Allocating public resources for health: developing pro-poor approaches

Public funds are often a key source of financing for services used by the poor therefore the way in which a country finances its health care can have a major impact on the access of the poor. How then can financing policies be made more pro poor? This issues paper, produced for the Department for International Development (DFID) by the DFID Health systems Resource Centre (HSRC), addresses this question focusing on the allocation of public resources and the extent to which different approaches enable poor people to access essential services.

Drawing on experiences and lessons from a number of countries in which DFID has been working the paper identifies and discusses current approaches to resource allocation, key elements of a needs-based approach, and practical problems and issues in implementing a needs-based formula. Three short case studies on Cambodia, South Africa and Uganda are included (Annexes 1 to 3). As are two annexes on the potential for benchmarking and on allocation to hospitals (Annexes 4 and 5).

A number of conclusions are made:

• In developing new approaches to the allocation of resources a number of preconditions should be met: supporting data should be available, there should be supporting changes and improvements in overall planning procedures, there must be capacity to regulate financial flows and there must be a reasonable likelihood that resources are put to their intended use.
• The resource allocation process must be developed around sectoral goals with clear targets
• Effective implementation requires that the definition of equity at a macro level is consistent with any existing pro-poor health policy, the definition can be translated from a national to a provincial or district level, that data exists at the lower level for the formulae to be reliably calculated, abd that there is a political willingness to deliver at all levels.
• Any approach to the reallocation of resources should be fully reflected in any medium-term expenditure framework. It has to be recognised that the reallocation process may take longer than the period covered by existing financial frameworks.
• Formulaic approaches are more objective and more transparent than alternatives, making the process less subject to negative external influence.

A needs-based approach need not be necessarily pro poor. Other factors such as the costs of delivering services and other financing sources also need to be considered.

• Formulae require accurate and timely data which are rarely, if ever, present in low income countries. Simple formulae based on population, age and sex with an adjustment for specific local factors should be sufficient.
• Developing an appropriate resource allocation formula is important but it does not absolve central government from its responsibility for ensuring systems are in place to make sure that the resources are put to good use.
• Design of an allocation formula should take into account other financing approaches, such as user fees, to ensure consistency with overall goals for the health sector.
• Hospital services pose particular problems and may require different approaches.
• Formula-based approaches are most useful for predicting the relative levels of resources required to meet the needs of larger populations over broader groups of services. Similar approaches for smaller populations or a narrow range of services introduce a significant margin of uncertainty. Some risk can be avoided; some will have to be managed.