Accelerated progress towards and achievement of universal health coverage (UHC) has become a central goal of the Government of Pakistan’s (GoP) policy agenda in health in recent years. Both at the center and in the provinces, Pakistan’s domestic governments have now consistently reiterated, through the National Health Vision 2016–2025 and other essential agenda setting documents, their joint commitments to making UHC and primary care access a priority across the country. In response, the federal and provincial governments have initiated critical UHC and primary health care (PHC) related interventions. First, Pakistan has become an early adopter of the Disease Control Priority 3 (DCP3) framework and, in collaboration with the DCP3 Secretariat and the World Health Organization (WHO), has begun implementing for the first time a prioritized Essential Package of Health Services (EPHS). Another major program, being led by the federal government and now adopted by the provincial governments, is the social health protection initiative, the Sehat Sahulat Program (SSP). The program, a tax-financed scheme, provides cash-free coverage to inpatient hospital services at empaneled public and private hospitals for eligible low-income populations (households earning less than US$2 per day). The EPHS and the public health insurance scheme are two promising developments that together hold the potential to expand health coverage, grow existing health finance resource pools, and improve efficiency of public health expenditures. Each would in turn help achieve broader objectives in a health financing system that has to date produced concerningly lagging health and human development outcomes. However, faced with resource needs significantly higher than current health expenditures, and a particularly turbulent near-term macro-fiscal environment, the GoP’s ability to sustainably fund crucial UHC priorities has become decidedly uncertain. Accordingly—from a health financing for UHC perspective—the Federal Ministry of National Health Services, Regulation, and Coordination (MoNHSRC) and the provincial health departments have a joint need to understand what kinds of financing reforms are necessary to fund and expand the provincial social health insurance (SHI) programs and the district-level EPHS packages going forward. To help meet the GoP’s stated analytical need, this executive briefing provides a policy-oriented executive summary of key evidence and research generated in the Pakistan Health Financing System Assessment report—itself as part of the World Bank’s larger Programmatic Analytic Services engagement in Pakistan. In the pages that follow, we provide a summary of strengths and key sub-national systemic reform opportunities in Pakistan’s decentralized health financing system. This Health Financing System Assessment (HFSA) policy brief can serve as a level-set for Pakistan’s policy makers: provincial and federal health department leaders can use the health financing assessments of all four major provinces and the federal government—presented here in a single view—as a basis from which to develop coordinated high-performance health financing reform strategies. It must be recognized that the absolute level of per capita health spending and the level of public health spending both remain low in every province. As shown in Figure 1 below the current expenditure levels, expressed in 2020 US$, would equate to approximately, US$10.3 in Sindh, US$10.0 in Punjab, US$8.7 in Balochistan, and US$7.8 in Khyber Pakhtunkhwa (KP). Putting these figures in international comparison, the South Asia Region (SAR) average for per capita public expenditures on health in 2017 was US$17.5, while the lower-middle income country (LMIC) cohort average was US$27.1.1 As such, no province in Pakistan presently meets the SAR average for per capita public health spending, and the country remains at almost half what could be considered the benchmark level of LMIC spending. Although in absolute terms expenditures are low, a historically persistent trend of stagnant public health financing growth appears to have fundamentally shifted in Pakistan. Real per capita public health expenditures increased by only PKR 200 between FY2006 and FY2011 but have since increased by ~PKR 1,000 between FY2011 and FY2018. Growth—while not necessarily equal across the provinces—has been noticeable across the board. However, it is worth emphasizing that the observed disparities in provincial per capita health spending (a difference of almost PKR 400 per capita for FY2019) is still relatively significant. The next policy-relevant question therefore becomes, what has been driving this new trend in health financing? Expenditure estimates taken from the WHO Global Health Expenditure Database (2019). 1 1 Figure 1. Real Per Capita Public Expenditures on Health by Province (2020 US$, FY2006–19) Source: Poverty Reduction Strategy Papers (2006–19); Population estimates derived from the 2017 National Census, with a 2 percent growth rate applied to provincial population totals for all years after 2017. Note: USD:PKR exchange rate equal to 1:159.98. Decomposition analyses of historical public health expenditures provide clear evidence that increasing the share of health in the government budget—that is, reprioritization—has generated significant growth in the level of per capita public financing for health, provincially and nationally. This suggests that although health’s share of the public budget has increased significantly in every province, additional reprioritization for health should remain a policy option at the provincial and federal health departments. Figure 2. Decomposition of Growth in Real Public Health Expenditures: Recent Trends (FY2012–19) Source: Poverty Reduction Strategy Papers (2012–19); IMF WEO 2020; World Bank staff analysis. 