ACHIEVING COST REDUCTIONS

An alternative to raising subsidies proportionally as the number of family planning clients increases is to try for greater efficiency in service delivery. National family planning programs in many countries have grown very rapidly in short periods of time. Services are geographically dispersed and hard to supervise or manage. Family planning services are often delivered by large, unwieldy public organizations, characterized in varying degrees by misappropriation of resources, absenteeism, low morale or commitment to service, and poor skills. There is ample scope in such programs for doing more with existing resources.

In the second section of the meeting, participants discussed the extent to which programs could achieve cost savings without incurring unacceptable reductions in coverage or quality of services. The search for places where costs could be cut without much sacrifice of desired outputs could benefit from detailed, comparable studies of costs of family planning programs operating at different scales in different settings. The basic approach could be the same as in managerial finance for the private sector: take estimates of costs (money costs or even actual resources expended) for various operations when they are performed efficiently and compare estimates for the program being studied, to see where the gaps (“variances”) are greatest; these provide information about inefficient scale or process design (see, for example, Drury, 1990: Ch. 14).

Unfortunately, as Janowitz and Bratt (1992) have shown, it is very difficult to tell from existing studies of costs of family planning programs the extent to which apparent cost differences are due to differences in the quantity of real resources needed to produce standard amounts of program output, and how much are due to differences among authors in the types of costs included or their allocation to different components of programs. Perhaps the most that can be said from the studies reviewed by Janowitz and Bratt is that the wide variation in costs per couple-year of protection provides prima facie evidence that many of the programs could be operating much more efficiently. Some examples of inefficiencies include excessive medicalization of services, customs duties, and burdensome regulations for importing contraceptive supplies.

Such reductions in overall (public- and private-sector) costs may not entail reduction in the expenditures of each sector of the public program, as was pointed out at the meeting. For example, all family planning services operating in a country, both private- and public-sector, may be able to operate facilities at more efficient caseloads if information, education, and communication programs receive ample financial support from the public sector.

The current dearth of knowledge about the costs of family planning programs and the reasons for cost variation is due both to a simple lack of requisite facility-level data and to the lack of comparability among the studies that have been done. Janowitz and Bratt called for greater standardization of methodology in future studies (and have begun a series of cost studies using standard method-



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Resource Allocation for Family Planning in Developing Countries: Report of a Meeting ACHIEVING COST REDUCTIONS An alternative to raising subsidies proportionally as the number of family planning clients increases is to try for greater efficiency in service delivery. National family planning programs in many countries have grown very rapidly in short periods of time. Services are geographically dispersed and hard to supervise or manage. Family planning services are often delivered by large, unwieldy public organizations, characterized in varying degrees by misappropriation of resources, absenteeism, low morale or commitment to service, and poor skills. There is ample scope in such programs for doing more with existing resources. In the second section of the meeting, participants discussed the extent to which programs could achieve cost savings without incurring unacceptable reductions in coverage or quality of services. The search for places where costs could be cut without much sacrifice of desired outputs could benefit from detailed, comparable studies of costs of family planning programs operating at different scales in different settings. The basic approach could be the same as in managerial finance for the private sector: take estimates of costs (money costs or even actual resources expended) for various operations when they are performed efficiently and compare estimates for the program being studied, to see where the gaps (“variances”) are greatest; these provide information about inefficient scale or process design (see, for example, Drury, 1990: Ch. 14). Unfortunately, as Janowitz and Bratt (1992) have shown, it is very difficult to tell from existing studies of costs of family planning programs the extent to which apparent cost differences are due to differences in the quantity of real resources needed to produce standard amounts of program output, and how much are due to differences among authors in the types of costs included or their allocation to different components of programs. Perhaps the most that can be said from the studies reviewed by Janowitz and Bratt is that the wide variation in costs per couple-year of protection provides prima facie evidence that many of the programs could be operating much more efficiently. Some examples of inefficiencies include excessive medicalization of services, customs duties, and burdensome regulations for importing contraceptive supplies. Such reductions in overall (public- and private-sector) costs may not entail reduction in the expenditures of each sector of the public program, as was pointed out at the meeting. For example, all family planning services operating in a country, both private- and public-sector, may be able to operate facilities at more efficient caseloads if information, education, and communication programs receive ample financial support from the public sector. The current dearth of knowledge about the costs of family planning programs and the reasons for cost variation is due both to a simple lack of requisite facility-level data and to the lack of comparability among the studies that have been done. Janowitz and Bratt called for greater standardization of methodology in future studies (and have begun a series of cost studies using standard method-

