Report No: AUS1950 Lao People’s Democratic Republic Maternal Health Out-of-Pocket Expenditure and Service Readiness in Lao PDR Evidence for the National Free Maternal and Child Health Policy from a household and health center survey October 2013 Standard Disclaimer: Copyright Statement: This volume is a product of the staff of the Interna- The material in this publication is copyrighted. Copy- tional Bank for Reconstruction and Development/ ing and/or transmitting portions or all of this work The World Bank. The findings, interpretations, and without permission may be a violation of applicable conclusions expressed in this paper do not necessar- law. The International Bank for Reconstruction and ily reflect the views of the Executive Directors of The Development/ The World Bank encourages dissemi- World Bank or the governments they represent. 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MATERNAL HEALTH OUT-OF-POCKET EXPENDITURE AND SERVICE READINESS IN LAO PDR: EVIDENCE FOR THE NATIONAL FREE MATERNAL AND CHILD HEALTH POLICY FROM A HOUSEHOLD AND HEALTH CENTER SURVEY 1 Executive Summary Although Lao PDR has made notable progress Non-financial barriers are also crucial in this land- in improving maternal and child health (MCH), locked, sparsely-populated, and ethnically-diverse attainment of the MDG5 still remains a challenge. country. Physical access to remote communities Maternal mortality decreased from 1,600 per 100,000 is challenging and costly, especially during rainy births in 1990 to 357 per 100,000 live births in 20122, season. Cultural practices and beliefs influence the but is still very high and the country is off-track to health-seeking behavior of pregnant women, as attain the government’s target of 260 per 100,000 would linguistic and gender mismatches between live births by 2015. Low utilization of maternal health health providers and patients. Educational out- (MH) services is a key reason for these poor outcomes comes are also poor in Lao PDR, with only 41% liter- as only 42% of births were attended by a skilled birth acy among women aged 15-24 in rural communities attendant and only 38% of births occurred in a health without road access (69% nationally)4. facility. In seeking to inform the implementation and Financial barriers are an important impediment scale-up of this national free MCH policy at this to the utilization of MH services in the country. crucial initial stage, this paper reports on findings Government expenditure on health is low, account- from a timely household, village and health center ing for only 41% of total health expenditure (THE) or survey where for the first time in Lao PDR, large-scale 1.0% of GDP. Hence out-of-pocket (OOP) expendi- household-level data on OOP expenditure for specific tures are high, amounting to 46% of THE3, and limit the equitable utilization of health services (especially MH services was collected, in addition to data on the utilization of services and household characteristics. 1 preventative services) and put households at risk of impoverishment. Key findings from this survey, which was con- ducted among high priority and poor communities In order to address these financial barriers, the prior to the implementation of the policy, are that Government of Lao PDR has introduced a national MH OOP expenditure for an institutional birth at a free MCH policy. This policy essentially replaces user public health facility is substantial – both relative fees paid OOP by pregnant women with case-based to GDP per capita (4.1%) and relative to monthly payments by the government, for critical MCH ser- household expenditure, especially for the poorest vices. In addition, small cash payments are provided quintile of households (43% of monthly household to patients to cover opportunity and transport costs. expenditure). This expenditure is also highly variable This policy builds on the positive experiences of – depending chiefly on the choice for an institutional increased utilization from a pilot program provid- births compared with a non-institutional births (a ing free deliveries funded by the Health Services thirteen-fold difference in mean expenditure), but Improvement Project (HSIP) in two districts, and of also by the health facility level (approximately dou- ongoing Health Equity Funds (HEFs) which provide bling when advancing each level), and by the mode free deliveries and other health services to the of delivery (caesarean births compared with vaginal targeted poor. births). Even within each of these categories, there is 1 This report was written by Wei Aun Yap, Rong Li, and Ajay Tandon, based on a survey designed by Magnus Lindelow, Chantelle Boudreaux, and Robert McLaughlin. Peer and external reviewers are Valeria De Oliveira Cruz (WHO), Jun Gao (WHO), Pandu Harimurti (WB), and Owen K Smith (WB). Valuable inputs were provided by Eileen Braine Sullivan, Phetdara Chanthala, Toomas Palu, and Sophavanh Thitsy. 2 Government of Lao PDR, 2012. Lao Social Indicator Survey 2011-2012. 3 Government of Lao PDR, 2012. Lao PDR National Health Accounts FY 2009-2010. 4 Government of Lao PDR, 2012. Lao Social Indicator Survey 2011-2012. considerable variation in expenditure, making it dif- Finally, the supply-side readiness and manage- ficult for households to predict expenditure ex-ante. ment capacity of health centers needs to be im- MH OOP expenditure is also inequitable. House- proved. The supply-side readiness of health centers holds in the poorest quintiles spend 43% of their to provide MH services is low: only 2% and 10% of monthly household expenditure on an institutional health centers fulfilled all the surveyed WHO Service birth compared with 26% for households in the rich- Readiness Indicators for ANC and basic obstetric care est quintile. Similarly, communities with poor road respectively. This readiness of health centers is found access (more than 4km away) spend 35% of their to be positively associated with increased utiliza- monthly household expenditure on an institutional tion of MH services. Furthermore, poor households birth compared with 26% for communities with served by health centers with low service readiness direct road access. Given this context, the rationale are found to be exposed to higher levels of MH OOP and motivation for the free MCH policy in reducing expenditure compared with poor households served financial barriers and reducing OOP expenditure is by health centers with high service readiness. appreciated. In order to improve the effectiveness and equity The policy implications of these findings are first- of the national free MCH policy while minimizing ly that, although financial protection implied by perverse incentives, regular reviews of the utilization, the national free MCH policy is strong, reducing pricing, and case definition of services, investments financial barriers alone would not be sufficient to to improve the service readiness of health facilities, increase the utilization of services, as other non- and efforts to address non-financial barriers are vi- financial barriers such as the physical access to ser- tal. The autonomy of facilities to manage revenue vices, maternal education, and cultural practices are from this policy should also be enhanced and be ac- likely to limit large increases in utilization of MH ser- companied by concurrent reforms in public financial vices, especially among the poor. management, as expressed in the Ministry of Health’s reform plans. Secondly, this policy has the potential to be re- gressive due to the higher utilization of MH services The remainder of the paper is organized as follows: 2 by wealthier households. If there are no changes in the utilization patterns of households with this poli- • Section I provides the background context to the various health financing interventions in Lao cy, the richest quintile will capture 44% of the value PDR to date, focusing particularly on MH, and also of benefits from this policy, compared with 9% for the provides an overview of the characteristics of the poorest quintile. In reality, different socio-economic survey population compared with the national groups are likely to respond differently to the policy population; and the elasticity of demand for each group cannot • Section II presents the analysis of MH OOP – both be predicted with any certainty. Nevertheless, addi- in aggregate and disaggregated along various tional measures should be instituted to promote the dimensions; uptake of these free services by the poor and margin- • Section III presents the analysis of financial alized people. The targeting of services may also be protection provided to households with and with- considered in the future, in the interests of equity and out the national free MCH policy, and additional fiscal sustainability. demand-side perspectives; • Section IV explores the equity of MH service Thirdly, health providers at all levels of health utilization along four dimensions – economic facilities would experience substantial marginal status, physical access, education, and ethnicity; decreases in revenue per vaginal birth, given the • Section V views the national free MCH policy reimbursement schedules under the national free from the supply-side perspective, particularly its MCH policy. At lower level facilities, this may encour- implications on facility revenue, but also presents age inappropriate referrals to higher level facilities. analysis from the associated health center sur- At higher level facilities, there may be incentives for vey which reviews the service readiness of health health providers to increase revenues by choosing centers to provide MH services and interactions caesarean deliveries over vaginal deliveries, even if between readiness and utilization and equity; and not clinically justified. However, as demand for and • Section VI concludes with key findings and the quantity of services are likely to increase, net rev- recommendations. enues of health facilities should increase due to this policy. Section I: Background Health Financing Context Lao PDR is a land-locked, resource-rich, sparsely- Healthcare in Lao PDR was initially funded pri- populated, ethnically-diverse5 country with a to- marily through the government budget, with ex- tal population of 6.2 million6, two-thirds of whom ternal support from the Soviet Union, Vietnam are rural. Administratively, the country is divided and China, and a small network of health facilities into 17 provinces and further sub-divided into 142 providing a limited range of healthcare services10. districts and then into villages (or ‘ban’). It traces its As these external sources of support decreased, historical origins to the Lane Xang kingdom, founded alternative sources of financing were required. The in the 14th century, and has been governed as a sin- government officially adopted user fees through gle-party socialist republic since 1975, having previ- Decree 52 in 199511 and Revolving Drug Funds in ously been a protectorate of France until 1953, when 199712. In recognition of the inequalities caused by it gained full independence. this shift to private OOP financing, Decree 52 was revised in 200513 with the objective to promote equal The Lao economy is one of the fastest growing in access to health care services by collecting user fees the world and receives large revenues from natu- from people who can afford to pay, and exempting ral resources, thus enabling it to emerge as a low- others (such as government officials and retirees, middle income country in 2011 with a GNI per capita retired military officials, people with disabilities, of US$ 1,1307. Although poverty levels are declining, students under 18 years of age, monks and novices, 34% of the population still live on less than $1.25-a-day and certified poor people). However, the Revised and high incidences of poverty remain in the ‘remote Decree 52 was itself superseded by further reforms areas of the east and southeast along the Vietnam- introduced with the Curative Care Law14 and Decree ese border’8, contributing to significant inequality – 38115 later in 2005. The latter decree sets out the the GINI index for Lao PDR is 0.379. principles for the collection of technical revenues by government entities, including usage criteria for this revenue. Decree 316 specifies, on a service-by-service 3 basis (including for health services such as deliveries and ANC consultations), the technical revenues payable by users of these government services. 5 The Lao Front for National Construction recognizes 49 different groups and 160 subgroups. 6 WDI, 2010 7 World Bank, 2011 8 Epprecht, 2008 9 WDI, 2008 10 Lannes, 2011 11 Government of Lao PDR, 1995. Prime Ministerial Decree 52, 26/06/1995. 12 Government of Lao PDR, 1997. National Guideline on Revolving Drug Funds in Public Health Facilities 2nd edition, August 1997. 13 Government of Lao PDR, 2005. Prime Ministerial Decree 52 (Revised), 3/08/2005. 14 Government of Lao PDR, 2005. Curative Care Law (11/ 2005). 15 Government of Lao PDR, 2005. Prime Ministerial Decree 381, 23/12/2005. 