The Incidence of Social Spending
in Côte d'Ivoire, 1986-95
Lionel Demery, Julia Dayton and Kalpanna Mehra,
Poverty and Social Policy Department,
The World Bank, Washington D.C.
1996
I.Introduction: the Context
After years of successful growth in the 1960s and 1970s, Côte d’Ivoire has faced serious economic problems in more recent times. In part a result of terms of trade losses and an internal adjustment strategy, the country experienced negative growth for much of the 1980s and early 1990s (Demery, 1994). Living standards have fallen as a result. This period of economic decline also witnessed a significant surge in poverty, the headcount ratio increasing from 30 percent in 1985 to 46 percent in 1988. And by all accounts, it has continued to increase up to 1992 (Grootaert, 1993, 1994). These have been difficult times for the majority of the Ivoirian population, but especially for the poor.
The deteriorating living standards of Côte d’Ivoire are not only reflected in GDP and income-based measures of welfare. The UNDP’s Human Development Index combines a range of indicators which measure welfare directly. According to the Human Development Index, Côte d’Ivoire ranked 136th out of 173 countries—23 places lower than its ranking on the basis of per capita GDP. Clearly, Côte d’Ivoire is lagging behind countries at similar income levels in promoting social development.
Since January 1994, when the CFA franc was devalued, there has been a measure of economic recovery, and the decline in living standards has been arrested. The challenge is now to restore sustainable growth, and to ensure that such growth benefits the majority of the population, especially the poor. There are two basic requirements for broad based growth. First, growth must emphasize labor-intensive activities, such as agriculture and manufacturing. Second, Côte d’Ivoire must improve on its social development achievements. The population at large must have better access to human capital in order to benefit from the opportunities such growth presents. If the human resources of the poor fail to improve, their prospects of benefiting from growth will continue to be dim.
Given this broader socioeconomic context, this analysis of public social spending seeks to answer two broad questions. First, to what extent has the reliance upon internal adjustment penalized social spending in Côte d’Ivoire, and led to a deterioration in the targeting of such spending to the poor? Second, does the evidence suggest that the poor have adequate access to human capital-enhancing services, so that any future recovery in economic growth will be broad based?
The chapter is concerned only with the two critical human resources sectors, health and education. The following section deals with the approach that is taken in the chapter, this being ‘benefit’ incidence analysis. This method is then applied to spending on health (Section III) and on education (Section IV) for two years, 1986 and 1995. Section III describes the health system in Côte d’Ivoire, summarizes evidence from household surveys on health outcomes, and analyzes the incidence of government expenditures on health. Section IV then deals with education in like manner, beginning with the education system and outcomes at the household level, then analyzing the incidence of public spending on education. Finally, Section V makes comparisons with other countries, and Section VI draws some concluding observations.
II.Benefit Incidence Analysis
Benefit incidence analysis has become an established approach since the path-breaking work on Malaysia by Meerman (1979) and on Colombia by Selowsky (1979). There has been a recent resurgence of interest in the approach, which was well reviewed in Van de Walle and Nead (1995). Until recently few applications have been attempted in Africa, though several studies are now becoming available (and are reported in section V below).
The method seeks to measure how government subsidies on services such as health and education are distributed across groups in society. The distribution of these subsidies is determined by two broad factors. First, it depends on government spending itself, and how it is allocated within the sector. The lower the spending, and the greater the effective cost recovery, the lower will be the subsidy embodied in the service provided. Second, the distribution will depend on individual orhousehold behavior—on who uses the service that the government provides. It is only by using the service (by sending a child to a primary school, or visiting the outpatient department at a hospital) that individuals and households can lay a claim to the in-kind transfer that is implicit in the subsidy. Benefit incidence analysis therefore brings together two sources of information: data on the government subsidy (estimated as the unit cost of providing the service, less any cost recovery back to the government) allocated to the different categories of service (primary schooling, in-patient hospital care, etc.); and information on the use of these services by individuals and households, which is usually obtained from household surveys. Data from these two sources are often difficult to match, usually because of the way in which the information is collected and disaggregated. This is a problem, for example, in matching public expenditures on health with the information provided in household survey data in Côte d’Ivoire (as discussed in section III).
