The breakdown between recurrent and capital expenditures
Capital spending nationally, taking into account private spending, accounts for only a thin slice of total health outlays. The 2003 NHA estimated that capital spending was barely 6.7 percent of total health spending in 2001. According to the same source, the private sector financed 45 percent of health sector investments in 2001. These figures need to be taken cautiously, yet they highlight the need to include the private sector in health planning exercises and to regulate its activity. Besides, assessments of private sector investments include only new investments, and exclude the renovation and replacement of existing equipment or the rehabilitation of facilities. It is quite possible then that these figures may underestimate the weight of the private sector. Finally, since 2001 State investment has risen sharply, which might tend to reduce the weight of the private sector. Nevertheless, private clinics are growing rapidly and it is likely that private investments have also continued their growth.
At the central government level the Ministry of Health is the major player in health investments. Data for 2001 reveal that public investment in health, measured in terms of appropriations (crédits de paiement), represented 11 percent of total state health spending, and 91 percent of it was allocated to the budget of the Ministry of Health, while the residual was assigned to other ministries (Table 8.3).
To address growing needs, investment authorizations have risen sharply since 1999 (Table 8.5). For most of the 1990s, fiscal adjustment and the difficult circumstances in the country reduced public health investments, negatively impacting infrastructure and the quantity and quality of medical facilities. Investments have recovered since 1999 as health has become a priority sector, especially under the PSRE in 2001 and PCSC in 2005 (Box 8.2).
Table 8.5 Health Ministry Program Authorizations, 1998–2007 (MDAs)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Program authorizations
1465
2777
2966
12517
13254
14799
12349
16250
37440
27810
Trend n+1/n (%)
na
90
7
322
6
12
-17
32
130
-26
Source: Ministry of Health
Box 8.2 Health Sector Investments under the PCSC At 81.5 billion dinars, health sector appropriations represent barely 2 percent of the PCSC envelope. Less than half of the 2005–07 program authorizations are for construction of new facilities, while the majority is devoted to modernizing existing institutions (rehabilitation, acquisition of medical equipment). However, the amount of program authorizations is significant when compared to previous years: The total for 2006 and 2007 is almost as much as for the previous five years. Furthermore, the program includes large-scale projects for a total amount of 30 billion dinars such as the construction of seven hospitals, four cancer centers, five geriatric centers, 50 polyclinics, and 100 maternity centers, and the procurement of medical equipment.
Hence there is a high risk that PCSC implementation will exacerbate weaknesses in the management of investment projects in the health sector.
Investment planning is done on a relatively empirical basis. The overall choice of projects for PCSC financing reflects an underlying logic: to equalize the beds-per-capita ratio nationwide as far as possible, and to create specialized institutions in sectors where needs are most pressing (in particular cancer, orthopedics, geriatrics, and psychiatric care). But no in-depth analysis has been conducted of the abundant available data to justify these choices in greater detail.
In addition, the Health Ministry’s investment planning has many shortcomings. First,to speed up completion, many projects start without a proper feasibility study. Second, no consulting firms in Algeria specialize in assisting the government plan and execute big investments in hospital projects. Third, since very few building contractors specialize in that field, the biding process is usually unsuccessful. Finally, health departments at the wilaya level and the Health Ministry itself lack enough trained staff to design important projects, assess their costs, monitor their execution, and evaluate their quality and impact upon completion. All these deficiencies may create severe problems when executing the PCSC. Therefore big investment projects will need strong capacity building to be firmly assessed, coordinated, and managed by the Health Ministry and the wilayas.
Source : Bank Staff
But attention should be paid to notable shortcomings in the investment process. In addition to the difficulties noted in Box 8.2, the lack of a health map as a planning tool, and previously cited problems inherent in the budget process, the following areas also need to be addressed:
No one has a detailed overview about sector investments being made by different institutions. The Health Ministry closely tracks “centralized” investments, but it has no oversight of deconcentrated investments or of projects financed by the social security system. No regular reporting on investments by other ministries is available either. This is likely to create problems in coordinating project implementation.
