Section 4     The cost of EHP services and support

Direct: Direct costs have been defined in this model as costs incurred for providing a specific component of the EHP. For instance, the cost of providing an HIV/AIDs test is a direct cost under the STIs component; the cost of providing vitamin A to all pregnant women is a direct cost of the Adverse Maternal and Neonatal Outcomes component. Direct costs in the EHP model tend to be mainly drugs, medical supplies and equipment, laboratory tests, ambulatory referrals and hospital in-patient costs. 

Indirect: Direct costs have been defined in this model as costs jointly incurred across all components of the EHP. For instance, a health centre exists not to provide one or two components in the EHP, but all of them; as such its depreciation and maintenance is classed as an indirect cost. Typical indirect costs in the EHP model are the depreciation and maintenance of physical infrastructure (buildings), vehicles, medical equipment used to provide a number of components (e.g. X-ray machines or oxygen concentrators), utilities costs, staff salaries, management and supervision costs, consumable supplies (e.g. cleaning materials), IEC and social marketing of all EHP components and in-service training for staff.  

Recurrent costs: These are defined as those costs incurred on an annual basis. All of the direct costs and many of the indirect costs described above will be incurred on a regular or recurrent basis (e.g. drugs)   

Development: Development costs are also sometimes known as capital costs, and describe periodic expenditures incurred to upgrade the quantity or quality of health services provided. Typical development costs include facility construction and pre-service training for staff. As the EHP cost model assumes a good standard of health care, it does make a provision for some development costs. These are then annualised over a specified period; in this case 5 years for facilities and 6 years for human resources. 

Total and unit costs: The total cost of the EHP is the sum of both indirect and direct recurrent costs and the annualised cost of development. These costs can then be split by level (e.g. community, health centre or hospital), component or input type. Unit costs can then be generated, e.g. by taking the total cost of health centre level provision and dividing it by the number of health centres. 

A summary of the different types of costs involved in this model is presented in Table 3 below.

1.2.1       Document review

The starting point for the costing exercise was a review of existing MOHP documents relating to the proposed reforms, service priorities and targets, incidence of various conditions, utilisation of health services, plans and budgets etc.  Although these yield much useful information, one of the major constraints in undertaking this exercise has been the lack of complete, up-to-date and therefore reliable data.  The primary source of information for incidence of many of the conditions has been the MOHP publication Basic Health Statistics 1996, acknowledged to be incomplete.  In addition, this source has a major disadvantage in that, at best, it picks up only those cases reaching the formal health system, and therefore measures utilisation of access rather than the extent of a given health problem in the population as a whole.  

However, the recently launched HMIS, together with improved surveillance and other monitoring mechanisms by the central level technical programmes, is expected to substantially improve the quality and timeliness of data in the future, and subsequent revisions of the proposed EHP should be much simpler.

1.2.2       Consultation with MOHP staff

As stated earlier, a large number of people have been involved in the process of defining and costing the EHP. The technical programmes have been key, providing both input face to face, and in giving access to various documents.  There is still a certain amount of hesitation regarding the concept of an EHP, probably due to negative publicity of other countries’ experiences in this area, and further work will be necessary to reassure programme staff of their key role in helping to ensure quality service delivery. 

District health officials have been crucial in terms of providing guidance as to what actually happens on the ground, as opposed to in the various guidelines, where the constraints lie, and consequently where some of the important changes could usefully be made.

1.2.3       Research trips

Much of the indirect cost research was completed by the MoHP Planning Department in four districts: Dedza, Salima, Rumphi and Mzimba between June and September 2001. Details of the 22 facilities visited are contained in Table 4 below: 

From these visits, “best practice” in a number of indirect cost areas were observed (e.g. frequency of supervision, quantity of perishable supplies). This has become the basis of the EHP costing of indirect inputs.

Research on direct costs has been undertaken with the help of technical programmes and four districts (Blantyre, Chitipa, Machinga and Ntcheu). The results from this research have been fed into the separate volume, Annex 1, and the particular experience of community-based services visited is summarised in Appendix A.

This costing is a preliminary cost, and should not be considered in any sense a final estimate.  Many gaps remain, and assumptions have been made throughout the costing exercise, on incidence, coverage, and the basis for costing.  These have been mentioned throughout this report and the companion volume, and are subject to challenge and improvement.  It is hoped that through broad circulation of this draft document, many of these assumptions will be critically reviewed, feedback obtained, and the subsequent costing thereby strengthened.  In particular, the following inputs are critical to the implementation of the EHP but are not captured in the cost totals: 

• All central level management and most supervision of the districts;

• the costs of establishing and running a District Health Office (apart from supervision of health centres and lower levels, and the staff costs);

• more informed information on costs of further strengthening the community level component of the EHP;

• the staffing basis has been based on the MoHP’s establishment which may not be accurate in light of the EHP; 

• Some interventions have not been possible to cost, due to absent information: eg environmental management of schistosomiasis (8.3).

• General central level administration has not been costed, nor has any central hospital activity.

1.3.1       Modelling

Most of the cost estimates have been derived through development and use of a linked spreadsheet model, based on the one used in the WHO Mother-Baby Package.   Information and assumptions have been fed into this and, although relatively complex at present, it is hoped that it can be simplified to function as a tool for district level planning as well for central level use.  It may also be possible to develop a website that features an inter-active cost tool for interested partners to use both inside and outside Malawi.

This section presents the preliminary results of the exercise to cost the essential package.  As mentioned earlier, there are still uncertainties regarding the completeness and accuracy of the information. 

The costs are presented in summary tables.  The interested reader is referred to members of the EHP working group for more detail at this stage.  However, it is intended that in the final version of this document, a second annex will be added to include the actual format of the main spreadsheet model and the other calculations undertaken to arrive at the various cost estimates.

1.4.1       Total cost of the EHP

The total estimated annual cost of a fully implemented EHP for Malawi, using National Statistic Office (NSO) 2003 population projections is $205,988,692 or around $17.53 per capita. This cost has been calculated according to the parameter specifications given in Table 5, and details are shown in tables 6-10 below.

Although the initial intention had been to undertake a costing of the current situation together with the standard, in order to calculate the gap, this has not proved possible both due to lack of general information in some areas (e.g. community level activities) and also the variations in current practice around the country.  Further investigation of the extent to which the various assumptions hold in different settings will be required in order to validate some aspects of the model.

The decisions regarding the percentage of total expenditure/activity which is contained within the EHP as opposed to outside will require discussion and agreement at senior policymaker level.

As defined in Section 4.1.1, the direct cost measures those inputs that can are consumed in specific interventions, and can thus be directly attributed to a given  component.  These are shown in Table 6 below.  Although not the primary aim of the EHP exercise, this information could potentially be of use to district managers in determining intra-EHP allocations of resources.