ONA. IN THE AMOUNT OF SDR 27.6 MILLION (US$35.0 million equivalent) TO THE REPUBLIC OF BOLIVIA IN SUPPORT OF THE

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1 Public Disclosure Authorized Document of The World Bank Report No: BO Public Disclosure Authorized Public Disclosure Authorized PROJECT APPRAISAL DOCUMENT ONA PROPOSED ADAPTABLE PROGRAM CREDIT IN THE AMOUNT OF SDR 27.6 MILLION (US$35.0 million equivalent) TO THE REPUBLIC OF BOLIVIA IN SUPPORT OF THE SECOND PHASE OF THE HEALTH SECTOR REFORM PROGRAM Public Disclosure Authorized Human Development Department Bolivia, Paraguay, Peru Country Management Unit Latin America and the Caribbean Region June 12, 2001

2 CURRENCY EQUIVALENTS (Exchange Rate Effective June 6, 2001) Currency Unit = Boliviano (Bs) Bs 8.24 = US$I US$1 = Bs 6.56 FISCAL YEAR January I to December 31 ABBREVIATIONS AND ACRONYMS ADI APC APL ARI Bank CAI CAS CDF CEOC CG DCA DFID DGSS DHS DPT EA EPI EXTENSA FIS FPS GDP GNP GTZ HDI HIB HIPC IADB IBRD IDA IMCI Acute Diarrheal Infection Adaptable Program Credit Adaptable Program Loan Acute Respiratory Infection Refers to both IBRD and IDA Information Analysis Meeting Country Assistance Strategy Comprehensive Development Framework Comprehensive Essential Obstetric Care Consultative Group Development Credit Agreement British Assistance for Health Reform Direcci6n General de Servicios de Salud (General Office of Health Services) Demographic and Health Survey (Encuesta Demogrdfica de Salud) Diptheria, Pertusis, Tetanus vaccine Environmental Assessment Expanded Program of Immunization Programa Nacionalpara la Extension de Cobertura del SBS (National Program for the expansion of Basic Health Insurance) Fondo de Inversi6n Social (Social Investment Fund) Fondo Productivo y Social Gross Domestic Product Gross National Product Gesellschaft fur technische Zusammenarbeit (German technical cooperation agency) Human Development Index Haemophilus Influenzae type B vaccine Highly Indebted Poor Countries Inter-American Development Bank International Bank for Reconstruction and Development International Development Association Integrated Management of Childhood Illness (Atenci6n Integral de las Enfermedades Prevalentes de la Infancia) Vice President: Country Director: Sector Director: Task Team Leader: David de Ferranti Isabel Guerrero Xavier Coll Daniel Cotlear

3 IMF IMR IRR LACI MAR MBP MMR MoF MSPS NGO NPV ORT PA PAHO PES PMR POA PROISS PRSP QCBS SBS SEDES SNIS TOR UDAPE UNICEF URS WHO International Monetary Fund Infant Mortality Rate Internal rate of return Loan Administration Change Initiative Mecanismo de Asignaci6n de Recursos (Resource Allocation Mechanism) Mother-Baby Package (Paquete Materno-Neonatal) Maternal Mortality Rate Ministry of Finance Ministry of Health (Ministerio de Saludy Previsi6n Social) Non-Governmental Organization Net present value Oral Rehydration Therapy Performance Agreements Pan American Health Organization Plan Estrategico de Salud (Strategic Health Plan) Project Management Report Plan Operativo Anual (Annual Operating Plan) Proyecto Integrado de Servicios de Salud (Integrated Health Development Project) Poverty Reduction Strategy Paper Quality- and Cost-Based Selection Seguro Basico de Salud (Basic Health Insurance) Servicios Departamentales de Salud (Departmental Health Services) Sistema Nacional de Informaci6n de Salud (National System of Health Information) Terms of Reference Unidad de Analisis de Politica Economica (Unit for the Analisis of Economic Policy) United Nations Children's Fund Unidad de Reforma de Salud (Health Reform Unit) World Health Organization

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5 Bolivia Second Phase of the Health Sector Reform Program CONTENTS A Project Development Objective Program purpose and program phasing Project development objective Key performance indicators... 3 B Strategic Context Sector-related Country Assistance Strategy (CAS) goal supported by the project Main sector issues and Government strategy Sector issues to be addressed by the project and strategic choices Program description and perforn ance triggers for subsequent loans C Project Description Summary Project components Key policy and institutional reforms supported by the project Benefits and target population Institutional and implementation arrangements D Project Rationale Project alternatives considered and reasons for rejection Major related projects financed by the Bank and/or other development agencies Lessons learned and reflected in the project design Indications of borrower commitment and ownership Value added of Bank support in this project E Summary Project Analysis Economic Financial Technical Institutional Social Environmental assessment Participatory approach Financial Management F Sustainability and Risks Sustainability Critical Risks... 26

