Report No. 6563
Financing Health Services in Developing
Countries: An Agenda for Reform
December 31,1986
Population, Health and Nutrition Department
FOR OFFICIAL USE ONLY
Document of the World Bank
This document has a restricted distribution and may be used by recipients
only in the performance of their official duties. Its contents may not otherwise
be disclosed without World Bank authorization.



FOR OFCIL4 US ONLY
ACKNOWLEDaKNTS
This report was prepared in the Policy and Research Division of the
World Bank's Population, Health and Nutrition Department, by John Akin,
Nancy Birdsall and David de Ferranti. Important inputs were provided by
Charles Griffin and by numerous staff eabers of the Population, Health and
Nutrition Department, especially Anthony Measham, William McGreevey, Mead
Over, Vicente Paqueo and Nicholas Prescott. Useful coments were provided
by Brian Abel-Smith, Jere Behruan, Andrew Creese, Parvez Hasan, Henry
M.seley, Marcelo Selc sky, Alan Walters, and Herman van der Tak.  Thanks go
to Noni Jose and Amelia Menciano for typing 'he many versions, to Dirk
Prevoo for research support, and to Lauren Chester for logistical support.
The work was carried out under the general direction of John D. North.
This document has a restricted distribution and may be used by recipients only in the performance
of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.



Tabl. of ¢oot_ata
*XJCUTIV3B IUMMARY. . .. .... .............. .. . . *....... ** *************    1
1 .    HE EBAITH S$CTOR AND ITS PROBLA&. ........................... .    15
Health and the Health Sector in Developing Countries...........  16
Problems in the Health Sector ................ . ..................  17
An Allocation Problem:
Insufficient Spending on Cost-Effective ?rogr _ n..........  17
An Internal Efficiency Problem:
Inefficient Government Programs ........................... 26
An Equity Problem:
Inequitable Dintribution of Benefits .......... ............  30
2.   POLICY REFORMS ..................  .................  38
Charging Users of Government Health Facilities ................. 38
Should All Services Have Fees High Enough to Cover Costs? .... 40
What System of Charges is P ractical? .........................  42
Hcw High Should Charges Be? ................................. .    44
Can Most Households Afford Higher Charges? ...................   46
What About the Poor? ......................................... 47
Providing Insurance or Other Risk-Coverage ........... ..........  48
The Situation Today                ............ .  48
How Can Government Encourage Risk-Sharing? . ............ ..   50
Avoiding Cost Escalation .    .................................... 62
Protecting the Poor ................................ ......... 52
Using Nongovernment Resources Effectively ..................... .    53
Encouraging Nongovernaent Health Care Services         ...   54
Regulating Nongovernment Health Care              ...  56
Competition for Scarce Resources                .     .     .     57
Decentralizing Government Health Services            . . .    58
Control of Fees at What Level? ............................... 59
Appropriate Transfers from Central Government
to Local Facilities .......................................  61
Financing Reforms:  Problems and Pitfalls ...................... 63
3.   WHAT THE WORLD BANK CAN DO ..................................... 77
Stimulating Consideration of Financing Reforms .................  77
Lending Operations ............................................. 78
Conducting Research ............................................ 78
Bibliographical Notes .......................................... 81
References ............                                              82
Appendix Tables ................................................ 101
Technical Notes ............                                        118



Page No.
BOXES
1  Private and Public Benefits of Health Care       ....     ...  14
2   Organizati'an and Financing of the Health Sector in
Zimbabwe ...................................................  32
3   Primary Health Care:  Resources and Costs            . .    34
4   Urban Orientation of Public Health Spending        .    .      35
5   Village Health Worker Financing and a Revolving Drug
Fund in The Gambia ........................................   65
6   Prepaid Health Care Organizations             ..               66
7   Rural Risk Coverage: Thailand's Health Card System ........  67
8   Social Security Financing of Health Care in Latin America..   68
9   The Chinese Health Finance System ..........................  72
10  Public-Private Cooperation .............................,.,.73
11   Health Finance Reforms aVl Already Underway ................  75
12  World Bank Health Lending and Sector Work ..................  80
FIGURES
1  Total Per Capita Health Expenditures .....................      19
2   Central Government Expenditures on Health         .     .      23
TABLES
1  Effects of Policy Reforms .................................   10
2   Total and Public Health Expenditures for Selected
Countries .................................................   20
3   Public and Nongovernment Health Expenditures,
Selected Countries ...............                             22
4   Spending and Cost for Various Health Services .............   24
5   Typical Charges, Public Health Facilities,
Selected Countries ........................................   45



EXBCUTIVE SUHRY
Developing countries have achieved remarkable reductions in morbidity
and mortality over the last 30 years. But continuing gains depend largely
on' the capacity of health systems to deliver basic types of services and
information to households that are often dispersed sid poor. At the same
time, rising incomes, aging populations, and urbanization are increasing the
demand for conventional hospital and physician-based services. These
competing needs have put tremendous pressures on developing country health
systems, at a time when public spending in general cannot easily be
increased, and indeed in many countries must be curtailed.
In most developing countries, public spending in all sectors grew
rapidly in the 1960s and 1970s. But slow economic growth and record budget
deficits in the 1980s have forced reductions in public spending; public
spending on health has increased more slowly since 1980 and in some
countries has declined on a per capita basis. A case certainly could be
made for more public spending on health in developing countries.  Public and
private spending together in developing countries is on average less than 5
percent of that spent in developed countries; even were this money spent as
cost-effectively as possible, it would probably be insufficient to meet
critical health needs. But in most countries, the current environment of
general budget stringency makes it difficult, to argue fur more public
spending. For the foreseeable future, government efforts to improve health
are unlikely to come from tax or debt-financed increases in public spending,
or from reallocations of public expenditures from other sectors, even where
;uch increases or reallocations would be economically as well as socially
justified.
What can be done? This paper proposes an alterndtive approach to
financing health care. Even as governments continue to grapple with the
questions of the appropriate level of funding for health and the appropriate
allocation of total government resources to health, this alternative
approach deserves consideration. Indeed this approach makes sense even in
countries where the overall budget roblem is not severe.
This approach can be simply stated. It is to reduce government
responsibility for paying for those kinds of health s rvices for which the
benefits to society as a whole (a.s opposed to direct benefits to the users
of the service) are low, free.ng government (or publ .c) resources to pay for
those services for which benefits to society as a wtole are high. It is to
relieve government of the burden of spending public resources on health care
for the rich, freeing public resource_ for more spending for the poor.'
'The categories of "rich" and "poor" need to be defined in each
country and will depend on a country's income structure ind social
objectives.



2
Individuals are generally willing to pay for direct, largely curative
cure from which the benefits to themselves and their familieo are obvious.
Those who have sufficient income to do so should pay for these services.
The financing and provision of these "private" type health services
(benefitting mninly the direct consumer) should be shifted to a combination
of the nongovernxent sector and a public sector reorganized to be more
financially self-sufficient. Such a shift would increase the public
resources available for those types of health services which are "public
goods," currently underfunded health
program  such as i      unizations, control            Box 1
of vector-borne diseases, sanitar;         Private and Public Benefits
waste disposal, health education and,           of Health Care
in some circumstances, prenatal and        (Attached at end of Chapter]
aternal care, including fmnily planning
(see Box 1). The benefits of these largely preventive programs accrue to
communities a a whole as well as to individuals and their families. They
will not willingly be paid for by individuals, and should be the
responsibility of the government. The shift to payment for mcat curative
care, wvhether provided by the government or nongovernment sector, by thwe
who receive the care would also increase the public resources available for
government provision of basic curative care and referral for the poor, who
currently have only limited access to services of this nature.
Health Sector Problems
The characteristics and performance of the health sector vary
tre endously among developing countries.  But for most developing countries,
the overall structure of the sector and its performance can be described in
term of three main problems. This paper argues that each of these probleme
is due in part to the efforts of governments to cover the full costs of
health care for everyone from general public revenues. The three proble_
are:
1.  An allocation problem:  Insufficient spending on cost-effective
health activities. Current government spending, even were it
better allocated, would alone be insufficient to fully finance for
everyone a minimum package of cost-effective health activities,
including both the truly "public" health programs noted above and
basic curative care and referral. Though nongovernuent spending
on health is substantial, not enough of it goes for these basic
cost-effective health services. The result: Growth of important
health activities is slowed despite great need and ft t-growing
populations, and the apparent willingness of households to pay at
least some of the costs of health care.
2.   An internal efficiency problem:  Inefficient public Program.
Nonsalary recurrent expenditures, for drugs, fuel and maintenance,
are chronically underfunded, often reducing dramatically the
effectiveness of health staff. Many physicians cannot accommodate
their patient loads, yet other trained staff are not productIvely
employed. Lower-level facilities are underused while central



3
outpatient clinics and hospitals are overcrowded. Logistical
problems are pervasive in the distribution of services, equipmo.t,
and drugs. In government health services, quality is often low;
clients face unconeerned or harried personnel, shortages of drugs,
and deteriorating buildings and equipment.
3.   An equitY Problea: Inequitable distribution of benefits from
health services. In estment in expensive modern technologies to
serve the few continues to grow while simple low-cost
interventions for the masses are underfunded. The better-off in
most cr'intries have better access both to nongoveriment services,
because they can afford them, and to government services, because
they live in urban areas and know how to use the systm. The
rural poor benefit little from tax-funded subsidies to urban
hospitals, yet often pay high prices for drugs and traditional
care in the nongovernment sector.
Obviously these problems are not solely attributable to the approach
governments have taken to financing health. Nor will change in approaches
to financing health alone solve these problems. In the short run, for
example, change in the way resources are mobilized will not in had of itself
correct gross misallocation of health resources between high-cost hospital-
based care aad low-cost basic health services. Change in financing will not
eliminate the need to improve management, administration, training and
supervision in the public delivery of health services. Similarly, in its
work on health, the Bank is concerned not only with financing but with a
wide array of issues associated with the design of sustainable and effective
health program. (A World Bank policy paper published in 1980, Health:
Sector Policy Paper, deals with the health sector as a whole.)
Concentration on financing in this paper by no means reflects diminution of
concern with the full range of issues. It does reflect belief that
financing reforms deserve serious consideration as one part of an overall
renewed effort to improve the health status of developing country
populations.
Four 2olicy Reform
A set of four policies for health financing is proposed below. These
four policies constitute an agenda for reform; we argue that in virtually
all countrie, this agenda ought to be carefully considered. The four
policies are best thought of as a package; they are closely related and
mutually reinforce each other. Mot countries could benefit from adopting
only some parts of the package, and some countries might wish to move more
quickly on some parts than on others. But in the long run, because the
policies are complementary, all four merit consideration.
1.  Charging users of £overzmnt health facilities.  Institute charges
at goverment facilities, especially for drugs and for curative
care. These will increase resource. available to the government
health sector, allowing more spending on underfunded progr ms ,
encouraging improved quality and efficiency, and increasing access
for the poor. Use differential fees to protect the poor. The



4
poor should be the major bene'iciaries of expanding resources for
and improved efficiency in the goveriment sector.
Some countries have had user fees for decades, and some others,
particularly in Africa, are now beginning to introduce them. But the more
common approach to health care provision in developing countries has been to
treat health care as a right of the citizenry and to attempt to provide free
services to everyone. This approach does not usually work. It prevents the
government health system from collecting revenues that many patients are
both able and willing to pay. Thus the entire cost of health care must be
financed through frequently overburdened tax systems. It encourages clients
to use high-cost hospital services when their needs could be adressed at
lower levels of the system. It deprives health workers in government
facilities of feedback on their success in satisfying consumers' needs. It
makes it impossible to reduce subsidies to the rich by charging for certain
services, or to improve subsidies to the poor by expanding others.
In the short run, that is as soon as administrative mechanisms can be
put in place, countries should consider instituting modest charges,
focussing initially on charges for drugs and other supplies, and for private
rooms in government hospitals. Where the current price is zero, even modest
increases in charges could generate revenues covering 15-20 percent of most
countries' operating budgets for health care--enough to cover a substantial
part of the costs of currently underfunded nonsalary inputs such as drugs,
fuel and building maintenance. By "modest increases" is meant amounts wihich
would constitute, even for poor households, 1 percent or- less of annual
income, assuming four "sick" visits per year to a government health post.
In the longer run, user charges provide a way not just to raise revenue
but to improve the use of government resources. Curative services, most of
which are "private goods," currently account for 70 to 85 percent of all
developing country health expenditures, and probably 60 percent or more of
government exp3nditures on health. Over a period of years, once mechanisms
to protect the poor are in place (along with insurance systems to cover
catastrophic costs for all households), consideration should be given to
increasing charges for such services to levels that reflect the cost of
providing them. This would free resources equivalent to perhaps 60 percent
of current government expenditures on health for reallocation to basic
preventive programs and first-level curative care for the poor. (At the
same time, most preventive programs should remain free of charges and be
fill3nced directly by government.)
Capturing the beDefits of a policy of user charges requires attention
to three complementary steps by government. First, user charges will not
work unless access to and quality of services are reasonable; if they are
not, the problem of underutilization discussed below will only be
exacerbated. Second, user charges will not contribute to improved overall
allocation of government health spending unless the freed revenues are
actually funneled into the two activities mentioned above: underfunded
"public good" health programs, and ar, increase in the number and quality of
facilities to serve the poor. This redirection of freed resources requires



a strong political coinituent. Third, the poor who cannot afford new or
higher charges must somehow be protected.
How can the poor be protected? Lower or evei* zero charges in clinics
located in urban slums and in rural areas are a simple, practical step.
Combined with higher charges for hospital care, these would not only protect
the poor, but would improve the targeting of existing government health
spending. Another option is issuance of vouchers to the poor, based on
certification of poor households by local community leaders (a practice
which appears to work well in Ethiopia). Other options to protect the poor
include allowing staff discretion in collecting charges (though this is
difficult to do in the government sector), or in middle-income countries the
use of means tests (which often already exist for other programs). Finally,
in a well-functioning system of referral (in which patients enter the system
at a low cost lower level facility and, only if they cannot be treated
there, are referred for more complicated care to a higher level facility), a
schedule of low or even zero fees at the lower level, and referrals at no
additional cost, also provides protection for the poor. The most
appropriate option will depend on each country's situation; experimentation
with different approaches is likely to be required.
2.   Providing insurance or other risk coverage.  Encourage well-
designed health insurance programs to help mobiiize resources for
the health sector while simultaneously protecting households from
large financial losses. A modest level of cost recovery is
possible without insurance. But in the long run, insurance is
necessary to relieve the government budget of the high costs of
expensive curative care; governments cannot raise government
hospital charges close to costs until insurance is widely
available.
Insurance programs cover oinly a small portion of low-income louseholds
in most developing countries, especially in Africa and South Asia. Outside
of China, where the mujority of urban residents are insured, no more than 15
percent of the people in the low-income developing countries take part in
any form of risk coverage scheme (other than free public health care
provided with tax revenues). Most of these are covered under government-
sponsored social insurance plans in the middle-income countries of Latin
America and Asia. Private insurance, prepaid plans and employer-sponsored
coverage are all still relatively rare.
A starting point for insurance in most low-income countries is to make
coverage (whether provided by government or by the nongovernment sector)
compulsory for employees in the formal sector. Then at least the relatively
better-off will be paying the costs of their own care. A few low-income
countries and most of the middle-income countries in Latin America and Asia
have already taken this step, often through payroll taxes to fund social
insurance that covers health.
Insurance programs in industrialized countries and in Latin America
have undoubtedly contributed to rising health care costs. When schemes
cover most or all costs, and patients and health providers perceive care as



6
free, some unnecessary visits and unnecessary procedures are likely, leading
to escalating costs in the system a a whole. To avoid such escalation,
compulsory insurance plans in low-income countries should avoid covering
small, predictable costs (e.g., for low-cost curative care); they should
cover only costs that for an individual might be termed "catastrophic."
(Where practicable, the definition of the catastrophic expenditure level can
be related to household income.) Cost escalation in reimoursable systems
will also be less likely if consumers pay an entrance fee (or deductible)
and a co-payment for each illness, and if there is competition among
insurance providers. Without effective competition, insurance providers
will have little incentive to keep costs and premiums low, and higher costs
will be passed through in the form of higher wage bills and higher consumer
prices.
Avoiding cost escalation in governmert-run insurance programs is
especially critical to avoid a related problem: political pressure to
subsidize the insurance system from general tax revenues---:ich, if it
occurs, makes the insurance program a benefit for the better off, paid for
in part by the poor.
3.   Using nongovernment resources effectively.  Encourage the
nongovernment sector (including nonprofit groups, private
physicians, pharmacists, and other health practitioners) to
provide health services for which consumers are willing to pay,
allowing the government to Locus its resources on programs that
benefit whole comunities rather than particular individuals.
Government is an important, but by no means the sole provider of health
services in developing countries. Religious missions and other nonprofit
groups, independent physicians and pharmacists and traditional healers and
midwives are all active, and direct payments to these providers account for
up to half of all health spending in many countries. There is no "correct"
size of this nongcvernment sector compared with government; the relative
roles of the government and nongovernment sectors are bound to vary among
countries. However, governments reduce their own options for expanding
access to health when they actively discourage nongovernment suppliers, or
fail to seek efficient ways to encourage them.
Comunity run and privately managed cooperative health plans should be
encouraged. Capitalizing such plans, providing temporary subsidies, and
providing administrative support should be considered. Any prohibitions or
restrictions on nongovernment providers should be reviewed. The removal of
requirenients for unnecessary paper work and the reduction of regulations
relating to non-profit providers should be undertaken.  To provide better
care for the poor, subsidies to existing nongovernment facilities to make
them affordable should be considered as a cost-effective alternative to
direct provision of these services by the government sector.
There are important training, regulatory, and information roles that
only the public sector can perform in overseeing and guiding the activities
of nongovernment providers. The public health sector in every country needs
to take leadership in training health workers, testing them for competency,



7
and licensing nongovernuent facilities. Governments must play a central
role in research and development. Governments must set standards and
reulations to protect the populace from untrained or unethical
practitionerm, especially in countries where professional associations and
standards of professional conduct are not yet well established. Governments
need to develop the legal framework for prepaid health systems, and must
disseminate information about pharmaceuticals, and health inaurance options
to help const ers deal effectively with nongovernment providers.
In some countries, includirg much of Latin America and the middle-
income countries of Asia, it may be possible for the nongovernment sector to
provide most or even all curative care as long as risk coverage plans and
subsidies for the poor are implemented. In others, including in Africa and
the poorer countries of South Asia, where much of the population resides in
rural areas, and where basic curative and preventive services are closely
and appropriately integratedp the government sector will need to continue to
provide curative care in conjunction with its preventive care (for example
sick child visits in conjunction with iununization), ideally in a manner
that complements existing nongovernment (including traditional and mission)
services. In all countries, in most areas of preventive care, where social
benefits are large, the role of government will remain predominant and
indeed ought to expand.
4.  Decentralizing government health services.  Decentralize planning,
budgeting, and purchasing in provision by government of health
services, particularly of the "private" type services for which
users are charged. Under a general rubric of national setting of
policy and program directions, use market incentives where
possible to better motivate staff and allocate resources. Allow
retention of revenues collected as close as possible to the point
of service delivery. This will improve collection itself and
contribute to improved service efficiency.
There will be a continuing role for the government sector in provision
of health services in most nations. Increased efficiency in the provision
of these services cannot be neglected. In countries where managerial
resources are scarce, comnunication is difficult, transportation is slow,
and many people are isolated, decentralization of the government service
system should be considered as nne possible way to improve efficiency.
Decentralization is an approach appropriate primarily for the types of
services provided directly to people in dispersed facilities, where user
charges for drugs and curative care are implemented. Decentralization is
less likely to make sense for tax-supported "public" type goods, such as
ia unizations and control of vector-borne diseases. There programs are more
logically administered centrally, titough even these program3 can be, and are
in same countries, "contracted out" by the central government to local
governments. Decentralization gives local units greater responsibility for
planning and budgeting, for collecting user charges and for determining how
collected funds and transfers from the central government will be spent.
(It often also implies greater responsibility for personnel management and
discipline.)



E;
Decentralization of financial planning should include adherance to a
general principie regarding control of revenues collected in the form of
u3er chlarges: such revenues should be retained as close as possible to the
point at which t hey were co l ected.  This improves incentives for
(Col lect ion, increases kiccountability of local staff, within limits assures
Hiat local choice of' expend itures (whether Lo fix the well or purchase
drugs) refJects local needs, ar,d fosters development of managerial talent at
the community level.  'I'he Lorfverltion1Ul public finance argument, that all
pull ic revenues should revert to the center where they can be allocated
vYhti,j  most needed, fai.ls to takt into account a critical factor:  that the
systHm of collection itself affects the amount and use of revenues
'otllected. In general, the higher the transactions and information costs of
ul lectitng fees and administering revenues--that is the smaller the amounts
(eing c( Ii ected and the more frequent the colLection, as in drug charges and
l(ees for simple curative care- -the stronger are the arguments for control of
re(venues; at, the pointt of service delivery.
Decentralization anrd greater financial control by no means imply,
hiowevtr, complete financial independence of each individual facility.
(overnmelnt faci lities that provi de integrated curative and preventive
.i n rural area,m and to the urban poor will continue to require
cerntral support.  In fact, in rur^al areas the appropriate "unit" for
put po<ss of decentralized )lanniing and budgeting is likely tu be a regional
or dfistrijt office, not each of many sriall healtit posts.  Eventually
.g<cvernnmildt hospitals in urban areas could transfer some collected revenues
t) the center, to supplement general revenues in financing other government
health programs.
Control of revenues at the point of service delivery also helps
reinforce a more general principle:  as revenue collection in government
facilities makes Largely curative "private" services financially self-
sustaining, the freed government resources should be retained in the health
sector (but not necessarily at the level of individual facilities), until
"public" type health programs and care for the poor are adequately funded.
Decentralization of government health services will not be easy, and of
the four policy recommendations is probably the least tried. Where other
parts of government are highly centralized, there will be considerable
obstacles to decentralization (but considerable benefits as well since,
except for agricultural extension, perhaps no other government service is as
highly dispersed geographically in its activities). Where overall
administrative systems are weak, the quality of staff in remote areas is
poor, or positions are unfilled due to long standing difficulties in
attracting staff away from large cities, decentralization will have to be
planned and introduced gradually. In some countries, where staff of
regional agencies, local hospitals, and clinics have little experience in
managing revenues and expenditures, training in such skills and a period of
practice of such skills will need to precede decentralization.



9
Tbe PolicY Packase and Health Sector Problem
Table 1 suoarizes the potential effect of each of the four
recomnendations in alleviating hedilth sector problems. User charges for
govern ment-provided services can contribute to solving all three problems.
User charges increase resources for the system as a whole, allowing a shift
in government resources to more cost-effective, generally preventive
progr ams . This shift alone will tend to benefit the currently underserved
poor more than the rich, since the poor tend to suffer more from the health
probl  s that can best be addressed by preventive programs.  If revenues
fro user charges are channelled directly into underfunded nonsalary
expenditures, that is into drugs, fuel, and maintenance, the efficiency of
the existing government services will increase. User charges can also play
a direct role in making the health system more equitable: the rich who
benefit moat from government provided services, will now have to pay; the
government resources thus freed can be redirected into programs and
facilities targetted to the poor.
Risk coverage programs can provide more revenue to the system as a
whole, also allowing diversion of freed government resources to cost-
effective programs. By tapping the ability of the better-off to cover the
injor costs of their own care, risk-sharing schemes improve the overall
equity of government health spending.
Encouraging the ncngovcrnment sector helps mobilize resources from
families, coinunities and voluntary groups, and allows redirection of
government resources to programs that have high benefits but for which
willingness to pay is low--resulting in both more efficiency and greater
equity.
Finally, decentralization can contribute to increased revenue
mobilization. Consumers will be more willing to pay and and providers more
willing to collect charges because cf t'ie link between revenue collection
and better services. Decentralization can also contribute to improved use
of government resources, by making services provided by government more
responsive to client needs.
The parts of this policy package rely on each other for their positive
effects. Charges at government facilities will not be effective in raising
revenues unless competitive incentives in both the nongovernment sector and
the decentralized government sector orient the system toward provision of
quality care at affordable prices. The tendency to allocate too much of the
government health budget to high-cost hospital care, with negative effects
on overall cest-effectiveness and on equity, will be difficult to
change until charges come close to reflecting real costs. But charges at
hospitals and other government facilities cannot be raised to reflect costs
and recover larger amounts unless much of the population is insured. At
the same time insurance and other forms of risk coverage will collect little
revenue and in all likelihood fail if free ser vices remain available at
government facilities.  In the long run, divers,on of government resources



10
Table 1. EFFECTS OF POLICY REF0U"
The allocation         The internal         The equity
Policy                problem         efficiency problem       problem
Keep the Present System           0                      0                 0
Institute User Charges            +                      +                 +
and: Use freed government       +                      0                 +
revenues to expand
cost-effective
services
and: Use new revenues           0                      +                 +
to finance non-
salary costs
and: Use differential           0                      0                 +
charges to protect
the poor and reduce
existing subsidies
for the rich
Provide for Risk-Coverage         +                       0                +
Use Nongovernment                 +                       +                +
Resources Effectively
Decentralize Government           +                       +                +
Health Services
Note: 0 indicates no effect.



11
for cost-effective basic services will be easier if an active nongovernuent
sector is providing the bulk of curative care. An active high-quality
nongovernment sector requires availability of insurance.
Financing Reforma: Probleme and Pitfalls
Implementation of these reforms will by no means solve all the problems
of the health sector. User charges in government facilities will not
generate foreign exchange to pay for imported pharmaceuticals. Insurance
programs will not in and of themselves assure better quality of government
services. Decentralization will not eliminate the need for difficult
decisions at the center regarding the geographical allocation of new
investments and of health personnel. A strong nongovernment sector may not
adequately serve the poor in remote rural areas.
Financing reforms will have little impact without a political
co  itment by government to making the health sector more effective.  As
noted above, user charges (and other financing reforms) aJone will not
assure that government resources freed up will be well used; decisions made
largely in the political arena will determine whether freed funds are used
for the poor and for "public" type services, rather than for brilding urban
hospitals and buying expensive nonessential equipment. Political decisions
will largely govern whether freed revenues are used to improve access to and
quality of services sufficiently to attract fee-paying and insurance buying
customers. Only government action can bring necessary changes in management
and training programs--for example in the medical education system toward
more appropriate training of doctors and increased emphasis on the training
of paramedical personnel.
On the other hand, without financing reforms the revenues needed to
carry out political reallocation decisions both within and outside the
health sector may not be available. While financing reforms will not
automatically take care of political decisions, reforms will help make
available the resources that make political decisions feasible.
Nor is the finance policy package itself a simple one to implement. In
countries where administrative capability is weak, introduction of new
approaches will take time. Moreover, each of the four parts has potential
drawbacks if implemented without dne care. User charges could deter those
with the greatest capacity to benefit from seeking care, without recycling
funds into health. Risk-sharing schemes could raise costs and augment
existing disparities.  Deregulation of the nongovernment sector and
administrative decentralization could increase geographical inequality and
decrease quality of services.
Avoiding the pitfalls requires that political and social boldness in
innovating on the policy side be complemented by systematic and sustained
attention on the program monitoring side. At the country level, specific
approaches to implementation need to be monitored as they are tried;
flexibility in such areas as the size of user charges and the approach to
decentralization needs to be maintained.



12
Need for Further Analysis
As the finance reforms are tried, monitoring and operational research
work in country settings should focus on these kinds of questions:
1. What access to services of what quality is there now? What are
nongovernment expenditures on health care? How much do people now pay? How
much can they afford? How would utilization of services be affected were
prices raised? Would demand fall for services important from a health point
of view? Would utilization by the poor decline?
2. How much revenue can be raised from what size charges? What are
collection costs likely to be? What is a reasonable schedule of charges at
different levels of the system?
3. What health insurance programs now exist? Who is covered at what
cost? Are there informal insurance systems within extended families?
4. How equitable is the existing health system? What groups now
benefit from what services, et what cost to the government purse? What are
practical means of identifying and protecting those unable to pay for health
care?
5. How active is the nongovernment health sector? Is the for--profit
sector competitive? Are there private physicians, pharmacists, and other
trained health practitioners in rural areas? What income groups does the
nongovernment sector serve? What are alternative means, and their relative
costs, for improving infor.mation to consumers about the quality and prices
of private health services? How can both public and private health
providers be regulated and supervised so that the clients are protected from
ill-advised and overpriced services?
6. How can management of government health facilities be organized and
overseen so that resources are used efficiently and workers perform well?
What steps can be taken to ensure sustained political and popular support
for health financing reforms?
The Role of the World Bank
The World Bank began direct lending for health in 1980, and by 1983 had
become, along with the United States and Japan, one of the three largest
funders of health programs in developing countries. Lending operations in
over thirty countries have focussed on development of basic health care
programs, including expansion of primary health care, provision of drugs,
and support for training and technical assistance. Lending operations have
generally been preceded by systematic studies of the health sector as a
whole. These studies have enabled the Bank to carry on a policy dialogue
regarding system-wide health issues with government officials.



13
In its 3ector work and lending in health, the Bank has been concerned
not only with health financing, but with a wide array of system-wide issues,
including the appropriate allocation of investments in the sector given the
criterion of cost-effectiveness; the design of sustainable health programs;
and the need to improve management and training. Concentration on financing
in this paper by no means reflects diminution of concern with these other
issues. It does reflect mounting concern in the Bank and in member
countries about the resource problem in health, and a conviction that the
Bank, itself a financial institution, can make a useful contribution to
improving health in developing countries by encouraging improved health
financing policies.
The Bank is currently making renewed efforts to do so. A strengthened
program of country sector work includes attention to the health financing
issue. General reliews of overall government expenditures increasingly
include special attention to the health sector. Innovative lending programs
include assistance to countries in the development and implementation of new
health financing approaches. Dialogue with other donor agencies is more
active an(I a program of research and operational evaluation on the effects
of new approaclhes is planned.
The Bank consistently has advocated that overall economic policy be
grounded in sound principles of finance and project selection; the agenda
for health financing reform proposed in this paper is consistent wiih aid
reinforces that role in the health sector.



