Tanzania - Health Sector Reform Project

Report No. PIC2613 Project Name Tanzania-Health Sector Reform Project (@) Region Africa Sector Health Project ID TZPE2814 Borrower Government of Tanzania Implementing Agency Ministry of Health P.O. Box 9083, Dar es Salaam, Tanzania Contact: Dr. F.N. Njau Phone: +255-51-20261; Fax: +255-51-39951 Date the initial PID prepared November 3, 1995 Date this PID prepared March 24, 1997 Projected appraisal date February, 1998 Projected Board date May, 1998 1. Country and Sector Background. With an estimated GNP per capita of about US$ 140 in 1994 (see 1/), Tanzania is one of the poorest countries in the world. It has a population of about 29 million with a high annual growth rate at about 3 percent. After a severe economic downturn in the early 1980s, GDP has grown at the average of about 4 percent per annum since the mid-1980s as a series of reform measures were introduced. Despite the progress achieved since Independence and the recent favorable growth experience, Tanzania's social indicators still present a dismal picture. The infant mortality rate of 84 and the under-five mortality rate of 134 are significantly high, though lower than the average for Sub- Saharan Africa (92 and 161 respectively). Average life expectancy is estimated at 51 years and the total fertility rate is 5.8. The gross primary school enrollment rate (70 percent in 1993) is at about the average of all of sub-Saharan Africa (SSA) (71 percent) but has not recovered to the level achieved in the early 1980s of over 90 percent. The secondary school enrollment rate (5 percent) is the second lowest in Sub-Saharan Africa (see 2/). 2. Most of the major health problems in Tanzania can be attributed to preventable diseases. This was confirmed by a recent study which found that well over 70 percent of life years lost in Tanzania are caused by ten major diseases, such as perinatal/maternal conditions, malaria, diarrhea, and AIDS (see 3/). Perinatal/maternal conditions and malaria alone account for more than 40 percent. Many of these causes can be controlled or managed by known public health interventions, including vector control, health education, environmental health, immunization, and screening. One of the key messages in health economics is that such interventions should have the first claim on public resources due to substantial externalities to the society and under-spending on  them by private agents. 3. The government is committed to carry out major reforms in the health sector. It intends to redefine its role in health care service from that of a dominant provider to a facilitator (see 4). It is envisioned that public health services will be mostly channeled through a system in which authority and budgets are decentralized to the district level. The government will focus on ensuring that an essential cost-effective package of services can be financed for all the population, with full accountability to households as consumers, beneficiaries, and active participants. Government resources will be targeted first to public goods and to the poor, while expanding the sources of financing and provision of low priority services. The cost sharing program, developed with IDA and ODA assistance under the on-going Health and Nutrition Project, will be strengthened so that the revenues are better managed and that the system will better reflect the cost of providing services and better exempt the poor. In addition, financing mechanisms to further improve the efficiency and equity of the system is being developed, focusing on improved risk sharing through social health insurance for civil servants and formal sector employees and prepayment schemes for rural communities and the urban informal sector. 4. Since the joint Ministry of Health/donor mission in October 1995, where the government assured the donor community of its commitment to these reforms and donors affirmed their support to the reform process, a stronger collaboration among the Ministry and the donor community has been nurtured, which is expected to lead to better working relationships and improved coordination in support of the health sector in Tanzania. 5. Project Description. The project will assist the government in implementing some elements of their reform proposals which aim to increase the impact of existing resources on health outcomes and well being of the population. Since the reform plan envisages rather radical and fundamental changes in the modes of provision and financing of health services, it is evident that long-term commitment and investment will be required and some reforms can only be implemented through 'learning by doing.' The existing IDA Credit (Health and Nutrition Project - Credit 2098-TA) has recently been restructured, and is already supporting reform activities including design and pre-testing of a Community Health Fund and planning of a national social insurance. This three-year project will continue this process initially in a small scale, and progressively implement the proposed reforms. This will allow the government to assess the impact and implications of such reforms and make necessary adjustments as it proceeds with the reforms. It will also assist the government effort to decentralize and strengthen public health programs through targeted cost-effective interventions, building upon the experience in district health planning under the Health and Nutrition Project. The proposed project is intended to be a first phase of a longer-term assistance to the reform process, complementary to other donors' assistance in the context of sector-wide reforms. A possibility to make it a - 2 -  broad sector investment program will continue to be explored. 6. Briefly, the project will: (i) increase the efficiency and sustainability of the sector by improving health financing mechanisms, promoting alternative modes of service delivery, and enhancing the voice and participation of the clients in the health system; (ii) rationalize resource use and allocations based on public health priorities and cost effectiveness criteria, and intensify the impacts on the burden of disease through high-impact cost-effective public health interventions; and (iii) strengthen the institutional capacity to support a decentralized public health system that emphasizes increased responsibilities and resources for local agencies to manage public health programs and for facilities to manage themselves. 