Argentina - Health Insurance for the Poor Project

Document of The World Bank Report No: 19508 PROJECT APPRAISAL DOCUMENT ONA PROPOSED LEARNING AND INNOVATION LOAN (LIL) IN THE AMOUNT OF US$4.9 MILLION TO THE ARGENTINE REPUBLIC FOR A HEALTH INSURANCE FOR THE POOR PROJECT November 30, 1999 Human and Social Development Argentina, Chile and Uruguay Country Management Unit Region of Latin America and the Caribbean  CURRENCY EQUIVALENTS (Exchange Rate Effective June 29, 1999) Currency Unit = Argentine Peso (AR$) AR$1.00 = US$1.00 US$1.00 = AR$1.00 FISCAL YEAR January 1 through December 31 ABBREVIATIONS A"N ACRONYMS ANSeS Administraci6n Nacional de Seguridad Sociall National Social Security Administration CAS Country Assistance Strategy GoA Government of Argentina IBRD International Bank for Reconstruction and Development IPS Instituto Provincial de Saludl Provincial Obra Social of Salta INSSJP Instituto Nacional de Servicios Sociales para Jubilados y Pensionadosl National Social Service Institute for Retirees and Pensioners LIL Learning and Innovation Loan MoH Ministry of Health MSAS Ministerio de Salud y Acci6n Social/Ministry of Health and Social Action (National) Obras Sociales Social health insurance funds (linked to workers' place of Nacionales employment) at the national level Obras Sociales Social health insurance funds for public sector employees at Proviciales provincial level PCU Project Coordination Unit PMA Programa Medico Jsisrencial/Standard Health Benefits Package for the Poor (Provincial) PMO Programa Medico ObligatoriolStandard Health Benefits Package (National) PRESSAL Provincial Health Sector Development Loan PRESSS Programa de Reconversi6n del Sistema de Seguro de Saludl Restructuring Program of Health Insurance System PRL Provincial Reform Loan PROMIN Maternal and Child Health and Nutrition Project SIEMPRO Sistema de Informaci6n, Evaluaci6n y Monitoreo de Programas Socialesl Information, Evaluation and Monitoring System for Social Programs SISFAM Sistema de Identificaci6ny Registro de Familias Beneficiarias de Programas Socialesl Identification System and Registry of Social Programs Beneficiary Households SYNTIS Sistema de Identificaci6n Nacional Tributario y Social! Social and Fiscal National Identification System Vice President: David de Ferranti Country Director: Myrna Alexander Sector Director: Xavier Coll Team Leader: Marie-Odile Waty/ Girindre Beeharry  Argentina Health Insurance for the Poor Learning and Innovation Loan CONTENTS A Project Development Objective 1. Project development objective ..................................................................2 2. Key performance indicators .................................................................2 B Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project ........3 2. Main sector issues and Government strategy ..................................................................3 3. Project strategic choices and learning and development issues to be addressed ............5 4. Learning and innovation expectations . .................................................................8 C Project Description Summary 1. Project components ..................................................................9 2. Institutional and implementation arrangements ..............................................................9 3. M onitoring and evaluation arrangements ................................................................. 10 D Summary Project Analysis 1. Economic ................................................................. 11 2. Financial ................................................................. 11 3. Technical ................................................................. 11 4. Institutional ................................................................. 11 5. Social ..................................................................11 6. Environmental assessment ................................................................. 12 7. Participatory approach ................................................................. 12 E Sustainability and Risks 1. Sustainability ................................................................. 12 2. Critical Risks ................................................................. 12 3. Possible Controversial Aspects ................................................................. 14 F Main Loan Conditions 1. Effectiveness Conditions ................................................................. 14 2. Other ................................................................. 14 G Readiness for Implementation ................................................................. 14 H Compliance with Bank Policies ................................................................. 15  Annexes Annex 1. Project Design Summary Annex la. Monitoring and Evaluation Arrangements Annex 2. Detailed Project Description Annex 3. Estimated Project Costs Annex 4. Fiscal Impact Analysis Annex 5. Financial Summary Annex 6. Procurement and Disbursement Arrangements Table A. Project Costs by Procurement Arrangements Table Al. Consultant Selection Arrangements Table B. Thresholds for Procurement Methods and Prior Review Table C. Allocation of Loan Proceeds Table D. Project Procurement Plan Annex 7. Project Processing Budget and Schedule Annex 8. Documents in Project File Annex 9. Statement of Loans -and Credits Annex 10. Country at a Glance Map  Argentina Health Insurance for the Poor Project Appraisal Document Region of Latin America and the Caribbean Argentina, Chile and Uruguay Country Management Unit Date: November 30, 1999 Team Leader: Marie-Odile Waty/ Girindre Beeharry Country Director: Myma Alexander Sector Director: Xavier Coll Project ID: AR-PE 63388 Sector: Health, Nutrition and Population Lending Instrument: Learning and Innovation Loan (LIL) Theme(s): Poverty Targeted Intervention: [X] Yes LI] No Project Financing Data [X] Loan [] Credit [] Grant [ ] Guarantee [I) Other [Specify] For Loans/Credlits/Others: Amount (US$m): 4.9 Proposed terms: [] To be defined [ ] Multicurrency [X] Single currency Determined at Negotiations [ ] Standard Variable [ ] Fixed [X] LIBOR-based Grace period (years): 5 Years to maturity: 15 Commitment fee: 0.75% Service charge: % Front-end fee on Bank loan: 1.0% Financing plan: Government Federal 1.01 1.01 Provincial 1.16 - 1.16 IBRD 2.73 2.17 4.90 Total: 4.90 2.17 7.07 Borrower: Argentine Republic Guarantor: N/A Responsible agency: Ministry of Health and Social Action Estimated disbursements (Bank FY/US$M): Annual 1.00 2.40 1.00 0.50 Cumulativie 1.00 3.40 4.40 4.90 Project implementation period: 3 years Expected effectiveness date: January 15, 2000 Expected closing date: December 31, 2002 Implementing agency: Ministry of Health and Social Action Contact person: Dr. Roberto Peluso, Subsecretario de Regulaci6n y Fiscalizaci6n Address: Ministerio de Salud y Acci6n Social, Av. 9 de Julio 1925, Piso 2 Buenos Aires, Argentina Tel: 541-14-379-9015 Fax: 541-14-379-9152 E-mail:  Page 2 A: Project Development Objective 1. Project development objective: (see Annex 1) The objective of the proposed LIL is to pilot the development of health insurance for the poor in selected provinces of Argentina. The LIL will assist the Government of Argentina (GoA) in developing the legal, institutional and financial framework to establish the proposed health insurance scheme which could eventually be replicated throughout the country. The introduction of such a policy initiative involves significant risks and has major long term structural and political reform implications. It involves introducing radical changes in the financing of public health care providers, gradually replacing budgetary allocations with a mix of payment per capita, per group of services and fee-for-service. It also involves establishing financially sustainable health insurance that would improve the targeting of public subsidies to the most needy. Finally, it would mean gradually empowering the poor with similar basic rights, with regard to health care, as those of the currently insured population, and ultimately seeks to improve their health coverage. Several provinces in Argentina have already initiated activities to introduce health insurance for the poor as part of larger reform programs to improve health services, and many others have expressed their willingness to do so. In order to move this process of change along, the proposed LIL will advance implementation in a select number of provinces. A LIL would be the preferred loan instrument because of the high risk associated with this policy initiative, and the need to: - learn from successes and failures before replicating the plans on a wide scale throughout the country. This strategy of learning-by-doing is an essential initial step in developing such an initiative since it is a new and difficult area of reform for the country. - facilitate the preparation of the follow-.up operations that would introduce health insurance for the poor in other provinces. - build momentum and credibility for the structural reforms at stake so as to facilitate their political acceptability. 2. Key performance indicators: (see Annex 1) The performance of the pilots would be assessed based on their relative success in establishing health insurance for the poor as well as on the sustainability of the systems and approaches established. Key performance indicators would include: * The percentage of poor with health insurance in each of the targeted provinces, and the change in the absolute number of poor covered; * The differences in health coverage, access, and quality between the insured poor and the rest of the insured population in the province; * The proportion of public spending for health care services for the poor managed by the health insurance Agency; * The proportion of provincial health spending based on demand for and production of services; * The fiscal sustainability of the health insurance plans; and * The number of follow-up operations that build on the lessons learned from the proposed pilots. The targets for each indicator will be established with each province before project implementation, and will be included in the agreement signed between the Ministry of Health and Social Action (MSAS) and each province.  