Competitive voucher schemes
Can they improve healthcare for the poor?

Competitive voucher schemes are a relatively new way of organising healthcare provision. They may well help solve some of the difficult problems faced by conventional health programmes.

Vouchers allow governments and donors to:

• target and reach the poor
• subsidise only cost-effective interventions (i.e. based on evidence and best practice)
• involve both private and public sector healthcare providers
• use competition to minimise costs, and maximise quality
• broaden poor peoples' choices for healthcare.

The Central American Health Institute (ICAS) has been experimenting with voucher schemes for almost 10 years. It has applied the concept to HIV/AIDS prevention, adolescent health, and cervical cancer screening. ICAS contracts healthcare providers through competitive tenders and distributes vouchers to target populations. Patients then choose a provider whose services are paid for by the voucher agency at a contracted fixed fee per voucher received. Quality is monitored and the best providers are retained in the schemes.

The results have been encouraging. ICAS has demonstrated that these schemes can reach groups that are otherwise almost impossible to reach, whilst producing significant health benefits, greater equity and efficiency. However, many governments and donors are reluctant to implement voucher schemes.

Reasons why policy-makers might be reluctant to implement competitive voucher schemes or other public-private partnerships (PPPs) in health, include:

• a lack of best practice guidance or evidence on competitive voucher schemes. In the majority of both developed and developing countries this type of scheme is unheard of
• an ideological objection to working with the private sector. Some policy-makers are concerned that taxpayers' money should be invested in public health services and not distributed to the private sector
• concern that private sector services will cost more than publicly provided services
• the failure of some Ministry of Health (MOH) officials (and even some donors) to see their role as going beyond the day to day running of government hospitals and clinics. To support voucher schemes they must consider the whole health system within which their role is to sustain and improve peoples' health, regardless of who provides the services
• government-owned clinics tend to be short of many things (drugs, staff, equipment). It is therefore easy to make prioritise their rehabilitation before purchasing services from private providers
• political issues may be important. Voucher schemes can result in poor and underprivileged groups (such as sex workers) receiving better quality services than the general population. This can be difficult to justify to a powerful middle class electorate
• donors are more likely to query the sustainability of voucher schemes. Many believe that the resources they put into MOH activities will be 'picked up' by governments once their project funding ends. However, to ensure sustainability all donor-funded activities, including voucher schemes, require financial commitments to be eventually assumed by governments, social security funds, or the beneficiaries themselves. Without sustained economic growth, the prospect for this is poor
• concerns that schemes are susceptible to abuse. Black markets, collusion between healthcare providers and distributors, and counterfeiting are some obvious examples. Even if these abuses are rare, an isolated instance of abuse can undermine a programme's legitimacy in the view of many policy-makers. In extreme circumstances, it may even be in the interest of some to preserve existing abuses if, as is sometimes the case, it is organised corruption of direct benefit to them.

So what could policy-makers do in order to give voucher schemes a fair chance?

• Identify the reasons for bias against voucher schemes and develop understanding about the potential benefits for implementing a programme.
• Commission studies to propose possible voucher schemes, particularly for health problems involving difficult to reach populations, where there are well-defined proven best practices, where there is potential or existing competition to provide services, and/or where existing services are of poor quality.
• Experiment with voucher schemes on a small scale, with a willingness to roll these out nationwide if they prove to be successful.

Peter Sandiford
Institute for Health Sector Development
27 Old Street
London EC1V 9HL
UK

T +44 (0)207 253 2222
F +44 (0)207 251 4404
peter@sandifords.net

See also
'Vouchers for health: using voucher schemes for output-based aid', in Public Policy for the Private Sector (World Bank online journal), by Peter Sandiford et al., April 2002

Views expressed on these pages are not necessarily those of DFID, IDS, id21 or other contributing institutions. Copyright remains with the original authors but (unless stated otherwise) articles may be copied or quoted without restriction, provided id21 and originating author(s) and institution(s) are acknowledged. Copyright © 2005 id21. All rights reserved.