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Knowledge in Development Note: Health

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Health (2009)
What we know
Recent, ongoing, and future research on health


Good health is an end in its own right. But it is also a key to economic success at the household and country levels.

  • Death and illness, especially in the case of a breadwinner, can have potentially devastating consequences for a household.[1,2]
  • Well nourished children learn better, stay longer in school, and become more productive workers in adulthood.[3,4]
  • High rates of mortality from communicable and other diseases lower a country’s expected rate of economic growth.
  • The AIDS epidemic in Africa has been estimated to knock 0.3-1.5 percentage points off rates of economic growth.[5]
  • In East Asia as a whole, severe acute respiratory syndrome (SARS) is estimated to have reduced GDP by 2 percent during the second quarter of 2003.
  • Poor countries typically have the highest rates of mortality and morbidity. Just 1 percent of the world’s 11 million under-five deaths and just 2 percent of total maternal mortality occurred in high-income countries.[6]

The “‘technology” for improving health is not perfectly understood. Not all curative and preventive health care interventions are effective. Many interventions—including those delivered in high-income countries—have never been rigorously evaluated. But many have been evaluated and shown to be effective. Among them are interventions thought to be crucial to reducing malnutrition, child mortality, maternal mortality, and mortality from communicable diseases such as Tuberculosis (TB), malaria and HIV/AIDS—the health Millennium Development Goals.[7] These interventions are not expensive and can be delivered in a low-income setting. The challenge is less one of developing new technologies—new tests, new drugs, and so on—although developments in some fields (HIV/AIDS for example) would be welcome. Rather the challenges are preventing people from falling ill in the first place; ensuring they receive health care when they need it: and ensuring that the care they receive is appropriate to their needs.

What we know

Prevention of disease

For each disease a variety of preventive activities are known or believed to be effective. Yet many people often do not undertake them. Education is one factor, but its effects are not always as expected. For example, education predicts behaviors that protect against HIV/AIDS like condom use, use of counseling and testing, discussion among spouses and knowledge of HIV/AIDS transmission, but it also predicts a higher level of infidelity and a lower level of abstinence.[8] Public health systems are often better at top-down reactive work, such as bringing disease outbreaks under control, than they are proactive disease prevention.[9]

Non-use and under-use of health services is extensive

Many people do not seek care when they fall sick, even if their condition is not a trivial one. As a result, many children die unnecessarily, while many health facilities are under-used. Lack of awareness is one reason for this apparent lack of demand. When most children in a community are stunted mothers fail to recognize malnutrition; when they do, improvements often follow.[10] Benefits are often also perceived to be low relative to the costs incurred in using services. The costs include informal (under-the-table) payments as well as formal charges, which given the lack of health insurance in many developing countries can be very large and pose an especially large deterrent to poor households who are often least likely to have insurance coverage; they also include transport and time costs.

Inadequate incentives for providers to deliver care are another factor. Facilities may have too few patients, but health staff are frequently missing from their posts, often moonlighting in their private practices.[11] Drugs and other key consumables are frequently unavailable because they have been “borrowed” by staff to use in their private practice. Incentives partly explain these conditions. High rates of absenteeism among health workers reflect the fact that as salaried staff they have little incentive to focus on treating more patients or treating them well.

Solutions include demand-side and supply-side measures. On the demand side, conditional cash transfer (CCT) schemes provide cash payments to households conditional on their seeking and receiving specific interventions, such as preventive care for young children and mothers. These have had a remarkable impact on the use of services, but their use has thus far focused on a narrow range of maternal and child health interventions.[12]

Health insurance reduces the cost of care at the point of use without providing a positive financial incentive to use care, but even so typically has a positive impact on utilization—and on a broader range of services than covered under CCT schemes. However, covering entire populations has proved complicated. Other demand-side measures include steps to reduce the size of informal payments and investments in infrastructure to reduce the time costs associated with using health facilities—fully staffed health facilities are of little use if they lack electricity and prospective patients are unable to get to them because of poor roads.

