Financing Healthcare: The Example of the Raya-Kobo District

Sisay Mengistie, Centre for Federalism and Governance Studies, Addis Ababa University

Relevance of the Practice

Raya-Kobo Woreda is one of the districts/woredas found in North Wollo Administrative Zone of the Amhara region. It is located in north-eastern part of the country and Amhara region respectively. The woreda is located 570 km from Addis Ababa and 410 km from Bahir Dar, capital city of Amhara region. Raya-Kobo Woreda borders with Raya-Alamata District in the north, Gubalafto and Habru districts in the south, Gidan District in the west and Afar region in the east. Based on the 2007 national census conducted by the Central Statistical Agency of Ethiopia (CSA), the recent projection shows that the wereda has a total population of 245,149, an increase of 26.43 per cent over the 1994 census, 33,142 or 14.93 per cent are urban inhabitants. With an area of 2,001.57 square kilometers, Raya-Kobo has a population density of 110.89.

Provision of primary health care services is within the functional competences of woredas in the Amhara state even though not clearly provided in the state constitution. However, in practice woredas are engaged in primary health service provision.

Description of the Practice

The Raya-Kobo district has nine health centers and 47 health posts; therefore, 80 per cent of the population has access to health services. However, the shortage of medicine and other necessary health materials is very critical. As we will see in the following paragraphs, government is primarily responsible to build health organizations and to provide essential equipment including medicine.[1]

It is indeed true that the health management system highly centralized prior to the formulation of first national health policy during the transitional period of 1993. At that time, it was the central government that determined issues related to policy, budget, and construction of health institutions, even recruitment of health workers, and provisions of logistic supply like drugs and other materials. However, things were changing subsequent to the formulation of a health policy which gives priority to decentralization and democratization of the health system. Consequently, the health system of the country was restructured along a decentralized setting with nine regional states and two city administrations.[2]

Following this general direction, the federal government under proclamation no 475/1995 defined the powers and duties of government institutions at each level. Hence, several responsibilities were devolved to the district-level health units. Accordingly, the District Health Offices are empowered to manage and coordinate the function of primary health care services at district level. Moreover, they are in charge of planning, financing, monitoring and evaluating all health programs and service deliveries in the district.[3] Following the second phase of decentralization, responsibilities of health care service delivery were decentralized from the regional health bureau to the district health office.

According to the revised Constitution of Amhara Region (Articles 83 and 86), local governments have the powers and responsibilities to prepare and decide an annual economic development and social service plan within its jurisdiction. Thus, the tasks of administering primary health care institutions are the responsibilities of District Health Offices such as that of Raya-Kobo.

In particular, to collect user fees is one of the responsibilities of the district according to proclamation no 117/2006 of Amhara National Regional State, the Health Service Provision and Administration Proclamation. The proclamation unequivocally declared that health institutions, besides the government budget allocated to them, can collect and use internal revenue as an additional budget aimed at improving the quality and quantity of health services provided in that locality, and to improve their economic capacity for additional service provision. Therefore, according to this proclamation, improving the quality of health services is the central and the ultimate objective of health centers when utilizing their internal revenue. The proclamation, under Article 4, further lists the following sources of internal revenue of district health institutions:

  • fees from the provision of varieties of health treatment services, and bed services to in-patients;
  • revenues from the provision of services that have a direct relation with medical services such as laboratory fees;
  • revenues from drugs sale and laboratory examination, sales of finite – terminated medical equipment;
  • revenue generated from free service and from sale of non-clinical equipment, for example, house rent, and from contract income;
  • money or material directly donated by partner organizations in the form of cash or in-kind.

Once the money and materials are collected from the above sources, they must be kept in a special bank account opened in the name of health institution in collaboration with the District Finance Office and stored in the District Health Office. Health Offices can use all revenue that they generate from service provision. The procedure of opening an account requires three members of staff whose names are announced to the bank and deposited by the joint name of the two representatives. Accordingly, the medical director of the health center, the purchasing and finance administration officer, and a case team leader who is appointed by the medical director of the health center are the three persons responsible to sign and open a health center bank account by their name on behalf of health center.

The purpose of using internal revenue is to realize several aims: first, to provide standardized, quality, prompt and sustainable health services; second, to enhance the culture of people to use health institutions and to develop a sense of ownership by improving the quality of health service provision; third, to organize health institutions purchase necessary drug and medical equipment; and lastly, to enhance work motivation and to develop a sense of ownership through building the capacity of a health institution’s manpower.[4] Health center administrations, in collaboration with the District Health Office, prioritize their interests and actual demands, evaluate their financial capacity and determine how to act accordingly. Based on this principle they purchase drugs and reagents; cover transport costs; purchase medical equipment; construct infrastructural facility such as water pipes, lines for electric light, sewerage and fence building; invest in a clean and safe environment of the health institutions; cover the costs of nonmedical services (such as food, security and hygiene), transfers to third parties; improve health system information or evidence; and build additional rooms.