Page 3 B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) CAS Progress Report No. R-98-266; IFC/R98-233 Date of latest CA.S Progress Discussion: November 10, 1998 The Bank's assistance strategy focuses on supporting the Government's efforts to (a) enhance social development, including poverty alleviation and human resource development; (b) improve the performance and institutional capacity of governments, particularly at the subnational level, to deliver key social, infrastructure and environmental services; and (c) consolidate successful structural reforms in public finance, labor markets and the financial sector. Bank support in the health sector has followed this three-pronged strategy, by focusing on key public health interventions and targeted programs, strengthening institutional capacity at central, provincial and municipal levels, and introducing major reforms in the public health delivery and financing systems, including social health insurance. The last CAS update emphasized the need to help Argentina address its current economic and financial crisis, while pursuing its reform agenda and strengthening the social sectors. In particular, the Bank is supporting the development of innovative, small scale learning initiatives that would target social programs to vulnerable groups and address the specific social problems that Argentina is encountering. Building on complementary efforts to improve delivery of public health services, target services to particularly vulnerable groups, such as poor women and children, and restructure a major part of the existing health insurance funds for employees, the second generation of health sector interventions in Argentina seeks to consolidate and extend the ongoing reforms with a particular emphasis on the issue of equity of access to quality health care. The proposed LIL directly addresses this equity concern since the ultimate objective of establishing health insurance for the poor is to improve their access to quality health services. 2. Main sector issues and Government strategy: Total health care expenditures in Argentina are very high, at around seven to ten percent of GDP. Health outcomes and public satisfaction with the quality of care do not match the level of investment, or what could be expected from a country with the income and education level of Argentina. In addition, the current system falls far short of the constitutional mandate for equitable health care. The problem can be traced to: (a) inequitable health coverage; (b) an inefficient service provision system; (c) the segmented nature of health insurance financing; and (d) insufficient emphasis on public health and primary care. * Inequitable health coverage. The system is characterized by the existence of a large (36.5 percent of total population, i.e., around 13 million persons) and overwhelmingly poor uninsured population. At present some 8 million are covered by the union-run health insurance system (Obras Sociales Nacionales), another 5 million under provincial health insurance for public sector employees (Obras Sociales Provinciales), 4 million are covered by the National Social Services Institute for Retirees and Pensioners, and 2.2 million have private health insurance coverage. Health care for the uninsured population is financed mostly through provincial budget allocations to public facilities which then provide health care for free at the point of entry. The open and free availability of service from public hospitals can be seen as an implicit and informal insurance system, so that the 'uninsured' population can be said to benefit from an implicit coverage. The implicit insurance system is, however, characterized by the facts that: (a) the recipient cannot chose his/her insurance carrier; and (b) the choice of health care providers is restricted to the public network. The poor are captive to the public hospitals and cannot hope to obtain better health care from alternative providers unless they pay for these services out-of-pocket. The implicit insurance system suffers from two additional contextual problems: (a) many public hospitals in Argentina do not bill for services and/or collect fees from insured patients; this perpetuates cross-subsidization from the public sector (provincial general revenues) to the insurance sector; and (b) those public hospitals  Page 4 which have started to recover costs may have a direct incentive to provide more and better care to the insured than to uninsured patients. As l:he capacity of hospitals to collect fees increases, there is a risk that a two-tier system of care will develop within the public hospital system, differentiating between the insured and the uninsured poor. As a first step towards tackling these issues, the Government is attempting to extend formal and explicit health coverage to the poor, thereby establishing the legal and institutional basis: (a) for providing public hospitals with an incentive to provide appropriate care to the poor; and (b) for offering the recipients a choice of insurance carriers and of providers. The creation of health insurance for the poor initiates a process of switching to a more efficient, equitable, and transparent subsidization scheme. In effect, since these 'demand' subsidies would be de-linked from providers, they can more effectively be targeted to the poor, and they can be used as an instrument to motivate providers to be more efficient. Developing health insurance for the poor is therefore among the highest priorities of the new phase of reforms in the health sector in Argentina, and several provinces have already initiated the process. These efforts are, and will be, subject to the conditionality of a series of Bank adjustment loans, including the Second (ongoing), Third and Fourth Provincial Reform Loans (PRL), and the proposed second Health Insurance Reform Loan. The proposed LIL would explore and test ways in which the extension of explicit health coverage to the poor can be achieved efficiently in conjunction with the fiscal and social reforms supported by the PRL operations, * Inefficient service delivery in the public sector. Resources are allocated to public providers on a historical basis. Since they receive allocations that bear only a distant relation to the quality and quantity of services they provide, public hospitals neither have an incentive to provide appropriate care, nor to increase the efficiency of service provision. To increase the efficiency of heath care delivery in the public sector, the Government launched a pilot program through the Provincial Health Sector Development Loan (Ln. 3931-AR) which aimed at introducing management autonomy in public hospitals while strengthening their management systems, increasing the quality of hospital assets in selected areas, and developing the capacity of public hospitals to bill for services provided to insured patients. Similar reforms are also contemplated in the policy conditionality matrix of the Second Provincial Reform Loan (Ln. 3 877-AR) that is currently being implemented in four provinces (San Juan, Tucuman, Rio Negro and Salta). Significant administrative and financial autonomy was granted to some public hospitals, allowing them to collect fees from insured patients, and to use part of the revenues thus collected (80 percent in Salta and Rio Negro) to finance additional salary for staff, as well as some investments and maintenance costs. It is expected that the public hospital reform would be further expanded through a follow-on operation to Loan 3931-AR, as well as through the above-mentioned future provincial reform loans. * Segmented health insurancefinancing. Until the reforms that started in 1995, the insured population was captive to national union-run health insurance funds (Obras Sociales Nacionales) or provincial funds (Obras Sociales Provinciales) which were associated with place of employment and offered widely different health care coverage. Since Obras had captive beneficiaries who could not select another health insurer, they had little or no incentive to improve the quality and quantity of services, operate more efficiently, or control costs. To address these inefficiencies, the GoA launched the first phase of a health insurance reform program with support from an adjustment operation and a complementary technical assistance loan from the Bank in 1996 (Loans 4002/4003/4004-AR). The health insurance reform helped to introduce competition among national social insurance funds, to improve their internal efficiency, to develop risk adjustment mechanisms amDng social insurance funds, and to set up a central regulatory body as well as consumer protection and prudential norms for both social and private health insurance. The major outcomes of these reforms have been to increase choice for the insured population, to mandate a standard package of benefits (PMO), to compensate Obras for income disparities among them, and to improve the financial sustainability of the national health insurance funds. A follow-up operation proposed for FY2001 would support the second phase of the health insurance reform program. Its main objectives would be to deepen the reform at the national level, and to develop  Page 5 reform mechanisms for provincial health insurance funds (Obras Sociales Provinciales). The above- mentioned provincial reform loans would also support the restructuring of the Obras Sociales Provinciales. Insufficient emphasis on public health and primary care. Given its income level and its spending in health, Argentina could probably obtain better health outcomes. In order to improve these outcomes, more emphasis should be put on those health services that have high payoffs (typically, preventive and primary health care) and those services that are underprovided by the private sector (public goods and goods with externalities). The Government of Argentina is currently strengthening the public role in the health sector with the support of four Bank loans (the Maternal and Child Health and Nutrition I and II Projects, Ln. 3643-AR and Ln. 4164-AR, the Public Health Surveillance and Disease Control Project, AR-PE 55482, and the AIDS and STD Control Project, Ln. 4168-AR). 3. Project strategic choices and learning and development issues to be addressed: The LIL would help participating provinces develop: (a) the institutional and legal framework to provide health insurance to the uninsured poor; and (b) new payment systems to public providers for the care provided to the uninsured poor, gradually shifting from supply to demand subsidization. As a LIL, the project is relatively open as to the strategies to be adopted to achieve each of these objectives; the project is not designed to be prescriptive but to allow for experimentation and innovation. A number of strategic choices, however, have already had to be made. The following describes the alternatives considered as well as the learning and development issues that the proposed LIL will address. (a) Selection of pilot provinces. The LIL will support the full development of the proposed health insurance in the pilot provinces of Rio Negro and Salta. These two provinces were selected because they have already made a commitment to introduce health insurance for the poor and to transform public hospitals into autonomous entities in accordance with the policy conditionalities of the Bank-supported PRL II (Ln. 3877-AR). Both provinces have already established the basic legal framework to develop these two strategies and have started to identify the uninsured poor population. The political commitment of the two provinces to developing the proposed health insurance was renewed by the newly elected governments of Salta and Rio Negro, whose technical teams participated in the preparation of the proposed LIL. Funds will also be allocated to support diagnostic and preparatory