Head of Social Policy & Economics Demand- and Supply-Side Incentives in the Nicaraguan Social Protection Network Ferdinando Regalia Head of Social Policy & Economics UNICEF, South Africa Results Based Financing Workshop June 23rd – 27th, 2008, Kigali

Red de Protección Social (RPS) Started in 2000. ~ 170,000 beneficiaries at its peak coverage in 2004 (phase II) Multi-sector approach: education, health, nutrition Incentive-based welfare program (CCT) Transfers: ~ one fifth of households (HHs)’ average consumption pre-program Targeted to the poor (<US$1.10 per day) HHs’ average (median) yearly per-capita consumption pre-program: US$ 320 (US$245)

RPS starting point Matagalpa Madriz

Why demand-side incentives? Situation: Poor HHs consumed less preventive health care services than non-poor. Why? Perhaps supply constraints (though supply was “uniformly” mediocre within localities)… …perhaps demand-side constraints: High direct and indirect costs of accessing services Imperfect knowledge of private returns to health investment, etc.. Relative contributions of s- and d-side constraints difficult to disentangle ex ante

Why demand-side incentives? (2) Proposed solution: Some d-constraints (i.e. imperfect knowledge, externalities) justified “conditioning” d-side incentives (RBF) Interestingly, service utilization increased more among the very poor than the non-poor while all HHs faced a fairly uniform increase in access and quality of health care services Challenges: In 1999, little knowledge on how to set up a CCT scheme

Why supply-side incentives? Situation: Systemic capacity bottlenecks of MOH Unable to quickly expand services in remote localities Proposed solution: service outsourcing to private providers through a competitive bidding process Challenges: small market of private providers need to design incentives for health providers to develop efficient plans to rapidly expand coverage in underserved areas

Why supply-side incentives? (2) RBF: providers to be paid based on the achievement of measurable and predetermined targets, verified by independent sources

What did RBF want to achieve? D- and s-side incentives sought to increase: Utilization of preventive health services (children 0-5) Regular check ups (baseline: 70% among children < 3) Child growth and development monitoring (baseline: 60% among children < 3) including micronutrients and anti-parasites. Up-to-date vaccinations (baseline: 39% among children 12-23 months) Utilization of maternal health services (Phase II). Pre-natal and post-partum control Parents’ attendance to health educational workshops Household sanitation, reproductive health, nutritional counseling

Stakeholders’ buy-in: d-side incentives Planning stage: MOH opposed d-side incentives, fearing surge in workload Distribution of vaccines and other inputs, increasing referrals for curative services, etc. Government decided to go ahead anyway through SIF Implementation stage: high involvement by local stakeholders Households’ targeting validation Local authorities’ support for logistics Randomized evaluation plans Coordination of supply side response Beneficiaries’ coordination through promoters

Stakeholders’ buy-in: s-side incentives MOH (central) aware of bottlenecks but resisted outsourcing Wage competition (potential exodus of health workers); no experience with contracting of services Terms of the agreement between MOH and RPS team MOH responsible for providers’ selection, training and certification (with RPS team’s support in procurement) Additional budget allocated to MOH for supervision Providers obliged to feed the MIS of the MOH Stronger buy–in by MOH regional offices Understood faster than the central MOH the potential gains in coverage to be achieved through outsourcing and RBF

How d-incentives operate RPS socioeconomic survey administered to all HHs in (geographically) targeted localities All HHs eligible for d-incentives if extreme poverty incidence high. Otherwise Proxy Means Test applied Eligible HHs enrolled into roster. Mothers or primary care-givers entitled to receive bi-monthly transfers All HHs’ members identified by a bar code. Transfer recipients identified by a special i.d. card with picture Eligible HHs’ members mapped to health providers, payment agencies and schools Pre-printed forms with names and bar-codes distributed by RPS team to health providers

How d-incentives operate (2) Forms used by providers as planning tools to schedule all check ups with eligible HHs’ members. Information used by MOH to plan supply of inputs HHs’ attendance recorded by health providers. Forms regularly collected by RPS team and information downloaded to RPS MIS HHs’ record of compliance used to prepare payment orders. Two months lag between compliance updating and payments processing Non compliance triggers suspension of transfers (10%). Repeated non compliance triggers expulsion (1%) Spot checks of the compliance verification process

How s-incentives operate One year renewable RB contracts for health providers Contract’s final amount determined after a joint (RPS, provider) assessment of service coverage to: Validate, at the locality level, HHs’ demographic information collected through the RPS socioeconomic survey Identify the final “universe” of HHs a provider will be serving Enroll HHs with the provider and establish a baseline for the services to be provided Contract’s final amount obtained by multiplying the number of people served (by age group) by the unit cost of the specific service provided to each age group Providers are paid a per-HH fee for initial assessment

How s-incentives operate (2) Upfront payment: 3% of the contract. The rest: bi-monthly or quarterly payments against the achievement of coverage targets by age groups Targets: 93% - 95 % of active (i.e. receiving d-side transfers) beneficiaries by age group If target missed, RPS MIS automatically stops payments to the provider for the period in question Payments contingent upon RPS team’s verification of the coverage achieved (review of pre-printed forms) External independent auditing of a representative random sample of records held by providers and households (twice a year). Penalties and termination

Impact evaluation: selected results Regular check ups (stronger impact for the poorest)

Impact evaluation: selected results (2) Vaccination

Impact evaluation: selected results (3) Stunting

Impact evaluation: selected results (4) Increase in health service utilization persisted ten months after d-incentives discontinued Impact on % of children under 5 who had attended preventive growth monitoring during the previous six months 70.4 93.1 91.7 70.6 77.2 92.6 72.6 73.3 50 60 70 80 90 100 2000 2002 2004 Treatment Phase I Control Phase I/ Treatment Phase II Source: IFPRI (2005)

A few final considerations A package of d- and s-side incentives can increase utilization of preventive health care services Relative contribution unknown. Need to “unbundle the bundle” . D-side, S-side or both? Implementation of d-side incentives is technically feasible even in low-income countries Fiscal sustainability considerations Despite results, long term support for d- and s-side incentives in Nicaragua proved elusive D-side incentives controversial Cost-effectiveness of s-side incentives and outsourcing compared to alternatives, with or without d-side incentives