I.S.A.M. is owned by a private for-profit corporation,SICOMED, and is managed by a private for-profit corporation,SOGEMED. The investment in the hospital was 22.0 billion FCFA, and the price structure is set so that, at the usual bed-occupancy rate of 85 percent, receipts pay all operating costs and give a 20 percent return on investmentplus amortization. Even though their prices are controlled by the Government, the Government gives them a range of prices that they can charge for each service, and the range is sufficientlybroad that they are not overly constrainedat the upper limit. Also, the Government prohibits advertising,as such, but allows the hospital to distribute winformationwto its potential clientele. As a private corporation,the hospital does not give out informationabout its financialoperations, and, therefore, a budget was not available for study.

Given the perspective of this study, the Protestant Hospital at Dabou (H.P.D.) is a much more interestingcase, because the H.P.D. could easily serve as a model for the public sector institutions,both in management practices and in pricing policies. (See the Annex for reference to informationon the price schedule of the H.P.D., its budget for 1986-- 1988, and examples of the health cards that it issues for the adults and children,who come to the H.P.D. for care).

The H.P.D. has been providinghealth care in the Cote d'Ivoire since 1968, and has practiced cost recovery ever since that date. The administrativestaff at H.P.D. take the position that people should pay something for their health care, not only as a budgetary matter, but also as a means of having patients interested in the types of care that they receive and in the cost of that care. They also expressed the point of view that the price structure, if it were generalizedto the whole population and for all levels of care, should representa pyramid that would give financial incentives to first go to entities such as health posts, and would be more expensive at hospitals. Throughout its 19 years, the H.P.D. has collected anywhere from 40 to 45 percent of its total expenses from user charges; the rest of its budget is subsidizedby the Ivorien MSPP, and by churches in Europe. Only about 2 percent of its patients are unable to pay anything for their care. This latter point is interesting,because of the often-stated view that the majority of the people in the Cote d'Ivoire are too poor to pay for any of their own health care and that user charges cannot be collected. Moreover, the average patient at the H.P.D. is probably poorer than the average patient at the C.H.U. in Abidjan, because Dabou is primarily an agriculturalarea.

Examination of the price structure at Dabou indicates that there are a multiplicity of prices; that is to say that, just as at the P.I.S.A.M.,an effort has been taken to price each service, so that every service rendered receives some form of compensation. Sufficient cost data are not available to be able to ascertainhow close to marginal-costpricing - 124 - all these prices are. For hospitalization,Dabou does not use the three- class price structure that the governmenthas tried to use at the C.H.U., but Dabou does have different prices for adults and for children. Staff explained that having classes of care is contrary to their philosophy of operation. If one examines the hospital price structure for adults and for children, one does note some effort on the part of Dabou to use marginal- cost pricing. For example, it is now well-known in hospital economics that the first days of a hospital stay are more costly in terms of hospital resources used than subsequentdays; the start-up costs, such as preparing a bed and thoroughlyexamining the patient only happen once. Recognizing this fact, Dabou charges 5,000 FCFA for the first day of hospitalizationfor an adult, 3,000 FCFA for the next two days, and then 2,000 for the next two days. After the fifth day, each subsequentday costs 1,500. Thus, even though the average cost of a five-day stay is 3,000 per day (or 33 percent higher than a third-class stay at a C.H.U.), the 5,000 FCFA on the first day (which is 17 percent below the average 6,000 FCFA per day in second class at a C.H.U.) makes an attempt to capture the marginal cost of the first day's stay. The half-tariff for children (just as the half-tariff for children in airline seats on an airplane loaded to capacity) cannot be explained completely in terms of marginal cost pricing, because a used bed is a used bed, and is explainedmore easily in income redistributionalterms. But, the half-tariff for children does follow the same daily pattern as that for adults. The mean length of hospitalizationfor patients at Dabou is 3 days and bed-occupancy rates range between 85-95 percent, the latter of which is consideredextremely high for hospitals in the U.S. Therefore, the average cost of a hospital stay in Dabou is 11,000 FCFA for an adult, or 3,667 FCFA per day, includingmedicines and drugs, but excluding tests. Last year, Dabou had 130,000 outpatientvisits (or 542 per day, for the normal work week).

Other relevant aspects of the H.P.D. are that its administrators claim that it is the only hospital in the Cote d'Ivoire that screens blood for A.I.D.S., although it would be extremely surprisingif the P.I.S.A.M. did not also do so, given its clientele and given all of the up-to-date technologythat it possesses.11 Until just recently,Dabou did not maintain a sinking fund to replace its capital equipment,because, as they explained, their budget balance is always 'fragile,"and because they relied on church groups to replace their equipment;they are now making an effort to have a sinking fund for some of the essential equipment. There are plaques on the walls throughout the buildings,naming church groups and individualsas donors of things. Dabou has 225 employees (150 working in medical services, and 75 nurses), and 8 physicians, two of whom are Ivoirien interns. The foreign salaries (which do enter into the total for purposes of calculating the cost-recoveryratio) are subsidizedby various church groups in Europe. Dabou's greatest drawing point, despite the prices that it charges, is its reputation for quality of care of all types, its well-baby clinic, and the

11 The visit to the H.P.D. occurred after the visit to the P.I.S.A.M.,and time and a local holiday did not allow this question to be asked later at the P.I.S.A.M. - 125 -

child-care education that it gives to mothers at the well-baby clinic. As was noted earlier in this Chapter, there is a public MSPP hospital in Dabou that does not charge for inpatientor outpatient care, but that does require people to buy their medicines and drugs at a local pharmacy,where the prices are relativelyhigh. The fact that the H.P.D. continues to have a high bed-occupancyrate and a large number of outpatientvisits clearly shows where the local population'srevealed preferences lie (or, at least that part of the local population that can afford to pay something for health care). The H.P.D. has also tried an experimentwith one local village pharmacy depot (as was done in a number of villages near Kita in Mali). Thusfar this experimenthas been a success, largely, it would seem, because of the H.P.D.'s close supervisionof the villager who runs the depot and sells the pharmaceuticals. Some thought has been given to the expansion of H.P.D., but they have decided that if they do expand, they will build in another town, given the empirical evidence that economies of scale end in hospitals somewhere in the 200-300 bed-range.12

Decentralizationof the Health Care System

Table IV-8 showed the administrativeRegions of the Cote d'Ivoire. These Regions are now also used to administer the health care system. At least on paper, the seven E.P.N., that account for some 39 percent of the MSPP budget (see Table IV-4) are administrativelyand financiallyautonomous from the MSPP. Under the leadershipof Dr. Bretton, the C.A.T. have enjoyed a great deal of autonomy. The I.N.P.S. also seems to enjoy a great deal of autonomy. Certainly, the relatively large private health care sector in Abidjan and in Dabou is autonomous. But, until the seven E.P.N. and the other health care institutionsthat consume the other 61 percent of the MSPP budget achieve greater financial autonomy, in the case of the former, and some financialautonomy, in the case of the latter, the public health care sector will continue to be run by the MSPP in Abidjan. This can only be achieved by cost recovery efforts at each and every institution,that in turn, is allowed to keep and spend cost-recoveryproceeds. What is certainly clear is that all financial decisions regarding the allocation of financial resources are now made in Abidjan by the Ministry of Public Health and Population and by the Ministry of Finance, in conjunctionwith the Council of Ministers. Thus, the overall judgement on the public health care system in the Cote d'Ivoire is that it is now overly centralized. What gives cause for optimism is how relativelywell-developed the private health care sector and the insurance system have become.

12 The interestingaspect of this last observationwas that the administratorsat the H.P.D. were aware of this empirical evidence. - 126 -

V. COST RECOVERY POLICY IN GHANA

The contents of this Chapter are based upon a two-week mission to Ghana. During that stay, numerous meetings were held at the Ministry of Health with the Deputy Director,Medical Services,with the Director of Planning and his Assistant, and with the Director of Pharmacy. Visits were made to the Christian Hospital Association,that coordinates the efforts of the 35 mission hospitals and 34 mission clinics in Ghana, to the USAID mission in Accra and to UNICEF. Interviewswere held with various consultantsworking on problems in health care finance, in health insurance, and in planning in Ghana. Site visits were made to a private clinic, to GIHOC (the parastatal,manufacturing pharmaceuticals) and to the Ridge and Korle Bu hospitals in Accra.

BACKGROUND

The economic difficultiesthat Ghana experienced in the early 1980s had serious repercussionson the ability of the health sector to function in an efficaciousmanner. Nevertheless,in the short run at least, Ghana continues to have better health indicators than the higher-incomeCote d'Ivoire (See Chapter IV). Table V-1 contains time-seriesdata for nominal and real total government and Ministry of Health expenditures. Columns 1 and 2 show the nominal values of these expenditures,while column 3 shows the rapid increase in the level of consumer prices for the period 1978- 1985.1 During that period, the CPI increased from 43.2 (1980=100) to 909.1. Columns 4 and 5 show total government and Ministry of Health expenditures deflated by the CPI. The general pattern of total real government expendituresand Ministry of Health real expendituresis downward. Column 5 indicates that the rate of decline in MOH real expenditureswas more rapid than the decline in total government real expendituresuntil 1984. In 1978, the ratio of MOH to total government expenditureswas 8.8 percent (column 6); by 1983, the ratio had halved to 4.4 percent. In 1984, MOH real expendituresmore than doubled, while total real government expenditures only increased by 16.5 percent, so that MOH real expendituresclimbed to 9.3 percent of total real government expenditures. Nevertheless,MOH real expendituresin 1984 only amounted to 45.4 percent of what they had been in 1978. As one would expect with a growing population (Column 7), the relative decline of real health expenditureson a per capita basis was even

1 Unlike the Francophonecountries in this Study, Ghana does not enjoy the advantages of having its currency tied to a convertible currency such as the French franc. The symbol for the Ghanain Cedi is ¢; at the time of the mission, its value was U.S.$1=$156. Table V-1

Ioiual ad teal rotal Govrnmntad Halth Expeeditmres

no AverageNnthly GovernmetSalary, Social Services

(Nilliomedis)

Year Total Govt. OIN CPi Total Govt. MON NOR hpulation Real lNrmalAverage RealAverage Elpeditures Health Akcr EEpenditures Iklth haith Estiutes Ceis Ionthly Earnings NonthlyEarnings (NoeiallI Expeditvres (190:400) (IrDa) Expenditrn is a tercent (thousands) per Capita 6ovt.Employees ot. Employees (Noinal) (1)/ (3) (Ral) of Total Social ServiCes Social Services (2)/ (3) (9) I (3) (1) (2) (3) (4) (5) (6) (7) (6) (9) (10)

1976 3,334.5 209.6 43.2 7,710.0 670.6 6.6 10,550.0 63.6 225.2 521.3

1979 4,076.0 273.2 6.6 6,121.3 417.7 0.7 10,820.0 33.6 272.5 409.2

190 6.329.3 429.9 100.0 6,329.3 429.9 6.6 11,131.0 38.7 44S.0 446.0

19651 6,62.6 50D.4 216.5 3,973.5 231.6 5.0 11,390.0 20.3 553.0 255.4

192 6.I29.4 485.7 264.6 3,032.3 103.4 6.0 11,690.0 15.7 562.0 212.2

193 13,401.0 566.6 590.1 2,271.0 ".4 4.4 11,990.0 6.3 940.0 159.3

194 22.701.0 2,112.3 824.1 2,754.5 256.3 9.3 12,206.0 21.0

1965 2,642.0 909.1 290.6 12,620.0 23.0

Source: World Bank data, and International Monetary Fund InternationalFinancial Statistics 1986. - 128 - greater. Column 8 indicates that per capita real health expenditures declined from 463.6 to $8.3 between 1978-1983, and then rose to ¢23.0 by 1985.2

This decline in MOH real health care expendituresdid not necessarilymean that the patient population directly bore the entire brunt of this decline. Columns 9 and 10 show time series data for nominal and real average monthly earnings for governmentemployees in the social services sector.3 Average real governmentmonthly salaries fell from ¢521.3 in 1978 to $159.3 in 1983, the last year for which this series was available;therefore, the average Ministry of Health employee saw his/her real monthly salary decline by 69.4 percent between 1978-1983,while the MOH real budget declined by 85.2 percent. Thus, dependingupon the initial weight of salaries in the health budget, government employees in the MOH directly bore the burden of some of this decline over these years. To the extent that worker labor effort and output are not related to the level of real wages, then the amount of public health care available to the populationwould not have declined to the extent indicatedby the 85.2 percent decline in real MOH budget expenditures.

The dynamics and the measurable effects of what did happen in the public health care sector in Ghana during the years 1978-83 are not perfectly clear. What is known is that, between 1981-1984, the total number of physicians in Ghana declined from 1,700 to 800. Morale in the government sector was exceedinglylow, so that, no matter how the statisticsare manipulated,and inferencesmade about the incidenceof the decline in expenditures,everyone (providersand patients) seems to have suffered, and it appeared evident that somethinghad to be done. The government's response in 1984 was to more than double the real budget of the MOH from what it had been in 1983 (See column 5 of Table V-1). In 1985, the government salary schedulewas increased,and more salary-weightwas given to those in the higher-skillcategories at the MOH, with the result that the real MOH budget increasedby 13.4 percent between 1984 and 1985.

Table V-2 shows the structureof the MOH budget in 1985 and 1986. As can be seen from the wages percentages,(62 versus 76 percent), a dramatic shift took place in the importanceof wages in the budget, between the two years, as the full effects of the 1985 salary increases took hold in

2 However, the interpretationof these per capita figures should be accompaniedby at least two caveats. One is that, in themselves, they give no indicationof the amount of private and/or informal traditionalexpenditures that may be replacingpublic monetary expenditures. The second caveat is that they give no indication of the change in incidenceof these public expenditures. See the next paragraph in the text for one approximatelymeasurable case of a change in incidence.

3 Government employees in the social services sector was the best statisticalproxy that could be found for employeesof the Ministry of Health. - 129 -

Table V-2

Effectsof Eabargoesand 1986 Salary Increases on Wage and Non-WageComponents of Recurrent Expenditures, 1985-1996 (MillionsofCedis)

1985(Actual) 1986(Estimate) EffectiveAllocation EffectiveAllocation

Amount Percent Amount Percent

I. WAGES

1. PersonnelPayments 1,563 59 2,230 67

2. Subventions,Wages 88 3 316 9

TotalWages 1,651 62 2,546 76

II.NON-WAGES

1. BudgetItems 2-5* 970 37 755 23

2. Subventions,Non-wages 21 1 44 1

TotalNon-Wages 991 38 799 24

TotalRecurrent Expenditures 2,642 1001 3,346 100%

*Item2: Travelling and Transport ExDenditures Item3: GeneralExpenditure Item4: Maintenance,Repairs, and Renewals Item5: OtherCurrent Expenditures (includes 'drugs and dressings' and'supplies')

SOURCE:World Bank data. - 130 -

1986. Also, wage subventionsincreased from 3 to 9 percent of the total MOH budget. Table V-3 contains a list of the organizationsbenefiting from subventions. The Christian Health Association of Ghana receives 80 percent of the subventionsthat help it run its 35 hospitals;most of these subventionsgo to pay salaries and wages in these institutions. Table V-2 also indicates that the percentageof the MOH budget going to non-wages consequentlydeclined from 38 to 24 percent. The footnote to Table V-2 describes the compositionof these non-wage items.

Table V-4 giveb some idea about what has happened to drug and pharmaceuticalexpenditures during the approximatelysame time period as in Table V-1. The reader will immediatelynote that, for most years, there is a wide discrepancy between "EstimatedRequirements" and "Allocations Approved" in Table V-4. During 1980 and 1981, when there was a civilian Government, the Ministry could submit any figures that it desired as estimated drug requirements,even though the allocationwould be nowhere near the stated Ministry requirements. With the new Government, the Ministry was asked to present "reasonable'estimates, and the Government tried as much as possible to meet the requests,hence the relativelylarge approvals for 1982 and 1983, in spite of the economic difficultiesthat Ghana faced. However, the economic situation compelled the Government to reduce the allocation to $23 million in 1984, and, in 1985, the Ministry of Health was asked not to present estimates that were beyond what was approved in the previous year. The requirementswere thereforebroken down into a 'core' and a 'periphery". The $22 million representedthe "core" program. In spite of this reduced request, the Governmentcould only approve $15 million in 1985. And, in 1986, it could only approve $13.5 million out of the estimated $73 million requirement. This is also consistentwith the decline in non-wage percentagesin Table V-2.

The Ministry has not been unduly worried about the reductions in the approved allocationsover the past three years, because, within this same period, restrictionson the importationof drugs by the private sector have been relaxed. Many private individualshave used the Special UnnumberedLicenses (SUL) to import drugs into the country, so that, at the moment, there are reasonablequantities of a wide range of drugs on the Ghanaian market.

