Peru - Health Reform Project

Report No. PID7393 Project Name Peru-Health Reform Project Region Latin America and Caribbean Sector Health Project ID PEPE62932 Borrower Government of Peru Implementing Agency Ministry of Health (MINSA) Av. Salaverry Cdra. 8 s/n Jesus Maria Lima Tel: 431-1247, 424-8425 Fax: 432-6177 Date PID Prepared December 15, 1998 Expected Appraisal Date July, 1999 Expected Board Date January 15, 2000 Country and sector background. Peru is a country of 23.7 million people, half of whom are poor, with a growth rate of 1.9 percent and strong rural to urban migration. In 1993, the country was 70 percent urban. However, of the 11 million estimated poor in Peru, 60 percent reside in the primarily rural sierra and jungle regions. Peru's infant and child mortality indicators showed notable progress since 1990 due to sustained increase in immunization and effective control of diarrheal infections following strong educational campaigns launched by special health programs. However, Peru's infant mortality rate in 1996 (43 per 1,000 live births) still places it among the worst in the LAC Region. Progress was mainly in post-neonatal mortality (35w drop from 1990-1996); much less was achieved in neo-natal (17w drop) or in maternal mortality (11w drop). The chief causes of infant mortality are: perinatal illnesses (31.8 percent) and infectious diseases (including ARIs, EDAs, and other bacterial illnesses), which together account for one-third of the deaths of children under one year of age. The maternal mortality rate for 1990-1995 of 265 deaths for 100,000 live births is almost one and a half times higher than the LAC average, and is 15 times the average for developed countries. The chief causes of maternal mortality?hemorrhage (23%), mishandled abortions (22%), infections (18%), and hypertension (17%)?are a reflection of the low 18 percent rate of professionally-attended births, especially in rural areas. There is low priority for the development of obstetric services and high economic barriers for birth delivery and obstetric complications. In addition, the cultural barrier is heavily reinforced by services that remain unprepared to deal with poor indigenous women. The greater problems of mortality are concentrated among the poorer 40 percent of the population where almost 60 percent of child deaths occur. The main cause of death continues to be infectious diseases (including ARI, diarrhea, tuberculosis). Despite some progress in expanding rural water and sanitation, only 22 percent of the rural population has access to safe water. Inadequate food and waste disposal, together with a higher exposure to illness transmitted by vectors account for the greater health risk in the rural areas. In addition, epidemiological surveillance is weak, information systems are  insufficiently coordinated, and regional laboratories are poorly equipped and staffed. Emerging and reemerging diseases such as malaria of the falciparum variety, yellow fever, dengue, cholera, and rabies are believed to be either increasing or to have established themselves as chronic problems. Other main sectoral issues include: (i) inequitable access?between 1994 and 1997 the largest expansion in use of medical services occurred among the richest 40 percent; (ii) sector fragmentation?uncoordinated objectives and programs involving different public and semi-public agencies; (iii) financing and insurance issues? sector financing has been done on a historical basis without relation to sector outputs, and insurance provision has lacked competition, a situation which has led to inefficiencies; (iv) underutilization of public hospitals?there is a misalignment between the capital structure (physical plant and technology) and the actual services provided; and (v) human resources for health care?the location and quality of technical preparation of medical personnel, as well as the skills mismatch with national needs, are challenges to be addressed. Project objectives. The medium-term goal of the 7-10 year health sector reform program is to reduce infant and maternal mortality, and deaths of the poor from communicable diseases and inadequate environmental conditions. This program is proposed to be supported by an Adjustable Program Loan (APL) in conjunction with a flexible loan from the IDB. The first phase of the APL (FY2000-2003) aims to contribute to the above-mentioned medium-term health goal focusing on the poor households in 14 health departments in Peru. It will finance the design, pilot-testing, and, as appropriate, launching of policy and institutional reforms, as well as corollary investments necessary to pursue the following strategies: (i) guarantee the universal access of the poorest population groups to a program of essential health services which would include women's reproductive, child health and other health promotion/disease prevention interventions; (ii) reduce economic and cultural barriers to utilization of, and participation in, the health system; (iii) improve the quality, effectiveness and efficiency of health care services and specific public health programs by developing integrated health care networks, financing and managerial models in selected regional health departments; and (iv) strengthen the role of the Ministry of Health to provide norms, assure adequate health financing for the poor, and supervise the delivery of services by health providers. The proposed APL would complement a poverty-focused Structural Adjustment Loan (SAL) that is currently under discussion between the Peruvian Government and the Bank. The social agenda component of this possible SAL would include health conditionalities that would front load critical reform decisions. The implementation of these reforms would be financed under the APL. Project description. The first phase of the APL has four main components with subcomponents: I. Reorientation of Health Care Delivery System and Strengthening of Public Health Programs?