In general, government expenditures will be more equally distributed when the spending is concentrated on services that are used widely by the population, and used especially by poorer groups. If public expenditures are concentrated on primary education, or on primary-health facilities such as clinics or health centers—which are widely-used services benefiting poor and non-poor—public expenditures will tend to be more equally distributed. However, if governments spend more on high-cost services which are not generally used by poorer groups (such as university education or in-patient hospital care), the incidence of spending is likely to be more unequal. In sum, the benefit incidence of public spending depends both on the allocation of public expenditures within the sector, and on the behavior of households.
An important limitation of the approach is that it does not necessarily measure the effect of government spending on the welfare of households. The real benefit to a household in using a public service lies not so much in the monetary value of that service (usually approximated by unit cost), as in the direct benefits it gives—better health, literacy and better income-earning potential in the future. This should be borne in mind when interpreting the results of this chapter.
III.The Public Provision of Health Services
This section assesses the extent to which the poor in Côte d’Ivoire benefit from the public provision of health services. It is divided into three main sub-sections. The first documents the main characteristics of the system of health care in the country, providing estimates of public spending on health, and the subsidy that such spending implies. This is followed by a brief discussion of health outcomes: when household members become ill, how do they respond? The final section brings these two findings together in estimating the incidence of health spending in Côte d’Ivoire. A detailed analysis is provided for 1995 and then the change in the incidence of health expenditures in the past decade is examined by comparing the 1995 results with those for 1986.
III. 1The System of Health Care
The public sector provides almost all health care in Côte d’Ivoire, as the private sector is very underdeveloped. The public sector is comprised of three levels of health care: primary, which includes preventive as well as basic curative services; secondary, which includes first-level referral hospitals; and tertiary, which encompasses referral care from the secondary-level and all specialty-care. The system can be characterized in two ways. First, the referral system does not work well, and the separate levels of health care tend to operate independently, instead of coordinating health care services (World Bank 1995d). One consequence of this compartmentalization is that the quality of the services varies substantial among the various types of facilities. The system has traditionally centered around tertiary-level health care services, which provide comparatively high standards of care and are well-funded. The primary level, however, has poor service delivery and facilities that are poorly staffed and equipped. In addition, little attention has been given to preventive and promotional activities such as mother and infant health care, family planning, immunization and nutrition (World Bank 1995d). The variation in funding among the levels is discussed in more detail in the following section.
In the early 1990s, the Government began working to reorient the public health care delivery system. With the support of a Human Resources Sectoral Adjustment Loan (HRSECAL) from the World Bank, the program seeks to shift more resources to primary health care and first-level referral services. This new policy aims to integrate ongoing vertical health programs into a comprehensive system of primary health care, so that health care can be provided in the most cost effective manner. The new strategy is based on decentralization in the management of services and an increased participation by the community in both the management and financing of the primary level services. This approach represents a fundamental departure from past public health policy focusing on hospital-based care. To date, progress in all areas has been slow.
Public Expenditures on Health. Historically, Cote d’Ivoire has given high priority to public spending on human resources development. During the 1980s, the Government devoted over 50 percent of recurrent expenditures to the social sectors. Public expenditures on health accounted for about 6 percent of the total in the late 1980s and early 1990s, and the share has increased to about 8 percent in 1994. In real terms, spending on health has….
Within the health sector, the shift towards spending more at the primary level and less at the tertiary level did not occur as was intended in the health sector strategy. An annual increase had been planned in the share of recurrent expenditures for primary care, so that between 1991 and 1995 its share would increase from 35 to 42 percent of all recurrent expenditures. As shown in Table 1, recurrent expenditures for primary-level care have actually declined from 37 percent in 1991 to about 25 percent in 1994 and 1995.