Maintenance regimes are deficient, resulting in the very high rates of equipment failure reported by health facilities. About 24 percent of ultrasound scanners, 34 percent of endoscopes, and 23 percent of incinerators were out of service in 2003.162 Medical equipment that breaks down is generally not repaired. If funds are available, broken equipment is replaced with brand-new purchases. There are several reasons for this phenomenon: (a) maintenance is not a priority in many hospitals; (b) no effective procurement policy exists; (c) Algeria has a shortage of technicians and spare medical parts. To address this situation, the Health Ministry ordered, as of September 1, 2005, that equipment purchase contracts must contain clauses stipulating suppliers’ obligations for maintenance (for example, a commitment to provide skilled technicians in Algeria, and a minimum warranty period for servicing and repairs).
Hospitals do not use depreciation accounting. It is, therefore, difficult to anticipate their investment needs, and it is impossible to draw up an accurate balance sheet for the hospitals.
Meanwhile, recurrent expenditures have decreased continually in terms of GDP during the last decade. Recurrent expenditures are classified under nine categories in Algeria’s central government budget (Table 8.6). From 1994 to 1999, inflation alone explains the rise in expenditures in nominal terms: while the inflation rate was a high 75 percent, recurrent outlays increased by 78 percent. By contrast, from 1999 to 2004 inflation was relatively subdued, expenditure increases were driven essentially by the needs of the health sector: recurrent expenditure rose by 76 percent, while prices increased by 13 percent over that period. The main items responsible for the increase were payroll costs, drugs, and medical materials, which together accounted for 80 percent of the increase recorded over that time.163 In GDP terms, however, recurrent expenditure diminished from 2 percent in 1994 to 1.6 percent in 2004 (in terms of NHGDP the fall is slighter from 2.6 to 2.5 percent).
Growth in payroll costs is under control. Between 1994 and 2004, payroll costs as a proportion of total operating expenditures declined by 10 percent, but at 61 percent they remained, by far, the biggest expenditure item. This ratio, however, is not particularly high in international terms (for example, France’s 73 percent figure in 2004 and Morocco’s 76 percent in 2003). The recent decline can be explained by the sharp increases in other expenditure items (particularly drugs) and by changes in staffing levels and salaries. Staffing levels increased steadily but slowly during the past 15 years: 9.4 percent between 1991 and 2003 (Table 8.7).
Table 8.6 Operating Expenditures (in millions of current dinars and %)
10-year Trend in nominal terms (%)
Expenditure category
1994
1999
2004
Amount
%total
%GDP
% NH GDP
Amount
%total
%GDP
% NH GDP
Amount
%total
%GDP
% NH GDP
Personnel
21,503
70.5
1.44
1.86
36,313
66.9
1.12
1.68
58,057
60.6
0.95
1.53
170
Training
910
3.0
0.06
0.08
1,338
2.5
0.04
0.06
2,187
2.3
0.04
0.06
140
Food
700
2.3
0.05
0.06
938
1.7
0.03
0.04
1,828
1.9
0.03
0.05
161
Drugs
4,057
13.3
0.27
0.35
9,258
17.1
0.29
0.43
17,633
18.4
0.29
0.46
335
Prevention
470
1.5
0.03
0.04
1,161
2.1
0.04
0.05
2,609
2.7
0.04
0.07
455
Medical materials
823
2.7
0.06
0.07
1,861
3.4
0.06
0.09
4,953
5.2
0.08
0.13
502
Maintenance
450
1.5
0.03
0.04
800
1.5
0.02
0.04
2,730
2.9
0.04
0.07
507
Social services
370
1.2
0.02
0.03
609
1.1
0.02
0.03
1,037
1.1
0.02
0.03
180
Other
1,200
3.9
0.08
0.10
1,998
3.7
0.06
0.09
4,701
4.9
0.08
0.12
292
Medical research
30
0.1
0.002
0.003
20
0.04
0.001
0.00
40
0.04
0
0.00
33
Total
30,513
100
2.05
2.64
54,296
100
1.68
2.52
95,775
100
1.56
2.52
214
Source: Ministry of Health
Therefore, the ratio of public health institutional staff per 1,000 inhabitants declined over the period. The distribution of staff among major personnel categories is stable and appears relatively balanced. In particular, the proportion of administrative and technical personnel—34 percent—is at an acceptable level (by way of comparison, these categories account for about 29 percent of public hospital staff in France, where many tasks such as food and laundry services are outsourced; which is not the case in Algeria).
