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. This paper takes for granted the desirability of substantial public finance, and does not debate this. It rather asks the question, given the substantial public finance that exists for health care in many developing countries, of whether this is most efficiently employed in financing a public health bureaucracy, or whether there are arguments in favour of a pro-competition strategy. The main concern of the paper is with how to improve efficiency, though equity concerns are not completely ignored. In terms of efficiency, the concern is as much with how to use existing resources to greater effect as with simple cost savings.


Mills, A. Improving the efficiency of public sector health services in developing countries: Bureaucratic versus market approaches. (1995) 37 pp. [HEFP working paper 01/95] [Also published as PHP Departmental Publication No. 17, London School of Hygiene and Tropical Medicine, 1995; and as a chapter in: Colclough C. (ed.). Marketizing education and health in developing countries. Clarendon Press, Oxford, UK (1997) ISBN 0 19 829255 4]

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