Within the recurrent expenditure category, about 75 percent is spent on wages for health care personnel. As in many other African countries, there is a preponderance of physicians in the capital, concentrated in tertiary-level care, and a dearth in rural areas. This is primarily a result of training in medical school, which focuses heavily on specialized services and not enough on basic health care and health promotion. A reorientation of the training of Ivoirian physicians would help to encourage future physician to practice primary health care (MSPAS 1995). The distribution of nurses and other health care personnel is well balanced among the regions of the country, a result of a decade-long campaign to promote an equitable distribution among the regions.
Investment expenditures have varied considerably from year to year, showing no predominant pattern. Most importantly, actual disbursements in investment expenditures were consistently between one-third and one-half lower than the amount budgeted (not shown in table). This has made it hard to implement investment projects.
Table 1: Public Expenditures on Health, Recurrent and Investment, 1991-1995
(millions CFAF) / 1991 / (share) / 1992 / (share) / 1993 / (share) / 1994 / (share) / 1995 / (share)Recurrent
Primary / 15,223 / 36.8 / 10,737 / 25.4 / 10,037 / 26.0 / 11,348 / 25.1 / 13,478 / 26.1
Secondary / 6,484 / 15.7 / 5,776 / 13.7 / 4,812 / 12.5 / 11,338 / 25.1 / 7,952 / 15.4
Tertiary / 19,616 / 47.5 / 25,764 / 60.9 / 23,726 / 61.5 / 22,493 / 49.8 / 30,219 / 58.5
Total / 41,323 / 100.0 / 42,277 / 100.0 / 38,575 / 100.0 / 45,179 / 100.0 / 51,648 / 100.0
Investment
Primary / 461 / 21.6 / 3,510 / 44.6 / 1,104 / 23.0 / 1,222 / 15.8 / n.a.
Secondary / 649 / 30.5 / 2,949 / 37.4 / 1,924 / 40.0 / 1,557 / 20.1 / n.a.
Tertiary / 1,020 / 47.9 / 1,416 / 18.0 / 1,779 / 37.0 / 4,975 / 64.2 / n.a.
Total / 2,130 / 100.0 / 7,875 / 100.0 / 4,807 / 100.0 / 7,754 / 100.0 / n.a.
Grand Total / 43,453 / 50,152 / 43,382 / 52,933
Memorandum Items
Total as % of GDP
GDP Deflator
(1987=100) / 91 / 91 / 91
Real Total / 39,673 / 45,789 / 39,304
Percent change / 13 / -16
Note: All figures represent disbursed ('ordonnence') amounts.
* 1995 annual figures are based on an extrapolation of the actual expenditures for the first
eight months of the year.
Sources: World Bank (1995b) for all except 1995. 1995 from preliminary tables supplied
To what extent does the government subsidize the provision of health care in Côte d’Ivoire? Combining information on public-sector recurrent health disbursements for 1995 with information with data on health visits from the Social Dimensions of Structural Adjustment Priority Survey (PS) (1995),[1] it is possible to estimate unit costs for health services. Public expenditure data are broken down simply by level (primary, secondary and tertiary), and by salary/non-salary. The survey obtained information on the type of health care facility visited, and these have been matched to the level of care they provide.[2] Unfortunately, the questionnaire did not distinguish between hospitals at the secondary-level and those at the tertiary-level, and so it was necessary to combine these two categories when looking at unit costs. Hence, two levels of unit costs were established: one for consultations at health centers (including all primary-level facilities) and one for consultations to hospitals (including all secondary and tertiary-level facilities).
For 1986, public recurrent expenditure data is only not available by level of care, so per unit cost had to be averaged across all types of facilities. The survey data are from the 1986 Living Standards Measurement Study. These survey data are roughly comparable to those collected in 1995, although they differ in several ways, as discussed in Box 1. In an ideal analysis, visits to health centers and other primary health care institutions should be distinguished from other visits (such as hospital visits) because they attract a lower public expenditure subsidy, and this should be taken into account in analyzing who benefits from health spending. For example, an in-patient visit to a hospital will require more spending and involve a larger public subsidy than a visit to a clinic or health center. And it is the poor who tend to use these low-cost facilities and the rich the high cost facilities. However, given the limitations of the 1986 public expenditure information, this was not possible. Comparisons between the two years, 1986 and 1995, is based on this more rough calculation, and an analysis for both heath centers and hospitals is also be presented for 1995.