6 G Main Loan Conditions Effectiveness Conditions Other H Readiness for Implementation I Compliance with Bank Policies Annexes Annex I Annex 2 Annex 3 Annex 4 Annex 5 Annex 6. Annex 7. Annex 8. Annex 9. Annex 10. Annex I1. Annex 12. Annex 13. Annex 14. Annex 15. Project Design Summary Detailed Project Description Estimated Project Costs Economic and Equity Analysis Financial Summary Procurement and Disbursement Arrangements Project Processing Budget and Schedule Documents in Project File Statement of Loans and Credits Country at a Glance Letter of Development Policy Participation and Social Communication Basic Health Insurance (SBS) Support to the Medium-term immunization plan Medical Waste Management Map

7 Bolivia Second Phase APL for Health Sector Reform Project Appraisal Document Latin America and the Caribbean Regional Office Social and Human Development Date: June 12, 2001 Team Leader: Daniel Cotlear Country Manager/Director: Isabel Sector Manager/Director: Xavier Coll Guerrero Project ID: P Sector: HY - Other Population, Health & Nutrition Lending Instrument: APL Theme(s): Health/Nutrition/Population Poverty Targeted Intervention: [X] Yes [ ] No Program Xinancing Data APL Indicative Financing Plan Estimated Implementation Borrower Period (Bank FY) IDA Others Total Commitment Closing US$ m % US$m US$m Date Date APL % FY1999 FY2002 Republic of Bolivia Loan/ (expected) C redit _ APL 2 Loan/ % FY Republic of Bolivia Credit AP % FY 2005 FY 2008 Republic of Bolivia Loan/ Credit Project Financing Data [I Loan [X] Credit [ Grant [] Guarantee [ Other [Specify] For Loans/Credits/Others: Total Project Cost (US$m) 70.0 Total Bank Financing (US$m) 35.0 Proposed Terms: Grace period (years): 10 Years to Commitment Fee: N/A Service Charge: 0.75 maturity: 40 Estimated Disbursements FY Annual Cumulative Borrower: Republic of Bolivia Guarantor: N/A Responsible agency(ies): Ministry of Health and Social Welfare Project implementation period: 4 years Expected Effectiveness Date: December 31, 2001 Expected Closing date: June 30, 2006 Implementing Agency: Ministry of Health and Social Welfare and the Productive and Social Investment Fund Contact person: Fernando Lavadenz, General Manager Tel: refsalud@mail.entelnet.bo

8 A: PROGRAM PURPOSE AND PROJECT DEVELOPMENT OBJECTIVE 1. Proaram vurvose and proeram phasing (see Annex 1) This second phase of the Health Sector Reform adaptable program loan (APL2) continues a successful, results-driven approach to investing in the reduction of infant mortality in Bolivia, particularly among the most disadvantaged communities. The Health Sector Reform Program follows an approach that emphasizes the monitoring of results. Operationally, the Development Credit Agreement (DCA) for APL I introduces an innovation to emphasize results: it sets out targets for eight performance indicators designed to measure the outcomes of key, project-supported health interventions aimed at reducing the infant mortality rate. Project success is defined as reaching the targets for at least five of the eight performance indicators each year'. The project has been highly successful - in 2000 all targets for 2000 were exceeded and seven of the targets for 2001 were reached (a year in advance). The purpose of the program is to help reduce the infant mortality rate by complementing other interventions in education, rural productivity, and water and sanitation described in the equity pillar of the Bolivia CAS. The Bolivia CAS of 1998 proposed targets for the infant mortality rate; these targets were revised in the Bolivia CDF Document of May 21, 1999 (Report No BO). The following table shows the baseline from the Bolivia CAS, the target proposed by the Bolivia CDF Document, and the end-of-program target proposed by the PAD for APL I for Health Sector Reform (Report No BO). At the end of phase III, the mortality rates of infants and children under five years of age in Bolivia would be substantially closer to the average rate for Latin America than they were in 1998 when the program was designed. Baseline Target for 2001 Target for 2008 (1998) Infant Mortality Rate (per 1,000 births) The Health Sector Reform Program consists of three phases. During APL 1 ( ), an ambitious set of interventions were successfully introduced to improve the performance of the public health services: (i) the Seguro Basico de Salud (Basic Health Insurance-SBS) - a financing scheme for priority health interventions regulated by the Ministry of Health and implemented by all municipalities -- was established; (ii) the immunization program was revamped, and new vaccines were introduced; and (iii) three new management and implementation instruments were put into use: performance agreements (PA), treatment protocols for mothers and babies and for children under five years old, and an investment mechanism promoting maternal and child interventions. During Phase I, these instruments were utilized in a simplified form, closely supervised, and adjusted. While the SBS and PAs reached a national scale during 2000, the other interventions are still being phased-in and have not yet reached a national coverage. The interventions initiated by APL I improved the performance of public services where these services are well established. During APL2 ( ), these interventions would be expanded geographically, and a special effort would be launched to reach underserved areas. During this phase, the interventions introduced during APL I would be mainstreamed by enabling local agencies to manage and monitor them and by ensuring that they are increasingly financed out of domestic budgets. Policies promoting further progress toward decentralization of the social sectors are expected during implementation of APL2, the Lack of "success" allows the Bank to cease disbursements and request a restructuring of the project. 2

