Improving the Efficiency of Public Sector Health Services in Developing Countries: Bureaucratic versus Market Approaches

There is widespread concern over the efficiency of public sector health services in developing countries. To some the main problem is allocative efficiency: the distribution of resources between different health interventions and the over-provision of less cost-effective interventions. To others the main problem is technical efficiency: for example the widespread waste of resources because of poor purchasing and distribution systems and overstaffing. The purpose of this paper is to raise the question of the best means of remedying the widely acknowledged inefficiencies of the public health systems in developing countries, and in particular to ask whether improvement is best pursued by a continuation and reinforcing of attempts to improve government policy-making, planning and management structures relating to public provision, or whether there is value in market-oriented reforms that retain public financing but encourage competition between providers. The latter option draws on current reforms in developed countries, particularly in Western Europe, which seek to create quasi-markets/provider markets in health care in order to harness the benefits to be expected from competition (Le Grand and Bartlett 1993). These reforms are being reflected in some of the recent thinking of agencies such as the World Bank and ODA[HEFP WP NO 01/95]