This essay is one in a series of essays published by HITAP from students who studied the Masters in Primary Health Care Management at the ASEAN Institute for Health Development and Faculty of Graduate Studies at Mahidol University. HITAP staff assisted in teaching on the course ADPM 613 Health Economics and the essays featured on the HITAP website were examination answers submitted by students on the course.

There are many sources of funds available to the health sector in low- and middle-income countries, funds can be obtained from domestic resources, donors, non-governmental organisations (NGOs), health insurance, and household income. The allocation of funds to the sub-national level and each specific program is uneven due to the lack of standard norms for budget allocation, which causes inefficiency and inequity within the health care sector.

In the case of Lao PDR, the allocation of domestic funds is from the Ministry of Finance after the approval of National Assembly, the process is very complicated and time-consuming, especially the government subsidy under the National Health Insurance Fund that is considered as “on-budget”. There is no clear criteria for the planning and budgeting under the government’s recurrent budget, each level government doesn’t know on how to do a proper plan on the budget proposal, some provinces just add on5-15% of the current year’s budget for the requested budget for the following year request, they sometimes put a high number in the budget plan for the purpose of deduction by the Ministry of Health and Ministry of Finance before submitting to the National Assembly for approval. Donor funding is one of the largest sources of funding, it was around 20% of total health expenditure in 2019, the allocation of donor’s funds is also not effective due to the lack of planning and budgeting tools, criteria and standards, lists of poor families in each province, and the poor public financialmanagement (PFM) system. Funds are not properly pooled, they are fragmented and sometimes not allocated based on the government’s priorities.

Due to the problems stated above, the government of Lao PDR, especially the Ministry of Health, Ministry of Planning and Investment and Ministry of Finance should have a better coordination mechanism to ensure that funds are allocated based on the government’s priorities and the needs of the Lao citizens. To do this, the first step is to have a comprehensive PFM system, amedium termexpenditure framework, fiscal space analysis, and planning and budgeting tools that can be applied by each level of government. Formula-based and disbursement linked indicators for resource allocation should be encouraged. Revision of the government Chart of Accounts would help for having the budget allocated by vertical programs, geographical areas, by inputs and by specific diseases. These explicit approaches and criteria for resource allocation would helpthe health sector budget allocation process to be faster, more transparent and more efficient. It would allow Lao PDR to make better use of the funds it does have, leading to better health outcomes. Once funds have been allocated properly and efficiently, the quality of service will be improved and the beneficiaries will be satisfied. It will also finally link to the health sector’s goals and targets that ensure people are not left behind. 

Health sector expenditure analysis would also be encouraged to ensure that all the fund/expenditures are recorded and tracked. This exercise will allow the central and provincial government to know from the source of funding, where it is allocated to, who receives funds, and what the outcomes or outputs of the investment are. All this information will be used for policymaking by the higher-level government, especially the ministerial and National Assembly levels.

In summary, explicit processes and criteria for resource allocation increase transparency and efficiency in the resource allocation system, which in turn, will lead to better health outcomes.