14
Box 1. Private and Public Benefits of Health Care
Goods and service's provided by the health system can usefully be
classifLed with respect to who receives the benefits of their provision. At
the two extremes of classifiration nre purely private goods, for which all
benefits of use ar. captured by the person who consumes the health service,
and purely public goods, for which all benefits are equally received by all
members of society. An aspirin faken for a headache is a good example of a
purely private health good. Spraying to protect, all residents from a vector
borne disease closely approximates a purely public health good. Many actual
health services are of a mixed type; the cons;zmer captures some purely
private benefits, yet others also benefit from that person's consumption of
the service.  The person who is vacc:inated receives a private benefit of
protection, but others henefit as well because they are less likely to be
exposed to the illness.
Consumers' willingness to pay directly for health services with largely
private benefil.s is almost always highi.  Willingness to pay directly for
programs and services which benefit society or coumiunities as a whole is
generally very low.  Consumers will tend to wait and hope that others will
provide the funds needed for adequnte levels of these public type services
---the so-called free rider problem.  That is wlhy in most societies, "public"
type health services are funded by general revenues rather than user
charges.  Only public involvement will bring sufficient provision of public
goods (and mixed goo(ds with a significant public benefit. component).
Private and public benefit type health services, and therefore degrees
of willingness to pay, often are equated with curative ancd preventivel care
respectively (including in this paper, for' ease of exposition).  But the
corresporndence is no( exact.  For some preventive care, suech as growth
monitoring of infants, much of antenatal and perinatal care, end screening
for hypertension, most benefits arc captured by recipients of thle services
and their families.  Well-informed patients are likely to choose to pay for
these services rather than forego them.  For some curative care, such as the
care of the carrier of a contagious (lisease (tuberculosis is an example),
there are put)lic or social benefits to others as wel] ais private benefits to
the patient.
fEId of Box I1



15
CHAPTER 1
THE HEALTH SECTOR AND ITS PROBLBM
The main purpose of this paper is to discuss new and generally
underutilized approaches to health financing in developing countries--
approaches that should contribute to solving co on problems in the health
sector. J; this chapter, following a brief introduction to health status
and the health sector in developing countries, three major health sector
problems are discussed. In Chapter 2, four financing reforms to help deal
with these problems are described and evaluated. In Chapter 3, the
operational research needed to design programs appropriate to specific
nations and to evaluate the effects of financing reforms, and the World
Bank's role in assisting countries with health finance policy are discussed.
Health and the Health Sector in Developing Countries
The degree of ill health in developing countries is enormous.
Mortality is much higher than in developed countries, witih low- and middle-
income countries in 1983 experiencing average infant mortality rates about 8
times higher, and female life expectancy about a third shorter, than in the
industrialized nations. In pockets of Africa, nearly a fifth of all births
end in death before age one.
Morbidity is also high. The few available sample surveys of morbidity
demonstrate extraordinarily high levels of largely preventable sickness. A
1974 survey of two typical rural Punjab villages in Pakistan found 28
percent of the residents suffering from malaria and nearly 100 percent
infested with various parasitic worms. Children under five averaged six
bouts of diarrhea annually. A similar survey at the end of the dry season
in 15 rural Malian villages found a 50 percent prevalence of malaria and a
30 percent incidence each for goiter, schistosomiasis, salsonellosis,
hookworm, and onchocerciasis.
The health sector in developing countries consists of a heterogeneous
mixture of public, or government activities, and nongovernment activities,
including services provided by both modern and traditional practitioners
(Box 2).  The public or government
component itself is diverse,                          Box 2
providing a broad range of services         Organization and financing
through many different programs.               of the Health Sector
Governments typically provide free                 in Zimbabwe
or low-co3t curative care directly          (Attached at end of Chapter]
through Ministry of Health institu-
tions; they administer social security systems that provide free curative
services to insurees through a second set of (often) government-owned
facilities; they support mental hospitals, leprosaria and infectious disease
hvapitals; and they finance vector--borne (lisease control programs, water and
sanitation projects, tin(l othier public health activities.



16
Use of the government service system varies enormously across and
within countries, depending on its effectiveness and its competitive
environment. In the Ivory Coast, the government system serves 90 percent of
outpatients; in the Philippines, with its larger modern private sector, the
government system serves at least 25 percent of outpatients. The lesson of
recent surveys, however, is that aimost nowhere are government clinics and
hospitals the only source of care. At a minimum, they compete with private
physicians in urban areas and with traditional practitioners in rural areas;
more often they compete with both. New government programs are thus often
inserted into areas where people have well-established medical service
demand patterns; there is rarely a complete absence of services. For
example, in the well-known Narangwal, India, study, approximately a third of
sick children in villages not receiving project health services were found
to use private or traditional care. The rest stayed at home. In project
villages, where free primary health services were aggressively delivered,
the percentage of all sick children receiving any medical care increased,
but still a third of them paid for private or traditional care.
The nongovernment sector is no less complex than the government sector.
Modern private care is dominated by independent physicians. In Bangladesh,
Indonesia, Malaysia, Peru, Thailand, and the Ivory Coast, surveys show
private physicians account for at least 25 percent of outpatient visits. In
densely settled middle-income countries like the Philippines and Korea, as
many as 40 percent of visits are to private physicians, even in rural areas.
In many countries, private physicians are joined by government physicians
who maintain part-time private practices, by nurses, midwives, and
paramedics who work privately, and by various non-profit and voluntary
organizations.
In Africa and parts of Latin America, modern non-public care is also
provided by religious missions and other nonprofit groups. Private
employers also provide direct care, often for the sound business reason,
that it helps to maintain a stable work force. The Firestone company had by
the late 1960s built up impressive health facilities for its workers and
their families in Liberia. Among lhe facilities provided by the company
were two modern hospitals, a nursing school and formal programs for training
laboratory technicians and other skilled personnel. In 1966 the system had
over 500 employees, and over 500,000 patient visits per year were being
accommodated. Over 25 percent of total visits were by patients having no
connection with the company. In many countries, for example in francophone
Africa, social legislation requires that large employers provide health
services.
Also in the nongovernment sector are pharmacists and traditional
healers and midwives.  Private pharmacists, many of whom are primarily
shopkeepers without formal training, are a source of informal advice and
remedies. Traditional healers andl midwives provide fee-for-service care in
both urban and rural areas throughout the developing world, accounting for
10 to 50 percent of all medical visits in countries surveyed. Even in areas
where trained midwives are available and where women use modern prenatal
care, traditional midwives may attend well over half of all births.



17
Nationally representative World Fertility Survey data for Peru, a middle
income country, indicate that almort 60 percent of children born in the late
1970s were delivered at home. In Mali and the Philippines, two countries
that are among the few for which extensive  expenditure surveys have been
done, traditional services and purchases of drugs account for half to two-
thirds of household health expenditures.
Use of more than one source of health care is not at all uncommon;
indeed, inattention to the traditional and modern private sectors when
planning government services probably contributes to wasteful spending
through duplicated care. Anthropologists have observed patients using free
government care while simultaneously paying for traditional care, paying for
ineffective traditional services or pharmaceuticals before finally endling up
in a free govern-:nt hospital bed, and paying private physicians to refer
them to free government hospitals in the expectation of getting better care.
While it is useful to emphasize features common to developing country
health systems, it is important to point out that the countries are quite
different in ways that affect the delivery, accessibility, and financing of
health care.  Terrain, income levels, income distribution, literacy,
population density, capacity to educate health professionals, degree of
urbanization, transportation and communication systems, proportion of wage
earners in the population, and morbidity patterns vary tremendously.
Generully speaking, certain obvious combinations of these characteristics-
for example, low incomes, dispersed populations, and illiteracy---conspire to
make financing and delivery of medical care far more difficult in some
regions, including much of Africa. However, even within Africa thare is
great variation, with some countries characterized by relatively high and
rising levels of urbanization, extremely small geographical areas, pockets
of high incomes (especially in mining areas), and well-insured employees in
certain industries.
Problems in the Health Sector
Health sector problems can be summarized under three categories: an
allocation problem--insufficient spending on cost-effective health programs;
an internal efficiency problem--wasteful public programs of low quality; and
an equity problem--inequitable distribution of the benefits of health
services. Piecemeal efforts to address these problems, through foreign aid
to fund high-priority programs or adding more supervisory staff to control
quality, fail to address a fundamental underlying cause--poor approaches to
financing.
An Allocation Problem: Insufficient
Spendi g    Cost-effective Programs
Most countries have embraced an explicit social goal--to bring basic
health services to all members of their populations by the year 2000.  But
current public and private spending on ba:,)ic health services in developing
countries is insufficient to meet this goal. Though private spending is



18
substantial, little of it goes for the low-cost services which are most
cost-effective in improving health: basic health services, including
imunizations, vector control, health education, simple curative care and
referral, and effective drugs. Current public spending, even were it better
allocated, would alone probably be insufficient to finance these activities.
The result: growth of important health activities is slowed despite great
need and fast-growing populations, and the apparent willingness of
households to pay at least some of the costs of health care.
This sectioni outlines briefly the gap between actual and required
spending on critical health programs in developing countries. The evidence
of a gap is largely circumstantial. In the absencc of systematic studies of
the social returns to various types of health spending,' there is no simple
way to quantify the gap between potential high-return spending on health and
actual spending.
Actual spending on all health care. Per capita spending on health care
in developing countries, including public and private spending, averages
about US$9 in low-income countries and US$31 in middle-income countries.
These figures are low compared to an average of US$670 in industrial
countries (Figure 1). Much of the difference simply reflects differences in
overall per capita income; the proportion of total national income devoted
to health is in a range of 2-12 percent for almost all countries, developing
and developed. Health spending is highly income elastic; across countries,
as incomes rise absolute spending on health care rises at an even faster
rate (Table 2). As income levels rise in the poorer countries, the demand
for public spending in the health sector is likely to rise more than
proportionately, as has historically occurred in developed countries. Even
in the U.S., where more than half of care is provided privately, expenditure
by the public sector on health takes over 11 percent of the total government
budget (Appendix, Table 3) and much of private care is paid for by public
Medicare and Medicaid funds. Per capita public sector heallh rxpenditures
in the U.S. are larger than in most other developed countries (Table 2). As
development occurs all nations raise added funds for the public type goods
(and some, such as Sweden, fund much "private" care publicly).
Government is an important, but by no means the dominant, source of
health spending in developing countries. Direct private payments by
individuals account for more than half of all health spending in developing
countries, compared to less than one-quarter in developed countries. There
are large differences among developing countries. Expenditures by
individuals account for over 70 percent of total health expenditures in
Bangladesh, Ghana, India, South Korea, Pakistan, the Philippines, Syria, and
Thailand, and less than 30 percent in a number of poor African countries
1Such as exist already in education.



19
Fi&re_1. Total Per Capita Health Expenditures
Selected Countries (1981 82)
YUS                                      670.00
A.
30.93
8.84
Saurces:  World Bank Sector and Appraisal Reports for all developing
countries but Egypt and Portugal.
OECD.  "Measurinig Health Care 1960-198:3:  E:xpenditure, Costs and
Performaince."  OECI) Social Policy Studies No. 2, Paris, 1985.
Institute of Medicine.  "Health in Egypt:  Recontmendations for
U.S. Assistance, Report of a Sl.udy."  Nat ional Academy of
Sciences, Wash ington, D.C., January 1979.
Notes:  Averages are based orn selectedl countriefs.  Thelse count ries are (by
income classification):
Lov income    : Ethiopia, Mali, Uganda, Butrundi, flxrkina Faso, Rwarlda,
Somalia, Sri Lanka, Niger, Pakistan, and Senegal.
Middle- Income :  Indonesia, Lesotho, 7.ambia, Egypt, Swaziland, Thailand,
Philippines, Morocco, Zimbabwe, Botswana, Peru, Jamaica,
Ecuador, Colombia, .Jordan, Portuga 1, Greece.
Industrialized:  Ireland, Spain, Italy, New Zealand, IJniled Kingdom, Japan,
Austria, Finland, Australia, Carnada, Nelherlands, Belgium,
France, Iceland, Dermark, Federal Republic of Germany,
Norway, Sweclen, Switzerland.



20
Table 2. Total and Public Health Expenditures for Selected Countries
(per capita and as a per._ent of GDP)
------------------------------------------------.--------------------__---
Total       Public
Total          Public       Expenditures   Expen-
Year   Per Capita      Per Capita    as % of GDP   ditures
as x of GDP
Low Income:
Ethiopia     1981      2.81           1.52            2.01            1.09
Uganda       1982      9.73           1.91            4.23            0.83
China        1981      8.39           5.70            2.80            1.90
Sri Lanka    1982    10.25            6 14            3.20            1.92
Middle Income:
Zambia      1981      32.24          16.30            5.37            2.72
Indonesia   1982     15.03            5.70            2.59           0.98
Egypt       1977      16.53           6.98            5.17            2.18
Peru        1981      62.12          32.71            5.31            2.80
Industrialized:
Italy       1982    444.42          375.84            6.50           5.49
Japan       1982    605.63          433.65            6.01            4.30
Sweden      1982   1172.74         1076.16            8.21            7.66
United
States    1982   1402.65          591.14            9.38           4.49
Notes:    All data in this table are based on estimates.  All amounts are in
U.S. dollars of the year indicated.
Public is defined as the sum of all central government
expenditures on health, health expenditures through the social
security system, and foreign aid (excluding foreign aid to
nongovernmental organizations).
Sources:  World Bank Sector and Appraisal Reports for all developing
countries but Egypt.
OECD. "Measuring Health Care 1960-1983: Expenditure, Costs and
Performance." OECD Social Policy Studies No. 2, Paris, 1985.
Institute of Medicine.  "Health in Egypt:  Recommendations for
U.S. Assistance, Report of a Study." National Academy of
Sciences, Washington, D.C., January 1979.
World Bank. "World Development Report 1984." Washington, D.C.,
1983.
IMF. 'International Finance Statistics -- August 1984."
Washington, D.C., 1984.



21
(Table 3).  Spending ot) nongovernment health care consists predominantly of
fee payments and payment.s for drugs.  In Indonesia, at least 23 percent of
all health spending in 1982-83 was for household purchases of medicines, and
another 35 percent for fees to mo(dern and traditional private practitioners.
Between 1972 and 1982, the proportion of central government
expenditures devoted to health declined for developing countries as a group,
while it increased in developed countries (Figure 2).  For the poorest
countries, thc declining share of government expenditures going to health
translated illto real declines in public resources for health, and even
larger declines in per capita spending, because of fast population growth.
Sources of finance.  Spending by Ministries of Health is supported
almost exclusively by general tax revenues.  Social security institutions,
which are most prevalent in Latin Amierica, are almost always financed by
payroll and other earmarked taxes.  Cost. recovery in government ftcilities
usually covers onily a small fraction) of expenses.  Foreign assistance
accounts for a relatively high proportion of capital costs in the poorest
countries, but is rarely available fGr operating expenlses.
In the nongovernmernt sector, physicians, traditional healers,
traditional midwives, and pharmacists are financed by fees cr in-kind
payments.  Mission facilities are financed from three sources:  (i) user
fees, generally high enough to permit substantial cost recovery, (ii)
subsidies from affiliated churches, and (iii) in most African countries,
direct subsidies from the government. They also often benefit from the low
salaries of religious persoirmel.
Third party pakyment mechanisms are rare in developing countries outside
of Latin America, so reimbursements from insurance programs (either
governmernt or private) account for only a smaill share of private sector
revenues. However, prepaid health care programs, organized by central
governments, communities, or private companies, are becoming increasingly
common in nations such as Brazil, Jamaica, the Philippines, Thailand, and
tlruguay.
Required spending for critical programs. Estimates of the cost of a
package of basic health interventions -such as immunizations, prenatal care
and education about healthful pirsotnal habits--vary widely. Excluding water
and sanitation, one detailed evaluat.ion suggests annual costs on the order
of $10 per capita (see Box 3).
This is not large, compared to                            Box 3
total government aizd norigovernment               Primary Health Care:
spending of at least $30 per capita                Resources and Costs
in most countries.  But most current          [Attached at end of Chapter]
spending, goverrment and non-_
government, is for hospitals and other curative care and nonessential drugs,
not addressing fundamental health problems.  Tn most. developing countries,
health spending goes almost completel' to curative services provided almost
exclusively by hospitals (see Table 4). Estimates of the exact cost.-
effectiveness of alterrative types of sprvices are crude, but there is



22
Tole.  h6Itc  _d0  d            _ _    _ltdt  bo     itwr.
kiacted Contritma
Cemtry              Total            iltie     Eosw et  __eertJ
per CAwita   ,  Capita'   per Capital           Public
_______     _           CUSS)         CUSS)           (USS)
eaimsa Cautri
tin order of 1984
per capita to int_
Ethiopia, 19S1            2.81          1.52           1.29             0.86
"ol. 19H1                 4.45          2.08           2.40             1.17
Surikie  Foso, 1961       7.41          5.07           2.34            0.46
Niger, 1964               4.84          3.58           1.26            0.35
Suruadi, 1982             4.23          3.52           0.71            0.20
Ugand, I982               9.73          1.91           7.B2             4.09
Smali, 1982               9.10          4.48           4.62             1.03
bands,  1982              7.07          5.18           1,89             0.37
China, 1961               8.39          5.70           2.66             0.47
Sri LemMa, 1982          10.25          6.14           4.11             0.67
Pakiat ., 1982           11.18          3.23           7.96             2.46
Samgsl, 1961             17.73         11.09           6.64             0.60
Zamia, 1961              32.24         16.30          15.94             0.9B
Lesotho, 1960             6.99          7.94           1.06            0.13
Indonesia, 1M            15.03          5.70           9.33             1.64
Ptmxlippin", 196         18.23          4.83          13.39             2.77
worocco, 1962            23.53         10.60          12.93             1.22
Egypt, 1977              16.53          6.96           9.65             1.37
Zimwe,  1960             29.58         17.81          11.77            0.66
S5m land, 1962          52.22         20.90          31.32             1.50
Thailaod, 1979           19.56          6.86          13.70             2.34
botnw.s. 1978            36.66         20.74          15.91            0.77
Peru, 19B1               62.12         32.71          29.41            0.90
Ecuador, 1964            46.11         28.35          17.76            0.63
Jmics, 1960              61.93         41.62          20.31            0.49
ColabL,  1978            69.60         '6.42          23.18            0.50
Jordan, 1982             59.34         34.24          25.11            0.73
Portugal, 1962          134.86         96.8B          36.96            0.41
Grewce, 1982            173.16        14W.19          26.97             0.10
lotrialte Cvtrzi
i,n order of 19S4
per capitt incone)
Spain, 1982             301.34        218.22          83.12            0.38
Ireland, 1982          449.58        421.01           28.57            0.07
Italy, 1982            444.42         375.84          68.68            0.16
New Zealand, 1962      421.51         373.66          47.B5            0.13
United *ingdo, 1962  513.35           463.73          59.62            0.13
BeLgiia, 1982          531.14         490.09          41.05            0.08
Austria, 1962          641.85         404.76         237.09            0.5$)
Netherlands,  1962     842,75         671.12         171.63            0.26
rrwnce, 1982           935.00         664.34         270.65            0.41
Japan, 1982            605.63         433.66         171 9b            0.40
Finland, 1982          695.71         554 37         141.34            0.25
Iceland, 1982         1012.15        870.46          i41.7u            0.16
Germny, F. B., 1982  871,90           702.79         169.01             0.24
Denmerk, 1982           748.75        646. 80        101.96            0.16
Australia, 1962        843.33         555.22         286.12            0.S2
Sweden, 1982           1172.74       1076.16          96.58            0.09
Canada, 1982           1010.82        750.25         260.57            0.35
NWrway, 1982           934.20         912.50          21.71            0.02
United States, 1962  1402.65          59l.14         811.51             1.37
Sw'tterlend, 1982       945.50        618.46         327.05            0.53
Source.   World Sank Sector and Appraisal Reports for al! developing
countries but Egypt and Portugel.
02CD.  "Measuring Health Care 1960-1963   Expenditure. Coets and
Performance."  OSCD Social Policy Studies No  2, Forts, 1996
trititute of Medicine.  'Hlealth in Egypt   Recmeodations for u s.
Assistance," National Acadmy of Sciencee, Wawhington, D.C., JanuarY 1979.
World Sank,  "World Develop ent Report 1963."  Wshington, D C_ 1983
IMF "International Finance Statistics -- August 1984." Washington, D.C.,
1984
Notes  I/  3ecause sources use different definitions of public ad
nongoverniwntal, date for developing countries are not directly coarable
a*'rons -ountr les.
2   Public is defined as the sum of lil central goveriment
expendituies on Nealth, health expenditures through social aecurity
trintitutions, and foreign aid eixcluding foreign aid earmarked foa iossiosfi
end nongoverrtentel organizations
i  Nongoverrient  an defined as the sum of private expeniditure or,
healTh care, expenditures by missions, and expenditures by Nongovernmentai Organizations



23
Figure 2. Central Government Expenditures on Health
As a Percent of Total Ptublic Expenditures, 1972 1983
S-ource: World Development Report, 1986.



24
Table 4. Spending and Cost for Various Health Services
Percent of total         Approximate
expenditure         cost per addi-
S.ervices                              on health/a        tional life saved
Direct Services to Patients
Curative                                              70-86                 High
*  treatment and care of patietnts                                (probably
through hlealth facilities                                       $500-$5,000)
and independent providers
(including traditional
practitioners)
e retail selling of medicines
Preventive                                            10-20                 Medium
*  maternal and child health                                       (probably
care (e.g., immunization,                                         $100-1$600)
growth monitoring, family
planning, promotion of
improved breastf'eeding and
weaning practices)
t adult care (e.g., hyper-
tension screening, pap smears)
Community Services                                           5-l0
t  vector control p-ograms                                            Low
*  educational and promotional                                     (probably less
programs orn health and                                           than $250)
hygiene
*  monitoring of clisease
patterns
Total                                  100
Source:   Columns I and 2 are based on de Ferraniti, 1985 (rough estimates based on
review of World Bank sector and project documents).  Column 3 is a rough
guess by the authors.
a/   Includes both nongovernment and public spending.  Data on private
spending are available only for a limited number of countries.  Figures
here assumte 90 percent. of private spending is curative, 10 percent is
preventive (to patients).



25
little doubt that costs per life saved are much higher in curative hospital
care than in preventive services and comunity programs (see Table 4).
Yet spending on curative hospital services, especially private
spending, cannot easily be redirected. Nor should it all be redirected--at
least some spending on hospitals is required because hospitals are a
necessary part of referral systems. As part of a referral system, hospitals
in a sense serve the total population by being available to those who need
(and can reach) them. And because hospitals treat the most difficult cases,
inevitably costs per life saved (or episode of ill health ameliorated) will
be higher than elsewhere in the syste".
The allocation problem in the health sector is thus rooted in a
combination of limited overall resources for health, due in part to low per
capita income, and the tendency in both the government (public) and
nongovernment sectors to allocate what resources there are to high-cost
relatively ineffective care.
Why has this mismatch between resources and problems occurred?
In a centralized system, without any pricing mechanism to assist in resource
allocation, investment over the long run can diverge considerably from
needs. Even given a valid and important role for hospitals, it is likely
that, using cost-effectiveness as a guide, too much of government resources
is spent in the hospital subsector. Much more of the burden of this
spending could be borne by the actual beneficiaries of the less essential
care. In Niger, about half the government health budget goes to hospital
services in urban areas. Another 40 percent is spent on provincial-level
facilities located in the main towns, and just 10 percent is spent in rural
areas, where over 80 percent of the population lives. The 50 percent of the
budget devoted to hospitals in 1984 benefitted 350,000 hospital patients,
while the other half of the budget provided services for over 10 million
clients.
In Swaziland the seven most common causes of hospitalization are
gastrointestinal diseases, complications of pregnancy, respiratory
illnesses, tuberculosis, malnutrition, measles, and skin diseases. If the
public resources tied up in hospitals were redirected to lower levels of the
health syatem, many of these could be treated earlier at a less severe
stage, or prevented altogether. Similarly in Bangladesh, specialized
orthopedic, cardiovascular, and eye institutions, as well as a planned
cancer research center are publicly subsidized. Some specialization is hard
to avoid. But in a country with a life expectancy of only 50 years, the
chronic diseases those institutions are designed to treat will affect only 8
fraction of a percent of the population. At the same time, Bangladesh
estimates that on a yearly basis 325,000 active tuberculosis patients over
age ten receive no treatment, at least 90,000 children under 5 die of
pneumonia, and 136,000 infants die of tetanus.
Another symptom of insufficient spending on cost--effective health
activities is the difficulty of retaining trained personnel in critical
public sector health programs. Low salaries and amenities in the public
sector contribute to a loss of personnel to the private sector and overseas,



26
and make it difficult for the public service to staff basic health services
for the poor. India, which is widely regarded as havinj a surplus of
physicians and is a major contributor to the international migration of
physicians and nurses, had vacancy rates of 30 to 90 percent for
professional health service positions in rural states during the early
.980s. An inventory of government rural health clinics in the Philippines
in 1974 found a third to half of physician and nurse positions unfilled.
Because of the inability to raise salaries to a level competitive with other
opportunities, public sector health systems in many countries have been
forced to allow physicians to supplement. their incomes through private
practice, often reducing their time spent in basic programs, or to make
temporary government service ccmpulsory for recent medical and nursing
school graduates.
An Tnternal Efficiency Problem:  Inefficient Government Programs
In the government, component of national health systems, there is
plentiful evidence that scarce resources arc poorly used. Demand-side
prob-lems are created in part by low fees, which probably contribute to poor
use of referral systems.  Supply side problems, including low quality, are
associated with highly centralized management.
Demanid: inappropriate service use.  One of the most obvious symptoms of
inefficiency in health service demand is the widespread use of higher level
health care facilities by patients who could be well served at less
sophisticated units. A typical pattern is for some facilities, usually
central outpatient and inpatient facilities, to be crowded, with lengthy
waiting times, while other facilities, usually lower level ones, have few
clients.  In Colombia and Somelia, t.ertiary care hospitals in major cities
had occupancy rates of over 80 percent i.n recent years, while local
secondary hospitals had rates of 40 percent or less. In Rwanda, the bed
occupancy rate in city hospitals averages about 70 percent but is 30 percent
for rural health center beds. A World Bank mission in Somalia observed a
35-bed secondary hospital that had one patient and another 32-bed hospital
with no patients. In India, health clinics that have 8 to 10 beds serve
about 100,000 people.  An evaluation covering eight clinics in one district
found only one of 80 beds being used.
Consumers crowd themselves into higher quality institutions for obvious
reasons.  F'ersonnel have more training, equipment, and laboratories are more
complete, a wider array of diseases and emergencies can be handled, toilets
and running waler are available, and the institutions are located in cities
wthere required drugs and related services can be purchlased. Consumers have
little pecuniary incentive not to use the high level facilities when high
and low level facilities are either both free or charge the same fee.
The result:  many services are delivered unnecessarily through costly
facilities and personnel, and lower level services that are knowni by
professionals to be appropriate to (lisease patterns are inadequately used by
consumers. Crowded facilities are theni expalided to accommadate high patient
loads, and inefficient. use is reinforced.  Inappropriate pricing policies
result in inappropriate investmesnt patterns, and the vicious circle builds
on itself.



27
One reason for a near collapse of the Senegal's Sine Saloui Primary
Health Care Program in 1980 was exactly this type of pricing problem.
Village health workers charged a flat fee for their services, but free
treatment and drugs were also available at more distant government health
posts. Village workers simply could not compete with free services from
more highly trained nurses and nurses' aides. Moreover, they were slowly
depleting their stocks of pharmaceuticals because the flat visit charge did
not cover replacement costs. The situation was corrected when the
government instituted charges in the rest of the health system and drug
charges in villages were revised to reflect costs.
Demand: rationing by queue. A study in Calabar, Nigeria, found the
average visit to a government clinic to take one and a quarter hours, which
is not in itself exceptional, but waiting times ranged up to eight hours.
Data from facilities in Uganda showed that about half of patients were seen
within 2 hours, but 10 percent waited more than five hours. Nearly a third
of patients in health centers, the highest level facility in the sample,
waited over five hours. An anthropologist in Cote d'Ivoire observed
patients in government clinics waiting hours to be seen for a few minutes of
attention, with the time often wasted because required supplies or personnel
were not available. For the working poor--including mothers with high
demands on their time for child care, other home activities, and
agricultural work--the opportunity cost of waiting time can be high indeed.
The long lines at some government facilities can mean not only that
clients' time is poorly used, but also that there is unintended and
inefficient rationing of services--perhaps to those who can most afford to
wait rather than those most in need of the service (though the better off
usually can avoid long lines for free services--either going to the private
sector for health care, or using bribes or connections to skip the queue).
Long lines put pressure on providers to minimize time spent with each
patient, irrespective of the health problem. They are also likely to
indicate unobserved inefficiencies, including time lost by people
reconnoitering clinics to see if they have a chance of getting care and
faiiure of people who need care to get it because they cannot wait.
Supply: underfunded recurrent costs. Pressure to expand tbe system
combined with insufficient funds to do so leads to the cutbacks on critical
complementary inputs. When public budgets must be cut, it is easier,
especially in the short run, to cut spending on fuel, drugs and vehicie and
building maintenance than on salaries. Because these inputs are usually a
small portion of total costs (typically less tnan 20 percent), they must be
cut drastically to achieve a significant reduction in total spending. For
what is a small financial saving, a large drop in the effectiveness of
workers occurs.
In Zambia "free" government-provided health services were reportedly
inoperative because fuel and drugs were unavailable; yet nongovernment
services flourished alongside. About a third of all rural clinics in the
Philippines are located in dilapidated buildings. In Tanzania, availability
of working vehicles and bicycles in rural health clinics declined from an
already small one-third of the clinics in 1978 to less than a fifth in 1984.