9 interventions supported by the APL are designed to promote this process by continuing to strengthen the role of the Ministry of Health (MSPS) in policy-guidance and regulation, and the role of municipalities in implementation. Specifically, during Phase II: (i) the Basic Health Insurance Program would expand its benefit package to provide greater coverage of the health needs of the poor; new forms of delivery of care using indigenous community agents and itinerant health professionals would be incorporated in the SBS; and other reforms to expand health insurance coverage in ways consistent with decentralization would be supported; (ii) the performance agreements already used by the MSPS and all nine political departments would be expanded to include some of the larger municipalities as well; (iii) the new vaccines would be available nationwide and be fully financed by domestic sources; and (iv) a modified version of the investment mechanism promoting maternal and child interventions piloted in five departments during APLI would be expanded to the national level and would place greater emphasis on interventions designed to reduce perinatal mortality. Phase III (2006 to 2008) would focus on: (i) developing processes to complete the sustainability of the interventions of this APL. Specifically, the SBS became self-financed during APLI by securing earmarked municipal funds, and immunizations would become government-financed during APL2, the challenge for APL3 would be to make the proposed expansion of health teams in underserved areas domestically financed as part of the process of decentralization. (ii) extending maternal and child investments beyond the primary and secondary care levels by also investing in third level hospital maternities; and (iii) integrating into the SBS framework the use of private providers and social security providers, and by developing more complete insurance instruments possibly including the introduction of premiums or co-payments for higher-income beneficiaries. 2. Proiect development objective The activities of APL2 will aim at the same development objectives as APLI: * To increase coverage and quality of health services and related programs that would improve the health of the population, and to empower communities to improve their health status; and * To strengthen local capacity to respond to health needs. 3. Key performance indicators (see Annex 1) Progress during APL 1 was monitored using eight indicators measuring coverage, quality, equity and sustainability (see evaluation of these performance indicators in section B4). During APL 2, the same indicators will be used, with one small change. On the recommendation of specialists who consider that at the stage reached in Bolivia diarrheal infections should increasingly be prevented, rather than medically treated, the indicator for medical coverage of diarrheal infection will be replaced by an indicator measuring the coverage of nutrition programs. As explained below, during 1999 and 2000, partially as a result of APL 1, the evolution of these indicators was better than the historic trend. The new targets have been chosen based on the improved trend. The following indicators will be used (for quantitative targets and definitions, see annex IA): Coverage Indicators * Births attended by trained health personnel * Pneumonia cases of children attended in health services * Immunization coverage with pentavalent vaccine * Percent of children under 2 with third dose of iron 3

10 Quality Indicators * Complete prenatal care attendance * Early neonatal hospital mortality. Equity Indicator * Number of municipalities with pentavalent coverage of less than 80%. Sustainability Indicator * Annual targets for the domestic financing of vaccines B: STRATEGIC CONTEXT 1. Sector-related Country Assistance Strate2v (CAS) goal supported by the proiect (see Annex 1) Document number: BO Date of latest CAS discussion: June 5, 2001 The Bolivia Country Assistance Strategy (CAS) Progress Report was discussed by the Board on June 5, Prior to this, the last Country Assistance Strategy (CAS) for Bolivia covering FY98-02 was discussed by the Board in May A CAS update was discussed by the Board in connection with the presentation of Bolivia's Poverty Reduction Strategy in June The Health Reform APL was included in the 1998 CAS because Bolivia had high absolute levels of infant mortality and, relative to its per capita income level, was one of the countries with the worst overall infant and child mortality levels. The APL was designed to contribute to meeting one of the four CAS core benchmarks - the infant mortality rate. An APL was proposed in the 1998 CAS because it was recognized that improving infant mortality would take time and that the health sector would have to adapt to changes occurring throughout the rest of the government. The second phase of the APL was proposed for FY01 and is being presented on schedule. In addition to helping meet the infant mortality goal, the second phase of the APL will place increased emphasis on nutrition and will thereby contribute to meeting another CAS core benchmark - with respect to child nutrition. The preparation of this second phase has benefited from a nutrition study carried out by the Bank in FY01. The first phase of the Health Reform APL placed considerable emphasis on results-oriented management. This was a resounding success and will be carried forward through the second phase of the APL. In this respect, the health sector is providing an important demonstration effect for other sectors. Increasing the emphasis on development results and performance-based management was an important feature of the 1998 CAS, the 2001 CAS Update, and Bolivia's Poverty Reduction Strategy, as well as the recently discussed CAS Progress Report. 2. Main Sector Issues and Government Strate2 Even considering that Bolivia is one of the poorest countries in the region, it has significantly underperformed in health. The 1998 Demographic and Health Survey (DHS) estimated an infant mortality rate (IMR) of 67 per 1,000 and an under-5 mortality of 92 per 1,000 for The most recent official estimate of Maternal Mortality dates back to the 1994 Demographic and Health Survey (DHS), which registered 390 deaths per 100,000 births for the period. If we decompose the mortality rates, we see a huge differential between the poorest and the wealthiest populations - infant mortality was five times higher among the poorest 20% of the population than among the richest 20% (see the equity analysis in annex 4a). This gap is evidence of a major failure of the health system, as well as the underlying social, economic and cultural conditions. The major system failures can be found in historically low coverage of essential, high-impact interventions, and serious quality deficiencies, in terms 4