Ghana's essential drugs list (see Annex) is a modificationof the WHO essential drugs list that takes into account local health care needs in Ghana. The MOH strictly adheres to this list in purchasing its pharmaceuticalsupply. There is also a directory of pharmaceutical suppliers (see Annex) that contains (1) names and addresses of the 504 registeredpharmacists in Ghana, (2) a listing of the 17 registeredprivate pharmaceuticalmanufacturers (which does not include GIHOC, the parastatal that dominates the local industry), (3) a listing of the 33 registered pharmacy wholesale shops, (4) a listing of the 179 registeredpharmacy wholesale/retailshops, and (5) a listing of the 100 registeredpharmacy retail shops. This informationis presented as simply one more piece of the puzzle. On the face of it, there is a large, seeminglycompetitive, private pharmaceuticalsector in Ghana. - 131 -

Table V-3

ORGANISATIONS SUBSIDIZED BY THE MINISTRY OF HEALTH

Amount' Name and Type of Organisation Location 1987

1. British Leprosy Relief Association London 2. Ghana Medical Journal Accra 3. World Health Organisation Geneva 4. Society of Friends of Lepers Accra 5. Ghana Red Cross Society Accra 6. UNICEF Paris 7. International Committee of the Red Cross Geneva 8. Ghana Society for the Prevention of Accra Tuberculosis 9. Christian Health Association of Ghana Accra 4400,000,000 (Mission Hospitals) 10. Medical Statutory Boards (Med. & Dental Council, Nurses and Midwives Board, Pharmacy Board) Accra 11. Ghana Medical Students Association Accra 12. West African Health Community Lagos 13. Special Voluntary Health Promotion Fund Accra 14. International Hospital Federation London 15. Ghana Institute of Clinical Genetics Accra 16. Liverpool School of Tropical Medicine Liverpool 17. Ghana Leprosy Relief Association Accra 18. League of Red Cross Societies Geneva 19. Environmental Quality Control, Civil Kumasi Engineering Dept. U.S.T. 20. St. Johns Ambulance Brigade Accra 21. Pharmaceutical Students Association Accra 22. Occupational Health Association Accra 23. Nursing Department, University of Ghana Legon 24. Health Committee on Water Resources Accra 25. West African Health Examination's Board Lagos 26. Ghana Health Students Associations Accra 27. U.S.T. Medical Students Association Kumasi 28. Onchocerciasis Therapeutic Research Programme Hohoe

Total: $500,000,000

* For 1987, only the total amount of funds and the funds for the Christian Medical Association of Ghana are available.

Source: Ministry of Health - 132 -

Table V-4

Drug Supplies: Requirementsvs. Foreign Currency Allocations ($US million)

Estimated Allocations Allocations as a Requirements Approved Percent of Requirement

1980 118.0 17.6 14.9%

1981 143.0 21.4 15.0%

1982 77.0 41.6 54.0%

1983 76.7 41.5 54.2?o

1984 76.7 23.1 30.1%

1985 22.0 15.0 68.2%

1986 73.0 13.5 18.5'

SOURCE: Ministry of Health, Director, Pharmacy Services - 133 -

A visit to the pharmaceuticalmanufacturing facility 4 controlled by the Government Industrial Holding Company (GIHOC) enlightened some of these speculations. GIHOC produces 50 different lines of drugs and pharmaceuticalsand sells about 50 percent of its production to the government (Ministryof Health, Ministry of Defense, Police etc.) at wholesale prices, and 50 percent to the private sector (includingthe church missions) through wholesale outlets. GIHOC accounts for some 80 percent of total local pharmaceuticalmanufacturing output, and the types of pharmaceuticalthat they produce make up about 40 percent of the total market for these kinds of pharmaceuticalin the whole country. GIHOC has always made a profit, but they admit that they employ too many personnel. Their prices are controlledby the Prices and Incomes Board (PIB), but the PIB allows them to price according to elasticitiesof demand for their products. Thus, GIHOC charges prices close to average cost for common-use products such as aspirin, and charges what the market will bear for such products as tranquilizers. All of their raw materials are imported (includingsugar for their syrups); they package and create chemical entities. Their foreign currency allocationscome from the Ministry of Industry (MI), but must be approved by the Director of Pharmacy at the MOH.5 They also sometimesmake cedi loans to the MOH, when the MOH has short-term liquidityproblems, and the MOH is already in debt to them, because of unpaid past pharmaceuticalbills. GIHOC recognizes that, with rapid inflation, the real value of this debt is continuallydiminishing. In order to forestall some of this loss, GIHOC has even tried to persuade Customs (without success) to accept MOH certificatesof indebtednessas payment for customs duties on GIHOC imports of raw materials. In general, GIHOC seems to have a good reputation,both in the quality of its products, and in its managerial capabilities.

The data in Tables V-1, V-2 and V-4 give a feel for what has been happening in the governmenthealth care sector in Ghana in the recent past. Although the data do not allow a definitive step-by-stepchronology of conclusions,they do point to a general impression of a slow downward decline in the availabilityof real public resources for the health care sector. The vacillationsin the trends for budget, salaries, and drugs in all three Tables give the additional impression of a series of stop-gap policy measures that seek to ameliorate deviating bulges in the generally downward trend.

4 GIHOC is the parent holding company for a number of differing kinds of manufacturingactivity. Its drug and pharmaceutical manufacturingarm is also called GIHOC."

5 The reason that the allocation comes from the MI rather than the MOH, is that the MI deals with unfinished imports, whereas the MOH deals with finished imports for health-carepurposes. - 134 -

A DESCRIPTIVEANALYSIS OF THE EVOLUTION AND CURRENT PRACTICE OF COST RECOVERY IN GHANA

As one of the Special Conditionsfor the World Bank Health and Education RehabilitationProject begun in 1985, the MOH had hoped to undertake a cost-recoveryprogram that would generate revenues equivalent to at least 15Z of total recurrent expendituresof the MOH in 1986, 1987, and 1988. The data in Table I-5 show that the MOH is approaching that goal, but at a slower rate than it had anticipated. In some respects, cost recovery in Ghana has been relativelystraightforward compared to the experience to date studied in the Francophonecountries. Hospital Fees Regulationswere enacted in July of 1983 (See Annex). As the first paragraph of this document indicates,it is 'in exercise of the powers conferred on the Secretary responsiblefor Health by section 11 of the Hospital Fees Act, 1971...," showing that Ghana had been interested in cost recovery well before the World Bank project in 1985. However, there is no existent data to demonstratehow effectively that interest was exercised prior to 1985. The 1983 Regulationswere updated in 1985 (See Annex). We will analyze these two documents in turn.

Unlike the cost recovery programs in the Francophone countries in this Study, Ghana's program includes relativelyfewer exemptions from fee payment. Patients suffering from leprosy and tuberculosisare exempted from payment of all fees. Patients suffering from certain other diseases are subject to pay the charges for drugs, but are exempted from all other fees. In general, natal medical services are exempt; health-servicepersonnel are exempted, except for special amenities. The law itself is broadly divided into two Schedules.The First Schedule contains a seven-partfee schedule for (I) out-patients, (II) medical and surgical treatment, (III) dental charges, (IV) medical examinations, (V) drugs, (VI) hospital accommodation and catering services,and (VII)miscellaneous, that deals with such things as the fees for the cold-storageof bodies, orthopaedicappliances, physiotherapy,and ambulance rides. The Second Schedule defines and names minor operative procedures (PartA), minor surgical operations (Part B), and major surgical operations (Part C) for purposes of the charges to be levied under Part II above, 'medicaland surgical treatment." Differentialfees are charged for Ghanaians versus non-Ghanaians (three to five times the fee that is charged for Ghanaians,depending upon the procedure), and adults versus children (half the adult fee). Examinationof the adult Ghanaian fee structure indicates that it is probably based on some relative value scale (i.e. relative marginal cost), but when the level of fees is compared to what the marginal cost of each serviceprobably is, or is compared to the nominal monthly government salary for 1983 contained in column 9 of Table V-1 (as a proxy for marginal cost), the level of fees appears to be "too low.' As just two examples, consider Part II, Service 1, "Minor operative procedure as set out in Part A of the Second Schedule" at a fee of ¢10 for a Ghanaian. Assume that a physician earned (his/hermarginal value product) five times the average governmentmonthly salary rate of $940, or $4,700. This would amount to about $30 per hour based on a 160 hour work month. It is difficult to believe that the marginal cost of a 'paracentesisabdominisr (one of the minor surgery items) would only be ¢10, unless the physician could do it in 20 minutes, and there were no other marginal input costs. Another example of less than marginal cost pricing, that requires less - 135 -

Table V-5

Cost Recovery

(millionsof cedis)

Year Normal MOH Nominal Cost Cost Recovery as Budget Recovery a Percent of Receipts MOH Budget

(1985)* (2,642) 194** ( 7.3Z)

1985 3,765 194** 5.2Z

(1986) (3,346) 514 (15.4Z)

1986 6,497 514 7.9Z

1987 6,942 842 12.1X

* The data in parenthesescome from provisionalestimates of the recurrentbudget made in 1987; the data not in parenthesesare based on new 1988 MOH and World Bank data.

Consisting of ¢ 26.6 million under the "old" fee system (January-June1985), and * 166.8 million under the "new" fee system (July-December1985). See text for details.

Source: Ministry of Health and World Bank data. - 136 - assumptions,is Part V, 'Prescriptions,"where in-patientsand out-patients pay ¢3, when the cedi was only worth about $.03 in 1983.

The revampingof the fee schedule in the 1985 amendmentto the 1983 law somewhat confirms the analysis of the previous paragraph. Outpatient charges now differentiateby the technologicalsophistication of the providing facility,and, in general, are much higher. It is obvious that the 1985 law makes a greater effort to use marginal cost pricing for outpatient services,because it contains a much more detailed listing of services and a broader range of prices for the services than did the 1983 law. Increases in prices for the various kinds of medical and surgical treatmentranged from tenfold for 'minor operativeprocedures" (from $10 to $100) to 67 percent for birth deliveriesin Polyclinics/HealthCentres, H/Posts (from 430 to $50). Dental charges doubled for some services (Consultation/Examination),but quadrupled for others (major oral surgery). The fee per day for a bed in an open ward with catering service went from $7.50 to ¢100.0 for adults, but only from t50 to $150 for a side ward with catering service. However, as shall be shortly seen in quantitativeuser- fee collectionterms the most importantchange that occurred was in Part V called "Prescriptions"in the 1983 law and 'Drugs" in the 1985 law. The entry in Part V of the 1983 law read, "In-patientsand out-patientswill pay $3.00 per item for drugs collected from GovernmentHospitals, polyclinics, health centres, health posts, and other health institutions." The new Part V entry simply says, "all drugs will be supplied to patients at full cost." This new law went into effect on July 19, 1985.

A June 20, 1985 MOH directive,Modalities for CollectingNew Hospital Fees (See Annex) begins with the Preamble, "The purpose of this exercise is to maximize the fees collectedwithout unduly inconveniencing our clients/patients. To achieve this objective all health workers without exceptionhave to put in a little more effort than they have done so far." Accordingly,the six pages of the "Modalities"give specific instructionsto all MOH institutionsabout (a) record-keeping,and (b) how fees are to be collected in consulting rooms, in drug dispensaries,and for inpatientcare; it also gives examples of the different forms that are to be used for record-keepingand for reports to the Regional Offices and to the Ministry of Health. All in all, the "Modalities"gives the impression of being a carefully thought-outdocument and its intent was obviously to create a uniform collectingand reporting system for all of the public health care institutionsin the entire country.

Table V-6 gives the user-fee results for the 10 Regions and two teachinghospitals for 1986, by month. As can be seen, Table V-6 is still in the process of being updated, because not all of the Regions have yet submittedtheir results for November and December. In fact, the Volta Region has not submittedresults since September. The item of major interest in Table V-6 is the contrast at the bottom between total six-month revenues in 1985 under the old 1983 fee system ($26.6million) and total six-monthrevenues in the last half of 1985 under the new fee system ($166.8 million), or almost six and one-half times the amount of revenue under the 1983 fee schedule. Although the total revenue for 1986 is somewhat incomplete,because not all of the Regions have yet reported all of their Table V-6

Newomebrn (ImwitalsF?) lalsir of hIltb, 19W (aIlliu of ctdis)

EIm JA. FO. Arm NAT AKE XS A?T DEPT. TIKC TUEIM DICIE2 193

Sroator tera 4.4 4.6 4.1 5.2 4.4 5.4 4.6 5.6 4.6 6.4 4.3 -- S5.2 hit 1.9 1.0 2.1 2.5 1.7 1.5 1.0 1.2 -- - - 14.5

[aster 4.3 4.2 4.2 4.9 4.9 4.6 5.9 4.3 5.3 4.3 4.4 6. 62.9

Cutral 2.2 1.3 1.9 2.4 2.2 2.4 2.9 2.7 3.6 3.3 3.1 3.3 31.4 llstern 3.3 4. 3.9 4.4 4.2 4.5 4.2 4.3 4.6 5.6 4.9 4.9 S3.3 Asauti 4.6 3.7 3.7 4.6 4.1 4.5 5.3 4.6 5.3 *.3 5.4 5.9 57.1

DrugAbaft 1.4 1.9 1.6 2.6 2.2 2.1 2.3 2.7 2.4 2.3 2.9 3.1 23.0

Nhrtirm .7 1.5 1.5 2.6 1.5 1.7 1.9 1.7 1.3 2.1 2.2 2.5 21.7

IPW East 1.0 O.9 3.7 0.9 O.3 6.3 1.0 1.3 1.4 1.7 - -- 11.5

IWerist 1.3 1.6 3.4 3. 1.1 3.9 1.5 1.7 1.6 1.7 1.5 1.6 14.2

[Git h 5.2 5.1 5.3 6.3 4.3 6.4 7.4 7.1 7.2 7.4 5.6 7.6 77.1 TeKbil INs.

.fe. Anly1 5.4 5.4 5.7 4.5 4.4 4.2 4.5 6.1 4.6 7.5 4.4 -- 43.9

TOTAL 34.3 35.9 35.3 43.5 4U.O 41.3 47.3 43.3 43.7 50.9 42.7 35.4 495.1

Source: Ministry of Health. MOILOL FEES(JAINJE 193): 26.6CEfIS

TOIT.EU FEES (ULY-SEC. 1935): 164.3 CEOIS

TOTAL1934 FEES: 495.3 COIS - 138 - running ahead of the last half of 1985 on an annualizednominal basis (2 x 167 = 334). The ¢514 million for 1986, adjusted by the CPI from Table V-1, gives it a 1985 value of ¢340 million.6

Tables V-7 and V-8 are examples of the compositionof the total revenue contained in Table V-6. Table V-7 has October 1986 user charge revenue data for all of the MOH institutionsin the Accra Region by type of service. The last column in Table V-7 shows dispensary/drugsales as a percentage of the total. The Tema General Hospital (190 beds) collected 52.4 percent of its revenues from dispensary/drugsales, while the Ridge Hospital (101 beds) collected 41.2 percent from the same source. The Accra Mental Hospital (1,168 beds) collected 93.8Z of its revenue from dispensary/drugsales, because its patients are exempt from paying other charges. The main point to be taken from Table V-7 is that the bulk of user-chargerevenue seems to come from the dispensary/drugsales column. Table V-8 shows the December 1986 user charge results from the Ashanti Region. Again, the preponderanceof revenue (73 percent) comes from dispensary/drugsales. Therefore, it would seem that the change in the 1985 law that mandated the full-costpricing of drugs and pharmaceuticalswas the critical factor in improvingthe rate of collectionover that of the 1983 law. Another aspect of the drug and pharmaceuticalsituation that might be inferred from these data is the following. Table V-5 indicates that $514 million in user revenueswere collected in the public health care sector in 1986. If the 73 percent ratio for Ashanti is typical for the country as a whole, then about $375 million of the ¢514 million came from full-cost drug sales. From Table V-4, we know that total imports of drugs in 1986 were on the order of $2,106 million ($13.5 million x 156, which is the current auction exchange rate for the cedi). This combinationof numbers seems to

6 In order to obtain an idea of what could happen to user charge revenues in real terms, consider the MOH budgets for 1985, 1986, and the provisionalinterim budget for 1987.