28
Throughout much of Africa, many health posts have deteriorating roofs,
nonworking water supply, and old, dilapidated furniture and equipment. Drug
shortages are common in public facilities, even when drugs are widely
available in nearby nongovernment facilities.
Some apparent shortages stem from overly ambitious plans and the
natural temptation of recipients to accept foreign funds for buildings,
equipment, and service systems that cannot be maintained. However, even the
expected benefits of sensible investments often are not realized because
operating costs are not adequately financed.
Supply: overcentralization and costs. Tax-financed health systems,
highly centralized in their financing, are usually highly centralized in
their management as well. These centrally financed and managed systems tend
to use resources inefficiently. A donor-sponsored rural health
demoi,stration project in Mali consumed 63 percent of its planned US$.40 per
capita operating cost in supervising village health workers and carrying out
other administrative requirements, that, at great expense, replicated an
existing decentralized private sector distribution system. Centrally
managed and funded health systems are also susceptible to political
disruptions. In Uganda, the government health system was destroyed by
political upheaval that prevented central authority from effectively
managing or funding the system. Had there been no mission health system,
health services would have disappeared for most Ugandans in the 1970s.
Supply:  logistical problems.  Logistical problems in the supply of
drugs, equipment, and fuel are the result not only of resource constraints
but of highly centralized distribution systems. The distribution of
publicly-funded pharmaceuticals is an example. Countries typically have
central warehouses through which all Ministry of Health pharmaceuticals
flow. Brand name drugs are bought in small, expensive lots; drugs often
spoil in storage; lax inventory control results in losses from theft;
pharmaceuticals are allocated to facilities without regard to the demand for
them; there often are no formal. procedures for reordering drugs. In Haiti,
an analysis of drug supplies found that the central warehouse flooded each
fall during the rainy season, that there was no stock control or reordering
procedure, and drugs sent to local facilities bore only a chance relation to
what was needed.
In a few countries, inefficiencies in distribution show up in the form
of high consumer prices. In Burkinia Faso, consumers pay 60 percent more
than the retail price paid in France for similar pharmaceuticals.  In Sierra
Leone, in 1983 average prices paid by the government's Central Medical
Stores ranged up to 314 percent above average world market generic prices.
Similar problems arise in the distribution of fuel and in vehicle
maintenance. In the Gambia, some ve&iicles use half their biweekly fuel
allotment to drive to a depot to collect the allotment. In Ethiopia, half
the 1,025 health service vehicles ar-e inoperable at any one time. Over 40
percent of the vehicles dedicated to rural service are at least ten years
old. Fuel is allocated by vehicle, not b:' area covertd. In Zambia in 1982,



29
only 26 percent of 550 vehicles were operative, and few of the working
vehicles could be used becsuse of a lack of fuel.
Primary health program have taxed centralized distribution system to
the limit. A 1979 evaluation of community health workers in India found
that 40 percent had never received their drug kits and 60 percent had not
received their community health manuals. In Peru, only 34 percent of
village health promoters had received their medicine kits. Ministries of
Health have been unable to deliver support and supervision to dispersed
health workers. In immunization programs, logistical problems have caused
the cold chain for vaccines to fail. In the late 1960s in Nigeria, Measles
cases were increasing after an initially successful immunization campaign.
Many or the new cases were in children with clear records of having been
imsunized. Tests of measles vaccine found only one of 20 samples capable of
eliciting an immune response in a child. Similarly, Chile experienced a
measles epidemic in the late 1970. despite high levels of immunization
coverage. Sampling of measles vaccine found 100 percent to be effective at
the central stores, but only 76 percent at the local clinic level.
Supply: low quality in the public sector. Evidence of low quality of
government services is anecdotal and difficult to quantify. But it is also
impossible to ignore. In one African country focus group discussions were
undertaken to examine reasons for underutilization of public health
services.  Seven different groups were interviewed:   village women, village
men, elementary school teachers, traditional healers, sale civil servcnts,
female civil servants, and nurses from the general hospital. Respondents
complained of long waiting times in government facilities, shortages of
drugs, the poor attitude and demeanor of nurses, and the hastiness of
physicians. They viewed petty corruption as comonplace in government
health services. For example, respondents said that personal connections
were perceived to be important in skipping registration lines; that drugs
bought in the market place were frequently stamped as property of the
government stores; and that to assure adequate care meant arranging for
private care after hours.
A poor referral system, poorly-trained health workers, and lack of
supplies and drugs are other signs of low quality. A 1984 survey in
Tanzania showed that rural health clinic personnel referred onLy 3 percent
of their patients to a higher level, when in fact they were incapable of
treating 36 percent of their clients. The nonreferrals were given drugs
that could not have helped them.
The skills of village health workers were evaluated in 23 states in
India in 1979. They scored poorly in four areas: referrals, disease
prevention, emergency care, and general curative services. Responses in
these areas were on average correct less than 30 percent of the time. A
1982 study in one Indian state found that 80 percent of village health
workers did not know how to mix oral rehydration solutions.   In Peru,
village health workers in a 1984 review displayed "dismaying and alarming"
levels of ignoranice of symptoms of several important diseases.



30
An Equity Problem: Inequitable Distribution of Benefits
If public resources were unlimited, it might be possible for the
government to provide free health services for all. But government
resources are not unlimited. (And in any event, free services tend to lead
to waste and high costs.) Given the resource constraints outlined above,
and the high fixed costs of certain kinds of health care, developing country
governments can only provide a very low per person subsidy for health care.
In most countries, a low average subsidy leads inevitably to rationing--
there is simply not enough for everyone. Providing free publicly funded
curative services for all, translates to free and adequate services for some
and inadequate services, or none at all, for others.
Inequitable urban/rural distribution of benefits. As noted above, in
most developing countries, 70 percent or more of government spending on
health goes to urban hospital-based care (see Box 4). Hospitals are by
nature expensive. When their services are free, they create distinct
subsidy patterns that are difficult to modify.
In Tanzania, which has since 1972 pursued a                   Box 4
policy of limiting hospital construction in            Urban Orientation of
order to focus resources on rural health              Public Health Spending
services, the share of recurrent expenses          (Attached at end of Chapter]
going to hospitals fell from 82 percent in
1970/71 to a still substantial 60 percent in 1980/81. Hospitals consumed 34
percent of the capital budget for health in 1970/71, and the proportion
remained roughly constant over the following decade despite almost a 1,300
percent expansion of the rural health clinic program.
Hospitals are primarily located in cities, which is essential if the
market they serve is to be large enough to justify their high capital and
recurrent costs. The result of this location pattern is not surprising.
Even in well-functioning referral systems, in which man: hospital patients
come from rural areas, hospitals still end up serving primarily urban
residents. In developing countries, 70 to 90 percent of hospital clients
live within ten kilometers of the facility they use. As a consequence, in
Colombia, Malaysia, Indonesia, and China, the average health sector subsidy
captured by urban households ranges up to five times larger than that
captured by rural residents.
If hospital services are free, institution of fees or revolving drug
funds to finance rural health workers will obviously exacerbate this
imbalance. Self-financing rural health programs in Senegal and the Gambia,
initially added on to existing free urban systems, created patterns in which
rural residents paid for low-level care from a village health worker in
addition to subsidizing free, more sophisticated urban facilities, which
serve mainly urban dwellers.
Income inequalities. Because family incomes are significantly higher
in cities, the urban bias of most health systems creates a distribution of
facilities and personnel which favors the better-off. Demographics and
disease patterns also play a role. Higher income groups tend to be older on
average and to suffer from diseases or accidents requiring hospitalization,



31
whereas the poorest households more often are young families with children,
for which many health problems can be handled without hospitalization.
The extent of income bias varies across countries. In Colombia and
Malaysia, health subsidies appear to be roughly proportional to incomes,
with hospital subsidies favoring the rich, and health center subsidies
favoring the poor.2 In Indonesia, however, the poorest 40 percent capture
only about 19 per cent of the subsidies from public health centers and
hospitals.
A pattern of public subsidies similar to that of many other developing
countries is that of Lesotho. In 1983/84, 84 percent of the budget of the
Ministry of Health was absorbed by government-run hospitals and health
centers concentrated in the towns and lowland areas where higher income
citizens live. In these government facilities fees are very low, covering
less than 6 percent of costs. The low-income population, in the highlands,
is served by hospitals and clinics operated by mission agencies. Fees in
these mission facilities cover 60 to 80 percent of costs. Thus those who
live in the highlands, where incomes are low, pay a much higher proportion
of the costs of their health care than those who live in the more prosperous
lowlands and cities. Most of the government health subsidy is captured by
the rich.3
The foregoing subsidy patterns often lead to the broad prescription
that hospitals should be severely cut back or eliminated. However, a
certain number of hospitals is an essential part of any health system, even
one whose major emphasis is on primary level health care. In a sense, they
are a fixed cost of the health infrastructure. That fixeci cost can consume
a high proportion of health budgets even wheni hospitals are deemphasized, as
in Tanzania. The real equity issue is how the needed hospitals are paid
for. The problem is not only nor even primarily that developing countries'
health systems are hospital-based. It is that public spending for health is
hospital-oriented, and thus benefits the rich disproportionately.
2"Poor" and "rich" are relative terms. The definition of poor in each
country will depend on a country's overall income structure and social
objectives.
3When health services are provided through tax revenues, who benefits
is further modified by who pays the taxes. Tax burdens in developing
countries are generally thoughlt t) be proportionately distributed at best.



32
Box 2. Organization aDd Financing of the Health Sector in Zimbabwe
Reliable and complete information on developing country health system
is rare. Zimbabwe, a country with relatively good data, provides a typical
example, though even for Zimbabwe assumptions must be made in order to
provide a full picture.
General information. Zimbabwe is classified by the World Bank as a
lower riddle income country. It occupies a position around the median of
most development indicators. Female life expectancy is about 59 years,
infant mortality is 77 deaths per thousand live births, and there are about
7000 people per physician. It has a small population, about 8 million
people, with only 21 people per square kiloseter, of whom about 3P percent
live in cities.
Hospitals. The country has a public hospital-based health system run
by the Ministry of Health and local governments, along with a rural mission
system, which is also hospital-based, and a network of urban and rural
health centers. Large industries and mines maintain hospitals and clinics
for their own employees. The private modern sector, although large,
accounts for only a tiny proportion of hospital facilities. In the figure
below, the first bar represents the total number of hospitals, and it is
divided into four sections to show the proportion of hospitals owned by the
four components of the health system.
Clinics. Outside the hospital sphere, estimates are necessary. To
determine the number of outpatient facilities, shown in the second bar, we
assume that all hospitals provide outpatient services and that half the
doctors classified as private offer clinic services. The numbers of clinics
represented by these two groups are added to known government clinics and
estimated mission facilities to get an estimate of the total. Even with
this conservative estimate of the size of the private sector, it accounts
for about 40 percent of outpatient facilities. The private clinic sector is
large relative to the private hospital sector because public hospitals allow
privately attended patients.
Personnel. Zimbabwe requires annual registration of medical personnel.
After accounting for physicians and nurses employed in the government,
missions, and industry, there is a large residual in the third and fourth
columns of the figure, labelled "private". (Some of the individuals may be
retaining their licenses even though they are not practicing or are
practicing in a different country.) About 92 percent of government
physicians and nurses work in hospitals; government clinics are almost
completely staffed by paramedics. Zimbabwe has a traditional healer
registry that has so far tallied 11,000 traditional doctors. The total
number of physicians, nurses, medical assistants, and health aides in the
modern sector was just 11,159 in 1980.
Revenues.   Although government and mission facilities charge user
fees, people earning less than Z$150 a month are exempted. To offset the
resulting loss of revenue in non-MOH facilities, the Ministry of Health
contributes about 76 percent of the cost of rural clinics (with local



33
governments contributing the balance) and 86 percent of recurrent expenses
in sission hospitals. In addition, part of the cost of medical care in
private industry is borne by the government through tax rebates. The
Ministry of Health recovered about 4 percent of its total expenditure
through user fees or insurance payments in 1980/81.
The private sector portion of each bar in the graph includes one known
private expense, payments by insurance companies. The other components are
estimates. Individuals are assumed to have paid fees directly to private
physicians amounting to 10 percent of total insurance payments, to have
purchased pharmaceuticals totalling 50 percent more than the Ministry of
Health bought, and to have used the services of 20,000 traditional healers
and midwives often enough for each to earn the average per capita income for
Zimbabwe of Z$400. These conservative assumptions generate roughly a 60/40
split between government and nongovernment expenditures. Foreign aid
accounted for less than 1 percent of the total, a low proportion for Africa.
Insurance. Private insurance is relatively well developed in Zimbabwe
and takes the place, along with medical services run by mines and other
industries, of social insurance systems that are more coecon in Latin
America and Asia. There are five voluntary insurance schemes, one of which
is for government workers, covering about two-thirds of resident Europeans
but less than 1 percent of Africans. Another scheme is run by the
government for public and parastatal workers. Half of premiums are paid by
workers and half by employers, but both receive tax rebates for part of the
payments.
The government further subsidizes private insurance by charging far
less than actual costs for hospital stays. For example, about 7 percent of
total insurance expenditures went to the top Ministry of Health hospital,
where charges covered only an average of 28 percent of costs in 1979. Most
insurance expenditures go to private sector facilities and providers, even
though the public sector supplies most of the hospital services.
Public health and preventive care. In 1980/81, approximately 8 percent
of the Ministry of Health budget was spent on preventive services.
Conclusion. Zimbabwe's system is typical of other developing
countries. Public expenditures are largely urban. Ministry of Health
expenditures are almost entirely for curative care, and the government
heavily subsidizes medical care for citizens working in the moderni wage
sector of the economy. Available data have comon shortcomings. There is
little information on the private or traditional sectors, including who uses
them, how and how much users pay, and how much is spent for what drugs. For
the public and private systems together, it is difficult to distinguish
patterns of usage by different population groups. There is no information
about how facilities are distributed throughout the country, how busy they
are, or which income groups benefit from the public subsidies.
Sources: "Zimbabwe: Population, Health and Nutrition Sector Review (in two
volumes),'" (1983).
World Bank. "World Tables (Third Edition), Vol. II," (1984).
[End of Box 2]



34
Box 3. Primary Health Care: Resources and Costs
The World Health Organization's Global Strategy for Health for All br
the Year 2000, published in 1981, estimates that the cost of achieving
primary health care for all people in developing countries is approximately
US$30 billion annually (or about US$10 per capita) for 20 years (1980 to
2000). The amount now being spent on health services by public and private
sources combined in the same countries is about US$40 billion (US$13.3 per
capita) annually. Given these needs and approximate overall spending, could
primary health programs be financed simply by redirecting existing public,
private, and foreign aid expenditures in developing countries away from
hospital-based systems?
Some such redirection might be possible. But it will not alone solve
the resource problem.
First, even if all hospitals were closed down and the money used for
operating them were put into rural health services, the available real
inputs needed to produce healths services are simply not widely available.
Manpower is an example. The developed countries have slightly over nine
times the number of physicians per capita and about 18 times the number of
nurses per capita (WDR 1986) as developing countries. The United States has
800 people per physician compared with 8000 people per physician in the
Philippines; even assuming some waste in the United States, a tenfold
difference is dramatic.
Second, reallocation away from hospital care is not easy. First, there
is the physical impossibility of turning a few large and costly hospitals
into many small primary level health care wuits or of turning a nation's
highly trained doctors and nurses into less trained and less expensive
primary health care workers. Such facilities and personnel are not easily
trrnsformed; thus new primary level health care facilities must be built and
new lower level personnel trained to carry out primary health care duties.
Second, even if such facilities and personnel could be transformed, a system
without any high level personnel and facilities would not be desirable.
Soam high level facilities and personnel are needed, as the point at which
the overall referral system legitimately ends.
It is the financing of expensive hospital care that needs change, not
the existence of the care per se. Government must find ways to charge those
who are able to pay for the benefits of publicly-provided curative care,
freeing limited public funds for critical "public good" health programs and
for subsidizing care for the poor.
Sources: WHO, (1981).
World Bank, World Development 3Report 1986, (1986).
Patel, (1986).
[End of Box 3]



35
Box 4. Urban Orientation of Public Health Spending
Disparities in public spending between urban and rural areas are
comon. Per capita public expenditures on health care in urban areas are
often over three times sa high as in rural areas. National health
expenditure data are not usually sufficiently disaggregated to show intra-
country differences. Data from China, Senegal, and Peru do allow
examination of spending patterns in those countries.
China
In China, there is a pronounced urban focus of health subsidies,
primarily caused by state subsidies to urban beneficiaries of the compulsory
Government and Labor Insurance schemes. Total expenditure per capita in
1981 was estimated at $6 for rural areas and more than triple that amount,
$19, for urban areas. State subsidies to the health system averaged less
than $2 per capita in rural areas, but urban areas received almost ten time
as much, $15 per capita. Furthermore, private expenditures by rural
residents were higher than by urban residents, about S3 compared to $2.
Following the collapse of the rural cooperative insurance system as a
result of the recent economic reforms in China, the great majority of rural
people now have no insurance coverage to protect against the financial risks
of ill-health. These risks can be substantial in the Chinese health system
which is characterized by a high degree of cost recovery--hospitals
typically recover about three-quarters of their operating costs through user
fees and drug sales. Recent survey estimates indicate that the cost per
hospital admission averages about $75 for urban residents and $36 for rural
peasants. With rural incomes averaging as little as $85 per capita in some
regions, these costs are virtually unaffordable for many rural people. By
contrast the majority of urban residents benefit from state subsidized
health insurance--about nine percent of the population are covered by the
Government Insurance Scheme and another 57 percent by the Labor Insurance
Scheme for state enterprise employees and their dependents. These scheme
provide free medical care (no deductibles or copayments) for their primary
beneficiaries and the Labor Insurance Scheme reimburses 50 percent of the
costs for dependents.
Senegll
In smaller developing countries, public health sector investments and
recurrent expenditures tend to favor the national capital area. Inequality
in the availability of health resources is compounded by the fact that
referral systems rarely function to ensure equal access to health care by
those living in rural areas. Of the 10 national and regional hospitals in
Senegal in 1981, three, including a university hospital center, principally
served Dakar and the Cap Vert region. The Fleuve department in the north
wsu served by three hospitals, while two other departments, Louga and
Senegal Oriental, had no regional hospital at all. The ratio of population
served per hospital bed ranged from 426:1 in Cap Vert to 7254:1 in



36
Casamanca. Fifty percent of new investment funds are earmarked for the
capital region.
The urban/rural distribution of supplies and manpower follows that ,f
hospitals. Seventy percent of Senegal's physicians and pharmacists, sixty
percent of its midwives, over forty percent of its nurses, and virtually all
of its dentists are concentrated in the Dakar-Cap Vert region, where less
than thirty percent of the population lives. In 1981, the Dakar/Cap-Vert
hospitals received seventy percent of the hospital drug budget, which is
equal to fifty percent of the national drug budget. Health centers, t.he
secondary level of health care, received 32 percent of the national drug
budget, which they are supposed to share with health posts the primary
level. In practice the latter receive little, and annual pharmaceutical
supplies at the health post level are usually exhausted within six months,
requiring local populations to purchase their own drugs over the counter.
Overall, the Dakar/Cap-Vert region received almost 60 percent of the
national drug budget in 1979/80. The Fleuve department, with 10 percent of
the population, received 13 percent of the drug budget. The 6 other
departments, with 60 percent of the population, received less than 30
percent of the national drug budget.
The rural health system has fallen into relative neglect due to the
diversion of resources to urban curative services. Out of 36 health centers
in 1980, only 24 were considered operational. About half of Senegal's 492
health posts are in poor operating condition. Many health centers are
thirty to fifty years old and lack basic amenities such as water, latrines
and electricity.
Peru
National per capita public and private health expenditures in Peru
amounted to about US$59 in 1980. While 27 percent of the total population
in 1981 lived in the metropolitan area of Lima, the percentage of tctal
public spending increased from 37 percent to 47 percent from 1970 to 1981.
Per capita Ministry of Health expenditures in Lima were nearly twice that
spent in the San Martin Amazonas department and over five times that spent
in Cajamara, the most rural department.



37
Of total public health care expenditures in 1980 and 1981, 87 percent
was spent on curative care. Over the 1978-81 period, on average 11 percent
of the Ministry of Health's budget was spent on capital expenditures,
primarily for the construction of hospitals in cities. Two-thirds of all
doctors live in Lima, which has only 29 percent of' the country's population.
In mot rural areas there is only about one doctor per 10,000 or more
inhabitants.
Sources:  Prescott and Jauison (1984).
Prescott and Jauison (1985).
World Bank. "Senegal: Rural Health Project; Staff Appraisal
Report," (1982).
Mashayekhi, (1981).
World Bank. "Peru: Primary Health Project; Staff Appraisal
Report," (1982).
Chester (1982).
[End oif Box 41



38
CHAPTER 2
POLICY REFORMS
Four policies to help address the problems of national health systems
are discussed in this chapter. The policies share two comon
characteristics: they shift some of the burden of financing health care
ftom the public sector to the beneficiaries--households; and they shift some
decisionmaking from central planning agencies to those in closer touch with
local conditions and client needs. The policies are described in broad
terms--their specific application will be different in different country
situations. The four policies are best thought of as a package; they are
closely related and they mutually reinforce each other. Most countries
could benefit from adopting only some parts of the package, and some
countries may wish to move more quickly on some parts than on others. But
in the long run, because the policies are complementary, all four merit
consideration.
The four policies are:
.    Charging users at public health services, especially for those
types of curative care which benefit solely individuals and their
families;
*    Encouraging risk-coverage programs;
*    Strengthening nongovernment sector provision of health services
for which households are willing to pay;
*    Decentralizing the public health system.
These policies alorr. -ill not rectify all health sector pr-oblems.  Ihey will
tiot immediately help countries rectify the big investment mistakes --
investing too much in urban hospitals or in the wrong training facility.
Nor are all aspects of these policies easy to implement: user charges must
be designed to protect the poor; insurance programs are difficult to run in
rural areas; decentralization of the health system may be resisted by other
parts of government.
On the other hand, policy changes of the types proposed are already
underway in many countries, in at least partial response to the sector's
problems. Many of the details of such policies can be designed only at the
country level; and only at the country level can their effects be fully
evaluatid and specific designs altered with experience. And as argued
below, any substantial improvement in the effectiveness and fairness of
national health systems is difficult to envision without change in policies
along the lines proposed.



3U
Charging Users of aovernment Health Facilities
Government health facilities in developing countries tend to charge no
fees or very low ones for services, drugs and other supplies. An outpatient
visit for an adult in Botswana, Burundi, Lesotho, Pakistan, the Philippines
or Rwanda costs less than one third of the average daily agricultural wage.
In Indonesia the cost is about one half the daily wage. In Malawi, Mali,
Burilina Faso and Zimbabwe, the visit is free. How would increases in
charges to users--even modest increases---help solve typical health sector
problems?
First, higher charges at government health facilities would generate
more revenue. In the long run, more revenue would allow expansion of
currently underfunded but cost-effective basic health services, helping
governments redress the allocation problem. In the short run, revenues from
charges can be used to cover a substantial portion of the operating costs of
current programs, especially programs of simple curative care. In Colombia
and Indonesia, more than 15 percent of operating costs of the system as a
whole are covered by fees. Health projects in Mexico, India, Indonesia,
Zaire and Sierra Leone cover 20 percent or more of recurrent costs with
fees; a project in Cameroon covers 95 percent of its costs with fees.
Mission facilities in Africa cover as much as 70 percent of their costs with
fees. These examples suggest the likelihood that in many settings, even
relativel3 poor ones, governments could recover 15--20 percent of operating
costs. On the one hand, this is not much. On the other, it is a
substantial part of nonsalary costs----which as noted above tend to be
underfunded.
Second, higher charges could improve access of the poor to health
services. It appears that free health care would make it easier for the
poor to "afford" services. But appearances are deceptive. As discussed in
Chapter 1, because 60 to 80 percent of public funds are absorbed by urban,
hospital-based care, it is often the middle class and the rich, not the
poor, who benefit most from free services. Though the pattern of
subsidizing urban hospital services may help the urban poor, it can leave
the rural poor underserved. Even if the free services were available in
every area, so that the rich and poor appeared to have equal access, this
would not be the case. Because a Lunsequence of greater wealth is greater
ability to afford the travel and time costs of obtaining care, the rich
inevitably enjoy more of the subsidized free health care than do the poor.
Imposition of fees makes it possible for government to generate revenue to
extend appropriate services to the underserved. The charging of appropriate
fees to the rich also removes much of the unfair subsidy inherent in free
care approach.
Third, even modest charges to users are likely to make delivery of
government health services more efficient.  Consumers will be more sensible
in their demand for services. A system of fees to reflect the relative
costs of the services will charge more for hospital than for clinic visits,
encouraging proper use of referral systems. A small charge for a visit may
help discourage patients from seeking types of services they do not really
need--say, hospital care by a doator for a minor ailment that a visit to a



40
clinic paramedic or home help could handle (though time and travel costs are
probably more important than any small fee in discouraging frivolous use of
services). Different charges for different types of services can also
signal to consumers the importance of certain kinds of care; for example,
the sane health center could charge a low or zero charge for prenatal care
and a higher charge for regular outpatient services. Fees also encourage
efficiency on the supply side. Wasteful overprescription and multiple
prescribing are serious problems in developing countries. In public
facilities health providers will be less inclined to overprescribe if they
know patients must pay for drugs. Pilferage and spoilage of drugs and other
supplies are also likely to decline if providers of these goods are
accountable for their charges collected. Providers are likely to be more
responsive to the concerns and needs of clients. The use of fees for
funding some costs of health services, by linking revenues to performance,
gives staff an incentive to provide good care. If clients are not attracted
to a facility, a problem will be obvious. In contrast when either few
patients use free services or those who use them would not if they were not
free, there is no signal of a problem to higher management. For example,
the institution of fees at public facilities in a part of Nigeria led to a
sudden drop in utilization, and recognition by the authorities of serious
problems of service quality.
Should All Services Have Fees High Enough to Cover CoF's?
Full cost recovery is not appropriate for all health services. The
textbook rule is that, given certain necessary conditions, the price charged
for a good or service should equal the additional (or marginal) cost of
providing it.'  This pricing rule in most cases assures that prices charged
will cover costs, and that there will be an efficient allocation of
resources throughout the economy.  But the necessary conditions are not
fulfilled for every kind of health service. Where they are not, exceptions
to the price rule are appropriate. (In some cases it even makes sense to
charge users nothing or to offer them incentives or subsidies for using the
service.) What are the conditions, and when are exceptions justified?
Externalities. When the benefits to society of ar. individual consuming
a service exceed the benefits to the individual, the individus' will not
purchase enough of the service, from society's point of view, if he or she
must pay the full cost.  Immunization against contagious disease lhas such a
positive externality.  But most curative hospital care does not; all the
benefits of a mended broken bone are captured by the patient.
Incomplete information.  If people do not know enough about their own
or their family's health needs, or about what health care can do for them,
they are likely to purchase more or less than they would if they had
complete information. If mothers do not know that infants with diarrhea
need liquids, they will not purchase oral rehydration solution. Prenatal
health care, well-baby care and family planning are other examples of
lThe marginai cost is the cost of supplying the last unit provided.



41
services that have benefits of which may not be fully known to all
consumers.
A low or zero price is one way to encourage use of a new and valuable
but not fully understood seivice. But four points must be made about this
information argument for low fees. First, the argument seldom justifies
subsidies that are not fully complemented by education and information
programs. Second, the argument may justify subsidies for some period of
time, but not indefinitely. At some point, as consumers become aware of the
private benefits of such services, they will be willing to pay an amount
that permits full cost recovery. (Much of the preventive care about which
consumers will eventually learn is relatively cheap to provide, however, and
the costs of collecting small fees could even exceed the amounts collected.)
Third, as with the externalities argument, the information argument does not
justify subsidies for all types of health care. The problem of incomplete
information much less often applies to curative services, because most
people who are ill know they need health care. Fourth, lack of information
does not necessarily justify zero prices even for services about which
consumers are uninformed. A modest charge that is lower than marginal cost
may in fact be a proper way to create incentives for efficient consumption
and delivery of services. For example, charging for drugs may be the best
way to make the distribution network responsive to "consumer" demands in
rural areas, both in terms of quantity and type.  A lack of information does
not justify wholesale abandonment of marginal cost pricing policies. In
fact, it suggests that information or health education programs should be
subsidized, perhaps accompanied by subsidized health services as part of a
marketing strategy.
The free-rider prqoblem.  The benefits of certain health--care services-
disease control and monitoring programs among them----cannot be selectively
provided, only to those individuals willing to pay and not to others in the
same area. When killing flies, snails and mosqu'tos which carry parasitic
diseases or monitoring epidemics, entire regions must be blanketed. It is
simply impractical to charge since no provider--client transaction takes
place.  For most clinic services, however, there is no free-rider problem.
Failure in insurance and other markets. Lack of' an insurance market
could make it impossible for individuals to consujme some kinds of health
services even when they perceive the benefits of doing so, ard would,
through insurance premiums, be willing to pay the costs. Formal risk--
sharing schemes to cover curative health care are rare in rur-al areas of
developing countries. In Africa and South Asia, except for employees of
governments and large enterprises, insurance is not common even in urban
areas.
Lack of an insurance market. does make it difficult to charge the full
costs of expensive, hospital care. But it does not rule out charging small
amounts that at least deter frivolous use and raise some revenue.
The equity argument and "meri__gsods."  Tte exceptions discussed above
all argue aga-nst full marginal cost pricing on efficiency grounds, that is,
on the grounds that marginal cost prices would not lead to the best



42
allocation of resources. There is a separate equity argument as well. Soam
basic services, if priced at marginal cost, might not be purchased even by
well-informed consumers due to insufficient income. Government may want to
guarantee minimal consumption of "basic needs," (what economists refer to as
"merit goods") or redistribute income in a politically acceptable manner,
namely by taxing the rich to provide basic services to the poor.
This equity consideration argues particularly for subsidies to services
that primarily serve the poor, such as rural health posts. In general,
these have not absorbed large proportions of public health funds.
There are, in short, good reasons for charging less than full costs in
the provision of public health. Three points, however, should be borne in
mind:
*  Because a low or zero price is justified for some health services,
it is not justified for all.
*  Even when some subsidy is justified, a large subsidy (large enough
to keep the user price at zero) may not be.
*  Even when some subsidy is justified for some period of time, it may
not be justified indefinitely.
What System of Charges is Practical?
Actual experience in a few countries provides a practical guide on
which services should carry fees, and what sequence of introducing fees is
politically and administratively possible.  Whatever fee system is selected,
it should be flexible enough to allow increases and decreases in fees.
Flexibility allows adjustment for changes in utilization patterns and the
effects of inflation. Failure to raise fees with inflation has reduced
revenues in many countries in the last decade.
The theory outlined above indicates that fees should be implemented
first and be highest for curative care. Most curative care is inpatient
hospital and clinic care, although some is hospital outpatient care. Except
when a poor persoil is exempted for equity reasons, most outpatient dnd
inpatient curative care should be provided in public health facilities only
for a fee. Such curative services often account for 60 percent of total
public sector health spending. Thus even fees which covered only a portion
of the resource costs of such services, say one-third, could recover as much
as one-fifth of the health system's total cost.
However, until insurance is widely available, anything more than
nominal daily charges for hospital and clinic stays may be impractical md



43
unduly burden the unlucky sick. What kinds of fees are practical in the
shorter run, and already in use in some countries?
* Hospital charges for private patients. Publicly-run hospitals often
permit access by private physicians and private patients. In Zimbabwe,
Botswana, and The Gambia private patients are charged for use of private
rooms; in Botswana, the government is considering raising private fees above
costs in order to subsidize public patients. In public hospitals in
Indonesia, fees collected from the more affluent who elect semiprivate care
are used to subsidize general ward patients; the cross-subsidization is
large enough to underwrite free accoimodation for indigents. Private
physicians can also be charged for use of public hospital facilities, or
patients using private physicians could be assigned, without choice, a
private ward, and charged more than other patients.
* Hospital charges payable directly by insurance providers for insured
patients. If participation in some sort of insurance scheme is compulsory
for certain groups (public employees, formal sector employees) the full
costs of those patients can be covered. To ease the administrative burden
on hospitals, insurance providers could be billed full costs; they in turn
could bill their clients any applicable deductible or copayment costs. The
issue of insurance is discussed below.
v Drug charges. Instituting charges for drugs should be high on the
list of possible cost recovery steps because (i) there is widespread
acceptance already of the idea of purchasing drugs (a private market exists
in virtually every country, even in those in which drugs obtained through
the public nealth system are free),
(ii) where the procurement and                          Box
distribution of drugs in the public        Village Health Worker Financing
sector is inefficient, the ability         and a Revolving Drug Fund in
to charge for drugs provides the                        The Gambia
public a useful management incentive,        [Attached at end of Chapter!
and (iii) in a revolving fund system
in which revenues from charges are an important source of replenishmeni of
drug supplies, accountability of managers and distributors can be built in
and collection costs should be low (see Box 5).
* Bypass fees. In countries where a referral system exists, higher
fees should be charged for simple types of care at referral facilities.
Under such a system, a person who bypasses a iower-cost level of service to
go directly to a higher-cost level pays a fee at the higher level greater
than would be paid for the same service at the lower level. The higher fee
reflects the higher cost of providing low level services at high level
facilities and provides an incentive for patients to enter the referral
system at the appropriate level. Eventually (as soon as practicable) higher
level facilities should cease to provide low level services.
* Modest inpatient charges (hospi'als. other levels). There are many
choices: a fixed fee at entrance, regardless of length of stay; a charge
for use of linen, meals, etc., i.e. replenishables, with total cost to the
patient rising with length of stay; specific charges for identifiable goods,



44
including dr;gs, x-ray and laboratory services; a comprehensive schedule of
fees for different services. A simple structure with low administrative
costs may yield higher net revenues than a complex schedule which will
discourage enforcement.
* Outpatient fees (hospitals, ither levels). A few countries charge a
fee for an initial visit. A small charge for the registration card or other
record of visits (e.g. for prenatal and pediatric care) could increase
patients' incentives to keep and remember to bring their card on all visits.
How High Should Charges Be?
For most types of curative services for which some charge is
appropriate, the amount of the charge or the price should generally equal
the cost of providing that service. Thus a typical schedule of charges has
lower charges at the primary level of service--say local dispensaries, where
personnel and other costs are generally low--and successivel; higher fees at
higher levels. (Such a schedule also allows for use of a bypass system.)
However, the true cost of many health services is difficult to calculate.
For example, because most services are provided ,'ointly with other services,
the time devoted to a particular service by doctors, nurses and other
providers is not usually clear. For hospital, clinic and other curative
services, governments will usually want to implement a pricing reform by
starting with low fees that are clearly affordable to the bulk of the
population--for example, assuming an average of two clinic visits a year, a
fee that would not exceed 1 percent of per capita income for most families.
(Table 5 provides some actual examples.) When low fees are already in
place, a similar rule can govern increases in fees. Experience is then
likely to indicate whether prices are too low or too high. They are
probably too high if use drops by more than, say, 20 percent (and stays low
for more than a few months) or certain key groups cut back on their use.
For such services as hospital surgery and irtensive care, sudden fee
increases to cover full costs would financially overburden many households.
Only as opportunities to participate in risk-sharing (insurance) sc!emes
expand should these fees be raised substantially. But extension of
insurance to cover the bulk of the population will take time--in some cases,
ten years or more.
When a direct comparison between public and nongovernment facilities is
possible, a useful indicator for setting fees is the fee charged for the
same service at private, including mission, facilities. In most developing
countriee, private health-care providers charge higher (often much higher)
fees than does the public sector. In Kenya, the average charge for a day of
inpatient care at six missionary hospitals is more than twice that at
government hospitals. In Thailand, the fee private practitioners charge for
an outpatient consultation is typically 50 percent higher than at public
clinics, and in the Philippines it can be twenty-eight times as high. In
Peru, the prices for medicine at retailers are sometimaes more than three
times the official price at government facilities (where unofficial side
payments are nevertheless common and medicines are often out of stock).