11 of both technical quality and client perceptions / respectful care. Low coverage was the result of a combination of demand and supply factors. Demand factors included an economic barrier, created by high user fees and high costs of medicines and a cultural barrier created by ethnic and cultural differences. Supply factors, including the persistence of underserved areas have begun to be addressed in terms of investments for civil works and equipment for poor areas, but little progress has been achieved in improving the distribution of human resources to poor areas. By the end of the 1990s, the government introduced two new programs aimed at expanding coverage and improving quality of basic services and fighting communicable diseases: the Basic Health Insurance scheme (Seguro Basico de Salud - SBS), aimed at reforming the financing and delivery of a basic package of services for mothers, children, and other vulnerable groups and the Escudo Epidemiologico (epidemiological shield --EE), aimed at curbing the transmission of chagas, malaria and tuberculosis. APLI supported the SBS and health projects supported by other donors supported the EE. There have also been major investments in other sectors with significant implications for health outcomes such as provision of water and sanitation (US$227 million committed during 1999 to 2002), education (US$254 million committed during 1999 to 2002), and nutrition (US$92 million during 1999 and 2000). While data on infant and maternal mortality rate trends will not be available until 2002, when the results of the 2001 national population census and the 2002 DHS become available, indirect evidence suggests that significant progress is being achieved in reducing mortality as a result of the new programs. Considering that the main causes of child death during the 1990s were acute diarrhea diseases-add (36%), pneumonias (20%) and insufficient obstetric care leading to perinatal deaths, the substantial improvements achieved in the coverage of ADD, pneumonias and institutional deliveries during (see section B.4.A) are expected to have contributed to a lowering in this indicator. The increase in coverage of pre-natal care and of institutional deliveries (see section B.4.A) is also expected to have contributed to a significant reduction in maternal mortality. The SBS was developed to eliminate the economic access barrier by giving the population free access to a basic package of 75 preventive and curative interventions targeting the country's main causes of maternal and child mortality and morbidity from endemic diseases. Its implementation in 1999 represented the second step of a phased process, which started in 1996 with the Mother and Child Insurance program (a package of 26 services). The ensuing increase in coverage of key indicators (deliveries, vaccination, pneumonias and diarrheas) can be partly attributed to the implementation of the SBS. (See Annex 13 for more details on the SBS). Implementation of the SBS was supported by APL I and by projects supported by other donors (see section D2). Expansion of coverage in recent years has been accompanied by improved quality of services. A significant effort was made to overcome the cultural challenges arising from the cultural and ethnic diversity that characterizes Bolivian society by making health providers more respectful of the preferences and needs of the client. These efforts included a number of efforts organized jointly by MSPS and the two largest indigenous organizations to empower communities (see Annex 12 for details). The technical aspects of quality also improved by reducing the fragmentation of mother and child programs -- the SBS created an umbrella policy through which previously fragmented mother and child programs found a common institutional arrangement and were provided with sustainable financing of recurrent costs by municipalities. Under this umbrella, the government, with support from several donors introduced internationally tested protocols for the treatment of children under five (Integrated Management of Childhood Illness -- IMCI), and for mothers and babies (Mother Baby Package - MBP). It also launched the second generation of the Expanded Program of Immunization (EPI). The SBS has also begun to overcome the traditional fragmentation of donor support to the health sector. Having started life as a project coordination unit for APLI, the administration of the SBS was absorbed by the Health 5