2 While the case for reprioritization is clear, health input–output assessments conducted using public expenditure data from the provinces strongly suggest that efficiency focused reforms are a necessary step that must be pursued alongside any future reprioritization efforts—if not prior. This is because, given the state of expenditure inefficiency in the public health sector, arguments for increased prioritization will likely not win in budget negotiations without a clear plan to overcome existing spending bottlenecks. Evidence for this can be seen in the fact that the percentage of children with complete immunization coverage in KP province is almost exactly equal to that of Punjab (75 percent), even though KP spends US$2 less (< 20 percent) per capita on health than do Punjab or Sindh. Similarly, Sindh has considerably better health indicators on stunting prevalence and utilization of post-natal consultations by new mothers than does any other province, despite having nearly the same expenditure per capita as Punjab and only about US$1 more than Balochistan. While health outcomes are always multiply determined—dependent on social conditions and factors ranging from poverty and employment status to gender and literacy—high degrees of variation in health outcomes across the provinces reveal that opportunities exist for efficiency improvement at the sub-national and national levels. Improved strategic allocation of resources can make a difference in the actual levels of health outcomes achieved. Figure 3. Provincial Reproductive, Maternal, Newborn, and Child Health Outcomes Compared Against Public Health Expenditure (FY2019) Source: Pakistan Social & Living Standards Measurement Survey 2018–19 National /Provincial (Social Report); PRSP Progress Reports; World Bank staff analysis. Furthering the analysis on expenditure efficiency, it is clear that Pakistan is spending a limited amount on PHC (US$16 per capita), and reallocation of provincial budgets towards PHC is needed to efficiently achieve UHC targets. 3 Currently, Punjab and Sindh allocate the largest proportion of their overall health expenditures to “front-line” or primary and public health expenditures, at 16.8 percent and 12.1 percent respectively. In comparison, KP allocates approximately 6 percent towards primary and public health care services. Increasing PHC’s share of total and public health expenditures should therefore be a goal for all sub-national governments. However, what will be equally important is identifying mechanisms through which to actually increase budgetary allocations towards preventative PHC. Figure 4. Primary Care Spending as a Proportion of Total Public Health Spending (FY2018/19) Source: Pakistan BOOST (dataset), 2021. Compiled by World Bank staff using GoP data sources. To this end, provincial adoption and expansion of the EPHS could be considered a useful starting point from which to improve overall health financing efficiency and re-balancing expenditures towards PHC. The current EPHS is a budgetary mechanism through which funds can be increasingly released for front-line health expenditures. Relatedly, a concrete action the MoNHSRC and provincial departments of health can take is to update their chart of accounts specifically to better track PHC expenditures and their share of public health spending—a key measure of rationalized health finance. Presently, the best source of available data to measure the allocative share of PHC in public health expenditures is government budget data. Yet, it is currently very difficult to define and track primary or “front-line” care expenditures through the existing budget categories in the provincial and federal health budgets. Each provincial health department should pursue Public Financial Management reform efforts to clearly define PHC in their existing budget categories and make such definitions available to policy researchers. However, if the provinces are to drive after efficiency gains from additional reprioritization towards and focus on PHC expenditures, the question then becomes: what should be the mechanism to move towards more deliberate financing of PHC? One potential answer is that the provinces should pursue and scale up the district-level EPHS and the provincial social health protection initiatives. This is because the incidence of catastrophic health expenditures was increasing nationally among the poor even prior to the onset of the COVID-19 health emergency. Across the provinces, the single most important driver of out-of-pocket (OOP) and catastrophic health expenditures is the cost of medicines/drugs at the point of service, occurring mostly at private clinics and pharmacies. Coverage of outpatient and primary care services through the public SHI, which can already empanel private sector providers, can therefore help directly target OOP drug spending. Additionally, scaling up the EPHS can have a positive impact on health equity as Pakistan continues down a disease burden trajectory more heavily skewed towards non-communicable and chronic diseases that require longer-term chronic treatments and medication management. However, an