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Source: World Bank
31 August 1998

August 1998

West Bank and Gaza
Medium-Term Development Strategy for the Health Sector

A World Bank Country Study


Appendix 1: Flow of Funds - 24
Appendix 2: Ministry of Health Priorities and Recurrent Cost Implications - 25
Appendix 3: Structure of Health System - 33
Appendix 4: Savings of Pharmaceutical Reforms - 34
Appendix 5: Different Models of Health Financing and Management Systems - 35
Appendix 6: Estimated Levels of Subsidies - 36
Appendix 7: Follow Up Studies on Health Sector in the West Bank and Gaza - 37
Appendix 8: Organizational Structure of Ministry of Health - 45
Appendix 9: Macroeconomic Projections - 46
Appendix 10: Working Paper on Financing and Organization of Health Services - 51
Appendix 11: Reproductive Health - 112
Appendix 12: The Pharmaceutical Sector - 125
Appendix 13: Development of a Legislative Framework for Health Insurance - 145
Appendix 14: Updated Selected Population and Financial Information - 154


West Bank and Gaza's health system is at an evolutionary crossroads. Its improvement will depend largely on the Ministry of Health's ability to mobilize political support among various stakeholders, including policymakers, consumers, care providers, the legislative council and donors. The Ministry also faces the challenge of developing a coherent health strategy to cover a divided geographical area in a complex political and economic situation. The issues this challenge presents are unique and difficult.

This report - a joint product of the Palestinian Authority, the World Bank and the World Health Organization - assesses the performance and prospects of the health sector in West Bank-Gaza, providing a focal point for an ongoing development dialogue. Its analysis of sector delivery, financing and governance suggests the following short and medium term actions: (a) ensure financial sustainability by reevaluating the public investment plan in light of revised macroeconomic projections; (b) improve efficiency through sector wide initiatives; (c) improve the quality of services provided by improving delivery processes; and (d) clarify the roles and responsibilities of various sector agencies, with a focus on strengthening the Ministry's role in regulatory and policy functions and improving its insurance operations, as well as those at the Government Health Insurance organization.



This report, a joint effort of the Ministry of Health (MOH), World Bank and WHO, provides the MOH with short to medium term policy recommendations designed to ensure the financial sustainability of the health sector while improving access to health care as well as its efficiency and quality.

The West Bank and Gaza (WBG) is comprised of two geographically separated areas with a combined population currently at 2.3 million and growing at 3.7 percent per annum. The WBG, a lower middle income economy, has a GNP per capita of US$1,710.1 Compared to other lower middle income countries, the Palestinian population is well educated (84 percent literacy) and their overall health status is relatively good (e.g., IMR is 28 per 1,000 live births).
1. World Bank estimates, using the Atlas methodology. However, the purchasing power of one dollar within the WBG is likely to be influenced by its close links to the much richer Israeli economy and rising inflation (8 percent in 1996).


The impressive health and education status now enjoyed in WBG may not be sustainable. Severe economic disruptions related to the extremely complex political situation have caused the macroeconomic environment to deteriorate: per capita incomes fell by 7 percent in 1996 alone, unemployment is estimated at least at 30 percent and about one fifth of the population is estimated to live in poverty. The deteriorating economic environment can influence health status through rising poverty (the poor are less healthy) and by constraining expenditures on health and education.

The financial sustainability of currently planned investments provides a good illustration of this latter problem. In 1994, the National Health Plan was prepared with an assumption that economic growth would be relatively stable and with a goal of rapid health system expansion. In 1997, when many of the planned investments are about to become operational, resources available to operate them are declining. By 2002, estimates place the annual cost associated with operating all planned new facilities at over 25 percent of the total MOH budget. Financial sustainability of all sector activities — not just of investments — is further threatened by rising drug expenditure. Pharmaceuticals are the fastest growing component of MOH's recurrent budget, increasing from 22 percent of total health expenditure in 1995 to a projected 32 percent of expenditure in 1997.

