1. 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

2. Red de Protección Social (RPS)
Started in ~ 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)

3. RPS starting point
Matagalpa
Madriz

4. 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

5. 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

6. 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

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

8. 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 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

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

16. Impact evaluation: selected results (2)
Vaccination

17. Impact evaluation: selected results (3)
Stunting

18. 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)

19. 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