12 Ministry (the MSPS) and a planning effort is under way to channel donor support for MSPS in a coherent fashion (using the Matriz Ordenadora de la cooperaci6n tecnica - see section D.2) In 1999 and 2000 the government also had success with communicable diseases through the Escudo Epidemiol6gico Project (EE) financed by the IADB and DFID. The EE aims to guarantee a healthy national environment, reducing mortality and morbidity from the country's principal endemic diseases, namely chagas, malaria and tuberculosis, and promoting individual, family and community health. In the fight against chagas, over 150,000 houses were sprayed in 2000, benefiting over 1 million people, and transfusion control activities were initiated targeting blood banks and transfusion centers. The annual parasitic incidence of malaria was cut by one third from its 1998 peak (from to 58.3 per 1000 in 2000) through a strategy combining vector control with the active and passive search for and free treatment of cases. A consortium of donors carried out a nutrition assessment in 1999 and 2000 to determine how well the government was addressing malnutrition. The World Bank had a particularly strong interest in this because malnutrition was a core CAS indicator. The study included beneficiary assessments and constraints assessments in 24 of the poorest municipalities in Bolivia. It also included a public expenditure review of nutrition, quantitative analyses using three surveys, an institutional analysis, and several syntheses of lessons learned in Bolivia. The results of the study showed that the governmentt is devoting about $63 million per year to nutrition related programs of which only 7% are targeted to the high priority groups and cost-effective programs. It also showed that the poor are highly conscious of malnutrition and its multiple causes -- from environmental degradation to unemployment to lack of knowledge about what foods are nutritious -- but that nutrition program managers do not understand how their programs actually impact on nutrition and programs are often inappropriate. The study makes it clear that household behaviors are the primary cause of malnutrition in the vast majority of households. Such behaviors include inadequate breastfeeding, feeding watery low nutrient soups to weaning age children, poor hygiene and unsanitary food handling practices, and failure to understand how much and how often an infant really needs to eat. While infectious disease, particularly diarrhea, is a significant cause of malnutrition, it is also the product of malnutrition. One way to break the vicious cycle is to improve household feeding and sanitation behaviors. The study is being reviewed by the Government and donors seeking to identify key interventions to undertake in the short term and whether to finance these interventions from new projects, by redirecting existing funds from inefficient projects, or by a combination of these options. APL2 will adapt community based growth promotion as a key means of changing household behaviors and organizing the health and nutrition promotion work of community health workers. The model has been used successfully elsewhere in Latin America and the materials and methods will be rapidly adapted to the Bolivian context. Government Strategy The government, now working within a new framework set by the "National Dialogue 2000," has made the reduction of child and maternal mortality a core component of its health sector strategy, as is reflected in the Strategic Health Plan (PES) published in June The national dialogue consolidated demands from local and national governments, civil society, and other actors, and culminated in the Poverty Reduction Strategy Paper (PRSP) and the National Dialogue Law Project currently being discussed by the Senate. The PRSP's main health sector objectives are to reduce maternal and child mortality and to bring the principal endemic diseases under control. To achieve those objectives, the Strategy envisages the following priority actions: (a) efficient management of human resources; (b) expansion of the SBS; (c) control of communicable diseases and strengthening of the epidemiological surveillance system; (d) 6

13 improved quality and nutritional status of the population; and (e) development of interculturality in health. The first phase of this APL supported interventions related to points (b), (c) and (e) above. In the second phase, activities are also planned to attract health workers to areas that remain underserved by the health services, responding to the first priority action identified by the PRSP. 3. Sector issues to be addressed by the project and strategic choices Despite the significant progress referred to above, many of the poor continue to suffer from low coverage of basic services and the low quality and responsiveness of those to which they do have access. Expanding coverage of SBS interventions requires expanding both demand and supply of services. To expand demand, the economic and cultural obstacles need to be confronted, requiring further strengthening of the SBS and empowering communities. Expanding supply requires boosting the effectiveness of the technical programs for mother and child health, assigning more health workers to underserved areas, and enhancing local capacities to implement the SBS. These issues are discussed below: Strengthening Management of the SBS To be successful the SBS requires better information on the production of services and the health status of the population; and active management and monitoring of incentives for health providers and of the quality of the services provided Support for Information Systems. The main source of information on the production of health services in Bolivia is SNIS (Sistema Nacional de Informacion de Salud). After receiving support from several projects, today, in terms of the presentation and timeliness of its data, SNIS compares favorably with information systems in other Latin American countries. Despite this achievement, for the purposes of this project it has two important shortcomings. First, it reports information about the production of services by health providers, but it does not directly deal with coverage or with outcomes for the population. Second, the information is not subject to external controls and local administrators have incentives to exaggerate the effectiveness of the services they are responsible for. Support to the Administration of the SBS. The SBS is implemented by the municipalities, which finance and manage the accounts used to pay for the services covered by the SBS. The MSPS has a policy-setting and regulatory role vis-a-vis the SBS. The policy-setting role is applied by establishing the microeconomic incentives for providers, for instance by defining the interventions covered in the SBS benefit package, the reimbursement rate, and the payment mechanisms used to reimburse the services. The MSPS is currently considering ways to: induce greater use of high priority interventions (e.g. by rewarding mothers who complete a pre-natal cycle or attend nutrition-related workshops), develop new service delivery methods (e.g. itinerant health professionals for rural areas), help small municipalities to pool resources, create mechanisms for inter-municipal payments (when a hospital in one municipality serves beneficiaries from another municipality), incorporate providers outside the public sector (such as NGOs or hospitals in the social security system), and link the SBS with other health insurance schemes. MSPS's regulatory role over the SBS is exercised by assisting municipalities in the control of the appropriate and effective use of SBS municipal funds. In recent months there have been a number of accusations of misuse of SBS funds, mostly because funds have been used to pay interventions not included in the SBS package, but also because of alleged over-invoicing. At present controls are conducted manually. A control software is being designed (financed by Phase I of this APL). Once implemented, the software will not only identify irregularities but also accelerate payment to health providers by municipalities. [The SBS is described in more detail in Annex 13]. 7

