China : AIDS expenditure tracking in Guangxi Zhuang Autonomous Region - A case study

 68674 CHINA: AIDS Expenditure Tracking in Guangxi Zhuang Autonomous Region A Case Study China Health Economics Institute And The World Bank Human Development Unit East Asia and Pacific Region The World Bank January, 2007 Document of the World Bank  Acknowledgements This report has been prepared by a team comprising Shiyong Wang (World Bank); Q Zhu (Guangxi Center for Disease Control); Y Zhao, Y Zhang, J Liu, and Q Wan (China National Institution for Health Economics); M Tan and H Li (Guangxi Regional Health Bureau); and H Huang (Municipal Bureau of Health, Liuzhou, Guangxi). The work was done under the supervision of Ana Revenga, Task Team Leader for the China AIDS AAA Program, and benefited from inputs from David Wilson (World Bank), Emiko Masaki (ADB) and Dr. Viroj Tangcharoensathien (IHPP, Thailand). 2  Table of Contents List of Acronyms ............................................................................................................................................... 5 Executive Summary .......................................................................................................................................... 6 Introduction ..................................................................................................................................................... 10 Chapter 1: Background ................................................................................................................................... 12 1.1 Social-economic Information on Guangxi Zhuang Autonomous Region and the County of Luzhai 12 1.2 HIV/AIDS Epidemics in Guangxi and Luzhai........................................................................ 13 1.3 Delivery of HIV/AIDS Prevention and Care ........................................................................... 15 1.4 HIV/AIDS Financing ................................................................................................................ 17 Chapter 2: Purposes and Methodology......................................................................................................... 18 2.1 Purposes ..................................................................................................................................... 18 2.2 Definition and Boundaries of HIV/AIDS related Expenditures ............................................ 18 2.2.1 HIV/AIDS Expenditures .................................................................................................. 18 2.2.2 Boundaries........................................................................................................................ 19 2.3 Methodology ............................................................................................................................... 19 2.4 Study Tools ................................................................................................................................. 19 Chapter 3 Results ............................................................................................................................................ 21 3.1 The Total Expenditure on HIV/AIDS in Luzhai County ....................................................... 21 3.1.1 OOP Payment ................................................................................................................... 24 3.1.2 Financial Input from Government .................................................................................... 25 3.1.3 Contribution from International Organizations ................................................................ 27 3.2 HIV/AIDS Expenditure by Service Provider in Luzhai ......................................................... 28 3.3 HIV/AIDS Fund Flow ............................................................................................................... 31 3.3.1 Key Government and International Financial Inputs for HIV/AIDS Prevention and Control in Guangxi .................................................................................................................... 31 3.3.2 Budget Preparation ........................................................................................................... 32 3.3.3 Funds Flow ....................................................................................................................... 34 3.3.4 Financial Management ..................................................................................................... 36 Chapter 4: Discussion .................................................................................................................................... 39 4.1 Sustainability of HIV/AIDS Financing .................................................................................... 39 4.1.1 Low Share of Public Spending on HIV/AIDS ................................................................. 39 4.1.2 Disproportional Allocation to the Local level .................................................................. 40 4.2 Equity of HIV/AIDS Financing................................................................................................ 41 4.2.1 Allocation of Government Earmarked Transfers for HIV/AIDS...................................... 41 4.2.2 OOP Payments for HIV /AIDS Prevention and Control .................................................. 44 4.3 Efficiency of Funds’ Utilization ................................................................................................ 45 4.4 Integration of Resources for HIV/AIDS Prevention and Control ......................................... 47 4.5 Limitations of the Methodology ............................................................................................... 47 4.5.1 Different scenarios for the calculation of total HIV/AIDS Expenditure .......................... 47 4.5.2 Need for better estimation of OOP Payments .................................................................. 48 4.5.3 HIV/AIDS Expenditures at Private Service Providers ..................................................... 49 4.5.4 Underestimation of Co-payment by Insurance Schemes .................................................. 49 4.5.5 Limited data availability................................................................................................... 50 Chapter 5 Conclusions and Recommendations ..................................................................................... 51 3  5.1 Achieving a Better Understanding of the Overall Financial Needs and Inputs for HIV/AIDS Prevention and Control ............................................................................................... 51 5.2 Increasing the Input from the Central/provincial Government and Alleviating the Financial Burden to PHAs.............................................................................................................. 52 5.3 Using current Input for HIV/AIDS Prevention and Control effectively .............................. 53 5.4 Improving the Equity and Rationality of the Government’s Input for HIV/AIDS Prevention and Control .................................................................................................................. 53 5.5 Integrating Resources for HIV/AIDS Prevention and Control ............................................. 54 ANNEXES ......................................................................................................................................................... 55 4  List of Acronyms AA HIV/AIDS Account ART Antiretroviral Therapy BMI Basic Medical Insurance CDC Center for Disease Control CSWs Commercial Sex Workers EPS Epidemic Prevention Station FDG Focus Group Discussion GFATM Global Fund for HIV/AIDS, Tuberculosis and Malaria HRGs High Risk Groups IDUs Injecting Drug Users IEC Information, Education, and Communication MMT Methadone Maintenance Therapy MA Medical Assistance MSM Men Having Sex with Men NCMS New Cooperative Medical Scheme NEP Needle Exchange Program NHA National Health Account OI Opportunistic Infections OOP Out-of Pocket PET Public Expenditure Tracking PHA People Living with HIV/AIDS PMTCT Prevention of Mother to Child Transmission PQ Price and Quantity STIs Sexually Transmitted Infections TEA Total Expenditure on HIV/AIDS TEH Total Expenditure on Health TEPH Total Expenditure on Public Health THCs Township Health Centers TGEA Total Government Expenditure on HIV/AIDS VCT Voluntary Counseling and Testing WB World Bank WHO World Health Organization 5  Executive Summary The Chinese government‘s spending on HIV/AIDS has increased dramatically in recent years. It only accounts, however, for a part of the total resources dedicated to HIV/AIDS. The fragmented nature of HIV/AIDS financing makes it difficult to register the flows of funds in a holistic and useful manner. More importantly, there are questions over the extent to which increased resources for HIV/AIDS have been allocated and utilized in an equitable and effective manner in order to achieve the intended outcomes specified in the Second Five Year Action Plan for HIV/AIDS Prevention and Control (2005-2010). This study was designed to gain a better understanding of possible impediments to an effective local HIV/AIDS response. It mainly focused on: (a) assessing different aspects of HIV/AIDS financing such as sources of financing, HIV/AIDS related services and their providers being financed, and beneficiaries; (b) estimating households‘ out of pocket spending on HIV/AIDS; and (c) identifying bottlenecks preventing the effective and equitable utilization of existing HIV/AIDS resources. An array of methods was used for the study. Among them, the National Health Account and the Public Expenditure Tracking were the two most important ones. The study combines analysis of province-level data with an in-depth case study of HIV/AIDS financing in a single, high HIV prevalence county – Luzhai. Purpose Method Understanding HIV/AIDS Financing: NHA: Surveys, Desk Review -sources, providers, services, beneficiaries Analysis of Kendall Concordance -equity of HIV/AIDS financing Coefficient Identifying Bottle-neck Issues in Flow of PET, Desk Review, Interview with Key HIV/AIDS Resources Informants Collecting Information on the Local HIV Epidemiology, Health Seeking Behaviors, Desk Review, Delphi Method etc. Key findings from the study include: 1. The current structure for HIV/AIDS financing in Guangxi, as illustrated by the case of Luzhai county, seems to be inequitable and rely excessively on out of pocket (OOP) spending. Total annual HIV/AIDS expenditure in Luzhai in 2005 was 7.04 Yuan per capita, (representing 2.58 percent of the total annual health expenditure). About 62 percent of this AIDS spending was OOP, representing a large burden on HIV/AIDS patients.1 PHA‘s average annual expenditure for inpatient HIV/AIDS treatment and care alone was 8,100 Yuan in 2005, which was 2.67 times higher 1 In comparison, OOP spending accounted for 57.7% of total expenditures on health. 6  than the net average annual income per capita of Luzhai‘s population. This is clearly unsustainable from a patient‘s perspective. Surprisingly, the share of OOP is particularly high for prevention spending – even though much of that spending could be considered as contributing to a public good.2 Government contributions (all levels) amounted to only 28.4 percent of the total HIV/AIDS expenditure. Of this 28.4 percent, more than one half were contributions of provincial, prefecture and local governments; while central government contributions represented only 11% of total HIV/AIDS spending. This allocation of responsibility for HIV/AIDS financing is not in line with the Chinese Government‘s principle that ‗HIV/AIDS should be financed by different sources, of which government’s input is the prime source’ although it does reflect its maxim that the responsibility is to be shared by different levels of government. 2. The effectiveness of Government‘s expenditure on HIV/AIDS can be increased significantly by improving both allocative and technical efficiency. The allocation of spending does not correlate well with evidenced-based policy priorities. While spending on prevention activities correctly accounts for the bulk of total spending (69.5%), the distribution of spending across different types of interventions does not reflect the priority that should be given to interventions among high risk groups. Spending on STI prevention and control, PMTCT and M&E are too low, while that on IEC is too high. Indeed, IEC consumed the largest share of government spending on HIV/AIDS, even though the characteristics of the Guangxi epidemic and cost-effectiveness analysis suggest that the most effective use of resources would be to support low-cost interventions (such as NEP and STI prevention and control) among high risk groups in high prevalence areas. The fact that only 0.3 percent of HIV/AIDS expenditure was spent on M&E of ongoing projects suggests that M&E is not systematic. In this context prospects for further developing evidence-based policies targeted to the specific characteristics of Guangxi‘s AIDS epidemic are not good. 3. There is significant scope to improve budget preparation and financial management practices at both the central and provincial level. Budget preparation at both central and provincial level is excessively top-down3 and does not reflect overall needs, risk factors, fiscal capacity or implementation capacity at the county and below-county level. An analysis of the consistency between the size/distribution of central earmarked transfers and provincial needs suggested that the allocation of transfers across provinces is fairly equitable and in correlation with needs. 