One obvious supply-side reform is to change the way providers are paid. In the case of preventive care, it is increasingly common for providers to receive an amount per item of service delivered. Sometimes, the price and the providers themselves will be decided through a competitive contracting process.[13] In the case of curative care, fee-for-service is also used, but tends to encourage providers to deliver unnecessary care—see below. Paying according to the number and diagnosis of patients (diagnosis-related groups) is a favored alternative. Other supply-side measures include improved governance and oversight of health facilities, sometimes through community-based organizations or local governments. More radical reforms include an institutional separation of the functions of delivering health care and “purchasing’ it, where a government body (often the insurance agency) is charged with commissioning or purchasing care from providers, which may include private as well as public providers.

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The quality of care received by those who do get care is often poor

Inappropriate care—often but not always involving unnecessary services—is common. Lack of knowledge among health providers is one factor. But there also seems to be a difference between what providers say they ought to (and will) do when confronted by a patient and what they actually do when a patient shows up. Those who know more also do more. In India private sector providers apply more of their knowledge than public providers do, but also are more inclined to over-prescribe drugs.[14]

More competition in the local “market” does not, it seems, guarantee that patients get the care they need. In part, this is because patients are a poor judge of their medical needs, and demand more drugs and tests than they require. In a market where providers face stiff competition, providers may fear losing patients if they deny patients care they demand but do not need. For these reasons, quality of care could inadvertently worsen with increase in the demand for care, such as through the provision of health insurance. This is why measures aimed at strengthening demand needs to be accompanied by supply-side reforms that encourage providers to deliver appropriate care.

Treatment protocols, lists of approved drugs, and training of staff are among the methods that have been used to improve the quality of care. Incentives are critical, however.[15] Financial sanctions to providers deviating from protocols are used. Paying providers a set amount for each type of case, dictated by the resources required if the relevant treatment protocol is used, is a better method, though this may encourage under-treatment especially in complex cases. Having a knowledgeable purchaser of health services sitting across from the provider is believed by some to be more likely to lead to a better outcome than reliance on ill-informed patient-consumers to keep providers in check. Others hope that the publication of quality ratings of different providers (e.g. mortality among patients receiving surgery) will, it is hoped, empower patient-consumers.

The international aid community for health has expanded

Development assistance in the health field has grown in volume and has become considerably more crowded in the last 10 years or so. International initiatives focused on single diseases (e.g., Stop TB), groups of diseases (e.g., the Global Fund for AIDS, TB and Malaria) and single interventions (e.g., the Global Alliance and Vaccine Initiative) have emerged.

New foundations dedicated largely to health issues (e.g., the Gates Foundation) have sprung up. Bilateral and multilateral aid in health has also increased. These developments have increased the opportunities to tackle health problems in the developing world, but pose considerable coordination issues and the risk overwhelming small poor countries who can find themselves overextended simply meeting the requests of the various donors. The need for specialization according to comparative advantage is widely acknowledged but “players” are reluctant to be left out of partnerships, particularly since many seem to promise “quick fixes.”

Recently, it has become increasingly clear that there are, in fact, no quick fixes in the health sector, that vaccines and insecticide-treated bednets cannot be dropped from helicopters like manna from heaven but require a well-functioning health system in place where the various actors—households, providers, insurers and government—face the right incentives, have the necessary resources, and operate within strong systems of governance and under sensible but tightly enforced regulations. The Bank’s new health sector strategy commits to repositioning the Bank as a leader in the field of the economics of health and health systems, the challenge being to ensure that the Bank becomes once again a leader in ideas as well as in the transmission and testing of ideas through its lending activities.

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Recent, ongoing, and future research on health

Recent, ongoing and future research is geared toward better measurement of quality and other key aspects of health sector performance, understanding better the demand and supply sides of the health sector and how they shape key outcomes, and the scope for successfully improving the performance of the health sector though better policies. Much of the work involves evaluation of programs, including Bank-financed ones, and much feeds into ongoing and planned analytic and advisory activities at the Bank.