7. The Health Care Financing Component will develop and pilot test new financing mechanisms which will enhance service quality, competition in service provision, and sustainable and equitable health care financing. The component will consist of the following sub-components: a) Expansion of the Community Health Fund (CHF) pilot: The CHF is a prepayment scheme for rural communities designed after extensive consultations with various stakeholders and beneficiaries, and is being pre-tested in one district since July 1996. The project will help expand the CHF to about ten districts, while making adjustments and refinement of the design based on close monitoring, evaluation and client consultations. b) Social health insurance for the formal sector: This sub- component will provide technical assistance to further develop the design of the proposed National Health Insurance Scheme for the formal sector, and support its implementation initially only for civil servants. The government plans to implement this social insurance by contracting it out to professional insurers who will operate the scheme that will cover basic health service packages for its members. 8. The Public Health Component will develop mechanisms to finance priority public health programs in a cost-effective and sustainable manner, and to strengthen local capacity to manage and deliver such programs effectively. It will also encourage the development and testing of alternative modes of delivering services through, for instance, contracting them out on an outcome-oriented basis at the district level and below. The project will assist in financing public health interventions and testing new approaches to provision mainly in the 10 districts under the Health and Nutrition Project. These districts already have three years of experience in preparing district health plans, which have been focused on "hardware" or rehabilitation. This project will help them focus on "software" or how to produce improved public health outcomes. It will finance district proposals for targeted cost-effective public health interventions based on complete plans with measurable output indicators. This will assist the government effort to decentralize and would help develop models for the other districts to implement. - 3-  The component will also assist the community to make effective use of funds allocated from the CHF for community-based public health programs. Support systems from the District Health Management Teams (DHMTs) will also be strengthened. NGOs will be supported in a manner complementary to the district sponsored activities. 9. The Health Services Management Component will strengthen institutional mechanisms and capacity at all levels to increasingly reorient their focus to assume new roles under a decentralized system envisaged. This will mainly be achieved through technical assistance and training and will include activities to: (i) strengthen the capacity at the district level and below in managing health care services, in particular the district-based health planning mechanisms, financial management and control, and monitoring and evaluation of the implementation and impacts of district health plans; (ii) strengthen the Ministry of Health to provide adequate technical support, supervision, and quality assurance in the area of preventive and public health; and (iii) improve the three-year rolling planning mechanism for the recurrent budget and a public investment program to enhance cost-effective use of public funds and reorient its resources to public health programs. 10. Cost and Financing. The cost of the project will depend on the design of the components and cost estimates to be derived over the next 6-9 months, particularly costs derived from the roll-out plan of the CHF. At this point, an IDA credit of US$ 25 million equivalent is proposed with the following estimated breakdown by component: $ 15 million for the CHF pilots, $ 2 million for formal- sector insurance, $ 5 million for public health programs, and $ 3 million for management. 11. Project Implementation. The proposed project will be implemented using the same model as was successfully used for the Health and Nutrition Project. Overall coordination will be provided by the Ministry of Health (MOH), with close coordination and collaboration with the Prime Minister's Office/Local Government. The Principal Secretary of the MOH will be responsible for overseeing the management and coordination of project activities with an inter-ministerial Coordinating Committee at the Principal Secretary level and a working-level Technical Committee from the relevant implementing ministries and departments. The day-to-day implementation will be highly decentralized and will benefit from other donors' assistance to the government in decentralized decision making. 12. Project Sustainability. Once a society goes through a demographic and epidemiologic transition due to reductions in the risk of environmental hazards, communicable diseases, and vector- borne diseases, such changes tend to be irreversible even in times of economic downturn for two reasons. First, these gains are often closely associated with changes in behavior and knowledge, plus improvements in the environment. Such changes are not subject to short-run cycles. Second, the large initial costs in making these changes typically do not have to be repeated. The costs of -4 -  maintaining the gains are fairly low relative to the initial costs of gaining control. Once under control, diseases can be kept in check with relatively small recurrent expenditures of time and/or resources by households and communities. Similarly, financial structures that will improve the equity and efficiency of financing for curative services are in high demand by households and will be sustained by a combination of household spending and government subsidies once developed. 