4 However, the same analysis revealed that the allocation of central, provincial and 2 73.2% of all OOP spending went to prevention, and 26.8% to treatment. Blood safety, purchasing clean syringes and condoms, and STI treatment consumed 90% of OOP on HIV/AIDS prevention. 3 Prior to 2006, the central government did not consult provinces when developing the budget plan for earmarked AIDS transfers. This made it difficult to integrate central transfers with the rest of the resources available at the province level. 4 Although the equity of the allocation may be reduced by the fact that provincial GDP per capita is not taken into account. 7  pooled transfers within the province (e.g. across counties) was not equitable and did not reflect county-level needs and risk factors. The analysis also suggests that share of central and provincial earmarked transfers reaching the county level is too low (only 25% in 2004 and 2005). Moreover, central earmarked transfers took too long (average of 18 months) to reach the service providers. In 2005, it took 9 months for the central earmarked funds to be released to the provinces. An additional 5 months delay took place between the provincial and the prefecture level, 2 more months between prefecture and county, and 3 additional months within county, before the funds would reach the actual providers. Provincial earmarked funds did not do much better, and there has been no evidence of improvement in the timeliness of the flow of funds in the last few years. Another significant bottleneck is that all central and provincial transfers take the form of a ‗quota‘ for fund allocation not cash. These transfers are only materialized after the county and province have fulfilled their commitments to the required revenue to the provincial and central government respectively. This tends to penalize poor counties, and those with less revenue generating capacity. In practice it means that providers/implementation agencies have to front the funds needed to provide HIV/AIDS services before they can be reimbursed. In the more extreme cases, they will simply not provide services until the transfers have ‗materialized‘. 4. Current annual budgeting approaches are prone to inflexibility embedded in the principle of ‗designated fund for designated tasks‘. This is especially true for transfers from the central government. At the provincial level, conventional ‗line item‘ budgeting has also suffered from inflexibility and lack of results orientation. Moreover, different timelines and budget methodologies at central and provincial level (and also for international supported projects) have meant that there has been no integration of resources from different channels. As a result, unnecessary redundancy and negligence in both project geographic coverage and package of service provision co-exist in Guangxi. In addition, slow disbursement is widespread in both government and donor financed HIV/AIDS projects, mainly due to the fact that a key impediment, low capacity at the grass roots level, was not addressed. The team put forward the following recommendations based upon the above mentioned findings: 1. Efforts should be made to better understand the overall financial needs for HIV/AIDS prevention and control at both national and local levels. This can be achieved through the promotion of resource needs estimation and AIDS Account. Bottom-up approaches are suggested over top-down approaches in case that the low capacity problem at lower levels is addressed. 2. The government should increase its share in the total HIV/AIDS expenditure to at least 70 percent. The central government‘s share in total public spending on HIV/AIDS should be increased to 60 percent and the share of County government‗s expenditure reduced to less than 10 percent. 8  3. The inputs for HIV/AIDS prevention and control should be used more effectively by: (a) developing an integrated and results-based budget for central and provincial earmarked transfers by provinces; (c) improving capacity at County level and below; (d) increasing share of spending on STI prevention and control and M&E; and (e) implementing cost containment measures such as prospective provider payment mechanisms and improved compliance of the patients to treatment. 4. Better results on equity and rationality of government‘s input for HIV/AIDS prevention and control should be achieved. It is recommended to develop an overall needs index representing key determinants to be used as criteria for funds‘ allocation. The proportion of funds allocated should be greater for counties where new HIV infection is happening daily. To ensure equitable access to HIV/AIDS services, it is recommended that: (a) the threshold of ART access is lowered; (b) free treatment for priority OIs is provided; (c) behavior interventions, treatment and care are brought closer to PHAs by developing capacity at County level and below; (d) BMI, NCMS and MA are expanded and deepened so that OOP spending will be reduced. 5. Integrating resources for HIV/AIDS prevention and control would be required. It is imperative and feasible to integrate central and regional earmarked transfers for HIV/AIDS if budget plans were developed by the provinces. Budget development could be delegated to the provinces so that integration of both central and provincial earmarked transfers would be feasible. This study represents the first attempt to systematically analyze and document HIV/AIDS financing in China. It suffered from a number of limitations and challenges. The findings in one County and one province can not be simply extrapolated to other settings. Nevertheless, it definitely could help policy makers in the areas of HIV/AIDS prevention and control at central and local levels, by pointing out some of problematic issues that they do not normally consider. It is hoped that the findings of this study will help provide solutions to the problems identified so that the local response to HIV/AIDS can be more effective. 9  Introduction Fragmentation in both financing and service delivery is a key feature of the health sector in China, as it is for HIV/AIDS prevention and control. The government of China has set up the principle that ‗HIV/AIDS should be financed by different sources, of which government’s input is the prime source, and the responsibility is to be shared by different levels of government’ for HIV/AIDS financing. Such a system entails various channels and modalities for HIV/AIDS financing. In response to the escalating HIV epidemic and increased advocacy from the international society, the government of China has strengthened its commitment to fight against the disease. HIV/AIDS policies, countermeasures and financial inputs have experienced dramatic changes as a result (Figure 1). At the central level, besides the increase in the earmarked funds for HIV/AIDS prevention and control, public spending on construction of disease prevention and control systems and blood centers have also benefited HIV/AIDS prevention and control activities. The provincial governments have emulated the central government and increased their financial contributions for HIV/AIDS prevention and control. For instance, in 2003 county's AIDS funds increased by 53 percent compared to those of the previous year. International organizations had committed to the fight of HIV/ADIS in China around 2.2 billion Yuan by the end of 2005, of which 700 million US dollars were disbursed in 2003 and 2004. However, the above mentioned financial inputs are not exhaustive, since private inputs for HIV/AIDS prevention and treatment and payments by different health insurance schemes for HIV/AIDS and STIs have not been included. Figure 1: Evolution of HIV/AIDS Policy and Financial Input from the Central Government’s in China 900 2006: The AIDS Stipulation & the Second Five Year Action Plan 800 (2006-2010) Nine Countermeasures by Premier Wen Jiabao 2005: The 700 600 2004: The SCAWCO Setup 500 2003: The Five Commitments at the UNGASS by the GOC 400 2002: Launch of China Cares Initiatives 300 2001: Five Year Action Plan 200 (2001-2005) 1998: MLT Plan (1998-2010) 100 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 One of the first key questions to answer when discussing HIV/AIDS financing is to how much the need for HIV/AIDS prevention and care amounts. Needs are determined by many factors, such as the size of high risk populations and their behaviors, costs and effectiveness of intervention measures, and the capacity to absorb funds at the local level. This makes it 10 challenging to answer that question. There have been some limited attempts to gauge the total financial inputs required for HIV/AIDS prevention and control at the provincial level. However, the usefulness of such exercises has not been yet confirmed. More practical questions relevant to HIV/AIDS financing include: (a) how much of the total expenditure on HIV/AIDS should come from the Government? (b) What share of the responsibility the different Government levels have? (c) How to integrate the funds from different financers? (d) How the resources for HIV/AIDS prevention and control should be allocated and utilized so that their impact could be maximized? Unfortunately, there is no existing data to answer these questions. To add further complications, there is also little information on private spending on HIV/AIDS in China. One possible way to answer these questions is to develop HIV/AIDS Account (AA) so as to describe the funds flows from different sources. AA is also useful for understanding to what extent HIV/AIDS related policies are effectively implemented on the ground, and the bottleneck issues in the funds‘ utilization. 11  Chapter 1: Background In order to understand the financing, allocation, management and utilization of HIV/AIDS resources in China, identify any existing problems in HIV/AIDS funds‘ flows, and explore possible measures to address the issues identified, a case study on the implementation of a HIV/AIDS account was conducted in Guangxi Zhuang Autonomous Region. The case study represents the very first attempt to set up an HIV/AIDS account in China. In order to effectively manage the exercise, the team decided to develop the HIV/AIDS account at the County level, which is the lowest level of government that has financial responsibility. The County is also where new HIV/AIDS happens daily. The following criteria were established for the selection of provincial and county candidates: 1. Support from health and finance authorities at provincial and County levels 2. Existing provincial and County health accounts. Preferably existence of local public health account 3. Relatively severe HIV/AIDS epidemic and exists a sizable number of AIDS patients for gauging OOP for HIV/AIDS 4. Various behavioral interventions among identified high risk groups have been implemented 5. Systematic documentation of HIV/AIDS epidemiology, as well as funds utilization Following the above mentioned criteria, the research team identified Guangxi Zhuang Autonomous Region and Luzhai County for the case study. 1.1 Social-economic Information on Guangxi Zhuang Autonomous Region and the County of Luzhai Guangxi Zhuang Autonomous Region is located in the southwest of China, bordering with Guangdong, Yunnan, Guizhou and Hunan provinces in China as well as with Viet Nam. There are 14 prefectures and 109 counties/prefectures in the region, with a population of 49.25 million in 2005, of which 66.38 percent are farmers who reside in the rural areas. The GDP and fiscal revenue per capita in the region were respectively 8,746 Yuan and 607.3 Yuan in 2005—Guangxi ranked 28th and 24th among the 31 provinces, Autonomous Regions and municipalities in the country in terms of GDP and fiscal revenue per capita. Located in Liuzhou Prefecture, the County of Luzhai had a population of 482.6 thousand persons in 2005, of which 81.12 percent were farmers. The GDP per capita was 9,032 Yuan and the fiscal revenue per capita was 623 Yuan in 2005 (Table 1). The public health expenditure in 2004 was 12.67 million Yuan in total or 26.2 Yuan per capita. It represented 13.49 percent of the total health expenditure. Out of the total expenditure for public health, 39.16 percent came from the Government, and 57.66 percent from the private 12 sector in the form of out-of-pocket spending. International projects‘ funds only accounted for 3.18 percent of the total. Table 1: Selected Socio- economic Indicators in Guangxi and Luzhai, 2005 Indicators Guangxi Luzhai Size of Population(10,000 persons) 4,660 48.26 Share of Rural Residents 66.38 81.12 GDP Per Capita (Yuan) 8,746 9,031.64 Government Revenue (100 million Yuan） 283 3.01 Government Expenditure（100 million Yuan） 607.3 3.32 Average Annual Disposable Income of Urban Residents (Yuan) 8,916.8 8,630.00 Average Annual Net Income of Rural Residents (Yuan) 2,494.7 3,008.00 Total Health Expenditure Per Capita(Yuan) 334.64* 272.52 Total Health Expenditure as % of GDP 4.93* 3.02 Public Health Expenditure Per Capita(Yuan) n.a 26.2* Public Health Expenditure as % of GDP n.a 0.36* Note: * refers to the data in 2004. 