Nominal Budget a Deflator (1985=100)b Real Budget

1985 2,642 100 2,642 1986 3,346 151 2,216 1987 4,459 202 2,207

a In billions of cedis b The deflator assumes that the rate of inflationin 1987 will be the same 51Z that occurred in 1986

Even if user charges remain at 15 percent of the budget, total real resourcesdevoted to health care from the total of both user charges and budgetary resourceswill still have declined. The nominal $514 million shows the results of p x Q, at the 1986 price level, while the deflated $340 million shows the pure Q effect, if we ignore substitutioneffects caused either by price illusion,or by changes in relative prices. Table V-7

mrEVEUE RETINIS1- NIHXTIlI 0r HEL- GREATEO ACCRA - RECIOII 6 NORTH: O...... °E ?...... 1.*

DiXT, I Q DENTA T- IU- TMTRE Erl-E kealth 0 P D DISPDISARY/DELIVERT L A B I-RAT FET H_LD VPTIfN UXRJ0YLANCE 0 Institution FM DRUGS_LES FES 1T1LRAPY 75,150 4,9oo . 680-364. 41.21 Ridge Hoop. iti,95o0oo 280.02,.o0 208.340 . _ - - 397,?30. 40,950.00 1,710.O - - P.H.L.Hosp. - - - - - Pantang a - 3,560.00 65,3m.wn 93.8S Accra Hent.H. 525.00 61,430.00 - - 22,100 _ _ . , 362404.0n 59.62 Achimota Hoop. 69,910.00 216,129.00 7,620.00 16,695.00 1o,goO 1g.050 31.35C - 6,000 5,600.001 097,675.O 52.42 TernG.Hosp. 104.420.00 574,560.00 20.i00.Od 13,060.00 46,lo0 e5t205 4,680 - - - * _ - 312,535.00 64.31 Adabraka P/G 83,300.00 200*9C5.00 110.20.00 18,100 - - 22,520.00 438,4O0.uo 65.6Z Hamprobi 84,150.00 28a,410.OD 15,300.OU 28,920.00 - - 200 - - _ - 318,977.ao - Hamobi P/C - - - 59.1X 11,500 - 38,930 - - 3,300 100.00 405,015.00 Sabadi * 106,950.00 239,535.00 - 4,700.00 62.82 - 2,500 z9,360 - - 1,100 1,600.00 413,695.0I Kaneshie 109,890.00 259,855.00 - 7,490.00 7,900 - - _- - _ Tema - - - - - Hanhean H.P. - - - 2,100, _ _ _ 1,000.00 '120,987.00 81.5X Ada-Foah I 14,890.00 98,547.00 950.00 - - 3,500 _f, 20.ds 7s. Ashaiun H.P. 18,440.00 71,600.00 3,450.00 1,930.00 - - - _ - 14,300.00 83.4Z 2,270.00 11,930.00 100.00 - - - - - * _ Obom H.Post 43,795.00 81.3Z Dodowa H.P. 7,550.00 35,595.00 650.00 - - - - 153,140.0bD Tena Port H. - - - - - Sege H.Post - - - - Prampram H.P ------01,760 H.P ------Kasseh ------36,070 Nigo Health Post - 35320.O0 5.o00 - - - - * 200.00 66,628 98.52 Amasaman I 11,390.00 57,938.oo 29550.00 - - - - 114,590 87.0Z Hallam Atta Clin.22,890.00 91,700.00 - - - - - _ 19.200 - - 2,460.00 203,270 80.02 UssherlJamee T Cli 44,80.00 183,640.00 15,890.00 - - _ 125,130 91.32 28.500.00 96,630.00 - __- Dansoman H.Post 77.2S - - - - - 1,210 Sastle Clinic 230.00 980.00 - - - - - 71,82A 81.02 52,162.00 - _ _ _ _ Stadium Clinic 19,660.00 36,70z 72.61 - - - Airport Clinic -- - 9030 - Parliament I 2,570.00 6,460.00 o- - 56,020 71.52 Hakola Clinic 12,640.00 43,380.00 - - - - _ _ - 82,460 77.42 OsuHat.Home - 68,460.oc 14,000.00 _ _ _ _ . . 3, 83.0S6000 Int. Vacc.Centre ------84,630 31,600.00 5!,030.00 - - - - - Comm.Dis.Hosp. 49_545 62.12 6,690.00 42,705.00 150.00 ,- Danfa H. Centre 86.21 - - 29,230 T.U.C. Base Clinic -

Source: Ministry of Health - 140 -

TABLEV-8 REVENUERETURNS FORDECEMBER 1986, MINISTRY OFHEALTH, ASHANTI

S I A T I 0 N DISPENSARY/ TOTAL DRUGSS DRUGSFEES FEES OFTOTAL

1. KumawuHealth Post 77,340 103,660 74.6% 2. ManhyiaHealth Centre 598,685 761,655 78.6% 3. AboasoMaternity Clinic 56,780 75,910 74.8% 4. AboabogyaHealth Post 19,370 25,370 76.4% 5. KonaHealth Post 17,185 22,855 75.2% 6. TetremMaternity Clinic 7,224 11,004 65.9% 7. KuntunaseHealth Post 4_49,640 58,050 85.5% 8. NyinahinHealth Centre 41,985 58,145 72.2% 9. AsuofuaMaternity Clinic 80,590 92,140 87.5% 10. ManhyiaInnoculation Centre 64,190 11. SuntresoHealth Centre 220,250 340,681 64.5% 12. IansoEdubia Health Centre 69,304 98,074 70.7% 13. OldTato Urban Health Centre 252,390 320,000 78.9% 14. Maternity& Child HealthCentre 85,716 103,101 83.1% 15.Abuakwa Health Post 71,660 103,450 69.3% 16. RegionalMedical Stores 259,623 259,623 100.0% 17. KyekyeuereHealth Post 38,892 56,612 68.7% 18. AsonomasoHealth Post 48,464 60,794 79.7% 19. 8oamangMaternity Clinic 26,146 34,926 14.9% 20. Foase MaternityClinic 34,569 42,869 80.6% 21. HankransoHealth Post 60,230 70,350 85.6% 22. rrabuomHealth Post 24,000 37,850 63.4% 23. ChirapatreUrban Health Centre 219,430 263,840 83.2% 24. KonongoHealth Centre 27,300 45,930 59.4% 25. Juaso Health Centre 102,440 134,100 76.4% 26. BoafaHealth Post 33,260 48,270 68.9% 27. Praeso HealthPost 10,070 13,130 76.7% 28. OweaseHealth Post 22,590 27,430 82.4% 29. AchiaseHealth Post 31,050 35,690 87.0% 30. AsiwaHealth Post 12,320 15,070 81.6% 31. HkenkaasuHealth Centre 80,495 119,537 67.3% 32. AbotourHospital Post 56,390 75,990 74.2% 33. AkrokerriHealth Centre 100,940 124,190 81.3% 34. EffiduaseHealth Centre 128,029 149,589 85.6% 35. MampongDistrict Hospital 263,583 630,681 41.8% 36. EjuraHealth Centre 47,180 61,820 76.3% 37. AsaaaHealth Post 27,860 33,990 82.0% 38. KwamangHealth Post 26,507 37,807 73.3% 39. BeninHealth Post 25,834 31,404 45.8% 40. BakwaiHospital 377,727 515,547 77.0% 41. KokufuLeprosarium 21,780 47,510 79.0% 42. DunkuraaHealth Post 35,800 46,470 81.4% 43. ObuasiHealth Centre 273,615 346,515 86.4% 44. AgonaHealth Post 49,404 60,704 84.7% 45. Hinistries Clinic 29,003 33,563 84.7% 46.Esuowin Health Post 39,965 44,795 72.5% 47. JamasiHealth Post 88,727 104,747 84.7% 48. JachieHealth Post ..Jt,i70 22,570 72.7% 49. LiebFitting Centre 3,185 rOTALS 4,287,712 5,875,383 73.0%

OutstandingStations: 1. Kofiasehealth Post 2. SekyedusaseHealth Post 3. MpasasoHealth Post 4. AkomadanHealth Post Source:Ministry of Health - 141 - imply that about $1,592 million of the importswere sold from private outlets.7

Tables V-7 and V-8 also allow one to make some tentative comparisonsabout the effectivenessof cost recovery in the other services. For example, the Ridge Hospital has 101 beds. At 85 percent occupancy it has about 86 adjusted beds. This means that the Ridge Hospital has 31,390 bed-days per year. In October, the hospital collected $208,340 in inpatient fees, or $2,500,080on an annualizedbasis, or $79.6 per bed day, which is fairly close to the $100 per bed-day that the 1985 law mandates for adults in an open ward with catering service. Similar calculationsfor the Tema General Hospital yield 58,948 bed-days per year. October in-patient revenueswere $251,205, or $3,014,460on an annualized basis, or $51.1 per bed day. Either Tema has a differentin-patient clientelethan the Ridge Hospital (for example, it might have more children patients,whose daily rate is only $50 in the 1985 law), or, it is less effective in cost recovery than the Ridge Hospital.

Tables V-9 and V-10 contain sample cost recovery data for the two largest generalhospitals in Ghana, the Korle Bu Teaching Hospital (1,334 beds) in Accra, and the Kamfo Anokye Teaching Hospital (893 beds) in Kumasi. As was the case for the hospitals in the two regional samples in Tables V-7 and V-8, at Korle Bu and at Kamfo Anokye, dispensary/drugsales as a percent of total revenues (at 35.1 and 30.6 percent respectively)were lower than the percentagesfor such less skill-intensiveunits as health centers and health posts. Bed-day revenue calculationsfor these two hospitals, similar to the calculationsdone above for the Ridge and Tema hospitals yield bed- day revenues of $62.4 for Korle Bu and $63.6 for Komfo Amokye for March, 1986. The data in Table V-10 give a more detailed breakdown of revenue from service centers than do Tables V-7, V-8 and V-9, and show the accounting breakdown of the category "dispensary/drugsales' given in those Tables. For Komfo Amokye, dispensary/drugsales were 30.6 percent of total revenues; "dispensarywsales (to out-patients)were 14.2 percent of the grand total, and "drug" sales (to in-patients)were 16.4 percent of the grand total. Total outpatient and inpatient revenueswere about equally divided at 47.8 percent and 52.2 percent of the total respectively.

Finally, all of these data do not yield much informationabout how closely the prices in the 1985 law approach the marginal costs of the servicesprovided. Drug prices may come closest to marginal cost, but their "full cost" prices only include the costs of the drugs themselves,and not the internal distributioncosts within the country. It could be argued that the fact that user charges in 1987 were only equal to a little more than 12 percent of the MOH budget, strongly suggests that the 1985 prices are far from being marginal-costprices, but such an argument depends upon how one

7 However, these calculationsassume that the public health-care sector only consumes imports,which is most likely not the case, because the parastatal GIHOC is the largest of all of the manufacturerslisted there, and sells 50 percent of its output to government. Table V-9

1BUmu TMusg MIu n orIIzLaI. - 186 Ou...... umzou......

ibeith CPD Diep.ary/ Delivery Lab I'ly gad la-patients Medical Dental Mortuary £Aba- Theatre Other Total Institution Yoga Drug &a1t. Foos I.e. !hearWp US.. lmanc Fees -

2,150,750 2,725,92.04 4.100 310,100 110,300 1,4U,350 S0o 30,200 355,225 524,5 7,726s,43-. 1

Source: Ministry of Health - 143 -

Table V-lO onIo NomKrTEACHIJG HOSPITAL COMPARATIVSSCHUDULE 0 MONTITE REVENU COLLEOTIONS BY SRMVICECEMTRWS FOR 1986

Services To Out-Patients MARCH APRIL

Polyclinio Consult. Room 1 & 2 51125.00 68995.00 U 3 & 4 95160.00 118605.00

U 5 & 6 32175.00 59615.00 17& 8 34510.00 38390.00 Polyclinic Dental 24010.00 32510.00 Polyclinic Dispensary 697051.00 93'780.50 I..lJ Departrent 143200.00 179850.00 Laboratory Department 71450.00 114810.00 Casualty 237486.00 313145.00 Main Dispensary 806103.86 942850.35 Specialist Consulting Room 1 52105.00 61215.00 *U * 9A 50725.00 69065.00 * * * 9B 6700.00 8490.00 * * " 10 23605.00 22905:00 " 8" 43075.00 47570.00 B.. J 2T 52155.00 72935.00 1y Clinic 133440.00 157495.00 Ptysiotherapy 13400.00 13150.00 Dental Main Hospital 48820.00 61910.00 Mortuary 101750.00 159750.00 Sub Total 2720)015.86 3g477,035.85

Services To In-Patients Accomodation and Catering 1468735.00 1455442.00 Theatre Fees 451600.00 430730.00 Drugs 933302.35 1059749.00 X-Rat 13100.00 16900.00 Miscellaneous Lab. Infusion Btc. 105680.31 109632.60

Sub Total 29724,17.65 3,072153.60

GRAND TOTALS FOM MONTHS 5,692463.51 654>489.45

Dipensary/Drugsas Z of Total 30.62 30.6S Outpatientas 2 of Total (lose Diapneary) 33.6Z 38.72 Source: Ministryof Health - 144 - views the fixed costs of the MOH. Salaries and wages consumed an estimated 76 percent of the MOH budget in 1986 (see Table V-2). If salaries and wages are considered fixed costs in the short run, and if central MOH administrativefixed costs are fairly high, then, over the relevant range of output, marginal costs may be very low for many of the services listed in the 1985 law, and the prices listed there may be close to marginal costs. On the other hand, most people who were interviewedat the MOH felt that the present level of user charges is too low and should be adjusted upward. At the moment, the Peoples' National Defense Council deems it inadvisableto increase health prices for political reasons. What is certain though is that, if the CPI continues to follow the trend shown in Table V-1, the present level of user fees will rapidly yield a smaller and smaller percentage of the Ministry budget in the next two or three years. Indexationof health care user prices to the Ghanaian CPI would be one way to avoid this economic problem for the MOH.

Visits to two public hospitals in Accra gave some insight into the mechanics of the user-fee collectionprocess. At Korle Bu, there is an initial registrationfee of 4200 that also covers a first medical consultation. Additional collectionstake place at each point in the system such as at the laboratory,at the pharmacy, and at the gynecologicalunit. At the dispensary,the patient presents his/her prescriptionand registration-feereceipt, and then pays for the prescription. The chief accountant observed that people do not seem to have difficultypaying outpatient fees, but do encounter difficulty in paying inpatient fees, particularlyif their hospital stay is a relatively long one. As a partial financialcontingency for the hospital inpatient,Korle Bu asks for a $1,500 initial deposit; during the hospital stay, the patient and his/her relatives are sometimes reminded that the bill is mounting, and are asked to pay something toward it. The fee-collectorsare salaried hospital staff, whose activities are scrutinizedby a floating inspection team from the accounts department. The chief accountantpointed out that checks and balances are the mainstream of his collection system, and his preferredmethodology is to use surprise visits to collectionpoints, and even to consultationrooms, where he can supervisephysician compliance. He would like to have more collectors,so that he could maintain a 24-hour collection service8; he has, therefore,asked the MOH for additionalcollector staff. He would also like to pay some kind of additional financialincentive to the collectors, because he thinks that that would spur them on to even greater effort; accordingly,he has asked the MOH for permission to do so. Korle Bu sends its weekly user receipts to the bank, and from this account the MOH draws its weekly share. He said that Korle Bu has thusfar received some criticism from the MOH because its receipts have been lower, relative to size, than those of Komfo Anokye, the other teachinghospital, but that this criticism is unfair, because of three factors at Korle Bu: (1) it has a poorer clientele; (2) it has more T.B. patients,who are exempt from the payment of

8 A MOH staff member, who accompaniedthe visit, observed that he had once brought a relative to Korle Bu at night for a minor emergency,and, even though he wanted to pay the fee, he could find no one to whom he could pay it. - 145 - fees (in both the 1983 and 1985 law); and (3) it has more orthopaedic patients, who generally have long stays, and who are, consequently, less able to pay the whole bill. All in all, the accounting department seemed highly motivated for cost recovery,as was the rest of the hospital staff. No doubt, part of this motivation stems from a number of visits that the MOH Director of Medical Services has made to the hospital, in order to exhort the staff to greater cost recovery activities,and to explain to them the basic reasons for the MOH interest in cost recovery.

Personnel at the Ridge hospital believed that the hospital fee system had been established and implementedbefore the hospitals had had time to adequately develop qualifiedpeople and systems to collect the user fees. The main problem at Ridge is that they are not satisfiedwith the performanceof their fee collectors. The administrationat Ridge has also noted a certain amount of slippage in the revenues that they have been able to collect from their fee system. One possible explanation for this problem may be that the extended family system makes it possible for the extended families of Ridge staff to have more than their fair share of free treatment. The apparent slippage in drug revenues may have a similar explanation,and may also be due to stealing and pilfering from the hospital drug supply for resale, that is prompted by the relativelyhigher drug prices at local pharmacies. Personnel saw the positive benefits of cost recovery for such neglected hospital chores as building maintenance, and general improvement,but argued vigorously with the MOH official present:at a meeting that they needed and deserved more than the 25 percent of the revenues that they were allowed to keep. The MOH official then told them that, if they were allowed to keep a greater percentage, they would probably attempt to build another wing on the hospital.9 The administratorconcluded that successful cost recovery necessitatesinvolvement by all of the staff all of the time. The discussion at Ridge seemed to indicate that cost recovery efforts there were not nearly as advanced as at Korle Bu. Their surveillanceof the fee collectorswas not as well done as at Korle Bu, and Ridge does not require an initial in-patient deposit as does Korle Bu.

ANALYSIS

As in the other country studies on cost-recovery,the English- language version of the cost recovery questionnaire (see Figure I-2 in Chapter I) was given to each person at each meeting in Ghana, in order to serve as a frame of reference for the discussion at the meetings. This section contains the analytical summary of the substance of the responses to the questions pertinent to cost recovery.

1. Present public-sectortariff structures are those listed in the 1985 Hospital Fees Regulations (See Annex). In the opinion of most MOH officials, the tariffs are not high enough, particularly if one takes into account the rapid annual rate of increase in the general price level in

9 See the section on decentralizationbelow, for further observationson this somewhat sensitive issue in Ghana. - 146 -

Ghana. The religious mission sector in Ghana would like to keep prices at a low enough level commensuratewith what they consider to be quality care.

2. Ghana had a cost recovery to MOH budget ratio of a little more than 15 percent in 1986. This ratio will rapidly fall in the future, if the user fee structure is not adjusted for inflation. The missions recover a higher percentage of their budgets, but receive considerable subsidies from the governmentand from foreign church sources (see the section on the private sector below).

3. Fairly high quality curative care is available in Accra and in Kumasi, and some tertiary care is available in all of the regional capitals. Physical access to primary care would be improved with the building of the 100 additionalhealth posts called for in the 1986-88 investmentplan. Financial access remains a problem for some people.

4. Payments in the formal public health care system range from ¢100 to $500 per person per health care visit; this is equally true for the mission health care system. Prices in the private non-mission sector are considerablyhigher. The private non-mission sector is used by the upper income classes. Distance costs weigh heavily for some people (see the results of the small Mission survey in the concluding section).

5. The majority of people can afford the prices for outpatient care that are presently in the law. Many of them have difficultypaying for prolonged in-patient stays. On this point, one MOH official drew the analogy with food prices as a cost of one of the basic necessities of life. For some people, the combinationof distance costs and out-of-pocket treatment costs may become prohibitive.