Table 8.7 Public Sector Staffing Levels
1991
1996
2000
2003
Number
% total
Number
% total
Number
% total
Number
% total
Medical personnel
24,365
15.3
24,286
14.6
26,734
15.7
29,024
16.7
Paramedical personnel
83,362
52.5
84,065
50.4
85,717
50.3
86,205
49.6
Administrative, technical, and support personnel
51,036
32.2
58,514
35.0
57,793
34.0
58,478
34.0
Total
158,763
100.0
166,865
100.0
170,244
100.0
173,707
100.0
Source : MOH (Sante des Algériens 2003 for medical personnel and Annuaires Statistiques for other categories of personnel)
Salary increases have been very modest during the past 15 years. The purchasing power of health institution personnel deteriorated 1994–99: payroll costs rose by 69 percent, while inflation was up by 75 percent, and employment in health care facilities edged up. Real wages recovered somewhat 1999–2004: personnel costs rose by 60 percent, while inflation was 12.6 percent, and employment rose by about 5 percent. Some recent changes by grade can be noted in one specialized hospital, where salaries rose 44 percent for a professor, 49 percent for a specialist, and 34 percent for a state-licensed nurse between 2002 and 2005.
Despite this recent increase, primarily due to the introduction of bonuses in 2002 for certain personnel categories, salaries in public institutions remain low, particularly in comparison with the private sector. To compensate for their low official salaries, many public sector physicians have taken advantage of the law of August 19, 1998, to pursue “supplementary practice” in the private sector. Yet this provision does little to improve general living standards for health care personnel since only the “corps of university hospital specialists” is eligible. More importantly, public hospital performance is being disrupted as many eligible specialists devote more than the one day per week mandated by law to their private practices, and some physicians begin to steer their better-off patients toward the private sector. No large-scale study has looked at these trends, but examples are cited anecdotally in the Algerian press and in official government documents. The 2003 report on The Health of Algerians notes that “since the introduction of legislation on supplementary practice, activity in public hospitals has tended to decline considerably after 12 noon.”
For this reason, control over operating expenses does not necessarily signify improved efficiency in health care facilities. Comparison between expenditures and the quantity and quality of care provided shows the system’s performance to be relatively unsatisfactory.
Drug costs have risen sharply during the past 10 years. Drug costs are the second-largest operating expenditure, accounting for 18.4 percent of total outlays. Reasons for such growth mirror those noted for insurance-reimbursed outpatient drug sales (see Box 8.3).
Box 8.3 The Spike in Public Sector Drug Costs I Figure 8.7: Drug Expenditures, % GDP
Sources: MoHPR, MoL
n recent years, there has been a significant rise in drug expenditures by the government and the social security system (Figure 8.7). Reimbursements by the CNAS rose from 0.4 percent to 0.7 percent of GDP between 1994 and 2004 (in terms of NHGDP from 0.56 percent to 1.08 percent). Costs of hospital-dispensed drugs rose from 0.27 percent of GDP to 0.29 percent over the same period (i.e. from 0.35 percent to 0.46 percent of NHGDP). Drug outlays per capita, however, remain very low: around US$28 annually per person in 2004. Consequently there is potential for further increases, given the progress of chronic illnesses that are costly to treat, the high degree of public drug coverage in Algeria, and the likely introduction of new specialty medications dispensed in hospitals or reimbursed by Social Security.