14 Support for community empowerment activities Bolivia has significant ethnic and cultural diversity, with 57 percent of the population belonging to Quechua, Aymara and other smaller native groups in While there is no specific information about the coverage of health services to indigenous groups, they are known to be a large part of the population without basic health services. Because most of the non-native population (43 percent) already had access to services prior to the recent expansion of coverage achieved by the SBS, it is likely that most of this expansion has been among the native population. Despite this, a key challenge of the health service remains to increase coverage to the indigenous populations. APL 1 made significant efforts to achieve this aim, including: (i) incorporating the results of anthropological studies in the SBS health care protocols (including traditional drugs at the primary level of care); (ii) formalizing agreements with two of the largest indigenous organizations to implement the SBS in indigenous areas with monitoring by an indigenous health committee, financing the establishment of pharmaceutical funds, purchasing motorboats, training indigenous health workers as nursing auxiliaries, and granting civil service posts for indigenous staff trained as auxiliary nurses; (iii) supporting the Willaqkuna project, which combines occidental and traditional medicine and has assigned Willaqkuna representatives to supervise maternity services in 10 hospitals; (iv) developing the Pregnant Women 's Bill of Rights based on focal groups that included indigenous women; and (v) implementing user satisfaction surveys in 40 urban hospitals. APL2 will continue these efforts and engage in new activities in four key areas: (i) formally incorporating communal agents as members of health teams; (ii) implementing the practice of having health professionals co-sign the Pregnant Women's Bill of Rights with pregnant women during their first prenatal consultation, (iii) training the newly created Health Advocates to be community representatives for health issues in various government bodies; and (iv) expanding the use of user satisfaction surveys to rural hospitals and to the first level of care and including ethnic background as part of the questionnaires. Support to national programs for mothers and children While the SBS provides financing for key interventions, their quality depends on the national programs that regulate the technical content of these interventions. In recent years there have been significant interventions in the areas of immunizations, the treatment protocols for mothers and children, nutrition, and the management of medical waste at the primary level. Support for the Second Generation Expanded Immunization Program (see a more detailed description in annex 14). During , immunization coverage fell due to (a) institutional weaknesses of the country's health system in general and that of the Expanded Program on Immunization, in particular; (b) insufficient and inconsistent allocation of funds by the government, relying mostly on funds from extemal cooperation; and (c) lack of a sustained social communications strategy. Also, Bolivia lagged behind the rest of the Americas in the incorporation of Haemophilus influenzae type b vaccine (HIB), which in other countries had proved to be a potentially powerful factor in reducing infant mortality. During , with the support of PAHO, other donor agencies, and Phase I of this APL, the Government reversed the downturn trends by implementing a medium-term immunization plan that introduced the Second Generation Expanded Program of Immunization (EPI). Immunization coverage with three doses of DPT reached 89 percent in 2000 and the measles outbreak of is now under control. Key elements during Phase I of the Project included: agreement with the Ministry of Finance on the need to increase domestic financing of vaccines, strengthening the management of the EPI Unit, completing the introduction of new vaccines (including HIB), consolidating the implementation of rapid response brigades (Brigadas de Acci6n Rapida - BEAR), and improving the surveillance system. These improvements need to be sustained and completed. 8