6. Observationsby MOH officialswere that the quantity of health care services demanded slackened after the change from the 1983 to the 1985 pricing schedule. However, the quantity demanded now exceeds the previous level. The MOH hypothesizesan upward ratchet effect. In technical terms this would imply an outward shift in the demand function, probably caused by the population'sincreased perception of their recently unmet vital health care needs. Also, during the transitionfrom the 1983 to the 1985 price schedule, there were widespread complaintsin newspaper stories about how unaffordablehealth care was becoming; this may have influenced initial demand, when the 1985 prices went into effect.

7. There would probably not be much change in demand for emergency care. Initially, demand for discretionaryforms of health care might diminish, but, see the response to question number 6.

8. Utilization by the relativelypoor would probably decline. Paupers would continue to receive health care, because they are now allowed free health care in most public facilities. - 147 -

9. The relativelypoor would end up going to traditionalhealers. Depending upon the level of prices, there might be serious long-run effects on the health of the lower and middle-incomepopulation as they allowed their health to deterioratebecause they could not or would not pay higher prices.

10. In technical terms, this depends upon the price-elasticityof demand. Experience with the new 1985 law indicates that a fair amount of revenue can be raised, if the health care institutionsseriously contribute to the collection effort. However, at some point, people cannot pay the costs without some form of insurance. The difficultiesthat Korle Bu is experiencingin collecting some in-patient charges is a good example of this. Ultimately, this is an empirical question.

11. At some point in time, in the user-cost experiment now under way, it may be necessary to differentiatehealth care charges by the level of income of the patients. A satisfactorylevel of charges, or revenues,would probably be one that enabled the health care institutionsto pay for all of their variable costs, excluding salaries,which are considered to be a fixed cost. People in Ghana seem to be willing to pay, at least at current levels of user charges.

12. The marginal money cost of the collection of fees is presently very low, because the collectors are already presently employed and paid by the public sector. The real costs are probably also low, because lower- level personnel in the health care system are probably underemployed. To the extent that new revenue collectors are needed (as they say that they are at Korle Bu) and to the extent that the MOH has to hire new personnel, collection costs would go up. Printing costs for tickets and for forms for reporting purposes are not that onerous.

13. Because the fee structure in the 1985 law does not differentiate by income class, it is regressive to income, just as all prices are. Because the health care system is still biased towards curative hospital care, and because that system is largely urban, the system lacks equity.

14. Health staff and their dependents do not pay. Other civil servants pay and claim a refund from their Ministry. None of these people have any idea of what this all costs the Government.

15. Presently, physicians use their discretion in declaring patients to be paupers. Any more formal system of identificationcould prove to be relativelycostly (to the extent that those doing the identificationwere not already underemployed).

CONCLUDING OBSERVATIONS

Cost recovery for health care seems to have gotten off to a good start in Ghana, despite the general economic situation that has been so uncertain and difficult in recent years. Under the World Bank-I.M.F.- supported structural adjustment program, begun in April 1983, economic normalcy is starting to return to Ghana. Indeed, after the long economic - 148 - decline between 1970-1984, real GDP is estimated to have risen by about five percent in both 1985 and 1986. The 1987 budget seems to demonstrate the Government'sintention to continue domestic resource mobilization efforts and to improve the structureof expenditures. In concluding its March 30, 1987 Report, the World Bank had this to say: "The impressive efforts of Ghana's policy makers to date, and the evident progress of those efforts, give cause for optimism, although the task ahead remains difficult."

The agenda that the public health care sector in Ghana faces also promises to be a difficult one. As was noted earlier, health indicatorsfor Ghana have been good, relative to the same indicators for other countries at about the same stage of economic development. However, because of the time- lag in health indicatorsafter changes in policy, it is not certain that these health indicatorswill remain at previous levels.10 The major razor's edge tradeoff that the MOH must make is that between allocating its recurrentbudget t6ward manpower needs and for non-wage expenditures. Unlike the other countries in this Study, Ghana has had serious manpower disruptionsin the health care sector, because wage levels did not reflect cost-of-livingincreases. This led to migrations of skilled manpower out of the country. It remains to be seen whether the decrease in the number of physiciansby more than half during the early 1980s will have a long-run effect upon Ghanaian health indicators.11 On the other hand, it is extremely difficult to provide effectivehealth care without an adequate pharmacopiaof modern drugs such as antibiotics. Here the issue is also complex. Structuralreform implies that budgets be abstemious;there is also a shortage of foreign currency. Although the time allocated for this study did not permit an in-depth investigationinto the internal pharmaceuticalsituation, the directory of pharmaceuticalsuppliers in the country (See Annex) indicates that there is a local manufacturingcapacity that is small and dispersed. Reform would seem to imply that this local capacity be more fully mobilized. But then, even if greater MOH budgetary funds in local currency were available for non-wage items, the problem of foreign currency shortageswill exist throughoutthe structuraladjustment process. The essential drugs list that the MOH has established and uses representsone effort to trim fat from the non-wage portion of the MOH budget. "Full cost" pricing of drugs in the cost-recoveryprogram

10 For example, in the United States, there is some evidence that such indicatorsas black infant mortality rates are now again rising. Critics blame these adverse results on selected cutbacks in the Medicaid program (the health care program for the poor) that were effected in the early 1980s.

11 While the causality may seem obvious, some past experience is counter-intuitive. For example, during the Second World War, about a third of U.S. physicianswere drafted into the Armed Forces. Studies on health status in the U.S. during and immediatelyafter the War, found no evidence that the relative lack of physiciansavailable to the civilian populationhad any measurable effect upon its health status. - 149 - represents another effort to economize in the use of resources.12 The ultimate economic question is how to maximize the amount of non-wage health care resources available to the population for a given national outlay; such a result can usually be achieved (1) by competitivebidding, (2) by greater reliance on the private sector, and (3) by rational pricing policies in the public sector. The implementationof (3) above is in process in Ghana; it is yet unclear how far the health sector has gone with respect to (1) and (2).

The smooth balance between wage and non-wage expenditureshas not yet been achieved. If cost recovery could be expanded in real terms, or if the present level of cost recovery can be maintained in real terms by tying public health care prices to the CPI, then some of the past vacillation in budgets should be modified, and more certainty for all of the actors involved should be created. If the real level of cost recovery is not retained, the wage-non-wagebudgetary conundrummay return to what it has been in the past, at least until inflationarypressures have abated. Already, the first-quarterinterim health budget for 1987 only gives 58.6 percent of the total to wages and salaries,which is considerablybelow the 76.0 percentage of the budget that it was in 1986.

The remainder of this concluding section on Ghana will address those issues that are highly pertinent and essentiallyrelated to the problem of successful cost recovery.

Health Insurance in Ghana

In Ghana, there are presently two kinds of general insurance available to the population. The Social Security system exists for the formal labor market that consists of government employees and employees in the private sector. Its revenues come from a 1 percent of wage or salary contributionby employees. Because the contributionpercentage is so low, the system does not pay a pension at retirement,but pays a superannuation that is now about $10,000when the person retires. The Governmentwould like to convert the system to a pension system. However, to do so, it would have to dramaticallyincrease the contributionrate. Given the drastic decline in the real purchasing power of the cedi in the last ten years, retirees now are not pleased with the $10,000 that they receive on the retirementday. Private insurance is available for automobiles,marine, and fire, but life insurance represents less than 2 percent of the value of insurancepremiums written. There is no formal health insurance, as such.

However, the Government is interested in developing health insurance in Ghana, and in December 1985, the Committee of Secretariesof the Peoples' National Defense Council approved a scheme to enter into a bilateral technical assistance contract with a West German firm that would study the feasibilityof creating a "NationalHealth Insurance* program in Ghana, and would try to identify groups that could and would participate in

12 Including transportationand distributioncosts in the "full cost" of the drugs would be still another improvement. - 150 - the plan. In the Ghanaian context, "NationalHealth Insurance"would not have the same connotationas, say, in the United Kingdom. It would be health insurance in which government employeeswould participatevia the payment of premiums and in which private sector employeeswould similarly participate. That is to say, it would be a purely private affair, where the Governmentwould not be the underwriter (or, the ultimate sole bearer of the risk), but would possibly participatevia a partial initial capital contribution. The German firm would also provide management training and computer training. Roughly, three distinct groups were identifiedby the Germans as market possibilitiesfor this health insurance. The first group was comprised of the 200,000-300,000independent cocoa farmerswho would be organized under the umbrella of the Cocoa Marketing Board. A second group consistedof the some 2 million employees in other formal labor markets, and a third group would be the 200,000 civil servants.

For health insurancepurposes, identificationof insurable groups is, perhaps, the easiest task. Two other aspects of the total task are somewhat more difficult, particularlyin the case of a developing country, where health insurancemay not have been tried, and where there are rapid and unpredictableannual rates of price inflation. One such task, which has politicalovertones, is the rating system that will be used as one of the determinantsof the premium charged. Governmentsusually prefer some form of community rating, because community rating easily incorporateshigh-risk groups, and it also provides a measure of income redistributionamong risk groups, because high-risk groups get insuranceat a premium lower than their expected insurancelosses. When private insurers compete against each other in the selling of health insurance,experience-rating usually prevails, because the risk experience of each insurablegroup provides an easily identifiableframe (or, target) towardswhich the price competitionof lower premiums might work. In the early phase of the insurancefeasibility study, the Governmentmade it known that it preferred a common risk pool, that would include such high-risk groups as the fishing industry. Such a preferencewould bode ill for expectationsabout a competitivehealth insurancemarket, because one possible lever for competitionmight be lost.

A second more difficult task is to establish the level of experience for the common pool, or for any identifiablerisk-group within the common risk pool. The computationof a sustainablehealth insurance premium involves a forecast for a time period, such as for a year, of the number of illness events that will occur for the insured population, and the cost of each event. With no prior experience to go by, this can be a tricky forecast. For example, in a developed country, the illness experience of a new group that applies for insurancecan be approximatedby groups that are already insured and that have similar socio-economiccharacteristics as the new group that is applying. Past experiencewith groups already insured can also inform a price forecast for the new group. In periods of steady health-careprice inflation, an inflationaryfactor can also be built into the price. Already existing reserves or reinsuranceof the original risk provide additional safeguards for the financial solvency of the insurer. Thus, the fundamentalproblem for developinghealth insurance in a developmentalcontext is that there is no prior experience with the population and with the actuarialrisk involved, so that the "costing"of - 151 - health insurancepremiums is extremely difficult. Related to this problem is the definition of the family unit (for insurance purpose) in societies where polygamy exists and/or the extended family can be quite large and relatively ill-defined. The Social Security Systems in both Senegal and Mali have had actuarial problems, because the extended family was not adequately taken into account in their design. "Costing" for health insurance purposes is impossible if some firm definition of the family is not specifiedbeforehand. Also issues of fairness, somewhat similar to those that occur in the community-rating/experience-ratingdebate, arise if the standard deviation around the average family size is too large. This is not to say that financiallysound health insurance cannot be designed in developing countries,but it probably will not be initiated by the private sector, unless the private sector is subsidized in the initial stages, or (which is the same thing, but done in a differentmanner) unless the public sector reinsures the private sector by providing reserves for it to fall back on, or promises to indemnify its losses.

At the moment, the German firm has dropped out of the picture, and the Governmenthas hired a private Ghanaian consultant,who has American insurance training, to further study these issues.13 The Government remains interested in the issue, as do providers, such as physicians, and employer groups. Additional issues that need to be considered are: (i) the form of insurancepayment for the health-care,indemnity versus service benefit, (ii) the insurancepayment of private health-careproviders, as opposed to public health-careproviders, and (iii) the insurancepayment of "first dollar" kinds of health care (such as drugs) versus catastrophicexpenses. These last three design issues are crucial because of the kind of perverse economic incentives that could potentiallybe provided to consumers and/or health care providers. These issues and their solutionshave been well- studied in recent years for developed countries, and the knowledge gained from these studies should more or less be easily adaptable to the situation in developing countries.

The Private Health-Care System

Tables V-ll and V-12 give general informationon the types of ownership of treatment facilities and number of beds. Even more detail on numbers and types of bed by institutionis available (See Annex). There are 70 government and quasi-governmenthospitals in Ghana, (that serve about 3 million people) 35 mission hospitals (that serve about 1 million people) and 7 hospitals owned by the mines. Of the total of 173 clinics, 34 are owned by the missions (Table V-ll). Of the total 18,614 hospital beds in Ghana, the Government owns 70 percent, the missions own 25 percent, quasi- government owns 4 percent, and the mines own 2 percent (Table V-12). These data indicate that the missions make a significantcontribution to the health-care effort in Ghana. As has been noted previously, the government recognizes this contribution,by making a budgetary provision for the subsidizationof these mission operations through the Christian Health

13 A copy of his Report may be found in the project file for this Study. Table V-li

SUMMARY

HEALTH FACILITIES BY REGION AS AT JUNE 1985

H O S P I T A L C L I N I C S TRAINING

Quasi Health Health Teaching Regional District Special Govt. Mission Mines Centers Posts Govt. Missions Institutions

Greater Accra 1 - 4 5 4 - - 9 10 9 - 7

Volta 1 5 1 1 6 - 11 28 49 3 4

Eastern 1 9 - 1 3 1 10 24 6 8 5

Central 1 3 2 1 4 1 6 28 8 - 3

Western 1 7 2 3 3 6 16 10 1 1

Ashanti I - 3 2 2 6 2 13 26 10 7 5

Brong Ahafo 1 1 - 1 8 - 9 13 35 1 4

Northern 1 2 2 1 2 - 7 18 9 4 3

Upper East 1 1 - - 1 - 2 7 - 8 1

Upper West 1 1 - - 2 - 1 8 5 3 2

TOTAL 2 8 36 11 13 35 7 74 177 139 34 35

Source: Ministry of Health - 153 -

Table V-12

flUNM ARY DISTRIBUTrON OP BEDSTATESBY OWNDRSHIP

Type of Bed/Ownership Govt. Mission Quasi Govt. Mines Total iGeneral Beds 7155 2856 428 195 10634 Maternity Beds 2304 625 47 27 30Q3 Wooden Beds 532 61 - - 593 Ordinary Cots 1373 754 102 25 2254 Treasure Cots 1649 333 105 24 2111 Incubators 19 - - - 19 Total 13032 4629 682 271 18614

RGGIO0L DISTRIBUTION OF EDSTATES

lRegion/ Bed Type General Maternity. Wooden Ord.Cots Tr. Cots Incubators Total

Greater Lccra 2374 317 329 25Z 250 14 3536 Volta 1004 592 57 428 342 2423 Bastern 1129 450 - 308 313 2200 Oentral 1502 324 86 243 148 2303 Western 788 204 12 199 176 1379 Ashanti 1595 505 51 348 423 5 2927 Blrong Abaf. 713 220 48 188 220 1389 Northern 756 121 - 114 52 1043 Upper Last 353 135 10 87 111 696 Upper West 420 135 - 87 76 718

Total 10634 3003 593 2254 2111 19 18614

Source: Ministry of Health - 154 -

Association (C.H.A.)of Ghana, which is the coordinatingbody for the mission hospitals and clinics (see Table V-3). In 1987, this subsidy will amount to about $2.5 million at current exchange rates.

There are a number of interestingaspects about these mission operations. One is that they have always tried to collect some sort of fee for the services that they provide. Although no common fee schedule was available,the Executive Directress of the C.H.A. said that, even though user prices vary from mission to mission and from Church denominationto denominatiQn,there is a rough effort to match fees with the costs of the services provided. In fact, prior to the enactment of the "old" pricing law of 1983, the MOH studied the structure and level of fees that the members of the C.H.A. were then using, and then modeled the structureand level of fees for the 1983 law on that of the C.H.A. Periodically,the members of the C.H.A. meet to discuss pricing policies, and try to compare ranges of prices charged for specific forms of care and procedures. Their price increases are based upon increases in the average costs of the supplies and equipment that they must buy. They also make an effort to screen the truly indigent out of paying the fees. Ever since 1979, most of the drugs and pharmaceuticalsthat they use come from donors overseas. The C.H.A. sends lists of needed drugs and pharmaceuticalsto the Christian Medical Commission of the World Council of Churches in Geneva, which coordinates these lists with potential donors; the C.H.A., in turn, coordinates the distributionof these pharmaceuticalsto its members in Ghana. Beginning in 1987, the C.H.A. has had to pay import duties on these pharmaceuticals(as has had the Pharmacy Department in the MOH, and all other pharmaceutical importers). The C.H.A. now must also go to the foreign currency auction in order to have the foreign currency for the importationof any pharmaceuticalsthat its members desire over and above those received from donors abroad. Overall, the C.H.A. pricing policy for drugs is based upon a formula,whereby a distribution-distancefactor is added to the cost of the drug, and then this price is multiplied by .80. Thus, for example, if a drug cost 100, and the distributiondistance factor for the north of Ghana were 40, the price of the drug to the patient would be (100 + 40)X.80 = 112; in Accra itself, the price to the patient would be closer to 80. On average, the cost of drugs to the patient is less than 100. The Directress of the C.H.A. said that C.H.A. drug prices are now lower than government drug prices under the "new" 1985 law.14

About 51 percent of C.H.A. expendituresare for wages and salaries, and, by 1986, the Governmentwas subsidizingabout 47 percent of the C.H.A.'s costs; in earlier years, the Government subsidized about 40 percent of the C.H.A.'s costs. (See the large percentage increase for salary subventionsin the 1986 MOH budget over 1985 in Table V-2.) Now, Governmentwill try to subsidize100 percent of wages and salaries at local

14 If the average drug price of the C.H.A. is less than 100, and the government price (which, it has been shown, does not include distributioncosts) is 100, then her statement is correct. - 155 - levels of wages and salary (even for foreigners);foreign personnel receive a bonus in foreign currency,once they leave Ghana.15

The C.H.A. attempts to coordinateall of its actions vith those of the MOH, but, because the MOH does not seem to place enough emphasis upon primary health care, the C.H.A. tries to place relativelymore emphasis upon it. In fact, every C.H.A. hospital and clinic has a primary health care unit. They believe that the quality of their work is superior to that of government-runhealth care facilities;there is more dedicationto the work, and the atmosphereis completelydifferent. The Missions worry about the possibilityof a negative correlationbetween the amount of user fees that they collect and the Government'swillingness to subsidizethem; 16 they fear that if such substitutionshould take place, it would impair their ability to provide free health care for the truly poor.