13. Tanzania's problem is that the large initial investments to reduce the burden of disease and to develop sustainable systems and financing mechanisms have not yet been made successfully. Once made, they should be sustained at a relatively low cost to the government. IDA involvement, along with that of other donors, will assist the government to make the large initial investments to develop self-sustaining institutional and financial structures supported by household and community demand/resources. Past investments in the public sector, plus legal restrictions on non- government providers, were unable to create a sustainable system with a large impact on health. 14. Project sustainability will be further enhanced by full local ownership of the project throughout its preparation and implementation. The government has been committed to advancing health sector reforms, and has been taking a lead in developing its sector strategy. The whole process will be pursued in a highly participatory manner with continuous and deliberate efforts to consul stakeholders and beneficiaries. Moreover, the project will enhance participation of beneficiaries by emphasizing the role of communities in managing public health programs, by empowering the final consumers of health care services through improved financing mechanisms, and by supporting the process of decentralization of health services management to the district level and facility-based management that will respond to consumer demands. 15. Lessons Learned from Past Operation in the Country/Sector. The ongoing Health and Nutrition Project, the first IDA credit in the sector, has had some major successes. Together with DANIDA, it financed reform of the pharmaceutical financing, procurement, and logistics systems, and capitalized a revolving fund to institute a sustainable financing mechanism. It supported reform of health financing in the public sector and implementation of a cost sharing system. To support the MOH's primary health care program, it successfully instituted district health planning and its implementation in ten districts. It has financed the rehabilitation of health facilities in those districts and other health infrastructure. On the other hand, it has been primarily interested in providing infrastructure and other inputs paying little attention to consumer demand. It is so complex and tightly time bound (all inputs must be delivered simultaneously by the government, and local markets have played no role despite implementation of the project in ten of the most remote districts) that it has been difficult to implement. It made almost no provision for assessing outcomes. -5-  16. In addition to building on the extensive government and donor experience in Tanzania's health sector, this project will apply lessons learned from the shortcomings of the first IDA-financed project. Paying close attention to the underlying economics, the project will assist to develop institutional and financial structures that will sustain themselves through household and community demand/resources (rather than only from national and donor resources). The project development will be led by the government so that there is strong ownership and knowledge of the project by the time of implementation. Close attention will be paid to complementarity with other donor assistance in the effort to support the sector-wide reforms. 17. Poverty Category. The proposed project would assist in alleviating poverty by improving the health status of the population, particularly those of women and children. Underlying the objectives of the proposed project is the recognition that investments must be made in support of decentralized management and decision-making processes and to harness the participation and involvement of the communities in meeting their own health demands. It will also help reduce the burden of disease in Tanzania by investing more in public health. 18. Environmental Aspects. No negative environmental impact is envisaged in the proposed project. In fact, the public health component will contribute to a healthier environment. The environmental rating of "C" is proposed. 19. Program Objective Categories. The proposed project supports human resource development, improving the conditions of women and children, and beneficiaries' participation and community control over the management of appropriate health care programs. 20. Project Benefits. The proposed project will assist in alleviating poverty by improving the health status of the population, particularly that of women, children and other vulnerable groups in the country. It is aimed to help reduce the burden of disease in Tanzania, and result in improvement of life expectancy and gains in individual health status for all age groups. Underlying the objectives of the proposed project is the recognition that investments must support decentralized management and decision-making processes and harness the participation and involvement of the communities in meeting their own health demands. 21. Project Risks. The success of the projects may be undermined by several external and internal factors. These include: adverse public budgeting situation and inadequate counterpart funds; weak institutional capacity in management and implementation, especially at the district level; insufficient competition due to slow responses by public health institutions and/or inadequate development of the private sector; slow implementation due to the limited experience in insurance and financial management; cost escalation due to over-utilization by moral hazard and cheating of non-members. Except for the totally external factors such as the government budget, maximum effort will be made during the - 6 -  preparation to minimize these risks. 1/ World Development Report 1996, World Bank, Washington, DC. 2/ Social Indicators of Development 1996, World Bank, Washington, DC. 3/ Health Policy in Eastern Africa: A Structured Approach to Resource Allocation (1995), World Bank, Washington DC, Report No. 14040 AFR. The study defined burden of disease as discounted life years lost due to premature death. 4/ Proposals for Health Sector Reform (1994); Strategic Health Plan: 1995-1998 (1995); and Social Sector Strategy (1995). Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington, D.C. 20433 Telephone No.: (202) 458-5454 Fax No.: (202) 522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by the Public Information Center week ending April 4, 1997. - 7 -