45
Table  .  Typical Charg*e, Public  ealth facilities, Selected Countrie
Servic"
Out-                   In-                 Maternal
patient                patient   I_uni-   & Child
Country            consult       Druss    fees        zations   Health    Delivery
Botawana, 1983   $0.45           free                             $0.45      $0.55
Burkina Faso       free          free      minor    $0.12 per
1982                                               registr.
Burundi, 1983    $0.22           free      S2.20/                  free
week
Cameroon, 1983   free            free      $2 regis-
tration
China, 1982        regist.        15-30S   charge   service        free
fee           above    for        fee
whole-   room,
sale      food,
treatment
Ecuador, 1985    free            charge   free
Ethiopia, 1984   S0.25-0O50   cost         S1.09-$14.53
price of
drugs
Ghana, 1980       charge                   charge
Indonesia,       $0.36           free      charge for
1983                                     room and
treatment
Jamaica, 1985   $0.90            $0.90    $5.60                    free    $9.30
Lesotho, 1980   $1.20            free      $0.60/day &
treatment
Maalawi, 1981     free           free      free         free       free      s1-3
Mall, 1982        free           ft ee
Morocco, 1985   free             free      free         free       free      tree
Pakistan,         free 2                    charge  2
FY82           tprovinces)                provinces)
Rs 1 (2
provinces)
Philippines       free           free       charges
1982
Rwanda, 1977    chrge                       charge
Togo, 1979                                  $0.50-70/                        S1-2
day &
treatmwnt
Uganda, 1985    free             free       free        free       free      free
Zimbabwe, 1983  free             free       free        free                 free
Notes;  When drugs are included in the outpatient consultation fee, they are
recorded as free.  Although not noted, most countries  aave a special fee
schedule for "private" in-patients who desire superior accomodations.
Source: Ainsworth, 1984, p. 15, and World Bank Sector Reports.



46
In parts of Java, a visit to a traditional practitioner may cost a person
ten times as much as a visit to a public clinic.
Can Most Households Afford Higher Charges?
Household spending on health care equals 2 to 5 percent of annual
household income in many developing countries. Rural households often spend
much more in years of poor nealth; survey evidence shows drug purchases
alone take up 5 percent of income in parts of rural Mali, and in Malawi and
Indonesia fees of traditional practitioners may take up 10 percent of annual
income. On the one hand this is already a substantial amount, and
additional fees and charges at public facilities might be difficult to bear.
On the other hand, that level of spending indicates an ability and
willingness to pay for traditional curative care and perhaps for some
ineffectual drugs which the public sector could tap to finance modern
curative care and effective drugs (freeing public funds for preventive
programs).
Most households could probably afford modest fees at public facilities.
Consider as an example a fee of U.S.$0.25 for an outpatient visit. A four
person household with a low per capita income of US$200 annually would spend
just 1 percent of income to reach the WHO norm of two visits per person per
year. A household with only half as much income (US$100) would require 2
percent.2 Charges to cover the cost of drugs in public facilities might
actually reduce overall household spending on drugs, if the result of
charges were to provide funds which were used to make drugs more often
available in public facilities, saving clients the higher costs (and
sometimes wasteful overprescribing) of private pharmacists. The
availability of drugs in public facilities would provide effective
competition for the private pharmacies and eventually drive down high
profits often possible because of their near monopoly over available drugs.
Existing private spending suggests consumers would be able to pay for
public health serv.ces. But would they be willing to pay, or would they
simply stop using public services? The evidence from household surveys of
health care utilization is clear on this point: fees per se are not
critical in determining utilization. Studies in Malaysia and the
Philippines show that proximity and quality matter more than fees in
determining whether and what type of health care individuals use. If public
2The quest.ion of affordability arises in many countries in a context. in
which user charges are simultaneously being introduced for other public
services as well: education, water supply, irrigation, and so forth. This
is not an issue which can be treated adequately in this paper. However we
do note that (1) user charges for health would be small compared with new
charges for water, electricity, even education; and (2) user charges at
public facilities might not raise total household spending, but simply
divert spending away from less effective traditional care and nontherapeutic
drugs.



47
services are not of good quality or are too far away, even free services
will not attract clients. In the Philippines, the frequency of visits to
private (including traditional practitioners) instead of public services was
not affecied by relative fees, despite the fact that the nongovernrent
clinics and hospitals had average charges 28 times as great as the
government clinics and hospitals. Even demand for preventive care for
mothers and infants was found not to be particularly sensitive to fee level.
Studies to date, however, have not examined in detail the differences
between the non-poor and the poor in their responses to prices. Even though
very little if any reduction in overall health care use appears to result
from moderate price increases in many developing countries, it is plausible
that the reduction of use by the very poor is greater than average. For
that reason fee systems must be designed to protect the poor.
What About the Poor?
How can the poor be safeguarded from unaffordable costs?
Ironically, the poor in some cases may be better protected in the
private sector. A sliding scale of fees, allowing low or even no charge for
the poor, is common on an informal basis in missions and at the village
level, where ability to pay of any individual household is widely known.
(Traditional practitioners are known to charge different patients different
amounts depending on patient income.) But a sliding fee schedule in a
formal public system would be high in administrative costs, and experience
with this approach is lacking.
E.-!loyer and community insurance schemes, discussed below, can help,
but the very poor are those least likely to be included in such schemes.
Some form of differential pricing (whereby disadvantaged groups, households,
or individuals would be charged smaller fees) is thus necessary in public
systems.
One practical approach is to charge different fees based on where users
live. For instance, people in predominantly poor rural areas would pay a
low or even zero charge while those in urban districts pay more. (Though
some travel of urban residents to free rural health posts is poasible,
travel and time costs and perceptions of higher quality care in urban areas
are likely to obviate this problem.) Combined with higher charges for
hospital care, these would not only protect the poor, but would improve the
targeting of existing government health spending. Higher charges even for
the apparently same service in urban areas may be justified aside from
concern for the poor--since urban services are usually better staffed and
equipped. Another option is issuance of vouchers to the poor, based on
certification of poor households by local community leaders (a practice
which appears to work well in Ethiopia). Other options to protect the poor
include allowing staff discretion in collecting charges (though this is
difficult to do in the government sector), or in middle-income countries the
use of means tests (which often already exist for other programs). A few
countries, including Jamaica, Indonesia, and Thailand are experimenting with



48
more or less formal income tests, relying either on self-declarations by
patients or on documentation from the patient's village headman or other
community leader. In Thailand a means test establishes eligibility for a
"free card" program which is coordinated with the use of health cards which
are not free in a rural risk-sharing scheme (see Box 7 below). Finally,
some of the above suggestions for fees, such as higher fees for private and
semi-private accomodation in public hospitals and free or low-cost care at
referral facilities for patients referred from lower level facilities, also
implicitly protect the poor.
Providing Insurance Or Other Risk-Coverage
If initial cost recovery measures are confined to small bypass and
outpatient fees tor regularly used services, and to payment for frequently
used pharmaceuticals (aspirin, chloroquine, contraceptives), the issue of
insurance can safely be ignored. This may be a reasonable strategy in the
short run, especially for low income countries. There are several problems
with this strategy in the long run, however:
_ An equity problem--like an indirect tax, these routine charges place
a higher relative burden on the poor, given their lower income.
* A revenue problem--the proportion of total costs that can be
recovered is not likely to be high.
3 An efficiency problem----the structure consisting only of low fees
does nothing to discourage excess demand for high cost hospital care; some
of the -'otential efficiency gains of fees are forfeited.
Fees that would cover full costs for major hospital and other inpatient
treatment do not present these problems.  But inpatient care, though of low
Probability for any particular household, is expensive.  Thus full-cost fees
cannot be introduced until large parts of the population participate in some
form of risk-sharing: either "insurance," under which fees paid by users are
reimbursed by the insurer; or "prepayment" systems, including health
maintenance organizations (HMOs), under which all participants regularly pay
a fixed amount and in turn receive full care.
The Situation Today
Such programs, however, currently cover only a small proportion of low-
income households in most developing countries, and especially in Africa and
South Asia. Outside of China, no more than 15 percent of the people in
developing countries take part in any form of risk-coverage scheme. Adding
China boosts the figure to between 15 and 25 percent, reflecting China's
urban risk-coverage program (which covers the majority of urban residents),
some coverage in rural areas (though rural coverage has declined with the
recent privatization of production), and the large population. (In a sense,
of course, risk-coverage plans have existed ever since the extended family



49
has existed; in many developing countries the family is still the most
important mechanism for sharing risk.)
Perhaps the most important form of health insurance comes through
government-sponsored social insurance programs, most common in the widdle-
income countries of Latin America. Tn Brazil and Chile, social insurance
plans provide health coverage for more than 85 percent of the population.
Government-sponsored social insurance is often compulsory for public
employees. Such a public employee system in India serves about 5 percent of
the total population, and covers its own costs.  Thus at least part of the
population directly pays for its he'alth Lere. In Indonesia, there is some
evidence that the insured in a compulsory public employee insurance program
provide a slight subsidy to the public health system.
Employer plans are a second category of coverage.  They either provide
care directly through employer-owned, on-site health facilities, or rely on
contracts with outside providers or health-maintenance organizations. In
India, employers that sponsor group policies can turn to the private market,
or can, under certain conditions, join the public employees' government-run
scheme. In Chile, individuals or employers cani form health insurance plans
into which emplojee contributions which otherwis, would go into the public
insurance system are paid. Agricultural estates, such as banana plantations
in Honduras, rubber forests in Zaire and Liber-ia, and tea estates in India,
typically use the direct pattern of care, maintaining their own medical
staffs and health facilities in the rural locations where their employees
live and work.
In a third category of risk-sharing are prepayment plans; individuals
form or join a group to which they make payments in return for the receipt
of needed health care. Within this category fall personal prepayment plans,
community-sponsored plans (such as a village fund for purchasing medicines
or a broader self-supporting network of
local clinics) and cooperative-based                        Box 6
programs (such as a dairy farmers                   Prepaid Health Care
association in India or a coffee-growers                Organizations
group in Colombia).  Prepayment plans          [Attached at end of Chapter)
include health maintenance organizations,             _I___
and so-called preferred provider plans (Box 6). But prepayment and
community plans remain both few in number and small in scope--probably
reaching less than half a percent of those not covered by social insurance
or an employer plan.
Finally, there is private insurance to cover fees. In countries where
most health care is provided by the public sector at low or zero cost to
users, the market for private insurance is limited to those who wish to use
private practitioners. In Zimbabwe, the majority of holders of private
insurance are high-income Europeans; large tax rebates oni their insurance
premiums mean the public system is actually subsidizing them. In Jamaica,
private insurance has become increasingly popular for those who desire
better service than the public sector provides, and in Brazil private
insurance is increasingly available.



50
Many countries are already taking steps to extend risk coverage. In
Indonesia, there are plans to broaden the government program to cover all
employees of private firms. In Thailand, an innovative health card system
is providing risk coverage for some rural
people (Box 7).  In Latin America the                      Box 7
percentage of the population covered by    Rural Risk Coverage: Thailand's
social insurance rose from 21 percent in             Health Card System
1960 to 40 percent in 1980.  Risk-coverage   [Attatched at end of Chapterj
programs that did not exist twenty-five                        _
years ago now serve millions in Egypt, China, and the Philippines.  Most
employer plans, other than those of the older agricoltural estates, have
either come into being or been rapidly enlarged in recent years, as hlve all
but a handful of the community and cooperative schemes now opierating.
But change is slow. In most courntries governmenits that are introducing
cost. recovery in the health sector face the question of what to do to
encourage or provide systems of risk-sharing that cover much larger
proportions of the population than are now covered, at reasonable
administrative cost.
How Can Government Encourage Risk-Sharing?
In any risk-sharing scheme, small amounts of revenue are collected from
each participant (or from taxpayers) when the risk-sharing is accomplished
through a national service type system so that the large cost of unexpected
events can be shared. The only "economic" cost of risk coverage scheme is
the administrative cost. At the societal level, risk-sharing makes sense
under certain condition: when the event insured against is largely
unpredictable and the event's likelihood cannot be significantly reduced by
the behavior of the individual; when the cost of the event's occurrence is
large; and there is consensus that remedies are necessary to alleviate the
harm caused by the event. Ir health, such is the case. The probability of
the need for medical care (of the unpredictable and nonvoluntary type) is
generally low while the cost to those stricken may be very large.
Thus there ought to be a viable market for health coverage. Why is
such privately provided coverage so limited in developing countries? There
are at least two reasons: First, as long as services in the government
sector are free (or almost free), only those willing to pay extra to use
private health care will be interested in risk coverage. Of course, if
higher charges are introduced for once-free government services, this
problem will disappear. Second, and more problematic in the long run, the
administrative costs of organizing risk-sharing programs, monitoring
service, making payments, and so on, may be very large in countries where
communications are poor and literacy is low.
Under this second circumstance, what can government tdo to encourage
viable, low-cost risk-sharing? Two approaches will help:
*  Making coverage compulsory.  An effective approach is for government
to make health insurance compulsory, at least for employees in the formal



51
salaried sector.3 (As explained below, this need not imply government
itself is the provider of insurance, though it may be.)   Making coverage
compulsory has several attractive features. First, the more participants
there are, the larger the revenue collected. A higher proportion of the
costs of health services not covered by fees will be recovered via the
insurance system. Second, a large number of enrollees spreads risks
widely, making the system more
viable and more fair (see Box 8).                      Box 8
The burden of caring for those              Social Security Financing
who, if allowed would choose not                of Health Care in
to protect themselves against the                 Latin America
risk of illness is removed from           (Attached at end of Chapter]
others.  Third, a large "market" is
created; this will encourage private suppliers to enter the market and
introduce a range of alternative risk-coverage plans to attract customers.
The government under such a system could collect compulsory premiums, but
allow consumers to subscribe to any one of a number of government or
nongovernment risk-sharing systems. Fourth, but not least in importance,
with compulsory coverage the problem of adverse selection, the tendency of
the healthy to avoid joining or paying their premium, is effectively
avoided. With adverse selection those who remain in the plans, usually the
less wealthy who also suffer more illness, will face larger and larger
premiums as the average health level of the members decreases. Some would
suggest, however, that if some illness is due at least partly to poor habits
(smoking, drinking, lack of exercise, or poor dietary choices), the careful,
diligent, and strong-willed are paying for health costs of the lazy,
careless, and self-indulgent. In practical terms, perhaps little can be
done about this unfairness, other tl.a.. to assure that the plan covers a
large and diverse enough group to spread the risks related to poor habits,
and to retain deductibles and copayments to reduce the attractiveness of the
use of health-care services.
* Keeping coverage simple. Compulsory insurance plans (run or
subsidized by government) should aim, where politically possible, to avoid
covering small predictable costs (as they tend to do, for example, under the
social insurance schemes in Latin America). To collect from everyone the
amount needed to pay for routine check-ups and other such predictably needed
services and then to return tie same amounts to each participant as the
services are provided makes little sense. (If society considers check-ups
necessary but unlikely to 'Us purchased, or if it wishes to subsidize them
for the poor, then it is reasonable to provide them at a low fee or even
free of charge, but it is inefficient to collect from all members of the
coverage plan to pay for such health care.)
3It should be noted that financing health insurance through a labor tax
can introduce a distortion in the labor market, and if the wage costs are
passed to consumers, could be simply a new form of a regressive sales tax.
This is an important reason for keeping compulsory coverage simple and
limited, as argued below.



52
Only under prepayment plans does it make sense to cover low-cost
services. In prepayment systems, health personnel have incentives to use
supplies, equipment, and time wisely, and customers cannot successfully ask
for more expensive services than needed. At the same time, competition
among plans gives providers an incentive to be sure participants receive
adequate care.
Avoiding Cost Escalation
In some developed countries and in developing countries with large
social insurance schemes, runaway costs in the health sector as a whole have
become a problem. These are less the result of insurance per se than of
poorly designed insurance. Two aspects of insurance can assure that costs
will not escalate in the long run.
Deductibles and copayments. Services should not be seen by users and
providers as free. If those covered by compulsory insurance receive
services at no cost at all they will make too much use of costly services.
In fee-for-service systems, a deductible (an amount users must pay before
their insurance coverage begins) and a copayment (a percentage of total
costs above the deductible paid by the user) each help prevent overuse of
scarce personnel, equipment and supplies. Even small deductibles (e.g. I
percent of household income in a year period) and small copayments (10
percent or so of the cost of services received) can significantly reduce the
less-than-necessary use of medical care by patients. In richer countries
such as the U.S., insurance firms have experienced such high costs with
plans that do not have deductibles and copayments that they have almost
ceased to offer such coverage. With copayments suppliers also then have an
incentive to avoid waste. Once patients begin to view services as something
they must pay for, the incentives for suppliers to charge reasonable prices
increase. (Why should a supplier husband resources in systems where
whatever is used will be paid for without argument?) Accordingly, it
generally makes sense even in prepaid plans to charge at least a small fee
for each visit.
Competition among risk-sharing schemes. Only effective competition
will guarantee administrative costs will be minimized and a variety of
options offered. Wherever possible, government should thus avoid crowding
out private insurers. It may be even a good idea for government to
subsidize private insurers for a limited period (as it has in the
Philippines). Government can also set up a system to reinsure private
insurers against large losses that occur before they have been in operation
long enough to build up a sufficient reserve to survive.
Where a private market is unlikely to develop, government should
provide a range of options for coverage to purchasers. Some customers will
opt for small premiums with large copayments (payment only for large cost
illnesses). By so doing they put themselves in a pool of customers who have
incentives to keep expenditures (and therefore future premiums) low, while
effectively protecting themselves against catastrophic costs. Others will
find that HMO-type prepayment plans offer more for their money.



Protecting the Poor
What about the poor, who cannot afford even low premiums and cannot
afford deductibles and copayments? The cost of premiums can be subsidized
through vouchers to the poor (perLaps through a health card system). In
fee-based systems, when catastrophic illness strikes and even a small charge
per service adds up to a large financial burden, payments above a specified
level can be forgiven. Deductibles and copayments can be reduced for the
poor. The main practical problem with all these is identifying the poor--an
administrative difficulty everywhere since means tests are difficult to
apply.
Using Nongovernment Resources Effectively
In Chapter 1 the widespread provision of health care ini the
nongovertiment sector of health care in the developing world was documented.
Religious missions and other nonprofit groups, independent physicians and
pharmacists and traditional healers and midwives are all active, and direct
payments to these providers account for up to half of all health spending in
many countries.
There is no "correct" size of this nongovernment sector compared with
government; the relative roles of the government aind nongovernment sectors
are bound to vary among countries. However, governments reduce their own
options for expanding access to
health when they actively                               Box 9
discourage nongovernment                 The Chinese Health Finance System
suppliers, or fail to seek
efficient ways to encourage them.           [Attached at end of Chapter]
Even the Chinese health system          _ _I_
relies heavily on "private" practitioners and private payments (see Box 9).
Expansion of non-government services, including private for non-profit
services, can reduce the administrative and fiscal burden on the government
sector and broaden consumers' options. For some types of health care,
especially simple curative care, private for profit and non--profit
providers may well be more efficient than the government, providing
comparable or better-quality services at lower unit cost.3 Finally,
competition from the nongovernment sector can encourage improved efficiency
in government services.
The charging of fees at public facilities and the encouragement of risk
coverage systems will in themselves provide incentives for the further
development of nongovernment health care. With the institution of fees at
3Hard evidence is not readily available. in part because it is so
difficult to establish comparability, taking quality into account. For
example, a recent study comparing government and nongovernment hospitals in
Chile concluded that the nongovernment hospitals were more efficient because
the number of days per patient spent in these hospitals was smaller.
However, whether number of days spent in the hospital per patient is a
satisfactory efficiency measure is subject to debate.



54
public facilities private health-care providers are not forced to compete
with free services at public facilities; and under risk-sharing plans
designed to pay for treatment in the nongoverrunent sector (such as that
introduced in Chile), private professionals or organizations can be utilized
to provide some of the services covered by government or private insurance.
This section describes how public policy can encourage the
nongovernment sector, and discusses the need for regulation, especially of
the private for-profit sector, as a result of the special characteristics of
the health market. The con(litions under which nongovernment provision of
healtlh services is likely to make sense have been discussed in the fee and
risk-coverage sections above.  Nongovernment provision is likely to make
sense for most curative services, in which the full benefits of care accrue
to the patient, but riot, for vector control, immunizations, and certain
preventive services which benefit communities as well as individuals. Put
another way, nongovernment provision makes sense for those curative services
for which users all over the world have demonstrated a willingness to pay,
as attested by the high proportions of total health expenditures accounted
for by private household spending throughout the developing world--ranging
up to 70 percent and more in a few countries (see Table 3 in Chapter 1).
(In a few countries, it may even be practical to make use of the private,
nongovernment sector in provision of preventive care of the type for which
mariy benefits accrue to others than the recipient, The public health
authorities might contract to private providers for certain levels of
provision of these "public goods." Such use of the private (for profit and
non--profit) sector would require supervision and inspection by authorities
as well as public information campaigns to inform the people of the
obligations of the private sector institutions.)
Encouraging Non overnment Health Care Services
The barriers that restrict community organizations and private groups
from initiating, expanding, or improving health rare services are varied and
formidable. In Cameroorn, Chad, Togo, and Benin care independent of the
state-administer-ed health system is discouraged. In Malawi restrictions on
private practice have led to the emigration of indigenous doctors. Private
voluntary organizations (including churches) are often treated more as a
nuisance than as a partner by government. authorities. Approvals for
expansion are delayed, access to government sources for purchasing medicines
and supplies is denied, and long-range planning is limited. Nongovernment
community groups---for instance, a village or neighborhood that wants tc have
its own health post--still get little assistance from higher-level public
agencies in many countries during the difficult start-up phase. In some
societies traditional practitioners--instead of getting training and support
that would enable them to collaborate better with the modern sector to
promote primary health care--are dismissed as incompetent. Employees and
volunteers of non-profit and voluntary organizations are often treated in a
similar fashion.



To encourage community-run and private sector sources of health
services, the first step that many countries need to take is to reverse past
tendencies toward unnecessary restrictions, hostility, and neglect.
Additional positive steps include:
* Increasing public funding for trainiing and back-up support
(including technical supervision and assistance in procuremeni) to help
comunity-based nongovernment schemes get started.
* Providing technical and fHllancial assistance to private voluntary
organizations for training (especially in such areas as managemenit), and
coordination of activities.
p  Making credits accessible (especially where credit markets are
restricted) to communities and private ventures that want to expand or
upgrade services and facilities.
# Transferring (through sale, lease or contract) operation of health
government care facilities to nongovernuient
health care providers.  Such a step is                      Box IU
appropriate for curative care facilities         Public-Private CooperatioVI
where the benefits of care accrue
directly to those served (Box 10).                Attached at enjd of Chapterj
Regulating Nonverrent Health Care
There are certain critical functions the public sector must perform.
The government in virtually every country plays an important role in
training--and must do so, for example, to assure that health professionals
are trained in public health and preventive care (though those trained
should pay most or even all of the costs, through fees or service after
training).  The government sector, for the same "public good" reasons, must
support research and development in developing countries on improved
approaches to control of local diseases.
Most important, and more difficult, the government sector must take
steps to make the private for-profit market for individual health services
as competitive as possible. This requires heavy emphasis on consumer
information programs. The government can aid individuals to become better
purchasers of health care by providing such information as the prices
charged by health providers for specific types of care, the effective
treatment for various ailments, the equipment appropriate for treatment of
kinds of illness, and why insurance coverage is important. Even with
information available, however, the effort to increase competitive
incentives will also require regulation. A nongovernment health sector will
need to be regulated because not all consumers will always be sufficiently
informed about their own needs (this is indeed why they seek help) and the
options available to them.