1.2 HIV/AIDS Epidemics in Guangxi and Luzhai The first HIV infection in Guangxi was identified in 1996 among drug users. By the end of 2005 the number of reported HIV infections reached 20,604, among which 1,497 were AIDS cases. Guangxi‘s infection rate was the 3rd highest in the country. The HIV epidemic in Guangxi has the following features: (a) The epidemic is escalating and expanding rapidly. HIV infection has spread to all prefectures and counties in the region. The number of reported HIV infections since 2001 represented 87.28 percent of the total ever reported in the region. (b) Drugs injection is the main mode of HIV transmission, accounting for more than 50 percent of the total HIV infections identified. (c) Most of the infected are adults at their productive age. For example, 85 percent of the infected were in the 20 to 49 years old age group. (d) Some places in the region are experiencing severe HIV epidemic, evidenced by a high HIV prevalence among pregnant women or an increasing number of AIDS patients. Luzhai County is experiencing a severe HIV epidemic. The first HIV infection was reported in 1998. The total number of reported HIV infections reached 1,335 by 2005. The features of the epidemic in this case are: (a) Although the population of the County represented less than 1 percent of the total in the Autonomous Region, the share of HIV infections was 6.5 percent of the total number of reported HIV infections in the region and ranked 1st among all counties. (b) The main mode of HIV transmission in the County was drugs‘ injections. The detailed epidemiologic characteristics of HIV in Guangxi Autonomous Region and the County of Luzhai are presented in Table 2. 13 14  Table 2: Comparison of HIV/AIDS Epidemics in China, Guangxi Zhuang Autonomous Region and County of Luzhai, 2005 Epidemic feature China Guangxi Luzhai Time of the 1st reported HIV Infection 1985 1989 1998 The Cumulative Number of HIV 144,089 20,604 1,335 Infections The Cumulative Number of AIDS 32,886 1,497 n.a. Patients Main transmission Routes Injecting Drug Use 39.3% 56.3% 57.8% Sex contact 9.2% 9.7% 12.5% Mother to Child Transmission 0.9% 0.2% 0.3% Transfusion of Blood and Blood 24.7% 0.8% 0 Products 25.9% 33% 29.4% Others HIV Prevalence among HRGs CSWs 0.94% 1.19 %( 0-5%) 5% IDUs (0-13.5%)* 15.8 %( 0.5%-46 54.59%* MSM 6.64% %) n.a. Pregnant Women (0-87.9%)* n.a. 0.65% 1.4%* 0.34 %( 0-1.8%) 0.26% (0-2%)* Size of HRGs CSWs n.a. 105,530-104,567 400-800 Client of CSWs n.a. 1,055,280-1,545, n.a. IDUs n.a. 670 1,000-2,000 MSM n.a. 180,763-308,110 500-1,030 101,586-20,3169 Note: * refers to data in 2004. 1.3 Delivery of HIV/AIDS Prevention and Care The Commanding Center for HIV/AIDS prevention and control, Guangxi Zhuang Autonomous Region Working Committee for HIV/AIDS Prevention and Control was established in June, 2004. The Committee comprises 29 members including the Bureau of Health, the Bureau of Education, the Bureau of Public Security and the Bureau of Justice. Guangxi is also a member of the State Council Working Committee for HIV/AIDS Prevention and Control since 2004. The committees are mainly responsible for policy making for HIV/AIDS prevention and control, as well as for the coordination between different sectors. HIV/AIDS related services are provided through a complex system5. The designated technical body for HIV/AIDS prevention and control in the region is the system for disease prevention and control at an arm‘s length distance of the health bureaus at different levels. 5 In line with OECD SHA, health services related to HIV/AIDS prevention and care include HIV/AIDS care, surveillance, prevention, program administration, capital formulation and social support to AIDS patients. 15 There are 106 Centers for Disease Control (CDCs) or Epidemic Prevention Stations (EPSs) set up in all of the 109 counties/cities with a total number of 775 staff. The system is responsible for HIV sero-prevalence and behavioral surveillance surveys, and is the technical designer and key implementer for the regional HIV/AIDS prevention and control program. More information on HIV/AIDS services and their providers is summarized in Table 3. In terms of intervention among High Risk Groups (HRGs), forty three cities and counties have launched condom promotion programs. There were thirty Needle Exchange Programs (NEPs) and four clinics for Methadone Maintenance Therapy (MMT) in the region. Comprehensive care programs for People with HIV/AIDS (PHA) had been implemented in nine counties up to 2005. Table 3 HIV/AIDS Services and Providers Category Provider AIDS treatment and care Inpatient treatment and Care Designated hospitals Outpatient treatment and Care Designated hospitals, township health centers, and clinics HIV Surveillance AIDS and STI reporting All medical facilities, CDC, STD prevention and treatment facilities Sero-prevalence Surveillance CDCs, Institutions for STI prevention and control Behavior surveillance surveys CDCs Ad hoc surveys on HIV/AIDS and CDCs, Institutions for STI prevention and control STIs Prevention IEC activities CDCs, Institutions for STI prevention and control, health care providers6, other sectors, NGOs, social workers/volunteers Interventions among HRGs CDCs, Institutions for STD prevention and control, health care providers, other sectors such as public security, justice, and NGOs STI Clinical Management CDC, Institutions for STD prevention and control, health care providers, pharmacies Others PMTCT MCH centers, designated hospitals HIV VCT CDCs, health care providers HIV Screening CDC, health care providers, blood centers Blood Safety Blood centers, health care providers, NGOs such as Red Cross Associations Condom Promotion CDCs, Institutions for STD prevention and control, health care providers School-based Life Skills Training CDCs/EPS, schools Other Prevention-related activities Program Administration7 Members of the Regional HIV/AIDS Working Committee, 6 These include hospitals, MCH centers, Township health centers, village clinics, and other private clinics. 7 It includes policy development, advocacy, program/project development, monitoring and evaluation. 16  and the institutions affiliated to the Committee Training All above mentioned institutions and service providers Capital Formation for Health All above mentioned institutions and service providers Care Providers Social support and care to PHA Department of Civil Affairs, NGOs 1.4 HIV/AIDS Financing The research team has identified a number of potential financiers for HIV/AIDS prevention and control in the Guangxi Zhuang Autonomous Region by undertaking an exhaustive literature review and through the pilot study. These include the government at different levels, international organizations and bilateral donors, private contributors, health insurance and private donations. Contributions from these sources take different forms such as cash, earmarked transfers, and in-kind inputs. They also have different priorities for service delivery and geographic areas. However, there is little information on contributions to HIV/AIDS prevention and control by households and health insurance.8 8 Yu Dongbao, et al 17  Chapter 2: Purposes and Methodology 2.1 Purposes This study was designed to estimate the financial inputs from different sources and analyze the funds‘ allocation and utilization. It was also intended to identify any bottleneck issues and their root causes in these processes for some of the key sources such as government and international donors at the regional and county levels in order to provide evidence for improving the principles and practices for HIV/AIDS related resource allocation, strengthening financial management and improving the effectiveness of resource utilization. 2.2 Definition and Boundaries of HIV/AIDS related Expenditures The research is based on the principles for health accounts adopted by the OECD countries, international experience in the development of HIV/AIDS accounts, HIV/AIDS prevention and control practices in China for defining HIV/AIDS related functions and services, and the category of sources of financing and service providers. 2.2.1 HIV/AIDS Expenditures In line with general the National Health Account (NHA), this sub-analysis used a functional approach to defining HIV/AIDS expenditures. The HIV/AIDS expenditures are the expenditures primarily intended to prevent the spread of HIV/AIDS and provide treatment and care to PHAs in a defined timeframe (usually 1 year). In the study, HIV/AIDS expenditures included direct health expenditures, health-related expenditures and non-health-related expenditures as shown in the following sketch map (Figure 2). Figure 2: Boundaries of HIV/AIDS Expenditures Direct Health Expenditures Health-related Non-health-related Expenditures Expenditures HIV/AIDS Expenditures Direct health expenditures are the core of this study. Health-related expenditures refer to services such as capital investment and staff training needed for HIV/AIDS prevention and control. Non-health expenditures included support to and care for HIV/AIDS orphaned children and HIV affected families. 18 2.2.2 Boundaries For the HIV/AIDS sub-analysis the expenditures are defined as expenditures incurred by and for the citizens of Luzhai on HIV/AIDS prevention and treatment in 2005, which did not only happen within the border of the county, but also were made by its citizens in health facilities outside the county. This study has used an accrual method of accounting, which means the goods and services are accounted for the same year they are provided or delivered, rather than the time when they are actually paid for. HIV/AIDS prevention and care activities have been mainly categorized in seven groups including treatment and care, HIV surveillance, prevention, training, program administration, capital investment and social support to PHAs. Treatment and care activities include outpatient/inpatient services for Antiretroviral Therapy (ART) and Opportunistic Infection (OI) management. Prevention activities included Information, Education, and Communication (IEC) campaigns, intervention among HRGs, Clinical management of Sexually Transmitted Infections (STIs), HIV VCT, blood safety, prevention of mother-to-child transmission, condom promotion, etc. The category of training included all training activities relevant to HIV/AIDS prevention and control. 2.3 Methodology In order to develop an HIV/AIDS Account (AA) and analyze funds‘ flows, both quantitative and qualitative methods were employed. The quantitative methods included National Health Accounts, analysis of equity of resource allocation through the Kendall‘s coefficient of concordance and questionnaire investigation among selected high risk groups such as Commercial Sex Workers (CSWs), Men having sex with Men (MSM) and Drug users (Table 4). The qualitative methods included a literature review, interviews with key informants and the Delphi method (Table 4 and Annex 4). Table 4: Methods Used and Their Purposes Purpose Method Understanding HIV/AIDS Financing: -sources, providers, services, beneficiaries NHA: Surveys, Desk Review -equity of HIV/AIDS financing Analysis of Kendall Concordance Coefficient Identifying Bottle-neck Issues in Flow of PET, Desk Review, Interview with Key HIV/AIDS Resources Informants Collecting Information on the Local HIV Desk Review, Delphi Method Epidemiology, Health Seeking Behaviors, etc. 2.4 Study Tools Informed by the international practices and a pilot study, the research team designed 19 different tools such as outlines for structured interviews and survey questionnaires for different institutions and target groups (Table 5). Table 5: HIV/AIDS Expenditure Tracking: Service Providers, Investigation Methods and Tools Institution Method Tool 1.Health Authority: Guangxi Regional Interview with Key Interview Outline; Health Bureau, Luzhai County Health Informants Questionnaires Bureau NHA 2.Health Service Provider: County Interview with Key Interview Outline ; hospitals, THCs, private clinics, other Informants Questionnaires for Institution designated hospitals（Longtan hospital in NHA and AIDS Patients Liuzhou, the 4th hospital in Nanning） Structured Interview with PHA 3.Public Health Institution: County CDC, Interview with Key Interview Outline for Key County Maternal and Child Care center, Informants Informants and Delphi Method; Regional CDC NHA Questionnaires for Institutions