Demand- and Supply-Side Incentives in the Nicaraguan Social Protection Network

1. Demand- and Supply-Side Incentives in the Nicaraguan Social Protection Network Ferdinando Regalia Head of Social Policy & Economics UNICEF, South Africa Results Based Financing Workshop June 23rd – 27th, 2008, Kigali

2. Red de Protección Social (RPS) • Started in 2000. ~ 170,000 beneficiaries at its peak coverage in 2004 (phase II) • Multi-sector approach: education, health, nutrition • Incentive-based welfare program (CCT) • Transfers: ~ one fifth of households (HHs)’ average consumption pre-program • Targeted to the poor (<US$1.10 per day) • HHs’ average (median) yearly per-capita consumption pre-program: US$ 320 (US$245)

3. Madriz Matagalpa RPS starting point

4. Why demand-side incentives? • Situation: Poor HHs consumed less preventive health care services than non-poor. Why? • Perhaps supply constraints (though supply was “uniformly” mediocre within localities)… • …perhaps demand-side constraints: • High direct and indirect costs of accessing services • Imperfect knowledge of private returns to health investment, etc.. • Relative contributions of s- and d-side constraints difficult to disentangle ex ante

5. Why demand-side incentives? (2) • Proposed solution: Some d-constraints (i.e. imperfect knowledge, externalities) justified “conditioning” d-side incentives (RBF) • Interestingly, service utilization increased more among the very poor than the non-poor • while all HHs faced a fairly uniform increase in access and quality of health care services • Challenges: • In 1999, little knowledge on how to set up a CCT scheme

6. Why supply-side incentives? • Situation: Systemic capacity bottlenecks of MOH • Unable to quickly expand services in remote localities • Proposed solution: service outsourcing to private providers through a competitive bidding process • Challenges: • small market of private providers • need to design incentives for health providers to develop efficient plans to rapidly expand coverage in underserved areas

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

8. What did RBF want to achieve? • D- and s-side incentives sought to increase: • Utilization of preventive health services (children 0-5) • Regular check ups (baseline: 70% among children < 3) • Child growth and development monitoring (baseline: 60% among children < 3) including micronutrients and anti-parasites. • Up-to-date vaccinations (baseline: 39% among children 12-23 months) • Utilization of maternal health services (Phase II). • Pre-natal and post-partum control • Parents’ attendance to health educational workshops • Household sanitation, reproductive health, nutritional counseling

9. Stakeholders’ buy-in: d-side incentives • Planning stage: • MOH opposed d-side incentives, fearing surge in workload • Distribution of vaccines and other inputs, increasing referrals for curative services, etc. • Government decided to go ahead anyway through SIF • Implementation stage: high involvement by local stakeholders • Households’ targeting validation • Local authorities’ support for logistics • Randomized evaluation plans • Coordination of supply side response • Beneficiaries’ coordination through promoters

10. Stakeholders’ buy-in: s-side incentives • MOH (central) aware of bottlenecks but resisted outsourcing • Wage competition (potential exodus of health workers); no experience with contracting of services • Terms of the agreement between MOH and RPS team • MOH responsible for providers’ selection, training and certification (with RPS team’s support in procurement) • Additional budget allocated to MOH for supervision • Providers obliged to feed the MIS of the MOH • Stronger buy–in by MOH regional offices • Understood faster than the central MOH the potential gains in coverage to be achieved through outsourcing and RBF

11. How d-incentives operate • RPS socioeconomic survey administered to all HHs in (geographically) targeted localities • All HHs eligible for d-incentives if extreme poverty incidence high. Otherwise Proxy Means Test applied • Eligible HHs enrolled into roster. Mothers or primary care-givers entitled to receive bi-monthly transfers • All HHs’ members identified by a bar code. Transfer recipients identified by a special i.d. card with picture • Eligible HHs’ members mapped to health providers, payment agencies and schools • Pre-printed forms with names and bar-codes distributed by RPS team to health providers

12. How d-incentives operate (2) • Forms used by providers as planning tools to schedule all check ups with eligible HHs’ members. Information used by MOH to plan supply of inputs • HHs’ attendance recorded by health providers. Forms regularly collected by RPS team and information downloaded to RPS MIS • HHs’ record of compliance used to prepare payment orders. Two months lag between compliance updating and payments processing • Non compliance triggers suspension of transfers (10%). Repeated non compliance triggers expulsion (1%) • Spot checks of the compliance verification process

13. How s-incentives operate • One year renewable RB contracts for health providers • Contract’s final amount determined after a joint (RPS, provider) assessment of service coverage to: • Validate, at the locality level, HHs’ demographic information collected through the RPS socioeconomic survey • Identify the final “universe” of HHs a provider will be serving • Enroll HHs with the provider and establish a baseline for the services to be provided • Contract’s final amount obtained by multiplying the number of people served (by age group) by the unit cost of the specific service provided to each age group • Providers are paid a per-HH fee for initial assessment

14. How s-incentives operate (2) • Upfront payment: 3% of the contract. The rest: bi-monthly or quarterly payments against the achievement of coverage targets by age groups • Targets: 93% - 95 % of active (i.e. receiving d-side transfers) beneficiaries by age group • If target missed, RPS MIS automatically stops payments to the provider for the period in question • Payments contingent upon RPS team’s verification of the coverage achieved (review of pre-printed forms) • External independent auditing of a representative random sample of records held by providers and households (twice a year). Penalties and termination

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

16. Impact evaluation: selected results (2) • Vaccination

17. Impact evaluation: selected results (3) • Stunting

18. Impact on % of children under 5 who had attended preventive growth monitoring during the previous six months 100 93.1 92.6 91.7 90 Treatment Phase I 80 77.2 Control Phase I/ Treatment Phase II 73.3 72.6 70.6 70.4 70 Treatment Phase II 60 50 2000 2002 2004 Source: IFPRI (2005) Impact evaluation: selected results (4) • Increase in health service utilization persisted ten months after d-incentives discontinued

19. A few final considerations • A package of d- and s-side incentives can increase utilization of preventive health care services • Relative contribution unknown. Need to “unbundle the bundle” . D-side, S-side or both? • Implementation of d-side incentives is technically feasible even in low-income countries • Fiscal sustainability considerations • Despite results, long term support for d- and s-side incentives in Nicaragua proved elusive • D-side incentives controversial • Cost-effectiveness of s-side incentives and outsourcing compared to alternatives, with or without d-side incentives