56
Quality control. On the one hand, fostering faster expansion of the
nongovernment sector will not necessarily threaten quality. In fact, World
Bank health analysts report that nongovernment providers in many countries
(Zambia, Ecuador, Thailand) offer better quality care than government
facilities.  In Nigeria and Uganda, mission hospitals and clinics have
medicines and other supplies when public facilities do not. In Malawi,
consumers walk miles past nearly free government health centers to get to
mission clinics that charge many times as much. In the Philippines, low-
income people pay to use private for profit high-quality facilities when
free government clinics are available. (One aspect of quality to which
consumers are likely to be sensitive is waiting time. "Free" government
clinics may cost more to use if many hours are lost waiting on line.)
On the other hand, some government monitoring is likely to be critical
to prevent untrained people from providing incorrect or harmful treatments
and to prevent unscrupulous health providers from charging for services
which are not needed or for charging userous prices for necessary services
over which they have a monopoly.
Periodic reviews by government monitoring teams of private facilities
backed by a certification process is an option, though in poor countries it
may be too costly. Examination and licensing of individuals at the time
they enter the health profession is common and practical. Government can
also encourage and monitor self-policing by providers. Private for-profit
providers frequently develop their own means of dealing with low quality,
through professional association and accreditation requirements (as
developed for various types of healers in India even before the government
intervened).
Where health resources are extremely scarce (as they are in most of
Africa and the poorer rural parts of many other countries), the benefits of
quality control must be balanced against the costs. Where shortages are
severe, the most constructive approach to quality control may be to help
support private for profit and non-profit practitioners through advisory
visits aimed at building up skills, periodic free training at various
levels, and sponsoring of professional workshops. Where the nongovernment
sector is already active but of lower quality than government health
services, it may be less costly to upgrade through training than to restrict
or regulate their activities. This is obviously most true where government
health services are not widely accessible. Many countries now train
traditional midwives in modern techniques of prenatal, birthing and
postnatal care. Traditional practitioners have been licensed to provide
psychiatric care in parts of West Africa. Several countries have schemes
under which the public sector subsidizes the commercial distribution of
contraceptives.
Cost Control. An effective way to regulate for cost control is to
require that payments to providers be through prepayment plans or capitation
(per patient served during the period) payments to providers. Under such
systems physicians and hospitals cannot increase their revenues by the
choices of treatment they make for the patient. If the patient has a choice
among doctors or prepaid plan to whom the capitation fee is paid the problem



57
of lack of incentives to provide high quality care will also be alleviated.
Governments or insurance authorities retain the power under such a system to
regulate both service quality and the medical conditions that must be
covered by providers.
Governments need to maintain some control over cost in fee-for-service
insurance systems--especially where competitien has not developed among
insurance providers. As discussed above, deductibles and copayments are
vital to control of health costs. Use of diagnostically related groups
(DRGs) eliminates some of the minutiae associated with voluminous price
lists and creates incentives for cost-conscious beliavior by providers.
Related medical procedures are aggregated into "groupings," and payments for
each such DRG are based on historical average costs across different
institutions. Providers who can reduce their costs below the average keep
the difference, and this incentive tends to reduce curtrent average costs on
which future reimbursements will be based.
Competition for Scarce Resources
Price regulation is always difficult in every sector, In the long run
competition among service and insurance providers to gain customers by
providing good service for a specified cost will be a better answer to the
cost escalation problem. But would encouraging private for-profit providers
to expand create competition between public and private providers, in turn
causing shortages or sharp price increases for scarce healtt. resources?
The principal concern is that shortages of skilled personnel in the
government sector, especially doctors and nurses, will be exacerbated if the
private sector expands. Shortages of trained health professionals are
severe in many countries and to train more--the solution---takes a long time.
Increasing the supply of physicians, for example, requires at least three to
five years--even more if medical schools must be expanded or upgraded before
additional students can be admitted.  Worse, where the training itself is
highly subsidized, the solution of training more people raises public costs.
There are several ways countries can deal with this problem.
In a number of countries, including the Philippines, a period of public
service is required of doctors before they can open a private practice. In
many places in Asia, the practice of allowing private practice in off duty
hours has helped to attract doctors to the public sector. Where shortages
are severe, countries may need to rely for some period on use of foreign
staff to staff public programs--a sensible interim solution for countries
that can afford it or have access to donor funds. Donor funds might also be
used to raise public sector salaries of highly-trained personnel, or to
provide international professiontal contacts and in-service training of a
calibre that would help attract the best local graduates of professional
training to public careers.
In the long run, the training of high-level health professionals,
especially doctors, should not be so highly subsidized from public funds.
Few countries today in Africa, South Asia, or even East Asia charge the full



58
costs of training physicians and other health personnel, and the cost of
training a physician is often in the range of US$10-20,000 per year of
studies. Because the training is subsidized, "leakage" of personnel to the
private for-profit sector involves considerable loss to the public system.
(Ironically, the result of free training in countries such as India is an
apparent "oversupply" of doctors; students have little to lose going through
medical school that is free even in the face of future underemp]oyment.)
Trainiing could be financed by government-backed loans to students. If
students must borrow for their training, a publicly-sponsored loan scheme
can include stipulations forgiving portions of the loan for persons who
serve in rural areas or accept lower salaries in the public sector. This is
one example of how increased cost recovery in one sector (education) can
reduce p-oblems in another (health).
A more fuwdamental problem is the potential effect of a large, rich and
privileged private for-profit medical sector on public perceptions of what
constitutes "goodt" health care----a potential confusion between good care and
costly care.  The solution to ttlis problem is not, however, for government
tc restrict the nongovernrnent sector; restrictions are likely to drain
talent away from the health sector altogether and to place the ful'l
administrative burden of curative care on already overburdened public
sectors. The solution is for government to play an aggresive role in
developing truly "public," usually preventive programs, and in educating
consumers about these programs and their critical role in improving health.
Decentralizing Governrent Health Services
Even assumirng conisiderable involvement of nongovernment providers in
health care, the role of the government. sector in health care will remain
large.  The government will continiue to be responsible for such "public"
type programs as communicable disease control and most aspeots of preventive
care for which there is no real "market."  In low-income rural areas and
even in many urban areas, even simple modern curative care will continue to
he provided by government for the foreseeable future because of the
difficulty of attracting private for-profit or non--profit health
practitioners. In most developing countries, government service networks
sensibly combine curative and preventive care at the local level.
Thus the issue of improving the efficiency of public health services
cannot be negiected.  In countries where managerial resources are scarce,
communication is difficult, transportation is slow, and many people are
isolated, decentralization of the government service system should be
considered as one possible way to improve efficiency.
Decentralization of government health services means granting greater
financial (and management) autonomy to local ullits of the-system.
Decentralization is an approachl appropriate primarily for the types of
services provided directly to people in dispersed facilities, where user
charges for drugs and curative care are implemented. Decentralization is
less likely to make sense for tax--supported "public" type goods, such as
immunizations ancl control of vector horne diseases.  These programs are more



59
logically administered centrally, though even these programs can be, and are
in some countrics, "contracted out" by the central government to local
governments.
Decentralization gives local units greater responsibility for planning
and budgeting, for collecting user charges and for determining how collected
funds and transfers from the central government will be spent. It does not
imply loss of control of the central government over broad policy
development. Even with 4-centralization, the central government should
continue to retain control over such areas as training policy, ass.ignment of
some personnel, and overall system planning--when and where to invest in new
facilities.
There should be two general aims of financial devolution to facilities
where fees are charged.  The first is to give managers planning and
budgeting autonomy, including the freedom to economize on inputs and adjust
their service mix more to demand.  The second is more controversial:   to
give managers incentives to genierate fee revenue by crediting fees to the
management accounts rather than to the central government, and by not
reducing automatically any cenitral government. budget. support in proport.ion
to fees collected.
Control of Fees at What Level?
In practical terms, the questiDn of at what level revenues from cost
recovery should be controlled takes two forms:  first, should revenues be
controlled by the Ministry of Finance or by the Ministry of Health?; arid
second, if controlled within a particular Ministry, how centralized should
that control be? For optimal allocation of given resources, one view is
that all revenues should go to a central government fund, where revenues can
be allocated across all sectors and activities in a way which assures iheir
best possible use. Thus revenues collected in health clinics might, at the
margin, be best, used to improve agricultural research, to retire part of the
national debt, or to reduce what may be highly distortioniary levels of
taxation.  Within any one sector, an analogous argument. applies; central
control of health revenues within the health ministry could allow fees
collected for hospital meals to finance immunizations, if t.hat were viewed
as optimal for the sector as a whole.
Several other considerations, however, argue for control of revenues as
close as possible to the point of collection.  Tlhese have to do with
possible high costs of administering a system to collect fees, and with
problems of policing against misuse of collected revenues.
*  Improving the incentive foi fee payment and (o'1lect ion.  When fees
are not retained at the service delivery point, local users are less likely
to see obvious value from their payments, and local health care providers
will have less of an incentive to enforce client payment. In some
situations collusion could develop betweer local provider and clients in
nonpayment.  [n hospitals, for ex.umpJe, staff who believe fees they collect
from the sick will not be use(d to improve thf hospital environment have



60
little incentive to collect such fees. The benefit to friends and
acquaintances of collecting no fees is obvious; the benefit to society of
added revenues in central government funds is less readily perceived.
* Accountability. Where fees are retained at the service delivery
point and used to replenish drug supplies, maintain buildings, or for other
valued programs, service users implicitly police the use of their payments
on the part of the local service staff, reducing considerably the policing
costs to the public sector itself.
* Signalling the center. Where revenues are collected and controlled
at the service level, service staff have greater latitude over whether, for
example, to replace the clinic well or purchase more drugs.  The local
choice is more likely to reflect local need than a central decision. The
center itself receives signals as to what resources are valued and needed by
observing the spending patterns of the service units.
* Community development. The collection and allocation of revenues in
small communities can provide one impetus for more generalized community
participation in development activities.  For example, local management of a
village revolving fund for drugs can be the impetus for related community
health work such as environmental sanitation.  The involvement of local
persons in decisions of local importance develops the capacity for decision-
making and self-government in the community.
*  Minimizing administrative costs.  The immediate cost of collection
is the staff time allocated to enforce payment of fees by users at the
service delivery point. Additional administrative costs are incurred if
revenues are then shifted to higher levels, with necesssary accounting.
In general, the higher the transactions and information costs of
collecting fees and administering revenues---that is the smaller the amounts
being collected, the more differentiated the amounts (e.g., different
charges for different ,rugs) and the more frequent the collection----the
stronger are the arguments for control of revenues closer to the point of
service delivery. This argument often applies to local health posts. In
China local facilities have paid all non-salary costs from locally collected
user charges and drug fees for many years and in Pakistan the government is
considering retention of fees by local facilities. It also applies to
drugs: in a revolving fund for drugs, stocks at local levels must be
periodically replenished through fees.  And it can apply to hospitals (as is
being tried in Jamaica). Tn Zambia, a public hospital operates as a
parastatal with complete financial autonomy; Burkina Faso and Cote d'Ivoire
are considering a similar arrangement. Setting up a hospital as a
parastatal can make it more financially self-sufficient and less of a drain
on public health funds.
Is there point at which revenues collected in public health facilities
should be used to reduce the central budget allocation to the health sector,
thus relieving fiscal pressure on the cent-al government? The thrust of the
argument throughout this paper is that certain health programs of a "public"
nature are no'& underfuinded.  As revenue collection in public facilities



61
makes large "private' curative services financially self-su.staining, the
freed government funds should be absorbed in truly "public" health
activities and in subsidizing "private" care for the poor. The situation in
every country will be different; but what this principle implies is that the
overall central budget allocation to health should be protected over a
period when user charges are introduced. Only if and when the point of
adequate provision of "public" type health activities by the central
government is eventually achieved and there is critical curative care for
the poor should reduced public funding for health be considered.
Appropriate Transfers from Central Government to Local Facilities
Decentralization and greater financial control by no means imply
complete financial independence of each individual facility. Government
facilities that provide integrated curative and preventive services in rural
areas and to the urban poor will continue to require budget transfers from
the center. In fact, in rural areas the appropriate "unit" for purposes of
decentralized planning and budgeting is likely to be a regional or district
office, not each of many small health posts. At the same time, government
hospitals in urban areas could eventually transfer some collected revenues
to the center, to supplement general revenues in financing other government
health programs.
The ideal form for transfers from the center to local areas would be in
the form of vouchers directly to individuals, who could then spend the funds
at the facility (government or nongovernment) of their choice. Thailand
(see Box 7 above) and Chile are experimenting with this approach. In most
countries, however, central governments transfers are made directly to local
facilities on an annual basis. The amount of the transfer is usually based
on a dialogue between the center and local levels. This approach relies
heavily on the quality of the dialogue between the central government
(usually the health ministry) and the local facility (or district or other-
level management). Frequent and honest interchanges can allow units to
dlefend and explain their requests--and to understand better the central
government's constraints. But such interchanges may not always operate
well, especially for the areas and local units farthest from the center.
Full annual reviews require a large staff with special capabilities that
many health ministries lack.
An alternative is to rely on one or another formula for the size of the
annual grant. Three types of formulas are:
* A matching grant, using a "throughput" approach, in which the amount
is set per unit of output, and output is measured as some proportion of fee
revenue. The proportion of fee revenue subsidized can be adjusted to
reflect the social value of different services. For example, children's
medical fees might have a matching grant of 200 percent while general
geriatric care would have no matching grant. The proportion can also be
adjusted for different regions according to need and the ability to pay.



62
This approach is likely to work best for hospitals in middle-income
countries with sufficiently developed insurance systems to allow for fees
close to costs. It will not work in primary care facilities at district
levels, where many services carry no fee at all.
* The capitation (a reference to "per cepita") approach, which
distributes resources according to the size of the population served. Some
such plans also take such socioeconomic characteristics as age and incomi
distributions into account; since these affect needs. The capitation
approach is sensible for annual transfers to regional or district level
systems from a central health ministry.
* The diagnostic related grouping (DRG) approachi, based on the number
of patients served rather than the general population's size and
characteristics. The DIG approach is appropriate for inpatient facilities.
Estimates of the resources required to treat each group of patients
adequately are classified according to reported diagnoses. Under this
system, a service unit that sees many patients needing expensive care
receives more transfer funds than one that deals with mostly minor cases.
As long as providers' diagnoses are not influenced by its adoption, a DRG
strategy ias a  atractive on equity grounds and to apply than capitation--
because information is more readily available on patients than on entire
populations. However, administrative and record-keeping costs are high (the
U.S. system has more than 450 groups and a similar system in Chile has over
3000) and frequent and careful reviews of categories and allowable payments
are needed. Experience in the United States and the Federal Republic of
Germany also shows a tendency for reported diagnoses tend to respond to the
system, with more patients appearing in the more highly compensated
categories once the system is in place.
For developing countries, a sensible early step is small-scale
experimentation with a capitation system for' regional-level facilities and a
simple DRG system for hospitals.
Another point about annual budgetary transfers to local facilities is
worth noting. Transfers should be made on a prospective basis; cross-year
recoupment should be avoided.  The central government should neither take
away any surplus that efficient operation allows a local facility to achieve
nor make good any deficit by adjusting the next year's amount. In Java's
Cirebon district the government hospital receives a central government grant
for about 40 percent of its revenue. The amount is paid regardless of how
well or poorly the facility provides services to the 3urrounding population.
Hospital managers have an incentive to save on costs.
Decentralization of government health services will not be easy, and of
the four policy recommendations is probably the least tried. Where other
parts of government are highly centralized, t.here will be considerable
obstacles in attempting decentralization (hut considerable benefits as well



63
since except for agricultural extension, perhaps no other government service
is an highly dispersed geographically in its activities). Where overall
administrative systems are weak, the quality of staff in remote areas is
poor, or positions are unfilled due to long standing difficulties in
attracting staff away from large cities, decentralization will have to be
planned and introduced gradually. In some countries, where staff of
regional agencies, local hospitals, and clinics have little experience in
managing revenues and expenditures, training in such skills and a period of
practice of such skills will need to precede decentralization.
Financing Reforms:  Problems and Pitfalls
Implementation of these reforms will not solve all the problems of the
health sector. User charges in public facilities will not generate foreign
exchange to pay for imported pharmaceuticals. Insurance programs will not
in and of themselves assure better quality. Decentralization will not
eliminate the need for difficult political decisions regarding new
investments, training subsidies, and wage scales for public workers. Even a
high-quality nongovernment sector will not fill such critical needs as
environmental disease control, and may not adequately serve the poor in
remote rural areas. Financing reforms will have little impact without a
political commitment by government to making the health sector more
effective. As noted above, user charges (and other financing reforms) alone
will not assure that government resources freed up will be well used;
decisions made largely in the political arena will determine whether freed
funds are used for the poor and for "public" type services, rather than for
building urban hospitals and buying expensive nonessential equipment.
Political decisions will largely govern whether freed revenues are used to
improve access to and quality of services sufficiently to attract fee-paying
and insurance buying customers. Only government action can bring necessary
changes in management and training programs-for example in the medical
education system so that training of doctors is more appropriate to needs
and training of paramedical personnel is strengthened.
Nor is the finance policy package itself a simple one to implement;
each of the four parts has potential drawbacks if implemented without due
care. User charges could deter those with the greatest capacity to benefit
from seeking care, without recycling funds into health. Risk-sharing
schemes could raise costs and augment existing disparities. Deregulation of
the nongovernment sector and administrative decentralization could increase
geographical inequality and decrease quality of services.
Avoiding the pitfalls requires that political and social boldness in
innovating on the policy side be complemented by systematic and sustained
attention on the program monitoring side. At the country level, specific
approaches to implementation need to be monitored as they are tried;
flexibility in such areas as the size of user charges and the approach to
decentralization needs to be maintained.



64
For these reasons, implementation must be expected to take time; this
is all the more true in countries where administrative capability is weak.
Indeed, implementation is bound to occur at paces which differ according to
the circumstances in each nation. For example, in many countries, changes
in policy will require changes in administrative sutpport systems (for
example cash-handling rules) and legislative changes. In countries where
overall administration is weak, change will need to be introduced gradually.
But in every country, initial
steps are possible (see Box 11).  The                       Box 11
most important first step is to begin               Health Finance Reforms
to charge some amount to most users of               Are Already UJnderway
curative public health care services.            (Attached at end of Chapter)
In some countries the ability to
differentiate the poor from the not so poor will allow charges for these
"private" type services to be raised toward marginal cost quickly; in others
overall fees will have to remain modest until methods to identify the poor
are tested.
The necessary pace of introduction of risk-coverage protection will be
determined by the speed with which fees can be instituted and increased
toward full service cost for the non-poor.  As fees become higher the
necessity for risk coverage plans will increase.
Timing of the reforms to more effectively use the nongovernment sector
will vary greatly by society. In some nations the nongovernment sector is
strong and prevalent, both in a technical and a political sense, and the
important issues are ones of appropriate regulation and cost control. In
other nations both poiitical reality and lack of a strong nongovernment
sector mean that more effective use of the nongovernment sector activities
will be a longer term goal.
How quickly greater decentralization of public health systems can be
accomplished will also vary by nation. In some cases management ability,
record-keeping and local resources will be available in many localities and
decentralization of certain facilities will be relatively easy. In others
movement toward greater decisionmaking and resource control at the local
level will only be feasible after a period of training and experimentation,
development of costing and accounting procedures, and design of
complementary regulatory and supervisory programs.



65
Box 5. Village Health Worker Finincing and a Revolving
Drug Fund in the (Gmbia
Many primary health care program have ouccessfully incorporated
elements of self finance, usually in the form of comunity support and sale
of drugs. In the Gambia, village level services are providel by a village
health worker, who is trained to administer wutple curative health services
and preventive care, and by a truditional birth attendant, who is trained in
maternity care. Both workers are chosen by a village development cosnittee.
Following a short training periotd, they work in their villages under the
supervision of a conunity haalth nurse who visits the 4 or 5 villages for
which he or she is responsible once a week.
Village health workers are paid a salary by the village development
couaittee or may be subsidized by paople in the village helping to work
their fields.  The traditiona' birth atteDdant is compensated for services
directly by the patients, as is traditional. These components constitute
the "comunity contributiorn" to the health workers.
Drugs are financed by a revol-.ing fund. Tnitially a three month supply
of drugs is donated to the villagwu by the central government.  A small flat
charge of dalasis .06 (less than U.S. $.06) per table&i or teaspoon is
charged by the health worker. Revenues are turned over to the development
council, which pays to replenish tle stock of drugs, Purchase oriers for
pharmaceuticals are written by the coax:mvity nurse and Dicktel up by the
village health workers at the Ministry of Feea1tti'rs regional 3tore. The
central goverrment subsidizes these 2urcbases orly to the extent of
absorbing transport and handling charges to she point or fhe regional store.
Village pharmaceutical stocks and &ccounts a,.e phy,nically separatedi from the
rest of the health system to help ntrulatwu village health wo:kers from
shortages.
(End of Box ;i



66
Box 6. Prepaid Health Care Organizations
There are a variety of ways of organizing private groups for the
provision of prepaid health care. In each of these charges all participants
pay a participation fee or prepayment. This spreads the risk of health care
costs over the entire group. Some schemes also charge small additional fees
for care (copayments) to discourage overuse, but the general pattern is that
the one payment entitles the participant to all health services and care
needed over the period. The premia collected provide the funds for paying
staff and buying all supplies and equipment. Providers have incentives to
provide care in a cost effective manner because providing more or more
expensive services does not produce added revenues. There are also
incentives to provide cost effective preventive care to the participants to
reduce illness; and thus lower costs for curative case. So long as
participants have a choice of providers, competition among providers
prevents the provision of low quality care, which would drive away clients.
Prepayment plans may differ in whether services are provided by
salaried employees or private doctors who participate as "preferred
providers". The so-called Health Maintenance Organizations (HMO's) directly
provide care with salaried employees in facilities owned by the
organizations.
The preferred Provider Organizations (PPO's) indirectly provide care by
allowing participants to choose among participating professionals.
Participating professionals in turn may be paid on either a fee for service
or a capitation (fixed amount per participant per year) oasis.
Counity and cooperative prepayment programs are generally organized
on either the direct provision (HMO) or indirect provision (PPO) basis.
[End of Box 6]



67
Box 7. Rural Risk Coverage: Thailand's Health Card System
The provision of risk coverage ij difficult in rural areas for several
reasons. Poor coumunication, the dispersion of the population, and low
money income restrict the market for private insurance and prepaid plans.
Collection of premiums and reimbursement would be difficult for a govern ent
run risk sharing plan as well as for a private plan. Record-keeping for
catastrophic coverage (i.e. the amount spent by an individual or household
per illness or per time period) or for billing the risk coverage plan when
deductibles or co-payments are used, is simply impractical in many
facilities.
In 1983 the Ministry of Public Health initiated a health card system in
rural areas. Households are sold a card entitling the bearer to treatment
for a specified number (usually eight) of illness episodes during the period
of the card's validity. The cards are sold at a modest price, so that most
households can afford them. Not only do they entitle the purchaser to the
illness treatments, but also to unlimited visits for the preventive care
services of maternal and child health and immunizations. The system is set
up so that cardholders must enter the health system at the health center or
drug fund level. Entry to a district or provincial hospital for higher
level care requires a referral from the lower level facility. With the
referral slip a cardholder is entitled to quick attention at the referral
hospital via a "green channel" or "expressway"; this reduction of waiting
time increases the incentive for the purchase of the health card.
In principle the health cards should encourage the use of preventive
health care (which is free to holder), increase the use of local health
centers (which had in the past often been bypassed by care seekers), reduce
waiting time and congestion for those referred to hospitals, raise capital
to finance better and more health services, and allow households to protect
themselves against catastrophic health costs.
An evaluative survey carried out severa'L months after the progrm
started found "uniform enthusiasm for the funds among cardholders."  In the
five villages covered by the card lunds, from 55 to 100 percent of villagers
purchased the cards. The cards, which are priced at less than the
households on average were spending, mostly for private care, have captured
new revenues for the public sector. While the program is still too now to
declare it successful, there is room for optimism about the prospects that
card system can help improve rural health care in Thailand and other
developing countries.
Sources: World Bank sector reviews and analysis, and Myers, Dow, and
Causino (1985).
[End of Box 7]



68
Box 8. Social Security Financing of Health Care in Latin America
A health financing method that has been used for over 60 years in Latin
America is social insurance. Sixteen Latin American countries have social
insurance systems that provide health care to some portion of the
population.
Social insurance systems are thought to contribute to development of
dual public health systems--a Ministry of Health system for indigents and a
comparatively wealthy social security system for already well-off modern
sector workers. They are said to create an environment in which expensive,
high technology curative services are overemphasized to the neglect of less
sophisticated types of care and preventive services. They are widely
believed to contribute to the concentration of facilities and personnel in
urban areas and to compete with public systems for scarce personnel and
equipment.
The evidence on these points, however, is not clearcut. First, the
dual nature of health systems in Latin America is declining as social
insurance coverage expands.  Generally, social insurance only covers workers
(and sometimes dependents) in the wage sector, a restriction which excludes
the poorest occupational groups, such as farmers, agricultural workers, and
domestic servants. However, as countries develop, and more workers are
brought into the modern wage sector, more are covered, and as incomes rise
countries can afford broader coverage. In fact, throughout Latin America,
coverage has been increasing, and is much higher in middle--income than
lower-income countries (see figure).
The Brazilian system has expanded rapidly since the 1960s, extending
coverage from 23 percent of the economically active population in 1963 to
over 85 percent by 1984. Coverage of rural areas and indigents has been
accomplished by federal subsidies, acreage taxes, taxes on agricultural
sales, and taxes on rural employers. Any Brazilian needing emergency care
will be treated in social security facilities. In Mexico, the social
security system covered about 35 percent of the population in 1978. Between
1978 and 1980, federal subsidies were used to build 2100 rural health
clinics that are run by the social security system. This program has
brought about a third of rural residents into the social security system
(although they have access only to these clinics, not to hospital care).
Ecuador has extended medical care under social insurance to about ten
percent of rural residents.
Second, within most social security systems, benefits are relatively
equitably distributed. Workers usually pay a fixed percentage of wages to
the system, so contributions are proportional to wage income (at least
within same range of earnings). Medical benefits are generally not closely
related to income, so all members are eligible for the same health services
despite their unequal contributions. In systeam with broad coverage, this
arrangement can create desirable redistributions from the more wealthy to
the less. In Brazil in 1981, for example, the social security system



69
collected 42 percent of its revenues in the State of Sao Paulo (the richest
state) but made only 24 percent of its health expenditures there.
Social security systems do spend a large amount per beneficiary on
health care, probably more than do the corresponding public health systems,
especially in the lower income countries. The social security systems of
the seven higher income Latin American countries spent an average of US$44
per beneficiary in 1977, while the lower income countries actually spent
more on average, US$53 per capita.
On the other hand, the systems are usually self-financing, based
primarily on payroll taxes. There were no state subsidies in Argentina,
Bolivia, the Dominican Republic, or El Salvador in 1977. In Costa Rica and
Panama, state subsidies were less than 4 percent of revenues; in Uruguay, 12
percent; and in Venezuela, 15 percent. In Colombia, the state subsidy is
rather high--26 percent of total revenues, but this 26 percent does include
the government's contribution for government employees. Thus the systems
are fair in the sense that the benefits are paid for by those who receive
them. The results can of course be judged inequitable insofar as the poor
receive little coverage.
The effect of social insurance on health care is undoubtedly to expand
the hospital-based system. However, people who are covered by social
security systems generally also have a better record of immunizations,
attended deliveries, and prenatal care than do people covered only by public
health systems.
Whether social insurance systems contribute to the centralization of
health resources is equally questionable. Care has been extended to rural
areas through social insurance in Brazil, Ecuador, and Mexico. Most
hospital services paid for by social security in Brazil are provided under
contract by the private sector. Public and philanthropic institutions
provide services to social security beneficiaries who live long distances
from social security facilities.
In summary, inequities created by social insurance systems in Latin
America appear to be mainly a matter of incomplete coverage. Within a given
fund (except in Chile) health care benefits are the same for rich or poor
participants. Moreover, in these countries social insurance has proven its
ability to generate revenue for hesith.
Several countries have had problems with over-consumption of health
services (similar to problems in developed countries). As a result, there
is wide experimentation with different health delivery systems, coverage
plans, and prepayment and co-payment reimbursement policies. Brazil, for
example, has introduced a diagnosis related group (DRG) system with
reasonable success at cost containment. The need for reform measures to
reduce cost inflation should not be itself a cause for overlook.ng positive
aspects of the systems.



70
Fijg.  Coverage ad Share of             x  pmditur. of
Social Insurac  Medical Plow, South  Arica, 1977
71%
11%                               .26   799       8.32 7.02
Socia)    Public   Social   Public
Insurance Health Insurance Health
Lower Income   Hgiher Income          Low Income        High Income
(480-910)     ( 1290-2910)
COVEGE                     SHAIER OF oOVEMENT EXPENDITURE
These are averages across countries, weighted by population.
High Income:       Argentina, Brazil, Costa Rica, Mexico, Panama, Uruguay,
Venezuela.
Lower lncome:      Bolivia, Colombia, Dominican Republic, Ecuador, E1
Salvador, Guatemala, Honduras, Paraguay, Peru.



71
Sumaary Table. Overview of Medical Care Under Soc'ial Insurance
in 16 Latin American Countries
Per Capita                   Health Care
Countries        Percent      Cost of                      Share of
(in order of     Popula-   Medical Care  Health  Care   Government
per capita         tion    Under Social  Share of GDP  Expenditures
income)        Covered    Insuranice    S.L.    P.H.  S.I.        P.R.
($U.S.)
Higher-income
countries
Venezuela         30         59         0.7      2.2   2.3       7.3
Argentina         80          n.a.      1. a     I1. a.  n.a.    nIa.
Uruguay           50          14        0.5      0.9   2.2       2.0
Brazil            83          23        1.4      0.7   7.4       8.1
Panama            47          74        3.1      '1.3  10.3     14,)
Costa Rica        82          51        :3.8     0.6  1'9.4      3.2
Mexico            56          n.a.      n.a.    n.a.  1.l'.      n.a.
71         44.2
Lower-income
countries
Dominican Republic 4          7:3       0.4      J.2   2.6       6.5
Ecuador             5        89         0.7      1.3   5,0       9.9
Guatemala          14         25        o.5      0.8   5.0       7.6
Colombia           10         19        0.i     !0.8   8.,0     8. fi
Peru               12         36        0.8      1.4   4. 3      5.9
Paraguay           13       n.a..       D.;i    LI.I.  i.        II..
Bolivia            13        52         1.3      1.0  10.4       8.0
El Salvador         5        52)        0.;    1.4   3.9         9.8
Honduras            7        48         (.8      1.Lfi  3.8      8.5
11        53
Notes:  S.I. = Social Insurance; P.H.   Public Health.
Sources: Zschock (1983) and (1983b).
International Labour Office '1985.,
(End of Box H'



72
Box 9. The Chineue Health Finance Systm
The Chinese health system provides an important example of success in
the effective delivery of low-cost health services. Along wvith China's high
level of literacy and its food policies which help assure adequate
nutrition, China's health service system has been important in raising life
expectancy to almost 70 years, well above the average for countries of
comparable income.
How is the Chinese health system financed? Consider how China has used
each of the four approaches proposed in this paper.
User charges. The Chinese do charge users of public facilities. The
central government pays 100 percent of the salaries of the health
workers in state-owned hospitals and health centers and 60 percent of
the salaries of workers in collectively owned health centers. The
government also provides very small subsidies to village doctors
working in some remote areas. User charges, however, cover all other
costs. All drugs are sold at a 15 to 25 percent profit, and fees for
services are set at a level to cover all non-salary costs not covered
by the drug revenues. Hospitals typically cover 75 percent of
operating costs through drug fees and user charges.
Risk coveraoe. The Chinese system provides health insurance for a
significant part of the population. A state-sponsored compulsory
Government Insurance Scheme covers about 20 million people, and a Labor
Insurance Scheme covers another 120 million state enterprise employees
and their dependents. The two programs, introduced in 1952, cover
approximately 14 percent o. the population, mostly in urban areas.
Most rural residents were covered by a rural cooperative insurance
system until recent economic reforms led to its collapse. The great
majority of rural people now have no insurance coverage, a situation
causing large risk because of the high user charges.
Effective use of the private sector. "Barefoot doctors," now
officially called rural or village doctors, are all effectively
nongovernment for profit practitioners. They cover their own costs
through charges to patients for curative services and through drug
sales (at a markup of 15 percent for Western drugs and 25 percent for
traditional drugs). They are typically well trained (one to three
years) and well paid (incomes greater than average).
Decentralization. China has 8 long standing policy that fees collected
are used by the collecting facility as it sees fit. As would be the
case elsewhere, decentralization may itself bring problems. For
example, a recent decision to permit hospitals to distribute profits in
the form of bonuses to employees may have contributed to an increase in
drug sales (particularly to insured patients). If additional drugs
were not actually needed, this would amount to supplier-induced demand.
_____________________
Souces:  World Bank eector reviews and analysis.
Prescott and Jamison (1984) and (1985)>
[End of Box 91



73
Box 10. Public-Private Cooperation
Cooperation between the public and non-governmental sector in providing
health care has been deliberately fostered by governments, particularly in
countries where non-government entities have historically provided an
important share of health care services and where the government sector has
been unable to expand rapidly enough to satisfy demand. This cooperation
can take several different forms.
Subsidizing Nongovernmental Orsanizations
In Rwanda, where missions provide 40 percent of health care services,
the government reimburses them for 86 percent of the salaries of Rwandese
staff. These public subsidies account for about 4 to 5 percent of recurrent
public health spending.
In Zimbabwe, the government provided missions with Z$4.6 million (about
US$6.6 million)in 1980/81 to reimburse them for provA.ing health care to
indigents. This subsidy represented 4 percent of central government health
care spending, but an estimated 85 percent of mission heallh service
revenues. In addition, the government purchased Z$.9 million in services
from hospitals owned by industrial or mining companies.
In Zambia, the government provides missions with K6.6 million (about
US$9.4 million) which is over half of missions' expenditures on health care.
Mining companies received K.08 million to reimburse them for health care
services to indigents, representing approximately 2.5 percent of total
health expenditures by the mines.
Contracting to Nontovernment Providers
In Indonesia, the government employees' health insurance scheme pays
nearly 20 percent of its total health expenditures to private health
providers.
In Colombia, the Social Security Institute contracts for beds in
private sector hospitals.
In the Philippines, the government compensates private hospitals to
maintain charity beds in areas not covered by the public system, and it pays
private hospitals for services that are unavailable through public
hospitals. The Philippine social insurance system pays the full cost of
inpatient nervices in public hospitals, but patients are free to use the
cash value of that coverage as a partial payment for services from more
expensive private providers. To solve a problem of few providers in some
rural areas where the Philippine system has beneficiaries, the government
has supported the construction of at least 29 new private hospitals.