Outpatient drug sales are also rising sharply and placing the CNAS and CASNOS sickness funds under stress. The lack of a precise information system precludes detailed analysis of expenditure trends, but this increase can probably be explained by several factors: (a) the epidemiological transition toward higher incidence of chronic diseases, (b) higher costs of new drugs (anticholesterol and antihypertension medications, proton pump inhibitors, etc.), (c) the high proportion of drugs covered by social health insurance; (d) an inadequate generic drug policy, (e) the lack of a prescription control policy, (f) the transfer of hospital prescriptions to pharmacy sales, and (g) fraudulent claims for reimbursement. This upward trend has been slowed, however, by measures to restrict the marketing of innovative drugs: the registration of new drugs was suspended for several years, and is now slowly picking up. In addition, import restrictions have also caused stocks of many drugs to run out.
In hospitals, drug costs jumped by a factor of 20 in 14 years, from DA 800 million in 1984 to DA 17.6 billion in 2004, with wide fluctuations year to year (with annual increases ranging from 10 percent to 100 percent). As with outpatient sales, these fluctuations are difficult to analyze because there is no effective information system. However, plausible explanations would include some of the same factors listed above: (a) the epidemiological transition, (b) more-expensive new drugs (cancer medicines, blood derivatives, drugs developed through biotechnology, and so forth.), and (c) an inadequate generic drug policy. Other factors may include (d) no procurement policy, (e) inadequate management of drug usage, (f) a decline in the numbers of pharmacists, and (g) pilferage.
Social security outlays.164 There has been a sharp increase in outlays by the sickness funds in recent years, both in nominal terms and GDP terms (Table 8.8). The CNAS accounts for 96 percent of all Social Security health spending. Several points should be noted:
Drug outlays alone account for 67 percent of the increase recorded by the CNAS between 2000 and 2004. The rising trend in pharmaceutical expenses dates back much earlier, rising by a factor of 30 between 1991 and 2004 (see Table 8.8 for an analysis of expenditure trends). These outlays today represent 53 percent of health spending by the CNAS, and 0.67 percent of GDP compared to 0.5 percent in 2000 (i.e. 0.8 percent and 1.08 percent of NHGDP).
The other significant item in CNAS outlays is the hospital grant (forfait hospitalier), which represented 35 percent of total health spending in 2004. It more than tripled between 1989 and 2004, to meet rising institutional needs and to prevent a spike in the state contribution (see 2.2 for an analysis of this issue). However, in GDP (and NHGDP) terms, the contribution grant has decreased during the past four years.
The medical procedures item is relatively stable, reflecting their very low reimbursement rates. Efforts now under way to revise the 1987 tariffs could, however, increase these expenditures.
Finally, expenditures for transfer for treatment abroad remains very high, totaling DA 3.13 billion in 2002 and 2.6 billion in 2003. The final figure for 2004 was apparently higher than expected, at around DA 3.8 billion165, compared to the 2.1 billion previously forecast. Steps have been taken to reduce this expenditure item. In particular, the number of contracts with Algerian private hospitals has risen significantly in recent years (there were eight private cardiovascular surgery clinics under contract in 2004 compared to one in 2000, 36 private dialysis clinics in 2004 compared with 4 in 2000). Despite this, the number of patients treated abroad has not declined significantly (1,441 in 2000; 1,512 in 2002; 727 in the first half of 2004), and the unit cost of treatment has increased, causing a steady rise in outlays. The effort to reduce the cost of transfers should therefore be intensified by expanding the measures taken to date (increasing the number of contractual arrangements, reducing the number of illnesses that entitle patients to a transfer, diversifying host countries, and encouraging foreign medical teams to come to Algeria).
