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Submitted by Rob Yates on
An interesting blog Shanta and Jishnu, but I am not sure you are raising anything new here and I fear you are muddling up a number of issues. Nobody is doubting that health workers respond to financial incentives, but I would challenge what would appear to be your overall argument that direct fee-for-service payments to providers results in BETTER performance. They can, as has been shown by some of the Bank’s performance-based-financing work but these successes are associated with improved PUBLIC purchasing of services not private financing through patient fees. See for example the excellent example of Burundi where the Bank is celebrating the stunning success of the Government in replacing patient fees with performance related public financing: http://www.worldbank.org/en/news/feature/2012/09/24/burundi-investing-in-safer-births Why did the government implement this policy? Because it recognized the fundamental market failure associated with healthcare provision – the massive asymmetry of information between the consumer and the supplier. All over the world where user fees are charged health care providers take full advantage of these incentives to oversupply services to vulnerable consumers. From personal experience I remember an employee of ours in Congo being charged $20 for 5 medicines to treat malaria – but which didn't include ACT. This exploitation can reach terrifying proportions (see this brief video): http://www.clipsyndicate.com/video/playlist/5895/1343344?cpt=8&title=health&wpid=2057 In fact the free health care policy in Burundi came about because the President realized that government hospitals were being turned into debtors prisons http://www.hrw.org/reports/2006/09/06/high-price-pay-0 Across the world governments are therefore realizing that, in general, public purchasing of health care (which may involve private sector administration and the use of private providers) is better than private purchasing of care. Sure we can look at including incentive mechanisms into these purchasing systems but public purchasers are much more likely to secure improved efficiency and equity than a poor woman with a desperately sick child clutching a fistful of grubby bank notes