74
Incentives
In Chile, following legislative changes in 1979/80, all employes make
mandatory contributions of 6 percent of their income for healteh care either
to the public social security health system (FONASA) or a private social
security fund (ISAPRE). Tho!se who choose coverage under the public social
security scheme can opt to receive private health services through a voucher
system.  Most of the prive .e social security funds are financial
intermediaries that receive fees and reimburse the provider of the
patient's choosing. Some provide services directly; the largest operates a
complete range of outpatient and inpatient health care facilities. Overall
the result has been an expansion of private services.  A decrease in
government spending has been more than offset by an increase in
nongovernment spending over the period 1980-1982.
In Uruguay, the social secuirity system does not have its own
facilities, but encourages purchase of services from nongovernment health
maintenance organizations (HMOs), which are now the primary source of care
for beneficiaries of the system. The HMOs provide services to 45 percent of
the population. Monthly fees, copayments, and required services in
Uruguay's 23 HMOs are closely regulated by the Ministry of Health.
In Brazil, services financed by the social security fund may be
purchased from the private for profit sector. Starting in the early 1960s
firms have been allowed to contract with prepaid health organizations to
provide the same benefits that are otherwise provided by the social security
system, and to retain their social. security contribution for that purpose.
This has fostered an enormous expansion of health maintenance organizations
(HMOs). Between 1961 and 1979, over 200 HMOs were organized. In 1981 this
provision was frozen, except for firms already contracting with HMDs,
because of financial problems within the social security system.
[End of Box 10]



75
Box 11. Health Finance Reforms Are Already Underway
Several nations have already begun to institute the types of reforms
discussed here.
J_maica
After discussions with the Bank, the government made several changes in
the health finance system. A procedure for exempting the poor from fees,
based on eligibility for an already operating food aid program, was adopted.
The Ministry of Health (MOH) obtained central government approval for e
decentralization plan under which 50 percent of fees are kept by the
collecting health facility and the remaining 50 percent remains with the
MOR. A study of risk-sharing alternatives has been commissioned and plars
are being made for a pilot test of a prepaid health system for rural areas.
Thailand
A card system which effectively both provides risk--coverage and
subsidizes the use of medical care by the poor has been put into operation
in several rural areas. (See Box 7.)
Scamlia
The private practice of medicine, which had teen forbidden, has
recently been legalized. World Bank staff are recommending increased levels
of cost recovery for selected health services.
Z?bia
Because the constitution prohibits charging citizens for health
services plans are being made for making the university hospital at Lusaka a
parastatal, with charges for services and drugs for expatriate clients.
Public funds replaced by the fee revenues at the hospital will be
transferred to finance the operating costs of new maternal and child
health/family planning services.
Zimbabwe
The government has introduced a fee for patients who bypass lower
levels of the health system and raised room fees for private patients in
public hospitals. A national health insurance scheme, as a part of the
social security system, is being initiated.
The Gambia
A plan has been implemented under which fees are charged for drugs and
the revenues collected are used by the village development council to
purchase replacement drug supplies (a so called revolving drug fund). (See
Box 5.)



76
Plans are being made to increase user fees end allow them to be
retained by the Ministry of Health (rather than be sent to the Finance
Ministry), and to have the private for profit sector largely take over the
pharmaceutical supply function.
China
A risk-coverage plan is being tested in selected rural areas. Plans
are being sade for a provincial-level revolving fund (with capitalization
financed by a World Bank loan) to make loans to provincial hospitals, which
in turn would generate funds to repay the loans through raising fees to
hospital service users.
Brazil
The recession beginning in 1981 prompted Brazilian authorities to
contain health costs. The social security medical system closed several
large hospitals for tuberculosis and psychiatric care that were underused.
Contracts with private hospitals were rewritten for payment on the basis of
diagnostically related groups. The system expanded its payments to state
and local governments providing basic health care on a capitation basis,
rather than for services delivered. Costs had been growing by 22 percent
per annun in the 1970s but fell in the early 19a0s, and are projected to
grow by no more than 6 percent per annum through 1989. Cost containment has
been achieved with no evidence of declining quality; more effective
incentives prompted providers to eliminate waste and unnecessary use of
services.
Sources: (1) World Bank documents; Birdsall 1986; McGreevey, 1986.
(End of Box 11]



77
CRAPTIR 3
WHAT THE WORLD BANK CAN DO
The World Bank began direct lending for health in 1980. By 1983, the
Bank, along with Japan and the United States, was among the three largest
funders of health projects, lending over $100 million annually. Lending
operations in over twenty countries have focussed on development of basic
health care programs, including expansion of primary health care, provision
of drugs, and support for training and technical assistance. Lending
operations have generally been preceded by systematic studies of the health
sector as a whole. These studies have enabled the Bank to carry on a policy
dialogue regarding system-wide issues with government officials (See Box
12).
Stimulating Consideration Of Financing Reform
The Bank is now broadening that dialogue, both with borrowers and other
donors, encouraging consideration of new financing approaches, and
rethinking of prevailing strategies
and the concepts on which they are                     Box 12
based.  Many countries, before             World Bank Health Lending and
they can carry out policy                           Sector Work
reforms, must clarify for themselves        (Attached at end of Chapter]
what their alternatives are and why        -
change may be desirable. The financing climate in the health sector differs
markedly from that in, say, public utilities. For example, while charging
prices for electricity is acceptable everywhere, the argument for charging
fees for governmentally provided health services is not widely appreciated.
Policy dialogue is supported by staff analysis of health finance issues
in the form of sector studies, in the context ol project design work, and in
economic studies of overall public investments. Opportunities are being
sought for discussions with the highest levels of government (inside and
outside the health ministry). The issues addressed are being expanded and
altered.  To the recent main agenda items-expenditure and revenue trends,
public sector fees, and fiaancial management problems--are being added risk
coverage, stimulation of the nongovernment sector, and decentralization of
the public sector. Operational studies of these are being suggested and
supported.
The added evidence and experience accumulated from staff analyses
should increase the Bank's ability to make sound suggestions on specific
programs. New operational studies should help the Bank to acquire practical
information about the progress of health financing reforms, and thus to
improve future discussions and advice.
Discussions and exchanges of ideas and research findings with other
multilateral and with bilateral aid organizations are also going on, and are
meant to forge greater agreement on approaches to health finance in



78
developing countries. The Bank is one of the few institutions able to press
strongly for greater attention to health financing. It is doing so
agre"sively through routine meetings, through special conferences on the
subject, and through interaction with other donors at the country level.
The coordination of strategies and approaches should benefit the developing
countries, which must respond to what have been at times contradictory
suggestions on health financing.
The Bank is also increasing its support for training courses for
country officials in health finance and health economics. The Bank's
Economic Development Institute .-ourses ozi health care include a financing
module; special courses on financing issues for government staff of health,
finance and planning ministries are planned. Support for training is also
provided throulgh inclusion of funds for fellowships in project loans.
Expanding Lending
Bank lending operations can be and are being used to assist countries
with health financing reforms. Finance-related activities are being
incorporated into projects mainly focused on other health care issues. For
example, a project might include support for traininig of health nianagers in
the fundamentals of new approaches to financing. Or support for the
development of a new essential drugs program might be accompanied by the
introduction of new charges for drugs that would over time assure that the
new program could be sustained. Lending can cover the start-up costs of new
finance policies, such as the design and testing of pilot insurance schemes
or new programs of user charges, and the development of accounting systems
for health facilities. Lending can also be used to assure the quality of
public services (necessary to begin attracting fee-paying customers) and to
implement decentralization.
Conducting Research
Progress in spreading new ideas and challenging old ones has been ;low
because evidence on some topics is scarce. Sector studies can help, but
more extensive data collection and analysis, much of which can be carried
out in conjunction with operational work, is also required. The knowledge
of health financing is at a stage where the potential payoff to well-chosen
research projects is high. The central issues are clear, the hypotheses
exist, the audience to be persuaded is large and important, and the
techniques needed to obtain the needed information are available.
Indicative of the possibilities for Bank--supported research are
investigations of:
1. What access to services of what quality is there now? What are
nongovernment expenditures on health care? How much do people now pay? How
much can they afford? How would utilization of ser-vices be affected were
prices raised? Would demand fall for services important from a health point
of view? Would utilization by the poor decline?



79
2. How much revenue can be raised from what size charges? What are
collection costs likely to be? What is a reasonable schedule of chargis at
different levels of the system?
3. What health insurance programs now exist? Who is covered at what
cost? Are there informal insurance systems within extended fmilies?
4. How equitable is the existing health system? What groups now
benefit from what services, at what cost to the government purse? What are
practical means of identifying and protecting those unable to pay for health
care.
5. How active is the nongovernment health sector? Is the for-profit
sector competitive? Are there private physicians, pharmacists, and other
trained health practitioners in rural areas? What income groups does the
nonpublic sector serve? What are alternative means, and their relative
costs, for improving information to consumers about the quality and prices
of private health services? How can both public and non-government health
providers be regulated and supervised so that the clients are protected from
ill-advised and overpriced services?
6. How can management of public health facilities be oiganized and
overseen so that resources are used efficiently and workers perform well?
What steps can be taken to ensure sustained political and popular support
for health financing reforms?
Fostering improved health sector finance is among the most valuable
contributions the World Bank can make to better health care in low--income
countries. Through its sector work, through innovative lending strategies,
through dialogue with other donor agencies, and through research and
operational evaluation, the Bank can help direct the attention of
governments and international agencies to the neglected matter of health
sector finance. The Bank consistently has advocated that overall economic
policy be grounded in sound principles of finance and project, selection; the
agenda for health financing reform proposed in this paper is consi3tent with
and would reinforce that. role in the health sector.



80
Box 12. 'World Bank Health Lending and Sectcr Work
A March 1975 Health Policy Paper limited World Bank health operations
to support for project components in other sectors; then in late 1979 the
Board approved direct lending for health. The 1980 Health Sector Policy
Psper identified likely activities for inclusion in health projects:
a) Development of basic health infrastructure;
b)  Training of coaunity health workers and para-professional staff;
c) Strengthening of logistics and supply of essential drugs;
d) Promotion of proper nutrition;
e) Provision of maternal and child health care, including family
planning;
f) Prevention and control of endemic and epidemic diseases; and
g)  Development of mangement, supervision, and evaluation systems.
Since the Bank began direct health lending in 1980, 1 projects have
been approved by the Board. A total of over $600 million was coaitted
during the five fiscal years from 1981 through 1985.
World Bank lending operations are generally preceded by health sector
work--staff studies designed to improve knowledge of specific country
situations. Sector work by the Bank has often had a positive effect on
governments' approaches to financing health. In Zambia, the National
Coeittee for Development planning appointed a Coumittee that produced
comprehensive response to the Bank's sector report. The President held a
press conference at which he discussed the need for greater efficiency in
the health sector and the need for cost recovery. The Jordan Health Sector
Heview probably contributed to government decision to scale back planned
hospital construction. In the Philippines, China, Comoros, and Burkina
Faso, Bank sector reports have contributed to new thinking about finance
issuer   Bak reports also serve as a means of communication with other
dono,_ on financing as well as other health sector issues.
Source: Measha., (1986).
[End of Box 12]



81
Bibliographical Notes
This report uses information from a wide variety of World Bank and
outside sources.  World Bank sector reviews and project reports proved
especially useful and are listed in the references. Ongoing economic
analyses and research as well as project reports for specific countries
provided valuable facts. World Development Report.s for 1982, 1984 and 1986
were sources of information.  Discussions of the major sources for each
section of the report follow. Sources for tables, figures and boxes are
shown at the end of each.
Chapter 1. The Hedlth Sector and Its Problems
World Bank sector and appraisal reports provided much of the factual
information; especially useful were reports on Colombia, Ethiopia, The
Gambia, Lesotho, Niger, Nigeria, Somalia, Swaziland, Zambia and Zimbabwe.
For the section, "Health and the Health Sector in Developing Countries,"
other major sources were the Pakistan Population Planning and Social
Services Report (World Bank, 1978) and Birdsall (1986) on morbidity; Akin,
et al. (1985), Birdsall, Orivel, Ainsworth and Chuhan (1983), and
International Statistical Institute (1979) on service usage patter.is, andl
Clower et al. (1966) on the Firestone Company's health care system in
Liberia. The descriptions of existing health care systems are based on Bose
(1983), Valenzuela (1981) and Jonsson (1986).
The discussion of the problem of insufficient spending for cost
effective programs used Patel (1986), WHO (1981), de Ferranti (198.5) an]
USAID (1985) f'or expenditure information and estimates of the cost of
primary health care interventions. Examples for the section on inefficiency
came from Bose and Desai (1983), Bloom (1984), and Gesler (1979),
Gershenberg and Haskell (1972), and Lasker (1981) on rationing by queue.
The discussion of supply problems is based on Ainsworth (1983a), Danzon
(1985), Gray (1986), USAID (1985), WHO (1984), Jonsson (1986), and Gwatkin,
Berman, and Burger (1986). The discussio.a of the equity problem is based on
sector and appraisal reports, and on Jonsson (1986) from which much
Tanzanian information came; Jimenez (1985a) for information on Colombia,
Malaysia, Indonesia and China; Melrose (1982) on high technology medicine in
Bangladesh; Bergsman (1979) on tax incidence in developing countries; and
Mesa-Lago (1983) on Latin American social security systems.
Chapter 2. Policy Reforms
Especially useful for Chapter 2 were World Bank sector and other
reports on Argentina, Bangladesh, Botswana, Brazil, Cameroon, China,
Colombia, Ecuador, India, Indonesia, Ivory Coast, Kenya, Lesotho, Malawi,
the Philippines, Rwanda, Thailand, Zambia, and Zimbabwe. The section on
charging the fees relies for the general argument on de Ferranti (1985),
Birdsall (1986), Akin, et al. (1985), andl Jimenez (1985a).



82
The World Development Re2ort. 1983 and Saunders and Warford (1976) were
sources on marginal cost pricing methodology; Roemer and Shain (1959), Pauly
and Satterthwaite (1981), and Feldstein (1972) on supplier induced demand;
and Heller (1976), Birdsall, et al. (1983), Akin and Schwartz (1985),
Ainsworth (1983a), and de Ferranti (1983b) on the respo,nsiveness of health
service purchases to prices. Sources for the section on risk coverage
include Prescott and Jamison (1984), Abel-Smith (1985), ad(i Newhouse (1981).
The discussion of the privat.e sector benefitte(d from Fisk (1978) an(d Savas
(1981) on the pros and cons of contracting public services out to private
providers; Olson (1981) and Dobson (1978) on the probiems with the periodic
review method of regulation for both facilities and individual
practitioners; and Stinson (1982) on community-based health finance systems.
The discussion of decentralization benefitted from the World DeveloDgent
Report, 1982, and Birdsall (1986).
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101
APPENDIX TABLES



102
Table 1. Basic indizators
GNP pwC _                   Ll
Are                         t smuw          xp ncy
POPUIMI@      (tfoueand                     grwm rats          at btith
(minoi")       of squas      DoWrs          (peCW)            (Yers)
m*1984        kkomwows         984          19664846           1964
L.00nSodflif                          2,3 28365 t     31t791t         260w         2- w                6w8
China V  lnda                       117783 t        128491 2t0 w                   3.3 w             63 w
OW Uw,w4ncom                          611.21        18.946t           90 w         0.9w              52w
Su4ehetenFfvlca                       257.71        1506            210w         -0.1 w              46w
I Etlopia                               422           1 222          110           04                 44
2 Bangladeshr                           98 1            144          130            06                50
3 Mali                                   7 3          1 240          140            11                46
4 Zaire                                 297           2345            140         -16                 51
5 Burkina Faso                           66             274          160            12                45
6 Neoaal                                161             141           160           02                47
7 Burrr'a                               361            677           180            23                58
8 Malawi                                 68              18           180           17                45
9 Ntre,                                  62           1 267           190         -13                 43
0 -r2rzana                              2' S            945          210            06                52
I Bururdl                                46              28          220            19                48
2 Uganda                                '50             236          230            29                51
13 -ogo                                   2 9             57          250            05                51
'4 Central AlriaCn Rep                    2 5           623           260          -01                 49
'5 'a'a _1_492                                         3288           260            16                56
6 Macagascar                             99             587          260          -1 6                52
Somrala                                52            638           260                              46
8 B3en n                                 3 9            t 3          270            10                49
'9 Panda                                  58              26          280            23                47
20 CrOna                             01 29 2           9 561          310            45                69
2' Kenya                                  9 6            583          310            21                54
22 SierraLeone                            3 '             72           310           06                38
23 Hat                                    54              28          320            10                55
24 Guirea                                 59             246          330            11                38
25 Ghana                                 '23             239          350          -19                 53
26 Sr  anka                              159              66          360            29                 70
27 Sudian                                2' 3          2 506          360            12                48
28 Pakslan                               924             804          380            25                51
29 Senagal                                64             196          380          -05                 46
30 A!tganstan                                            648
31 Btrutan                                  2             47                                           44
32 C!ha a                                 4 9          ' 284                                           44
33 Kadrmuchea 5em                                        181
34 Lao POP                                3 5            237                                           45
35 MoZambique                            ' 4             802                                           46
36 VveNam                                60 1            330                                           65
MIddIe.4no econot                     1.18761         40,927t        1,250w          3.1 w             61 w
Ofle,pott                             556.1 t       15,510t        1,000 w         33w               58w
OilImomvu                             631.51        25,417t        1,460w          3,1 w             64w
Sub      Mahmn  Atrvt                 148 4 t        8.228 t        680 w          2.4 w             50 w
Loww mldiie.dn_m e                      691.1 t       19,132          740w           3.0w               58u
37 Maurtania                                7          1 031          450            03                 46
38 L ber.a                                21              1           470            05                 50
39 Iarrmla                                64             753          470          -13                  52
40  eso¶no                                '5              30          530            59                 54
41 Boliv;a                                62           1 099          540            02                 53
42 indonesia                            158 9          1 919          540            49                 55
J. yemen Arat Rer                         78             195          550            59                 45
44 Yernen POP                             20             333          550                               47
45 Coled Ivoire                           99             322          610            02                 52
46 Pi)ilippnes                           53 4            300          660            26                 63
47 Moroccc                              214             447          670            28                 59
48 Honduras                               42             112           700           05                 61
49 ElSaivador                             54              21          710          -06                  65
50 PapuaNewGutnea                         34             462          710            06                 52
81 Egypt, A abRep                        459            1 001          720           43                 60
52 Nrgera                                96 5            924          730            2                 o50
53 Zmbabwe                                8 1            391           760           1 5                57
54 Carneroon                              99             475          800            29                 54
55 Nicaragua                              32             130          860          -15                  60
56 Thadand                               500             514          860            42                 64
57 Botswana                               1 0            600          960            84                 58
58  ommncan Rep                           6 1             49          970            3 2                64
59 Petu                                  82            '285          1000          -01                  59
60 MaurtLus                                0               2         1 090           2 7                66
6t Congo PeopiesRep                       ' 8            342         1 140           37                 57
62 Ecuador                                9 1            284         1 150           38                 65
63 jarmaca                                22              11         i 150         -04                  73
64 Guaternmia                             7 7             0a         1 160           2 0                60
65 Tur4y                                  8              78I            W            2 9                64
See Notes at end of Appendix for sources and notes.



103
Table 1 (continued)
GNP w  cpa'                Lif
Area                    Averaep annual   *eWxpancy
%    lfln    (Ihouanwde                    Growth rate       at birth
(mall*t,S)    of qua.        Dollars       (perCent)        (yearsl
mwd-1964      ilOfmeters)     1964         1906-84           19E4
66 CostaRca                              25             51         1 190          16               73
67 Paraguay                              33            407         1240           44               66
68 Tuntsa                                7 0           164         1270           4 4              62
69 Colomta                              284          1139          1390           30               65
70 Jordan                               3 4             98        1570            4 8              fj4
71 SyranArabRep                         10 1            85        1620            4 5              63
72 A"go/                                99           I247                                          43
73 Cuba                                 9 9            1 5
74 Korea. Dan Rep                       199            1?1                                         ,8
75 LeOban                                               10
76 Mot4a                                 1 9         1565                                          63
Mr-Jdiss4nce.                         49e 6 t       21,795 t      1,950 u         3 3              65i
77 Chle                                 11t 6          757         1700          -0 
78 Braz.                               1326          8512          '720           46               64
79 Portugal                             10 2            92         '970           35                1
80 Malaysia                             15 3           330         1980           45               69
81 Panarna                               21             77         '980           26
82 Urugtay                              330            176         1980           1 8
83 Mexco                                46 8 1973                 2 020           29               t6
84 Korea.Repof                          401             98        2110            66               6S
85 Yugoslavia                           230            256        2 120           4 3              ;9
86 Argentina                            30 1         2767         2 230           0 3               '0
87 South Afric                          31 6         1221         2 340           1 4              ;j4
88 Algwra                               21 2         2 382        2 410           36 60
89 Venezuela                            6 8            912         3410           09
90 Gre0ee                                99            132        3 770           38               *5
91 Israel                                4 2            21        5 060           2                '5
92 Hong Kong                             5 4             1        6 330           62
93 Trindadand Tobago                     1 2             5         7 50           2 6              69
94 Singapore                             25              1         7260           78                *2
95 Iran. Isamc Rep                      43 8           648                                         6
96 Iraq                                 15 1           435                                         60
ad9t                                  186t         4,311t      11,250 w         3.2w             62w
97 Oman                                  I             300        6490            6I
98  bye                                  3 5          1760        8.520          - I
99 SaudiArabia                           I 1         2150         '0530           5 9              61'
100 Kuwait                                '7 18                   16 720         -01 7
101 United Arab Emirates                  1 3            84       21 920
111i0 -d mmhet
meNeMII8                             733 4 t      30.935 t     11.430 w         2.4 u'           76 w
102 Span                                38 7            505        4 440           2 7
103 lreland                               35             70        4970            24               '3
104 Italy                               570             30         6 420           27
105 NowZealand                            32            269        7 730             4'4
106 UnitelKingdow                       564             245        8r570           16               '4
107 Belgum                                99             31        8610            30        -
108 Austria                               76             84        3 t40           36               '3
109 Nethtielands                         144             41        9520            2
110 France                              549             547        9 760           30
111 Japan                               1200            372       '0630            4 I
112 Finan                                 4 9           337       10 770           33                75
113 Germany. Fed Reo                    61 2            249       11 130           2
114 Denmak                                 1             43       11 t70             8               'i
115 Autralia                             15 5         7 68        11 740           1                '6
116 Sweden                                83            450       tl 860           '8               A7
117 Caada                               25 1          9976        13280            24               '6
11t  Norway                               4 1           324       13 940           3 3
119 Un,td SStas                        237 0          9 363       '5 390             7              '6
120 Swtzrla                               64             4t       16330            '
5s_uumsuhis                          369.3r       23,421t                                        68 w
121 Hungary                              i 07            93        2 100           6 2              '
122 Poand                               369             313        2100            '5
123 Atria                                 29             29                                         '0
124 Bulgana                               9 0           I11
125 Cechostvahia                        15 5            *28
126 GCrn  DOem Rep                       16             ' 0 8-
127 Romwna                              22 7            238
121 USSR                               2750          22402



104
Table 2 Central government expenditure
Pt'-'Mir P of total Oxpomddure
HouMng;                                           TOW
aw "i0a;                                       expondilu(o
UKIW wurity    Economoc                        (pereentap ot
Defense        EdwCAI*n         HIWth         and weitares      sorvicn         othef,           GNP)
19720  ! 9831  19720  1983'  19720  19V    19720  1983c  19720  1983c  19720  1983c  19720  19V
Low-incono econan"a                 17 2 u, 19.5 w 12.7 w   4.7' u, 4.6 it, ',7 w  7.3 u, 5.8 to 22. 6 it, 24 0 w 35.4 u, 43.3 w I 8 2 w 16 3 it,
China " lrodW
Other low4ncorne                 17 2 Ev IS 5 zt- 12 7 ti, 9 9 (v  4 6 to  3 3 w  7 3 tv  8 -I it, 22. 8 1v 23 8 ti, 35 4 it, 30 4 it- 18 2 tv 19 9 U.
Sub-Saharan Atries               13 2 w10 3 Ev 15 5 it, 15 9 4, 5 2 u- 4 5 w  5 7 it- 5 0 u, 20 9 it- 2i 5 ti, 39 5 u, 42.8 Ev 21 0 (v 20 1 w
F,r, cD,a                       , 4i            1 4 4            5 7             4 4            22 9            38 3            13 1
Banacip"ir,                      I)I            ''j 9            5 o             9 8            393             25 9             9 3
ki
o'                                     I)                             '.1 5           'I 6             1  ,                          381.4
Za re                                                            2 3      1 2    2 0     0 4    13 .3  't) 8   56 i    5 -1  38 6           5
2     6 8    t 6      9 C)   155   '6 1   3          '5 6            '3 6
5            4 3   572   53           3              3 5        2
9"', 
4                                                                            5            201             !3 7            20 0
Y                                                                5       6 8    5 8         3   331   35 2   36                 221   K' o
2             39 0                                7
.33 9
'2  j4ar'lla                                           3   12 j        3    4 6        3    2 6    124    9 5   36 6   53 4   21a            4 5
3  bqo                                       'j                               7             8 2            '8 2            41 6            34 1
C e-"J,   Ca,, P',

'5                                                                                           46             '
4 1                           14 9
6 Y    v4as_v                                                                                                      3)                 9
9           21 (3
9 Awao(la                                          22 2               7             2 6               0            2 14            1 1 7
20 C
' na
... .... ....
9                    ?4 6   3C 2   A3 3         'I   2t 6
32
e:1

'5 3
                                         2                     6                          3   '5 1   '9 2   46 6   43 ?          5
26 Sr  ,J;)K,l                                                       b 4     5 1       .5   114   20 2    '3 1   3 7 7   60 8   25 4   3J 6
7 7 ',A

jap                                                                           4        .3     8   23 5   44 1   57 3   'g 2
28 Pak                                                                         0      ? 2       3      4   28 0   33 2   23 8    65
A   Seneqai                                                                                    6            A 2             40 3       4   .;h
.7'ao                                                                                                           i2
33
34 _3C P[,'P
35
315 v,pr Nam
Mick:11*4neorne oconarnlae          15 1 E, I i 4 v 12 8 rt, 12 1 u) 6 3 U, 4 5 w 20 0 w I I 0 u, 24 3 u- 21 9 it, 21 5 u, 33 1 u, 20 0 to 26 2
Oil expo"ws                      22 5:4. 15 4   14 5u- 12 8 Ek, 3 9 u, 3 7 u, 4 3 u, 9 3 u, 26.5 W 25.7 Et, 28 3 
L 33A u- 16 7 Et: 261 zi,
Oil importem                     14 3w 14 4   1 1 9 U, 10 9 :v  6 9 w   4 8 u, 215 8 u, 21 2 u, 21 9 w 19 8it, 18 2 u- 28 9 w 21 4 zt, 25 1 u,
Sub-Sawan Alfts                          13 2 a, 9 I u, 17 2 tv  4 9 to  6 3 U, 4 3 u, 8 4 u, 21 6 zt, 24 0 u- 47 0 it, 30 9 it, 13 1   32.4 Et,
Loww  micklWincorne                 18 4 u15 5 tv 16 4 u- 15 0 U, 4 1 it, 4 2 to  5 5 it  7 6 it, 30 3 iv 26 5:v 25 3 it, 31 2 w 16 8 zc, 24 4 tt,
I ' Mauf!ar,a
39 
- OPr,3                                                    9               3             2              28 t
39 Za-ra                                                     5 2     7 t    i 4        j       8   H         23   .15           7   3.1 J-   4
.4 0)                                                                          2       5       3   24
Bo,, a                                     8   30 6   26 9    5 6        3       29    '8 0                                                3
8 '.5
43  ferrer, Atao Pi-o                      '36              '6 6             4                                                3
44  e
,er PC-R
45 C we a i voie
46 P, i op-res                      'O 9    '3 6   16 3   25 6    3 2        6 8    43       49        6   4 4 r)  .1'
4 7 V,Drocco                        '2 3    '4 6   , 9 2    18 6    4 8      2 9    94        7     25 5    25 8   29       2  9   `24   3 3 2
48 
-fonauras                       '2 4            22 3             0 2             87             2i3             , 3              53
49 E; Saivaaor                       6 6       8   2 1 4    '6 6   'O 9      8 4     76      4      1 4         3   
4      33 1    2 8
50 Paoua Neyv Gwnea                          42             20 9             9 3                               6             4 2            .36 2
5 1 Egyp! A,at) Rep                                                                          49                               73            39"
52 N,gef,a                          40 2             4 'I;           3 6               8             9 ri           
14              D2
53 Z,mt)abwe                                18 3            2' 5             6 1                            20, 9           25 4            36 3
54 Carreroor
                                  6             3 2             3 7             8              '_1 6 1
1       
') 11          2 1 8
5 5 N:caraqua                       '2.3             6 6             4 0            16 4            27 1            23 6             5 5   49 2
56 Tnadard                          2 r
' 2  9 8   19 9   2 0,       3 7    5                4 6   25 6   2 '3   2 35    8           72    19 6
Bo
s*ana                                                'g 4    6 D      5 6   2'          1   283              34      3' 5
58 Dor, r can PL-1)                                  4 2                     0 5             4'   35 4                         0            I ; 6
59 pel
                                3               7                     6         3       8   3 1
                     46              .8 6
-to yauf ! 'S                                       .3                         8                     3              44
6 ! Congo P    
.s ;;ec
b2 Ec
,aaof                             7
63 Jarra4a                                                                             8        3   28              '12 6           1.3 4
64 Guatemaia                                         9 4                                4           218             ".5 8              9      I 1
65 %rkey                                               2               3       8    i3                 9    3'9         3   3
 7   2' 8   24 3