Demand-side work

On the demand side, work in a number of areas is underway, and in some cases results are already available. Recent research highlights the negative effects on health care utilization and child mortality of economic downturns.[16,17] Other research has examined the impacts of health insurance coverage expansion: In China, the new rural insurance scheme has increased utilization but has had a negligible impact on out-of-pocket spending, apparently because providers have responded by delivering more costly care. In Vietnam, by contrast, expansion of coverage among the poor has reduced out-of-pocket spending but has not had a major effect on utilization.[181920] The transition from tax-financed health care to social health insurance in many of the ECA countries has been found to increase total health spending and to increase utilization of hospital services; however, no reductions have been seen in mortality that is amenable to medical care.[21]

Research has also examined the impacts of cash transfer schemes, including ones where transfers are not conditional on use of health services. In rural Ecuador, a cash transfer program for poor mothers produced positive (albeit modest) effects on physical, cognitive, and socio-emotional development of the poorest children.[22]

Research is also examining the impact of information on child care through community-based programs in enhancing both nutrition and the management of childhood illnesses as well as in promoting the cognitive development of young children. Recent studies find effects of such programs on nutrition among young children.[23,24] Work is also underway on the analysis of policies aimed at preventing health shocks and improving households’ ability to recover from them. Surveys focusing on risk and vulnerability have been administered in several countries, and the data are now being analyzed.

Supply-side work

On the supply side, work on provider absenteeism continues, the emphasis now being to understand factors driving absenteeism and the success of policies to reduce it. Work on the quality of health care is also being extended along a number of dimensions, including to a number of other countries.
Recent work points to inequalities in the quality of care between poor and less poor neighborhoods, with poor neighborhoods being served by less competent doctors.[25] Recent research also highlights some of the correlates of the gap between what doctors know and what they actually do: in Paraguay, female doctors, doctors on temporary contracts, and doctors in certain types of facilities were found to exert greater effort.[26]

Research is ongoing trying to understanding the determinants of quality, and the impact of incentives on health-care provider performance. Policies being explored include contracting, decentralization to local governments (to give people a greater say in evaluating the performance of local providers), and mass media promotion of quality indicators to promote “yardstick” competition. Indeed, the appropriate role of government in health insurance and service provision continues to be an important research question.

Government’s role should be dictated by considerations of market failure as in other sectors

Some governments make the mistake of thinking they need to do everything in health care; others over-rely on the market. Health insurance need not be delivered by government, but there is a case for mandatory insurance to prevent adverse selection and for subsidies for the worse-off. Health services are being delivered by public or private providers, but patients lack the information to be the discriminating consumers they are in other sectors.

Contact: Adam Wagstaff,, 202-473-0566

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Most World Bank research documents cited in this summary are available through the World Bank’s research archives at or the Bankwide archives at

1.  K. Beegle, J. de Weerdt, and S. Dercon. 2006. “Adult Mortality and Consumption Growth in the Age of HIV/AIDS.” Policy Research Working Paper 4082, World Bank, Washington, DC.

2.  A. Wagstaff. 2007. “The Economic Consequences of Health Shocks: Evidence from Vietnam.” Journal of Health Econ 26(1): 82–100.

3.  H. Alderman, J. Hoddinott, and B. Kinsey. 2006. “Long Term Consequences of Early Childhood Malnutrition.” Oxford Economic Papers 58(3): 450–74.

4.  H. Alderman and J.R. Behrman. 2006. “Reducing the Incidence of Low Birth Weight in Low-Income Countries Has Substantial Economic Benefits.” World Bank Research Observer 21(1): 25–48.

5.  C. Bell, S. Devarajan, and H. Gersbach. 2006. “The Long-Run Economic Costs of AIDS: A Model with an Application to South Africa.” World Bank Economic Review 20(1): 55–89.

6.  A. Wagstaff and M. Claeson. 2004. The Millennium Development Goals For Health: Rising to the Challenges. Washington, DC: World Bank.

7.  A. Wagstaff, M. Claeson, R. Hecht, P. Gotrett, and Q. Fang. 2006. “Millennium Development Goals for Health: What Will It Take to Accelerate Progress?” In Disease Control Priorities in Developing Countries, 2nd edition, ed. D.T. Jamison, J.G. Breman, A.R. Measham. Oxford: Oxford University Press.

8.  D. de Walque. 2006. “Who Gets AIDS and How? The Determinants of HIV Infection and Sexual Behaviors in Burkina Faso, Cameroon, Ghana, Kenya, and Tanzania.” Policy Research Working Paper 3844, World Bank, Washington, DC.