16 Government of Lao PDR, 2008. Decree 3, 19/11/2008. These health financing and policy changes have Various health financing schemes emerged from been associated with large increases in private 2002 to 2006 to improve financial protection. health expenditure as a percentage of total They include Community-based Health Insurance health expenditure. The private share of total health (CBHI), Civil Servants Scheme (CSS) under the State expenditure (THE) increased from 40% in 1995 to Authority for Social Security (SASS), Social Health In- a peak of 83% in 2005. Government expenditure surance (SHI) under the Social Security Organization on health at just 17% of THE in 2005 was extremely (SSO) and Health Equity Funds (HEFs). These schemes low during that period. More than three-quarters of cater to the informal sector, civil servants, private private expenditure came from OOP in 200517. Analy- and state enterprise employees, and the targeted sis of LECS4 demonstrates that drugs comprise the poor, respectively. Although SHI is compulsory for majority of household health spending and that OOP private and state enterprises, coverage remains low spending has continued to rise in real terms over among the target population20. Of relevance to MH the five year period since the previous expenditure policy, households with a pregnant woman are more survey18. The latest National Health Accounts (NHA)19, likely to enroll in CBHI and enrolled households have which covers 2009-2010, indicate that THE is 2.5% of higher utilization rates and lower OOP expenditure. GDP (or US$27 per capita, at average exchange rates), However, due to the low overall coverage of CBHI, of which private health expenditure accounts for 59% these benefits limit its impact21. In 2010, only 12% of of THE. OOP expenditure comprises more than three- the Lao PDR population was covered by any of these quarters of this private health expenditure – which schemes, with the highest coverage 5.3% provided works out to just under half of THE. There is also by SASS followed by HEFs (2.9%), CBHI (2.3%), and significant dependence on external financing, which SSO (1.7%). For this reason it is unsurprising that OOP comprises 32% of THE. expenditure is a major financing source, contributing to 46% of THE in 2010. 4 Table 1: Health Financing Schemes in Lao PDR (2010)22 SASS SSO CBHI HEFs Ministerial authority MOLSW MOLSW MOH MOH Implementation date 2006 (revised scheme, 2002 2002 2004 previously CSS) Nature of the scheme Compulsory Voluntary Certified by local authority Legal instrument Prime Minister’s Ministerial regulation Ministerial regulation Decree (but project based) Employee 8% Household Contribution Employer 8.5% (where Employer and (Flat amount by family Donor and Lao (sources and level) 2% from each is for employee 2.2% each size, and urban or rural Government health) residence) Benefit package OPD & IPD OPD & IPD, travel and food costs 17 WHO, 2010. National Health Accounts. 18 Powell-Jackson, 2010. Out-of-pocket spending and health service utilization in Lao PDR: Evidence from the Lao Expenditure and Consumption Surveys. 19 Government of Lao PDR, 2012. Lao PDR National Health Accounts FY 2009-2010. 20 Powell-Jackson, 2010. Enrollment of Firms in Social Security in Lao PDR: Perspectives from the Private Sector. 21 Powell-Jackson, 2010. Community-Based Health Insurance in Lao PDR: Understanding Enrollment and Impacts. 22 Taken from: Government of Lao PDR, 2011. Draft Health Financing Strategy (19 August 2011). SASS SSO CBHI HEFs Payment method and Capitation (80,000 KIP) Capitation, level Cost-sharing for high Capitation ‘Fixed fee’ and cost/Risk-adjusted (45,000 KIP) Fee for Services capitation for 6 conditions Target population Civil servants & Private sector salaried Non-poor Individuals in households dependents employees & self-employed & identified as living under dependents dependents the poverty line Estimated number of 399,672 386,988 About 3 million About 1.6 million persons in the target population Coverage (average) 317,000 105,000 140,000 177,000 Coverage as % of 79% 27.1% 4.7% 11% targeted population % Coverage of total 5.3% 1.7% 2.3% 2.9% population It is therefore unsurprising, given this health This is consistent with international experiences financing context, that the utilization of MH on fee exemptions for MH services. For example, services is very low in Lao PDR. Only 42% of births various studies in Africa have reported increases in are attended by a skilled birth attendant, contrib- uting to high maternal mortality rates of 357 per 100,000 live births. Although the overall causes for primary care consultations after fee exemption policy was introduced25. 5 this are multi-factorial – including cultural barriers, Further MH financing schemes in Lao PDR are physical barriers, and the perceived quality of health currently active or planned. At another district in facilities23 – financial barriers are a key impediment. Savannakhet26, free deliveries are provided using the same mechanism as HEFs, but expanded universally Early Experiences with Free Maternal to include all pregnant women for MH services. A further World Bank financed project, the Community Health Services Nutrition Project, is providing Conditional Cash Trans- fers to pregnant women who deliver at an institution In order to reduce these financial barriers, the and attend ANC and PNC as scheduled, and provider World Bank has piloted a free delivery scheme reimbursements to health facilities for providing through the Health Services Improvement Project these services without user fees. Preliminary findings in two districts in Savannakhet province. This pilot (analysis is on-going) suggest that there have been pays health providers for providing delivery services increases in the uptake of MCH services such as ANC for free, based on a fixed-fee schedule. This resulted in consultations, well-baby visits, and institutional deliv- a three-fold increase in institutional deliveries albeit eries. Other development partners, such as Médecins from a very low level, from 8.5% to 23.7%. In compari- du Monde and WHO, have also been providing free son, institutional deliveries only increased from 13.1% MH services in other districts. to 18.4% in control districts, during the same period24. 23 Manithip, 2012 24 Boudreaux, 2012. Assessing the Elimination of User Fees for Delivery Services in Laos. 25 Morestin, 2011 26 Sepone district Initial results from pilots such as these have Household Survey of Maternal encouraged the government to scale-up a pack- age of MCH services (free deliveries, antenatal and Health Expenditure postnatal care) on a national scale starting in five southern provinces and selected poor and priority In 2010, a survey sampling 2,918 households28 with districts in the north, using financing from the World at least one child under two was conducted in high Bank27 and domestic revenue from the Nam Theun 2 priority and poor communities in the southern prov- hydropower dam. inces of Lao PDR. Uniquely, this survey included questions on OOP expenditure for MH services to inform and assess an intervention aimed at increas- The National Free MCH Policy ing the utilization of MH services through conditional cash transfers to pregnant women and payments to Following the approval of the policy of Free Deliveries providers. This is the first time that a large household and Free Health Care for Children under Five by the survey in Lao PDR has captured this information spe- government, the Minister of Health of Lao PDR, Prof cifically for MH services. The timing of this survey, at Eksavang Vongvichit, MD PhD, signed the Interim the inception of the national free MCH policy presents Guidelines for the Implementation of Prime Minister a timely opportunity for findings and insights from Decree on Free Delivery and Free Health Care for Chil- this survey to inform the scale-up of the national free dren under 5 years old (hereafter referred to as the MCH policy and to confirm the rationale behind the national free MCH policy) on May 29, 2012. Exclud- policy. Unfortunately, equivalent expenditure infor- ing external donor financing, approximately 5 billion mation for child health services was not included kip per year has been allocated from the domes- – and hence analysis and recommendations are tic government budget (NT2 revenue) to fund the focused on the MH aspect of the national free MCH implementation. This policy provides fixed-fee policy. reimbursements to health facilities and cash allow- 6 ances for food and transport for patients as detailed in the Annex. The prices for payments to health facili- tiesare understood to have been calculated centrally Additional methodological details about this house- hold and other related surveys can be found in the Annex. by estimating the costs of consumables typically required for each service, as determined by the relevant technical departments. Survey Population Characteristics Implementation of the free MCH policy has begun, This survey is not nationally representative but covering MH services first, in the southern provinc- instead focused intentionally on communities es beginning in early 2013. Selected districts in the which are the initial target of health financing northern and central provinces, with poor districts interventions for MH services. For this reason, the and communities being prioritized, are also receiv- survey population is reflective of high priority and ing financing from NT2 revenue and other donors to poor communities in the southern provinces of Lao implement the policy. PDR with a mean household size of 6.2, a large per- centage of non-Lao Thai household heads (50%). 27 Health Services Improvement Project Additional Financing 28 Similar analysis on MH OOP expenditure was reported in the Lao Economic Monitor, November 2012. In that earlier analysis three health centers and the households in their catchment areas were excluded resulting in a smaller sample size, as this analysis was initially conducted to inform the baseline of an impact evaluation which included intervention health centers and matched controls. As the importance of maximizing sample size was judged more important in this baseline analysis, which is not primarily intended as an impact evaluation but as a description of the baseline situation, these three health centers and the households in their catchment area were hence included. This results in small differences in the reported figures between the report in the Lao Economic Monitor, November 2012, although the conclusions and implications are the same. This contrasts with the national Lao PDR population hold expenditure than the national average, fewer where 33% of household heads are non-Lao Thai of these households are covered by any health insur- and the mean household size is 5.2 (see Table 2 for a ance or financing scheme. Even coverage of HEFs, detailed comparison of characteristics with the which are intended to cover the poor, is lower in the national population). survey population than the national average. Physical, educational, and financial barriers to- These barriers contribute towards the low utiliza- wards accessing health care facilities are noted tion of MH services confirmed by this survey. Only to be significant. About 38% of households live in 16% of births are institutional and 20% are assisted villages without direct road access and the mean by skilled birth attendants (either at a health institu- distance to the nearest health center and hospital is tion or through outreach), suggesting that outreach 5.5km and 31.2km respectively. For non-emergencies covers only about 4% of births. The percentage of during the rainy season, the mean duration of this births by caesarean section is less than 1% and is journey is 62 minutes and 143 minutes respectively. extremely low compared with international stand- These mean averages hide the fact that some com- ards29. Similarly, coverage of preventative MH services munities are 180km away from the nearest hospital such as antenatal care (ANC) is also very low. Most and a journey to the nearest hospital could take 24 pregnant women, 58%, do not attend ANC consulta- hours during the rainy season. More than one-third tions, and only 24% receive the recommended four or of household heads have had no formal education. more ANC consultations during pregnancy. Furthermore, despite lower mean monthly house- 7 Photo by Bart Verweij/The World Bank, 2013 29 The WHO recommended caesarean section rate is not more than 15% (WHO, 1985). Figure 1: Lao PDR and the Survey Map 8 Villages (Blue Dots), Health Centers (Red Crosses), and Districts (Orange) Table 2: Survey Population and National Population: Household Demographics and Maternal Health Utilization Household Demographics and Maternal Health Utilization Survey Population, 2010 Lao PDR National (Data Source) Household Demographics (LSIS 2012) Ethnicity of Household Head Non-Lao Thai 50% 33% Education of Household Head No Education 36% 20% Up to Primary School 40% 45% Household Size 6.3 5.2 Village Accessibility Road to Village 72% - Road > 4km away 15% - Nearest health center 5.5 km - Nearest hospital 31.2 km - Improved Sanitation Facility 27% 59% Monthly Household Expenditure (kip), 2010 prices 1,527,361 1,837,14830 (LECS4) Health Insurance Coverage, Any 3.1% 12.2% (MoH 2010) Civil Servants Insurance (Public sector) 1.2% 5.3% Social Health Insurance (Private sector) 1.0% 1.7% Community-based Health Insurance (Informal sector) Health Equity Funds (Targeted Poor) 0.2% 0.7% 2.3% 2.9% 9 Maternal Health Utilization (LSIS 2012) Antenatal Care None 58% 44% Four or more ANC consultations 24% 37% Assistance During Delivery Skilled Birth Attendant31 20% 42%32 Location of Delivery Institutional (Health Facility) 16% 37% Births by Caesarean Section 0.6% 3.7% Data Sources for Lao PDR: LSIS 201233, LECS4 2007/0834, MoH 201035 30 Adjusted for CPI to 2010 price levels, from 2007/08 31 For the purposes of this study, a skilled birth attendant is a ‘health staff’ as per the survey questionnaire. WHO (2004) defines a skilled birth attendant as “an accredited health professional – such as a midwife, doctor or nurse – who has been educated and trained to profi- ciency in the skills needed to manage normal (uncomplicated) pregnancies, childbirth and the immediate postnatal period, and in the identification, management and referral of complications in women and newborns.” 32 Women aged 15-49, in the two years preceding the survey 33 Government of Lao PDR, 2012. Lao Social Indicators Survey, 2011-2012. 34 Government of Lao PDR, 2008. Lao Expenditure and Consumption Survey, 2007-08. 