Delphi Method and HRGs 4.Health Insurance Agency: County Interview with Key Interview Outline; Rural NCMS Management Office, Informants Questionnaire for Institutions County Health Insurance Center, private NHA insurance company 5.Other Institutions: County Bureau for Interview with Key Interview Outline ; Public Security, Bureau/Department of Informants Questionnaires for Institutions Finance, Women‘s Federations, NHA and HRGs Bureau/Department for Family Planning, Bureau/Department of Education, Bureau/Department of Civil Affaires, and County Drug Rehabilitation Center 6. Donor financed projects: MSF, Interview with Key Interview Outline, GFATM, World Bank H9 Project, Informants Questionnaires, AusAID Project, A Squared Project by NHA FHI and Futures Group, etc. 7. Target Populations: HRGs such as Targeted Survey Questionnaire CSWs, MSM and Drug Users; AIDS Population Survey patients 20  Chapter 3 Results 3.1 The Total Expenditure on HIV/AIDS in Luzhai County The HIV/AIDS prevention and control program in Luzhai was financed from four major sources: Out-of Pocket payments (OOP), the government, international aid organizations, and social health insurance. Like for other diseases, OOP was the biggest contributor to the expenditure on HIV/AIDS prevention and treatment. The government contributions came from different levels. International aid organizations included the World Bank, the Global Fund, the Government of Australia and Mé res decins sans frontiè (MSF) among others. Health expenditures for HIV/AIDS and Sexually Transmitted Infections (STI) treatment and care were co-paid by urban Basic Medical Insurance (BMI) and the rural New Cooperative Medical Scheme (NCMS) in case the patients were part of these schemes. The compensation policy for AIDS related health expenditures was the same as for other diseases. There had been no contributions from any commercial health insurance schemes since HIV/AIDS related expenditures were purposely excluded from their benefits‘ package (Table 6). Table 6: Key Sources of Financing for Guangxi HIV/AIDS Prevention and Control in Luzai Sources Priority HIV/AIDS Transfer ART, HIV screening, HIV VCT, blood safety, PMTCT, intervention from the Central for behavior changes and IEC campaigns, etc. Government HIV/AIDS Transfer ART, surveillance, HIV VCT, intervention for behavioral change and from the Regional IEC campaigns, etc. Government Earmarked AIDS Fund Counterpart funds for international projects, intervention for from city and County behavioral change and IEC campaigns, etc. governments Donor Aid Projects ART and OI treatment, intervention for behavioral change, HIV VCT, and IEC campaigns, etc. OOP Payment ART and OI treatment, HIV testing, blood safety, STI treatment BMI and NCMS ART and OI treatment In 2005, the total expenditure on HIV/AIDS prevention and control was 3,396 million Yuan in Luzhai or 7.04 Yuan per capita (US$0.869). This means that 2.58 percent of the total expenditure on health in the county was spent on HIV/AIDS. OOP from individuals and households contributed the largest share with 2,093 million Yuan (61.6 percent). It was followed by spending from the government, which paid 963.3 thousand Yuan (28.4 percent). Contributions from international projects and social health insurance schemes were 9 The exchange rate from Chinese Yuan to US Dollar in 2005 was 8.18:1. 21 respectively 246.3 thousand Yuan (7.2 percent) and 94.5 thousand Yuan (2.8 percent) (see Figure 3). Figure 3: The Sources for HIV/AIDS Financing and Their Shares in Luzhai, 2005 International Aids 7.25% OOP 61.61% Central Gov. 11.61% Regional Gov. 7.90% Gov. Finance 28.36% Prefecture Gov. 1.01% County Gov. 7.85% Social Insurance 2.78% Out of all the expenditures on HIV/AIDS in Luzhai, spending on prevention accounted for 69.5 percent, treatment services for 23.6 percent, training for 3.1 percent, and capital investment for 2.8 percent. Program administration and social support to PHA accounted only for 0.8 percent and 0.2 percent of the total expenditure respectively. Regarding HIV/AIDS prevention, 21.8 percent of the funds were spent on interventions for behavioral change among HRGs, 15.1 percent went to blood safety, 9.6 percent to clinical management of STIs, 6.9 percent to IEC campaigns, 4.9 percent to condom promotion and HIV screening, 4.5 percent to HIV VCT and screening, and 1.5 percent to HIV sero-prevalence surveillance (see Figure 4). Three elements deserve special attention. Firstly, only 15.1 thousand Yuan or 0.4 percent of the total AIDS expenditure was used for monitoring and evaluation activities. Secondly, very little was spent by other sectors on HIV/AIDS. Only 10.1 thousand Yuan (0.3 percent) were used for multi-sectoral collaboration and policy advocacy. Thirdly, although the HIV infection rate among pregnant women had been almost 1 percent in recent years, Preventing Mother-to-child Transmission (PMTCT) of HIV activities consumed less than 700 Yuan (see Figure 4). 22  Figure 4: HIV/AIDS Spending by Function in Luzhai County, 2005 Social Support to PHA Capital Formation for 0.18% Health Providers 2.76% Surveillance 1.47% IEC Activities 6.92% Training 3.16% Intervention among HIV Program HRGs 21.77% Management 0.80% PMTCT 0.02% STI Clinical Management 9.61% HIV VCT 4.52% Prevention HIV Screening 4.88% AIDS Treatment and 69.51% Regional Blood Safety Care 23.61% 15.13% Condon Promotion 4.89% Life Skills Training in School 0.29% Different financers had their own priorities for spending on HIV/AIDS. OOP spending paid for most of functions and services except HIV surveillance, HIV VCT, IEC campaigns and training. For example, 96 percent of the expenditure for blood safety and 94 percent for STI clinical management were paid through OOP. They also paid for 66 percent of inpatient treatment and care, 78 percent of out-patient treatment and care, and 62.9 percent of the expenditure for intervention among HRGs. Government‘s input was mainly targeted at IEC activities and paid for 93.0 percent of the expenditure on these activities. Health insurances such as BMI and NCMS were mainly used to cover the costs of hospitalization of PHAs, and paid for 17.4 percent of the total expenditure for inpatient treatment and care in their case. International aid focused on training and interventions among HRGs, paying for 69.4 percent of the training expenditures (Figure 5, Annex 1). 23  Figure 5: Priorities for Spending on AIDS by Different Financers in Luzhai, 2005 Inpatient Services Outpatient Services Surveillance HIV Screening HIV VCT Intervention among HRGs IEC Activities STI Clinical Management Blood safety Condom Promotion Training 10,000yuan 0 10 20 30 40 50 60 70 80 Central Gov. Regional Gov. Prefecture Gov. County Gov. Social security funds OOP International Aids 3.1.1 OOP Payment Out of all the OOP payment for HIV/AIDS, 73.2 percent was spent on prevention and 26.8 percent on treatment. A breakdown of OOP spending on HIV/AIDS further revealed that OOP mainly focused on blood safety, intervention among high risk groups for behavioral change, inpatient care of AIDS patients and STI treatment (see Figure 6). Figure 6: Functions Paid for by OOP: Amount and Share in Luzhai, 2005 Inpatient Services 16.9% Outpaient Services 9.9% Intervention among HRGs 22.2% STI Clinical Management 14.7% HIV VCT 1.6% HIV Screening 5.4% Blood Safety 23.7% Condom Promotion 5.6% 0 10 20 30 40 50 60 24  When looking into OOP spending on HIV/AIDS prevention, it was found that blood safety, purchasing clean syringe and condom, and treatment consumed 90 percent of OOP spending. The remaining 10 percent paid for HIV VCT and screening (see Figure 7). On treatment and care, OOP paid for 63.0 percent of the expenditure on inpatient treatment and care while the remaining 37.0 percent was used to pay for outpatient care. Seventy six percent of OOP spending was made for treatment of OIs, and HIV confirmatory test and CD4 counting related to ART only consumed 3 percent of the OOP spending on treatment and care (Figure 8). Figure 7: OOP on HIV/AIDS Prevention Figure 8: OOP on HIV/AIDS Treatment & Care 3% 10% 32% 30% 11% 10% 76% 28% Others Purchase Syringe ART related cost excluding ARV drugs STI Treatment and Condoms Purchasing OI Treatment HIV Screening and VCT Laboratory Investigation Blood Safety 3.1.2 Financial Input from Government The Government‘s spending on HIV/AIDS prevention and control in Luzhai amounted to 963.3 thousand Yuan, and came from the central (40.9 percent), regional (27.8 percent), prefecture (3.6 percent) and County (27.7 percent) levels (see Figure 9). 25  Figure 9: Share of Financial Input from Government at Different levels for HIV/AIDS Prevention and Control in Luzhai County Gov. 27.66% Central Gov. 40.92% Prefecture Gov. 3.58% Regional Gov. 27.84% The priorities for the government‘s HIV/AIDS-related spending were HIV/AIDS prevention (44.5 percent), HIV/AIDS treatment and care (10.7 percent), HIV VCT (10.5 percent) and capital investment for health providers on HIV prevention and control (9.2 percent). However, the spending priorities were not the same at different government‘s levels. The top three priorities for central government‘s spending on HIV/AIDS were IEC activities (21.1 percent), capital investment (e.g. goods and civil works) (19.2 percent) and HIV VCT (15.6 percent). For the regional government the top three priorities were intervention among HRGs (52.2 percent), HIV/AIDS treatment and care (16.9 percent) and IEC activities (14.9 percent). For the county government, the top three priorities were IEC activities (32.5 percent); surveillance (12.3 percent) and intervention among HRGs. IEC activities for HIV/AIDS prevention and control were one of the main items across the different Government‘s levels. It consumed 32.1 percent of the total government‘s spending on HIV/AIDS and even exceeded the spending on interventions among HRGs (29 percent) (see figure 10). 26  Figure10: Composition of Government Input on HIV/AIDS Prevention and Care Inpatient Services Outpatient Services Surveillance IEC Activities Intervention among HRGs HIV VCT HIV Screening Blood Safety Condom Promotion Training Capital Formation for Health Providers Others 10,000yuan 0 5 10 15 20 25 Central Gov. Regional Gov. Prefecture Gov. County Gov. 3.1.3 Contribution from International Organizations International organizations spent 246.2 thousand Yuan on HIV/AIDS prevention and control activities in Luzhai in 2005, which accounted for 7.2 percent of the total HIV/AIDS expenditure in the County. The 4th round of the Global Fund for HIV/AIDS, Tuberculosis and Malaria (GFATM) was the biggest donor, contributing with 63 percent of the total pool of international spending on HIV/AIDS. It was followed by the World Bank (18.6 percent) and MSF (18.0 percent). Although the funds from the international organizations were small in size, they contributed tremendously to service categories such as project administration, training and interventions among HRGs, including needle exchange programs among injecting drug users and outreach activities among CSWs (see Table 7). Table 7: Services Having Higher Share of Contribution from International Projects, Luzhai Category Contribution Share （10 thousand (%) Yuan） Project Administration Policy Development and 0.73 71.7 Advocacy 1.18 78.7 Monitor and Evaluation Training 7.43 69.4 Intervention among HRGs Intervention Among CSWs 1.28 44.0 NEP 3.57 33.2 27  The focus of spending for the GFATM in Luzhai was training and interventions among HRGs. The World Bank Health Nine Project mainly spent its funds on training, IEC activities and interventions among HRGs. MSF‘s sole priority was HIV/AIDS treatment and care (Figure 11). Figure 11: Focus of International Projects Expenditure in Luzhai, 2005 10,000yuan 25 20 15 10 5 0 Total Health Ⅸ GF MSF Capital Formation for Health Providers Training HIV Program Management HIV Screening HIV VCT Intervention among HRGs IEC Activities Surveillance Outpatient Services Inpatient Services 3.2 HIV/AIDS Expenditure by Service Provider in Luzhai Since the current local response to the HIV epidemic has been mainly led by the health sector, it was not surprising to find that 78.8 percent of the expenditure on HIV/AIDS prevention and control actually took place in the health sector while in other government departments the expenditure on HIV/AIDS only amounted to 4.1 percent of the total10. Around 36.8 percent of the total expenditure was made by health providers outside the county, while 38.8 percent was made by health service providers at county level and 3.2 percent by providers below the county level. Among the county level‘s health service providers, the EPS11 consumed 22.5 percent of the total HIV/AIDS expenditure. A significant share of HIV/AIDS expenditure for treatment and care and blood safety actually happened outside Luzhai. Since there were no designated AIDS hospitals in the county by the time this study was conducted, most of the HIV/AID treatment and care actually was provided by hospitals like Longtan Hospital in Liuzhou, the 4th People‘s Hospital and the MSF clinic in Nanning. About 22.1 percent of the HIV/AIDS expenditure took place in these hospitals and clinics outside Luzhai. Secondly, since the initiative to centralize the blood supply system was implemented blood supply has been provided to Luzhai by the Provincial Blood Center located in the City of Liuzhou, which consumed 14.7 percent of the total HIV/AIDS expenditure. Very little HIV/AIDS expenditure was made by the health providers below the county 10 Besides, 17.1% of HIV/AIDS spending were personal spending in form of OOP in purchasing condoms and syringes. They purposely were not classified as spending from any government sectors. 