9.  M. Das Gupta, P. Khaleghian, and R. Sarwal. 2003. “Governance of Communicable Disease Control Services: A Case Study and Lessons from India.” Policy Research Working Paper 3100, World Bank, Washington, DC.

10.  L. Christiaensen and H. Alderman. 2004. “Child Malnutrition in Ethiopia: Can Maternal Knowledge Augment the Role of Income?” Economic Development and Cultural Change 52(2):287–312.

11.  N. Chaudhury, J. Hammer, M. Kremer, K. Muralidharan, and F. H. Rogers. 2006. “Missing in Action: Teacher and Health Worker Absence in Developing Countries.” Journal of Economic Perspectives 20(1): 91.

12.  S. S. Morris, R. Flores, P. Olinto, and J.M Medina. 2004. “Monetary Incentives in Primary Health Care and Effects on Use and Coverage of Preventive Health Care Interventions in Rural Honduras: Cluster Randomised Trial.” Lancet 364(9450): 2030–37.

13.  R. Eichler, P. Auxilia, and J. Pollock. 2001. “Promoting Preventive Health Care: Paying for Performance in Haiti.” In Contracting for Public Services: Output-based Aid and Its Applications, ed. P. J. Brook and S. Smith. Washington, DC: World Bank.

14.  J. Das and J. S. Hammer. 2007. “Money for Nothing: The Dire Straits of Medical Practice in Delhi, India.” Journal of Development Economics 83(1): 1–36.

15.  R. Ellis and M. McKinnon Miller. 2008. “Provider Payment Methods and Incentives.” In Encyclopedia of Public Health, ed., K. Heggenhougen. Amsterdam: North Holland.

16.  N. Schady, J. Friedman, and S. Baird. 2007. “Infant Mortality over the Business Cycle in the Developing World.” Policy Research Working Paper 4346, World Bank, Washington, DC.

17. F. H. G. Ferreira and N. Schady. 2008. “Aggregate Economic Shocks, Child Schooling and Child Health.” Policy Research Working Paper 4701, World Bank, Washington, DC.

18. A. Wagstaff and M. Lindelow. 2008. “Can Insurance Increase Financial Risk? The Curious Case of Health Insurance in China.” Journal of Health Economics 27(4): 990–1005.

19. A. Wagstaff. Forthcoming. “Estimating Health Insurance Impacts under Unobserved Heterogeneity: The Case of Vietnam’s Health Care Fund for the Poor.” Health Economics 18(6): 811–24.

20. A. Wagstaff, M. Lindelow, J. Gao, L. Xu, and J.C. Qian . 2009. “Extending Health Insurance to the Rural Population: An Impact Evaluation of China’s New Cooperative Medical Scheme.” Journal of Health Economics 28(1): 1–19.

21. A. Wagstaff and R. Moreno-Serra. 2009. “Europe and Central Asia’s Great Post-Communist Social Health Insurance Experiment: Aggregate Impacts on Health Sector Outcomes.” Journal of Health Economics 28(2): 322–40.

22. N. Schady and C. Paxson. 2007. “Does Money Matter ? The Effects of Cash Transfers on Child Health and Development in Rural Ecuador.” Policy Research Working Paper 4226, World Bank, Washington, DC.

23. H. Alderman. 2007. “Improving Nutrition through Community Growth Promotion: Longitudinal Study of the Nutrition and Early Child Development Program in Uganda.” World Development 35(8): 1376–89.

24. H. Alderman, B. Ndiaye, S. Linnemayr, A. Ka, C. Rokx, K. Dieng, and M. Mulder-Sibanda. 2009. “Effectiveness of a Community-based Intervention to Improve Nutrition in Young Children in Senegal: A Difference in Difference Analysis.” Public Health Nutr 12(5): 667–73.

25. J. Das and J. Hammer. 2007. “Location, Location, Location: Residence, Wealth, and the Quality of Medical Care in Delhi, India.” Health Affairs 26(3): W338–51.

26. J. Das and T. P. Sohnesen. 2007. “Variations in Doctor Effort: Evidence from Paraguay.” Health Affairs 26(3): W324–37.

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