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Resource Allocation for Family Planning in Developing Countries: Report of a Meeting ology, described in Janowitz and Bratt, 1994). Even without a high degree of standardization, studies of particular programs could contribute to the ability to make comparisons if they described methods clearly and presented “modular” estimates that could be recombined in different ways for different purposes. J.K. Satia argued that improved management could, almost by definition, reduce the need for public-sector subsidies, but that there is very little evidence of cost reduction to date in family planning programs. When programs like those in Indonesia, Bangladesh, Mexico, Kenya, and Zimbabwe are termed “successful,” it is almost always the increase in contraceptive prevalence that is being used as a criterion, or increase in contraceptive prevalence given a certain level of social and economic development, not the amount of services per unit of input (the definition of program efficiency). He contrasted program effectiveness (“doing the right things”) and efficiency (“doing things right”). High-level managers have not been pressured to pay attention to efficiency, especially in countries, including many in sub-Saharan Africa, in which large-scale family planning programs are just getting under way. The implied order of topics for managerial attention is: first get programs set up and infrastructure in place, then worry about making the program more efficient. He cited the examples of China, where the program continued for decades to rely heavily on stainless steel IUDs and only recently began to offer copper IUDs, and programs in South Asia and Indonesia, where fixed-site services replaced house-to-house visits only after moderate levels of contraceptive prevalence had been reached. These are also the implied priorities for operations researchers, Satia noted, since most projects are designed to test new types of services and show their feasibility and effects on contraceptive use rather than to test new, lower-cost ways to deliver the same package of services. Knowles questioned the idea of a sequence of topics, noting that new programs such as those in many African countries do not have the luxury of taking issues one at a time. Effectiveness and efficiency have to be considered together, since organizational inertia can mean that decisions made early in a program have a lasting influence on the way services are delivered. To increase attention to program efficiency, Satia asserted, would require careful attention to some strategic issues. When should pressure be put, and what types of pressure, on programs to increase efficiency? He was optimistic about the prospects for improving operational efficiency in many countries, on the basis of evidence that the environments in which programs operate are becoming more demanding, managers themselves are more sophisticated than in the past, and expertise among NGOs and management professionals and researchers in the specific field of population program management has been building. Faced with donor support declining in absolute or proportional terms, a typical response of programs has been to introduce user fees; less common are serious efforts to reduce costs for the same level of subsidy and quality of service. Satia pointed out that increased efficiency is possible in every aspect of family planning programs: by carefully planned training, by redirecting information, education, and

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Resource Allocation for Family Planning in Developing Countries: Report of a Meeting communication campaigns, by using NGOs or private firms to carry them out, by varying the frequency of services (Foreit et al., 1990), and by assigning specific tasks to supervisors. Efforts to improve family planning management have not been thoroughly evaluated. Considerable effort has gone into management training, often without much impact if unaccompanied by changes in the system in which the trained managers are to operate. Satia cited Keller 's (1991) review of management information systems in family planning programs, which showed that these systems are incomplete or nonexistent in many countries. Even relatively modest investments in such systems could give managers greater ability to target resources where they are needed. Stan Bernstein later pointed out that the United Nations Fund for Population Activities, as part of the follow-up to the 1994 International Conference on Population and Development, is helping countries prepare integrated reporting and cost estimates. It hopes to foster negotiations among bilateral donors, international agencies, and governments of developing countries to agree on “compacts” for the reallocation of resources to meet the provision of basic services envisioned in the Cairo Programme of Action. The emphasis on costs to the program is appropriate for some purposes, such as preparing budget projections and highlighting areas in which savings could be achieved. But for decisions on the allocation of resources to different types of programs, full social costs, including the costs borne by consumers, should be taken into account. James Knowles argued that community-based distribution programs would look more attractive (in comparison with clinic programs) if the private costs for transportation and waiting time are included. Even for estimating costs to public-sector budgets, a wide perspective is needed: Ross used Turkey as an example of a country that might save on costs associated with abortion if there were greater expenditures on promoting more effective contraceptive methods. One reason that there is so little micro-level information on costs is that there are no incentives for managers to know their costs, let alone reduce them. Gertler pointed out that financing in this sector typically involves the central program simply covering the costs of subordinate units, program elements, or clinics. No lower-level administrator can control her or his own budget, so of course they are not very cost conscious. Discussions of management and cost reduction in family planning have generally ignored the potential of price signals and incentives to managers. Gertler cited the example of Vietnam, where individual hospitals can keep some portion of the fees they collect; the hospital administrator thus has an incentive to know the marginal costs of different types of services and try to arrange practice patterns efficiently. The incentives for cost reduction have to be balanced against quality standards and coverage goals, but the advantages of decentralized decision making by accountable managers may well make it worthwhile.