activities in provinces other than the two pilot provinces of Rio Negro and Salta. Enough flexibility will be allowed to (i) allocate project funds between each of the pilot provinces (Rio Negro and Salta) depending on their respective implementation performance; and (ii) select other provinces as pilot provinces in case the province of Rio Negro or Salta does not comply with the project developmnent objectives or fails to carry out the project activities with the due diligence and efficiency required. In order to be selected, altemative pilot provinces would have to comply with the eligibility criteria and procedures established in the Operational Manual which would include: (i) the establishment of an adequate legal framework for the proposed health insurance; (ii) commitment that the selected health insurance agency meets the financial and institutional prerequisites described in Annex 2, paragraph 27; (iii) agreement that the technical and financial sustainability of the proposed health insurance will be ensured; (iv) commitment to finance counterpart funds, as needed; and (v) participation in the existing, or a future, provincial reform loan. (b) Choice of health care providers by the poor. The provincial authorities of Rio Negro and Salta opted fo;r a phased approach in introducing the proposed health insurance. The first phase, which would be supported by the proposed LIL, would involve changing the mode of payment of public hospitals so as to give them incentives to provide better care to the poor. In this first phase, the poor would receive services from the public sector network only. In a second phase, they would be able to choose their providers outside the public network. The province of Rio Negro decided to open the network to private providers within 2.5 to four years, whereas the province of Salta is contemplating a timeframe of four  Page 6 years. Allowing the enrolled poor to immediately select private providers might result in the financial collapse of some or many public hospitals, as they would be suddenly deprived of their captive patients and of the financial resources attached to them. Such a collapse would be very difficult to sustain politically and might lead to the premature abandonment of all efforts to shift hospital payment mechanisms from supply to demand subsidization. A phased approach would also give public hospitals a fair chance of surviving in a competitive environment. In addition, public providers are the only ones available in many, especially rural, areas. In those areas, improving the functioning of public facilities is a better instrument to improve health care for the poor than widening the choice of health providers. Private providers would, however, continue to be contracted by the health insurance agencies in order to provide the high-complexity medical care and technology that are currently not available in the public sector. (c) Choice of the health insurance carrier. Similarly, provincial authorities have opted for a gradual approach in selecting the health insurance carrier that would manage the proposed health insurance program for the poor. They rejected the more radical alternative of providing the enrolled poor with vouchers allowing them to immediately select their own insurance carrier. Such an alternative was considered politically unfeasible since most stakeholders, including potential beneficiaries, would have viewed it as "privatizing public health care". In addition, the transfer of funding from provincial health budgets to insurance carriers to pay for the care provided to the enrolled poor is likely to be determined by the pace at which it will be possible to: transfer personnel budgets, and thus staffing decisions, from the provincial governments to the autonormous public hospitals with the insurance carrier acting as the payment intermediary and contracting and quality assurance agent. The LIL would help to test two alternatives for the management of the proposed health insurance system. The province of Salta has chosen to entrust its management to the existing provincial Obra Social - IPS - which is providing coverage to around 330,000 public employees and their dependents. The Obra Social is well managed and currently has no operating deficit and debts. On the other hand, in view of the current operating deficit of its provincial Obra Social, the Province of Rio Negro has opted for the creation of a small agency (staffed with 15-20 persons) that would exclusively manage the health insurance plan for the enrolled poor. (d) Scope of the structural reforms. The proposed health insurance system would involve introducing two fundamental changes that have profound structural, political and cultural implications: the modification of payment mechanisms and incentives to public providers, and the separation of financing from provision by gradually transferring government funding to a third-party payer. The scope and extent of the changes that provincial. governments would be able to introduce in these two important reform areas during the timeframe of the LIL would certainly be modest. The modification of the payment mechanism for public hospitals is likely to be strongly resisted by the medical profession who would fear the introduction of payment systems based on productivity. The scope of the transfer of funding from the provincial Ministry of Health to the Agency that would manage the proposed health insurance is likely to be constrained by the centralization and current rigidities in the management of health personnel expenditures. The project would therefore set feasible and reachable targets within the LIL's implementation period; these targets would be included in the agreements to be signed between the project and pilot provinces. (e) Coverage of the minimum health benefits package (PMA4). Provincial authorities are committed to providing to the enrolled poor the same services as those included in the national health benefits package which became mandatory for all national insurance funds in 1995. However, in light of current fiscal constraints and the limited supply of high-complexity care in the province, provincial authorities are considering initially financing a reduced package and gradually extending it as financial resources permit. This may also be prudent given that demand for health services by the poor may actually increase as the system becomes more responsive to their demands. In view of the extremely limited resources of the beneficiary population, the provincial authorities have also decided not to impose co-payments for the health services provided in the PMA. The proposed LIL would help to identify a financially sustainable health benefits package (PMA), and to evaluate the cost of several extended packages, including that of  Page 7 the national PMO. These studies would also involve identifying and costing the package of services that both provincial Obras Sociales are providing to their beneficiaries, and assessing the current gap with the national PMO. With regard to drugs, each province will identify payment systems for outpatient drugs, including a list of those that would be fully subsidized under the new system. (f) Choice ofpayment mechanisms to public providers. The proposed LIL will help identify the best mix of payment mechanisms based on their respective cost and their incentives for demand and supply. Provincial authorities have expressed their initial preference for the following payment systems: (i) payment per capita for primary health care services; and (ii) fee-for-service for public hospitals, in order to provide them with the incentive to monitor their production and cost structure, as well as to bill for services. The latter payment system is currently being used by public hospitals to bill public and private insurance funds for services provided to their beneficiaries. Other payment mechanisms, such as payment per group of services (module), would gradually be introduced as knowledge of hospital costs and production improves. (g) Eligibility criteria for subsidized health insurance. Provincial governments in Argentina are mandatecl by the Constitution to provide health care coverage to any citizen, regardless of his/her ability to pay. Recent laws in the provinces of Salta and Rio Negro have established the principle of extending health insurance coverage to the population currently uninsured, i.e., regardless of their income level. Provincial authorities are, however, committed to subsidizing health insurance for the poor only. The proposed LIL would help provincial governments to identify: (i) the population currently not insured; (ii) the poverty criteria, consistent with the system adopted by the National Government to target social programs (SISFAM) which would be used to determine eligibility for subsidized health insurance; and (iii) the uninsured, poor population that would be eligible for the proposed health insurance. For the uninsured, non-poor population, provincial authorities are contemplating charging fees for health services in all public facilities. This particular group will therefore have the opition of subscribing to a voluntary health plan (with either the provincial Obra Social, or the new health insurance Agency, or any other insurance carrier), or pay for health services out-of-pocket. The LIL will help provincial authorities to design health plans, enrollment mechanisms and the financing plans (including premiums, co-payments and, eventually, provincial subsidization) for this population. (h) Establishment and maintenance of an enrollment database. The establishment and maintenance of a database that would accurately contain key data on the target population (the uninsured poor) would be an essential building block for the proposed health insurance and a critical factor for success. Available data indicates that 60 percent of the uninsured in Rio Negro and 80 percent of the uninsured in Salta are poor. The provinces could build the database in one of two ways: either to strive for as large an enrollment as possible initially, then eliminate those who do not qualify, or to build up the enrollment over time by registering beneficiaries as they come into contact with the public health system and verifying their eligibility. Both pilot provinces have chosen the first approach, but other participating provinces may find that the second one is more cost effective. Moreover, once the enrollment database is created, it will have to be maintained and regularly updated, allowing new beneficiaries to enroll (i.e., households meeting the poverty criteria) and ending eligibility for enrollees who no longer meet the criteria. The LIL will support provincial efforts to develop and maintain enrollment databases and, upon project completion, help sift through the different provincial experiences to identify the best strategies. A link would also be established with the new federal data exchange system, the Social and Fiscal National Identification System (SINTYS), supported by the Bank (Ln. 4459-AR), which allows federal and provincial authorities more timely access to accurate records on beneficiaries of different national and provincial programs and can provide a way to cross-check eligibility. (i) Giving voice to the consumer. The initial restriction regarding the choice of both insurance carriers and providers leaves open the question of how to guarantee a continuous increase in the quality of services provided to the beneficiaries. A strategic choice was made to establish a system of constant monitoring of beneficiary reaction, through quarterly focus groups and exit polls, as well as annual  Page 8 beneficiary assessments. This regular feedback will constitute an important management tool both to maintain pressure on the system to effect change, and to build political support from the beneficiary community. Such support could be a crucial risk-mitigating element to counter the likely opposition from other interest groups. 