Resource Allocation Formula could address our poor health budget utilisation

Bangladesh’s health budget allocation approach only partially reflects population needs and rarely considers changing demographics and other requirements, which increases the chance of misallocating and underutilising it. Photo: TBS

Since gaining independence in 1971, Bangladesh made significant strides in the socio-economic sector and achieved laudable progress in its health sector, which is well recognised globally. Bangladesh is one of the few countries with substantial success in achieving millennium development goals (MDGs), particularly in health indicators. 

Bangladesh is now in the middle and crucial stage of sustainable development goals (SDGs) and universal health coverage (UHC). To achieve the success of SDG and UHC, addressing the financial hardship, maximising its utilisation, and ensuring the availability of health services are key.

The current health budget allocation of Bangladesh is meagre, between 5% and 6% of the total budget, and this allocation is significantly low compared to the recommended 15% of the total budget. It is even lower than other South Asian countries like India, Nepal etc. Commensurate with the low budget allocation, there is a concerning trend of underspending which is particularly prevalent in low - and middle-income countries (LMICs). 

Optimising limited health resources in resource-constrained countries to maximise better health outcomes requires efficient resource distribution across health services and geographical areas. Bangladesh's health resource allocation is based on an incremental system that neither considers context-specific needs nor addresses emergencies. 

Low health budget utilisation has been pervasive in the country's health sector for the last few years. Therefore, it is time to adopt and implement the resource allocation formula (RAF), which stands out as the practical and optimal choice for efficient health budget allocation. 

The RAF's objective is to improve the efficiency, equity and political acceptability of the distribution of public funds to serve the people. The benefit of the RAF is substantial. It enhances the efficiency of technical and managerial output and establishes better equity, as RAF is a pro-poor approach. Recognising the effectiveness of the RAF, many countries have embraced it, and some African countries have experienced good results. 

Based on the positive experiences in other countries, the World Bank in Bangladesh supported the Health Economics Unit (HEU), a policy wing of the Ministry of Health and Family Welfare (MOHFW), to assess the potential of and draft an RAF for Bangladesh. Unfortunately, it was not approved and executed by the MOHFW. It is said that the lack of consensus among prime government stakeholders was the key obstacle to introducing RAF in the health budget. 

In Bangladesh, the health budget is structured on a line-item basis for both operating and development budgets, relying on the income and expenditure of the preceding year. This incremental budget allocation approach often falls short of addressing the unique healthcare context and the demand in healthcare facilities, contributing to a vicious cycle that negatively affects the budget burn rate and expected health services. 

Moreover, the country's health budget allocation approach partially reflects population needs, as the staffing of the health facilities is often distributed in a way that rarely considers changing demographics and epidemiological requirements. It is evident that no systematic evidence is considered; therefore, there is a high chance of misallocating the budget, which is one prime procedural reason for the underutilisation of the health budget.
 
It is obvious that the low budget utilisation stems from the structural default in the budget allocation system. This systematic bottleneck can be mitigated by introducing and utilising the RAF. It holds an immense potential to rectify the inequalities in access to healthcare by systematically integrating need-based criteria into allocation decisions. 

There are noteworthy benefits to embracing the RAF and integrating it into the current public financial management (PFM) of the country. MOHFW possesses all the data facilitated by the implementation of the integrated budget and accounting system (iBAS) at both national and local levels. Besides, the country's public financial management is flexible and allows RAF adoption without requiring extensive reforms.

The resource allocation formula can be instrumental in allocating a need-based budget rather than the normative system that prevails in Bangladesh. The RAF can navigate the budget execution optimally in the country's current budgetary system. Most importantly, UHC requires the empowerment of the local health institutions in terms of decision-making and financial availability. 

It is important to understand that introducing and executing the RAF in the health sector must have a dynamic leadership with clear health goals to get the optimum advantages, a dimension currently lacking in Bangladesh. It is optimistic that the government and MOHFW are committed to a sustained and efficient health program and are charting the potential pathways for ongoing health success.

Lastly, the improving health budget is a shared responsibility between the MOHFW and the government. Optimum budget utilisation is a long-term commitment but taking timely steps like introducing the RAF demonstrates the promise the government made to achieve the international and national health goals. 

In observing UHC day 2023, small steps like introducing RAF can be game changers for optimising health budget utilisation. Ultimately, it will help to achieve the national and global health goals and to continue the success earned by Bangladesh so far.

Monaemul Islam Sizear is a Health System Researcher and Technical Advisor at Health System for Tuberculosis. sizear.monaemul@gmail.com. 

Dr. Taufique Joarder is an Associate Professor of Global Health Evaluation at SingHealth Duke-NUS Global Health Institute, National University of Singapore. taufiquejoarder@gmail.com.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.