15 Supportfor quality improvements in priority nationalprograms related to the SBS. In recent years, partly through the efforts of Phase I of this APL, Mother and Child programs have been revamped. Treatment of children under 5 is now done using Integrated Management of Childhood Illness (IMCI) protocols. The original WHO protocols were adapted to Bolivian needs by PAHO and adopted by the MSPS. They were also supported by numerous other donors (especially USAID) and NGOs (especially BASICS) that now have developed effective systems of institutional coordination. Pregnancy and birth now benefit from the Mother Baby Package (MBP), as adapted to Bolivian circumstances by MotherCare (a USAIDfinanced organization) and other NGOs. Large-scale programs offering training in the appropriate use of IMCI and MBP are currently under way, and the MSPS is launching an evaluation effort to assess the impact of these initiatives so far. A World Bank team has produced a report on the status of nutrition in Bolivia and has made recommendations for the improvement of nutritional interventions. This report is currently under discussion with the Government and other donors. Multi-donor coordination efforts are also under way in the area of nutrition, and there is a systematic effort to improve the nutritional impact of food programs, strengthen their educational impact, improve their targeting, and reduce duplication. There are several initiatives to improve medical waste management in hospitals, including drafting of new legislation. The Expanded Program of Immunizations, partly with support from Phase 1 of this program, has also introduced significant improvements in the management of waste at the primary level (See annex 14 on the immunization program and annex 15 on medical waste management). In collaboration with other government and donor initiatives, Phase 1 of this APL successfully placed these programs on the national agenda, launched the initial activities for the design of technical protocols, and organized large-scale training programs. At present there is a need to evaluate the progress achieved, identify gaps for further work, agree with other donor agencies on a division of labor and a system of coordination, and then to fill any financing gaps. There is also a special need to boost MSPS capacity to monitor the effectiveness of the large training programs under way. At the moment it only measures the inputs (number of workers or community members trained). In addition, accreditation and licensing procedures for health providers serving the SBS have yet to be developed. Support for the expansion of SBS coverage During coverage of the SBS has improved significantly in those areas where there exists a supply of services. While this has included those poor municipalities where services are available, it has benefited to a lesser extent underserved areas. During the 1990s there were many attempts to expand coverage into underserved areas. These attempts mostly emphasized investments in infrastructure and equipment. Many of these investments remain underutilized because health workers have not been assigned to those areas, or if they were hired for these locations, soon after becoming public employees they moved into hospitals and other attractive locations. Previously, the system required all physicians to do a year of compulsory rural service, as a pre-requisite for receiving their degree or for obtaining a public sector job. Several pilot projects, generally supported by NGOs, have emphasized different techniques to reach underserved locations with human resources (locally known as "family health or community health" models of delivery of service). Well documented successful experiences include, in rural areas, San Lorenzo (CIDA, Canada), Yotala (Catholic church), and Challapata (DFID-UK) and in urban areas El Alto (Dutch Cooperation) and Guayaramerin (CIDA, Canada). Despite their success in their small area of operation, these pilots have not been expanded and in some cases even after several decades of operation continue to function as local projects benefiting a small population. Mexico, Brazil and Peru have struggled with the challenge of taking similar experiences to a national scale and have now found ways to do so. Bolivia now plans to replicate this experience by adopting two key features of these programs (see lessons learned). First, these programs make use of health teams, consisting on the use of local community agents (indigenous where relevant) combined with itinerant health professionals and auxiliary nurses. The community agents live in the community, provide a cultural bridge in ethnically diverse contexts and focus on preventive and health promotional activities, and on organizing the demand 9

16 for professional services. Health professionals work on an itinerant fashion, visiting each location with predetermined schedules that allow target groups (such as mothers, school children, infants, etc.) to effectively access their services. Second, in all these countries, the expansion has been based on hiring health workers outside the rigid norms and regulations of the civil service. Health workers are hired using short-term private contracts that pay relatively high bonuses for difficult locations and stipulate performance criteria for success in the job. Renewal of contracts is done periodically and is based on success in reaching the performance criteria. 4. Proeram description and nerformance triggers for subsequent loans Evaluation of Triggers for Phase 1 Triggers to move from Phase I to Phase 2 included: (i) the achievement of the targets for 2001 in eight performance indicators, (ii) progress toward institutional change in five areas; and (iii) adequate progress in disbursements. An evaluation of the progress achieved towards meeting these triggers was carried out as part of the appraisal of APL2 and concluded that these triggers were met successfully. Performance in relation to these triggers is described below. Performance Indicators During negotiations it was agreed that the project would be considered successful if in a given year fewer five or more of the eight indicators reached their target for the year. The trigger for APL2 consisted of meeting the targets for As shown in the table below, seven of the eight targets for 2001 were reached in 2000 (a year ahead of schedule), hence this trigger was met. Achievement of Trigger for the Performance Indicators Variable Baseline for Targets for Phase 11 Results 2000 Targets Met / Not Met Institutional births 36% 43% 50% Met Complete prenatal 28% 36% 32% Not met controls Early neonatal hospital 1.44% 1.20% 0.90% Met mortality Pneumonia 68, , ,154 Met ADI 292, , ,772 Met DPT3 75% 75% 86% Met Municipal coverage of Met DPT3<80% EPI domestic Financing Met (US$3.5 (US$ million) million budgeted for 2001) Coverage Indicators * Coverage of births attended by trained health personnel. Low coverage of births attended by trained health personnel has been identified as a main cause of perinatal and maternal mortality and the evolution of this indicator has received special attention from the Government and the donor community as a leading benchmark for HIPC I and CDF (and is now being proposed for the PRSP). With a baseline of 36 percent for , the project set a target of 43 percent in This indicator was one of the most successful: by end-2000 coverage had already reached 52 percent, exceeding the target for