According to the federal health policy, health centers can also use such internal revenue for training purposes (for laboratory, pharmacy and counseling); to computerize the finance and drug storage systems of the health institutions; to purchase necessary office materials (pen, paper, etc.); to pay for transport costs; to build additional rooms; for rehabilitation purposes; to cover the salary of contractual workers who will be employed not more than 3 months; to cover other recurrent administrative costs related to improving the quality of health institutions; for non-medical training (computer and other office administration and management activities).

There are, however, certain tasks which are not covered by internal sources of health institutions. For instance, scholarship training and its transport cost; domestic training that is longer than a month; payment in the form of gifts for a third party; the employment and salary of advisors (including research work); and any activities which are not explicitly mentioned in the previous paragraphs.

As far as financial matters are concerned, the District Health Office has no direct contact with the nearby Zonal Health Department but has a direct relation with the Regional Health Bureau which directly finances its subsidy to the District Health Office without the need for an intermediary body (zone administration). The only relation the district has with the Zonal Health Department is in the sphere of reporting (prior to the submission of reports to the Regional Health Bureau, whatever the matter, it shall report first to the zone) and training to upgrade the capacity of district institutions, organized either by the zone or by the region. In addition to health treatment fees, district health institutions are financed through district block grants transferred by the regional government, and external loans as well as in-kind or cash assistances from donor organizations and other sources.

Assessment of the Practice

As we have seen from the above discussion, the local governments in general and health sector district level institutions in particular have been granted important powers and functions. The tasks of constructing health centers and health posts, recruiting health workers, providing professional as well as in-service training, generating internal revenue from user fees and to finance health institutions etc. are some of the competences of district-level local governments in general and district health offices in particular. The result of the study also highlights the problem of inadequate budget which hampers the quality and quantity of health care service provision in general and the quantity of buildings and other related infrastructures in the district in particular. Even though District Health Offices have the power to generate internal revenue from user fees, they cannot spend it in performing tasks they want, like, for example, to pay for worker’s salary and per-diem fees. Instead, they are bound to invest internal revenue in pre-determined tasks. Therefore, on the bases of the above analysis and discussion, the following recommendations are deemed necessary to enhance the quality health services and to reinforce the ability of local government health institutions. Although responsibilities of expenditure given to local government is highly decentralized, assignments of revenue collection power still remain centralized. As a result, the major share of district budgets is granted either by the regional state or federal government in the form of conditional grants and rarely in the form of unconditional ones.

Hence, it seems plausible to balance the assignment of expenditure responsibilities with the power of revenue collection. The regional state government has to give discretional power to the woreda administration and District Health Office to use their internal revenue at least to cover the per-diem and monthly salary of the workers employed through contract. It indeed enhances the motivation of the health workers’ activities as well as reduces the existing budget gap and thereby improves the quality and quantity of health care services at the local government level. Capacity building of local government should keep being implemented with increased capital budget and hence more funding to lower tiers of government institutions is necessary.

Reference to Scientific and Non-Scientific Sources

Legal Documents:

Federal Democratic Republic of Ethiopia (FDRE) Constitution (1995)

Amhara Region Revised Constitution (2001)

Amhara National Regional State Health Care Financing System, Zikre Hig Gazette no 24/2006

Scientific and Non-Scientific Publications:

Ayenew M, ‘A Rapid Assessment of Wereda Decentralization in Ethiopia’ in Taye Assefa and Tegegne Gebre-Egziabher (eds), Decentralization in Ethiopia (Forum for Social Studies 2007)

Cohen M and Lemma M, ‘Agricultural Extension Services and Gender Equality’ (IFPRI – International Food Policy Research Institute 2011)

Garcia M and Rajkumar A, ‘Achieving Better Service Delivery through Decentralization in Ethiopia’ (World Bank 2008)

Hashim T, ‘Creating a Regional Civil Service in Ethiopia from the Ground up’ (5th International Conference on Federalism, Forum of Federations, December 2010)

Ministry of Health, ‘Health Sector Development Programme (HSDP- IV)’ (2010)

Negalegn M, ‘An Assessment of the Current Status of Decentralized Governance and Self-Administration in Amhara National Regional State: A Study on Awi Nationality Administrative Zone’ (master thesis, Addis Ababa University 2010)

Tesfaye T, (2007), ‘Decentralization and Education Service Delivery: The Sase of Moretenna Jirru and Bereh Aleltu Woreda in North Shoa’ in Taye Assefa and Tegegne Gebre-Egziabher (eds), Decentralization in Ethiopia (Forum for Social Studies 2007)

United States Agency for International Development (USAID), ‘Comparative Assessment of Decentralization in Africa: Ethiopia Desk Study’ (2010)

Wamai R, ‘Reforming Health Systems: The Role of NGOs in Decentralization Lessons from Kenya and Ethiopia’ (Harvard School of Public Health 2004)

[1] Interview with Haimanot Moges, Head of Raya-Kobo Woreda Health Office (Kobo, 10 May 2020).

[2] Ministry of Health, ‘Health Sector Development Programme (HSDP- IV)’ (2010); Richard Wamai, ‘Reforming Health Systems: The Role of NGOs in Decentralization Lessons from Kenya and Ethiopia’ (Harvard School of Public Health 2004).

[3] Ministry of Health, ‘Health Sector Development Programme (HSDP- IV)’.

[4] Proclamation no 117/2006.