11 Disease prevention system reform did not take place when the research was done. 28 level in Luzhai. The township health centers and clinics only used 3.2 percent of the total expenditure. Other public sector institutions provided HIV/AIDS services, including free condom distribution by Family Planning agencies and IEC activities by the Radio and Television Broadcasting. However, these sectors were not fully mobilized. They contributed only 4.1 percent to the total HIV/AIDS expenditure (see Figure 12). Figure 12: HIV/AIDS Service Providers and Their Shares of Expenditure in Luzhai, 2005 Other Health Providers within County MCH Center County Hospitals 3.17% 1.62% 14.63% County EPS 22.57% Health Providers Outside County 22.11% Regional Blood Center 14.68% Other Gov. Sectors Others 4.10% 17.13% As showed in Figures 13 and 14, the key services provided by the county‘s EPS included interventions among HRGs, IEC activities, HIV VCT, training, and HIV surveillance. Hospitals at county level were the biggest providers for STI clinical management. Hospitals outside Luzhai such as Longtan Hospital and the 4th People's hospital of Nanning were the major service providers for inpatient treatment and care for PHAs. Providers classified as ‗others‘ included pharmacies and stores supplying condoms and syringes. 29  Figure 13: HIV/AIDS Services and the Providers in Luzhai, 2005 Inpatient Servives Outpatient Servives Surveillance IEC Activities Intervention among HRGs STI Clinical Management HIV VCT HIV Screening Blood Safety Condom Promotion Training Capital Formation for Health Providers 10,000yuan 0 10 20 30 40 50 60 70 80 Longtan Hospital No. 4 People's Hospital, Nanning Medical Insitutions outside County County Hospital Town Health Center Private Clinics and Pharmacies MCH Center County EPS Regional Blood Center Other Gov. Sectors Others Figure 14: Selected Key HIV/AIDS Service Providers in Luzhai, 2005 10,000yuan 80 70 60 50 40 30 20 10 0 Longtan No. 4 Medical County MCH County Hospital People's Insitutions Hospital Center EPS Hospital, outside Nanning County Others Training Condom Promotion Blood Safety HIV Screening HIV VCT STI Clinical Management Intervention among HRGs IEC Activities Surveillance Outpaient Services Inpatient Services 30 3.3 HIV/AIDS Fund Flow As mentioned earlier, HIV/AIDS prevention and control in Guangxi Zhuang Autonomous Region has been mainly financed by OOP from households, government funds at different levels, external aid and social insurance. This section will focus on analyzing transfers from both the central and the regional governments for HIV/AIDS prevention and control. The Public Expenditure Tracking Method was used to scrutinize the funds‘ flows from financiers to service providers. Two international projects, the World Bank Health Nine Project and the GFATM were chosen as the comparators in the analysis. The reasons for only focusing on the earmarked transfers from the central and regional governments were that: (1) the trend in HIV/AIDS financing worldwide has showed that governments and international organizations were the key source of funding for HIV/AIDS programs, and that is expected to also happen in China in the near future; (2) because of the many layers and steps involved in funds‘ flows processing from governments and international organizations, monitoring and analyzing the process would reveal any potential bottlenecks preventing effective fund‘s utilization and hence would be useful for their solution; (3) although OOP spending by households accounted for the single largest share in the expenditure on HIV/AIDS prevention and control, and it might remain so for a certain period of time in China, the process for such an expenditure was simple and clear since services and actual payment corresponded to each other in time and space; (4) BMI and NCMS paid for health expenditures of people living with HIV/AIDS. Currently the contribution from the two schemes is small, and their reimbursement policy does not discriminate among patients. 3.3.1 Key Government and International Financial Inputs for HIV/AIDS Prevention and Control in Guangxi Apart from OOP spending, the central and regional earmarked transfers, World Bank Health Nine Project, GFATM Project and China Australia Project were the main financers for HIV/AIDS prevention and control in Guangxi. These sources of financing varied in size, geographic coverage and duration. The central and regional earmarked transfers and the World Bank Health Nine Project had a wider geographic coverage. However a large share of their funding has been allocated to the regional level. Such arrangement differs from the coverage and geographic focus for fund allocation of the GFATM. 31  Table 8: Basic information on the Selected Key HIV/AIDS Financers Content Transfer Transfer World Bank GFATM AusAID from Central from Loan (Grant) govt. Regional govt. Size (Million 4569* 2700** 7057.5 2769.6*** 3618 Yuan) Start year 2003 1998 1999 2005 2002 End year long term long term 2008 2010 2007 Coverage 14 cities and 14 cities and 13 cities and 5 cities and 2 cities and 73 counties 73 County 20 counties 13 counties 4 counties Fund Allocation (%) Region 73.2 80.7 47.6 28.5 n.a. Prefecture 13.4 10.3 39.8 5.0 n.a. County 13.4 9.0 12.6 66.5 n.a. Note：* refers to actual spending between 2003 to 2005; ** refer to actual spending from 1998 to 2005; *** refer to the committed amount from 2005 to 2007. 3.3.2 Budget Preparation Budget Preparation for Central Earmarked Transfers In preparation for HIV/AIDS transfer, a mechanism of Zero-base Budgeting was adopted by the Central Government and the budget was decided upon annually. The budget process had been evolving. From 2004, a process of ―at least seven steps‖ has been adopted for budget development for central earmarked transfers (Box 2). The amount for the central earmarked transfers is usually approved in March every year. The detailed allocation plan is worked out later by MOH with endorsement from MOF before being sent to the provinces. Box 2 Budget Preparation Process At the Central Level Since 2004 1. Ministry of Health (MOH) submits the projected size of transfer for the next year to Ministry of Finance (MOF) in July 2. MOF sets the budget target for HIV/AIDS Transfer after balancing various needs and according to the projected revenue in the next year, and sends back to MOH 3. MOF and MOH agree on the budget target before it is sent to the National People‘s Congress for approval in next March 4. MOH develops the detailed allocation plan by considering the amount available and its annual work priorities 5. MOF reviews the plan and sends its feedback to MOH 6. MOH revises the plan and re-submits it for approval by MOF 7. MOF approves the allocation plan MOH prepared the annual budget for HIV/AIDS prevention and control basically using the Price-Quantity Method The budget for any given activity would be determined by the work volume multiplied by unit costs. However, since there had been no empirical data 32 on unit costs for each activity in China, estimations of the different unit costs by the selected national experts for HIV/AIDS prevention and control were used. The Achilles‘ heel of such an approach was that it did not discriminate unit costs across the different settings. Elements such as risk factors and the reported number of HIV infections were considered for estimating the workload. In addition, the financial capacity of any given province was also factored in when decision on final budgets was made, but not the capacity for project implementation. It was not a common practice for the Central Government to consult the provinces when developing budget plans for using earmarked AIDS transfer before 2006. One of the drawbacks caused by this method was that it was difficult to integrate the central transfers with the rest of the resources available for any given province. This would certainly undermine the efficiency of funds‘ utilization. MOH is moving from such a practice in the development of the budget plan for central transfers for 200712. Each province would have to prepare detailed ―plans for within province allocation‖ after the budget allocation plan is made available to the provinces. In Guangxi, such plan was usually developed by the officials working in the Regional HIV/AIDS Working Committee Office located in the Regional Health Bureau and the experts from the Regional CDC. Cities and counties would not be consulted when such a plan for within province allocation was prepared. It was claimed that parameters such as HIV prevalence, the size of HRGs and working experience (an equivalent to implementation capacity) were considered for allocation within the region. However, this was not supported by the evidence found by the research team. After the reallocation plan was developed, the Regional Health Bureau had to submit it to the Regional Bureau of Finance for approval before the plan could be formally shared with lower levels. Budget Preparation for Regional Earmarked Transfers The regional government also adopted the method of zero-base budgeting and annual budget development process. Such a budget plan was a rough one compared with the plan for using AIDS earmarked transfer from the central government. It was in essence a line-item budget plan, which amount would increase yearly, and with no specification on project outputs. The process was simply described as ―Two ups and two downs‖ (Box 3). The budget plan for using regional earmarked AIDS transfers was usually reviewed and approved by the Regional People‘s Congress in either January or February. 12 Now the MOH requests the provinces to submit annual plans for using the central earmarked transfers (mainly work volume). The MOH will then design its budget based on the national priorities and follow the criteria set for AIDS funds‘ allocation. 33  Box 3 Budget Preparation Process at the Regional Level 1. Regional Bureau of Health makes department-based budge and submit it to Finance Bureau 2. Regional Bureau of Finance discusses with Bureau of Health to set the total amount for health including for HIV/AIDS based on its fiscal capacity 3. Regional Bureau of Health adjusts the budget according to the total amount available and re-submits to Provincial Finance Bureau 4. Regional Bureau of Finance reviews the budget and submits it to Provincial People‘s Congress for checking and approval In summary, there were some key issues related to budget development for the earmarked central and provincial transfers. Firstly, it was time consuming since clearly there had been no adequate tools to facilitate budget development and due to the lack of relevant data such as the unit costs for different activities. Secondly, the top-down approach for budget development at central and regional levels was not designed for addressing the local needs. The current annual budgeting approach was prone to inflexibility embedded in the principle of ―designated fund for designated task‖, particularly in the case of the transfers from the central government. Since the annual budget plan for the central transfers was developed in a way that the funds were fixed to each activity specified in the plan, it left little room for local readjustment. Thirdly, it was difficult to integrate the central and provincial earmarked transfers because of the different timelines and different budget methodologies. Fourthly, budget development at the regional level was conventional (line item budgeting), and not results-oriented. Budget Preparation for International Projects International projects generally adopted multi-year budgeting frameworks while annual or even quarterly work plans were to be developed by the project counties. Such a bottom-up approach had several advantages such as: (a) its flexibility in accommodating local needs; (b) its transparency since key stakeholders were consulted during the process of project design and work plan development; and (c) the easiness to integrate these projects with other resources to better serve the regional HIV/AIDS prevention and control program. 