Table 2 reports government expenditures on health for 1995 by level of care. In 1995, the average cost of a visit to a primary-level health center (health post or dispensary) was CFAF 1,540, as compared with the average visit to a hospital of CFAF 1,760. The difference in the two unit costs is not as large as might be expected, since in other African countries the average cost of care at a hospital is significantly more expensive that at a health center. The reason for this small difference in unit costs is not clearly understood, but could be because so many people consult hospitals for minor outpatient services, causing the average cost of care to drop. For 1986, the average unit cost, an average across all levels of service, was CFAF 2,239, compared with CFAF 1,647 for 1995 (Annex Table 1). As these are an average of higher unit costs for tertiary care and lower costs for primary and secondary care, an analysis based on this unit cost is abstracting from a major source of inequality in health care delivery. If the poor use mainly lower levels of care, and the better off have a higher propensity to visit hospitals when sick, an analysis based on the mean subsidy for the public health sector as a whole would underestimate the true inequality in health service provision.
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Table 2: Public Expenditures and Unit Subsidies for Health, 1995
(CFAF million unless stated otherwise)Salaries / Non-Salary / Total / (less Cost / Net / Prorated / Health / Subsidy
Level / (Disbursed) / (Disbursed) / Expenditures / Recovery)* / Total / Sub-Totals** / visits / per visit
(Disbursed) / (number) / (CFAF)
Primary: / Primary: / Primary:
Primary / 11,697 / 4,805 / 16,502 / 200 / 16,302 / 23,310 / 15,140,866 / 1,540
Secondary / Secondary / Secondary
Secondary / 5,378 / 2,655 / 8,033 / 925 / 7,108 / and Tertiary: / and Tertiary: / and Tertiary:
25,277 / 14,361,100 / 1,760
Tertiary / 9,840 / 5,441 / 15,281 / 4,711 / 10,570
Research / 1,967 / 549 / 2,516 / 2,516
Administration / 4,547 / 1,379 / 5,925 / 5,925
Social Affairs / 3,393 / 2,775 / 6,168 / 6,168
Average:
Total / 36,821 / 17,603 / 54,423 / 5,836 / 48,587 / 48,587 / 29,501,966 / 1,647
*Cost Recovery revenues are estimated based on the 'Voted Budget' for 1995.
**Spending research, administration and social Affairs has been pro-rated and added to the primary and secondary/tertiary health services,
according to their respective shares in the budget, in order to account for all public health spending in the per-visit subsidy.
Note: Annual spending was extrapolated based on actual spending through 8/31/95.
Sources:Preliminary Tables from the Ministry of Health, 'Evolution des depenses publiques de Sante de 1992 a 1995, 10 Dec 1995.
Cost Recovery data from 'Examen des Depenses Publiques dans le Secteur de la Sante', MSPAS, 1995.
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User charges. Cote d’Ivoire began the first phase of its cost recovery program in 1991, when fees were charged for consultations and drugs provided in tertiary-level facilities. In October 1994, user charges for pharmaceuticals and medical consultations were extended to all level of the public health care system. The basic principle is that 65 percent of the revenues remain at the local level to be used for the purchase of drugs, supplies and maintenance. The rest is returned to the Treasury and is used to help finance the recurrent costs of the health sector. The revenues retained at the local level are to be run by locally-selected committees call ‘Comites de gestion.’ The system of Comites de gestion has been set up, but is not yet functional in all local areas.
In the spirit of the Bamako Initiative, there is no waiver or exemption policy. No analysis has been done to determine whether the fees deter anyone from using public health care facilities. Many suspect, however, that the use of public health care services declined following the devaluation, as a result of a sharp increase in the price of pharmaceuticals (which are imported).
Overall, the system of cost recovery has been set up to provide an additional source of financing for the public health sector, with the goal that the funds generated from the program will substitute for allocations from the central government. Less attention has been given to other aspects of the cost recovery system, such as improving the quality of the services provided or extending access to those who do not currently use the services.