Allocating resources to support universal health coverage: development of a geographical funding formula in Malawi

Abstract

BackgroundUniversal health coverage (UHC) requires that local health sector institutions—such as local authorities—are properly funded to fulfil their service delivery commitments. In this study, we examine how formula funding can align sub-national resource allocations with national priorities. This is illustrated by outlining alternative options for using mathematical formula to guide the allocation of national drug and service delivery budgets to district councils in Malawi in 2018/2019.MethodsWe use demographic, epidemiological and health sector budget data with information on implementation constraints to construct three variant allocation formulae. The first gives an equal per capita allocation to each district, and is included as a baseline to compare alternatives. The second allocates funds to districts using estimates of the resources required to provide Malawi’s essential health package of priority cost-effective interventions to the full population in need of each intervention. The third adjusts these estimates to reflect a practicable level of attainable coverage for each intervention, based on the current configurations of health services and demand for interventions.FindingsCompared with current district allocations, not underpinned by an explicit formula, the formulae presented in this study suggest sizeable shifts in the allocations received by many districts. In some cases, the magnitude of these shifts exceed 50% reductions or doubling of district budgets. The large shifts illustrate inequities in the current system of budget allocation and the potential improvements possible.ConclusionThe use of mathematical formulae can guide the efficient and equitable allocation of healthcare funds to local health authorities. The formulae developed were facilitated by the existence of an explicit package of priority interventions. The approach can be replicated in wide range of countries seeking to achieve UHC.

Allocating resources to support universal health coverage: policy processes and implementation in Malawi

“…12 The primacy of the HBP coverage as a goal for the MOHP meant that the HBP served as a foundation for the design of the RAF. 8 McGuire et al (2020) proposed four theoretical frameworks within which the formula for Malawi could be placed-ranging from the easy to implement and highly parsimonious framework based simply on the size of the population, on the one hand, to a more comprehensive and accurate framework based on the detailed calculation of expected service delivery cost based on population size, disease burden, unit cost of treatment and current coverage rates. The shape of the HBP, that is, the level of specificity of interventions included in the package, in Malawi, along with the availability of adequately granular epidemiological and treatment cost data, and the political preference for accuracy, implied that the more accurate 'bottom-up epidemiological approaches' 13 could be applied.…”

“…The objective of efficiency was operationalised by aligning the formula-based allocation to the HBP which is rooted in the principles of cost-effectiveness and health maximisation. The second objective of equity was characterised as providing 'equal opportunity to deliver the standard level of health services specified' 8 in the HBP to all allocative units. Finally, like any other public health policy, the RAF was formulated within the context of the politics of the country, with the objective of improving the acceptability of resource distribution among all stakeholders.…”

“…Based on the first and second criteria, the first option proposed in McGuire et al (2020), 8 based solely on population size was rejected since it did not account for the national objective of maximising health impact through the implementation of the cost-effective interventions in the HBP. Under the third criterion of implementation feasibility, the completeness, granularity, timeliness and reliability of data required for the components of the formula were evaluated.…”

“…1 2 There has been a rising adoption of a formula-based approach to resource allocation among low and middleincome countries, 3 4 with the objective of achieving efficient and equitable allocation across devolved units in-charge of delivering public services. There is growing literature on the principles of formula design, 5 possible frameworks, [6][7][8] as well as challenges to the implementation of a formula. 4 Missing in the literature, however, is an illustration of the practical processes required to adopt and implement a new formula for resource allocation.…”

“…Given that there is no gold standard for the components of an 'ideal' resource allocation formula (RAF), 6 it is particularly important to follow a systematic process for arriving at a nationally accepted formula which adequately captures contextual determinants of service delivery costs. This paper attempts to fill this gap by describing Malawi's recent experience of designing a new practicable RAF, based on the technical foundation presented in McGuire et al (2020) 8 to distribute its health sector budget to districts. In this vein, the below can serve as a guide to other decentralised governments seeking to revise their RAFs.…”