35 Government of Lao PDR, 2011. Draft Health Financing Strategy (19 August 2011). Section II: Maternal Health Out-of-Pocket Expenditure Maternal health (MH) out-of-pocket (OOP) expendi- es, room rates, and medicines in these user fees. Trans- ture collected in the household questionnaire of this portation expenditure refers to the OOP spending survey come from six different buckets, user fees and incurred for transportation to access these services. transportation expenditure for three key MH services With regards to ANC consultations, OOP expenditure – antenatal care (ANC) consultations, deliveries, and for user fees and transportation was only asked of the postnatal care (PNC) consultations (see Figure 2). User most recent ANC consultation (both facility-based fees in this context refer to “a financing mechanism consultations and outreach consultations) and of the that has two main characteristics: payment is made total number of ANC consultations received during at the point of service use and there is no risk sharing. the pregnancy. Deliveries include both institutional User fees can entail any combination of drug costs, births (in a health facility; including both vaginal and supply and medical material costs, entrance fees or caesarean births) and non-institutional births. PNC consultation fees. They are typically paid for each visit consultations included both facility-based consulta- to a health service provider, although in some cases tions and outreach consultations. Additional details follow-up visits for the same episode of illness can be on the sources of MH OOP expenditure and survey covered by the initial payment”.36 Survey respondents questions are included in the Annex. were specifically asked to include tips, service charg- Figure 2: Composition of Maternal Health Out-of-Pocket Expenditure in this survey 10 Public health facilities in Lao PDR include the central The referral system in Lao PDR is rudimentary. hospitals (specialized hospitals located in the capital Patients often bypass health centers and go straight city, Vientiane), provincial hospitals (in each of the 16 to provincial hospitals or district hospitals to seek provinces and Vientiane municipality), district hos- care as there are no rules preventing them from pitals (Type A district hospitals which provide basic doing so. Although, health centers can refer patients surgical services such as caesarean sections and Type and issue referral letters, this function is not gener- B district hospitals which do not), and health centers ally used for the purposes of gatekeeping, although (which provide basic outpatient services). There are certain project-based interventions may require few registered private health facilities which provide these. For example, the Community Nutrition Project delivery services, especially in the rural and remote requires patients to be referred formally from health areas – in this survey only 11 institutional births centers to hospitals, in order to be eligible for fee occurred outside the Lao PDR public health system37. exemptions for deliveries. 36 ALagarde, 2008 37 Ten births which occurred outside Lao PDR (in Vietnam or Thailand) and one birth occurring at a “clinic” were excluded from the analysis, out of a remaining total of 2,918 birth events captured for analysis. This section is organized as follows: The first part Type of health facility and mode of birth (vagi- addresses the combined MH OOP expenditure which nal or caesarean) were also important determi- includes user fees and transportation expenditure for nants of mean MH OOP expenditure. Including all three basic MH services, the second part explores only vaginal births, mean MH OOP expenditure the user fee component of MH OOP expenditure for varied from 214,000 kip at health centers, doubling to each of the three services, and the third part explores 488,000 kip at district hospitals, and doubling again the transportation expenditure component of MH to 991,000 kip at provincial hospitals (see Figure 4). OOP expenditure. District hospitals (7% of all births) and health centers (6% of all births) are the main locations for institution- Maternal Health Out-of-Pocket al deliveries. Births by caesarean section incurred far greater MH OOP expenditure than vaginal deliveries Expenditure – 1,466,000 kip (see Table 3), at district hospitals or provincial hospitals, although they account for only a Mean combined MH OOP expenditure for sam- small percentage (0.6%) of all births, Therefore, even pled births was 111,000 kip. This mean value belies though the vast majority of births were non-institu- the skewed distribution of this expenditure, which tional, more than half of the entire burden of MH OOP reflects the utilization patterns of these services. Only expenditure in the sample was borne by the 10% of 15% of all births occurred in a health facility and only women delivering in provincial and district hospitals 0.6% of all births are caesarean births. For this reason, (see Figure 5). the median OOP expenditure was actually zero kip, as 84% of all births were non-institutional and 50% Figure 4: MH OOP Expenditure by Location of Birth of all births were completely unassisted38 (even by unskilled personnel). Unsurprisingly, actual utilization of MH services was the major determinant of mean MH OOP expenditure. Where facility-based delivery services 11 are not utilized (84% of births) mean MH OOP expenditure (i.e., including ANC and PNC consul- tations) amounts to just 37,000 kip but increases precipitously by about 13-times to 489,000 kip where facility-based delivery services are used. Figure 3: MH OOP Expenditure for Institutional and Non-Institutional Births 38 Assistance at birth: 50% unassisted, 20% by health staff, 25% by traditional birth attendants or healers, and 4% by village health volunteers. Figure 5: Where did births occur and where was expenditure incurred? Mean MH OOP expenditure was not the only indi- providers pad out their costs by charging for unnec- cator of the financial barriers faced by households essary tests and interventions”.39 This survey found in accessing MH services. Transparency and predicta- considerable variation in MH OOP expenditure; even bility of expenditure are also important aspects of an when only cases of institutional births were included effective financing of MH services as, compared with – the lowest 10% of expenditure was less than 20,000 12 fee-for-service where the ex-ante costs are unknown, “households prefer fixed charges for episodes of care to fee for service since this reduces the risk that kip compared with more than 1,000,000 kip for the highest 10% (also see box plots in Figure 3). Photo by Bart Verweij/The World Bank, 2013 39 Ensor, 2005 Table 3: Maternal Health Out-of-Pocket Expenditure Decomposed, by Location and Type of Birth Mean Non- All Health District Provincial All All Births Expenditure Institutional Institutional Center 41 Hospital Hospital Hospitals (kip) Births Births40 (Vaginal) (Vaginal) (Caesarean)42 % of births in 83.7% 16.3% 6.4% 7.0% 2.3% 0.6% 100% sample OOP Expenditure by Usage43: User Fees and Transportation Expenditure User Fees 26,36344 381,745 167,514 370,489 756,336 1,302,623 84,351 User Fees as % 70% 78% 78% 76% 76% 89% 76% of Total Transportation 11,043 106,978 46,594 117,244 234,861 132,572 26,697 expenditure OOP Expenditure by Maternal Health Service45: ANC, Deliveries, and PNC ANC 12,444 52,163 31,394 47,916 124,661 40,133 18,925 Expenditure Delivery 19,693 433,486 179,475 436,097 866,511 1,387,866 87,211 Expenditure Delivery 53% 89% 84% 89% 87% 95% 79% Expenditure as % of Total PNC Expenditure 5,26846 3,073 3,239 3,720 24 5,516 4,910 13 Total OOP 37,406 488,723 214,108 487,733 991,197 1,466,200 111,047 Expenditure Prices quoted at 2010 levels. 1 USD = 8,259 kip (WDI, 2010) 40 Health Centers, District Hospitals, and Provincial Hospitals 41 Health centers do not have the capacity to perform caesarean births 42 n=15 43 User fees for ANC, PNC, and deliveries 44 For example, the cost of medications paid to the birth attendant. 45 Including user fees and direct transportation costs 46 The costs of subsequent PNC consultations following a non-institutional birth Breakdown of Maternal Health Out-of-Pocket Expenditure User fees accounted for three-quarters of MH the survey is contrasted with the fixed case-based OOP expenditure, of which delivery user fees reimbursement schedule in Table 4. The supply-side accounted for the largest share. As both transpor- implications of the mismatch between and actual tation expenditure (presumably due to the increas- marginal user fees and the implications of the trans- ing distance of higher-level facilities) and user fees fer of risk inherent in this change in provider payment (presumably due to the complications or additional mechanism is explored in greater detail in Section V. services) increased at higher level facilities, the user fees fraction of combined MH OOP expenditure was Deliveries fairly constant. User fees related to the actual delivery itself47 (excluding ANC and PNC) accounted for most User fees for vaginal deliveries increased dra- of the overall user fees (see Figure 6). matically by facility level, from 20,000 kip for non-institutional deliveries (e.g., to cover medicines, Figure 6: Breakdown of MH OOP Expenditure, commodities, and other outreach charges), rising by Location of Delivery steeply to 160,000kip at health centers, 359,000 kip at district hospitals and 744,000 kip at provincial hospitals. This could be due to the increasing complexity of cases referred to higher levels or the provision of additional services or drugs.48 It should be noted that however, even prior to the implementation of the national free MCH policy 14 when this survey was conducted, many institutional deliveries at public health facilities were already free of user fees (i.e., 27% of health center deliveries, 14% of district hospital deliveries, and 18% of pro- vincial hospital deliveries) suggesting that there was already some degree of supply-side financing or existing health financing schemes (such as Health Equity Funds), which enabled health facilities to pro- vide these services without charging additional user User Fees fees. It should be noted that overall household cover- age of any demand-side health financing scheme in On the demand-side, the national free MCH policy this sample is only 3.1% and hence these free services provides fee exemptions for facility-based MH cannot be completely attributed to these schemes. services and cash transfers to users to cover food Although the free MCH policy allows for higher pay- and transportation costs related to a facility-based ment rates for higher level facilities, this increase is delivery according to a fixed schedule (see Annex). not proportionate to the mean marginal user fees On the supply-side, the policy provides fixed-fee derived from this survey, and may have implications reimbursements dependent on the type of service on provider behavior with respect to referrals which and the location of service provision. The mean mar- will be explored in Section V. ginal user fees for each of these services derived from 47 Although the survey questionnaire included questions to disaggregate user fees (e.g. medicines, tips, room fees, etc.), too few respond- ents were able to recall the disaggregation for any meaningful analysis to be possible. 48 These findings are comparable to those from a cross-sectional study of 581 women at two provincial hospitals (Khammuane and Borikhamxay) in central provinces in Lao PDR in 2010. In that study, medical expenses were estimated at approximately 248,000 kip (USD 30) for vaginal deliveries and 1,272,000 kip (USD 154) for caesarean section births, which is slightly lower than the typical user fee paid pregnant women from this high priority and poor community going to or referred to provincial hospitals to deliver (Douangvichit, 2012). Unsurprisingly, deliveries by caesarean section in- ture expected with the implementation of the free curred higher user charges – on average 1,292,000 MCH policy would likely be very much welcome and kip. However, as the increase in free MCH policy associated with enhanced financial protection, but reimbursement for deliveries by caesarean section on the supply-side, there would be implications on was even greater and exceeded this mean, this may providers appetite for absorbing the risk, given the also have implications on provider behavior by small risk pool sizes of under-utilized health facilities creating a financial incentive in favor of deliveries by spread out over the sparsely populated rural areas, caesarean section. unless significant increases in utilization allow econo- mies of scale to offset some of this risk by expanding The uncertainty and variability in combined the risk pooling and by lowering the average cost of MH OOP expenditure faced by households was services as fixed costs are diluted. further noted even when only delivery user fees were analyzed in a disaggregated manner for each International comparisons of delivery expenditure facility level and for each mode of delivery (see are provided in Table 5, where deliveries in Lao PDR Figure 7). For example, the 75% quartile of user fees appear to be more expensive in absolute terms and for a vaginal delivery at a district hospital was 500,000 as a fraction of GDP per capita, compared with the kip, which was five times what the 25% quartile comparator countries selected for the availability of would pay, 100,000 kip. Hence, on the demand-side, recent data. the predictability and reductions of OOP expendi- Figure 7: Delivery User Fees 15 16 Table 4: User Fees for Maternal Health Services, contrasted with Free MCH Provider Payments Service Location of Service Provision: Non-Institutional Health Center District Hospital Provincial Hospital Vaginal Mean User Fees per Service (kip) 19,69349 160,209 359,453 743,727 Delivery Free MCH Provider Payments (kip) 0 125,000 175,000 200,000 % of all births 83.7% 6.4% 7.0% 2.3% (n) (n=2,477) (n=191) (n=188) (n=47) District And Provincial Hospitals Caesarean Mean User Fees per Service (kip) - - Delivery Free MCH Provider Payments (kip) - - 1,291,851 % of all births - - 1,500,000 (n) 0.6% (n=15) Service Location of Service Provision: Health Center District And Provincial Hospitals Antenatal Care Mean User Fees per Service (kip) 1,566 4,017 Free MCH Provider Payments (kip) 15,000 20,000 for District Hospitals 30,000 for Provincial Hospitals % of all births (n) 21.0% 14.8% (n=609) (n=357) Postnatal Care Mean User Fees per Service (kip) 21,846 261,507 Free MCH Provider Payments (kip) 15,000 20,000 for District Hospitals 30,000 for Provincial Hospitals % of all births (n) 1.8% 1.3% (n=56) (n=36) Prices quoted at 2010 levels. 