Access to maternity health services is vital for reducing maternal mortality in developing countries. How can government subsidies better target the poorest people? Analysis by the London School of Economics suggests that competitive voucher schemes could improve service equity and efficiency, offer a choice of providers and increase responsiveness and quality of care.

Reproductive and child health (RCH) services in many developing countries are tax financed and provided universally ‘free’ for all by the public health system. This approach has some disadvantages:

• huge financial investment by the government with little flexibility to move resources
• health budgets spent mostly on salaries rather than drugs or maintenance of equipment
• limited consumer choice, no competition and poor quality services
• little incentive for staff to improve their performance or be responsive to patients
• inequalities across socio-economic groups in access to and utilisation of services and in health outcomes

Both rich and poor people use private health care for services such as antenatal care, deliveries, and in-patient and out-patient care. So, any strategy to improve access to RCH services must involve private providers, especially where public health care is inadequate. However, it should also be in line with government thinking and patient preferences, and move towards performance-related funding.

According to the authors, subsidising demand among key patient groups, whilst allowing a competitive market for providers, may be better than using the same resources to subsidise supply. Demand-side financing gives power to the consumer and repays providers based on the number of clients they attract. Competitive vouchers are one demand-side approach. A government or donor gives funds to a voucher agency, which contracts and trains service providers from the public and/or private sector. The agency produces and distributes the vouchers. Recipients take the vouchers to a provider of their choice and exchange them for goods or services. Providers return the voucher to the agency and are repaid according to their contract. The analysis shows that schemes like this can:

• target subsidies more accurately
• provoke demand for under-used services
• offer simpler administration than other demand-side subsidies
• reduce some of the problems with provider-induced demand
• increase technical quality by including standards in provider contracts

Their limitations include high administrative and transaction costs, over-servicing because of the direct link between outputs and payment, supplier-induced demand, and the risk of corrupted activities taking place. The authors conclude that evidence-based policy-making on health financing needs more pilot competitive voucher schemes aiming to address these potential concerns. They should also assess factors which make governments and donors reluctant to implement voucher schemes, such as:

• ideological objection to working with the private sector
• belief that private sector services will cost more
• unfamiliarity with voucher schemes
• policy issues of targeting certain populations
• lack of government administrative capacity

Source(s):
‘Improving Access to Reproductive and Child Health Services in Developing Countries: Are Competitive Voucher Schemes an Option?’, Journal of International Development, 19(7), pages 975-981, by Mrigesh Bhatia and Anna Gorter, 2007 (PDF) Full document.

id21 Research Highlight: 18 December 2007

Further Information:
Mrigesh Bhatia
Department of Social Policy
London School of Economics & Political Science
Houghton Street
London WC2A 2AE
UK

Tel: +44 (0)20 7955 6416
Contact the contributor: M.R.Bhatia@lse.ac.uk

London School of Economics and Political Science, UK

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