As regards user-cost burdens at C.H.A. facilities,a July 1986 survey of patients at Fainso gave the following 59 responses (88Z response rate):

Average Health Costs TransportationCosts

Cost Number of Persons Cost Number of Persons

Less Than $500 38 Less Than $2,000 17

¢ 600 - ¢ 1,000 6 ¢ 2,000 - ¢ 3,000 4

¢ 1,000 - ¢ 2,000 8 ¢ 3,000 - ¢ 4,000 16

¢ 3,000 1 ¢ 5,000 - ¢ 6,000 3

¢ 4,000 1 40**

$ 25,000 1* ------55**

* Hospital Stay ** Neither of these add to 59. The time period for these expendituresis not specified.

The large transportationcosts, relative to average health care costs, merit further consideration.

15 This likely represents the Government'sresponse to the exodus of skilledmanpower in the early 1980s.

16 Certainly,the Government's200 percent increase,in 1986, in the level of subventionsfor wages and salaries (TableV-2) belies this fear, at least in the short run. - 156 -

Decentralizationof the Health Care System

Figure V-1 shows the current de facto organizationof the Ministry of Health. It is difficultto make a judgement about the degree of decentralizationin Ghana. The Director of Medical Services is the de facto chief operating officer, but his operating and financialautonomy are limited by the political decisionsof the Peoples National Defense Council (the P.N.D.C.), and by his immediatepolitical and administrativesuperior, the Secretary for Health of the P.N.D.C. The investmentplan is formulated in the Regions and sent to the MOH in Accra; and recurrentbudget allocation decisionsare made in Accra on the basis of requests made by the Regions and the availabilityof funds. The allocationof foreign currency for the purchase of medicines and supplies is made by the Ministry of Finance.

The general official allocatory formula for the retentionof user charge fees is to be 50 percent to the Ministry of Finance, 25 percent to the Ministry of Health and 25 percent to the health-careproviding entity that collects the fees. In practice, the specific allocatory formulahas not yet been completelydetermined. One decision rule would be to allocate 25 percent of the 50 percent, that does not go to the Ministry of Finance, to the hospitals, but only 12 1/2 percent to health centers and health posts. The hospitals, at least, have argued that they should receive even more than the 25 percent, because of the long period of maintenancenegLect that they have suffered. While recognizingthe positive effect that th,e more-than-25percent would give to the hospitals to be vigorous in their fee-collectingattempts, the MOH is afraid that the hospitalswill use the additionalfunds for "development"purposes. That is to say, that the refurbishing-maintenanceproject, for an operatingroom, for example, once begun in the hospital, and at the hospital'sown financial initiative,may result in a full-scaleaddition to the operatingroom, the funds for which the MOH could have alternativelyspent on primary health care elsewhere in the system. In this regard, the MOH is also concerned about regional discretionand final purpose in the spendingof these 'discretionary'funds; they believe that the funds there might also go to 'development",rather than to primary care. As a final observationon this subject, it is worth noting that the MOH believes that the 'income"effect will predominateover the 'substitution'effect. That is to say that, even though the 50 percent allocationto the MOF and the 25 percent, or so, allocation to the MOH amounts to a 'tax' on the collectionefforts of the individualhospital or other health-careunit, the units may have some target user-fee income that they hope to achieve for their own use. Therefore,rather than discouraging collectionefforts, the mandated allocationsto the MOF and MOH actually encouragethe units to make an even stronger effort to collect fees, to the benefit of the total health-revenuesystem.

Tables V-7 throughV-10 imply that the Regions have good financial control and surveillanceover the operatingunits under them. As always, in these matters, it is difficultthough to imagine administrativeautonomy without financialautonomy. With total user-fee revenue equal to a little more than 12 percent of the recurrentbudget in 1987, Ghana seems to have made a better start in financialautonomy for health care in general than the other countriesin this study. The operatingentities now have, in - 157 -

Figure V-1

OrganizationalChart of the Ministry of Health

PNDC Secretariat for Health

Under-Secretary

ThiS C.D. DMN.

DDMS (MC) DIMS (PH) D P. D.N.S. DPS I It 1 Hospitals Environment C.H.S. Health Care Population r Nutrition PAS Personnel CEN Accounts Stores

12 Regions

PHNDC - Peoples' National Defense Council EMS - Director, Medical Services C.D. ADMN. - Chief Director, Administration DDMS (MC) Deputy Director, Medical Services (Medical Care) DDMS (PH) - Deputy Director, Medical Services (Public Health) DP - Director of Planning CHS- Center for Health Studies DNS - Director, Nursing Services DPS - Director, Pharmacy Services - 158 - practice, on average, one-fourth of that percentage under their own control, so they also have a greater possibilityof self autonomy. During the mission, the popular press and the televisionoften carried stories on the necessity for decentralizationin all aspects of Ghanaian government. The Ministry of Health itself has expressed the desire to establishhospital boards for the governance of each hospital. Conversationsindicate that these proposed boards would be similar to the Committees in Senegal, and would decide on price changes, or expenditurepolicy, and on running the hospitals' affairs in general. At the present time, so much is in motion in the public health care sector in Ghana that it is difficult to predict what degree of decentralizationwill have taken place in the near future. - 159 -

VI. SUMMARYAND CONCLUSIONS: WHAT WE HAVE LEARNED AND POLICY RECOMMENDATIONS

THE ALLOCATION OF FINANCIAL RESOURCES FOR HEALTH CARE

In some respects, this study only reinforces what we already know about the problems of financing the health-care sector in the developing countries of West Africa. For example, the data that were obtained in order to answer the allocatory questions posed in Part A of the questionnaire, contained in Figure I-2 of Chapter I, do not tell a much different story than that told in Golladay (1980), in Akin, Birdsall and de Ferranti (1987) and in Jimenez (1987). There is no generally-agreed-upon practicing formula for the balance between investment costs and recurrent costs, but we do know that all four countries studied to date have had difficulty meeting their recurrent costs. Heller (1974) has shown what the theoretically optimal balance should be, depending upon real rates of growth of the economy and upon the recurrent cost factor for particular projects. All four countries have experienced small or negative real growth rates during the last few years, but their rates of investment in the health care sector have increased. Some of this investment has been for 'renovation purposes." The renovation is made necessary by past difficulties in meeting recurrent costs for maintenance. So, in some sense, that part of new investment is really lagged recurrent costs, and should not have great future recurrent cost implications, except for maintenance, upon the renovated facility, if the maintenance is economically scheduled.l However, in all four countries, the Ministry of Health recurrent budget has been declining as a percent of the national recurrent budget. If the national recurrent budget declines in real terms, this would inhibit the health sector's ability to pay its recurrent costs. In this sense then, health investment budgets in all four countries are probably too high and are growing at too rapid a rate relative to the ability to meet all recurrent costs.

Moreover, trends show that health salaries have been increasing as a percentage of health recurrent costs. The government wage bill in each country and in each Ministry is a function of both hiring practices and salary policy. Ozgediz (1983) found that: (1) the structure and level of government salaries does not reflect skill shortages and (2) the size of the civil service in the countries studied is too large. Further research needs to be done in order to ascertain whether the rising wage bill ratio in the four countries studied here is due to an overly ambitious investment program (LN = f(KN), in terms of Figure 1-1 in Chapter I), or due to other factors. The experience in Ghana provides a vivid illustration of how losses in skilled manpower can quickly occur if real salary levels are not maintained for the skilled categories, and as a consequence, Ghana has recently made an effort to readjust the structure and level of salaries in order to more nearly approximate skill shortages. All four countries probably need to do

1 In terms of economic theory, the cost of maintaining depreciating capital equipment would be treated as a component of gross investment. See, A. Mead Over, Jr. (1981). - 160- this periodically,but, again, as the experience in Ghana indicates, such adjustmentsrequire careful fine-tuning,because the wage bill can quickly mount as a percentage of recurringcosts. The experience in the Francophone countries indicatesthat the wage bill at the health administrativeand support levels ought to be reexamined,because there appears to be too many administrativeand support staff, relative to line staff at the care-giving level. Many of these support staff are at lower levels and casual in- country observationgives the impressionthat they do not do much work.

Although the evidence is only circumstantial,because better and more direct data could not be obtained, it would appear that the amounts spent upon curative care, relative to preventivecare, are still excessive for all four countries.2 In this regard, the preferencesof the medical profession are well-enoughknown, so that this is not just a problem in developingcountries, but the developing countries, includingthe four in the study, did inherit a colonial health care structurethat was heavily biased towards hospital care.3 Given the percentagesof budgets spent on hospital care for the countries in this study, the bias towards hospital- based curative care seems to have persisted. And, related to this, the disparitiesbetween the percentagesof the population living in rural areas and the percentagesof recurrenthealth care funds spent upon them in the four countries speak for themselves.

The final allocation-of-financial-resourcesquestion concerns the mix of private and public sector initiativesin the health care sector. Mali just recently allowed the private practice of medicine after 27 years of independence. Ghana heavily subsidizesmission hospitals and clinics. Senegal and the Cote d'Ivoire each have a thriving ultra-modernprivate hospital in the capital. Where the private for-profithealth-care sector has emerged, its natural clientelehas been the indigenousupper classes and the expatriate community;these are the groups that can afford to pay high enough fees, or have health insurance,that enable medical entrepreneursto earn a competitiverate of return on their capital. In the three countries that have allowed the private practice of medicine in the past, there exists a certain amount of ambiguityabout what has transpired. In Senegal and the Cote d'Ivoire,when speaking of certain examples of private practice, it is readily admitted that I... il s'agit de la medicine des riches," but a socialisticethos continuesto hold sway in many quarters. Mercedes Benz in the streets may be tolerable,but Mercedes medicine has not been fully

2 However, this judgement depends upon the point of view that one takes. Most donor institutionsimplicitly seem to take an egalitarianpoint of view, i.e. every life has equal value. Recipient countriesmay place differentvalues on different lives, so that the skewing of health care expenditurestoward curative care may be economicallyrational from the point of view of the leadership of developingcountries.

3 See "Le Systeme HospitalierColonial: Role et Fonction de L'Hopital Durant La Periode Coloniale,"chapter in undated, untitled manuscript in Project File for Senegal. - 161 - accepted ideologically. What is clear though is that everyone freely grants whether it be for the mission facilities in all four countries, or for the private for-profit facilities in Ghana, Senegal, and the Cote d'Ivoire, that the quality of care in these facilities seems to be superior to that in government facilities,and that they are managed and run more efficiently. These latter two aspects are also related to the fact that cost recovery in the private sector is more prevalent and at a higher level than in the public sector.

COST RECOVERY POLICY

In the 1980s, not only have Ministry of Health budgets declined (a) as a percentage of the total government budget, (b) in real terms, and (c) on a per capita basis, but the compositionof the government health budget has also slowly changed. The data indicate that salaries of personnel have gradually increased as a percentage of the MOH budget. While governmentsin developing countries have often been criticized for their public sector employment policies, recent experience in the health-care sector in Ghana indicates that there are no easy solutions to this difficult problem. Between 1981-84, the total number of physicians in Ghana declined from 1,700 to 800. The reason for this exodus was simply that morale had plummeted because of low governmentalpay scales for physicians. At the same time, though, Government authorities in Ghana recognize that every dollar spent on salaries is one less dollar available for oral rehydratLon packets or for penicillin. In the health care sector, lack or shortage of these complementaryinputs can make an enormous difference in the quality of the health care provided, and in the eventual outcome for the patient.

Confronted with budgetary trends over which they have little or no control, and realizing that the recent lack of financial resources has impaired their ability to function effectively,Ministries of Health in all four countrieshave become interested in applying cost recovery. However, interest in and applicationof user charges carries various shadings in each country. For example, even though Senegal and the Cote d'Ivoire have had cost recovery legislationin their statutes ever since the 1960s, it has been only recently that both countries have begun tentative steps to implement the legislation. Cost recovery in Ghana began with legislation in July of 1983 and is now more comprehensivein coverage than in any of the other three countries. With the exception of Mali, which only legalizedthe private, for-profitpractice of medicine in 1987, the private for-profit sector in these countries has had to practice cost recovery as a condition of existence. In all four countries,church missions seem to have been successfulnot only in covering a large percentage of their operating costs with user charges, but also in providing quality care for a population similar to that which government serves. For ideologicalreasons, all four countries have manifested a certain amount of ambiguity about the ultimate role of cost recovery in the governmenthealth care sector, but it is becoming increasinglyclear to most policy-makersthere that some level of cost recovery is absolutelynecessary, if an acceptable level of health care provision is to be maintained in the public sector, and that cost recovery is practicable. The major policy question in each of the four countries concerns the pace at which cost recovery ought to proceed. In many - 162 -

quarters, the church mission experience is seen as a model for pricing decisions, as a model for reasonabledefinitions of the poor who would be excluded from paying, and as a model for a standard of quality to be maintained and nourished by the revenue available from user charges.

Although the policy issues involved in cost recovery are complex enough, they can be roughly grouped under four broad headings: (i) the structure of health care prices and the amounts of revenue collected, (ii) patient reaction to cost recovery, (iii) equity aspects, and (iv) administrativeproblems and collectioncosts. These issues will be discussed in turn.

The Structure of Health Care Prices and Revenue Collected

Present price structuresin the governmenthealth-care sector reflect the prevailingpolitical philosophiesin each country studied, and even in each region, if pricing decisions are made at the local level as in Senegal and at the World Bank Project in Mali. Each country has had a basic piece of enabling legislationthat set the subsequenttone for the structure of prices that exist in mid-1987.4 Typically,the base legislation specifiesprices: (1) by service level (healthpost vs. health center, etc.), (2) by treatment location (urban vs. rural), (3) by age (childrenvs. adults), and (4), in the case of hospitals,by service category (first class vs. second class, etc.). Ghana's law further differentiatesbetween Ghanaians and non-Ghanaians,with non-Ghanaiansgenerally paying three to five times the price paid by Ghanaians. In all four countries, but particularlyin the Francophonecountries, the laws, or amendments to them, contain relatively long lists of categoriesof persons who are fully or partially exempt from paying the mandated fees. Also, government employees always receive preferentialtreatment, whether that be in the price that they pay, or who pays the price for them. The stated purpose of the exemptionsis to preserve equity. But, as will be seen in the section of this Chapter on equity, many of the exemptionscertainly work against vertical equity. Furthermore,these exemptionshave an important effect on total revenue. For example, the large Point G Hospital in Mali had to provide 68.8 percent of its patient days of hospitalizationwithout charge in 1986, because of the exemptionsallowed under current legislation. User charges are usually collected by sellers of tickets at the entrance to health-care facilities,or at the entrance to well-definedservices in the case of hospitals. Table VI-1 attempts to capture the principal pricing characteristicsof each cost recovery law. Although Table VI-1 is useful for comparativepurposes, the constraintsupon its page-size hide some of the pricing diversity that exists in each country. For example, pricing decisions at the health post and health center levels in Senegal are left to the discretionof locally- elected Committees;the prices shown in Table VI- 1 are those suggestedby the Ministry of Health in its 1980 promulgationof the "Red Book", which is a directive for considerationby the local Committees (See Annex).

4 The dates of these laws are: Senegal, July 1968; Mali, December 1983; Ivory Coast, January 1960; and Ghana, July 1983. - 163 -

Table VI-l

Price Structure,Government Health Sector

Seneoal* Mali* Cote d'Ivoire* Ghana'

1. Health Post Level (a) Rural Areas

- Adult Consultation 50 150-200 30 - Child (0-14 Years old) 25 20 - First Prenatal 200 Consultation(and Health Care) - PrenatalConsultation 50 - Vaccination 50 - Birth 1,000 50

(b) Urban Areas - Adult Consultation 100 50 - Child 50 30

2. Health Center Level

- Consultationfor Adults 100 100 500 50 - Consultationfor Children 100 100 300 30 - LaboratoryWork 50 300 - Day of Hospitalization 100 - Birth in the Ward 1,500 1,000 - Birth in a Room 2,000 - Endemic Disease Services 50 Free

3. Hospital Level (a) Daily Charge for Room (i) IndividualsPaying out of Pocket

- First Class 3,400 2,500 10,000 250 - Second Class 2,000 1,500 6,000 150 - Third Class 640 375 2,000 100(50)b

(ii) Government Fonctionnaires

- First Class 2,720 - Second Class 1,500 - Third Class 540

(iii) Indigents 100

(table continueson followingpage) - 164 -

Table VI-I (Cont.)

