Reviewing the evidence on health financing for effective coverage: do financial incentives work?

The widening gap between improving healthcare coverage rates and stagnating health outcomes across low-income and middle-income countries highlights the need for investments in quality of care, in addition to access. New research, presented in a World Bank report, examines one type of relevant policy reform: performance-based financing (PBF), which is a package reform that always includes performance pay to front-line health workers and often also provides facility autonomy, transparency and community engagement. A large body of rigorous studies and new analysis show that in under-resourced, centralised health systems, PBF can result in gains to service utilisation, but only has limited impacts on quality. Even the relative benefits of PBF on service utilisation are less clear when compared with (1) direct facility financing which provides front-line facilities with operating budgets and provider autonomy, but not performance pay and (2) demand-side financial support for health services (ie, conditional cash transfers and vouchers). Thus, the central component of PBF-the performance pay-appears to add little value over flexible payment systems and provider autonomy. The analysis shows that this lack of impact is unsurprising because most of the constraints to improving quality do not lie with the health worker in these settings. While PBF was conceived as a complex package 'blueprint', we review the evidence to conclude that only some elements seem to make sense. To improve quality of care, health financing should pivot from performance pay while retaining the elements of direct facility financing, autonomy, transparency and community engagement.