Table 2 (cuntinued)                                                        105
pefrentage of total expNdi4ture
Ifousing.                                 Total
anwntt,eS,48                            sxpmndrt'ire
local wur'tv   Economic                  per1centage of
Defense      Educatin       Health     and wetfafed    servicee      Orner         GNP)
197?  i963  '972   ¶D3'  1972'  1903  1972   i983C  197?  '982'  '972   983C  1972O  '982'
66 C'os'ta~'ca_'           _'28 6'         0628 i3 -  9'94    38 25    6        7'   2'l i   20 2   '6    '38,   '89   26 4
67 Paraguay                    138   '2 5   121   '20    3 5    3?7  '83   32 2   '9 6   '40   32 7  25 7   '3'1 t
68 Tur's*a                      4 9          30 5           7 4          88           2 3~                       2268   3?'
69 Colorn)oa                                                                                                      73O
'0 Jorda"                            25 6           '5            3 6          '3'1 33                    '.
71 Syr!an AratoReo            3'7 2                                      316          A9
'2 Angola
'3 C.jb.;
74 Xo(ea Dem P9ep
15 Let)a,,Of
76 Mon goli
Uppem mddle incom*'            140 :,' 9                                       ilS ¶O   Ow 4.29~ O6:.?i i  022 51 wi6  3377c2 13 7 -2.6 9 ~ 
7' Ch,ie                       6'    2       '43    3      62    60    9        5    '5      6.    6       6      2      4
'a Bral!                R~~3    4'    6 8    3.      4    ~      b 36   15'  ?16   ?3 8 ''            3     3:
'9 Por,ugai
8O Malavs,a                   '6             23                           4    '5 '2                32' 
8' Pan'ama                                  207   ''       ''    '3    '28   '22   24 2    35    9'   72   2/6   494
82 ufga                         56   '2~  95    65    '6            4  `223   5'       98    8'  2'     '5   '5 0   :99 
83 Mex co                       42    20   '64   ''         5         .'  20   '25   34 2    22   '52   4' 2   '2       2
54 K~rea Rec v                 25 5   3' '3   ' 5 9 2        2      9 2C26    3 6   .5'26 t.                        '   3
55  .osia~ a                   J'4A                                       96            2
86 Afqsn~,ra                   58      9             '    294        23  5    39' 4  7?   - 4'             52   '6    12 3
8? Souin Alr Ca                                                                                                  .3      6
58 Aiger a
89ve,,ezi,eia                 '3       5     '8 6            79  '  Ž      2    3'      .4  Y'5.3
SO Greece                      '43            9                         32            24            '23
9' 'srae'                      1986  2924                   35     3     '9      '    63    54  2K5I             44.3  .;A
93 ~'*r"dad and T'4na9o
94 Singapore                   353   185   '5' 7    '6    78    64    3 9    56    '9   '43   23   33    'M    Ž3'
'35"ar s'am,c Pe               A'      3' '4   '3, :0        .    '        '    '3    36  ~32    5             jM
'46 'aa
Nf0lnconm
ol4lexportera                13 0 ; 27 7  13 6wt 9 4    5 6    6 0   14 9   1'21;4 17 8; 21 9  35 1   22 9;24 2 x30 9 :
97 OC'an                       39      '      3      4     5              '     '      4                          2 S  4  ?  43
98 '..cya
39 Said Arau,a
''00 Kuwa t                      3   '2         '     '                    .     73    65   ;S. :.             234        3
''.3  0n!ed Arac Em a!es       2415   432   '2    98         5    ' '                   9 82'3       7     7        ' 
tndustrla mau.to
fconomi"                    20 8  143;,  5 4    47w 100 u 112  37 2.  411  12 0    92.  14 6   19 5  22 9   30 0.
'02 Soanr                       65    44    63    5?    39          5     3.    54 '"                  '     4
'03  'relanc                                                                                                       3: s
064 !K,v                                             9 6   '26  2      5  94           `1 4 
''38 A''" Z2 a                             ''2    '9    '3'   '
j'2   7e43 Ke                        "3           82
3oar)
''2 F 'ar'ct                    6'    55;  '53   '38   '0           6~  48 -; 
''3 Ger-ar  ea Reo)            '24    93    '5    05   7'   '8 6   16 9
''4 C0e,'afK                    '2           '59           '044
'5 Aus!ralIa                   ''     9'   44 4'9            I2.         '    30'. ' 5           '                 8
''6 S*elen                     '35     6      4       2     3              44 3  49 4    -           4       I           46 9
'7 Caraoa                              80            73           5            '6.'6
''8 Nororay                       ?    86     9       88      3     6    399   361 '" '         5        3'
'¶9 Un,fod States               3?22   237    3;      '     8 6      7'  35 93   '36'3   3                  ' '
¶20OSw'tzerlar'o                '' '4          .2      ' '30 '4   39q    4'4    '.               .'                      '4
East Eumopea
nonwsm  cotxmn
'21 r4ungar,
'22 Poiard
' 23 A;baria
'24 Sw ga0a
'25 _Zec"Vsivak'a
'26 Gee-an, Oem Pep
'27 Qomaina                                            '4 



106
Table  3.  Helth gxpenditur. as Percent of Total Central Govare t Spedidg
Country                     1976        1976        1977        1978         1979        1960        1981        1962        1ow          1
Argentina                                4.5         2.8         2.2          1.7         1.7         1.4         1. 1         1.4
Australia                    7,9        13.0        11.0        10.4         10.2        10.0        10.1         7.1         7.1          7.8
Austria                     12.3        12.6        13.2        12.8         12.9        13.0        12.9        12.2        11.5
BatngLadesh                  5.4         5.0         4.7          ,.3                     6.f
Belgium                      1.6         1.5         1.8          1.H         1.9         1.6         1.7         1.7
Benin                                                6.11        6.38         5.6
Bolivia                      8.1         8.0         R.(         8.8          8.fi       1".1         7.2                     3.1
Botswanea                    fj.3        6.4         f.8         6.0         4.7          5.4        .5.9         4.9         5.6
Brazil                       6.5         7.5         6.9         7.3          7.4         6.5         7.4         7.8         7.3
Burkina Faso                 6. 6         !.5          .'.3   i '.6           I. 9        5.8          .8    f     i.6        6.8
Bur-ma                       6. fi       6.f6         , 9        6.7         6.           5. 3        f.1         7.0
Burundi                      7.2 '4.9                .1.
Cameroon                                  1.8         1.8         1.6         4.3         '. I2. 7                            3.7          4.4
Cana(la                      7,7         8.3         6 .9        7.6          7.fi        6.7         6.2         5.2         6.3
Chad                         8     4.7    1 2
Chile                        7.0         i,9        6.9         6. 9         6i.5r       7.1         6.5         6.8         6.0         6I.2
Colombia                     6,1         6.1         6.0(         6.8         6.1         6. 8
Costa Rica                   4.5)        ).0         73.3       25.1         25.0                                32.8        2!2. 5
Denmark                      3.6         2.9         1.3          I.          1.t         1.          [.4
Dominicani Rep.              f.8         8.8         (i.0        '4. 1        '. I        9.3         9.7        I0.7        I 0.
.xui-idor                    7. 3        7.2         6.8         H.-,         H,4         7.8         7.0         7,7         7.5
Fgypt                        2.7         26           1.2 L         i :(.                             2.''L       2.1         2.8         2.7
Fl Salvddor                  8.2         9.2         'i.8        8.9          H.7        '1.0         8.4         7.1         8.4         8.1
tthIupnI-                    1.7    I      .5        4.0                     3.f8         3. i
Fi n i s11(i              10.7        I0.8         II.-         .L         iO.5        i0.5        It. '1      ,II          10.6
Lran c                      I.5.0        1.R        Il.fi       11 8        I 1. 0       F).0       Ii.7        I1.0
Gatn Ib i, lhe               8 L         H .          4.1 I..       3
Germany,    . R.            19.8        19.8        19..         19.3    I    9.0        19.0       1I'.2        N.3         1I.6
Ghana                        8.3         8 0         7.1         7.3          6.(         7.0         6-.1 1H                             8.6
Greece                       7.9         8.1         H. I        3.9         1,0r.       10.3        i().
Guatemala                    8, f;       8.3         7.6         7.1          7. 6i
Hlon(duras                  !2.8        11.7         8.5         8.'         R.0
Ind8a                       2.4          '.5         '.(         _.         .t            I .6        '.n         2.3         '.1



1f7
We 3. Comt'd.
Indoomim                  2.1       1.9        2.5        2.1        2.4       2.5        2.5        2.5        2.2
1Ira                     3.2        2.9        3.0        3.5        4.4       6.4        5.4        5.5        5.7
Israel                   3.7        3.4        4.3        4.6        5.2       3.5        3.5        4.3        3.7
Italy                   16.8                              7.6       10.5       12.6      10.7       10.6       11.5       11.5
Jmi_ica                   9.3       8.2        7.8
Jordan                    4.1       4.4        3.6        3.7        4.1                   3.7       3.8        3.6
Konya                    8.0        7.9        8.2        7.4        7.2        7,8       7.8        7.3        7.0
Korea                                1.1       1.7        1.6        1.1        1.2        1.3        I.l       1.6        1.4
Kuwait                                         5.9        5,9        6.3        5,1       4.9        5.4        6.2        6.3
Lesotho                  5.5        5.2        5.4                                                              7.2
Liberia                  9.3        7.2        7.9        8.2        r.1        5.2       7.6        7.2        7.3        f.2
Malawi                    5.8       ti.4       5.4        5.3        1.7        'i.5       5.2         . 2      6).8
Malaysia                  F.9        5.7       7.4        6.4        6.5        5.1        4.4
Mali                                6.9        6.2        5.3        5.3        3.1        4.6       2.8        2.5
Mauritania                                                3.5        2.8
Mexico                    4.2       4.1        4A4        4.0        3.9        2.1.9                 1.3 1.2
Morocco                   3.6       3.3        3.0        3.6        3.1        3.4        3.0        2.9       2.9
Nepal                    5.9        6.7        5.5        5.3        5.1        3 Y       4.1        4.$
Netherlands              .1.7      [1.6       11.8       11.9       11.7       11.7       [.f  11.6    .        1.31      11.0
New Zealand              I5.0      15.7       15.0       15.0       [5.2       15.2       14.2      1:3.5      12.Fi
Nicaragua                8.4       [LlB        9.6       10.0       10.3       14.6
Niger                               4.9        4.5        4.6        4.7        1.1
Nigeria                  2.2        2.7   °     .2        2.5
Norway                   13. 4     1'3.3      11.2                                        [0.3 W.ti             0 f6
oan                       3.2       3.2        2.7        3.2        :3.2       .          .3U                   4 1  3 ,  4.1
Pakistan                  1.5       1.8        1.6        1.6        1.3         .r       l.S        1. IM
Panama                  14.5       13.2       14.5       15.1       12.1       12.7       3.2       11.
Papua New Guinea         6.3        8.5        8.3        8.2        7.9       8.6        u S        9.3
Paraguay                 2.8        2.8        2.7        2.7        :3.7      3.6        4.5        3.7
Peru                     5.1        5.8        5.9        5.6        6.1       4.5        S.3        t 6.2
Philippines              3.9        4.5        4.6        4.3        4.7        3.9       4.1        4.1        ; 8
Portugal                 4.4
Romania                  0.3        0.4        0.4        0.4        0.3        0.6       t).7      l3,H        i8
Rwanda                   6.5        5.0        4.8        6.2        4.8       4.5
Senegal                  5.9                                                   4.7         lw.       . .'i      1,7
Sierra Leone             4.fi       5.u        5.2        4.3        4.1 I.H
Singapore                8.5        7.7        7.4        8.5   ,     .        6. 9       7.i   \     .1
Somalia                  5.9        S.7        4.9        3.2
Spain                    0.9        0.8        0.7        0.7        0.8       o. ,.                 0 f        C1I6
Sri Lanka               f6. i       6.3        6.0        4.2        5.2       4.!         i..       .i.
Sudan                     1.6       1.R        1.5        1.7        1.5        1.1



108
Table 3. Cont'd.
Swaziland                 6.4       6.8        6.5        4.9        6.3        7.2        5.4       7.1        7.4
Sweden                    3.1       3.1        2.6        2.6        2.5        2.2        2.0       2.1        1.5        1.4
Switzerland              10.4       10.1      10.6       10.9       11.4       11.7       12.7      12.9       13.4
Syria                     0.8        1.0       0.9        (1.7       1.0        0.8        1.1
Tanzia                    7.0       7.1        7.1        7.3        5.7        6.0        6.0
Thailand                  3.7       4.4        4.7        4.4        4.5        4.1       4.2        4.9        5.1        5.4
Togo                                           4.7        4.6        5.6                   5.3       6.1        5.7        5.4
Trinidad and Tobago                 7.0        7.8        6.9        6.4        5 8       5.9
Tunisia                   6.2       6.7        7.0        7.3        6.4        7.2        7.7       6.7
Turkey                              2.5        2,5        2.2        2.9        3.6        2.1
Uganda                    4.0       5.6        8.1        8._ '       .2        5.8        5.9       5.2        4.6        2.6
Ulnited Arab Emiretes   10.1        7.0        8 9        93.2       9.3        7.9        6. 2      7.1        7.7
United Kingdom           12.9       12.9      12.6       12.'       12.4
United States             9.3       97.7      10.()      I.2        10.5       10.4       10.8      1(.8       10.7       11,0
Uruguay                   3.9       3.9        ..8        .5,0       1. 7       4.9        3.8       3.3        3.4
Venezuela                9.1        9.1        8.0        7.8        8.5       8.8        7.6        7.6        8.6        7.6
Yemen, Arab Rep.          2.7       2.9        L' 8       3.9        3.4        4.0        3.3       4.5        4.9        4.2
Zaire                     1.5       3.0        4.0        3.9        3.2        2.5        2.6       3.2
Zambia                    5.8       7.0        7.3        7.7        f.9        6.1       6.0        8.4
Zimbabwe                            6.9        5.8        5.7        5.9        5.4        7.1       6.4        6.1



109
Table 4. Index of Constant per Capita Central Government Health Expenditures
Country            1975    1976    1977    1978    1979    1980    1981    1982    1983
Argentina                   189.7   100.0    79.7    65.0    69.7    59.6    43.5    60.0
Australia           63.2   118.5   100.0    97.9    95.5    93.5    96.5    68.5    72.5
Austria             84.6    92.1   100.0   105.1   109r6   114.0   117.4   112.3   108.9
Bangladesh          54.1    94.1   100.0    95.2              114.5
Belgium             81.6    82.6   100.0   106.8   117.2   '07.4   120.3   118.7
Benin                               100.0    85.8    79.1
Bolivia             89.4    98.0   100.0   108 4   108.9                87.3    35.3
Botswana            88.6    96.4   100.0   121.2    91.0   108.9   135.6   139.8   146.0
Brazil              82.1   100.6   100.0   110.7   106.1   108.1   119.8   134.0   114.0
Burkina Faso       105.4   121.8   100.0   112.7   110.3   117.1   119.0   151.6   118.2
Burma               J4.8    99.3   100.0   128.4   122.8   115.7   144.2   177.1
Bur.ndi            122.6   117.8   100.0
Cameroon                    110.6   100.0   100.6    93.2   110.7    82.2               113.1
Canada             107.3   114.9   100.0   114.1   111.9   103.9   100.2    87.6   110.0
Chile              113.5    96.8   100.0    97.8    82.8    89.5    81.0    98.0
Colombia           113.1   102.8   100.0   125.0   127.9   159.5
Costa Rica         124.3   149.6   100.0   950.1 1,021.4
Denmark            170.9   142.7   100.0    93.4    93.3   106.5    91.0
Dominican Rep.      85.1   106.5   100.0   113.2   124.7   127.1   129.4   118.7
Ecuador             89.7    97.6   100.0   106.1   104.3   134.2   151.7   142.8   110.8
Egypt               97.0    98.3   100.0   106.6   101.2                74.3
El Salvador         77.5    96.4   100.0    97.8    92.9    98.8    89.6    72.0
Ethiopia            90.1    92.5   100.0    94.5    90.2    93.1
Finland             89.1    91.9   100.0    98.6    99.3   102.4   112.3   117.0   121.4
France              94.8    98.3   100.0   1.08.0   113.7   116.9   122.1   127.1
Germany, F.R.       94.3    99.2   100.0   102.7   103.2   110.4   114.1   115.8   111.7
Ghana              133.7   127.1   100.0    81.5    63.9    54.4    42.1    37.9
Greece              81.6    95.2   100.0   128.3   137.3   143.5   164.6
Honduras           126.9   157.5   100.0   118.6   113.8
India              112.6   119.5   100.0   114.7    92.3    85.9   112.5   136.9
Indornesia          78.8    81.8   100.0    99.7   125.2   143.2   168.7   145.1   133.1
Iran               110.0    96.7   100.0   110.9    96.9   127.1   109.4
Israel              80.7    79.6   100.0   100.8   129.4    89.8    95.1   115.6   119.8



110
Table 4. Cont'd.
J _ ica            114.0   105.8   100.0
Jordbn              91.3   100.2   100.0    98.4   132.9              115.5   120.3   111.3
Kenya              102.3    99.9   100.0   116.6   123.3   132.3   142.4   130.4   105.1
Korea                        62.9   100.0   100.7    76.7    86.2    96.7   115.3   139.3
Kuwait                              100.0   119.8    84.7    69.8    81.8
Lesotho             73.9    81.4   100.0
Liberia             92.7   104.4   100.0   121.7   119.4    73.1   123.5
Malawi             123.9   111.8   100.0   125.3    49.1   166.3   146.8   115.5   154.2
Malaysia            77.4    68.9   100.0    81.2    79.4    85.1   102.9
Mexico              59.6    71.4   100.0   107.7   137.1   117.2   137.4   217.2
Morocco             94.1   106.0   100.0   103.0    91.9   103.2   102.3    97.2    83.4
Nepal               71.8   100.2   10;1.0    98.2    95.1    74.2    84.1   109.8
Netherlands         92.2    96.0   100.0   104.9   109.0   112.1   113.5   116.2   116.5
New Zealand        101.2    96.0   100.0   108.2   107.2   111.3   114.1   113.1
Nicaragua           71.7    95.5   100.0    82.9    71.6   151.7
Niger                      113.6   100.0   122.6   137.2   146.3
Nigeria             87.8    99.4   100.0    63.4
Norway             100.0   111.8   100.0                              102.7   108.0   111.1
Pakistan            99.3   118.0   100.0   117.4   103.8   113.1   138.5    92.1    99.3
Pan am             102.4    93.9   100.0   106.8   111.4   112.7   124.7   140.9
Papua New Guineu   97.1   117.5   100.0   108.9   101.4   114.7   132.4   126.5   118.6
Paraguay            88.5    97.9   100.0   110.1   149.6   152.8   213.8   183.3
Peru                93.5   104.4   100.0    85.2    85.2    85.4   103.2   103.8
Philippines         82.6    98.6   100.0    96.5   101.7    88.3    99.0    97.3   121.9
Rwanda             108.0    96.0   100.0   131.1   118.4   105.5
Sierra Leone       110.1   100.3   100.0    93.7    90.7                               143.7
Singapore           88.8    94.9   100.0   119.2   106.5   119.5   155.1   133.2   152.2
Somalia             90.9    87.9   100.0    96.6
South Africa                        100.0    97.6    92.5    93.6    96.5   131.6
Spain              107.4    93.4   100.0   103.8   127.7   106.3   103.6   101.9   110.8
Sri Lanka          107.6   118.2   100.0   126.1   153.8   168.0   101.6   102.0   155.6
Sudan               87.4   104.4   106.0   103.2    80.4    67.9               60.3
Swaziland           83.6    99.9   100.0   108.1    93.9   104.8    90.2   113.9   101.3
Sweden              99.8   108.0   100.0   105.2   111.1    98.6    95.9   102.4    80.2
Switzerland         84.2    91.0   100.0   101.1   108.3   113.1   117.5   124.4   130.0
Syria               92.8   119.8   100.0    75.5    99.5   101.4   114.5



111
Table 4. Cont'd.
T2nzania           111.3    93.0   100.0   107.2   105.2    94.3    87.8
Thailand            63.7    89.4   100.0   105.4   114.0   112.1   120.8   155.1   162.3
Togo                                100.0   105.1    97.7               88.3    93.4    80.6
Trinidad and                 87.6   100.0   120.7   119.5    98.2    99.1
Tobago
Tunisia             74.1    84.9   100.0   109.6   100.8   109.7   126.9   132.9
Turkey                       84.5   100.0    81.9   116.9   128.7    69.6                65.9
United Kingdom    102.4   IOf,.2   100.0   103.5   104.9
United States       85.1    93.6   100.0   103.5   107.4   113.8   121.4   127.4   131.9
Uruguay             96.8   103.5   100.0   137.1   121.6   142.9
Venezuela           89.4    98.5   100.0    96.4    80.1    81.4    91.4    87.5
Yemen               72.5    87.9   100.0   190.2   250.1   291.4   340.2   518.7
Zaire               47.7   101.3   100.0    77.0    60.2    49.0    60.8    70.9
Zambia             101.3   105.7   100.0    88.5    72.6    78.7    78.4   109.3
Zimbabwe                    108.7   100.0   110.1   103.1   109.5   136.3   148.5



112
Table 5. Health&vlated indicators
Pt~~~~~~~~O P"t o
Asp per-siteps
°x" pmm                             @ r oerquvemrm
Low-nWe om eamneml                  0367 w       5,37S w              5,037 w     3,20 w             2,336 '    102 uw
ChinuandhdaW                      4210 w        2,06 w              4,443 w     2.917 v            2.415 w     10 w
OeJ w  _wmp                      26,631w       1t7,234              7,961w       7,546w            2,275w      102w
SWiih_ Affla                      33,649 w     42,670 w             5,714 w     3,022 w            2,064 u      90 w
1Ehopa                             70190        88,120              5,970        5.000              2,1:2        93
2  a d                                          9010                             19.40               1,864       81
3 Mli                             :^ 0i0        25!38C               3,200       2,320               1.597       68
4 Zo*                              39,050                                                           2,136        96
5 BrkinaFo                         74110        49280               4,170        3,070              2,014        85
6 Nl                               46.180       30,060                           33,430             2047         93
7 Burma                            11,660       48660               11,410       4.890              2 534       117
8 Maw                              46,900       52,960              49,240       2,980              2,200        95
9 Nigr                             71,440                           6.210                           2,271        97
10 Tanzaa                           21,840                           2,100                           2,271       96
11 Burun                            54,930                           7,310                           2.378       102
12 Uganda                           11,060       22,180              3,130        2,000              2.351       101
13 bgo                              24,960       16,550              4990         1.640              2,156       94
14 C4ntralAfrcanRep.                44490        23,090              3,000        2,120              2,048       91
15S India                           4,860        2,610               6,500        4,670              2,115       96
16 Madagasa                         9.900        9,940               3,820        1.090              2,543       112
17 Somjis                           35,060       15,630              3,630        2.550              2.063       89
18 Bonm                             28,790       16,980              2,540        1,660              1,907       83
19 Rwand1                           74,170       29.150              7.450        10.260             2.276       98
20 Chwn                             3,780         1,730              3,040        1,670              2,620       111
21 Ke                               13.450       7,540                1.860         990              1,919        83
22 SeenaLeone                       17,690       17,670              4,700        2,110              2.082       91
23 Hag                              12,580                           12.870                          1.887       83
24 Guines                           54,610                           4,750                           1,939       84
25 Grnana                           12,040       6,760               3,710         630               1,516       66
26 SnLav*a                          5,750        7.620               3.210        1,260              2,348      106
2? Sudn                            2i,500        9,070               3,360        1,440              2,122       90
28 Palean                           3.160        3.320               9,900        5.870              2.205       95
29 Senl                             21,130       13,060              2.640       1t990               2.436      102
30 A rt&n                           15,770                           24,450
31 &hAan                                         18,160                           7960
32 Chad                             73.040                           13.620                          1.620       68
33 Kar w Dom                       22.500                            3,670
34 Lao                              26,510                           5,320                           1,992       90
35  Jozan6que                       21,560       33,340              5,370        5,610              1,668       71
36 l'weflNn                                      4,310                            1.040              2,017       93
''rie4nesma _onee~.                s11,192w      4,764w              3,526v       1,474wv           2,681 w     11ow
O--pel                           20,006 w      6,587 w             5,464 w      1,684 w            2,512 w     109 w
Olbnplw_s.                        3.043w       2,902w              1,876w       1273uw             2.692w      11lw
Sub4d~aumtAf,Iea      35.741 w      8,445 w             4.876 w     2,206 w            2,06 k0      89 w
Lw    MO,ldls.l_eeme               18.215 w      8,235 w             4,73 w       1,783 w            2,448 w    106 u,
37 Mauritaia                        36.580                                                           2.252       97
38 Lbeia                            12,450       8.550               2,30i        2.940              2.367      102
39 Zamb                             11,390       7.110               5,820        1.660              1,929       84
40 Lesc@o                          22.930                            4700                            2,376      104
41 Bolia                            3,310        1,950               3,990                           1,954       82
42 indonea                          31,820       11,320              9,500                           2.380      110
43  enw Arab Rep                    58,240       7.070                            3,440              2.226       92
44 Yrbten, POR                      12,870       7.120               1,850         820               2.254       94
45 Cosled'lvo                       20.690                           1,850                           2,576      112
46 Phdppm                           1,310        2.150               1,130        2,590              2.357      104
47 Moro                            12,120       17,230              2.290         900               2,544      105
48 Hondutr                          5,450                            1,540                           2.135       94
49 ElSalvdor                        4.630        3.220               1,300                           2.060       90
50 PapuaNowGunem                    12,520       16,070               620          960               2,109       79
5t EgyvM Arab  p                    2.260          800               2.030         790               3.163      126
52 Niger.                           44,990       10,540              5,780        2,420              2,022       86
53 Zimbebwe                         5,190        6,650                 990        1000               1,956       82
54 Caeroon                         29.720                            1,970                           2.031       88
56 Nicarg                           2,490        2.290               1.390         590               2.26S      101
56 Thaland                          7,230        6,770               5,020        2.140              2.330      105
57 Bowani                           22,090       9.250               16.2t0        700               2.152       93
58 DOmnanRep                        1,720        1,390               1.C40        1,240              2.368      105
59 Peru                             t620                              880                            1,997       85
60 Maurn                            3.850        1730                1.990         570               2.675      118
61 Cono,Peope'sRep                  14,210                             950                           2,425      109
62 Ecador                           3.020                            2.320                           2.043       89
63 Jenari                           1.930                              340                           2.493      1M1
64 Guwnale                          3,830                            8,250        0,360              2,071       96
as TOPY   5 .                       2,860        1,50)               2.290        1.240              3'1 00      123



113
Table 5 (continued)
o@f cwm
PtcOn      NopP0atbon cet:                                            -
1111168       1.61116                                                             3
66 Coa Ara                            2,04)                                630                             2,556       114
67 Para y                              1 840        1.310                1,550          650                2,811       122
68 Turni                              8,040         3,620                1,150          950                2,889       121
69 Colombia                           2530                                 890                             2,546       110
70 Jordan                             4,670         1,170                1810O         1.170              2.882       117
71 SyrunAabRep.                       4050          2.160                11,760        1,370              3,156       127
72 Anod                               12,000                             3.820                            2,041        87
73 CLbi-                              1,150          600                  620                             2,914       126
74 Korm. Dmn Rep                                                                                          2,968       127
75 Lebanon                            1,240                              2.500
76 AfOg                                 710          440                  310           240               2,841       117
UpRdle4neome                          2,473w        1,374w               1,914w         975w              2,830w      l1ew
77 Che                                2.060          950                  600                             2,574       105
78 Brha                               2,180         1,200                1,550        1,140               2,533       106
79 po                                 1,170          450                 1,160                            3.046       124
80 Maaysi                             6,220         3.920                1,320         1,390              2.477       1II
81 Panuna                             2,170         1,010                  680                            2,275        98
82 Urugu"y                              870          510                   590                            2.647        99
83 Mexoo                             2,060         1,140                  950                            2.934       126
64 Koreca Pp. d                       2,740         1,440                2.990          350               2765       le
85 Yugocalan                          1,190          670                  850           300               3,575       141
86 Argenn                               640                               610                             3,159       119
87 South Afria                        2,060                               500                             2,807       118
88 Agegw                              8.400                             1'.770                            2,750       115
89 9Mnezuula                          1,270          930                  560                             2,451        99
90 Gre                                  710          390                  600           370               3,601       144
0l lsral                                410          400                  300           130               3,110       121
92 Hon Kon                            2.400         1,260                1,220          800               2,787       122
93 Tiridad= dToeo                     3,820         1,390                 560           390               3,120       129
94 Sngapore                            ,910         1,100                 600           340               2,636       115
95 khn, AsicRep.                      3.770         2,630                4,170        1,t160              28S5        1f8
96 ilaq                               4.970         1.790                2,910        2,250               2.840       118
sA.mpoflar                          8,836 w       1,406 w             4,626 w         573 w             3,345 w
97 Oman                               23.790        1.680                6.380          440
96 Lbya                               3.970          660                  850           360               3.651       155
99 Saud Arabia                        9.400         1.800                6,060          730               3.244       134
100 Kuwait                               830          600                  270           180               3,369
101 Unrad Arab Emirates                               720                                390               3.407
soonomie                              867 w        564 w                425 w         177 w             3,352 w     130 w
102 Spain                                810          360                 1,220         280                3.237       132
103 fejand                               960          780                  170           120               3.579       143
104 fliy                               1.850          750                  790          250                3,521       140
106 NewZalWa                             820          590                  980           110               3,493       132
106 UnOSdKJngOO                          860          680                  200           120               3.226       128
107 Begin                                700          380                  590           130               3.705       140
08 AuW'a                                 720          580                  350           170               3419        132
109 NeVieands                            860          480                  270                             3477        129
110 Franoe                               890          460                                110               3514        139
111 Jap                                  970          740                  t10          210                2,653       113
112 find                               1,290          460                  180           100               3,077       114
113 GC nw  Fwd. PRp                     880           420                  500          170                3,475       130
114  Derwk                               740          420                  190           140               3,525       131
115 Australia                            120          500                  11o          100                3,068       115
116 Swiden                               910          410                  310          100                3.115       116
117 Cana                                 770          510                  190          120                3,459       130
118 Norwy                                800          460                  340           70                3,068       115
119 UndedSW.                             640          500                  310          180                3,623       137
120 Swiuld                               750          390                  270          130                3,472       129
_ikm onsule                           564 w        329 w                300 w         ¶99 w            3,409 w      132 w
121 Hungry                               630          320                  240          140                3.563       135
122 POdid                                800          550                  410                             3.336       127
123 Atww                               2,100                               550                             2.907       121
124 Stmoo                               800           400                  410          190                3,675       147
125 Cle,oPlovaA                          540          350                  200          130                3.555       54
126 Gon;,n Dom RAp                       870          490                                                  3.718       142
127 Roinnm                               740          650                  '00          280                3341        126
128 USSR                                 480          260                  280                             3381        132



