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

Abstract

Background: Universal 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.

Methods: We 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.

Findings: Compared 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.

Conclusion: The 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.

Keywords: health economics; health policy; health systems.

Figure 1

Per capita district allocation (2018/2019). ORT, other recurrent transactions.

Figure 2

District per capita allocations with EHP ‘full coverage’ formula relative to per capita allocations with unadjusted capitation formula. EHP, essential health package.

Figure 3

Shift in budgetary share implied by use of the EHP formula (% change). EHP, essential health package.

Figure 4

Shift in budgetary share between ‘full’ EHP need formula and ‘realistic’ EHP need formula (% change). EHP, essential health package.

Figure 5

(A) Relative weight of national budget allocations to disease areas in the EHP ‘full coverage’ formula and (B) relative weight of national budget allocations to disease areas in the EHP ‘realistic coverage’ formula. EHP, health package. RMNCAH, Reproductive, Maternal, Newborn, Child and Adolescent Health; IMCI, Integrated Management of Childhood Illness.