1 USD = 8,259 kip (WDI, 2010) 49 Costs mainly related to medicine, service charges and tips, for births attended through outreach. Table 5: Selected International Comparisons of Delivery Expenditure Country Year Uncomplicated Complicated Uncomplicated Complicated GDP per Uncomplicated Source Delivery OOP Delivery OOP Delivery OOP Delivery OOP capita Delivery OOP Expenditure Expenditure Expenditure Expenditure (current US$) Expenditure at Public at Public at Private at Private at Public Facility (US$) Facility (US$) Facility (US$) Facility (US$) Facility (% of GDP) India 2012 28 - 84 - 1,50650 1.9% Mohanty, 2012 Lao PDR 2010 30 154 - - 1,158 2.6% Douangvichit, (urban) 2012 Lao PDR 2010 4851 156 - - 1,15852 4.1% This survey (rural) Burkina 2006 6.6 - 13.3 10.8 - 30.4 3.1 4.3 40053 1.7 - 3.3% Perkins, 2009 Faso Kenya 2006 4.3 - 13.5 6.7 - 26.0 13.5 - 42.8 15.4 – 202.4 616 0.7 – 2.2% Perkins, 2009 Tanzania 2006 2.5 - 5.2 3.4 – 8.6 4.8 – 21.0 6.9 – 28.5 370 0.7 – 1.4% Perkins, 2009 Nepal 2004 6754 132 - - 260 26% Borghi, 2006 50 WDI, 2011 51 Official exchange rates (period average), WDI, 2010 52 WDI, 2010 53 WDI, 2006 54 Including transportation; Prices adjusted to 2006 17 Antenatal Care and Postnatal Care Consultations The mean user fee for an ANC consultation was an is discharged from hospital (following an institu- 2,000 kip at health centers and 4,000 kip at hospi- tional delivery) or before the skilled attendant leaves tals. This mean value was relatively low because most a woman delivering outside an institution. Hence, ANC consultations were already free of user fees (74% the reimbursements of these routine PNC consult at hospitals, 86% at health centers) even without the tions should be embedded into the reimbursement national free MCH policy55. The high percentage of that providers receive for institutional deliveries, free ANC consultations suggests that supply-side and these additional PNC consultation reimburse- funding was often adequate. Despite this, few preg- ments reserved for non-institutional births which are nant women (42%) attended for any ANC consulta- followed by a routine PNC consultation at a health tion56, perhaps due to transportation expenditure facility or an institutional birth followed by a routine or other financial and non-financial barriers as PNC consultation during a separate visit. An addition- discussed in the later sections. Furthermore, there al reimbursement category and provider payment wouldhave been little marginal incentive for provid- should be defined for complications following deliv- ers to increase the utilization of ANC visits, except ery, being aware that these may well be more costly for visits where medications (such as iron or folate than an uncomplicated delivery, and that coverage of tablets) and services (ultrasound scans) can be billed these occasional but high and unpredictable expen- for. These survey findings imply that the national ditures are important for financial protection. free MCH policy reimbursement rates are generous,   which may be appropriate given the context of low Transportation Expenditure utilization if providers are able to appropriately in- duce increased utilization of these services among 18 disadvantaged communities. Mean user fees for a PNC consultation was 22,000 Deliveries Mean transportation expenditure rangedfrom at health centers and 262,000 kip at hospitals. 19,000 kip to go to a health center, to 77,000 These findings need to be interpreted with caution kip and 118,000 kip to go to a district hospital as the extremely low rates of PNC consultations (only and provincial hospital respectively (see Table 6).57 3.6% of respondents reported a PNC consultation – This was less than OOP expenditure on user fees but facility-based or by outreach – which is even lower was still a significant proportion. The average round than the rates of institutional deliveries) imply these trip distance to the nearest hospital (46.8km) was were not the preventative routine PNC checks within seven-times more than the equivalent distance to a 6 weeks of childbirth, but are postnatal consultations health center (6.6km). When measured in terms of due to complications following the delivery. These su time instead of distance, travel time was increased, vey findings have implications on the case definition from 42 minutes (to a health center) to 96 minutes of PNC consultations in the national free MCH policy. (to a district hospital), but not as dramatically as the Most routine PNC consultations occur before a wom- increased distances would suggest. Considering that 55 The national free MCH policy recommends four ANC consultations – one during the first trimester, one during the second trimester, and two during the third trimester – and two PNC consultations within 6 weeks of birth. 56 WHO guidelines for ANC state that ‘all pregnant women should have at least four antenatal care assessments by or under the supervision of a skilled attendant. These should, as a minimum, include all the interventions outlined in the new WHO antenatal care model and be spaced at regular intervals throughout pregnancy, commencing as early as possible in the first trimester.’ (WHO, 2007. Provision of Effec- tive Antenatal Care, Integrated Management of Pregnancy and Childbirth). 57 In a complementary cross-sectional study of 581 women at two provincial hospitals (Khammuane and Borikhamxay) in central provinces in Lao PDR in 2010, non-medical expenses (transportation, food, additional costs, productivity loss) made up a significant proportion of total childbirth expenditure – 49% for vaginal births and 43% of caesarean section births. These non-medical expenses were estimated at approximately 240,000 kip for vaginal deliveries (USD 29) and 958,000 kip (USD 116) for caesarean sections (Douangvichit, 2012). it was faster and cheaper to travel to a health center four recommended ANC consultations to a health to deliver, compared with a district hospital, it is center or 6.8 hours58 for a hospital. The importance of interesting to note that almost the same percentage outreach in providing these preventative services is of deliveries occur in district hospitals, 7%, as health highlighted. centers, 6%. This likely reflects a balancing of prefer- ences of perceived quality and convenience of travel. Mean transportation expenditure for a PNC con- sultation at a hospital, 43,000 kip, was almost Antenatal Care and Postnatal Care double that of an ANC consultation at a hospi- Consultations tal, 25,000 kip, even though the mean distances traveled were almost the same. This likely reflect- Mean transportation expenditure for an ANC con- ed the emergent nature of these consultations, as sultation at a health center was 6,000 kip, which discussed in the earlier section. Taken together, this- was about four-times the typical ANC user fee. suggests that addressing expenditure related to Transportation costs were much higher at hospitals, complications following childbirth, would make a 25,000 kip, than at health centers. Considering the significant contribution towards financial protection. dangers, discomfort and inconvenience of traveling Furthermore, greater utilization of quality institution- in this region, especially if pregnant, it is unsurpris- al births and ANC consultations would also helpfully ing that most women do not choose to spend the 2.8 reduce complications following childbirth. hours of total round trip travel time required for the Table 6: Transportation Expenditure for Maternal Health Services Service Health Center District Hospital Provincial Hospital Deliveries Mean Transportation Expenditure (kip) Mean User Fee for Vaginal Delivery (kip) 19,265 160,209 77,494 359,453 117,832 743,727 19 Mean Distance (km) 59 6.6 46.8 N/A Travel Time during Dry Season60 (hrs) 0.7 1.6 N/A Health Center District And Provincial Hospitals Antenatal Care Mean Transportation Expenditure (kip) 6,001 24,585 Mean User Fee (kip) 1,566 4,017 Mean Distance (km) 5.8 41.3 Travel Time during Dry Season (hrs) 0.7 1.7 Postnatal Care Mean Transportation Expenditure (kip) 4,542 42,239 Mean User Fee (kip) 21,846 261,507 Mean Distance (km) 4.5 42.2 Travel Time during Dry Season (hrs) 0.7 1.6 Prices quoted at 2010 levels. 1 USD = 8,259 kip (WDI, 2010) 58 During the dry season 59 Round-trips 60 Travel time is increased by 45% during the rainy season, compared with the dry season (author’s analysis of the survey) Section III: Financial Protection and Demand-Side Financing Implications Maternal Health Out-of-Pocket Ex- Without the National Free MCH Policy penditure Contrasted with Monthly Financial protection of women delivering at a Household Expenditure health facility was weak without the free MCH policy. Mean combined MH OOP expenditure for a Measurements of financial protection for health are pregnant woman delivering at a district hospital, the usually classified into catastrophic and impoverish- most common location for institutional births, was ing health expenditure.61 Catastrophic health ex- 493,000 kip (see Table 7). When contrasted with av- penditure is defined in terms of a threshold related erage monthly household expenditure of 1,527,000 to a ‘household’s prepayment income’. An example of kip, this OOP expenditure represented 26% of aver- this would be OOP expenditure on health exceeding age monthly household expenditure, rising to 52% 40% of a household’s capacity to pay, defined as ‘effe- for provincial hospital births. MH OOP expenditure tive income remaining after basic subsistence needs for non-institutional births by contrast, represented have been met’.62 A household is usually considered just 3% of average monthly household expenditure. to have been impoverished by health expenditure if the expenditure causes the household to cross below Using a further measure of economic hardship64, the poverty line. As the household survey used in this more than 10% of households had to borrow report does not include detailed household expendi- money to cover the cost of deliveries, when this 20 ture and consumption modules, a detailed econo- metric exploration of these formal measures of finan- cial protection is not possible nor intended. Instead, happened at hospitals (11% for district hospitals; and 13% for provincial hospitals). The mean amount borrowed by these households was 1,219,000 kip total monthly household expenditure is used as the and 1,634,000 kip for district and provincial hospi- primary denominator in contextualizing MH OOP tals respectively. Where these deliveries occurred at expenditure, in the interest of comparability with health centers, 6% of households borrowed a mean the literature on MH expenditure, while acknowledg- of 651,000 kip to cover the cost of deliveries. Only ing that there may be other denominators for con- 3% of households choosing non-institutional births textualizing these costs, such as annual household borrowed to cover the cost of delivery, but when expenditure and GDP per capita.63 For this analysis, they did, the amount borrowed was still substantial total monthly household expenditure was estimat- – 556,000 kip. ed for each household in this 2010 survey based on expenditure data from the Fourth Lao Expenditure and Consumption Survey (LECS4) 2007/08 using standard methodology described in the Annex. 61 Wagstaff, 2008 62 Xu, 2003 63 Goudge, 2009; Perkins, 2009 64 Kruk, 2009 The magnitude of MH OOP expenditure and On the other side of the spectrum, MH OOP for monthly household expenditure is demonstrated non-institutional births, which comprised 84% in a ‘pencil parade’ for all 2,918 households in Fig- of births, were typically small and rarely exceed ure 8, for institutional deliveries (red, on left side and monthly household expenditure. Health outcomes non-institutional deliveries (blue, on right side), or- may have been adverse, but expenditure was rela- dered by total average monthly household expendi- tively predictable and small, even considering that ture (the highest converging at the center). The small these households tended to have lower average proportion institutional births (16%) are compacted monthly household expenditure than those associat- at the left, but resulted in most of the OOP expend ed with institutional deliveries. There were only three ture which on a household level, often exceeded the occasions in the sample when catastrophic MH OOP average monthly household expenditure, even for from PNC exceeded monthly household expenditure. households at the lower expenditure quartiles. This suggests that the MH OOP expenditure was non- discretionary and may have impacted the livelihoods of the household. MH OOP expenditure related to institutional births exceeded monthly household expenditure on numerous occasions throughout the whole spectrum of total household expenditure. Table 7: Financial Protection with and without the national free MCH policy Location of Birth Non- Health District Provincial Institutional Center Hospital Hospital % of births 83.7% 6.4% 7.2% 2.8% 21 Without the national Free MCH Policy Mean MH OOP expenditure (kip) 37,406 214,108 493,379 1,113,404 % of mean monthly household expenditure65 3% 12% 26% 52% % of households where total MH OOP expenditure exceeds 1.8% 17.6% 52.9% 70.2% 20% of monthly household expenditure % of households where total MH OOP expenditure exceeds 0.5% 3.7% 21.9% 50.7% 40% of monthly household expenditure % of households borrowing to cover cost of delivery 2.6% 6.0% 11.2% 13.3% Mean amount borrowed among those borrowing (kip) 555,538 650,663 1,218,819 1,634,357 With the national Free MCH Policy Mean remaining MH OOP expenditure (kip) 11,043 -10,754 26,912 120,037 % of households where remaining MH OOP expenditure 0.5% 1.5% 2.6% 6.9% exceeds 20% of monthly household expenditure % of households where remaining MH OOP expenditure 0.0% 0.0% 1.6% 3.2% exceeds 40% of monthly household expenditure Prices quoted at 2010 levels. 