important nuance to the mandate to rebalance expenditures towards PHC is that, under the current structure of the public health sector, a system of historically determined budgets (as opposed to need and/or performance-based budgets) means that some districts may in fact need additional hospital/tertiary care spending to be efficient (see the case example below). Despite significant changes to the health financing structure after the 18th Constitutional Amendment, there remains “no formal and explicit formula to allocate budgets to public facilities. Resource allocation is mainly based on historical patterns and political and other influences, including some informal assessment of performance and patient load. 4 There are wide variations in the resources allocated to urban and rural health facilities.”2 Without need-based and eventually performance-based budget allocations, it will be difficult to make the kinds of infrastructure investments and budget reallocations needed to improve district-level health financing efficiency in Pakistan’s health system. CASE EXAMPLE: RAWALPINDI AND SARGODHA Under the current budgetary approach, overall public health expenditures in two otherwise similar districts can be hugely unequal. For example, Rawalpindi (population ~5.4 million) and Sargodha (population ~3.7 million) have many similarities but spending in Rawalpindi was nearly PKR 8 billion in 2018, while in Sargodha expenditures totaled PKR 1.6 billion—a four-fold difference. One key reason for this difference lies in the fact that Rawalpindi’s health infrastructure is heavily weighted towards tertiary care, while Sargodha’s leans more on primary care—3.2 basic health units versus 1.8, and 0.4 rural health clinics versus 0.2 (per 100,000 persons). As a result, Rawalpindi district outperforms Sargodha on many health outcomes indicators not associated with primary and population health. Given the relative overabundance of tertiary care and underabundance of primary care facilities, it may be that care that could be managed at a lower-tier, lower-cost setting is in fact being re-directed to higher-cost care settings. The second reason could be the provincial budget process itself: if past expenditures are a core component of future allocations, then higher costs will automatically result in higher budget allocations going forward. The key takeaway from this comparison is that district-level health systems in Pakistan are structurally unbalanced, and this results in highly divergent health expenditures between districts. Comparison of Public Health Expenditures and Health Infrastructure in Two Districts Indicator Rawalpindi Sargodha (2018) (2018) Population 5,405,633 3,703,588 (2017) Teaching hospitals 4 0 DHQ hospitals 0 1 THQ hospitals 4 4 Rural health centers 10 14 Basic health units 98 117 Source: Finance Division, GoP, Project to Improve Financial Reporting & Auditing (2018). Comparison of Key Health Indicators in Two Districts (2018) Source: Punjab Multiple Indicator Cluster Survey, 2018. 5 Ultimately, the current system of provincial health budget allocation, which is largely based on historical expenditures, likely exacerbates inefficiencies in health financing at the district and provincial levels. It is possible that districts like Rawalpindi may need to direct a greater share of new health expenditures towards primary care facilities, whereas districts like Sargodha may need additional resources to invest in tertiary care. Coming to issues of health equity, overreliance on OOP expenditures to finance health remains the critical equity concern in every province. OOP expenditures are extremely high nationally (60 percent of current health expenditures) and the latest National Health Accounts exercise has shown OOP rates in the provinces ranging from 54 percent in Balochistan, 64 in KP, to 68 percent in Islamabad. Such high levels of OOP share are well above the LMIC average (48 percent), and even higher than the WHO target range of 15–20 percent. As a result of high OOP spending, other critical financial protection indicators such as catastrophic and impoverishing health expenditures are also suffering in Pakistan. Table 1. Sub-national OOP Expenditures as Share of Total Health Expenditures (FY2017/18) PKR Millions Percent Province/ Total health Private OOP OOP share of total health territory expenditure expenditure expenditure Pakistan 1,206,332 649,999 53.9 percent Punjab 612,621 344,499 56.2 percent Sindh 276,622 149,500 54.0 percent KP & FATA 173,599 110,500 63.7 percent Balochistan 71,871 39,000 54.3 percent Islamabad 9,567 6,500 67.9 percent Source: National Health Accounts 2017/18. Ultimately, these data suggest that the MoNHSRC and the provincial health departments should continue their policy focus on social protection via expanding the SSP and implementing the new district-level EPHS. Although the OOP share of total health expenditures has improved sub-nationally in the post-devolution period, the OOP share remains above 55 percent in every province (Table 1). Putting the provinces in international context, the provinces are each above the low-income and LMIC averages for OOP expenditures as a share of total health expenditures. This means that lowering the share of OOP expenditures must be a core health financing policy for every province. The next important issue from an equity standpoint is to understand the sub-drivers of OOP expenditures. Accordingly, the relevant policy question becomes: