The Way Forward for Sustainable Health Financing in Timor-Leste
Health financing is a critical area of focus for the Government of Timor-Leste (GoTL) as it works to build a self-reliant health system that is well-governed, efficient, accountable, and responsive to people’s needs.
In Timor-Leste, government spending on health represented just 2.7 percent of the GDP and 6.67 percent of the general government expenditure in 2017, the most recent data available. [1] As a result, 20–30 percent of the country’s health spending relies on donor assistance which limits health program sustainability. [2]
Over the past few months, the USAID Health System Sustainability Activity in Timor-Leste, conducted a series of interviews to gather perspectives from key stakeholders on the path towards more robust health financing. In August 2022, the Activity’s Health Governance and Finance Lead, Julião dos Reis, interviewed Mr. Marcelo Amaral, Director General of Corporate Service at the Ministry of Health (MoH).
Below are excerpts from this interview, where they discuss the issues facing GoTL, ongoing initiatives to strengthen health financing, and how these strategies play a role in Timor-Leste’s progress towards more sustainable health financing.
dos Reis: What pathways is the Ministry of Health pursuing to ensure sufficient, sustainable public funding for health sector programs?
Director General Amaral: We consider the medium-term expenditure framework (MTEF) approach as one strategic instrument to mobilize resources in all priority areas and increase our health sector budget allocation. The MoH has used MTEF before, but unfortunately discontinued the approach because it was unable to sustain MTEF implementation alone and had limited power to influence other stakeholders i.e., Ministry of Finance (MoF), who continued to use line-item budgeting models. However, the MoF recently initiated use of MTEF across government ministries and developed concept notes that mention health, education, and infrastructure specifically as the sectors that will pilot renewed MTEF implementation. The World Bank is providing technical assistance for this initiative. In fact, we had planned to implement MTEF in 2020, but the COVID-19 pandemic delayed that. But I do feel MTEF is going to be very effective.
Medium-term expenditure framework is a multi-year budget planning methodology that takes a strategic approach to establishing priorities and allocating resources. MTEFs require policy makers to look across sectors, programs, and projects to see how spending can be restructured to best serve established policy objectives.
Another approach that has been under discussion is the revision and expansion of pro-health taxes on items such as alcohol, tobacco, and sugary drinks. These policies were previously discussed by the Fiscal Reform Commission, but that commission did not continue after the new government came in. However, the discussion continued in the Parliament and within MoF. The World Health Organization has also been in discussion with the MoF to introduce such pro-health taxes as part of public finance reform. MoH directorates are involved in providing information and technical support on questions related to the proposed pro-health taxes’ effects on health financing. The MoH hopes to be more engaged in discussions on the use of pro-health taxes as a financing mechanism for health.
In recent months we have seen an increase in tobacco prices due to increased tobacco taxes. The collected tax will go into the Treasury account, but at this point that revenue is not specifically earmarked for health. I feel there should be more policy dialogue to ensure that such funds are allocated for health.
So as far as resource mobilization is concerned, we’ve had some coordination meetings, but the effort has not gained sufficient momentum yet. We’ve discussed gaps, issues, and priorities, but a real, concentrated effort to translate those discussions into concrete actions is still lacking. That’s because the MoH continues to have vertical, fragmented thinking — in part because every development partner comes with its own projects. Once the MTEF approach is in place, I hope that it will be much easier for us to mobilize resources. In fact, MTEF can be used as a policy dialogue instrument to communicate with partners.
dos Reis: Program-based budgeting and performance-based financing are two transformative reforms that the GoTL has been pursuing. What changes do you expect them to bring and what more needs to be done?
Director General Amaral: Program-based budgeting (PBB) is one of our key reform initiatives for public financial management. We believe that PBB will help the government improve efficiency and effectiveness of budget execution in health, raise revenue, achieve value for money, and ultimately improve accountability in the use of public funds.
Program-based budgeting aims to shift the focus of the budgeting process from allocation of funding for line items of input categories such as salaries, goods, and services to expected achievements, using measurable indicators.
We have already begun implementing PBB, but we need to make sure that it is linked with performance indicators that the Government ministries agree on. Right now, PBB is being used but only to indicate how much budget goes to each program. We haven’t yet discussed how the budget will link with a program’s performance indicators. So further discussion is still needed with the National Agency for Planning, Monitoring, and Evaluation and the MoF.