1 USD = 8,259 kip (WDI, 2010); Negative numbers imply a net gain due to cash transfers. 65 Monthly household expenditure for the individual household Figure 8: Maternal Health Expenditure compared with Monthly Household Expenditure, for Institutional and Non-Institutional Births. Red households (institutional births) ordered by increasing household expenditure Blue households (non-institutional births) ordered by decreasing household expenditure MH OOP expenditure (falling lines) crossing the black zero line is greater than average monthly household expenditure 22 With the National Free MCH Policy Figure 9: Financial Protection Afforded by the Free MCH Policy, by Place and Type of Delivery Financial protection afforded by this policy for maternal services is strong theoretically, with mean reductions in MH OOP expenditure greater than 100% (i.e. households will receive a net surplus due to the cash allowances provided, disregarding other opportunity costs not captured in the survey), for births at health centers. These allowances and fee exemptions will reduce expenditure for delivery at a health center so much that it may often be ‘cheaper’ than a delivery at home (see Table 7). These findings are based on analysis which de- scribes the baseline scenario of the free MCH policy on MH OOP expenditure for the same households, assuming no change in behavior or Although theoretical financial protection is strong, utilization patterns. User fees are exempted and there is no certainty that additional informal pay- pregnant women receive cash allowances as per the ments would not occur. International experiences free MCH policy. Where previously MH OOP expendi- suggest that informal payments are more likely66, if ture accounted for more than 20% of monthly house- services are underpriced, and there is some indica- hold expenditure in more than half of households tion that the reimbursements to providers would delivering at hospital, with the free MCH policy fewer be less than what they would normally receive from than 7% of households are simulated to incur this out-of-pocket payments (more details on the impli- proportion of MH expenditure (see Table 7 and Figure 9). Advanced modeling of utilization patterns using this 2010 baseline data was not attempted as data cations for providers are discussed in the later sec- tion on Supply-Side Considerations). These informal payments will undermine the financial protection 23 collection for an endline survey has recently been rationale of fee exemptions and may have implica- completed in July 2013 and will be used for analy- tions on equity of access. Of potential interest to sis of actual benefits incidence and changes in utili- policymakers in Lao PDR, a study conducted in five zation. It is probably that different socio-economic countries (Egypt, India, Kenya, Peru, and Vietnam) groups are likely to respond differently to the policy found that the practice of exemptions has not meant and the elasticity of demand for each group cannot an end to the imposition of informal fees and other be predicted with any certainty. costs associated with seeking and receiving MH ser- vices67. Similarly, in Dhaka, where maternity services are nominally free, there were a number of hidden costs for medicine, blood tests, travel, food, hospital fees, services provided by ayas68, and tips69. Further- more, if the reimbursements are indeed underpriced and informal payments do not occur, providers may be further dis-incentivized from encouraging the utilization of these services, in the context of already low utilization of MH services. Accountability mecha- nisms should hence be strengthened, for example, by establishing a mobile phone hotline service to allow patient clients make complaints of informal payments or reluctance to provide services. 66 Lewis, 2007 67 Sharma, 2005 68 Female ward assistants 69 Nahar, 1998 Section IV: Equity Dimensions Economic Status Utilization and Barriers Utilization of MH services increased dramatically as Figure 11: Barriers Against Institutional Births economic status increases (see Figure 10 and Figure 11). Only 6% of women in the poorest economic quin- tile gave birth in an institution compared with 37% in the richest economic quintile. Given this context, it is unsurprising that financial barriers were cited with increasing frequency by poorer households as the reason for choosing a non-institutional birth. How- ever, it is notable that citing traditional beliefs as a reason for choosing a non-institutional birth, was even more strongly associated with the poorer eco- nomic quintiles, suggesting that addressing financial barriers alone will not be sufficient in improving the equity of health outcomes. This is further demonstrat- ed by the strong association between low maternal education and/or the physical accessibility, and the economic status of the household (see Figure 12), Figure 12: Economic Status is Associated with Other 24 which implies that the economic status of the house- hold taken in isolation may not be the main or only barrier towards the utilization of MH services. Determinants of Health Access Figure 10: Location of Birth, by Economic Quintile Expenditure without the National Free MCH Policy Without the free MCH policy, OOP expenditure was Ironically, for the households covered by government regressive among households reporting an institu- health insurance schemes or HEFs, mean MH OOP tional birth, with the poorest quintile of households expenditure for institutional deliveries appeared to spending a greater proportion of household expend- be higher, 546,000 kip, than for uninsured house- iture, 43%, on OOP expenditure compared with the holds, 371,000 kip, although there were only 24 insti- richest quintile of households, 26% (see Figure 13). tutional births represented in this insured sub-sam- Furthermore, more than half (57%) of the poorest ple, as only institutional births are counted to adjust households choosing institutional deliveries incurred for differences in utilization. There could be many expenditure greater than 20% of monthly household possible reasons for this higher MH OOP expenditure expenditure and almost one-fifth (19%) borrowed a – for example, an inadequate benefit package, poor mean of 1,153,000 kip to cover the cost of the deliv- implementation of the scheme, informal payments, ery. Richer households spent more on user fees but or the choice of patients to spend more on additional less as a percentage of monthly household expendi- health services or pharmaceuticals. This also does ture. This increased absolute spending was unlikely not appear to be related to differences in caesarean to be due to a greater incidence of complicated preg- rates as these are similar among those covered by the nancies, and hence it suggests that there may be an schemes and those who are not covered. Reassuring- element of discretionary expenditure related to these ly, despite the increased MH OOP expenditure, these services. Six percent of these households borrowed schemes were associated with increased rates of money to cover the cost of the delivery – but the institutional births - 32% compared with 16% among mean amount borrowed, 1,105,000 kip, was even less the uninsured. However, if only the poorest quintile in absolute terms than the mean amount borrowed was analyzed, coverage of an insurance scheme was by the poorest quintile. It should be noted that in these high priority and associated with lower rates of institutional births than those without coverage - 3.2% compared with 5.7%. This worrying finding again suggests that low- 25 poor communities, the richest quintile is still rela- ering financial barriers alone may not be sufficient to tively poor, and despite significantly higher rates of improve MH outcomes. institutional deliveries, 37%, it is still very low. The coverage of health financing schemes by Figure 13: MH OOP Expenditure, by Economic Quintile economic quintile is presented in Figure 14. Overall coverage was poor – with only 3.1% of surveyed households covered by any scheme. Some house- holds in the poorer quintiles were covered by HEFs which are targeted to the poor, though there is some suggestion of inclusion errors as even households in the 4th and 5th economic quintile were covered. However, the larger schemes – for formal private sector workers and civil servants - covered the richer quintiles more comprehensively. This leaves a U-shaped ‘missing middle’ not covered by any health financing scheme. Figure 14: Coverage of Health Financing Schemes, by Economic Quintile Expenditure with the National Free MCH Policy As the free MCH policy provides universal (i.e.poor and non-poor alike) fee exemptions for MCH ser- vices, the policy has the potential to be progres- sive-as the same absolute fee exemptions would 26 make up a larger share of expenditure for the less wealthy. However, because utilization of MH services was strongly associated with wealth, a larger share of Photo by Stan Fradelizi/The World Bank, 2011 the benefits of fee exemptions and cash allowances As the international perspective suggests that it will be accrued by the wealthier households. Figure is not uncommon for the overall distribution of 15 demonstrates the inequality of MCH policy ben- service benefits to favor the richer people70, the efits, with wealthier households receiving more ben- free MCH policy may be appropriate as a transition efits mainly due to a greater concentration of MH ser- towards improved access to quality essential services, vice utilization, rather than the due to higher quantity and the potential for regressivity noted and mitigat- of benefits received per service. ed through other means – for example, information campaigns targeted at rural areas. If no additional interventions are used to increase the utilization of MCH services among the poor- est, and the same ‘baseline’ modeling assump- tions described earlier are used, the free MCH policy will be regressive – with the wealthiest quin- tile in these poor and priority communities taking 44% of the benefits of the policy, compared with 9% for the lowest quintile (see Figure 16). 70 Mills, 2012 Table 8: MH OOP Expenditure, by Household Expenditure Quintiles MH Expenditure for households reporting institutional births only are included, in order to compensate for differences due to utilization alone. Household Expenditure Quintile Poorest Richest Quintile Quintile 1 2 3 4 5 Monthly Household Expenditure, ‘000 kip 1,033 1,211 1,427 1,708 2,269 Institutional Delivery Rate (%) 6% 11% 10% 19% 37% Institutional Deliveries 7% 13% 12% 23% 37% (as % of Institutional Deliveries in the sample) Without the national Free MCH Policy Mean MH OOP expenditure (kip) 437,430 340,512 421,963 384,967 613,066 Mean % of monthly household expenditure71 43% 28% 29% 23% 26% % of households where total MH OOP expenditure exceeds 57% 43% 52% 39% 38% 20% of monthly household expenditure % of households borrowing to cover cost of delivery 19.2% 9.5% 16.6% 9.7% 5.6% Mean amount borrowed among those borrowing (kip) 1,153,416 174,308 1,585,432 1,306,564 1,105,027 With the national Free MCH Policy Mean remaining MH OOP expenditure (kip) 12,237 -4,382 34,346 20,400 42,337 % of households where remaining MH OOP expenditure 6% 3% 6% 2% 2% exceeds 20% of monthly household expenditure Prices quoted at 2010 levels. 1 USD = 8,259 kip (WDI, 2010). Negative numbers imply a net gain due to cash transfers. Figure 15: Accrual of MH Policy Benefits 27 Red lines represent the value of cash allowances and blue lines represent the value of user fee exemptions. 71 Mean monthly household expenditure calculated for each quintile separately. Figure 16: Q-Q Plot of Cumulative Free MH Benefits by Economic Quintile 28 Photo by Bart Verweij/The World Bank, 2013 Box 1: Should Free MCH benefits be targeted? In addition, the very fact that free MCH services are focused on specific groups – pregnant wom- International experiences indicate the potential en and children under five – can also be seen for regressivity when fee exemptions for health as a form of targeting, which may even have an services are provided universally and analysis element of progressivity if fertility rates among of this survey indicate that the free MCH policy the marginalized groups are higher (although in may not be an exception. Should free MCH ben- the survey sample, this does not appear to have efits be targeted at marginalized people instead been a dominant effect). of being provided universally, in the interests of equity and the broader fiscal sustainability of As the prevalence of poverty declines in Lao these programs? PDR, one of the fastest growing economies in the world, the ease of administering geographic Internationally, voucher schemes are often quot- targeting schemes may be offset by the ineffi- ed as an example of a mechanism to allow free ciencies of including the non-poor households in services to be targeted to specific marginalized poor areas and the dangers of excluding the poor groups72, to stimulate demand, and to encourage in areas which are not poor in aggregate. The lat- market competition among providers73. In Bang- ter is of particular relevance to Lao PDR where, ladesh, ‘poor voucher recipients were 4.3 times although ‘poverty rates are highest in the remote more likely to deliver in a health facility … than upland areas, these are sparsely populated ar- the non-poor recipients’, resulting in enhanced eas, so most of the poor live in the Mekong River equity74. However, administrative costs for these valley’76. schemes ‘can be high’75, and the population distribution and density of Bangladesh may not Health Equity Funds, which provide fee exemp- be a comparable model for Lao PDR which is tions for a basic package of health services to the land-locked and sparsely populated. In Lao PDR, there are a variety of targeting mech- targeted poor in selected districts in the north and southern regions of Lao PDR, have depended 29 on household-level targeting. A variety of meth- anisms in existance. Geographic targeting, where ods have been used including the government’s eligibility is determined by residence in targeted ‘list of poor’ in northern districts and mixed districts, village development clusters (‘kum methods in southern districts, which combine ban’), or villages, is in practice already being used geographic targeting, household-level proxy in the national free MCH policy (and other initia- means tests, and a controlled participatory ap- tives across sectors) as the scale-up of national proach. Although universal (or crude geographic implementation is prioritizes priority and poor targeting) of free MCH benefits may be appropri- districts, given budgetary constraints. In low ate at this stage of transition to better access to income and low capacity countries, geographic essential services (by allowing greater volumes of targeting may often be the most feasible and appropriate targeting method as the adminis- services to increase and allow providers to gain trative burden of sophisticated household-level more expertise), there may future justification for targeting and the risk of excluding the most vul- more sophisticated household-level targeting as nerable may outweigh the efficiency gains of ex- the prevalence of poverty declines and benefit cluding the non-poor households in poor areas. packages are expanded to include more services. 