what is driving OOP expenditures and how do these drivers affect different populations differently? The single key factor driving OOP expenditures for patients across Pakistan, nationally and sub-nationally, is costs related to medicines and vaccines. Like the similarities observed in OOP share across provinces, there is little that differentiates drivers of OOP expenditures: medicines/vaccines as a cost category account for the majority of OOP health expenditures in every province and therefore across Pakistan. The share of all OOP health expenditures for medicines was almost 40 percent in Balochistan, and then highest in Punjab at nearly 54 percent. However, in every case the next closest contributor to OOP health expenditures—usually doctors’ fees—did not even come within 30 percentage points of medicines. Addressing the affordability and accessibility of medicines through targeted health financing programs can therefore be a high impact intervention in each province. 2 Muhammad Ashar Malik. 2015. “Universal Health Coverage Assessment Pakistan.” The Aga Khan University. http://ecommons.aku.edu/ pakistan_fhs_mc_chs_chs/203. 6 While the positive potential of the recent UHC initiatives is large, additional resources are urgently needed to ensure that both initiatives remain fiscally viable in the years to come. Based on costing exercises completed by the DCP3 Secretariat, the cost of a package that includes all necessary high-priority interventions in Pakistan would be approximately US$25.4 per capita; while if even a few medium-priority interventions are included, the cost would rise to over US$28.0 per capita.3 However, Pakistan’s current level of per capita public health expenditures is approximately US$14—far below levels needed to finance an EPHS that meets the urgent health needs of all Pakistanis. Likewise, as population coverage targets are achieved through the SSP and the program is expanded into new provinces and territories, an additional sum of PKR 1,755 (2020 US$11.0) per beneficiary is added to public health financing needs through premium costs alone. To be clear, Pakistanis who are suffering from lagging health indicators need both the EPHS and the SSP to help meet their immediate needs. Strategic health financing reform that helps improve the status of domestic resource use and mobilization (DRUM) for health, expenditure efficiency, and equity status of the health sector must therefore become an immediate priority for Pakistan’s policy makers. 7 APPENDIX A. SUMMARIZED HFSA FINDINGS AND RECOMMENDATIONS Findings Recommendations Timeline Overall objectives with health financing recommendations: funding and scaling up the SSP and the district-level EPHS to improve UHC coverage and human capital. I. Domestic Resource Use and Mobilization Low domestic resources on 1. Conduct regular policy dialogue with the Ministry of Long term health in Pakistan compared Finance and Finance Departments to make a business to regional and other LMICs. case for the public expenditure on health expressed as Public expenditures on health percentage of GDP to 1.5 percent by 2025. expressed as a percentage of However, due to uncertain macro-economic prospects gross domestic product (GDP) entailed by the unpredictability of the COVID-19 crisis were 1.08 percent in 2019; the and increased debt burden, the prospect of domestic LMIC average was significantly resource mobilization may be limited. higher at 1.42 percent. Similarly, the public share of 2. Sustain the growth in budgetary reprioritization to Midterm total current health health at federal and provincial levels through expenditures in Pakistan was regular health financing and capacity building on only 32 percent compared to health financing at provincial authority. There are more 39 percent. potentials tapping into re-prioritization of health in government budgets at national and provincial level: at Absolute level of per capita provincial level, the perspective of public funding for health is reprioritization remains good, most particularly in low. Pakistan’s current level Punjab, Sindh, KP, and Balochistan. As a result, Punjab of per capita public health and KP have decided to expand domestic resource expenditures is US$14—far mobilization for PHC in the coming years, which will not below levels needed to finance only increase the size of the health resources but also a comprehensive EPHS that contribute to allocative efficiency. meets the urgent health needs of all Pakistanis (US$28). 3. Raising sector-specific revenues for health is a Long term possible but a difficult and inadvisable policy Absolute level of per capita objective: all provinces face legal and political hurdles government health funding in securing earmarks for health from federal revenue varies by province but there sources. Furthermore, tobacco taxes, which are are important opportunities to currently on Pakistan’s fiscal and health financing foster the DRUM agenda in the agenda, have uncertain revenue prospects. health sector at provincial level. 4. In the short term, a feasibility study on health taxes Short term and soft earmarking to a specific health program (like a social health protection initiative) should be undertaken. 3 Disease Control Priorities 3 Secretariat. July 2020. Universal Health Coverage: Essential Package of Health Services for Pakistan; A Report for Review by the International Advisory Group. 