114
Table 6. lepwLatim. per belt.l bed
Z *_ _I ,_  I- I-a                                                 K -_  i IaIw  1.i-a
ea                   .. s                   i"I     p    ,    ..
a                                                       II    ~I.t  .1. '  '
Ja
'- 1.1    _                                   _                                      I 
~~~~~~~a..s, ,, .im "!|||s
ANL.
. ~~~~~~~~~~~~~~~~~~~~~~~~mni am '|  1  m |.tl S"i
ii _-. .   . . . ............. .. . . . .  . .  . .
ma                                                           if    aa
'   ''E'' _ t l~~~~~i                                           a                               iag .
-  ___                                                                                  tU~~~~~~~~~weA-   =
1T11.                    IG ?    44
IJ   u tt    a                    uad....II- A o               1     1     ii
;,  iE X~~~ae                       am~ 
a      am~~~~~jfll                        ir?~~~~~~~~~~mam ftAa                           a,
=w~~~~~~~~~~~~~~~~~~mi .jU ea..r  ta ma a l                                     m^.^
LI5!_                                                    i                       'all'|P,,  
FAM                    412111   ; 1*  I2  J "      5                              m     am    Itl2
S       tt     &    tSS                       P ~~~~~~~~~~~~~~avcT's'.e"t  14   too   10    I
1s5   eaX ,*,, !La 1a  CISa
a              *.r i  Sl uO  -4                                        m     Mi4 lo,
soE;                 t.          am. :r  su                                                  -
I     Ir   "I" ".                                           ,tl, ,a 
Itt a  m     m ImI                     -   im A,                i      . 8    ma
'I 3"       1:a    * *                                   aa           ia wa
JIA-                                                   YVV At U,  fSi*ABm tS    isa as   ama
miss   Sal   is~~~~~~~~~ImaSAti v IT..ma                             ,    .
mm  &.sit  %.M  us~~~~~~~mm -va5m                                      m
BASsi     i. to   aI41     a



Table 7. L&fe exeny and related indicators
Ubk asruom   PI,y el
ING      1904              INS       1964              1965     14                 NS         1014
L-pplneeme   _mlss               49       6S,    61.w                                   12IN'      72a              tO.         Ii
CHimj jhjI                     51 w     63 w               53w      64w               115w       se               16'w        6 P
Oo rI        b_on.em           44 w     50w                45w      52w               147 w     il4r                 .w      Isa
Sub4am   *AMC1 u4     47u                                 43w       50w               155u    129u'               36.        2L6.
IEmiopoa                        42       43                43       46                 168       172               37         39
2 84 5                                   50                 44       51                153       124               24        1i
3  ali                          37       44                 39       48                207       176               47         44
4Zawe                           42       49                45        53                142       103               30         20
5S BurkmFaso                    40       44                42        45                195       146               52         30
6Napl                           40       47                39        46                184       135               30         20
7Burma                          46       57                49        60                125        67               21          7
amalew"                         38       44                40        46                201       t58               56         30
9Ngr                            35       42                 38       45                181       142               46         29
tO lanzam       _                41       50                44        53                138       t1t               29         22
I iBurune                        42       46                45       49                 143       120        3i                24
12Uganda                         43       49                47        53                122       110               26         21
3 Togo                           40       50                43       53                 156        96               36         12
14 CantralAtrcaFlep              40       47                41       S0                 169       138               47        27
1S Inda                          46       56                44       55                 151        90               23         11
16 madgucaw                      41       51                44       54                           110                         22
1 7sm Skfna36                             44                40       47                 166       153               37        33
Is Bww                           41       47                43       51                 1se       116               52         19
1 9Rwaida                        47       46                51       49                 141       128               35        26
20 Chrin_                        55       68                59        70                 90        36               11          2
2i Kenya                         43       52                46        56                113        92               25         16
22 SwraLeoe                      32       38                33        39                221       176              01          44
23 Hat,                          46       53                47        57                138       124               37         22
24 dGura                         34       38                36       39                 197       176               53         44
25 Ghana                         45       51                49       55                 123        95               25         11
26S  LtAnka                      63       68                64       72                  63        37                6          2
27 Sudan                         39       46                41       50                 161       t13               37         is
28 Pako1n                        46       52                44       50                 150       116               23         16
29 Seongel                       40       45                42       48                 172       138               42        27
30 A wi7antan                    34                         35                          223                         39
31 Wxnn                          34       44                32       43                 184       135               30        20
32 Ctad                          39       43                41       45                 184       139               47        27
33 K(^nchea, Don                 43                         45                          135                         19
34 LaoPfhR   '39                         43                42       46                 196      153                34        24
35 Mozarm6que                    36       45                39       48                 172       125               31        22
36 VW Nam                        47       63                50       67                  89       50                 a         4
Mlgdisbem 1n m   iwtIn           51 w     So w              54wit    63 w               115.      72.w              16,        6.'
Oleapsuists                    47 u     56 w              50 w     60 w               136 to     9 v              22 ,      12 v
' _u,W,.                       ~       i55u  62 w         58 w     67 w                97 w     57w        5      15w    S      
Is*SimmA*Iea                   41 r     49 r              44 w     52 w               16*  w   107 w              33 v      low
Lower wolddWl.n                  47uw    56u                50w      60w                133w      83w               22v       11w
37 Maurtania                     39       45                42       48                 171      133                41        25
38 Lwma                          40       48                44       52                 172       128               32        23
30 Zarnba                        42       50                46       53                 123       85                29        1S
40 LesMho                        47       52                50       56                 143       107               20        14
41 Soka                         42       51                46       54                 161      118                37        20
42 lndorwea                      43       53                45       56                 138       97                20        12
43 YnenArabAep.                  37       U                 38       46                 200       155               55        35
U  Ymn.w,PDR                     37       46                39       48                 194      146                52        31
45 Coed'lvoore                   43       51                45       54                 176      106                37        15
46 Ptippns                       54       61                57       65                  73       49                11         4
47 Muoooo                       48       57                51       61                 147       91                32        10
40 Honduras                      48       59                51       63                 131       77                24         7
49 El Salvad                     52       63                56       6e                 120       66                20         5
50 PapuaNewGuine                 44       51                44       54                 143       69                23         7
51 Eyp.Arab Pep                  47       59                50       62                 173       94                21        11
52 Nig"                          4C       48                43       51                 179      110                33        21
53 ZmSrtw"e                      46       55                49       59                 104       77                15         7
54 Cerneoon                      U        53                47       56                 145       92                34        10
55 Nicaaua                       49       58                51       62                t23        70                24         6
56 Thaand                        53       62                58       66                 90        U                 11         3
57 Bolwana                       46       55                49       61                 106       72                21        11
58 DomnwcanFeP                   52       62                56       66                I11        71                14         6
59 Psu                           49       58                52       61                 131       95                24        11
so Maubus                        59       62                63       69                  64       26                 9          1
61 Congo, PopIe'uRp              48       55                51       59                 121       78                19          7
62 Ecuador                       54       63                57       67                 113       67                22          5
63 Jenasc                        63       71                67        76                 51        20                4          1
64 Gualad                        48       58                S0        62                114        66               16          5
65T w10Y                         52       61                55       66                 157       86                35          9



1 16
Table 7 (continued)
Lt "Pt-4 att
mm*                        Ftffi                    (gpd t de$ s)                 (agedo "-(
19e      IM                  9e       #  19S5 1964                       ,1964       4690NA
66OW  ICkXRa                                                                                      67i 6 6i 9 -   -
67 P rFguUy 56                             64                 60       68                  74      44                  7          2
69 InIasI                         so       60                 51       64                 147       79                30          8
69 C4lormbis                      53       63                 59       67                  99       48                 8          3
70 Jordon                         49       62                 51       66                 117      50                 19          3
71 SyrunArabRep                   51       62                 54       65                 116      55                 19          4
72  4m                            34       42                 37       44                 193      144                52         3fl
73 Qft                            65       73                 69       77                  38       16                 4         O
74 Korn  Dhrm. Rep.               55       65                 58       72                  64      28                  6          2
75 Ldoron                         60                         64                            57                          4
7G mongois                        55       61                58        65                  89      50                             4
Uppsv wmidie-Ifcome               56 w     @3                 80w      68u                 91      56 u               13 ou
77 Chi                            56       67                62        73                 110      22                 14          1
78  waad                          55       62                 59       67                 104      68                 14          6
79 PoeIuga                        61       71                 68       77                  69       19                 6          1
e 0mays                           56       66                 59       71                  57       28                 5          2
el Pgtnw                          62       70                 64       73                  59      25                  4          1
82 UrvuAy                         65       71                 72       75                  47      29                  3          1
83Msuto                           58       64                 61       69                  84      51                  9          3
84 Korea. Rep o                   55       65                 58       72                  64      28                  6          2
S5 Yugopt1rA                      64       66                 68       73                  72      28                  7          2
a6s Argewu                        63       67                 69       74                  59      4A                  4          1
87 SoiAttftAfca                   45       52                 48       56                 124      79                 22          7
88 A4pra                          49       59                 51       62                 155      82                 34          5
89 Venezuea                       60       66                 64       73                  67      38                  6          2
PO Gnee                           69       '2                 72       78                  37      16                  2          1
91 wao                            70       73                 73       77                 29       14                  2
92 HoNn Korg                      64       73                 71       79                  28       10                 2         ()
93  Vwdoc  andbago                63       67                67        72                 43       22                  3          1
S4 Sngpowe                        63       70                 68       75                  28      10                  1         (
95 kw.n        bPAP               52       61                 52       61                 150      112                32         17
95 kaq                            50       58                 53       62                121       74                 21          7
dolo1Sfs                        47 w     61 uw              50 w     64 uw             141 uw   65 uw               34 w        6S
97  naw                           40       52                42        55                175       11o                43         17
98 Ltys                           48       57                 51       61                 140      91                 29         10
99 SaudArabsa                     47       60                49        64                148       61                 38          4
100 KuwsI                         61        69                64        74                 43       22                  5          1
101 Un4sdArabEmwales              57        70                61        74                104       36                 14          1
-s-no mle                      66w       73 uw             74 u      79 u               24 i      9u 1u Itw U
102 Spui                          68        74                73       80                  38       10                  3
103 lreimd                        69        71                73        76                 27       10                  1         U
104 lWy                           68        74                73        79                 38       12                  3
105 NowZoaand                     68        71                74        77                 20       *.2                 1         U
106UnrtedKingdomn                 68        72                74        78                 20       10                  1
107 Beturn                        68        72                74        78                 24       11                  I
108 Auwra                         66        70                73        77                 30       "                   2         H
109 Neflajcs                      71        73                76       80                  14        8                  1 I
110 France                        68        74                75       80                  22        9                  1
111 jawn                          68        75                73       80                  21        6                  1
112 Frwmd                         66        72                73        79                 17        6                  1
113 GormwaNFed. Rep.              67        72                73       78                  26       10                  1         ()
114 rwiwti                        71        72                75       78                  19        8                  1         ()
I11S  AlAam                          68       73                 74       79                 19        9                  1         U
116 Sweden                        72        74                76       80                  13                           1         ()
117 C4s*de                        69        72                75       80                  24        9                  1         (
11ie Noway                        71        74                76       80                  17        8                  1         ()
119 UnidSfUes                     67        72                74       80                  25       11                  1
120 Swriwnd                       69        73                75       80                  18        8                  1 I
rCf"#e w  as w             73 w      71 w               31 uw   19 w                 2 u       ()w
121 Hunrgwy                       67       67                 72        74                 42       19                  3          1
122 Poind                         66       67                 72        76                 46       19                  3          1
123 Amwu                         64        67                67        73                 87       43                 10          3
124 StJoer                        66        68                72        74                 35       '7                  2          1
12X C6icutmva*b                   64       66                 73        74                 23       15                  1          1
126 Germ 1Dsm R.                  67        68                73        75                 27       11                  I 
127  Rai                          66        69                70        74                 53       25                  1          1
12S LeSR                          65        65                74        74                 30                           2



117
Tle . So                     nzon
tkw ppm_                                                             _     _     _    _     _
-           __                                                                              U__
iw  Iii    tW                       s-                                               lo   I             Z           it"  1
LI____S            U           17w  23Nw             4.-    46w                 Go Co"gRu-                      36   45               36         33
Cl__  t N3w                                     6? P~A=                         36   d1              32    34
Oa 0mmwva      s1 Sw                  Mw           53          1               Gu                             40       54           4 3        3111
Al.    21            6.2.       61               G 69 CcipO                     54       67           43         29
D Ercgz                      8      15            74        61               7O ora                          47       72           4 7        4 r
2  1    _                      6       is           66         r                71 SyrAhriAab4O                40       49           4a         43
3 U                           13      19            54         45              72 Ano                          13       24           59         60
4ZaF Z                         9      39            59         7 I              73 Cb                          58       ?            2I ¶6
5                                                           8knFoo  6  65   4 8  74 Ko8". 9o    45                      63           49         4'
6 NOW                          4        7           4 3        8 4              75 LOWW                        49                    6 2
&Otama                        21      29            40        40               ?SMongow                        42       55           46    *         d
maw                          5      '2            82         73 43                                                   6             3w 4t 
9Nigw                           7      ¶4            ¼0        I  I__________ip39v                                                              4
10 Tarzrm                       6       ¶4           8 1       8 6              t7 CI'¶                         72      83            2 6        2 4
1 1evuru                     2       2            1 4        3 3             78 ar"                          24      3,2           42         25
l2Ugan~~~~~~~~~~~  6  7          83        0¶ ~~~~~~~~~~~~0   my                             6      3 1           3 3        3 6
13Tgo                          I 1     23            6 4       6                ao    w.,a                              so   -       '           3 3
I 4CentalAllman Rep            2?7     45            4 4       4 6              8   aw~                          4      513
IS Inodi                        9      25            40        4 2               2 Utuguay                      aI      es           C8         08
i6s.-                           2      2'            53         55              83 Mexco                        55      89            4a         40
17So                           20      33            64         5        4 8     4Kroat Fo                      32      64           6 5         4 a
is8en                           I       S5           4 5        50              85 IYu9oC a                     31      46            3 t        2 7
19 R*4nda                       3       5            60        6 6              806 Aflv$                       76      84            2 1        2 1
20 Cthn                        i8      22            30         2               8  SotAica                      47      SG            26         37
21 Kea                         9       '8           73         79              88 Alger                        32      47            25         54
22 So'tLo' L5                         24            50         35              89 dnnuga                       72      6s            4          4*3
23 H¶l                          8      27            38         4 2             90 Greec                        48      65            25         25
24 Guina                       12      27            50         62              91's,al                         81      90            38         2?
25 C"w                         26      39   _        4 5       5 3 _ _          92 Hong Kong                    89      93            2 1        2 6
26 9S, Lian                    20      2 1           3 4        3 5             93 Tn-aW 'tbO ago               22      22            0 6        t 2
27 Sudadn                      13      21            6 3        5 5             94 S      g                     00     t00            I a ¶       3
2    i Pak4w                   2        94 *           3        4 4             9Sran  eC   O                   37      54            54    *         0
29 SiSgI                       27      35            * 2        3 8             96 1aQ                          51      70           5 7        5 5
30 AgE                          9                    i6                         .N                                         _                        .
31 &%                           3       4           -2'         4 6                am      g                     6      lw62                      7
32 Chad                         9      21            6 9        65                     _                    _  X I    70             92w        7 7 r
33  &tuvuche DOrr              11                     34                        97 *PW                           4      27           '06       1¶7
34 LaOPOP                       8       5            4 6        5 7             g9L Oy                          29      63            8 9        7 9
35  t40nA0 ue                   5       '6           82        102              99 SauAraba                     39      72           84          73
316 vjftb,                      6      20            5 5       2 3             '00 Ku*wa                       7t5      93           9 3        7 7
_mu s                        36w    49.            45w       41w             '' Uonit Arab E6fam             56       79          t67        '04
t  lt               X~~~~~2 w    42 v     4 4 Ay    4 4 w            kh  tlUl _u
ON               402 w    S  wv         4 5 w     3  4w             t  m      |m6                 72 w    77 itw I 0 t             1 2 w
- ANN            16 u,   26d 56        6 4 w      5 9 w          02 Swn                          61       t7           2 5        2 0
L.     11   t _9MIM 2n                 37            5 I w       2                                              49      57                       22
37 Mairahm                      7      26           '60         5 '            '04 la"bv                       62       7              4        ' 0
38 L,tea                       22      39            5 3       6t0 05 Ne* Zeatanc1                             9       83            19        0 9
39 21                          24      48            76         64             7)6 z :eC K3                             92           0'         02
40 Lot92 O                      2       '3           78        20' 1           *07  felm                       Be       89           09            2
41 i'bva                       40      43            89         36   _          3 A6 sit a                      5'      56           38 a36
42 15O4tiI                      6      25            4 1        4 5            '09 sNeme'ancs                   '9      76           0 a         I 0
43 Yige,AriDRep                 5       9            9          88 a             oFaNce                        67       81           20          '2
44 vu     e POP                30      37            3 4        3 5            '                               6'       76           2 *          4
d5SColed Ivo.t*                23      46            8 2        8 3             2r'n44                                  628¶
46 Ph*dpwm                     32      39              0         3 7           t   F3Genma   e e                79      86           2 8          9
47tdof                         32      43            40         4 2              4 OVnartk                      77      86            1 3       06
468 t4i m                      26      39            5 4        5 7            ii5 Au 4rwt                     83       86           2 6        ' 5
49 ElS#Iadf                    39      43            36         3 6            l6 Sivew                         77      86           ' 6        0 7
50 PMa g Nw GuMj                S       ¶ 4         ¶ 43       6 ¶
5 1Eg, ArabRlp                 40       23           30       30               I? Canada                        73      75           ¶9         12
52N~~~~~wma  '5    30            4'         5?             ''S~~~~~~~~~~~~~~~18Noiay        3 7     7 7          3 4        27?
52  gwi                1  3'       4 27 6               62             l'9 urld SIm                     '2      '4           ' 6        ¶3
53 Zy                          16 4t 6;       3      6 a                       120 Swaw                         37 77          S      i   o28
54 C&"w v                      ¶6      4 1           ' 3        8 2                                            53       6'9                     a
55 NcwqAue                     43      C6            4 4        5 2
'Taild3  i           48         3'                    4         _              52w    64-            2   I      II
57    w                         4      20           ¶90        ' 3             121 Huflaty                     43       55           2 2        ¶ 4
580Donscamonsc                 35      55            56         47             122Poland                       S0       60            5           8
59Peru                         52      6e 87                    36             ¶23Alaia                        32       39           35         32
60 MaoqpA                      37      56            46         344 *24  dWh                                   46      6U             32        2'
6' C o Peos R                   35      56           4 4         4             '25 Czectwosotia                5'       66     _        8       ' 7
62 Ecuador                     37      47            3                         ' ;26 GrmanOm 4ect                       76           0 2        0?
63 3arr.ca                     38      53            4 3        2              ' 27 %fr,W      AV              3'       52           4 2        3 0
64 Gu32W'                      34      44             328       4'             *2wSSA         t                52       66           59        -30
66?u'lw4v                       32     46            4 9        4 _.



118
Technical notes
The statistics and measures presented in the appendix tables have been
chosen to give a picture of the health sector in developing countries.  Data
for developed countries have been added for comparative purposes.
Considerable effort has been made to sta)dardize the data; nevertheless,
statistical methods, coverage, practices, and definitions differ widely.  In
addition, the statistical systems in many developing economies are still
weak, and th:s affects the availability and reliability of the data.
Readers are urged to take these limitations into account in interpreting the
indicators, particularly when making comparisons across countries.
All growth r-ates shown are in constant prices and, unless otherwise
noted, have been computed by using the least-squares method. The least-
squares growth re&e, r, is estimated by fittir.g a least-squares linear trend
line to the logarithmic annual values of the variable in the relevant
period. More specifically, the regression equation takes the form cf log
Lt -: a 4 bt + et , where this is equivalent to the logarithmic transformation
of the compound growth rate equation, Xt z Xo (1 + r)t. In these equations,
Xt is the variable, t is time, and a = log XO and b = log (1 + :) are the
parameters to be estimated; et is the error term.  If b* is tihe least-
squares estimate of b, then the annual average growth rate, r, is obtained
as [antilog (b*)]-l.
Table 1. basic indicators
The estimates of population for mid-1984 are based on data from the
U.N. Population Division or World Bank sources. In many cases the data take
into account the results of recent population censuses. Note that refugees
not permanently settled in the country of asylum are generally considered to
be part of the population of their country of origin. The data on area are
from the FAO Production Yearbook, 1984.
Gross national product (GNP) measures the total domestic and foreign
output ciaimed by residents, and is calculated without making deductions for
depreciation. It comprises gross domestic product (see the note for Table
2) adjusted by net factor income from abroad. That income comprises the
income ;esidents receive from abroad for factor services (labor, investment,
and interest) less similar payments made to nonresidents who contributed to
the domestic economy.
The GNP per capita figures are calculated according to the World Bank
Atlas method. The Bank recognizes that perfect cross-country comparability
of GNP per capita estimates cannot be achieved. Beyond the classic,
strictly intractable "index number problem," two obstacles stand in the way
of adequate comparability. One cotncerns GNP numbers themselves. There are
differences in the national accounting systems and in the coverage and
reliability of underlying statistical information between various countries.
The other relates to the conversion of GNP data, expressed in different
national currencies, to a common numeraire--conventionally the U.S. dollar--
to compare them across countries. The Bank's procedure for converting GNP
to U.S. dollars generally uses a three-year average of the official exchange



120
where,
Yt    current GNP (local currency) for year t
Pt    GNP deflator for year t
et - annual average exchange rate (local currency/U.S. dollars) for
year t
Nt    mid-year population for year, t
PS   U.S. GNP deflator for year t.
Because of problems associated with the availability of data and the
determination of exchange rates, information on GNP per capita is not shown
for most East European nonmarket economies.
Life expectancy at birth indicates the number of years a newborn intant
would live if patterns of mortality prevailing for all people at the time of
its birth were to stay the same throughout its life.  Data are from the U.N.
Population Division, supplemented by World Bank estimates.
The sumary measures for GNP per capita and life expectancy in this
table are weighted by population. Those for average annual retes of
inflation are weighted by the share of country GDP valued in current U.S.
dollars for the entire period in the particular income gi-oup.
Tables 2, 3 and 4. Central government expenditures
The data on central government finance in Tables 2, 3 and 4 are from
the IMF Government Finance Statistics Yearbook, 1986, IMF data files, and
World Bank country documentation. The accourts of each country are reported
using the system of common definitions and classifications found in the IMF
Manual on Government Finance Statistics. Due to differences in coverage of
available data, the individual components of central government expenditure
and current revenue shown in these tables may not be strictly comparable
across all economies. The shares of total expenditure and revenue by
category are calculated from national currencies.
The inadequate statistical coverage of state, provincial, and local
governments has dictated the use of central government data only. This may
seriously understate or distort the statistical portrayal of the allocation
of resources for various purposes, especially in large countries where lower
levels of government have considerable autonomy and are responsible for many
social services.
It must be emphasizeu that the data presented, especially those for
education and health, are not comparable for a number of reasons. In many
economies private health and education services are substantial, in othe-4
public services represent the major component of total expenditure but r sy



119
rate.  For a few countries, however, the prevailing official exchange rate
doea not refect the rate effectively applied to actual foreign exchange
transactions and in these cases an alternative conversion factor is used.
Recognizing that. these shortcomings affect. the comparability of the GNP
per capita estimates, the World Rank has introduced several, improvements in
the estimation procedures. Through its regular review of member countries'
national accounts, the World Bank systematically evaluates the GNP
estimates, focusing on the coverage an(d concepts employed and, where
appropriate, making adjustments to improve comparability. The Bank also
undertakes a systematic review to assess the appropriateness of the exchanige
rates as conversion factors. An alternate conversion factor is used when
the official exchange rate is judged to diverge by an exceptionally large
margin from the rate effectively applied to foreign transactions. This
applies to only a small number of countries.
In an effort to achieve greater comparability, the U.N. International
Comparison Project (ICP) has developed measures of GOP' using purchasing-
power parities rather than exchatnge rates. So far the project covers 60
countries f.r the year 1980, but some inherent methodological issues remain
unresolved.
The estimates of 1984 GNP and 1984 per capita GNP are calculated on the
basis of the 1982-84 base period. With this method, the first step is to
calculate the conversion factor. This is done by taking the simple
arithmetic average of the actual exhcnage rate for 1984 and of adjusted
exchange rates for 1982 and 1983. To obtain the deflated exchargc rate for
1982, the actual exchange rate for 1982 is multiplied by the r,..ative rate
of inflation for the country and for the United States between 1982 and
1984. For 1983, the actual exchange rate for 1983 is multiplied by the
relative rate of inflation for the country and the United States between
1983 and 1984.
This average of the actual and the deflat.ed exchange rate is intended
to smooth the impact of fluctuations in prices and exchanige rates. The
second step is to convert the GNP at current purchaser values and in
national currencies of the year 1984 by means of the conversion factor as
derived above. Then the resulting GNP in U.S. dollars is divided by the
midyear population to derive the 1984 per capita GNP.  The preliminary
estimates of GNP per capita for 1984 are shown in this table.
The following formulas describe the procedures for computing the
conversion factor for year t:
(el- 2.,   (e ,  2   PI   )  +   e* IP, )  +
and for calculating per capita GNP in U.S. dollars for year t:
(v)re,Y, I N, - e 2e
where,



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be financed by lower levels of government. Great caution should therefore
be exercised in using the data for cross-country comparisons.
Central government expenditure comprises the expenditure by all
government offices, departments, establishments, and other bodies that are
agencies or instruments of the central authority of a country. It includes
both current and canital (development) expenditures.
Defense comprises all expenditures, whether by de.ense or other
departments, on the maintenance of miiitary forces; including the purchase
of military supplies and equipment, construction, recruiting, and training.
Also in this category is expenditure on strengthening public services to
meet wartime emergencies, on training civil defense personnel, on supporting
research and development, and on funding administration of military aid
program.
Education comprises expenfliture on the provision, management,
inspection, and support of pre-primary, primary, and secondary schools; of
universities and colleges; and of vocational, technical, and other training
institutions by central governments. Also included is expenditure on the
general administration and regulation of the education system; on research
into its objectives, organization, administration, and methods; and on such
subsidiary services as transport, school meals, and medical and dental
services in schools.
Health covers public expenditures on hospitals. medical and dental
centers, and clinics with a major medical component; on national health and
medical insurance schemes and on family planning and preventive care. Also
included is expenditure co the general administrative and regulation of
relevant government departments, hospitals and clinics, health and
sanitation, and national health and medical insurance schemes; and on
research and development.
Housing and community amenities and social security and welfare cover
(1) public expenditure on housing, such as income-related schemes, on
provision and support of housing and slum clearance activities, on community
development, and on sanitary services; and (2) public expenditure on
compensation to the sick wid temporarily disabled for loss of income; on
payments to the elderly, the permanently disabled, and the unemployed; and
on family, maternity, and chil.d allowances. The second category also
includes the cost of welfare ser-'ices such as care of the aged, the
disabled, and children, as well as the cost of general administration,
regulation, and research associated with social security and welfare
services.
Economic services comprise public expenditure associated with the
regulation, support, and more efficient operation of business, economic
development, redress of regional 1.mbalances, and creation of employment
opportunities. Research, trade promotion, geological surveys, and
inspection and regulation ot particula- industry groups are among the
activities included. The flive major categories of economic services are



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fuel and energy, agriculture, industry, transportation and co_unication,
and other economic affairs and services.
Other covers expenditure on the general administration of government
not included elsewhere; for a few economies it also includes amounts that
could not be allocated to other components.
The sumary measures for the components of central government
expenditures are computed from group totals for expenditure components and
central government expenditures in current dollars. Those for total
expenditure as a percentage of GNP are computed from group totals for the
above total expenditures in current. dollars, and GNP in current dollars,
respectively.
Table 5. Hea.th-related indicators
The estimates of population per physician and nursing person are
derived from World Health Organization (WHO) data.   They also take into
account revised estimates of population. Nursing persons include graduate,
practical, assistant, and auxiliary nurses; the inclusion of auxiliary
nurses allows for a better estimat.ion of the availability of nursing care.
Because definitions of nursing personnel vary----and because the data shown
are for a variety of years, generally not more than two years distant from
those specified--the data for these two indicators are not strictly
comparable across the countries.
The daily calorie supply per capita is calculated by dividing the
calorie equivalent of the food supplies in an economy by the population.
Food supplies comprise dorestic production, imports less exports, and
changes in stocks; they exclude animal feeds, seeds for use in agriculture,
and food lost, in processing and distribution. The daily calorie requirenent
per capita refers to the calories needed to sustain a person at normal
levels of activity and health, taking into account age and sex
distributions, average body weights, and environment.al temperatures.
Because no later figures are available, 1977 calorie requirement data are
used for these calculations.  Both sets of estimates are from the Food and
Agriculture Organization (FAO).
The sumary measures in this table are country figures weighted by each
country's share in the aggregate population.
Table 6. Number of persons per hospital bed
A review of the number of persons per hospital bed is given in this
table.  For the period 1950-1970, data for the closest available year have
been used, whenever information was not available for the exact year.
A hospital bed is defined by WHO as a bed regularly maintained and
staffed for the accomodation and full time care of a succession of
inpatients and is situated in a ward or a part of a hospital where



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continuous medical care for is, patients is provided.  Cribs and bassinets
used for healthy newborn infunts who do not require special care are not
included.
The source for the dat.a is the World Health Statistical Annual, 1983,
published by the World Health Organization.
Table 7. Life expectancy and related indicators
Life expectancy at birth is defined in the note for Table 1.
The infant mortality rate is the number of infants who die before
reaching one year of age, per thousand live births in a given year. The
data are from a variety of IJ.N. sources---"Infant Mortality: World Estimates
and Projections, 1950-2025" in Population Bulletin of the United Nations
(1983) and recent issues of Demographic Yearbook and Population and Vital
Statistics Report--and from the World Bank.
The child death rate is the number of deaths of children aged 1-4 per
thousand children in the same age group in a given year. Estimates are
based on the data on infant mortality and on the relationship between the
infant mortality rate and the child death rate implicit in the appropriate
Coale-Demeny Model life tables; see Ansley J. Coale arid Paul Demeny,
Regional Model Life Tables and Stable Populations (Princeton, NJ: Princeton
University Press, 1966).
The sumary measures in this table are country figures weighted by each
country'3 share in the aggregate population.
Table 8. Urbanization
The data on urban population as a percentage of total population are
from U.N. Estimates and Projects of Urban, Rural and City Populations 1950--
2025: The 1982 Assessment, 1985, supplemented by data from various issues
of the U.N. Demographic Yearbook, and from the World Bank.
The growth rates of urban population are calculated from the World
Bank's population estimates; the estimates of urban population share are
calculated from the sources cited above.  Data on urban agglomeration are
from the U.N. Patterns of Urban and Rural Population Growth, 1980.
Because the estimates in this table are based oni differenlt national
definitions of what is "urbane," cross--country comparisons should be
interpreted with caution.



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The su=ary measures for urban population as a percentage of total
population are calculated from country percentages weighted by each
country's share in the aggregate population; the other su ary measures in
this table are weighted in the same fashion, using urban population.
For reasons explained in the notes to the previous tables, the data
presented are not comparable across the countries.