72 Borghi, 2006 73 Ahmed, 2011. A maternal health voucher scheme: what have we learned from the demand-side financing scheme in Bangladesh? 74 Ahmed, 2011. Is demand-side financing equity enhancing? Lessons from a maternal health voucher scheme in Bangladesh. 75 Borghi, 2006 76 Epprecht, 2008 Village Accessibility Figure 18: Barriers against Institutional Births Utilization and Barriers Utilization of MH services by households in villag- es with road access was higher than those lacking road access (see Table 9) and unsurprisingly, distance was increasingly cited as a reason for choosing a non- institutional birth among less accessible households. (Within this sample, villages with no direct road access but with a road less than 4 km away appeared to be poorer and to utilize fewer MH services. This could be a specific feature of this survey sample of high priority and poor communities in the southern provinces rather than a national trend.) Even when coming from a village with road access, Expenditure women traveled 12.5km one-way to reach the health facility to deliver, but this was less than half the mean Including only institutional births, women from distance traveled by those from villages with road villages with road access more than 4km from the access more than 4 km from the village. village incurred more MH OOP expenditure – in total, for transportation expenditure separately, and as Reported findings from the Lao Expenditure and a percentage of monthly household expenditure– Consumption 2007-200877 also indicate that ‘difficul- than women from villages with direct road access. 30 ty to get to’ health facilities is the main reason for not getting treatment in 57% of households in rural areas. The national free MCH policy which provides vari- able cash transfers to women based on the distance of their village from the health facility compensates Figure 17: Location of Births, by Village Access somewhat for the increased expenditure of travel but even with the policy implemented, women from villages with a road more than 4km still end up paying about three-times more OOP than a women from a village with direct road access. Additional analysis, specifically for informing policy- makers on the appropriate strength of cash transfers to cover transportation costs is included in the Annex. 77 Anuranga, 2012 Table 9: MCH OOP Expenditure, by Village Accessibility MH Expenditure for households reporting institutional births only are included, in order to compensate for differences due to utilization alone. Households from Villages with Villages with Road Villages with Road Road Access < 4km away ≥ 4km away Households in Survey (%) 72% 13% 15% Monthly Household Expenditure, ‘000 kip 1,909 1,472 1,607 Institutional Delivery Rate (%) 20% 6% 8% Institutional Deliveries 88% 5% 7% (as % of Institutional Deliveries in the sample) Actual mean distance travelled (one-way, km) 12.5km 14.1km 31.3km Without the national Free MCH Policy Mean MH OOP expenditure (kip) 494,876 259,597 567,255 Transportation Expenditure (kip) 104,002 56,428 177,003 Mean % of monthly household expenditure 78 26% 18% 35% % of households where total MH OOP expenditure exceeds 42% 38% 50% 20% of monthly household expenditure With the national Free MCH Policy Mean remaining MH OOP expenditure (kip) 25,672 -21,929 88,135 % of households where remaining MH OOP expenditure 3% 0% 8% exceeds 20% of monthly household expenditure 31 Prices quoted at 2010 levels. 1 USD = 8,259 kip (WDI, 2010). Negative numbers imply a net gain due to cash transfers. Ethnicity and Maternal Education Educational and cultural barriers were important (11%). Similarly, 35% of mothers with upper second- constraints against utilization of MH services. ary education delivered at an institution compared Women without any formal education were much with 9% for mothers without any formal education. less likely to utilize MH services (see Figure 19) as were Traditional beliefs featured prominently as a reason women from non-Lao-Tai households (see Figure 21). for not choosing an institutional birth, which vary Institutional birth rates among Lao-Tai households widely by these ethnic and educational parameters were double (22%) that of Mon-Khmer households (see Figure 20 and Figure 22). 78 Mean monthly household expenditure calculated for each quintile separately. These findings are consistent with international and Figure 20: Barriers against Institutional Births domestic evidence. A cross-country study involving Demographic and Health Surveys from 31 coun- tries finds that women’s ‘economic, educational and empowerment status’ is strongly associated with the utilization of maternal health services79. Hence, in order for the national free MCH policy to be more eq- uitable, non-financial barriers need to be addressed in a comprehensive manner, to include investments in other sectors such as universal primary education, broad poverty reduction, and the empowerment of women. In Lao PDR, these large-scale associations noted by cross-country analysis are contextual- ized by a recent qualitative study in Lao PDR, which summarized the obstacles that impede institutional births as: “(1) Distance to the health facilities and Figure 21: Location of Birth, by Ethnicity difficulties and costs of getting there; (2) Attitudes, quality of care, and care practices at the health facilities, including a horizontal birth position, episiotomies, lack of privacy, and the presence of male staff; (3) The wish to have family members near- by and the need for women to be close to their other children and the housework; and (4) The wish to follow traditional birth practices such as giving birth 32 in a squatting position and lying on a ‘hot bed’ after delivery”80. Figure 19: Location of Birth, by Maternal Education Figure 22: Barriers against Institutional Births 79 Ahmed, 2010. Economic Status, Education and Empowerment: Implications for Maternal Health Service Utilization in Developing Countries. 80 Sychareun, 2012 Section V: Supply-Side Considerations Supply-Side Financing Implications financing interventions may be required in order to address the risk appetite of these health facilities. Provider Payment Mechanism Revenue and Cost In addition to a change in the financing of MH services implied in the national free MCH policy With the implementation of the national free – from private OOP financing to public financing MCH policy, some health facilities, such as dis- – there is an additional implied change in the pro- trict hospitals and provincial hospitals, may vider payment mechanism – from fee-for-service experience a reduction in marginal revenue for to a case-based payment mechanism. The former vaginal deliveries of 184,000 kip and 544,000 locates most of the risk of variable costs arising from kip per delivery. This represents a deep reduc- complications onto the payor, while the latter locates tion of 51% and 73% respectively, compared with the risk onto the provider. For example, if a woman revenue received from user fees without the free develops an infection following childbirth which MCH policy. Health centers will also experience a requires a longer period of hospitalization and addi- reduction in revenues although, if ANC consulta- tional medicines: under the previous fee-for-service tions are included, the reimbursement payment for system, the payor would incur all the risks of these those services may compensate for this reduction variable costs, but under a case-based payment in delivery revenues. The picture is more mixed for mechanism, the provider would bear the risks of caesarean deliveries – as district hospitals, which these variable costs without additional payment from receive the same reimbursement of 1,500,000 kip for the payor. caesarean deliveries as provincial hospitals, stand to gain almost 940,000 kip of additional revenue per 33 Case-based payment mechanisms are usually caesarean delivery because of the free MCH policy. priced to factor in these variable costs on average, Provincial hospitals, however, would receive slightly and if providers have large case loads and pric- less revenue although this could be due to the com- ing of the services are appropriate, the additional plexity of cases requiring referral to provincial hos- costs of occasional high expense services would pitals from these poor and remote communities. If be offset by the additional profit from the usual caesarean deliveries are considered in aggregate, the lower expense services. Indeed, the provider would reimbursement rate is comparable to mean health be incentivized to reduce the possibility of complica- facility revenues from user fees for a caesarean deliv- tions as far as possible in order to avoid these high ery of 1,292,000 kip. expenses, although other behaviors – such as under- treatment, referral, reclassification of cases81, and Findings from the analysis presented in Table 10 inappropriate discharge and multiple readmissions – simulates the baseline scenario of the free MCH are also possible. However, given the low utilization policy on marginal health facility revenue for de- of health facilities in remote areas and their limited liveries, excluding ANC and PNC consultations as financial reserves, the quantity of maternal services these could and do occur at different facilities. provided may not be enough for an individual health Instead of receiving user fees from patients who pay facility to confidently accept the occasional high OOP, the health facilities will receive fixed reimburse- expense services as their risk pool is small. Adjust- ments from the Ministry of Health according to the ments of the pricing of reimbursements or other free MCH policy reimbursement schedule, per unit of service provided. 81 According to the national free MCH policy, there are no additional case-definitions for complications except for miscarriages which are priced similarly to deliveries (see Table 12) Table 10: Supply-side Financing Implications for Free Deliveries Health Facility Revenue, Per Delivery Vaginal Delivery Caesarean Delivery82 Health District Provincial District Provincial Center Hospital Hospital Hospital Hospital Without the national Free MCH Policy Health Facility Revenue (kip) 160,210 359,453 743,727 560,490 1,634,080 With the national Free MCH Policy Health Facility Revenue (kip) 125,000 175,000 200,000 1,500,000 1,500,000 Change in revenue (kip) -35,210 -184,453 -543,727 939,510 -134,080 Change in revenue (% of revenue without Free MCH) -22% -51% -73% 168% -8% Prices quoted at 2010 levels. 1 USD = 8,259 kip (WDI, 2010). Negative values imply a reduction in revenue with the national free MCH policy. Although this analysis expects a decline in mar- Secondly, user fees charged may have incorpo- ginal revenues for most types of deliveries, some rated an element of rent seeking by the provider. of this difference may be appropriate as the govern- This survey does not collect information which would ment is larger and more technically sophisticated a provide evidence on the existence or scale of rent purchaser than an individual patient. seeking, even though that may be influenced by the current remuneration of civil servants and vol- Furthermore, revenue to facilities in the form of unteers at health facilities. Technical staff employed user fees from patients who pay OOP may not by the civil service receive a total net numeration represent the true marginal cost of these services equivalent to only 49% of the consumption of a rural 34 for several reasons. Firstly, the analysis in Table 10 assumes no change in the utilization patterns result- ing from the national free MCH policy. In reality, the household83. Although there are planned substantial increases to the wages of civil servants including health staff from 2013 to 2015 according to Govern- decrease in financial barriers is expected to increase ment Decree 22184, this increase is starting from a demand for and utilization of these MH services. very low base as even senior staff – for example, the Even though a portion of costs per service provided head of a district hospital – received about US$100 are variable costs – for example, commodities and per month in net remuneration. medicines, which increase for each additional ser- vice provided – a portion of the these costs are also Incentive Structure fixed costs which do not depend on the number of services provided – for example, staffing, equipment, The balance of the pricing of reimbursements and utility costs. An increase in the number of servic- for MH services and the marginal cost of provid- es provided will thus allow facilities to divide these ing these services generate incentives. Ideally, fixed costs over the additional numbers of services the pricing of case-based payments should be fairly provided, and thus lower the average per unit cost of neutral (exceptions would be to incentivize an ap- MH services. Furthermore, depending on the elastic- propriate increase in utilization, increasing uptake of ity of demand, the net revenues health facilities that preventative services, and to promote good practic- a health facility would receive could increase due to es) and that decisions on the clinical management of this policy. patients – e.g., referrals, choice of delivery mode-are made on clinical expediencies. 