While investment planning assumptions affect the prospects for sustainability, the current organization of the system presents other problems. Overall sectoral efficiency could be improved, as shown in the varying utilization rates, with for instance 83 percent of capacity at use in MOH hospitals, compared to 64 percent in NGO hospitals. At the same time, the perception of both providers and patients is that the quality of health services could be enhanced. While most of the population has reasonable physical access to health facilities, effective financial access is constrained for the one half of all households which is not covered by the health insurance program - Government Health Insurance (GHI) -. These households must bear, in out of pocket payments at the time of illness, the full cost of health care. Many of these households may have chosen to opt out of the GHI. Anecdotal evidence however suggests that others such as the non-refugee poor have not done so voluntarily and yet face great financial difficulties in accessing health care. This raises concerns about the effectiveness of the government's social welfare program, which is supposed to fully cover the indigent population's GHI premiums. UNRWA, which is currently facing major financial problems, is responsible for the provision of basic care to registered refugees.


The challenges facing the MOH in its attempt to develop a coherent health strategy to cover a divided geographical area in a complex political situation are unique and difficult. The recent economic downturn exacerbates the difficulties. Inaction however will result only in further deterioration of the system and the health status of the population. This report offers a number of suggestions for short and medium term actions to improve the situation.

Ensure that the system is financially sustainable

Reevaluation of the affordability and sustainability of the public investment strategy is urgently needed. At the same time, immediate action is also needed to contain recurrent costs in critical areas including drug expenditure and overseas treatment. Pharmaceutical reforms could reduce drug expenditures by 30 to 40 percent of their present level.

Improve efficiency through sector wide initiatives

Employing strategies to increase the efficiency and effectiveness of resource use will require an improved understanding of financial flows, utilization patterns and demand for services in all sub-sectors. This information can be used to design measures under the following three broad strategies, each of which would result in significant efficiency gains.

- Improve the delivery system's technical efficiency by strengthening facility level management capacity.

- Strengthen the role of primary care givers and improve the referral system.

- Increase the complementarity of government, private and NGO services.

Measures designed to pursue these strategies will also require staged development of a provider payment system conducive to cost containment and the capacity to contract between MOH/GHI and various NGO/private providers and to monitor provider performance under these contracts. Improving sectoral management information systems will thus be crucial to efficiency improvement efforts.

The gains to be had from improving sector efficiency are large. If, for example, the average occupancy rate of the hospital beds reaches 80 percent, the cost of the proposed public investment plan could be reduced by at least US$63 million. This would in turn reduce the recurrent costs needed to operate the new facilities investments by about US$32 million each year.

Improve the quality of services provided

Improving the processes involved in delivery should be the first focus of quality improvement measures. Protocols and standards for medical procedures need to be established and integrated into various training programs. Similar protocols and standards should be gradually introduced in MOH and UNRWA facilities. Uniform licensing for all health professionals should be required and could be used to spur demand for continuing education among professionals. This would also contribute to harmonizing the level of professional competence of health care providers. A sustainable human resource strategy for the sector should be developed. Improved planning and training of the health workforce however will not by itself improve patient care; it must also be accompanied by work conditions (including salaries and non­financial remuneration) which motivate professionals in the sector to provide quality services.

The role and responsibilities of various agencies (including MOH) within the sector should be better defined, and should form part of a unified regulatory framework.

The MOH needs to strengthen its role in regulatory and policy functions, and to improve the insurance function of MOH/GHI. Immediate steps could be taken to strengthen MOH's revenue collection capacity. Mobilizing employers contribution through group contracts would be a reasonable first step in this regard.

In the longer term, the government needs to decide on its chosen option towards achieving universal financial access for health care.


WBG is at a crossroads in the evolution of its health system. The prospects for improving the health system depend largely on the ability of the MOH to mobilize sufficient political support among various stakeholders (including key policy-makers, consumers, providers, the legislative council and donor agencies) to implement the changes proposed in this report. The process of developing the new National Health Plan will provide an opportunity to foster a policy dialogue and to build consensus. This will help ensure that the necessary political support materializes. Donors can help in two main ways. They can support capacity building in management, policy formulation and service delivery that would result in the development of sustainable local institutions, and they can provide financial assistance to those investments which are financially sustainable within the limits of WBG resources in the medium to long term. Together, these measures will engender an effective and efficient health delivery system.

This report attempts to provide a focal point for ongoing dialogue in the sector. The World Bank and WHO stand ready to assist in facilitating a process of review and discussion by Palestinian constituencies and the donor community. It has to be recognized that the Palestinian health sector is not static, and the MOH has already started implementing several of the recommendations included in this report during the course of its preparation. Whatever answers are ultimately adopted by WBG authorities, the strategic issues identified in this report will have a significant impact on the Palestinian health system in the years to come.


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