Price Structure, Government Health Sector

Senegal* Mali* Cote d'Ivoire* Ghana-

3. Hospital Level (b) Selected Procedures (i) Laboratory

- Blood 10 - Urine 5

(ii) Surgery 10,000 1,000 (iii) Deliveries 100

- Specialist 200(100) - General 75(40)

4. Pharmaceuticals Full Cost

* FCFA + Cedis a. Indigents b. Children - 165 -

Two questions can be posed about these price schedules. The first deals with health-facilityefficiency effects, and the other has to do with system-wideefficiency and with revenue-raisingeffects. From an allocatory point of view, the wright"price for any good or service is a price that reflects its marginal cost of provision, i.e. the real resources used in its production. If price is set below marginal cost, the good or service will be undervaluedby consumers, and too much of it will be consumed; if the price is set above marginal cost, too little will be consumed. However, even if the price schedules in Table VI-1 do reflect marginal costs, it is also of interest to know how widely they are applied in the health care system, thereby affecting system-wideefficiency and the amount of revenue generated. In each of the four countries studied, there is wide variation in the actual use of these price schedules,and in the emphasis placed upon pricing at each level of the system. We first examine the revenue and system effects in each country.

Senegal. In Senegal, most of the activity with user charges has been at the health post and health center level. Experimentationwith user charges was initiated at local sites in both Pikine and Sine Saloum in the late 1970s. Beginningwith the "Red Book" in 1980, this experimentationhas branched out to other local communities,but it is only now in its initial stages at the hospital level.

At the local level, the Health Committee is the basic administrativeunit for setting a schedule of user charges, and seeing to it that the charges are collected,properly accounted, and spent in a manner consistentwith the broadly-statedhealth-care objective of the country. The objective is to approach health problems from a four-dimensional perspective of cure, prevention,education and social action. In effect, each local Health Committeehas complete financialcontrol over those local finances that come from user charges. The 'Red Book" is quite specific in delineatinghow the Health Committee is to be democraticallyelected at the local level, and in requiring that the members of the Committee serve on a voluntary basis.

At the health center level, all of the Committees from the surroundinglocal health posts form an Association for the Promotion of Health (APS) in the geographic area of the center. Each local Health Committee is required to contribute about 5 percent of its receipts, in order to support the functions of the APS. Finally, at the regional level, there is a regional Union of APS, and at the national level, a national Union of APS. - 166 -

Major financial reliance at the local level still has to be placed upon the central governmentwith its much broader tax-revenuebase, and upon municipal governmentsthat had already been collectinga head tax. In 1985, the local Health Committeescollected 385.6 million FCFA, which represented about 4.7 percent of the Ministry of Health budget; commissionspaid to ticket sellers were 73.2 million FCFA, or 20 percent of total collections.5 The price data given in Table VI-8 for health posts and health centers are the guideline prices suggestedby the 'Red Book' in 1980; the prices charged presently at each level of post and center care are now higher and vary geographicallyaccording to the judgement of the local Health Committee as to what is equitable and politicallyacceptable.

Individualhospitals in Senegal have recently begun forming their own individualAssociations for the Promotion of the Hospital (APH). The APH have adopted the same democraticorganizational principles as the APS. However, cost recovery in the hospitals has had a somewhat peculiar progression. The mandate for cost recovery at the hospital level has been in Senegal's statutes since July 1968, but it was never enforced, except sporadically. The provisions of this law were that user charges were to be collected from the non-indigentand then remitted to the Ministry of Finance. Beginning in 1982, the Ministry of Health asked three experimental regional hospitals in Kaolack, Ndioum, and Ourossogui to further refine the definitionof indigent into the very-indigentand the not-so-indigent. These three hospitals were directed to make a renewed effort to collect user charges from the non-indigentand send the proceeds to the Ministry of Finance. Patients who were consideredto be not-so-indigentcould also be charged according to a price schedule establishedby the newly-createdAPH at each hospital, and the proceeds from these charges could be retained by the hospitals themselves. The very-indigentwould continue to receive free care. With this arrangement,the hospitals have a stronger incentive to collect user charges, at least from the not-so-indigent,because they can now retain all of the proceeds from this source.

The price data given for hospitals in Senegal in Table VI-1 come from the Hopital St. Louis which is a regional hospital,with a particularlyvigorous administrator,who began his APH in early 1987. Serious efforts at cost recovery have also recently begun at other regional hospitals, but the large public hospitals in Dakar, such as Dantec, have, up until now, done nothing in this regard. The result is that the pricing schedule that has actually been in effect gives the wrong signals from a systemic perspective. For example, why would a person seek care at a health center in Pikine, which is a suburb of Dakar, and pay for that care, when he/she can just as easily take a bus into Dakar and receive free care from the Dantec Hospital. Given this asymmetry in user charge policy, hospitals such as Dantec are operating at more than 100 percent of capacity, while local treatment facilitiesare underutilized. This, in turn, drives investmentpolicy: almost half of the projects in Senegal's three-year

5 This commissionpercentage is considerablysmaller than is true for most lotteries,which in many places around the world are used to finance social services, such as education. - 167 - investment plan are for renovationsor additions to the Dantec Hospital. Table I-8 indicates that about 50 percent of the government recurrent health budget is spent on hospitals in Senegal. Given the dominance of hospitals in the health-care system, revenue maximizationconsiderations alone indicate that user charge policy would begin at the hospital level and work downward through the system rather than the way it has been done up to now in Senegal.

Mali. Mali's approach to cost recovery has been somewhat hesitant, but has begun by using hospitals as the prime sites for cost recovery. Official cost recovery in Mali dates from December 13, 1983 in Decree N. 245/PG-RM, Fixant le Regime de la Remunerationdes Actes Medicaux et de l'HospitalisationDans les Formations Sanitaires. It is signed by the President, by the Minister of Finance, and by the Minister of Health. This document contains a 38-page price list for outpatient and inpatient treatment, and goes into great detail as to the exact price for each kind of treatment. Although a reading of the Decree indicates that it is to hold for all of the hospitals in Mali, its main initial intent was for experimentationat the three national hospitals: (1) Gabriel Toure, (2) Hopital Point G, and (3) the Hopital de Kati. Cost recovery was first tested at Gabriel Toure during 1984 and 1985, and was fully applied to all three hospitals in 1986. The government'seventual goal is to make these three hospitals financiallyautonomous. In the Malien context, it is clear from what government officials have said that "financialautonomy, for them means a hospital's ability to generate enough funds to cover most of its recurrent costs, especially those for medications,equipment, and maintenance. Within this context, personnel costs are really not seen as recurrent costs, but as fixed costs. In 1986, the three hospitals had an estimated combined cost recovery ratio of 11.8 percent of recurrent costs.

The only other public sector cost-recoveryactivity that is presently taking place in Mali is at the World Bank project sites in the towns of Kita, Bafoulabe, and Kenieba in the Kayes Region and at a Medecins Sans Frontieres project in the north in the Timbuctu and Dire Regions. In Table VI-8, the prices shown for the health centers in Mali are those charged by the centers in Kita, Bafoulabe and Kenieba, and the prices shown for health posts come from Timbuctu. In Kita in 1986, average monthly receipts were 453,736 FCFA and average monthly expenses were 396,772 FCFA, so that the average monthly "profit"was 56,964 FCFA. In Kenieba, average monthly receiptswere 223,736 FCFA and average monthly expenditureswere 228,050 FCFA, while at Bafoulabe, the respective figureswere 211,063 and 255,552 FCFA. Government salary expenses are not given, but if we assume that salaries would roughly double monthly expenditures,the cost recovery ratios at Kita, Bafoulabe, and Kenieba would be, respectively57, 42, and 49 percent. Total reported user-chargerevenues of 14.3 million FCFA at Kita, Bafoulabe and Kenieba amount to about 16 percent of what the three national hospitals collected.6 Although no data are yet available for the Medecins San Frontieres project in Dire, rough estimatesfor Timbuctu indicate that user charges there would generate about 11.9 million FCFA on an annual basis

6 Only eight months of operating results were available for Bafoulabe. - 168 -

in 1986; this would be about 22.7 percent of recurrentcosts, including salaries. Altogether then, cost-recoveryreceipts in the public sector in Mali were about 114.6 million FCFA in 1986. As a percent of the 1985 MOH budget, they amounted to 2.7 percent; as a percent of the MOH budget, plus the MOH expendituresfrom foreign aid funds (such as from the World Bank project funds), they amounted to 1.3 percent.

The most importantaspect of the Malien cost-recoverysystem to date is that it began at the hospital level, which enables it to give systemic price signals downward, unlike the cost recovery program in Senegal. Another importantfeature of this system is that the medical school,where the curriculumhas been redesigned to emphasizeprimary care, is an integral part of the Hopital Point G. Given this arrangement,medical studentshave the opportunity,at the beginning of their medical careers, to be exposed to and acquire a cost-recoveryattitude that should eventually permeate the entire medical establishmentin the future. Already, management at all three national hospitalsbelieves that the daily room rate set by the 1983 law is too low. Given the 1987 price level in Mali, they maintain that the prices for the three classes of hospital room ought to now be 10,000 FCFA, 4,000 FCFA, and 1,500 FCFA respectively. Management thinks that it should eventuallybe able to collect between 15-20 percent of the total budget in user charges, but believes that it can never go beyond 15 percent, unless it were allowed to raise the price schedule by a change in the hospital price law. Besides this pricing problem, Ministry of Health analysis of the 1986 experiencewith cost recovery in the three national hospitals reveals the following roadblocks: (i) public sector institutions are not paying the hospital bills of their employees and families who have been hospitalized, (ii) a high incidenceof indigents among the patient load, and (iii) not enough effort being made to make sure that everyone pays who can pay.

Cote d'Ivoire. The price data on the Cote d'Ivoire in Table VI-1 are the prices charged by the National Institute of Public Health and by the two University Hospital Centers (C.H.U.) in Abidjan. Health-carepricing in the Cote d'Ivoire is difficult to characterizebecause of the complexity of institutionalarrangements. Briefly, there are seven major governmental health care institutionsthat have been legally designated as either 'Public Establishmentof An AdministrativeNature' (E.P.A.)or "Public Establishmentsof an Industrialand CommercialNature' (E.P.I.C.)all seven being under the umbrella classificationof "NationalPublic Entities' (E.P.N.). The two University Hospital Centers (C.H.U.)andthe Public Health Pharmacy (P.S.P.)have been put in the latter of the two categories,and, according to the law enacted in June of 1984, have full administrativeand financialautonomy. The problem is that the University Hospital Center at Cocody only collected 3.3 percent of its recurrentcosts with user charges in 1986; the figure for the University Hospital Center at Treichvillewas 1.0 percent. If double-countingis removed from governmentdata, the Public Health Pharmacy covered 16.0 percent of its recurrentcosts. The prices charged by the C.H.U. are those in Table VI-1, but very few people pay them. The P.S.P. 'sells" its drugs and pharmaceuticalsat full cost to the other six E.P.N,. and gives them without charge to all of the other government - 169 - health care facilities.7 With the exceptionof the seven E.P.N. and the eight AntitubercularCenters, governmenthealth care facilitiesdo not charge patients for care or for pharmaceuticals.

The estimatednet cost-recoveryratio of the E.P.N. is 8.1 percent, and the net national cost recovery ratio is 3.1 percent, which is only slightly better than that of Mali whose GNP per capita is only 25.5 percent of that of the Cote d'Ivoire. The question arises as to why the seven E.P.N. and the AntitubercularCenters are the only public entities that are presentlyengaged in cost recovery in the Cote d'Ivoire, despite the 1977 legislationin the statutes that mandates cost recovery for all public institutions. The answer is that these institutionsare viewed as pilot efforts in cost recovery. Because of their specializednature, their cost recovery effortswill only affect certain segments of the Ivorien population,rather than the population as a whole. The strategy is to proceed slowly at first, and then only after, to try to impose cost recovery at all public institutions. Currently, there is a debate about the level of charges for hospitalizationat the two C.H.U.. The hospital administrators and some personnel in the Ministry of Health believe that the 10,000 FCFA, 6,000 FCFA, and 2,000 PCFA for the three classes of hospital bed are too high, and point to this as the reason for the low cost recovery ratios at the C.H.U.; others argue that the level of prices is not the problem, but that the administrationof cost recoveryhas thusfar only been done in El half-heartedfashion.

Ghana. Ghana is similar to Senegal in GNP per capita, and in governmenthealth expendituresper capita. However, Ghana's cost recovery ratio was 7.9 percent and 12.1 percent in 1986 and 1987 respectively,which is, by far, the highest for all four countries. In some respects,cost recovery in Ghana has been relativelystraight-forward compared to the experienceup to now in the Francophonecountries. The price-schedulein Table VI-1 reflects a 1985 update of the original 1983 cost recovery law that mandated cost recovery for all governmentalhealth-care institutions, and that also created a uniform collectingand reporting system. The price- schedule is hierarchicalin charging lower prices at lower-level institutions. Ghana's cost recovery law also allows fewer exemptions from payment than do the laws in the Francophonecountries. Perhaps the most significantchange in the 1985 law is that it mandates full-costpricing of drugs and pharmaceuticals,whereas the 1983 law only had a nominal charge. As a consequenceof this change, drug and pharmaceuticalreceipts account for the bulk of user charge revenues,particularly at the health-care facilitiesbelow the hospital level. Because the rate of inflationin Ghana has averaged about 52 percent per year recently,the user-price schedule will have to be indexed to the CPI, if revenue collectionsare to remain at

7 The double-countinginvolved in these sales has to do with whether one wants to impute a central government subsidy to the C.H.U., for example, or to the P.S.P., but not to both at the same time. If both the C.H.U. and the PSP are subsidizedby general revenues, one cannot accurately characterizea transfer from one to another as "cost recovery"or as a "sale" (See Chapter IV). - 170 - their present 1987 level of 12.1 percent of recurrentexpenditures. Such an indexationwill be particularlyimportant for the hospitals, since about 50 percent of their revenues come from non-drug services that do not benefit from the full-costpricing that is used for drugs. Various arithmetical checks upon the user-charge revenues coming from the differenthealth-care facilitiesindicates that user charges are being successfullycollected at all levels of the system. Immediatelyafter the implementationof the 1985 law, there was a noticeable drop in the demand for health-care services. By 1986, demand exceeded earlier levels; officialsat the Ministry of Health attribute this initial fall in demand to unfavorablenewspaper publicity about the new level of prices under the 1985 law.

There has been some expression of dissatisfactionwith the level of health-careprices in each country. This dissatisfactionwas most often verbalized in terms of prices being 'too high" or 'too low". In Mali and Senegal, administratorsjudged prices to be too low and, in the Cote d'Ivoire,prices were consideredto be too high. In Senegal, many people thought that the Health Committeeswere overly conservativein their approach to setting prices. The prices of pharmaceuticals,which are mostly bought on internationalmarkets, rose about 31 percent between 1981-84. Prices that were too low were said to cause losses in revenue, and prices that were too high were said to cause losses in revenue and to have adverse equity effects. As indicatedearlier, general economic principles prescribe that prices are efficientwhen set at the marginal cost of providing a good or service; equity considerationsare served by providing lump sum transfers to those persons considered to be too poor to pay the marginal cost prices, or by exempting them from paying the prices. From an efficiency perspective,it would be legitimateto inquire how closely the prices in Table VI-8 reflect the marginal cost of the provision of the services. Part of the answer to this inquiry depends upon how one views labor costs in the short run. Traditionaleconomy theory considerslabor costs to be variable costs, and thus they depend upon the level of output. However, given the institutionaland political realitiesin these countries, it could equally- well be argued that labor costs are fixed costs in the short run. If one takes this view, then the marginal cost of an additionalunit of output would be lower than if a marginal variable input of labor cost were added into the cost. For example, the marginal cost of a vaccinationwould only be the cost of the syringe and the vaccine, rather than the cost of those two inputs plus, say, the hourly pay of the nurse who administersthem. From that perspectivethen, some of the prices in Table VI-1 may approach the marginal costs of the provisionof services,particularly as in Ghana where the price schedule reflects the level of sophisticationof treatment.

In actual price-settingpractice, the prices reflect some level of average cost for each service or procedure. For example, in Ghana, the governmentprice-schedule is explicitlymodeled after the church-mission price-schedule. The church missions attempt to reach a target level of self-finance,such as 50 percent of operatingcosts, and there is a rough effort to match fees with the costs of the services provided. Periodically, the members of the church mission associationmeet to discuss pricing - 171 - policies, and try to compare ranges of prices charged for specific forms of care and procedures. Their price increases are based upon increases in the average cost of the supplies and equipmentthat they must buy.

Patient Reaction to Cost Recovery

The prices in Table VI-l are one set of explicit prices that patients face. Another set of prices that are implicit are related to the amount of time that patientsmust spend waiting for treatment and the prices in time and money that they must face in order to arrive physically at the treatment site (Acton, 1975). All other things being equal, higher prices, both explicit and implicit, should lead to a lower quantity demanded. One examplewhere the total price might be lower is a case where higher explicit prices for treatment itself enabled a Government to provide a health-care service in the village of residence,with no waiting time involved. In this case, the total of higher explicit price, but with no waiting or travel, could be lower than the previous total of lower explicit price but with waiting and travel costs. Two other dimensionsof patient reaction relate to changes in the level of patient income and to changes in the quality of care received. Again, all other things being equal (such as explicit and implicit prices), increasesin income and quality of care should increase the demand for health care. Taking into account the interactionbetween price, income and the level of quality yields theoreticalresults that are unequivocablypositive, if the improved quality causes outward shifts of the demand curve that are greater than the possibly negative results of combined lower income and higher price effects (Birdsall,1987).