(a) Technical assistance to establish integrated health care networks (redes) geared to delivery of a program of essential health services to address mother and child health problems, communicable diseases, and improvement of public health policies and interventions; and (b) Investment financing for Health Subprojects: (i) to establish/strengthen redes for the delivery of essential health services; (ii) to support innovative community-based, integrated projects promoting the health and well-being of the local population; and (iii) to carry out modernization of selected hospitals in the project areas. II. Pilot Reform -2 -  of the Health Financing Mechanisms?Technical assistance to (a) implement the pilot and geographic extension of the mother and child reimbursement scheme (Seguro Materno Infantil-SMI); (b) increase the coverage and efficiency of social security administration (IPSS), private insurers and autonomous hospitals; and (c) develop pricing and payment mechanisms to purchase health services. III. Reorientation of the Roles of MINSA and Public/Private Health Providers: Technical assistance to (a) improve MINSA's role in supervising mother and child health, epidemiological surveillance, and public health conditions; (b) pilot test of management service contracts (acuerdos de gestion) between MINSA and the public/autonomous health entities; (c) strengthening of regional health departments; and (d) hold consensus workshops on health care reforms. IV. Project Coordination. Management of project implementation. Project financing. The total cost of the ten year health reform program is estimated to be US$300 million. The cost of the first phase (the current APL) is about US$150 million, of which the Bank would contribute US$50 million, the IDB another US$50 million, and the rest would be covered by Government financing. Trigger indicators to enter the subsequent phases of the APL will be specified. Project implementation. The Ministry of Health will coordinate project implementation. Investments related to Component I (b) would be implemented through a (managed) demand-driven, subproject mechanism. Subprojects can be proposed by individual or group of health departments, autonomous hospitals, or communities. The subproject eligibility criteria would include the need for "planes locales de salud" a practice already existing in the CLAS. Subprojects which form part of an integrated set of health activities in the local area will be given priority. Technical assistance and investments related to Components II and III would be implemented through a subcontracting mechanism between the MINSA and eligible entities. The eligibility and appraisal criteria, as well as arrangements for contracting, supervision and disbursements, would be specified in a Procedures Manual. Project sustainability. Implementing the lessons learned from the pilot financing and service delivery reforms would increase the chances of sustainability. Also, the requirements to have the investment subprojects as part of an integral part of the local health plans would ensure a well- thought-out set of health services and activities with appropriate personnel and maintenance support. Lessons learned from past operations in the country/sector. The project design builds upon the experience of relevant operations financed by the World Bank Group over the past decade, including the ongoing Basic Health and Nutrition project in Peru, as well as other international experiences. Key lessons incorporated into the project design are: (i) project objective and scope should be linked to a clear policy framework; (ii) strong government and stakeholder commitment should be obtained, particularly from regional, municipal, and community organizations; (iii) the implementation of a flexible preparatory project is prudent before launching a sector-wide reform program, as it enables the public and interest groups to debate specific issues prior to large-scale implementation; (iv) subproject design should be simple, focused, with modest objectives; (v) financing of critical investments should be linked to the implementation of policy and/or institutional reform; (vi) provision of support systems and human resources development is important to -3 -  increase decision making and management capacity of the MINSA; (vii) an adequate monitoring and impact evaluation system should be developed to allow adjustments to be made in project design and implementation arrangements during the life of the project; and (viii) decentralization should be accompanied by measures to ensure accountability and equity among decentralized entities, particularly when activities are financed within a competitive framework. Poverty category. The proposed project addresses poverty reduction by explicitly focusing project activities on improving the access to, and the quality of, health and related services (e.g. water and sanitation) in 14 health departments in Peru. Special focus on indigenous women and children will be a feature of the project. Environmental aspects. The proposed project would not have environmental risks. No resettlement would be called for. A study of how best to serve the needs of the indigenous population is planned. Program Objective category. The category for this project is Poverty Reduction and Human Resources. Contact Point: The InfoShop 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 activities and/or components may not be included in the final project. Processed by the InfoShop week ending March 5, 1999. - 4-