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April 30, 2021

 Why PFM is Key for the Effective Roll Out of COVID-19 Vaccines

Budget Covid-19

Posted by Hélène Barroy[1], Federica Margini[1], Triin Habicht[2], Tomas Roubal[3], Peter Cowley[3], and Joseph Kutzin[1]

As COVID-19 vaccines are rolled out globally, the number one question for many countries is how much it is going to cost to procure and deploy the vaccines. Currently, COVAX only covers 20% of the vaccine purchase price for 92 eligible low- and middle-income countries. While the question “how much?” is a legitimate one to consider, especially given the fiscally constrained environment, another key question— “how to?”—requires careful attention as well. Figuring out how to channel necessary funds towards the vaccine roll-out is as important as determining the cost of the roll-out itself. For this, PFM becomes highly relevant as it is what supports the last mile distribution of a predominantly publicly funded and managed public good.

Preliminary country evidence indicates that PFM bottlenecks, regularly encountered in the health sector during normal times, are also affecting COVID-19 vaccination plans. Some of the key issues include: How are vaccine procurement and delivery costs formulated in budget structures? How will funds flow to health service providers to cover costs associated with implementation? What are the rules for hiring and contracting temporary vaccinators? How will providers be incentivized for vaccination services? How can reporting mechanisms ensure financial accountability for vaccine-related expenditures?

This article describes PFM “stress points” in each phase of the budget cycle that may arise throughout the vaccine roll-out. The article also uses country examples to illustrate possible ways to overcome these barriers.

Budget planning and formulation

  • Budget estimates: Uncertainties around the cost of COVID-19 vaccines, their availability and their uptake have exacerbated the typical disconnect between costing and budgeting in health. While most countries have a costed deployment plan, very few regular or supplementary budgets for 2021 include provisions for COVID-19 vaccination. In March, Ghana adopted a 2021 budget which incorporates COVID-19 vaccine procurement and operational costs. Those costs will be co-funded through a COVID-19 health levy which increases by one percentage point the national health insurance levy and the value-added tax (VAT) flat rate.
  • Budget planning: Some countries struggle to define a medium-term vision for budget planning and to align allocations with longer-term vaccine deployment needs and other priority health needs. Where budget provisions for COVID-19 vaccination do exist, they are often fragmented. It is possible for health ministry budget provisions for vaccination to co-exist with allocations to an extra-budgetary fund (as in Mauritius and its National COVID-19 Vaccination Program Fund) and/or through a special Presidential envelope. In South Africa, spending on COVID-19 vaccination was consolidated in the Medium Term Expenditure Framework (MTEF) to cover expenditure forecasts up to FY 2022/2023, while the country pursues a flexible scenario-based budgeting approach for annual updates.
  • Budget structure: If routine immunization allocations are any indication, input-based budgeting may reduce flexibility for COVID-19 vaccination resource management, with separate budget lines for vaccines, cold chain and support staff. Several countries have created a temporary program line that groups all inputs related to COVID-19 vaccination together. In Georgia, costs related to vaccination are included in the state budget as part of a new COVID-19 management budgetary program to make resource management for COVID-19 vaccination more flexible and provide a clear audit trail.
  • Budget holders: To enable full budget execution, each budget holder in the multi-stakeholder response must be clearly defined and their vaccine-related expenditure properly coordinated and tracked. In South Africa, the COVID-19 vaccination budget allocations are split between national budget holders (primarily the National Department of Health) for vaccine procurement and provincial departments of health for implementation-related expenditures. In other countries, budget is allocated to the main purchasing agency – the national health insurance fund – for the reimbursement of the full distribution costs (Czech Republic), or to cover provider-related costs only (Korea), while other central departments (e.g. defense, education) and agencies (e.g. centers for disease control) may receive subsidies to support additional spending related to vaccination campaigns.

Budget execution and spending modalities

  • Central and subnational spending authorization: Cumbersome and multilayered spending authorization processes, across administration levels, can hamper efficient health spending. Prior to the vaccine roll-out, several countries, like India, adjusted modalities to allow public funds for COVID-19 goods and services to be disbursed more readily upon appropriation. The same procedures continue to apply for vaccination-related spending. Some countries, including Ukraine, have also simplified procedures for budgetary transfers to subnational levels and/or purchasing entities in charge of vaccination, to allow for the rapid deployment of vaccines.
  • Procurement rules: Procurement processes can sometimes stand in the way of efficiently procuring COVID-19 vaccines and other related products. Most countries use emergency procurement processes to purchase vaccines and some non-vaccine-related items (e.g. medical supplies, cold chain). These emergency processes generally allow for direct negotiations with vaccine manufacturers and remove the competitive bidding process. When emergency procurement provisions were not comprehensive enough, some countries like Morocco and the Philippines , adopted further regulations for these emergency purchases to allow sole source contracting and advance payments to vaccine manufacturers. However, when these contracts and payment amounts are kept secret, the approach raises concerns with regards to financial transparency and accountability.
  • Provider contracting modalities: Rigid personnel recruitment and contracting policies can hamper the efficient roll out of vaccines. In many cases, there are rigid frameworks—or in some cases, no frameworks at all—for contracting private providers in the health sector. Some countries are updating their regulatory frameworks to make tendering easier while ensuring that contracted providers are still held accountable for outputs. In Estonia, additional private providers have been contracted to vaccinate front-line workers. The Estonian Health Insurance Fund held an open call to identify new providers and developed a new contract template to ensure their work aligned with vaccination requirements.
  • Payment and incentives to providers: A lack of or inconsistent incentives for providers may alter how effectively vaccines are deployed. Revising payment methods to support vaccine delivery can help mitigate the problem. In Ukraine, the government added a vaccination performance fee to the current capitation payment for primary care providers. In other countries, an extra fee-for-service was introduced to incentivize the supply; in Estonia the fee-for-service goes to family doctors while in Italy it goes to pharmacists.
  • Rules for resource use by providers: Front-line health workers are often handcuffed by a lack of access to operational funds, as well as cumbersome authorization and reporting rules when resources are used. Several countries have started to update their PFM frameworks to allow front-line workers to receive and manage public funds directly, including for the vaccine roll-out and COVID-19 related goods and services. The Philippines implements the Bayanihan to Heal as One Act which allows for prospective payments by the main purchasing agency, Philhealth, to more than 700 eligible facilities.

Expenditure reporting and accountability

  • Tracking vaccination expenditure: Weak reporting systems, multiple reporting processes, and a narrow or incomplete view of vaccine-related spending can create challenges for financial accountability. Some countries, like Ghana, have started to assign special codes for COVID-19 vaccination expenditure in their FMIS. In other countries, when a program structure allows, budget tagging systems are used to track vaccination-related activities and spending. In Estonia, budget tagging for COVID-19 vaccination expenditure helps to ensure financial accountability.

A more detailed mapping of these challenges and possible solutions is available here.

This article is part of a series related to the Coronavirus Crisis. All of our articles covering the topic can be found on our PFM Blog Coronavirus Articles page.

 

[1] Health Systems Governance and Financing, World Health Organization

[2] Barcelona Office for Health Systems Financing, World Health Organization

[3] Regional Office for the Western Pacific, World Health Organization

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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