4. Learning and innovation expectationls: [X] Economic [X] Financial [X] Technical [X] Institutional [X] Social [ ] Environmental [X] Participation [ ] Other The project innovates in at least three areas: (i) it extends formal health insurance coverage to the poor; (ii) it helps the provincial ministries of health, through the health insurance Agencies, to specialize in the purchasing function and enter into contractual agreements with providers; and (iii) it experiments, although in a limited way, with gatekeeping for basic maternal and child health. The project provides numerous learning opportunities, among which: (a) how to maintain a database of the beneficiaries of the insurance prograni and keep accurate records of entry and exit; (b) how to extend coverage to the uninsured non-poor population; (c) how to design a sustainable package of services; (d) how to manage demand for health services and control costs; (e) how to increase quality of care in an environment where customers initially have a choice neither of insurers nor of providers; (f) whether it makes better sense to create a health insurance agency or to contract existing health insurers (administrative costs); (g) how to prepare public providers for competition from private providers; (h) how best to implement the transition to demand-based allocation of resources to public providers; (i) how Obras Sociales react to public hospital billing; (j) how to create political support for the program to surmount opposition to the reform; and (k) how best to mitigate the risks associated with the project. The analysis will be based on a comparison of the achievements of provinces in designing and implementing these strategies and their relative success in overcoming social, political and financial constraints. A comparison will also be made with provinces that are developing similar strategies without project support.  Page 9 C: Project Description Summary 1. Project components: (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown) The proposed project would include the following three parts: Part A: Enrollment Database This part would include the following activities: (i) identifying eligibility criteria based on different poverty measures; (ii) designing a questionnaire and implementing on-site surveys; (iii) establishing the enrollment database of the uninsured poor and implementing the mechanisms for its regular updating; (iv) designing and distributing identification cards to the beneficiaries; and (v) designing and implementing communications campaigns targeted to the beneficiary population and to the provider networks. Part B: Health Insurance for the Poor This part would include the following activities: (i) establishing the legal framework for the proposed health insurance; (ii) identifying a fiscally affordable minimum health benefits package for the beneficiary population as well as alternative health plans for the uninsured, non-poor households; (iii) selecting the network of providers in the public and private sectors; (iv) designing payment systems to providers, including at the primary health care level, that would include appropriate incentives; and (v) establishing, within the selected Agency, the capacity to manage the proposed health insurance. Part C: Preparation, Monitoring, Evaluation and Administration The project would support diagnostic and preparation activities in proviinces other than the two pilot ones (RIo Negro and Salta). The project would also support monitoring and evaluation activities that would allow evaluation of the impact of the project and capitalize upon the learning opportunities that this project would provide. The component is therefore designed to monitor and evaluate indicators specified in Annex l a (Project Design Summary) at inception, during implementation, and upon project completion. The administration of the project by the Coordination Unit is also included in this component since the unit would be primarily responsible for monitoring and evaluation. 1. Enrollment database HY 2.2 31.0% 1.82 37.0%/ 2. Health Insurance HY 2.89 41.1% 1.44 29.0% 3. Preparation, Monitoring, HY 1.93 27.2% 1.59 33.0% Evaluation and Administration Total Project Costs 7.02 99.3% 4.85 99.0% Front-end fee 0.049 0.7% 0.049 1.0% Total Financing Required 7.07 100% 4.90 100% HlY = Other Population, Health and Nutrition 2. Institutional and implementation arrangements: The Ministry of Health and Social Action (MSAS) at the federal level will be responsible for the overall coordination of the proposed project. The provincial Health Council of Rio Negro and the Ministry of Health of Salta would be responsible for implementing the project in their respective provinces. The provinces will work in close collaboration with the selected health insurance Agency. The province of Rio Negro has already established, within the Provincial Health Council, a Directorate for Provincial Health Insurance which will later become the autonomous health insurance Agency. The province of  Page 10 Salta is contemplating the creation of a General Coordination Unit within the Provincial Ministry of Health which would be responsible for overseeing the design and implementation of the proposed health insurance, and maintaining the enrollment database. The provincial Obra Social would be in charge of the day-to-day administrative and financial management of the proposed health insurance. The National Director of the project would be the Undersecretary for Regulation and Control in the MSAS, and the project would be managed by a Project Coordination Unit (PCU) which would report to the Undersecretary. The PCU will be responsible for (i) the overall management, coordination and monitoring and evaluation of the project; (ii) assisting the provinces in implementing the project; (iii) facilitating the dialogue between provinces in order to learn from each other's experiences; and (iv) collaborating with on-going Bank projects (especially the Provincial Reform Loan II, the Provincial Health Sector Development Project, and the Maternal and Child Health and Nutrition Project) in order to ensure consistency of objectives and facilitate the implementation of the proposed activities. The PCU will be headed by a full-time Project Coordinator and staffed with the following key personnel: (i) an Administrative Manager who shall be responsible for procurement and financial management under the project; (ii) (a) Financial Health Insurance Expert, (b) a Medical Health Insurance Expert, (c) a Legal Advisor, one of whom shall be appointed as Technical Manager; and (iii) such other personnel with functions, responsibilities, qualifications and experience acceptable to the Bank, as may be required for the proper implementation of the project. As part of its managerial responsibilities, the PCU will be responsible for handling all procurement and administrative matters in close collaboration with the central unit that has been established within the MSAS in order to carry out administrative tasks for a certain number of Bank-financed projects (See Annex 6). An agreement will be signed between the National Project Director and each pilot province ("Provincial Technical Assistance Agreement"), which will detail the objectives, content, timetable, and cost of the activities to be implemented, as well as targets for the performance and impact indicators. The agreement will also describe the requirements that the province must meet in order to ensure the adequate design, implementation and execution of the proposed health insurance. The Agreement will include the terms and procedures for the transfer of funds from each Pilot Province to the corresponding Health Insurance Agency. It also will include a clause for potential suspension of the project in case the province does not comply with the requirements. The standard terms of the agreement are detailed in the Operational Manual. The signing of this agreement will be a condition of disbursement for consultant services and training in each pilot province. As a purchaser of care, the health insurance Agency will, in turn, sign a management contract with each provider of the network. The project will provide technical assistance to define the content of the management contract to be signed with public and private providers at the primary, secondary and tertiary level. 3. Monitoring and evaluation arrangements: The monitoring and evaluation component is designed to obtain feedback from beneficiaries, providers, the health insurance Agencies, and the provincial health authorities so as to gather and sort the lessons learned from the pilot experiences and put them to practical use in other provinces. The details are provided in Annex l b.  Page 1 1 D: Summary Project Analysis: (detailed assessments for those analyses applicable to LIL are in the project file, see Annex 8) 1. Economic: (supported by Annex 4) [ ] Cost-Benefit Analysis: Not applicable [ ] Cost Effectiveness Analysis: Not applicable [X] Other (specify): Fiscal impact analysis 2. Financial: (see Annex 5) NPV= Not applicable FRR= Not applicable A fiscal analysis will be undertaken during project implementation to evaluate the short and medium term fiscal impact of the proposed health insurance on provincial budgets. An initial step will involve estimating the past and current share of the provincial budget that is targeted to financing health care services for the poor, and monitoring this indicator during and after the project's implementation period. Different fiscal impact scenarios, based on different experiences regarding the minimum benefits package to be provided, changes in demand anticipated as a result of the system, and the options for provider payment mechanisms, will be explored. A similar exercise will be carried out for those provinces that decide to partially subsidize health insurance for the uninsured, non-poor population. A simultaneous monitoring of the fiscal situation, of the flow of payments and the status of reimbursements due to the health providers, and of the interface between the provincial budget and the payment mechanisms will be carried out in the pilot provinces. Effects on the demand for health services will be monitored for both the currently insured population and the targeted poor population (whose utilization rates are likely to increase because of easier access and more information). Both the volume and the type of services will be monitored to gauge the change in provision of cost-effective services. The project will also track the cost of administering the system under various management options for the proposed health insurance program and assess the impact on health service delivery costs, in order to determine the cost-effectiveness of the system. 