3.3.3 Funds Flow Central and Regional Earmarked AIDS Transfers Transfers from the central government were materialized at the local level through the ―quota for fund using‖ principle, which basically meant that a document was issued by the Ministry of Finance to inform any given province of the size of the earmarked AIDS transfers allocated to it. This process did not involve any cash transfers from the central to the provincial or regional levels. In essence, such a transfer was funded from taxes levied by the central government. The regional earmarked AIDS transfers were also made through the ―quota for fund 34 allocation‖. The difference between regional earmarked transfers and the central ones was that the former came from local taxes so that the regional government had the authority to decide how the funds would be used. Central earmarked transfers experienced significant delays in reaching the service providers. In the past three years, it took on average one and half years for the service providers to get the funds. Most of the delays actually happened between the central and regional/provincial levels although there was some degree of delay at each step. In 2005, it took 9 months for the central earmarked funds to be released to the provinces. Additionally there was a 5 months‘ delay between the regional and the prefecture level, 2 months between the prefectures and counties, and 3 months within the county further exacerbated the situation. There has been no evidence of any improvement in shortening the time of funds flows over the last several years. The flow of the regional earmarked transfers was better than that of the central ones. The quotas of transfer were made known in two batches in each half of the year so that they could arrive at the county level and to the final users in the same year. However it still took at least 7 months for the county CDC to get the funds (Table 9). Table 9: Time of Fund Flow for Central and Regional Earmarked Transfer for AIDS Milestone Events Central Transfer Regional Transfer 2003 2004 2005 2005 Budget Approval 2003-3 2004-3 2005-3 2005-2 Allocation Plan release 2004-3-22 2004-12-15 2005-12-5 2005-2 Transfer arrival at Region 2004-3-16 2004-11-25 2005-12-5 level Within Region Allocation 2004-10-8 2005-4-22 2006-4-12 Plan Release Transfer arrival at 2004-10-8 2005-4-19 2006-4-12 2005-4-14 prefecture level 2005-11-17 Transfer arrival at County 2004-10-19 2005-6-9 2006-7-26 2005-4-25 level 2006-8-23 2005-11-22 Fund from County BoF to 2004-11-23 2005-10-9 2005-9-5 N.A. BoH 2005-11-8 2005-12-7 Fund from BoH to County 2005-7 2005-10-27 2005-9 N.A. CDC, etc. 2005-11-8 2005-12-13 International project funds There were three modes for the funds from the international projects to be transferred to the final users. All of them ensured that the funds were readily available for the implementation before any project activities started. The first mode involved that transfers to the designated account were made in advance for the implementation agencies after the project was approved, as in case of China- Australia AIDS Prevention and Control Project. In the second one, funds would be released in trenches after the work plan was approved by the funding agency, like GFATM did. The third mode entailed the deposit of a part of the funds in the project designated account in 35 the form of revolving funds that could be replenished at any time. In this case, the project implementation agencies had to pay for any project activities first before the expenditure was reimbursed by the funding agency. The World Bank was using this modality for its Health Nine Project in China. 3.3.4 Financial Management Financial Management Risk The financial management arrangement as well as the results of the different channels mentioned above differ (Table 10). The financial management system for the World Bank Health Nine Project was the most elaborated one and had been effectively implemented and monitored by the region. There were designated financial management specialists for the project at each level. Independent audits from the Regional Audit Office were done on an annual basis. Financial management risk13 under such a system was low. However, because both financial and health sectors at different levels served as watchdogs, occasionally there were significant delays in the reimbursement of the expenditures. This was certainly discouraging and indeed affected the effective use of the project funds. For example, Luzhai filed the claims three times respectively in June 2003, December 2003 and October 2004, and eventually received reimbursements in October 2004, January 2005 and August 2005. It took 16, 13, and 10 months respectively for the County to be compensated. The GFATM was facing potential financial management risk since its financial management and procurement management staff was new. The financial management system was similar to that of the World Bank Health Nine Project. Since the fund flow occurred only within the health sector, and the fund was deposited in the designated project account in advance, the fund could reach the implementation agencies at County level timely after quarterly work plan was approved. For the management of the central earmarked transfers, the Ministry of Finance and Ministry of Health issued Provisional Methods for the Earmarked Funds for Local Health Development From the Central Government. Some loopholes were identified in its financial management. There was no proper accounting (i.e. filing of financial documents) at the end users and supervision was irregular, and therefore the project suffered from relatively higher financial management risk than the World Bank and GFATM funds. The regional earmarked transfers suffered the highest financial management risk. Neither a financial management guideline nor a proper designated accounting system was set up for the regional earmarked transfers. There had been no financial management supervision and audit so far. 13 A method for assessing the World Bank Project‘s financial management risk was used (Annex 1, Table 20). The key projects in Guangxi were assessed using this method. 36  Table 10: Comparison of Different Funds’ Financial Management Agreements Central Earmarked Fund Regional WB Loan GFATM Grant Earmarked fund Guidelines Provisional Methods for the Earmarked No Methods for Financial Management for GFATM Guidelines for Fund Funds for Local Health Development WB Loans Utilization from the Central Government Implementation  no proper filing of financial  no designated  Designated FM specialist with special  Designated FM specialist at documents accounting training at provincial level regional level  Irregular supervision by the system  Special account at regional level  Special account at County Regional Health Bureau  Semiannual supervision by the World level  Audit since 2005  No supervision Bank, and regular supervision by MOF  Semiannual supervision by and MOH the provincial team  Regular financial management reports  Annual audit report and project implementation progress reports  Annual independent audit reports Effectiveness Results  None  None  Project M&E system in place; project  Project M&E system in monitoring med-term evaluation done; regular place; regular supervision supervision and financial audit and financial audit Risk  Moderate risk  High risk  Low risk  Moderate risk Efficiency  Serious delay in fund releasing  Serious delay in  Delay in reimbursement  No problem identified fund releasing 37  Fund Utilization The study showed that slow disbursement was a prevailing phenomenon for the funds from different sources (Table 11, Annex 1: Table 16-19). The central earmarked transfer for 2005 did not arrive by the time of the investigation so its utilization could not be presented and discussed. For the central earmarked transfer planned for 2004, 21.5 percent of the allocation to the Regional CDC was disbursed by the end of 2005. Although the regional earmarked transfer planned for 2005 arrived at the Regional CDC in the same year, only 10 percent of the allocation to the Regional CDC was disbursed by the end of 2005. Disbursement for the Global Fund was not better than the governments‘ transfers. For instance, only 45 percent of the allocation for the last quarter14 to the Regional CDC, and 38.9 percent for the Luzhai EPS were used by 2005. Because of slow disbursement, the Global Fund for Luzhai had to be temporarily suspended in the first quarter of 2006. Table 11: Disbursement Rate of the Funds from Different Sources by 2005 in Guangxi Source of Financing Regional CDC Luzhai EPS Allocation* Disbursement Allocation* Disbursement Rate Rate Central Earmarked Transfer in 67.8 21.5% 36.2 71.4% 2004 Regional Earmarked Transfer in 22 10% N.A. N.A. 2005 GFATM the fourth quarter 40 45% 40.1 38.9% allocation Note: The unit for the allocation is 10 thousand Yuan. Under-spending was more pronounced for some activities, including interventions among CSWs at entertainment establishments and needle exchange programs, than for others such as surveillance. At least three reasons contributed to slow disbursement and under-spending. There were delays for the funds to reach the final users, low capacity of the implementation agencies at grass-root levels in reaching the ‗hard to reach‘ high risk groups and carrying out interventions among them, and insufficient involvement of health institutions below County level and other sectors for HIV/AIDS prevention and control. 14 GFATM was allocated quarterly against the approved work plan. 38  Chapter 4: Discussion 4.1 Sustainability of HIV/AIDS Financing As proven in Luzhai, despite of increasing contributions from the Government, social insurance schemes and international organization, OOP spending was still the single largest source for HIV/AIDS financing. The team considers that HIV/AIDS financing in Guangxi will not be significantly different, since there is varied evidence that OOP spending has been the biggest financer for health in general and public health in particular. Such an arrangement for HIV/AIDS financing is neither adequate, nor appropriate. In this section, we would like to elaborate on this point mainly by analyzing the current financing structure. However, certain limitations of the analysis should be considered. There are no time series data, and the extrapolation of the findings from Luzhai and Guangxi Zhuang Autonomous Region to the rest of China must be done with caution. 4.1.1 Low Share of Public Spending on HIV/AIDS In other countries that have recently established national AIDS Accounts15, unlike in China, National AIDS Programs are basically financed either by the government or through international support. HIV/AIDS prevention and control in Luzhai County was mainly funded by OOP payment while public expenditure only accounted for 31 percent (Figure 15). It should not be a problem for the Government of China to increase its share in HIV/AIDS financing to catch up with countries like Thailand, and Brazil at the premise of government‘s commitment to universal access to primary health care. As the first step, the Government‘s spending on HIV/AIDS should at least catch up with that for public health so that share of OOP payment can be reduced (Table 12). Figure 15: Comparison of Sources for HIV/AIDS Financing in Selected Countries Mex ic o Chile Cost a Ric a Panama Venez uela, RB Ur uguay Ar gent ina Br az il Thailand El Salv ador Guat emala Colombia China ( Luz hai) Philippines Par aguay Hondur as Boliv ia Nic ar agua Keny a Laos PDR Ghana Public OOP Int. aid Cambodia Bur k ina Faso Moz ambique Rwanda 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Public OOP ROW 15 The data were SIDALAC and most of the AIDS accounts in these countries were between 2002 and 2004. 39  Table 12: Comparison Financing of Health, Public Health, and HIV/AIDS in Luzhai Source of Financing THE* TEPH* TEA OOP 65.7 55.5 61.5 Government 15.8 39.2 28.5 Rest of the World 18.5 5.3 9.9 Total 100 100 100 Note: The data on the total expenditure on health and public health were of 2004. 4.1.2 Disproportional Allocation to the Local level Only looking at the earmarked contributions for HIV/AIDS prevention and control from the government, the Central Government had the biggest share for HIV/AIDS financial responsibility (Table 13). However this picture is misleading since these earmarked funds for HIV/AIDS are only one part of the total government‘s spending on HIV/AIDS prevention and control in the region. As revealed in the case of Luzai, when all forms of government‘s spending on HIV/AIDS prevention and control were taken into consideration, the picture was different. Over 27 percent of the total government‘s spending on HIV/AIDS came from the County Government. This finding is not surprising since local governments have been responsible for the financing and service delivery of public health in China for a long time. For example, the government of Luzhai County‘s spending on public health accounted for 89.5 percent of the total government expenditure on public health.16 Table 13: Size of Earmarked Funds for HIV/AIDS from Government at Different Levels 2004 2005 Administrative Amount Amount Level (10,000 Share (10,000 Share Yuan） Yuan） Central 985.00 66.4 3584.00 77.3 Regional 380.00 25.6 800.00 17.2 Prefecture 89.62 6.0 219.58 4.7 County 30.21 2.0 35.76 0.8 Total 1484.83 100 4639.34 100 More important is where the money goes. The data showed that most of government‘s spending stayed at the regional level in Guangxi (Table 14). For the central earmarked transfers in 2004 and 2005, 62.6 and 72.2 percent respectively were allocated to the regional level. After the cost for procuring ARV drugs and equipment was deducted17, still 55 and 52 percent of the total central government transfers on HIV/AIDS in Guangxi went to the regional level. As for the regional earmarked transfers, 52.3 and 56.7 percent in 2004 and 2005 respectively went to the regional level. 