82 n = 15 (7 at district hospitals, 8 at provincial hospitals) 83 World Bank, 2010. Lao PDR Civil Service Pay and Compensation Review: Attracting and Motivating Civil Servants. 84 Government of Lao PDR, 2012. Decree 221 (30 May 2012). If the service reimbursements are too gener- The pricing of reimbursements may also affect the ously priced, there is the risk of supply-induced quality of services. If facilities are not adequately demand with providers encouraging the utiliza- compensated, they may not have the resources to tion of health services. Considering the context of ensure the availability of commodities and drugs86. extremely low utilization of MH services in Lao PDR, this is desirable as long as increased fiduciary risk and Supply-Side Readiness equity concerns are addressed. The readiness of health centers to meaningfully If service reimbursements are substantially un- provide these basic MH services was generally low. derpriced, health facilities may be reluctant to Using the WHO’s Service Availability and Readiness even accept pregnant women for deliveries or Assessment (SARA), the readiness of the 41 surveyed to attempt extract informal payments, which will health centers was measured (see Table 11, Figure 23 have implications on the degree of financial pro- and Figure 24). As not all the SARA Service Readiness tection and may fail to increase utilization of these Indicators were included in the questionnaire, only services. Furthermore, if and when a woman does a subset of available indicators was analyzed. Based attempt to deliver at a particular health facility, there on this assessment, the readiness of health centers would be an incentive for the health facility to refer to provide MH services was extremely limited – for the case on to a higher level facility, even if there are example, only 2% of health centers fulfilled all the no clinical reasons to warrant referral and the woman available ANC service-specific indicators and only can safely give birth at the original health facility. Of 10% of health centers fulfilled all the available basic further concern for provincial hospitals and some obstetric (i.e., delivery) care service-specific indica- district hospitals85 where caesarean sections can be tors. There was also a large amount of variation in performed, the health facility may well face a financ- health center readiness, considering that all these ing deficit if the woman gave birth vaginally, and face health centers are publically-financed (though some a financing surplus if the woman gave birth by cae- sarean section. This financial incentive to promote or encourage a caesarean delivery, even where there is may have received additional donor-financing). In order for increased utilization of health services 35 no clinical reason for doing so, would be of great con- expected with the reduction of financial barriers cern and may be harmful to both mother and child. implied in the national free MCH policy to result in improved health outcomes, the service readiness The provision of preventative services such as of health facilities needs to be improved. This may ANC and PNC consultations – for which the pric- require initial supply-side investments which can be ing appears generous and the costs are more then maintained and enhanced with the revenue predictable – should also be encouraged in order health facilities receive from this policy, provided that to build up the financial resilience of facilities, espe- health facilities are given effective decision rights and cially lower level facilities. It should be noted, how- the right management incentives to do so, as current ever, that on the demand-side, the vast majority of guidance on the usage of free MCH revenue are ANC consultations are already provided for free and unclear. This lends weight to the importance of man- hence fee-exemptions may not have a strong effect agement reforms, which are on the agenda for health on the demand-side, especially since most of the sector reform in Lao PDR. OOP expenditure related to these services is spent on transportation, which is not covered for preventative services under the free MCH policy. 85 Caesarean sections are only performed in certain district hospitals (designated as District Hospital Type A). 86 Ridde, 2011 At the health facility-level, the autonomy of pub- management or administration. In addition to tech- lic providers in managing revenue is unclear. A nical revenues, health facilities are permitted to cross-sectoral decree on technical revenues issued operate a revolving drug fund. According to the by the Ministry of Finance87 indicates that budgeting national guidelines88, public health facilities are units which receive technical revenues can use these allowed to mark-up the sales price of drugs by 25% revenues to firstly pay utility bills and to improve to be used for (i) transportation costs, (ii) losses/infla- service quality, but the surplus cannot be used for tion/safety margin, and (iii) management costs. Table 11: Health Center Service Readiness, with International Comparators Service % of Health Centers Mean fulfillment of Sierra Leone, 201190 Zambia, 201091 Readiness fulfilling all sur- surveyed indicators (Mean Scores for (Overall Readiness Indicator89 veyed indicators per per domain, Community Health Score Health Domains domain un-weighted % Centers) Centers) General Service Readiness Basic Amenities 37% 64% 58% 64% Basic Equipment 44% 81% 76% 86% Standard Precautions 5% 59% 57% 77% for Infection Prevention Diagnostic Capacity 2% 9% 18% 40% Service Specific Indicators Family Planning Services 41% 82% 80% 78% Antenatal Care Services 2% 45% 64% 77% 36 Basic Obstetric Care 10% 28% 58% 59% Note: Not all SARA Service Readiness Indicators where ascertained in the health center survey. This table summarizes only the surveyed indicators. 87 Government of Lao PDR, 2010. Ministry of Finance Decree 727: Guidance on Management of Revenue-Expenditure of Technical Service Charges of Budgeting Units and Government Funds. 88 Government of Lao PDR, 1997. National Guideline on Revolving Drug Funds in Public Health Facilities 2nd edition, August 1997. 89 Service Readiness Indicators, WHO 2012. Available from: http://www.who.int/healthinfo/systems/sara_indicators_questionnaire/en/ index.html 90 Government of Sierra Leone, 2011. Mean Score for Community Health Centers. Note. The exact indicators used between for the Sierra Leone survey and for the Lao PDR analysis would not be identical. 91 Government of Zambia, 2010. Overall Readiness Score for Health Centers. Note: The exact indicators used between for the Zambia sur- vey and for the Lao PDR analysis would not be identical. Figure 23: Selected General Service Readiness Indicators Figure 24: Selected Service-Specific Readiness Indicators 37 Implications of Supply-Side Readi- ness on Utilization and Equity Utilization of MH services-i.e., institutional births There is also some indication that the poor among -was associated with service readiness. The greater communities served by health centers with low the mean SARA Service Readiness score of a health mean SARA scores, were more exposed financially center, the more the births that occurred at that when opting for an institutional birth. Figure 26 health center (see Figure 25). Furthermore, there presents the mean MH OOP expenditure for house- is a general trend that Type A health centers, which holds choosing institutional births, by economic are better equipped and staffed than Type B health quintile. The paired bars further disaggregate these centers, are linked with increased utilization of MH households by those covered by health centers with services and with mean SARA Service Readiness low mean SARA scores, and those with high mean scores. Although causality is not implied, it is pos- SARA scores, using 0.5 as the cut-off. Although mean sible that health centers which were more ready to MH expenditure among the richer two quintiles did provide services attracted more clients, and/or that not vary a lot depending on the readiness of the greater utilization of health centers induced improve- health centers serving them, the households in the ments in their readiness. Of concern is the observa- poorest quintile served by health centers with low tion that the utilization of health centers which fulfill readiness scores spent a mean of 869,000 kip, which half or less of these service readiness indicators was was more than double that spent by similarly poor very minimal. Hence, although health centers are households served by health centers with high readi- expected to and allowed to use revenues from the ness scores. national free MCH policy to finance investments in their supply-side readiness, many of the least ready health centers will not be able to depend solely on 38 these utilization-based revenues, but will require an initial investment in order to ‘break out’ of this cycle of low utilization (low revenues) and low service readiness (greater need for investments). Figure 25: Utilization of Health Centers (for deliveries) and Service Readiness Score of Health Centers Type A and Type B Figure 26: Maternal Health Out-of-Pocket Expenditure by Health Center Readiness These two indications – associations of supply-side health centers, especially those serving marginal- readiness with both utilization and depth of financial protection – suggest that even supply-side financ- ing activities aimed at improving the readiness of ized and poor populations, could achieve some of the goals of the demand-side financing emphasis of the national free MCH policy. 39 Photo by Bart Verweij/The World Bank, 2013 Section VI: Key Findings and Recommendations policy, the richest quintile will capture 44% of the Key Findings and Policy value of benefits from this policy, compared with 9% Implications for the poorest quintile. In reality, different socio-eco- nomic groups are likely to respond differently to the Among the high priority and poor communities sam- policy and the elasticity of demand for each group pled, this survey finds that MH OOP expenditure for cannot be predicted with any certainty. Nevertheless, an institutional birth at a public health facility was additional measures should be instituted to promote substantial – both relative to GDP per capita (4.1%) the uptake of these free services by the poor and and relative to monthly household expenditure, marginalized people. The targeting of services may especially for the poorest quintile of households (43% also be considered in the future, in the interests of of monthly household expenditure). This expendi- equity and fiscal sustainability. ture was also highly variable – depending chiefly on the choice for an institutional births compared with Thirdly, health providers at all levels of health a non-institutional births (a thirteen-fold difference facilities would experience substantial marginal in mean expenditure), but also by the level of health decreases in revenue per vaginal birth, given the facility (approximately doubling when advancing reimbursement schedules under the national free each level), and by the mode of delivery (caesarean MCH policy. At lower level facilities, this may encour- births compared with vaginal births). However, there age inappropriate referrals to higher level facilities. remained considerable variation in expenditure At higher level facilities, there may be incentives for even within each of these categories of location and health providers to increase revenues by choosing 40 mode of delivery, making it difficult for households to predict this expenditure ex-ante despite choosing the location of birth. MH OOP expenditure was also caesarean deliveries over vaginal deliveries, even if not clinically justified. However, as demand for and the quantity of services are likely to increase, net inequitable as households in the poorest quintiles revenues of health facilities should increase due to spent 43% of their monthly household expenditure this policy. on an institutional birth compared with households in the richest quintile which spend only 26%. Simi- Finally, the supply-side readiness and manage- larly, communities with poor road access (more than ment capacity of health centers needs to be 4km away) spent 35% of their monthly household improved. The supply-side readiness of health expenditure on an institutional birth compared with centers to provide MH services is low: only 2% and 26% for communities with direct road access. 