3. Technical: The project will help identify the best options for a number of instrumental issues for the proposed health insurance, including: (a) how to establish a health insurance enrollment (latabase when a large part of the beneficiaries work in the informal sector; (b) how to maintain the database and keep accurate records of entry and exit; (c) how to extend coverage to the uninsured non-poor population and prevent them from becoming free-riders; (d) how to control costs and manage demand as appropriate; (e) how to increase quality in a non-competitive environment; (f) what is the optimal management structure for the health insurance Agency; (g) how to prepare public providers for competition from private providers; and (h) how to facilitate the transition to demand-based allocation of resources to public providers. 4. Institutional: The project will assist institutions in redefining their functions and help them equip themselves for their new roles. More specifically, the project will (a) assist the creation, where needed, of a new health insurance Agency; (b) assist Obras Sociales Provinciales which have been selected as health insurance carriers to take on the additional responsibility of purchasing health care for the poor; and (c) help provincial Ministries of Health to regulate and supervise insurance carriers and providers. The project will also (a) test the appropriateness of different institutional entities for the proposed health insurance, and (b) study the responsiveness of public hospitals to changes in their payment method.  Page 12 5. Social: It is expected that the proposed system will have a positive social impact on the poor as it should enhance their sense of being adequately served by the health care system. The project will finance assessments to evaluate the level of beneficiary satisfaction with the proposed health insurance plans and with the provision of care before, during and upon project completion by using periodic surveys, exit polls and focus groups to gain feedback. These assessments will help monitor the health care gap with the currently insured population and will attempt to measure any attitudinal behavioral shifts on the part of the target population in terms of their willingness; to seek medical attention, their understanding of the services being offered and their ability to interact with the system on complaints and issues of quality. The results of these assessments will be published to maintain the momentum for improvement. 6. Environmental assessment: Environmental Category [ ] A [ ] B [X] C There are no environmental issues. The proposed operation will support the implementation of a health insurance reform program which will not pose any environmental risks or damage. The operation would provide technical and financial assistance to implement policy and institutional changes in the health insurance market. None of these activities would have direct implications for health care delivery facilities, nor potential to generate hazardous waste. 7. Participatory approach: Provincial health authorities in the pillot provinces would establish formal consultations with key stakeholders during project implementation: beneficiary associations, medical professional associations, public employees associations, private providers associations, the Ministry of Economy, and national and provincial Obras Sociales and private health insurance. E: Sustainability and Risks 1. Sustainability: (This section is not to be completed in a LIL PAD) 2. Critical Risks: (reflecting assumptions in the fourth column of Annex 1) As shown in the table below, the design and implementation of the reform bear substantial risks which justify the overall risk rating of "High" for the project. ~~~~~~~~~~ _ FW O' "'4 Financial constraints on provincial health H - Regularly publish reports on the services financing limit the scope and content of the health available to and health spending on the poor and insurance plan for the poor, to the extent that the non-poor with a view to create a political access to health services is even more limited commitment to reduce the gap. than under the current subsidization system. - Policy dialogue through the PRLs. - Define eligibility criteria for access to high- complexity health care that is outside the basic package of services. Demand changes induced by the improved M -Close monitoring of the effect of introducing availability and quality of services for the poor the health insurance program on demand for result in an increase in overall costs to the services and cost, and its fiscal sustainability in provinces the pilot provinces.  Page 13 Fiscal transfers from the provincial Treasury to H - Ensure through policy dialogue, in particular the health insurance Agency are not regular and through the PRLs, that the health insurance consistent with plans Agency has regular budget transfers (no bailing out by provincial government) so that it operates within the fiscal boundaries. PMA is not financially sustainable S - Take corrective measures to ensure sustainability of the PMA by limiting its scope and managing demand. - Regular monitoring of volume and cost of services provided, and financing available from general and hospital revenues. Management Information Systems in public H - Assist hospitals in pilot provinces to obtain the hospitals are inadequate to meet the demands of a adequate management information systems and more complex billing and payment system training through PRESSAL technical assistance. Public Hospitals do not file claims for M - Assist the transition to demand subsidization. reimbursement If revenues are primarily production-based, public hospitals will have an incentive to file claims for reimbursements. - Assist public hospitals to file claims and collect fees from insurance funds. Providers are not paid promptly for services S - Equip the health insurance Agency with supplied to the beneficiary population adequate management tools. - Monitor financial health of Agency and ensure prompt provider payment. Medical associations block the change in payment H - Encourage involvement of such associations at mechanisms all stages of project development and implementation. - Develop payment mechanisms that ensure that part of hospital revenues generated from service production are used for supplementary personnel compensation. Pressure from public providers to limit S - Help public hospitals equip themselves for participation of private providers competition with the private sector by strengthening efficiency and productivity. From Components to Outputs . Financial and technical constraints may hamper H - Develop adequate intersectoral mechanisms to the regular updating of the beneficiary database monitor eligibility of current and potential beneficiaries. - Ensure t]hrough policy dialogue, in particular through the PRLs, and regular monitoring that the provinces do not bail out the insurance agency if it runs over budget; strict financial constraints will provide a strong incentive to the insurance agency to know and keep track of its beneficiary population.  Page 14 Non-insured non-poor have an incentive to S - On-site surveys and application of eligibility underreport income so as to free-ride on the criteria. Assist in the creation of an affordable insurance scheme and to default on out-of-pocket health plan for this population. payments. Resistance to a PMA for the poor that is different S - Propose transition plan to the National PMO. from the National PMO O' ireraIIRisk R atin g H$Ss _ _ _ _ _ _ _ _ __ii_ _ _ _ _ _ _ _ _ _ __3 Risk Rating - H (High Risk), S (Substantial Risk), M (modest Risk), N (Negligible or Low Risk) 3. Possible Controversial Aspects: The de facto transfer of control of health personnel budgets from the provincial budgets to autonomous health care providers is likely to be resisted. It is also expected that the medical professionals will resist the change in the payment mechanisms antid accountability for results for public health facilities. F: Main Loan Conditions 1. Effectiveness Conditions: > The key staff of the PCU: (i) the Project Coordinator; (ii) the Administrative Manager, (iii) the Legal Advisor, (iv) the Medical Health Insurance Expert, and (v) the Financial Health Insurance Expert are appointed and are in place. > The Operational Manual has been approved by the Bank and adopted by the MSAS. > All actions have been taken by the Borrower to permit that the procurement of goods and services required for the project, and to be financed out of the proceeds of the loan, be carried out in accordance with the provisions set forth or referred to in the Loan Agreement. 2. Other: (classify according to covenant types used in the Legal Agreements) > Disbursements for consultant services and training for each of the pilot provinces is conditioned to the signing of the Provincial Technical Assistance Agreement with each of the pilot provinces, in accordance with terms acceptable to the Bank. > Semi-annual progress reports on the execution of the project will be provided to the Bank by May 31 and November 30 of each year of project execution. > A report integrating the results of the monitoring and evaluation activities performed in relation to the above-mentioned progress reports will be furnished to the Bank no later than June 30, 2001. This report will be reviewed with the Bank by September 30, 2001, or such later date as the Bank shall request. > The LACI system will be in place no later than six months after the effectiveness date. G: Readiness for Implementation [X] 1. The procurement documents for thie first six month's activities are complete and ready for the start of project implementation; and a framework for agreement on standard bidding documents that will be used for ongoing procurement during the project has been established. [X] 2. The LIL's implementation plan has been appraised and found to be realistic and of satisfactory quality.  