16 Public Health: A Case Study in Two Counties in China 17 These items were procured for all the levels. 40  However, less than 20 percent of the central transfers, and less than 25 percent of the regional ones in Guangxi eventually reached the County level and below where the HIV epidemic evolved daily in 2004 and 2005. Table 14: Share of Earmarked Transfers for HIV/AIDS by Different Levels in Guangxi Central Earmarked Transfer Regional Earmarked Administrative Transfer Level 2004 2005 2004 2005 Regional 62.6 72.2 52.3 56.7 Prefecture 17.8 12.3 34.5 18.5 County 19.6 11.5 13.2 24.8 Total 100 100 100 100 4.2 Equity of HIV/AIDS Financing Equity issues can be looked at from two different perspectives, namely whether resource allocation by geographic location is fair, and whether the cost of HIV services exceeds the people‘s ability to pay. 4.2.1 Allocation of Government Earmarked Transfers for HIV/AIDS As mentioned earlier, the government was the 2nd biggest financer for HIV/AIDS prevention and care in Guangxi and its role for HIV/AIDS financing will likely be even more important in the future when international aid for HIV/AIDS prevention and care eventually decreases. Given the scarce resources, it is relevant to analyze whether the current allocation of resources from the government is rationale so that the future spending can be better targeted and to maximize its outcomes in terms of averted new HIV infections and improved quality of life of PHAs. In the following analyses, we define equity of HIV/AIDS financing as consistency between fund allocation and the needs for HIV/AIDS prevention and control. Equity in this sense would exist when more funds are allocated to areas where the needs are arguably higher. The following parameters have been used to build the overall needs index for HIV/AIDS prevention and control in any given place: HIV prevalence, number of reported AIDS cases per 100 thousand people, size of key HRGs such as CSWs and IDUs per 100 thousand people, revenue per capita and number of full time professional staff for HIV prevention and control per 100 thousand people18. The overall needs index for HIV/AIDS prevention and control will be represented by Z Score. The higher the Z Score, the larger the needs. The Kendal‘s coefficient of concordance is then calculated to assess the concordance between actual fund allocation and the needs. The value of Kendall‘s 18 Because of the availability of the data, only the 1 st, 2nd, 4th, and 5th parameters were used for the equity analysis of resource allocation across provinces and the 1st, 3rd, 4th and 5th parameters were used for equity analysis of resource allocation across the counties. 41 coefficient of concordance ranges from 0 to 1, with ―0‖ indicating absolute inequity for fund allocation, and ―1‖ reflecting absolute equity. Figure 16: Steps in Analyzing Equity in HIV/AIDS Resource Allocation Calculate the needs Calculate Per capita (Z-score) for HIV/AIDS allocation for IV/AIDS in in each geographic area each geographic area Calculate Kendal‘s Sort financial needs for Coefficient of Sort allocated resources HIV/AIDS for HIV/AIDS Concordance Assess the rationality Allocation of Central Earmarked Transfer to Provinces The results pf the analysis showed that allocation of the central earmarked transfers in 2005 corresponded highly to the overall needs for HIV/AIDS prevention and control across the country. This means that the overall resource allocation by province was equitable (Table 14). However, equity for resource allocation was compromised since when the resources were allocated, the GDP per capita of each province was not factored in. Moreover, overall equity did not guarantee fairness in access to resources for every province. For instance, the resource needs for Guangxi ranked the 4th in China, whereas the amount of central earmarked transfer to the Region only ranked the 11th among all the provinces. Table 15: Coefficients of Concordance between Size of Central Earmarked Transfers and Overall Needs and Selected Parameters in China, 2005 Indicator W Value Overall Needs Index 0.510* * Revenue Per Capita 0.046 No. of HIV Infections 0.510* No. of AIDS Patients 0.862* * Within-region Allocation of the Central Earmarked Transfers in Guangxi Neither the within-region allocation of the central earmarked transfers by prefecture nor by County corresponded to the overall needs and the selected parameters (Table 15). This indicates that there was no equity consideration for allocation of the central earmarked transfer within the regions in 2005 since none of the burden of HIV, the size of risk factors, fiscal capacity of local governments and their capacity for implementation were considered. 42 Table 16: Coefficients of Concordance between Size of Central Earmarked Transfers and Local Needs and Selected Parameters in Guangxi, 2005 W Value of W Value of Allocation Indicator Reallocation By County Overall needs Index By Prefecture 0.029 0.040 No. of HIV infections 0.024 0.010 No. of IDUs 0.005 n.a. No. of CSWs 0.005 n.a. No. of full time 0.024 0.007 professional in Revenue Per Capita HIV/AIDS facilities 0.000 0.000 Allocation of Regional Earmarked Transfers in Guangxi The analysis revealed that allocation of the regional earmarked Transfers for HIV/AIDS prevention and control in 2005 did not correspond to the overall needs, the size of risk factors, the fiscal capacity and the capacity for activity implementation of the counties (Table 17). Table 17: Coefficient of Concordance of Allocation of Regional Earmarked Transfers with the Local needs and the Selected Parameters in Guangxi, 2005 Indicator W Value Overall Needs Index 0.000 No. of HIV Infections 0.058 No. of IDUs 0.050 No. of CSWs 0.000 No. of Full Time Professionals 0.005 Revenue Per Capita 0.005 Allocation of the Pooled Central and Regional Earmarked Transfers The earmarked transfers from both central and regional levels will eventually be used at the local levels so that analysis of the equity of allocation of the ―pooled‖ central and regional earmarked transfers will make sense. Unfortunately, it was found that the pooled central and regional earmarked transfers were not allocated according to either the overall needs, or any individual parameters (Table 18). 43  Table 18: Coefficient of Concordance between Pooled Central and Provincial Transfers and Local Needs and Selected Parameters in Guangxi, 2005 Indicator Prefecture County Overall Needs Index 0.029 0.040 No. of HIV Infections 0.006 0.013 No. of IDUs 0.024 - No. of CSWs 0.006 - No. of Full Time 0.006 0.002 Professionals Revenue Per Capita 0.000 0.007 The construction of the overall needs index is undoubtedly the key in this methodology and should be further improved. In the analyses above, only routinely available data were used for construction of the overall needs, some other critical determinants for needs such as high risk behaviors were not taken into consideration. Nevertheless, such an analysis will help equitable allocation of resources for HIV/AIDS from central and regional levels. 4.2.2 OOP Payments for HIV /AIDS Prevention and Control From the individuals‘ perspective, equity of HIV/AIDS financing can be defined as follows: the cost of HIV/AIDS services should not exceed the patient’s ability to pay. This study revealed that AIDS patients bear too much share of the expenditure for their treatment and laboratory investigation. Although Four Frees and One Care Policy was effective since the end of 2003, the beneficiaries of this policy were only the rural AIDS patients, while urban AIDS patients were not covered by BMI. The policy only allowed the free provision of ART and of four CD4 counts a year. The impact of this policy was thus limited due to: (a) health expenditure for the rest of PHAs and for the rest of health services had to be paid by the patients themselves; (b) most of the health expenditure for PHAs was OI related but not free of charge or even partly co-paid by either BMI or the rural NCMS since most of AIDS patients were not enrolled. The cost of ART represented only a very small share in the total health expenditure for a given AIDS patient. For instance, it accounted for 1 percent of the expenditure for inpatient treatment and care in Luzhai; (c) only four CD4 tests were provided freely and the rest19 had to be paid by the patients themselves. The price for one CD4 count was 250 Yuan. The average expenditure for inpatient treatment and care of Luzhai AIDS patients was 5162.35 Yuan in 2005. This represented 1.7 times the average net annual income per capita of Luzhai residents in 2005. Most of PHAs in Luzhai were not covered by any form of health insurance and thus had limited capacity for coping with the financial risks caused by HIV/AIDS treatment and care. Even for those patients who were covered by BMI or NCMS, they often chose not to ask for the reimbursement from the schemes due to concerns over discrimination after the disclosure of their HIV status. Facing such a burden, the poor patients had to use their savings, sell their property or borrow money for seeking care, or were forced to give up treatment. 19 For the first year of ART, monthly CD4 Count is required according to the National Guidelines. 44  Individuals did not only pay for treatment and care but also for preventive services. For instance, the costs of 81.2 percent of needles and 70 percent of condoms were covered by private disbursements, while the government paid for 12.5 and 29.8 percent respectively in Luzhai in 2005. In addition, only HIV VCT in the designated spots was free. In other health facilities people had to pay for HIV testing. Moreover, HIV Confirmatory Tests were not provided without charge, and the cost for them was about 700 Yuan—without including indirect costs such as transportation and fee charged for sending the blood samples20, that also had to be paid by any individual to be tested. 4.3 Efficiency of Funds’ Utilization Analyzing HIV/AIDS expenditure by function has demonstrated that efficiency in HIV/AIDS resource utilization from the government in Guangxi can be improved. Expenditure on functions and services such as STI prevention and control, PMTCT of HIV, and monitoring and evaluation was too low. For instance, less than 2 percent of government‘s spending on HIV/AIDS was for STI prevention and control, which has proven to be one of the most cost effective interventions for HIV/AIDS prevention. Given the increasing prevalence of congenital syphilis in Luzhai and Guangxi Region, it will make sense for the government to provide free screening and treatment for syphilis among pregnant women. Allocation for monitoring and evaluation represented only 0.3 percent, definitely not enough for identifying any problems and monitor effectiveness of the current HIV/AIDS response. On the contrary, 22.7 percent of the government HIV/AIDS spending went to IEC related activities. When the epidemic was still largely confined to the high risk groups, the current level of spending on IEC activities could be scaled down to leave more resources available for needy or cost effective interventions such as intervention among HRGs, STI Control, PMTCT of HIV, and AIDS treatment and care (Table 19). Table 19: Composition of HIV/AIDS Expenditure by function in Luzhai, 2005 Function/Service TEA (%) TGEA (%) AIDS treatment and care 23.61 10.66 Surveillance 1.47 4.90 Prevention 68.04 70.57 IEC Activities 6.92 22.68 Intervention among HRGs 21.77 22.18 STD Control 9.61 1.97 PMTCT 0.02 0.07 HIV VCT 4.52 10.49 Blood Safety 15.13 1.97 Condom Promotion 4.89 5.14 Life Skill Training in Schools 0.29 1.04 HIV related Policy advocacy 0.30 0.30 20 HIV confirmatory test can only be taken at the Regional CDC, anyone to be tested either is asked to go to the CDC or his/her blood sample is sent to it by the county CDC. 45  Monitoring and Evaluation 0.44 0.33 Training 3.15 3.41 Capital Formulation 2.76 9.20 Social Support to PHA 0.18 0.62 Total 100.00 100.00 In 2005, around 78.3 percent of expenditure for HIV/AIDS treatment and care took place outside the Luzhai County, which resulted in an increased burden of direct and indirect expenditure for AIDS patients. Very little HIV/AIDS expenditure, however, occurred below the county level, where most of AIDS patients were living. To gradually build up the capacity at the county level and below and make services more closer to the patients will surely reduce HIV/AIDS expenditure for both the government and patients, and would result in more services at the same cost. The