Ministry officialsin all four countriesthought that there would be some sensitivityto price changes, particularlyfor non-emergencycare and care for the poor, and that is why the Francophonecountries have been so cautious in their approach to cost recovery. Indeed, recent empirical research at the World Bank, using data from rural Cote d'Ivoire, in areas where there were no non-governmentalternatives to providinghealth care (Gertler and van der Gaag, 1988), confirmshow sensitivepersons with varying levels of income are to prices, at a given level of quality of care.8 All observers in all four countrieswere unanimous in their appreciationfor the interactionbetween price and the quality of care as determinantsrespectively of the quantity of cure demanded and of the demand for health care. Officials also recognizedthat, in general, the quality of care in government facilitieswas inferior to that in the private sector or mission facilities and were very concernedabout raising the level of quality so that people would be willing to pay user charges at government facilities. In each country, the relatively long-standingexperience of the church-missionfacilities gives fairly conclusive evidence that people will pay for quality health care. For example, in the Cote d'Ivoire, the 125-bed

8 The authors' estimatescame from deriving a discrete choice specificationof the demand for medical care from a theoretical model in which private time variation is used to identify the parametersnecessary to computemonetary price elasticitiesand willingness to pay measures. - 172 -

Protestant Hospital at Dabou: (a) has been practicing cost recovery since 1968, (b) has always covered about 40-45 percent of its operating costs (includingall local Ivorien salaries)with user charges, (c) probably serves a poorer population than do the C.H.U., because of its location in a rural agriculturalarea, (d) has taken a very firm stance on the necessity of cost recovery, if quality of care is going to be maintained, and (e) has raised its user cost prices almost every year, in order to approach a 45 percent cost recovery ratio. What is of further interest about the situation at Dabou is that there is a local public hospital nearby that does not charge for inpatient or outpatientcare, although it does require people to buy their medicine and drugs at a local pharmacy. Nevertheless,the reputationfor quality at the ProtestantHospital is such that its bed- occupancy ratio is usually about 90-95 percent, and its well-baby clinic and dispensariesare said to be working at more than 100 percent of capacity.

Because medical care at higher prices would represent a larger percentage of a poor family's income than that of a more well-to-do family's income, we would expect that the demand for health care by the poor would be more sensitive to price charges in an upward direction. This would be even more true for familieswhose income approachedbasic subsistence. Depending upon the level of health care prices, the demand for emergency services might not decline at as rapid a rate as the demand for more discretionary services,but, at the limit, basic subsistenceneeds might curtail the demand for both emergency and discretionaryservices. In this case, the poor family might become fatalisticconcerning its financial access to health care. Nonetheless,the experienceof the Medecins Sans Frontieres in one of the poorest regions of the world, the north of Mali, does give evidence that the poor can and will pay for some health services,when the services and pharmaceuticalsare available and their quality is perceived to be high.

Equity aspects

There are at least seven different definitions of the concept of equity in health care: (1) equal expenditureper capita, (2) equal inputs per capita, (3) equal inputs for equal needs, (4) equal financial access for equal need, (5) equal utilization for equal need, (6) equal marginal net need, and (7) equal health status (Menzel,1983). Each one of these definitionsas a goal has different implicationsfor the amount of resources that would be expended upon health care, also places different implicit values on human lives, and cannot be made operationalunless a time-frameis specified. For example, equal utilizationfor equal need has greater resource implicationsthan equal financialaccess for equal need. Equal inputs for equal need implies that the additionalyear that a fifty-five year old may live, as a result of having received medical care, has the same value as the additionalfifty-four years that a one-year old might live, after having received care. Equal health status implies a different time-frame than equal expenditureper capita. Moreover, equity in the provision of health care must also be consideredwith respect to equity in the finance of the health care. For example, if a country did provide equal health care expenditureper capita, and thus achieved equity in provision, but financed the health care by means of a regressivetax system, then equity still would not have been achieved. One beginning operational definition of equity for cost recovery in the health sector in developing - 173 - countriesmight be "equal financialand physical access for equal need", when the tax system is proportionalto income. This definitionwould correspondto the public finance concept of vertical equity on the expendituresside of the equation,but not on the tax side.

It seems indeed ironic that almost every governmentofficial that was interviewedexpressed concern for the poor in discussing changes in user charges, but at the same time freely admitted that the existing pattern of expenditurewas extremely inequitable. The data in Table I-8 show the disparitiesbetween urban/ruraland preventive/curativeexpenditures in present patterns of expenditurein all four countries. Much of the inequity in the situation is due to the further fact that taxes in these countries are roughlyproportional, or slightly regressiveto income,while much health care has been, in effect, free to everyone. Because the health care facilitiesand the pharmaceuticalsare more easily physically accessibleto upper-incomegroups, such as governmentofficials living in urban areas, they, in effect, pay taxes that are proportionalto their income, and receivehealth care benefits that are directly related to their income. Moreover, one of the greatest obstaclesto increasedtotal user charge revenue is the large number of people who are exempt from the payment of user charges, at least in the Francophonecountries. If the pattern of exemptionsvaried inverselywith income, they could be overlooked,but it is preciselythose groups who would seem to have the relativelyhigher and more stable sources of income, such as governmentemployees, who are most often the beneficiariesof these exemptions.

One way of taking into account ability to pay is to levy a progressiveincome tax and then use the proceeds of the tax to pay for free care for all, or for free care for those who do not have incomes above some officially-definedpoverty level. This method is administrativelydifficult in a developingcountry, because it assumes that literacy and the supporting institutionalmachinery are in place. Another way of price discriminating by income (abilityto pay) is to charge differentprices to different income groups. This method, too, poses numerous identificationand other administrativeproblems and complexities. Health care prices have the same positive and normative characteristicsas the prices of other goods and services;they bring about efficiencyin production and consumption,and they produce revenue, but they are regressiveto income. When efficiency and ability to pay are both considered to be important,optimal policy would dictate a compromisepricing/income-redistribution policy that would take both into account, as some acceptablelevel of administrativecost (Vogel, 1988).

Every societyhas its definitionof who are the very poor and, as they embark upon user charges, the four countriesin this study are trying to cope with that definition for purposes of charging for health care. They have all tried issuing certificatesof indigence,but any meaningful investigationsprior to the issue of the certificateare mostly precluded because of the high cost involved. At the local rural level this has not been as severe a problem because everyone seems to know everyone else and their affairs. For example, even at a relativelylarge institutionsuch as the ProtestantHospital at Dabou, administratorsthere were fairly confident - 174 - that they were making the right choices as to who was really poor and who was not, and charging accordingly. In large urban areas, the relative anonymity of the populationmakes identificationmore difficult, but area of residencewithin the urban metropolismay be one signal of indigence. In practice, then, this means that some public health care entities within the urban area will have a high percentage of clients who will not be able to pay anything for their own care, while other entities will have a higher percentage of revenue collection.9

As just one example of why equity issues in cost recovery cannot be ignored, Medicus Mundi of Belgium recently reported on a study done by the health center at Kita in Mali, that the proportionof hospitalizations for children, aged 0 to 10 years old is small relative to the proportion of hospitalizationsfor those in the age group 25-45 years old. Moreover, the average length of a hospital stay for a child was less than a day and nearly a third of the hospitalizedchildren died. It is thought that the majority of these deaths could probably have been prevented,if earlier care had been sought. One plausible explanationfor the delay in seeking care is that the cost of paying for the care may have been consideredtoo unaffordableby the childrens' families.

AdministrativeProblems and CollectionCosts

In the four countries studied, the amounts of revenue raised importantlyappear to be a function of the vigor with which cost recovery is pursued at the national and local level and of the competenceand commitment of local administratorswho head the health-care facilitiesthemselves. In each country, there were striking differencesbetween the amounts of revenue raised by weak administratorsand those raised by strong administrators. For example, in Mali, the three national hospitals all operate under the same conditionsand constraints,and yet, the hospital at Kati had an estimated cost-recoveryratio of 27.1 percent, whereas the Hopital Point G and Gabriel Toure only had estimated cost-recoveryratios of 7.5 and 14.9 percent respectively. In the Cote d'Ivoire, the AntitubercularCenters, under the leadershipof a man convinced of the need for cost-recovery,had a much higher cost recovery ratio than the other seven, supposedly financially autonomous,national public health care entities.

The day-to-dayadministrative aspects of cost recovery naturally flow from the vigor of the administrativeleadership. However, some of the necessary conditionsfor successfulcollection appear to be: (1) well- defined entrance points, whether they be at the entry gate of the health- care facilitiesthemselves, or at the entry point for each service at larger institutionssuch as hospitals; (2) the issuance of some paper instrument,

9 On the basis of their empirical research,Gertler and van der Gaag (1988) recommend price discriminationby rural geographicarea, in order to avoid adverse distributionaleffects. Their reasoning is based upon the assumptionthat people will not travel between rural geographicalareas, in order to obtain lower health-care prices. - 175 -

such as a ticket,with duplicatecopies, that serves both as a proof of payment and as a management control device; (3) a tightly controlled mechanism for ascertainingwho are the truly poor and who are not, and the elimination of exemptions from payment, on any other basis; (4) careful indoctrinationof the care-giving staff that treatment is not to be rendered unless a ticket or certificateof indigence is produced by the patient; (5) spot checks by someone in an accountingor administrativecapacity to ensure that steps (1) through (4) above are constantly being observed by all of the staff; and (6) periodic audit of all of the financialtransactions. While steps (1) through (6) might appear cumbersome,there is nothing in them that any sound commercial business enterprisewould not put into practice, except for step (3), the equity check.

The administrationof drugs and pharmaceuticalsis a similar but separate issue that cannot be consideredat length here. Suffice it to say that the administrationof the selling aspects should be the same as steps (1) through (6) above, when the use of pharmaceuticalsis immediatelylinked to treatment, as in the inpatienthospital setting. The separate macro issues revolve around: (1) the establishmentof an essential drugs list, (2) the purchase of pharmaceuticalson an internationallycompetitive market, and (3) the most efficient distributionmechanism for the pharmaceuticals, once they have arrived at the port of entry. As just one example of the importance of these issues, the administratorsof the project at Kita in Mali, estimated that they would only have to spend about half of what they presently spend on pharmaceuticalsand medicines, if the supply were bought on the competitive internationalmarket and otherwise rationalized. With regard to the distributionproblem, it would seem that centrally-directed command mechanisms have not worked in the past, given prevailing shortages, especially in rural areas. As seems to have been done in the Cote d'Ivoire, one might best leave the distributionproblem to the profit motive in the private sector. This aspect of drug distributionin the Cote d'Ivoire deserves more study. At Kita, the profit motive has been tried by using retired health care workers in villages surroundingKita, as drug-depot vendors and paying a commission.'In Sine Saloum, health-postworkers have assumed this function. In neither case have these experimentsbeen overly successful. The reason usually given is lack of supervisionand lack of experience in keeping accounts. Pending further study of the drug distributionsystem in the Cote d'Ivoire,one might argue that ordinary merchants, on commission,would be more-able vendors of drugs, simply because of their past business experienceand business acumen. For those who could pay, drugs then might be slightly more expensive than hypothetically-availabledrugs provided by the governmentwould be, but at least the drugs would be there. For those who could not pay, carefully- designed vouchers supplied by local governmentsmight be the answer. The local administrationof these vouchers would be preferable for ease of identificationof the very poor.

Also, the private sector and the mission sector can serve as administrativemodels for the public sector as to the revenue and quality possibilitiesof cost recovery, although the mission hospitals and clinics are certainlymore appropriatemodels because their clientele is more similar to that of the public sector, in terms of income, education, - 176 - sophistication,and case-mix. The answer to questions about collection costs most often heard in the four countrieswas that, except for printing costs, collectioncosts were minimal, because already-employedgovernment employeeswere doing the collecting. The problem with this answer is that it ignores the economic concept of opportunitycost. If these collectors were already producing other services,before they began collecting,then their collection duties preclude doing the other work, and that is the cost of collection. If they were doing no work, but neverthelessreceiving a government salary because of institutionalrealities, then, the cost of collection is the real resources that that salary could have purchased. Where commissionshad to be paid to collectors,as in Senegal, commissions ranged between 10-20 percent of collections,with 20 percent producing the best (revenuemaximizing) results. These costs do not include the costs of identificationof the very poor.

There are two final importantissues related to collection incentives. One issue has to do with incentives for care-givingpersonnel, such as physicians and nurses, and the other concerns the administrative level at which collectionsare kept. Under the collectionsystem presently in use in all four countries,there are no financial incentivesfor care- giving personnel, in the sense that they would directly benefit or suffer from increasesor decreasesin institutionalrevenues from cost recovery. Now, their sole motivation comes from supervisorycontrol, and from the hope that some portion of user-chargerevenues will enable their units to purchase better equipmentor better maintenance,thereby enhancing quality of care for patients and creating a better working environment. If some percentage of their salarieswere tied to increasingor decreasinguser-cost revenues,as has been done in the health zones in Zaire, there would be a much stronger incentive for care-givingpersonnel to be attentive to the proof of payment for health services,which has been the problem with care- giving personnel in all four countries. Moreover, these same employees would have a stronger incentiveto provide care of a higher quality, in order to attract greater numbers of paying patients.

A similar incentiveproblem exists at the institutionallevel. In the Cote d'Ivoire,all cost recovery revenuemust be remitted to the Ministry of Finance. In Senegal, at the hospital level, revenue goes to the Ministry of Finance, with the exceptionof revenue collection from people who are poor but not the very poor. User-cost revenue in Mali is remitted to the Ministry of Health. Ghana's system allocates 50 percent of collected revenue to the Ministry of Finance, 25 percent to the Ministry of Health and 25 percent to the facility doing the collecting. The theory of public finance argues that all governmentrevenue should go to one central governmentauthority such as the Ministry of Finance, and that central government expendituresdecisions, at the margin, should not be based upon sources of revenue, but upon areas where there is the highest social rate of return. The problem with the theory is that it ignores collection incentives,and is more aptly applied to tax revenues than to government sales, where the exclusionprinciple does apply. If health-careuser fees are really prices that people pay, then the area under the demand curve measures the privatevalue (rate of return) that people place upon these services. If the private value is close to the social value, as in curative - 177 - care, and that value is high, as expressed in willingness to pay, then the revenue from prices ought to be returned to the entity supplying the service for a price. Allocatory formulae for revenue collections,such as those used in the four countries, are conceptuallysimilar to and have the same incentive effects as an income tax (Griffin,1987). In the Cote d'Ivoire, in Mali and for a portion of the revenues for hospitals in Senegal, this amounts to a 100 percent "tax" on the user-charge income of the care-giving entity. In Ghana, the "tax" rate is 75 percent. These "taxes"have incentiveeffects on economic behavior. The theory of public finance distinguishesbetween the substitutionand income effects of an income tax. The substitutioneffect refers to the fact that additional taxed effort brings in less additional reward; substitutioneffects should be more severe under a progressive income tax than under a proportionalincome tax. The income effect refers to the diminution in after-tax income. If a person has a target income, such as to enable them to buy a specific quantity of goods and services at given prices, then the income effect of a tax will actually make them work harder in order to enable them to attain a given after-tax income. The income effect under a progressive income tax will be stronger than under a proportionalincome tax. Depending upon the relative strength of the substitutionand income effects which move in opposite directions, an income tax may actually encouragemore effort rather than less. With a 100 percent income tax, as is true for user-chargeefforts in the Cote d'Ivoire, for the three national hospitals in Mali, and for a segment of hospital revenue in Senegal, there can be no income effect, but there may be a substitutioneffect, or, at best, no substitutioneffect. With Ghana's "tax" structure on cost-recoveryrevenues, it is possible that the income effect may be stronger than the substitutioneffect, and this, at least, is what central government officials there believe to be the case. The Ministry of Health in Mali has also tried to cut back on the subsidies that it provides to the health center at Kita, as the center becomes more successful in cost recovery. If the cut-backs amount to the same amount of revenue received in user charges, then this could have the same incentive effect as a 100 percent income tax. The main point to be noted here is that incentives do matter, and that if Ministry officials ignore these incentives,they ignore them to the peril of revenue collection. Depending upon what one believes to be the prevailing strength of substitutionand income effects for care-givingpersonnel and for the health-care institutionsthemselves, it is possible to design allocatory formulae for the cost recovery revenues on regressive,proportional, or progressive scales that enhance or attenuate these effects.

HEALTH INSURANCE, THE PRIVATE SECTOR, AND DECENTRALIZATION

Cost recovery is only one of the reforms that must be pursued, if the financing of health care is to be rationalizedin these four developing countries. Such a rationalizationwould certainly ameliorate the three major generic problems of the misallocationof resources, of internal inefficiency,and of the maldistributionof health care benefits.

One inkling of the limits of cost recovery was revealed by the fact that, in all four countries, in those quarters where cost recovery was pursued vigorously, it was difficult to get people to pay for their hospital - 178 - bills, particularlyif the hospital-staywas protracted. At any level of income above the subsistencelevel, people can budget their income in order to save for major purchases,whether that be a new chair or, perhaps, a radio, within the context of a developingcountry. These purchases are not urgent and can be put off until the appropriate level of savings has been reached. For the individualfamily, many forms of illness are both urgent and random events that cannot be readily foreseen, and, as a consequence, that are not easily budgeted. Budgeting for these events constitutes self- insurance,and this is often done in developing countrieswhen the fruits of this budgeting, such as a live chicken, are paid to a traditional practitionerfor urgent care. But many forms of modern treatment are more expensive and more effective than that provided by traditionalhealers, and self-insuranceis inherentlyinefficient because it does not spread the risk of the large random event of major illness over a larger group of families for which the occurrenceof the random event can be more precisely calculated.