Page 15 H: Compliance with Bank Policies [X] 1. This project complies with all applicable Bank policies. [X] 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. Team Leaders: Marie-OdWaty/ Girindre Beeharry Secto ector: Xavier Coll Conr lrco: yn lxne   Annex la: Project Design Summary Argentina: Health Insurance for the Poor U -- Sector-related CAS Goal: Sector Indicators: Sector / Country Reports: (from Goal to Bank Mission) Promote equity in health by . Increased utilization rates * Health Insurance . Employment improving access to and of health services by the poor Agency and Project data opportunities and quality of health services for . Increased beneficiary * Beneficiary satisfaction access to education the non-insured poor satisfaction with the quality of surveys at the beginning for the poor are services and end of the project maintained or * Increased public spending * Provincial MoH data increased for the poor through the complemented by hospital reduction in cross-subsidies surveys at the beginning from the poor to the non-poor and end of the project Project Development Objective: Outcome / Impact Indicators: Project Reports: (from Objective to Goal) (1) Provide the non-insured . Absolute number and * Provincial MoH and * Public hospitals poor with increasing percentage of poor with Project data have enough opportunities for access to the health insurance in each incentives and same benefits as the insured province . . sufficient management population through the . Differences in health * Differences In the sufficien management establishment of a financially coverage, access, and quality minimum health benefits regarding personnel, to sustainable health insurance between the insured poor and package, in the choice of be able to provide scheme and by linking the rest of the insured providers, in length ofmore and better care to payments to providers of population waiting ists, etc. health care to the poor to their * Fiscal sustainability of . Provincial MoH and the poor. production. health insurance Project data * Public hospitals * Proportion of public . Provincial MoH and have the capacity to spending for health care Project data charge and collect fees transferred to the health from insured patients insurance Agency for the poor . Percentage of provincial * Provincial MoH and health spending based on Project data production of services . Improved efficiency and * Hospital surveys at the productivity indicators for beginning and end of the hospital services project * Number of follow-up . Project documents operations that build on the lessons leamed from the proposed LIL  Output from each component: Output Indicators: Project Reports: (from Outputs to Objective) (1) Enrollment database . Percentage of the poor * Health Insurance * Financial (padr6n) for the non-insured enrolled in the database in Agency and Project data constraints on poor established and regularly each pilot province * Health Insurance provincial health maintained . The database is regularly Agency and Project data financing do not limit updated the scope and content of the health insurance (2) Sustainable Health * Legal instruments * Provincial MoH and plan for the poor, to Insurance Plan and efficient establishing health insurance Project data the extent that access health insurance Agency in for the poor and capacity of to health services is operation public hospitals to charge fees even more limited than established under the current * Respective roles of the * Provincial MoH and subsidization system. Provincial MoH and the Project data health insurance Agency * Fiscal transfers defined from the provincial * Health benefits package, * Provincial MoH and Treasury to the health provider network and! Project data insurance Agency are financing plan designed in a regular and consistent financially sustainable way with plans . An independent and a Financial and economic financially viable Agency has indicators of the Agency . The PMA is been established financially * Provider payment systems * Provincial MoH and sustainable and unit prices compare Project data favorably with those obtained * Management by other insurance agencies Information Systems * Adequate hospital MIS . Provincial MoH and in public hospitals are Project data appropriate * Number and quality of * Provincial MoH and audits of providers carried out Project data . Public Hospitals by the health insurance actually file claims for Agency reimbursement * Incentives to providers for * Health Insurance efficient use of primaLry health Agency and Project data . Providers are paid care services promptly for services * Hospital and beneficiary * Provincial MoH and supplied to the satisfaction surveys Project data beneficiary population implemented (3) Adequate systems of * Monitoring reports . Provincial MoH and * Medical monitoring and evaluation in prepared every six months Project data associations do not place block the change in payment mechanisms  Project Components/Sub- Inputs: (budget for each Project Reports: (from Components to components: component) Outputs) (1) Establishment of a (US$2.2 million) * Provincial MoH and * Financial and beneficiaries Enrollment * Determination of Project data technical constraints database eligibility criteria do not hamper the * Development of the regular updating of the database of the uninsured beneficiary database poor * On-site surveys to identify * Non-insured non- current beneficiaries poor have an incentive * Identification and to underreport income establishment of mechanisms so as to free-ride for the regular updating of the insurance scheme database * Design and distribution of * Mechanisms are in beneficiary identification place to update the cards database for exit and * Launch communication entry campaigns (2) Design and (US$2.89 million) * Provincial MoH and * Resistance to a Implementation of a Health * Design appropriate legal Project data PMA for the poor that Insurance Plan for the poor framework is different from the * Where needed, create, National PMO define functions, equip and . Pressure from staff health insurance Agency public providers to * Technical assistance to limit participation of identify a fiscally affordable private providers package of minimum health benefits * Technical assistance to identify and contract a provider network in the public and private sectors * Technical assistance to design provider payment systems and incentives for each level of care (3) Preparation, Monitoring, (US$1.93 million) . Project data Evaluation and . Diagnostic and preparation Administration activities in participating provinces * Hospital and health center surveys * Beneficiary satisfaction surveys * Project administration cost  Annex lb: Monitorinig and Evaluation Arrangements The monitoring and evaluation (M&E) component is designed to evaluate the impact of the project and to capitalize upon the learning opportunities that this projects provides. The component is therefore designed to monitor and evaluate the indicators specified in Annex 1 a (Project Design Summary) at inception, during the implementation period, and upon project completion. The following table summariizes the monitoring indicators that the entities involved in the development of this project will need to generate or obtain, as well as key methodological specifications (source, frequency, control group, etc). Baseline data for each indicator will be collected at the beginning of project implementation. - Percentage of patients whose insurance - survey A (carried out on a sample of public status is identified at point of entry hospitals and health centers at the beginning and upon project completion in areas supported by the project and control group in areas not supported by the project). - Percentage of reimbursements claimed - survey A from social and private health insurance funds for services rendered to their beneficiaries that are effectively collected - Key efficiency and productivity - survey A. Indicators would be identified at the indicators start of the project and would be monitored against relevant benchmarks. Indicators could include: average length of stay, utilization rates of health services, number of laboratory tests per consultation, production of medical services per medical staff, administrative costs etc. - Utilization rates for key services - regular monitoring in areas where both the proposed project and the PROMIN project are active, and comparison with a control group (areas supported by PROMIN but not by the proposed project. -~, - Number of poor registered in the - frequency: every 3 months database - Absolute number and percentage of poor - frequency: every 3 months with health insurance - Aggregate cost of PMA, and evolution of - frequency: every six months its cost structure over time - Number and quality of audits of - source: project supervision data providers carried out  - Functioning MIS - source: project supervision data - Comparison of methods of payment and - source: project supervision data unit prices with those obtained by other insurance carriers - Financial and economic indicators of the - frequency: every month Agency, including administrative costs - Proportion of public spending for health - frequency: every six months care services for the poor managed by the health insurance Agency - Level of cross-subsidies from poor to - survey A, and hospital billing data non-poor - Fiscal impact of the new payment system - frequency: every six months and of a possible subsidization of health insurance for the uninsured, non-poor population - Differences in health coverage, spending, - frequency: every year access, and quality between the insured poor and the rest of the insured population - Knowledge of and satisfaction with - beneficiary assessment (survey B) carried out at health insurance plans and agency the beginning, at mid-term, and upon project completion in the project areas and control group in areas not covered by the project. - Satisfaction with the quality of care; - exit polls from hospitals and health centers; waiting time and waiting lists focus groups; claims filed with ombudsmen; survey B - Evolution of out-of-pocket payments for - survey B health care over time - Utilization rates of services included in - frequency: every month the PMA - Project performance in each province - frequency: every month; based on project progress reports - Quality of technical assistance - frequency: as required - Number of requests which are made by - at the end of the project other provinces to implement similar schemes  Annex 2: Project Description Argentina: Health Insurance for the Poor The following project description details the menu of activities that will be developed to execute the proposed health insurance in each of the provinces. Given the US$5.0 million ceiling of the LIL, the project will support the full development of the following activities in the two provinces of Rio Negro and Salta only (the pilot provinces), and initial activities in other provinces that meet the eligibility criteria (participating provinces). As previously mentioned, some flexibility would, however, be- permitted to reallocate funds among pilot participating provinces depending on their respective performance and compliance with the project requirements. In the following description of project activities, a situational assessment is provided for the provinces of Rio Negro and Salta. Part A: Establishment of the Enrollment Database (Padr6n) (US$2.2 million) 1. Objective. The establishment of a database that accurately summarizes key data on the target population (the non-insured poor) is an essential building block for the health insurance plan and a critical factor for success. The development of the enrollment database in the pilot provinces would involve the following: (i) determination of eligibility criteria; (ii) establishment of the database of the non-insured poor and identification of the mechanisms for its regular updating; (iii) design and distribution of beneficiary identification cards, and (iv) implementation of a communications campaign. The proposed project would finance technical assistance, training and goods to implement the above-mentioned activities. 