Table 8.8 Health Outlays by the Social Security Funds, 2000-2004
2000
2001
2002
2003
2004
CNAS
45.33
49.33
57.59
67.43
77.12
% GDP
1.10%
1.16%
1.27%
1.28%
1.26%
% NH GDP
1.84%
1.75%
1.88%
1.99%
2.03%
Trend n+1/n
8.8%
16.7%
17.1%
14.4%
- medical procedures
1.51
1.65
1.59
1.8
2
Trend n+1 / n
9.3%
-3.6%
13.2%
11.1%
- pharmaceuticals
19.67
22.77
25.54
33.33
41
% GDP
0.48%
0.53%
0.56%
0.63%
0.67%
% NH GDP
0.80%
0.81%
0.83%
0.98%
1.08%
Trend n+1 / n
24.2%
15.8%
12.2%
30.5%
23.0%
- other in-kind benefits (fittings, spa treatments…)
1.48
1.49
1.83
2.4
3
Trend n+1 / n
0.7%
22.8%
31.1%
25.0%
- hospitals grant
20.6
21.5
24
25
27.02
% GDP
0.50%
0.50%
0.53%
0.47%
0.44%
% NH GDP
0.84%
0.76%
0.78%
0.74%
0.71%
Trend n+1 / n
4.4%
11.6%
4.2%
8.1%
- transfers for treatment abroad
1.8
1.92
3.13
2.6
2.1
Trend n+1 / n
6.7%
63.0%
-16.9%
-19.2%
- financing of institutions under contract
0.274
0.0002
1.5
2.3
2
Trend n+1 / n
-99.9%
x7500
53.3%
-13.0%
CASNOS
1.17
1.47
1.63
2.18
2.89
Trend n+1/n
44.4%
25.6%
10.9%
33.7%
32.6%
TOTAL
46.5
50.8
59.22
69.61
80.01
Trend n+1/n
9.2%
16.6%
17.5%
14.9%
GDP
4,123.5
4,260.8
4,546.1
5,264.3
6,126.7
NH GDP
2,464.3
2,816.9
3,069.1
3,391.1
3,797.4
Source : Ministry of Labor and Social Security
Notes: Figures in bold are in billions of dinars; figures and percentage for 2004 are estimates
Expenditure efficiency
It is very difficult to make an informed judgment on the efficiency of health expenditures, especially with the lack of data in Algeria on hospital activities and on health care quality. Overall, Algeria’s health indicators are positive for a country at its income level, while health spending—as a proportion of GDP—is on the low side. However, this observation must be tempered by the following caveats.
The quality of health care seems far from optimal. Studies conducted in two university hospitals in 1991 and 2000 reveal a high rate of in-hospital infections (16 percent), indicating internal deficiencies. Other indicators also suggest that the quality of care delivered in public institutions is inadequate: including shortages of drugs and operating facilities in some facilities, a high rate of malfunctioning medical equipment, and resentment and lack of motivation (leading to absenteeism) among health personnel because of low pay, and so forth.
The various levels of health care are not being used properly. The average length of stay in public institutions is satisfactory. However, bed occupancy rates are very low and have declined recently, dropping overall from 57 percent in 2000 to 50 percent in 2003. These rates are inadequate for the CHUs and the EHSs, but the situation is particularly critical in the secteurs sanitaires (local hospital) facilities, where the occupancy rate was 44 percent in 2003 (Table 8.9), compared to 50 percent in 2000. The number of medical consultations per capita in the public sector is also very low: 1.3 per person, including all public service providers, and 1.13 in the secteurs sanitaires. These figures seem to confirm that patients have little confidence in secteurs sanitaires s. It is clear that they prefer to turn directly to a CHU or EHS, or to the private sector, for consultations, which generates additional costs for the health system. The lack of qualified medical staff and a shortage of drugs and materials, especially in rural areas, would seem to be the underlying causes of this underutilization of secteurs sanitaires resources.