4 Ozer et al. 2020. “Health Earmarks and Health Taxes: What Do We Know?” HNP GP Knowledge Brief, World Bank Group, Washington, DC. 8 Per capita public expenditures The use of taxes that discourage the consumption of on health have been health-impacting consumables—i.e., tobacco and calculated in this HFSA to sugar-sweetened beverages—can help address the range from 2020 US$7.8 in KP, extremely high utilization burden diabetes and 2020 US$8.9 in Balochistan, to lung-related diseases have been placing on the health of 2020 US$10 in Sindh and Pakistanis. Additionally, pro-health taxes can raise Punjab (FY18/19). Across the additional revenues for domestic government to spend four provinces, the key factor on pro-poor social protection initiatives, helping to that has enabled provincial offset some concerns related to the potential regressivity governments to realize from health taxes. Furthermore, it should be noted that additional fiscal space for concerns around regressivity are not strongly borne out health in recent years has been in the data: recent analysis shows that if the externality health sector reprioritization. of increased health costs is considered, the net effect of health taxes is not regressive and likely to be pro-poor when linked to progressive health policies such as UHC expansion to the poor5. II. Efficiency PHC nationally. Pakistan 1. Implementing the EPHS is a starting point to further spends a limited amount on prioritize resources towards PHC and improve Short term PHC and current levels are allocative efficiency. While DCP3 estimated the EPHS too low to make efficient UHC to cost US$58, Pakistan allocates US$20, which calls for a progress—US$16 per capita prioritized EPHS. The EPHS may be expanded while (measured in 2017US$). This is Pakistan’s fiscal space improves. The result of the significantly below the PHC resource mapping and expenditures tracking of UHC expenditures of other LMICs Benefit Package may also help prioritizing further the like Nepal (US$25 per capita), EPHS or better identify funding gap based on which the Indian (US$30 per capita), or GoP can further lobby among donors and the even Indonesia (US$49 per Ministry of Finance to raise additional funding. capita). PHC provincially. Punjab and 2. To increase funding towards the EPHS, Sindh allocate a greater provincial health government, with support from Midterm proportion of their overall external partners, have adopted a two-pronged health expenditures to what approach: 1) tracking PHC resources in four provinces, might be considered Balochistan, KP, Punjab, and Sindh, through “front-line” or primary and updating the chart of account to reflect facility- and public health expenditures: priority service-level expenditures at the primary care 16.8 percent in Punjab and level; 2) increase share of government spending 12.1 percent in Sindh. In allocated to PHC in Balochistan and Sindh provinces. comparison, KP allocated only 6 percent towards primary and 3. Conduct further analysis of hospital expenditures to public health care services in understand data limitation and main drivers of Short term FY2018/19. hospital inefficiency and recommendations to rationalize this sector. Hospital care. Pakistan’s public health sector tends to over-rely on hospital care for service delivery. Hospital related services account for over 50 percent of total public health expenditures in every province (latest FY data available). Fuchs, Alan, Fernanda González Icaza,and Daniela Paz. 2019. “Distributional Effects of Tobacco Taxation: A Comparative Analysis.” Policy Research 5 Working Paper No. 8805, World Bank, Washington, DC. 9 III. Equity OOP Prevalence. 60 percent of 1. Improve subsidies to the poor by implementing and Short term current health expenditure is facilitating the expansion of the federal SSP nationally. sourced from private The SSP, instituted in 2018, has established a households. tax-financed platform through to offer public health insurance for families below the poverty line. This Catastrophic health program has in recent years become a national expenditures risk. Extremely priority, and at present is operating in 68 districts across high reliance on OOP the country, providing important financial protection expenditures to finance health from hospital expenditures to approximately 35 million services in Pakistan mean that families across the country.7 today the majority of the population (50.3 percent) 2. Focusing on the cost of medicines and vaccines at Short term stand at risk of suffering the point of care can be an effective means to target catastrophic health health financing equity. To this end, the current expenditures, compared with primary care focused EPHS program can be of great a SAR average of 36 percent. value, especially as Pakistan continues on a disease Sub-national estimates burden trajectory more heavily skewed towards suggest that current non-communicable and chronic disease that require prevalence of catastrophic chronic medication treatments and management. expenditures on health are also high, at 30 percent in Balochistan and Punjab, 38 percent in Sindh, and 41 percent in KP 6. Subsequently, National Health Accounts data reveal that the single most important driver of OOP and catastrophic health expenditures is the cost of medicines/drugs. 6 SAF Rizvi, 2021. “Household Catastrophic Health Expenditures and its Determinants in Pakistan.” Federating Area 1 Economic Review. ffhal-03341700f. 7Sehat Sahulat Program, Government of Pakistan. https://www.pmhealthprogram.gov.pk/. 10