2. Context. Estimates of the number of uninsured poor in Rio Negro vary from 135,000 to 350,000 according to whether an income-based poverty line or a Basic Unmet Needs criterion is used. This population is relatively evenly distributed throughout the province. The province has decided to introduce the proposed health insurance in a gradual way in its six health zones. It would start with Zone III, the location of the provincial capital, which has a total population of 92,000 people (i.e. approximately 1/5 of the population of the province). 3. Estimates of the number of uninsured poor in Salta vary from 380,000 to 450,000 according to whether an income-based poverty line or a Basic Unmet Needs criterion is used. It is estimated that forty percent of them live in the capital city and its suburbs. The proposed health insurance would be introduced gradually in the province's four health zones, starting with the capital where 473,000 people live (i.e., 45 percent of the total population). (a) Determination of Eligibility Criteria 4. A major task would be to determine the eligibility criteria for the proposed health insurance. A list of poverty indicators will be defined based on the poverty measures currently in use at the national level, and instruments developed by the SIEMPRO program, to ensure a coherent identification system throughout the country. The database would also be shared with the SYNTIS project. A questionnaire would be designed which would be used during on-site surveys. This survey would collect socio-economic data at the household level and check them against the pre-identified poverty indicators. In the province of Rio Negro, the project would finance technical assistance to assist in the determination of the poverty criteria and prepare the questionnaire that would be used for on-site surveys. No technical assistance would  Annex 2 Page 2 of 8 be needed in the province of Salta since the latter has contracted international experts to carry out t]he task (which should be completed by December 1999). (b) Establishment of the database of the non-insured poor and identification of the mechanisms for its regular updating 5. The province of Rio Negro has developed a preliminary database that currently includes 515,000 people out of a total population of approximately 600,000. To identify the insured population, the province is in the process of merging this database with the enrollment database of the insured population from the Provincial Obra Social, the national Obras Sociales, the INSSJP, and ANSeS. As a further refinement, the province would merge this database with that of the national revenue service which identifies formal sector employees and tax-paying independent workers. A preliminary database of the non-insured poor would be established by eliminating all those with insurance coverage as well as the tax-paying independent workers, since the latter are considered to be above the poverty line. This database would be gradually refined by on-site surveys to identify the household demographic and socio-economic data using the above-mentioned questionnaire. Based on the poverty criteria previously identified, the province would establish the database of the non-insured poor. 6. Since August 1998, the province of Salta, in collaboration with the SIEMPRO program of the Secretariat for Social Development, is starting to register through SISFAM all families who benefit from a social assistance program. The database would be merged with those of the provincial Obra Social and of the national revenue office (see case of Rio Negro above). The establishment of the database is partly financed by the Inter-American Development Bank and the proposed project would finance complementary technical assistance. 7. In each province, the proposed project would support the identification of the most efficient mechanisms by which the database would be updated. The database would be distributed electronically (CD-Roms, floppy disks, internet, etc.) to all public and private providers of the network and would be used for billing purposes. The database would be comprehensive, i.e. would register all those who meet the eligibility criteria. 8. The project would finance technical assistance and training in each province to: (i) develop the database and identify mechanisms for its regular updating; (ii) implement on-site surveys; and (iii) distribute the database among all providers and train public hospital staff. (c) Design and distribution of beneficiary identification cards 9. Each beneficiary, including their dependents, will receive an individual card with a unique identifying number. The provinces are contemplating supplying magnetic cards, which could also be used for billing purposes, vis-a-vis simple paper identification cards. The health insurance Agency in each province would be exclusively responsible for supplying these cards. In each province, the project would finance technical assistance to design the card, print it, identify the most cost-effective distribution system and supervise its distribution. One option would be to distribute these cards to the beneficiaries through the community health workers.  Annex 2 Page 3 of 8 (d) Communications campaign 10. The project would finance technical assistance in each province to design communication campaigns targeted to the beneficiary population and the networks of health care providers. The objective of the campaigns would be to inform these two groups about the proposed health insurance plans. A wide range of communications and media will be used in order to reach the full spectrum of the targeted audience. (e) Chronogram 11. It is estimated that the establishment of the enrollment database would be completed within a period of twelve months in the province of Rio Negro, between January 2000 to December 2000. It is expected to be completed within twelve months in the province of Salta, between March 2000 and February 2001. Part B: Development of the proposed health insurance (US$2.89 million) (a) Establishment of the Legal and Institutional Framework 12. Objective. In each of the pilot provinces, the project will help design and establish the legal and institutional framework for the implementation of health insurance for the poor. This framework would include the following: ( i) legal instruments establishing health insurance for the poor which would define the principal concepts regarding eligibility, health coverage (basic benefits package), financing sources and transfer mechanisms, the legal entity administrating the health insurance, provider network, quality control and financial monitoring systems and; (ii) legal instruments establishing the capacity of public hospitals to charge fees for insured, and non- insured/non-poor patients. Subsequent decrees and resolutions will detail each of these elements. 13. Context. The provinces of Rio Negro and Salta recently enacted an Insurance Law that establishes the creation of health insurance coverage for all uninsured individuals. According to both laws, the proposed health insurance (called in both cases "provincial health insurance") will be managed by an entity whose legal status would be later defined by the Government. Through a subsequent decree in April 1999, the province of Salta entrusted management of the proposed health insurance to the existing provincial Obra Social - Instituto provincial de Salud - IPS (see below). The province of Rio Negro has decided to create a new institution (see below). The laws allow the selected Agencies to contract services for their beneficiaries through a network of public and private health care providers. With regard to the financing, both laws mention that the proposed health insurance would be funded by provincial general revenues and that there would be a gradual transfer of funds from the provincial health budget to the new health insurance Agency. Health insurance would be fully subsidized for the insured poor population. For those who do not meet the poverty criteria but who lack insurance, both provinces would consider making available the basic health benefits package against a monthly premium or charge fees at the point of service. In this manner, the provinces seek to balance their goal of universal health insurance while focusing their resources on those financially most needy. 14. The law of the province of Rio Negro establishes a permanent advisory body composed of representatives from the Government and the Legislative Assembly, health care personnel, public/private health insurance providers, and the health insurance Agency. This advisory body will supervise and evaluate the developrnent of the health insurance plan, and propose necessary  Annex 2 Page 4 of 8 modifications. The law also indicates that the health insurance plan should be implemented within two years. In the province of Salta, the government has designated a person to oversee the implementation of the proposed health insurance. The Government of Salta intends to create a new Secretariat for provincial health insurance under the Ministry of Health. The new Secretariat would be responsible for supervising the proposed health insurance and would in particular: (i) coordinate with the Ministry of Health and the provincial Obra Social to ensure optimal development of the health insurance; (ii) determine premium-based annual budgets to be transferred to the provincial Obra Social (the Agency) to pay for the care provided to the enrolled poor; (iii) gradually implement the proposed health insurance until total coverage of the eligible population is achieved; and (iv) ensure compliance with the administrative and financing norms of the provincial government. Ministries of health in both provinces will be responsible for implementing grievance, complaint and arbitration mechanisms for the insured poor and the providers in their relation to the health insurance agencies. 15. Both provinces passed legislation on hospital management autonomy, granting to an increasing number of public hospitals the right to bill for services provided to insured patients, as well as to individuals who would not be covered by the proposed insurance. These laws also decree that a certain percentage of the income generated through such payments would be retained by the hospital and used for its improvement, as well as for bonuses for personnel. The balance would revert to the provincial health budget. 