research team estimated the technical efficiency for the key HIV/AIDS services implemented in Luzhai in 2005 (Table 20). This represents one of the first attempts to do so in China. Data limitations were thus and obstacle to make any meaningful comparison. Such an effort needs to be continued in Luzhai and elsewhere in China so that (a) information will be available for designing proper strategies and methods to improve the technical efficiency of HIV/AIDS services and (b) all-included unit costs, rather than partial ones, for HIV/AIDS services will be available to better estimate the needs for HIV/AIDS prevention and control. Table 20 Technical Efficiency of Some Selected HIV/AIDS Services in Guangxi, 2005 Total Input Coverage HIV/AIDS Services Technical Efficiency (10,000 Yuan) (person) 147 persons per 10,000 Yuan HIV VCT 19.66 2,883 or 68 Yuan per person 28 persons per 10,000 Yuan NEP 10.74 300 or 358 Yuan per person < 2 persons per 10,000 Yuan Inpatient care for PHA 53.59 66 or 8100 Yuan per person Efficiency of funds‘ utilization could be improved. Several issues identified through this study would need to be addressed in order to achieve this. Firstly, it took the central earmarked transfers about 18 months to arrive at the county level. Secondly all the transfers, central or regional ones, represent quotas for funds allocation rather than cash. They become ‗cashable‘ and materialize only after the county and region fulfill their tax commitments regarding the required revenue to the regional and central governments. This usually happens at the end of the year, particularly in poor counties. This hindered HIV/AIDS prevention and control in poor counties that had the least capacity for income generation. This in turn meant that the implementation agencies had to pay for HIV/AIDS services in advance from their own budgets before they could be reimbursed after the 46 central earmarked transfers arrived. But in most cases, they chose to do nothing before the funds‘ arrival. Thirdly, lack of capacity for interventions among high risk groups contributed to slow down the disbursement rate for both central and regional earmarked transfers as well as for resources from other channels. 4.4 Integration of Resources for HIV/AIDS Prevention and Control The study found that the resources for HIV/AIDS prevention and control in Guangxi were not effectively integrated. Annual planning, including budget preparation, was done separately for the projects and initiatives financed by different sources. They varied in timing and methodology, which created problems for integration. This was further complicated by the fact that both time and modes for fund allocation were different for the funds coming from different channels. Such incompatibility and independency of different projects and initiatives was troublesome and caused problems such as redundancy and avoidable negligence in geographic coverage and service provision. The integration of resources for HIV/AIDS prevention and control is possible, and it is imperative in the case of the earmarked transfers from central and regional governments. As a matter of fact, some degree of functional complementary between these two existed in 2005. For instance, the central earmarked transfer focused on IEC activities, laboratory facilities, ART, and PMTCT of HIV while regional transfer was spent on interventions among HRGs, particularly among IDUs. To integrate the central and regional earmarked transfers, it is important to synchronize them in methodology and time for annual planning and budget preparation. If the annual planning and budget for both transfers were drafted by the provinces themselves integration would not be so difficult. A prerequisite for such a change is that there must be sufficient and well trained staff for annual planning and budget development at the provincial level. The benefits for doing so include: (a) the central transfers to provinces will better suit the local needs; (b) central and provincial transfers can be better integrated and coordinated; (c) it will be easier for the central level to integrate provincially developed annual plans into a national annual plan in case the same and standardized methodology is used by the provinces; and (d) it will shorten the time needed to develop within province allocation plans. One further suggestion on integration of the two transfers is that the quota for fund allocation of central earmarked transfer should be released twice as has been done for the regional earmarked transfers in Guangxi. 4.5 Limitations of the Methodology The study has been so far the first attempt to establish a HIV/AIDS Account in China. It was based upon many assumptions that were critical and had impacts on the validity and reliability of the final estimation of HIV/AIDS expenditure in Luzhai. 4.5.1 Different scenarios for the calculation of total HIV/AIDS Expenditure One critical assumption was made on utilization of needles and syringes procurement 47 by IDUs. The results of AA in Luzhai presented in the Chapter 3 were based on the scenario that all the privately procured needles and syringes by IDUs were used for drug injection and not shared with others. This scenario was defined as ―100% not sharing‖. This assumption may not be true in the real world. The team then re-calculated the results of AA based upon the other two scenarios, namely the ―75% not sharing‖ and the ―50% not sharing‖. The scenario of ―50% not sharing‖ resembles the current level of needle sharing and the scenario of ―75% not sharing‖ represents the level of needle sharing after certain intervention among IDUs. The results of recalculations are presented in the Table 21. From the initial scenario of ―100% not sharing‖ to that of ―50% not sharing‖, the difference in the total HIV/AIDS expenditures in Luzhai in 2005 is 232.7 thousand Yuan, or only 0.48 Yuan per capita. However, the difference in the shares of different sources is not significant, only about 2 percent. Table 21: Contribution and Shares of Different Sources for HIV/AIDS Financing in Luzhai Under Three Different Scenarios, 2005 Scenario Government OOP Foreign Insurance Total AID 100% Not 96.33 209.24 24.6 9.44 339.64 Sharing (28.4%) (61.6%) (27.2%) (2.8%) (100%) 75% Not 96.33 197.61 24.6 9.44 328 Sharing (29.4%) (60.2%) (27.5%) (2.9%) (100%) 50% Not 96.33 185.98 24.6 9.44 316.37 Sharing (30.4%) (58.8%) (27.8%) (3.0%) (100%) Note: The unit for the figures in the table is 10 thousand Yuan. 4.5.2 Need for better estimation of OOP Payments Informed by the literature review and the case study on public health in Guangxi, the research team concluded that OOP payments for HIV/AIDS surely did not represent a negligible share of the total HIV/AIDS-related expenditures. However, estimating the OOP payments for HIV/AIDS is a formidable task when private sexual and drug using behaviors are involved. Using stratified population surveys among HRGs to find out information on OOP payment for HIV/AIDS will be costly and time consuming. For this case study in Luzhai, the simple method of ―snowball sampling‖ was employed for the investigation among selected groups in order to gauge the frequency of protective behaviors, health seeking behaviors, and burden of HIV/AIDS related diseases of the key HRGs and PHA. These pieces of information were combined with data on the price and volume for certain HIV/AIDS services from the institutional surveys implemented in parallel so that OOP payments for HIV/AIDS services were eventually estimated by using the PQ method. Such a method has different effects on estimations of OOP payment for HIV/AIDS services of different populations (Table 22). For PHA, since most of investigated AIDS patients were from hospitals, their ability to pay was higher than those who could not afford to go to hospitals. Therefore, using their OOP payments for HIV/AIDS to extrapolate the total OOP payment for HIV/AIDS of all patients would result in 48  overestimation. Some AIDS patient sought health care outside the region, and OOP payment for HIV/AIDS may be underestimated in the case that such expenditures are not included. However, the research team concluded that this part of the expenditure could be neglected since if we assumed 5 percent of AIDS patients selected to be hospitalized at provincial capitals and outside of province21. In this scenario, the total expenditure for HIV/AIDS service outside the region on AIDS patients from Luzhai would be 29,127.7 Yuan22, which only accounted for 5.4 percent of the total expenditure for hospitalization of AIDS patients, or 0.9 percent of the total HIV/AIDS expenditures in Luzhai. For other key groups such as IDUs, CSWs and MSM, OOP payments can be either overestimated or underestimated, since factors for overestimation and underestimation co-existed when using the data from the sampled population to extrapolate the OOP payments for HIV/AIDS to the whole population they represented. For instance, since the CSWs investigated were mainly from nightclubs and Karaoke bars, they represented the upper class of CSW population. They had better health seeking behaviors and were more likely to use condom during commercial sex. Hence, their OOP payment for HIV/AIDS preventive services would likely to be higher than those of girls from small road-side inns and street walkers, but they may, however, ended up paying less for STI services than the latter. The situation was the same for IDUs and MSM. Table 22 Population surveyed and Related Bias on Cost Estimation Target Population Sample Size Potential Effect PHA 19 + IDUs 18 +/- CSWs 12 +/- MSM 6 +/- 4.5.3 HIV/AIDS Expenditures at Private Service Providers Although private clinics were investigated mainly for STI services, the true volume of STI services provided by them were difficult to be obtained since they were not allowed to provide STI services by the Bureau of Health in Luzhai. Incomplete data from private clinics would contribute to underestimate the expenditure for STIs services, most of which was in form of OOP payment. 4.5.4 Underestimation of Co-payment by Insurance Schemes Since the records for health services at hospitals, particularly in the case of outpatient services, were not adequately documented and kept, information on co-payment by health insurance schemes such as BMI and the rural NCMS was not complete. This would lead to an underestimation of the contributions from health insurance for HIV/AIDS services. 21 The National Health Survey in Guangxi found that only 5 percent of patients chose to be hospitalized either in Nanning (the Regional Capital) or other places outside of Guangxi in 2003. 22 Average expenditure for hospitalization at the Regional level was 7,281.9 Yuan in 2005. 49 4.5.5 Limited data availability There has been no regular collection and book keeping of expenditures for HIV/AIDS prevention and control activities. It is only in recent years that a computerized medical information system was introduced. Although the research team planned to set up AA from 2003 to 2005 in Luzhai, it eventually ended up with the AA for 2005, because of lack of availability of data required. 50  Chapter 5 Conclusions and Recommendations The study provided a chance for the team to identify some of the bottle neck issues in HIV/AIDS financing in Guangxi Zhuang Autonomous Region. Although the findings from the study can not be simply extrapolated and generalized, they definitely could help policy makers at central and local levels identify issues that have not been on their usual radar screening in the area of HIV/AIDS prevention and control. More important, the study‘s findings could lead to potential solutions to the existing problems, and thus could help improve the effectiveness of the local response to HIV/AIDS. Based upon the study‘s findings and international best practices, some general recommendations can be made. 5.1 Achieving a Better Understanding of the Overall Financial Needs and Inputs for HIV/AIDS Prevention and Control It is imperative to know the overall financial needs for HIV/AIDS prevention and control at all levels in order to secure sustainable and stable financing for it. Overall financial needs refer to the needs for achieving the objectives and targets specified in the Mid and Long Term Plan for HIV/AIDS Prevention and Control in China and the second Action Plan for HIV/AIDS Prevention and Control. Several tools for resource needs estimation for HIV/AIDS prevention and control have been developed such as the UNADIS and Futures Group Resource Need Model (RNM). The RNM model and similar ones can help projecting future financial needs for HIV/AIDS. Reliable projection is based on collection of the information listed in Box 3. Since it is difficult to find a set of data that represents the situation of the country or any given province, it is recommendable for the Ministry of Health to collect these data by adopting a bottom-up approach, aggregating the resources‘ needs of each individual province, in turn calculated aggregating the need of each individual County. Box 3 1. Demographic data：size