In terms of performance-based financing, the MoH is planning to adopt PBF models first for primary health care providers in Timor-Leste’s municipalities. In fact, this approach will be incorporated into the Government’s contract agreements with each municipality. That initiative will start with nutrition programs, at first using a case mix [3] based on population, geographic barriers, outpatient visits, etc. to distribute funds. Moving forward, further discussions will identify the criteria that are most suitable for the current situation.
Performance-based financing refers to a scheme to improve health service delivery by paying service providers based on achievement of specific indicators, for example provision of a pre-agreed set of services at appropriate standards of quality and administration.
Our biggest priority is to establish a Health System Strengthening Working Group (HSSWG) with several sub-working groups, one of which will be the Health Sector Budget Working Group. The HSSWG will be established as an umbrella body that provides overall strategic direction to its technical sub-working groups. Further, we have also had discussions about establishing a Health Financing Unit (HFU), which will provide technical analysis to inform policy on health financing and budgeting as well as on earmarking pro-health tax revenue (alcohol, tobacco, and sugary drinks) for health sector initiatives. The MoH will form a HFU and build its knowledge and technical capacity across a range of topics — such as the health financing system, national health accounts, public financial management, planning, budgeting, monitoring and evaluation, and other relevant topics — so that the team is well-equipped to handle new initiatives.
dos Reis: We know that the government is also working to define an essential health services package that can be asserted as a basic standard of care. How will this serve as a tool for entitlements, planning, and contracting?
Director General Amaral: The package of essential health services or EHP has already been costed and updated with technical support from the WHO. What we need to do now is to use the EHP as a strategic document to support the MoH in setting priorities and planning to improve efficiency, and effectively allocate and execute our budget. The launch of an essential health services package is eminent. Most importantly, we need to ensure that EHP activities are reflected in MoH program annual plans. In that way, the EHP will guide us in effective delivery of primary health care. It will also help us standardize the budget at the primary health care level and ensure that essential health services are part of the MoH’s integrated vertical approach health care system, for example through services such as family health and Integrated Community Health Systems.
A more integrated health care services approach has been considered and included in the updated EHP, but it needs to be institutionalized. As of now, health care service delivery tends to be siloed. We need to make the healthcare system and service delivery more integrated to ensure sustainability, and we also need consistent monitoring of implementation results. One big problem is that at the community health center level, the MoH is unable to monitor and track the performance progress of budget execution and the EHP implementation. We will need a tracking system to ensure that the package is implemented as planned. This will at least let us know the progress so that we can course correct when necessary.
As I mentioned before, I know that the discussion on MTEF has been initiated again. If the government finalizes it soon, that will be good progress towards better planning. Having both the MTEF and EHP established will guide effective allocation of resources as well as service delivery, because the MTEF can serve as a tool for the MoH to plan and cost EHP delivery with medium-term perspectives. The HSSWG will be the governance body that coordinates purposeful action on such fronts to meet our health priorities.
In the coming months, the Activity will continue working with the MoH to pursue many of the initiatives Director General Amaral mentioned. In particular, the MoH has asked for the Activity’s support in the establishment of the MoH’s HSSWG and its Health Financing Unit. Through this work, the Activity hopes to build government capacity for adoption of effective frameworks that promote more sustainable financing.
[1] Ministry of Health and World Health Organization/Timor-Leste, 2017
[2] World Health Organization, 2020
[3] Case mix refers to any system that aggregates information about patients and associated procedures into groups based on the type and mix of patients treated.
The USAID Health System Sustainability Activity aims to strengthen government capacity to support the country’s institutions and organizations to independently design, fund, implement, and manage their health system. To learn more, go to www.lhssproject.org/our-work/timor-leste.
The USAID Health System Sustainability Activity in Timor-Leste is part of USAID’s Local Health System Sustainability project, a global initiative to help countries achieve sustainable, self-financed health systems and support access to universal health coverage and improve health and well-being. This report was made possible by the support of the American people through the United States Agency for International Development (USAID). The contents are the sole responsibility of the authors and do not necessarily reflect the views of USAID or the United States government.