16. The project will support the development of all the necessary resolutions and decrees to make the provincial health insurance effective, and will review the existing provincial legal framework to ensure compatibility with the health insurance program. This task would be carried out by lawyers from the provincial health ministries in collaboration with the Project Coordination Unit (PCU), without the assistance of external consultants. (b) Design of a Sustainable Health Insurance Plan 17. Objective. The project would help design a health insurance plan for the non-insured poor, which would include: (i) a fiscally affordable package of minimum health benefits; (ii) the development of a provider network in the public and private sectors; and (iii) the design of provider payment systems with appropriate incentives. In addition to financing technical assistance for each of the activities listed below, the project would fund study tours for PCU and provincial staff involved in project implementation in countries that have experiences with health insurance that are relevant for the project. 18. Definition of the Basic Health Benefits Package. Provincial authorities seek to provide lto the beneficiaries the same services as those included in the national basic health benefits package (PMO). However, given current financial constraints and the limited supply of high- complexity care available, the provinces would consider financing a reduced package initially and gradually extending it as financial resources permit. This is feasible since the provinces have legal latitude to adopt a health benefits package for the target population that is different from the national PMO. 19. The project would finance the technical assistance and training required to identify the initial health benefits package (PMA) which the provinces can afford at the start of the project as well the extended package which could be provided later on with increased resources. Technical assistance would include: * analysis of the health services available in the public and private sectors, including operational efficiency, utilization data and unit costs;  Annex 2 Page 5 of 8 * classification of health services based on their epidemiological importance and medical complexity; * identification and costing of the health benefits package for each level of care, including dentistry, pharmacy and allied health services; * identification and costing of the extended package of services; and * definition of the criteria for access in exceptional cases to some of the services that are excluded from the package (such as low-incidence high-complexity care), and identification of financing options for these services. 20. Definition of the provider network in the public andprivate sectors. The provinces of Rio Negro and Salta have decided to use a provider network that would initially be limited to public sector facilities. This would restrict the choice of providers mostly for the beneficiaries that are living in the main cities of the provinces (about 50% of the population) where the private sector is present; it is virtually non-existent in other parts of the provinces. The provinces are, however, already contracting with the private sector for services that are not available in public hospitals, especially for high-complexity care and technology; this practice would continue under the project. The province of Rio Negro intends to open the network to private providers within a period of 2.5 to four years. The province of Salta initiated informal contacts with the main associations of private providers in the province to discuss their eventual integration into the provider network contracted by the Agency. Salta is contemplating opening the network within four years. A register of private providers would be established based on their compliance with the predetermined criteria. It will be maintained by each health insurance Agency. 21. The project would finance technical assistance and training in each province to: (i) analyze the existing network of public and private providers; (ii) identify a provider network based on a range of selection criteria that would include geographical accessibility; these criteria would later be expanded to include quality indicators as defined by the provincial quality assurance program; (iii) estimate utilization rates of the targeted population; and (iv) define appropriate referral patterns between the different levels of care. 22. Definition of provider payment systems and incentives. Based on the experience in Argentina, the following payment systems; for providers would be considered: * Payment per capita, especially for prirnary health care; * Payment for a group of services, especially for primary health care, which could include consultation(s), laboratory and other ancilllary services; * Payment by module (a module inclucles a set of hospital services, such as general medicine inpatient day, major surgery, etc. ); and * Fee-for-service. 23. The provinces of Rio Negro and Salta have expressed their initial preference for the following payment systems: (i) payment per capita or for a group of services for the primary care level; and (ii) fee-for-service for public hospitals, in order to provide them with incentives to monitor their production and cost structure, as well as to bill for services. In the second phase, the provinces envisage a shift to payment by module, or by risk-adjusted capita for hospitals. 24. The project would support the development of pilots that would develop incentives for both providers and beneficiaries to increase the appropriate use of primary health care services. These pilots would be tested in those areas where public primary health care facilities havebeen upgraded, largely through the support of the Maternal and Child Health and Nutrition Projects.  Annex 2 Page 6 of 8 The project will help to design appropriate incentives which may include gatekeeping schemes and price incentives for a list of maternal and child health services. 25. The project would finance technical assistance to identify the best payment systems and incentives for the different levels of care. For example, the existing salary incentives based on revenues generated by hospital billing to health insurance funds would be expanded to cover billing for services provided to project beneficiaries. The alternatives for payment systems will be evaluated based on two main criteria: (i) the expected cost of the package per beneficiary; and (ii) the incentives for demand and supply (i.e., under- or over-provision of services by providers, high or low utilization of services by patients). 26. Chronogram. It is estimated that the design of the health insurance plans would require twelve months in the province of Rio Negro (from January 2000 to December 2000) and thirteen months in the province of Salta (from March 2000 to February 2001). (c) Establishment and operation of the Health Insurance Agency 27. Objective. The project would support the design and operation of a health insurance Agency. The Agency can either be created or be added to an existing administrative structure. In case the province decides to use an existing entity to act as the health insurance Agency, it was agreed during project preparation that this entity would comply with the following pre-requisites: (1) if it has debts, those should be at a low and sustainable level; (2) it should have no operational deficit; and (3) it should have the capacity to manage administrative, financial and service delivery systems independently from the provincial government. In case the province decides to create a new entity, it was agreed that this new entity would be endowed with an organizational structure, operational capacity and financial resources that would ensure it technical and financial viability. 28. Prior to the establishment of the health insurance Agency, provincial governments would have to define the respective roles of the provincial health Authority and of the Agency. They would also have to establish the pace of transfer of funding from provincial health budgets to the Agency and the corresponding transfer of decision powers, especially with regard to the management of health personnel and the negotiation of management contracts with public hospitals. The province of Rio Negro intends to put this transfer of funds into effect within the next two years, while the province of Salta envisages a four-year horizon for this activity. 29. The health insurance Agencies would fulfill the following functions: (1) finance the services included in the basic benefits package to its beneficiaries and ensure effective delivery and quality of services; (2) efficiently manage the funds transferred from the provincial treasury; (3) contract with providers, including drug suppliers, and control compliance with contract indicators; (4) monitor and evaluate the enrollment database, the register of providers, the cost of the benefits package per beneficiary, including drugs etc; and (5) participate in the definition of the provincial health policy in coordination with the government and non-governmental agencies. 30. A monitoring and control system for the health insurance Agency would be established in each province, which would include regular monitoring of the financial, administrative, and technical performance of the Agency (see Annex lb), as well as financial audits carried out annually by provincial legislative bodies. 31. Context. The province of Rio Negro has decided to create a new entity to manage the proposed health insurance. This decision was taken based on the fact that the provincial Obra  Annex 2 Page 7 of 8 Social did not comply with the pre-requisites since it has a significant operating deficit. The Agency has already been created and, since February 1999, partly staffed. It has been involved in the preparation of the proposed project. The province of Salta, on the other hand, has chosen to entrust the management of the proposed health insurance to the existing provincial Obra Social - Instituto Provincial de Salud (IPS), which is providing health care coverage to around 330,000 public employees and their dependents. A financial assessment carried out during project preparation showed that the IPS complies with the above-mentioned financial prerequisites; it has no operating deficit and a very low debt ratio. 32. Design of the Health Insurance Agency. In the province of Rio Negro, the project would finance technical assistance and training to design: * the organizational structure, functions, and operational manuals; * the financial and administrative procedures; * the medical and financial systems to audit providers; * the information systems and the training to support the above; * management contracts with providers; * the mechanism to maintain the register of contracted providers; * the organization and function of the consumer service unit, including the creation of a grievance procedure and resolution function; and