To the extent that Governmentprovides 'free" health care to the population to that extent can we speak of a form of "nationalhealth insurance"that is financed from the general tax fund. But, as has been seen, this form of health insurance produces the three problems, previously described. Most of the research literaturehas concluded that catastrophic health insurance is the most desirable form of insurance from an efficiency perspective: if "catastrophe"is defined relative to family income, then equity considerationsare also satisfied. Health insurance sold by the private sector is also presumed to be more efficient than that provided or sold by the public sector, because insurance firms in the private sector are forced to compete against each other. In the four countries studied, other forms of private insurance, such as for fire and maritime activitieshave slowly developedwith the increase in demand for them. Except for the Cote d'Ivoire, private health insurance has not developed,partly because there was no demand for it in many quarters, given that Governmentprovided 'free" health care, and partly because the provision of such insurance is inherentlyrisky in an actuarial sense, given the lack of reliable data on the incidence of illness and its cost of treatment.

In 1975, Senegal establisheda public health insurance system (the Institutionsde PrevoyanceMaladie, or I.P.M.) for the formal labor market, where employers and employees are each supposed to contributea 6 percent share of the employees' salary, with a contributionceiling that stops contributionson any part of the monthly salary that exceeds 60,000 FCFA. The I.P.M. suffer from a number of design defects that threaten their solvency. Each firm with one-hundredor more employees is required to have its own I.P.M., rather than spreading the financial risk in a common pool of all I.P.M. gathered together. Almost all forms of treatment are covered, and employees seek treatment in the private sector which is expensive. Many covered employees have large extended families that are also covered, and there are indicationsthat overtreatmentoccurs because of the open-ended payment mechanism. Municipal governmentworkers have full insurance, because the "Red Book' exempts them from payment. Under the provisions of - 179 - the 1968 law, central government employeesare supposed to pay a special rate, but, in practice, they do not pay, so that, in effect, they are also fully insured.

In Mali, government employees are insured by their respective Ministries, in the sense that the Ministries are expected to pay 80 percent of their employees' treatmentcosts from their budgets. But, the Ministries do not usually pay and the health-careproviders end up absorbing the loss, except in the case of a hospital such as at Kati, where a strong administratorgoes to the Ministries and demands payment. Mali also has a Social Security system (the Prevoyance Sociale, or P.S.) for the formal labor market, but the P.S. suffers from most of the same design defects as the I.P.M. in Senegal. The financialcondition of the P.S. has deteriorated to such an extent that the P.S. does not now actually provide health insurance per se, but conducts a series of industrialmedical centers where limited free care is provided. Because no checks are made on the clientele of these industrialmedical centers, a large number of people who are not even members of the P.S. also receive free treatment there.

The Cote d'Ivoire also has a Social Security system (the Caisse Nationale de la Prevoyance Sociale, or C.N.P.S.) for the formal labor market that provides curative care in eight medical-socialcenters around the country. The design of the C.N.P.S. suffers from the same design defects as the I.P.M. in Senegal and the P.S. in Mali, and has the problem similar to that of Mali that many non-members receive treatment in its facilities. Government employees have their own mutual insurancethat conducts a free dispensary in Abidjan and that pays 70 percent of the cost of medicines and drugs, but does not cover hospitalization. As occurs in Senegal and Mali, in effect, government employees in the Cote d'Ivoire receive free care in the public hospitals. In order to obtain better health care, some government employees and private persons have now purchased group insurance in the private sector, through their own professionalassociations. Physicians, lawyers, and army officers have obtained such insurance at a cost of about 156,000 FCFA ($568) per family per year, and now the teachers' union is making an effort to obtain similar health insurance for its members. Individualprivate health insurancecan cost from 250,000 to 300,000 FCFA per year. As is usually true around the world, people with private health insurance in the Cote d'Ivoire do not seek treatment in public health-care facilities.

In Ghana, there is a Social Security system that pays a lump-sum indemnitywhen a person retires, but there is no health insurance. The government is interested in formingwhat is called a national health insurancebut that would be, in reality, a contributoryinsurance scheme, and has commissioneda rather extensive study to consider design and finance issues. The three initial markets under considerationfor this health insurancewould be the 200,000-300,000independent cocoa farmerswho would be insured under the umbrella of the Cocoa Marketing Board, the some 2 million employees in the other formal labor markets, and the 200,000 or so civil servants. - 180 -

As these four Governmentspursue cost recovery, the demand for health insurance should expand. But, unless the quality of care in governmenthealth-care facilitiesappreciably improves,one ironic developmentmay be that the newly-insuredforsake seeking further care in governmentfacilities, as seems to be happening in the Cote d'Ivoire.

With the exception of Mali, the private for-profithealth-care sector has taken a hold in the countries that were studied. The private, for-profithealth care entities cater to that segment of the population where a profit can be made, i.e. the upper-incomegroups that demand a quality of care that the Governmentsdo not, and possibly cannot, offer, given the financial constraints. If there is no governmentinterference with prices or with profit levels, there is no reason to believe that the private for-profitsector will not expand, particularlyif the respective economies grow and if health insurancebecomes more prevalent. But, as in every other country that has not achieved a large middle class, these for- profit providers will probably only cater to the upper-class far into the foreseeablefuture. They set an example to the Government for quality of care in their facilities,and, at the margin, provide competition for the Government,which is desirable on efficiencygrounds.

Particularlyin Ghana, the mission facilitiesprovide more rural and preventive care than does the Government. Because they tend to treat the same clientele as does the Government,with respect to income status and to case-mix, the mission facilitiespresent a model for government emulation. For the most part, they rival government facilitiesin the motivation of their personnel, in cleanliness,in quality of care, in efficiencyof operation,and in their greater ability to self-financetheir work by the use of cost recovery. Indeed, it would be interestingto see the efficiency effects upon government facilities,if the mission facilities were somehow able to provide in-servicemanagerial training to government health-careworkers. As do the for-profithealth care providers, the mission facilitiesare a source of diversity in health care provision, and present desirable competitionto governmentfacilities. Because of their superior managerial capabilitiesand because of the mystique that their non- profit status gives them in the eyes of the population,perhaps the missions would be a good place to initiate experiments in basic forms of prepaid health insurance for the rural population.

Efforts at administrativedecentralization have been made in all four countries that were studied. The problem is that administrative decentralizationis not very effective, if it is not accompaniedby financialautonomy. It would seem that cost recovery is the best means of fostering financial autonomy, if the proceeds of cost recovery are allowed to remain at the site of recovery. Finally though, cost-recoveryrevenue- sharing may be the only solution,given the fear of central authorities,as in Ghana, that too much financialautonomy will lead to the spending of cost recovery proceeds upon "development",such as building new hospital wings, rather than upon the recurringcosts of maintenance and medications. - 181 -

POLICY RECOMMENDATIONS

Because the seeds of the policy recommendations for cost recovery already lie in the previous pages of this Chapter, this sectionwill be brief.

The Structureof Health Care Prices and Revenue Collected

1. It is clear that system imbalancein demand will occur if user charge prices are not set in a fashion commensuratewith the hierarchicalsophistication of care provided. A corollary to this policy is that, if user charges are not applied at all levels of the system at once, beginning efforts should be made at the hospital level, rather than at the base of the system.

2. A policy of revenue maximizationfrom user charges will recognize that hospitals as a group will provide more revenue than lower level health-carefacilities as a group, simply because, as the system of health care provision is currently structured and financed in these four countries,hospitals treat the bulk of patientswho have the financialmeans to pay, and provide more services per patient than do lower-levelfacilities.

3. The schedule of health-careuser prices should be adjusted periodicallyin order to take into account increases in the general price level within the country, and in order to take account of price increasesof products, such as pharmaceuticals bought on internationalmarkets. If such adjustmentsare not made, the real value of revenueswill decline and Ministry of Health budgets will again become relatively inadequate for meeting levels of service need.

4. Because the large majority of patients are not well-to-do, nor members of the very poor, the bulk of revenues,both at hospitals and at lower-leveltreatment facilities, will have to come from this majority.

5. The generous list of personswho are now exempt from payment in all four countrieshas a deleteriouseffect on revenue and cannot be justified on equity grounds.

6. Because of the size of many hospital bills, cost recovery from hospital chargeswill have some upper limit until health insurance can be introduced. In this regard, there is no reason why a beginning could not be made for segments of the formal labor market, such as for governmentemployees. It is particularly importantthat any such health insurancebe well-designed actuariallyand that it provide incentivesfor efficient consumptionon the part of patients and efficientproduction on the part of care-givers. - 182 -

7. Drugs and pharmaceuticalsare in great demand, and have provided the bulk of revenue collection to date, but they could provide even more revenue, if more efficient procurement and distribution policies were followed by Government.

8. In all four countries, the church missions provide an excellent model for cost-recoveryefforts.

Patient Reaction to Cost Recovery

1. Cost-recoveryefforts without visible and fairly immediate improvementsin the quality of care provided will not receive patient support. Indeed, in all four countries, most government health-care facilities have a tarnished reputation for quality care, and for their ability to provide wanted drugs and pharmaceuticals.

2. The experience of the church missions indicates that people are willing to pay for quality health care.

3. It is also clear that the subsistencepoor will be driven out of the monetized health care market by cost recovery, but if appropriatemeasures are taken to protect them, the subsistence poor need not suffer because of cost recovery efforts. Indeed, they should benefit from cost recovery,because of the additional health care resources that cost recovery should make available for them.

Equity Aspects

1. The existing pattern of health-care expenditureis extremely inequitable in all four countries. Appropriately-structuredcost recovery could actually redress much of the inequity that presently exists, particularlyif cost recovery at hospitals were more widespread.

2. More attention needs to be paid to cost-effectivemethods for screening the very poor out of paying user charges, and making sure that those who can pay do pay. In the latter regard, Governmentshave been culpable because they seem to have been overly-generoustowards their own employees.

3. There are at least seven definitionsof the concept of equity, and both recipient countries and donor agencies should decide together upon which one of the concepts they are pursuing as a goal. - 183 -

AdministrativeProblems and CollectionCosts

1. The major administrativechallenge is to enhance incentives for collectionof user charges at the facility level and on the part of the care-giversthemselves. The Governmentsshould carefully consider the financialincentives involved rather than command methods, because the former seem to produce better results.

2. Accounting systemsneed to be improved,and the day-to-day selling of tickets rationalized.

3. Collectioncosts need not necessarilybe high, if appropriate incentivesfor the facilitiesand care-giverscan be devised.

4. The question always arises as to which should come first, cost recovery or improvementsin quality. Given the constrainedstate of health care recurrentfinancing in these four countries, the scope for large, immediatequality improvementswithout cost recovery is indeed limited. Long-standingexperience at the mission hospitals, such as at the ProtestantHospital at Dabou indicatesthat a fairly rapid accumulationof funds is possible, if the cost recoveryprocess itself is properly administered. If the cost-recoveryfunds themselvesare then properly managed, quality does improve and patients are even more willing to pay cost recovery. The initial cost recovery,with the quality of care held constant, is made possible by the fact that the demand for many kinds of curative care is not very price sensitivewithin some range of prices. Observationindicates that if quality of care does not improve relativelyrapidly, with an appropriate amount of publicityabout changes in quality after the imposition of the cost recovery,the cost-recovery/qualityimprovement effort will quickly lose credibility. The regional hospital at St. Louis in northern Senegalhas recentlydemonstrated how this dynamic can be made to work successfully;the national hospital at Kati in Mali provides another example of how vigorous leadershipon the part of the administratorcan bring about rapid quality improvementsthat enhance the cost-recoveryeffort.

It may be possible to predict some of the ultimate consequencesof cost recovery as economic developmentoccurs, and as cost recovery becomes more widespread. Because of the relativelylarge size of the bill for the typical hospital stay, cost recoveryat the public hospital level should create an initial demand for health insuranceamong the middle-incomestrata of the indigenouspopulation. In the countries studiedup to now, the expatriatepopulation usually alreadyhas some form of external health insurance,such as the French Social Security,and this group uses the private sector for its health care. The kind of health insurancethat the expatriateshave can be characterizedas *open-ended'in that it pays the greater part, if not all of the health care bill, and pays whatever the health care costs. Such insurancecan be judged to be inefficientbecause it divorces the payment of the insurancepremium from the payment of the health-carebill at the time of illness, and thus does not give the - 184 - consumersof health care an incentiveto exercise ordinary economic prudence in their use of medical care. At the same time, medical-careproviders have no incentiveto economizein the provision of medical care, because the insurancepays them whatever the medical care costs to provide. Many of the efficiencyproblems in the health care sector in the West have been ascribed to this form of insurance. If the demand for health insuranceon the part of the indigenouspopulation is eventually translatedinto the same kind of open-endedinsurance, one would expect this insuredpopulation to opt for health care in the private sector. Because this form of health insurance produces significantexternality effects upon the efficiencyof the whole system of health-careprovision, a convincingargument can be made that the structureof the health-insuranceprovisions should be regulatedby Government. Such regulationwould specify some out-of-pocketpayment in the form of deductiblesand coinsuranceby the consumer of health care, in order to preserve incentivesfor prudent choice of provider and amount of care received: the out-of-pocketpayment would also serve as a signal to the provider that there was some upper limit on the amount of care that would be paid. Eventually,groups of insured, such as a teachers'union, would have the incentive to negotiate fixed prices for care from providerswho would bid competitivelyfor the right to provide care to the group. Within such an institutionaland regulatorycontext, the public health-care sector would have the opportunityto competewith the private health-caresector in terms of both quality and price. What is clear, though, is that a majority of the people in these four countries,such as the not-so-poorin Senegal,will be too poor in the foreseeablefuture to purchase any kind of health insurance or to pay anything but a nominal percentageof their hospital bill. That being the case, the public sector will continue to be the provider of health care of last resort and the de facto health insurer of this group. For this group of people, small paymentsmade for cost recovery both in the inpatient hospital setting and in out-patientsettings have the same economic efficiencyeffects as deductiblesand coinsuranceunder health insurance sold by the private sector. The very poor in each countrywill have to be exempt from any payment and rely upon Governmentfor financingtheir health care. Cost recovery should force growth in the demand for health insurance in one form or another. But, the growth in demand will vary, dependingupon the distributionof income in the country and upon the economic incentives that differentforms of cost recovery provide. Given the evidence in the research literatureon the health care efficiencyeffects that prepaid health insurancecreates, it would seem desirablethat this type of health insuranceeventually evolve. Organizedgroups in the work force would be one starting point. With regards to who provides the health insurance,more thought should be given to the appropriaterespective roles of Government and the private sector in this area of activity.

In conclusion,further researchneeds to be done in Africa on many of the issues uncovered by this study. Not enough is known about the demand for the differentkinds of health care servicesby different income groups, nor is enough known about the demand for differentproviders of health care servicesby differentincome groups. Also, more focussedwork needs to be done on the demand for drugs and pharmaceuticalsby income group. Detailed in-countryeconometric studies would fill this gap in current knowledge. More study must be made of cost-effectiveadministrative methods for - 185 - screening the poor in cost-recoverysystems. Further, there is a large literature on revenue-sharingbetween levels of government in developed countries, but little work has been done for developing countries on the kind of revenue-sharingbetween Ministries of Health and health-care facilities and among regions that the development of efficient and equitable cost recovery systems would need. Finally, more considerationmust be given to design issues for health insurance in Africa; detailed analysis of the experience to date of other countries in Africa or in other developing areas, where health insurance has begun, would be the starting point for such an inquiry.

- 187 -

ANNEX

The following supporting documentationis availableupon request from the Project Files of the Population,Health and Nutrition Division, Africa TechnicalDepartment, World Bank. The documentationfor the Francophone countries is in French.

SENEGAL

o The "Red Book'

o Hopital St. Louis: Financial Report

o Hopital St. Louis: Exchange of Letters on Financial Participationwith Minister of Health.

o Documentationon the A.P.H. at St. Louis, and Subcommittee Activities.

o Hopital St. Louis: Certificateof Indigence.

MALI

o InterministerialNotice on Setting Rates and Prices for Medical Care and Hospitalizationin the Private Sector, January 27, 1987.

o Hopital du Point G: Management Report, 1986.

o Evaluation Report on the Test Project to Improve Management at Hopital Gabriel Toure, 1986.

o Annual Report on Management Autonomy at the National Hospitals in Mali, 1986.

o Charts, Tables and Documentationon Cost Recovery at Kita, Bafoulabe, and Kenieba, 1986.

o Financial Details on Village Pharmacy Depots at Kita.

COTE D'IVOIRE

o Newspaper Clippings on Public Sector to Private Sector Transfers and on Competitionin the Cote d'Ivoire.

O Enabling laws for C.H.U.

O Budgetary data for the E.P.N.

O Tariff structure for C.H.U. and other E.P.N.

O Material on the C.A.T. - 188 -

o Prices and Informationon the PolycliniqueInternationale Sainte Anne Marie.

o Price and Other Informationon the Hopital Protestant de Dabou.

GHANA

o Estimates of Drug Needs.

O EssentialDrugs List and Directory of Pharmaceutical Suppliers.

O Hospital Fees Regulation,1983.

O Hospital Fees Regulation,1985.

O Modalities for CollectingNew Hospital Fees.

O Summary of Health Care Institutionsin Ghana. 189 -

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World Bank. 1986. World DevelopmentReport 1986. New York, N.Y.: Oxford University Press. DISTRIBUTORSOF WORLDBANK PUBLICATIONS

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