Table 8.9 Public Health Activities, 2003
Beds
Admissions
Days of hospitalization
Consultations
Occupancy rate (%)
ALOS
(days)
Secteurs sanitaires
32,970
1,343,828
5,255,761
37,237,607
44
3.9
EHS
5,961
117,988
1,422,469
1,111,688
65
12.1
CHU
12,375
429,242
2,757,099
4,120,792
61
6.4
Total
51,306
1,891,058
9,435,329
42,470,087
50
5.0
Source: Statistiques Sanitaires, Année 2003.
Note: Average length of stay (ALOS).
Expenditure equity
Access to care is still subject to major inequalities by geographic zone. Algerian authorities have made significant efforts to equip the entire country with health infrastructure. Thus, the ratio of beds per 1,000 inhabitants is higher than the national average in the Southwest region and close to the national average in the Southeast region (Table 8.10). However, there are still considerable variations from one wilaya to the other. For example, in the central region, Algiers has 2.89 beds per 1,000 inhabitants, while Medea has only 40 percent as many (1.17). Moreover, while rates in the South are broadly satisfactory, they mask the fact that people often live too far from health centers, most of which lack adequate transportation to bring treatment to the countryside. Finally, most of the new private clinics are located in the wealthier wilayas, which exacerbates hospitalization access inequality.
Table 8.10 Geographic Distribution of Health Care by Regions, 2004
Population
Number of bedsa
Number of physiciansb
Beds/1,000
Physicians/ 1,000
Center
10,624,293
18,543
16,164
1.75
1.52
East
9,616,633
15,214
14,177
1.58
1.47
West
7,477,354
6,561
8,413
0.88
1.13
Southeast
2,610,160
3,431
2,102
1.31
0.81
Southwest
898,901
1,998
839
2.22
0.93
Total
31,227,341
45,747
41,695
1.46
1.34
Source: Health Map.
a Includes public-sector beds only; the number of private-sector beds, likely still low, is unknown.
b Public and private sector physicians.
The most glaring inequalities occur, however, in the distribution of health professionals. There are sharp discrepancies among regions: from 0.81 physicians per 1,000 inhabitants in the Southeast to 1.52, or nearly twice as many, in the Center. These gaps reflect physicians’ reluctance to serve in rural or isolated regions, particularly in the South, and their preference to reside and tendency to be concentrated in the major cities. Even public sector physicians resist assignments in the South or Western regions. To address this situation, the Ministry of Health announced that it would not post positions in the northern part of the country for physicians graduating in 2005 who must fulfill their national service obligations. Nonetheless, and despite the reduced period of compulsory service and the supplementary bonuses being offered, many physicians, women in particular, have given up their practices rather than leave the big coastal cities. Correlating access to health care with the 2001 Health Map confirms that public health facilities (beds) are now present in the poorest wilayas (Figure 8.8),166 but very few physicians choose to practice in them (Figure 8.9).
Figure 8.8 Number of Beds/1,000 Inhabitants in the "Poorest Wilayas,"2004 Source: MOL (Health Map), ONS (Poverty Map 2001).
Note: From left to right, in decreasing order (from the poorest to the "richest").
Figure 8.9 Number of Physicians/1,000 Inhabitants in the "Poorest Wilayas,” 2004
Source: MOL (Health Map), ONS (Poverty Map 2001).
The rapid growth of the private sector, overcoming shortcomings in the public sector, is exacerbating inequalities in the quality of services. Income is not an important factor in determining access to care in the public sector. On the contrary, health expenditures in the private sector are poorly covered by the social security system, because reimbursement rates are very low (see paragraph 8.34). Only the better-off population can afford private care. To prevent accentuating this tendency, either the quality of care in the public sector will have to be improved, or the conditions under which private medical services are covered by Social Security will have to be improved.
Source: MOL (Health Map), ONS (Poverty Map 2001).