10% of health centers fulfilled all the surveyed WHO Service Readiness Indicators for ANC and basic The policy implications of these findings are first- obstetric care respectively. This readiness of health ly that, although financial protection implied by centers is found to be positively associated with the national free MCH policy is strong, reducing increased utilization of MH services. Furthermore, financial barriers alone would not be sufficient poor households served by health centers with low to increase the utilization of services, as other service readiness are found to be exposed to higher non-financial barriers such as the physical access to levels of MH OOP expenditure compared with poor services, maternal education, and cultural practices households served by health centers with high are likely to limit large increases in utilization of MH service readiness. services, especially among the poor. In order to improve the effectiveness and equity Secondly, this policy has the potential to be of the national free MCH policy while minimizing regressive due to the higher utilization of MH servic- perverse incentives, regular reviews of the utilization, es by wealthier households. If there are no changes pricing, and case definition of services, investments in the utilization patterns of households with this to improve the service readiness of health facilities, and efforts to address non-financial barriers are as mobile phone hotline services, may be helpful in vital. The autonomy of facilities to manage revenue ensuring that fee exemptions are truly effective from this policy should also be enhanced and be without a compromise in quality. accompanied by concurrent reforms in public finan-   cial management, as expressed in the Ministry of Given the context of low supply-side readiness and Health’s reform plans. low utilization among many health centers, it would be appropriate to allow the pricing of MH services to Recommendations be generous at the initial stage to allow these health facilities to equip and ready themselves, gain more As Lao PDR has reduced maternal mortality rates by experience in smoothing the variability of actual almost three-quarters from 1,600 in 1990 to 357 per costs of routine and complicated cases, encourag- 100,000 live births in 2012, most of the low hang- ing increased utilization, and to learn how to manage ing fruit have already been harvested. In order for revenues from the policy. Many health centers which Lao PDR to continue this improvement to achieve its are the least ready to provide services, will likely need target of reducing the maternal mortality rate to 260 an initial investment (unlinked from utilization) to per 100,000 live births by 201592, MH services need improve their readiness in the beginning. Increased to be made more accessible by marginalized and facility revenue and autonomy to manage this poor communities. The Government of Lao PDR is revenue will need to be matched by concurrent finan- to be congratulated for the foresight evident in the cial management and general management reforms national free MCH policy in lowering financial barri- (e.g., financial controls, verification procedures, and ers for a critical health service expected to accelerate operating standards) at the facility-level, as expressed this progress over the last few decades in improv- in the Ministry of Health reform plans, ideally in ing MH, while also addressing the issue of financial collaboration with the Ministry of Finance and the protection. State Audit Authority. Case-based payments are an appropriate provider payment mechanism currently but the pricing of MH services (especially for vaginal and caesarean It may not be desirable for every single health center in this sparsely populated country to be expected to provide a full-range of maternal health services. An 41 deliveries at each facility level) will require regular appropriate balance is required – between allowing reviews throughout implementation. Strong moni- adequate service volumes at key referral facilities toring systems should be institutionalized to moni- to permit quality improvements as providers gain tor the utilization (especially rates and appropriate- expertise from servicing higher numbers of patients, ness of caesarean deliveries) and referral patterns and promoting access to services to remote com- among health facilities, and the reimbursement munities, which should also be improved through schedule adjusted periodically to ensure the right strengthened referral systems. incentives towards encouraging the utilization of appropriate preventative services and the lack of Non-financial barriers must also be addressed – perverse incentives for inappropriate services (e.g., by improving the knowledge and awareness of mar- caesarean births without any clinical justification). ginalized and poor communities of this policy and of Strengthening referral mechanisms and adopt- the importance of MH services, by bridging cultural, ing an integrated incentive mechanism may also be ethnic, and linguistic barriers between providers and helpful in facilitating clinically-justified referrals while patients, and by improving the physical accessibil- reducing unnecessary referrals. The case definition ity of these MH services. With regards to the latter, of PNC consultations should be reviewed with a sepa- reimbursements of transportation expenditure will rate category for addressing complications following be helpful, as recognized by the policy. These bar- births and a separate category for routine PNC con- riers are not only vital for improving the equity and sultations which occur as a separate episode from allocative efficiency of the policy, but to prevent the birth itself. Accountability mechanisms, such these barriers from being the next constraint once financial barriers are lowered. 92 Government of Lao PDR, 2011. Seventh Five-year National Socio-Economic Development Plan, Vientiane, October 7, 2011 Annex Data Sources For the village survey, five villages (from a panel of all villages in the catchment area of each HC as Maternal Health Out-of-Pocket maintained by the HC) were surveyed. If there were Expenditure fewer than five villages, all villages were surveyed. In each of the five villages, the village chief was taken Data on user fees and transportation expenditure through the village questionnaire. This questionnaire associated with ANC, deliveries (including caesarean provided important information on village character- sections), and PNC, was obtained from a household istics, for example, distances to health facilities. survey93 conducted in high-priority and poor com- munities in six central and southern provinces of For the household survey, households were sampled Lao PDR, Borikhamxay, Khammuane, Savannakhet, from the villages selected for the village survey. In Saravane, Champasack, and Attapeu, from March each village, survey teams worked with village chiefs to April 2010. This household survey only included to generate a panel of eligible households – i.e. those households with at least one child under two and with at least one child under two. From this panel, 15 expenditure information was asked of the most households were surveyed using interval selection recent birth. The survey data included 2,918 house- (random starting point). If there were fewer than 15 holds in 207 villages, which are within the catchment eligible households, all households were surveyed. area of 41 health centers. Births occurring in health Survey teams attempted to survey a target of 75 facilities outside Lao PDR (for example in neighboring households per HC catchment area (5 villages x 15 Vietnam) have been excluded from the analysis. households). If more than 70 households were sur- veyed, additional households were surveyed from 42 Data on distances (in terms of travel time and physi- cal distance) from health facilities was matched from an associated village questionnaire conducted at other surveyed villages in the HC catchment area. If 70 or fewer households were surveyed, an additional sixth village was randomly selected and surveyed the same time, in the same villages, and by the same as per the methodology of the initial five villages. survey firm. Despite best attempts, the target of 75 eligible house- hold per HC catchment area was not always achieved. Survey Sampling and Design During the analysis, village-level sample weights were used to compensate for the varying probability This household survey was originally designed in of inclusion in the survey based on the village popu- order to evaluate the impact of MCH and nutrition lation. interventions94 within the catchment area of 62 selected health centers (HCs). Of these 62 HCs, 20 Household Expenditure Questions were randomly selected for inclusion in the survey. These HCs were matched with control HCs, based on Information for the six buckets of MH OOP expendi- a number of criteria including size and catchment ture are taken from six survey questions, which are area terrain, the ethnic composition and staffing of addressed to the mother of the youngest child under the HC, and distance from major towns. For each HC, two in the household. survey teams conducted a series of interviews with health facility staff, with village chiefs, and with local households. 93 This survey was commissioned as a baseline survey in order to evaluate the Community Nutrition Project (CNP), a US$ 2.4m World Bank-funded project with specific demand- and supply-side interventions to improve nutrition and MCH in seven central and southern provinces of Lao PDR. These interventions are targeted at specifically identified health centers (HCs) in high-priority and poor districts, and their surrounding catchment villages. 94 These health center level interventions are part of the Community Nutrition Project, financed by the World Bank. User Fees http://www.who.int/healthinfo/systems/sara_indica- • ANC Consultations (most recent visit): “What were tors_questionnaire/en/index.html you charged for the following … (i) blood pres- The questions from this survey do not exhaustively sure, (ii) urine test, (iii) blood test, (iv) HIV/STD test, cover all indicators in the WHO SARA indicators. (v) iron tablets, (vi) folate tablets, (vii) deworming tablets, (viii) malaria drugs, (ix) bed nets, (x) ser- Monthly Household Expenditure vice charge, (xi) tip, (xii) others, and (xiii) total?” • Deliveries: “Can you tell me what services you Household expenditure data was obtained from received and what you paid? … (i) blood trans- the Fourth Lao Expenditure and Consumption fusion, (ii) injections for mother, (iii) vaccines for Survey (LECS4)95 conducted in 2007/08. Using com- baby, (iv) medicines, (v) room, (vi) meals, (vii) mon housing characteristics (building materials and service charge, (viii) tips, (ix) other, and (x) total” household size) and a common asset list as independ- • PNC Consultations (most recent visit): “What were ent variables, and total average monthly household you charged for the following: (i) iron supplemen- expenditure as an outcome variable for the LECS4 tation, (ii) folate supplementation, (iii) folic acid households, regression analysis was used to predict supplementation, (iv) vitamin A tablets, (v) child total average monthly household expenditure in vaccination, (vi) curative care, (vii) counseling, the 2010 household survey. Household expenditure (viii) others, (ix) service charge, and (x) total?” was adjusted for inflation by using the compounded increase in the consumer price index (CPI)96 for the Transportation Expenditure period 2007 to 2010. • ANC Consultations (most recent visit): “How much did you spend on transportation for this most Prices are quoted at 2010 levels, using the local Lao recent ante-natal visit?” currency (kip). For conversions to and from USD, 2010 • Deliveries: “How much did you spend on trans- market exchange rates of USD 1 equivalent to 8259 portation for the delivery?” • PNC Consultations (most recent visit): “How much did you spend on transportation for this most kip97 are used in this paper. National Free MCH Policy Benefit Package 43 recent post-natal visit?” The benefit package of the Lao PDR National Free Health Center SARA Scores MCH Policy was obtained from the Department of Finance, Ministry of Health. The schedule of benefits An associated questionnaire for the 41 health centers and prices is included as Table 12. serving the 207 villages in the sample was conduct- ed at the same time, by the same survey firm. These included various questions on the availability of equipment, staff training, and facility infrastructure, which was matched to indicators on the WHO Service Availability and Readiness Assessment (SARA), June 2012, available from: 95 Department of Statistics, Lao PDR, 2008 96 Bank of Lao PDR, 2011. Year-on-year base calculation. 97 WDI, 2010 44 Table 12: National Free MCH Policy Schedule Additional Analysis Transportation Expenditure and Proposed Reimbursement The national free MCH policy will reimburse deliv- If only OOP transportation expenditure is ac- ery transport on a fixed schedule based on village counted, the national free MCH policy reimburse- distance bands. This reimbursement is intended to ment schedule appears to be adequate in more cover return transport for the pregnant woman and than 70% of deliveries. As OOP transportation one accompanying person to the nearest health expenditure likely to make up only a proportion of center (or hospital, if this is nearer). However, imple- the overall opportunity costs, not to mention the mentation of this reimbursement differs on a pro- risks and inconvenience of travelling while pregnant, ject-by-project basis. In the southern provinces, this it would be difficult to predict if the delivery transpor- reimbursement will be provided to the patient. tation schedule would equitably encourage the least accessible households to deliver at facilities. Further- more, in the absence of public transport and vehicles, additional financing alone may not be adequate in reducing physical barriers, especially during the rainy season. 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WHO. 1985. “Appropriate Technology for Birth.” Lancet 2 (8452): 436–437. The World Bank Group The World Bank Lao PDR Country Office Patouxay Nehru Road P.O Box: 345 Vientiane, Lao PDR Tel: (856-21) 266 200 Fax: (856-21) 266 299 Websites: www.worldbank.org/lao The World Bank 1818 H Street, NW Washington, D.C. 20433, USA Tel: (202) 4731000 Fax: (202) 4776391 Website: www.worldbank.org