Innovations in financing

New market approaches are continually sought to ensure that the subsidy is received by those who need it. This section examines the use of: vouchers, user fees, cross-subsidy and output-based aid.

Vouchers

One approach is to target subsidies directly to the consumer rather than via product. Targeting the consumer allows resources to be spent on precisely those who most need subsidy, and does not adversely affect commercial entrants to the market due to artificial and unfair competition. Vouchers are one example of how such direct targeting can be achieved. The World Bank has conducted an extensive study of vouchers in health. See A guide to competitive vouchers in health.

For malaria prevention, vouchers for insecticide treated nets put the subsidy directly in the hands of the consumer (see PSI's programmes in Kenya and Tanzania) or go to the community via the distributor (see the Malaria Consortium's programme in Mozambique). Voucher programmes are relatively new and not extensively studied. However, some experts have argued that a voucher system has the potential to reinforce and strengthen a commercial sector delivery system. In this way, it could contribute to sustainability. See Targeting services towards the poor.

User fees

User fees in the public system are considered to be a market approach focused on efficiency and financial sustainability benefits, rather than on direct commercial involvement. User fees raise concerns about equity. Means testing (user fee exemptions) in public or private clinics, whereby individuals may be assessed for eligibility for free or subsidised government services, has not proven effective as the poor are often denied exemptions from user fees or other benefits. Providers may be conflicted by the need to grant exemptions while at the same time generate revenues for the clinic. Comprehensive coverage of this topic can be found on the key issues guide on user fees for health.

A variant on means testing being tried in Cambodia involves setting up an Equity Fund to pay for services of those eligible for free care. The idea is that the community determines eligibility for free care, rather than the providers. See Access to health care for all? User fees plus a health equity fund in Sotnikum, Cambodia.

Cross-subsidy

Cross-subsidisation is another way that programmes have lowered prices for poor people in a financially sustainable way. Cross subsidy may be within a product category (e.g. high- and low-priced condoms), across product categories (subsidising contraceptives with revenues from pregnancy test kits) or across countries within an implementer's overall portfolio of programmes or a MDA partner's overall activities (e.g. pharmaceutical companies using revenues to cross-subsidise less profitable activities). Aravind Eye Institute, where one-third of patients pay for the free eye care of the remaining two-thirds of the patients, provides an excellent example of cross-subsidy, albeit outside the reproductive health sector.

By creating a “platform” from which several different health products can be marketed, some social marketing organisations have achieved a somewhat different means of cross-subsidy. By sharing staff, office space, distribution and other cost-elements over several products, social marketers have lowered the cost of marketing each product. See the section on Country case studies in this guide.

Output-based aid

Output-based aid, whereby donor funds are provided on a “per service provided” basis, is being piloted with KfW support by Marie Stopes International in Uganda. The project aims to improve access to STI (sexually transmitted infection) diagnosis and treatment by providing subsidised vouchers to lower income individuals to receive STI services from accredited and trained private sector providers. From a donor perspective, output-based aid seeks to increase efficient use of donor resources and ensure measurable results.