17 * Number of child pneumonia cases attended in health services. Pneumonia is one of the leading causes of infant mortality in Bolivia. This indicator was set in absolute numbers (instead of a percentage) to avoid controversies about the actual number of children with pneumonia, which is difficult to estimate. This indicator had the most ambitious target for improvement (54 percent). Following a slow start in 1999, the MSPS boosted efforts to improve this indicator by raising the rate of reimbursements paid by the SBS for attending to pneumonia, improving the availability of antibiotics, and training personnel. This resulted in a significant improvement of this indicator in By end 2000, the benchmarks for 2001 had been reached. * Number of children's diarrhea cases attended in health services. Deaths from diarrhea ceased to be the main cause of infant mortality in Bolivia during the 1990s, thanks to an expansion of water and sanitation services, extensive use of oral rehydration therapy, and high coverage of diarrhea cases by the health system. Because of the relatively high initial coverage, the targeted increase in this indicator was modest (27 percent). The end-2000 coverage exceeded the target for * Immunization Coverage. After making significant gains in the early 1990s, immunization coverage wavered during The project aimed to improve coverage and introduce new vaccines. The tracer indicators for immunization were DPT3 for 1999 and pentavalent vaccine (which includes vaccines against DPT, HIB and hepatitis B) for Outbreaks of measles (due to the low coverage of ) and yellow fever required much attention by the immunization program and led to delays in the introduction of the pentavalent vaccine. Despite those delays, the immunization coverage program may be deemed a success as coverage of DPT3 rose to 86 percent in 2000, exceeding the pentavalent vaccine coverage target. In fact introduction of the pentavalent vaccine was only delayed by a matter of months, and it is now being widely utilized. Quality Indicators - Complete Prenatal Care attendance. This indicator measures the number of women who, after having a first prenatal contact, go on to complete the recommended pre-natal scheme 2. The baseline for this indicator was low (28 percent). It is regarded as an important measure of quality because it enables risk identification and a lowering of complications associated with deliveries, as well as guaranteeing that mothers have access to family planning information and nutrition education. As it is known to be a demanding indicator, a low target was set for Phase 1 of the APL. While there has been some progress in this indicator, it has been less marked than in all the other variables, possibly because in the past there was no special effort to give it an impluse. By end-2000, the target for 2000 was met (32 percent), but the trigger (the target for 2001) was not met. The Government is examining the possibility of providing special incentives for mothers who comply with the full scheme during the second phase of the APL. These incentives would be financed by the SBS and could be linked with a stronger emphasis on nutrition interventions. * Early neonatal hospital mortality. This variable measures the number of deaths during the first seven days of life per 1,000 live births reported in the ten largest tertiary hospitals. The reporting system did not exist prior to the project and was created to monitor progress in this variable. The mortality baseline was high, and -because no major interventions were planned in hospitals during Phase 1 -- a modest target was established. This indicator was included to pave the way for Phase 2 by providing incentives for the government to monitor this variable. The added attention paid off, as hospitals rapidly reacted by establishing simple but important improvements in the management of newborns. By end-2000, the target for 2001 was exceeded. 2A recent WHO multi-country study concluded that four ante-natal care visits are needed to provide an efficient program - not more as other protocols recommended. 11

18 Equitv Indicator * Number of municipalities with three-dose DPT coverage of less than 80%. Coverage targets are easier to reach by emphasizing the larger municipalities, where most of the population lives. In Bolivia, many of the poor live in small municipalities. This indicator was chosen to emphasize attention to the small, harder-to-reach municipalities. The baseline was very high, with 67 percent of municipalities showing low coverage of immunization. During 1999 and 2000, a huge effort was made to expand immunization to remote locations and by end-2000, the target for 2001 had been greatly exceeded, with only 21 percent of municipalities showing low coverage. Sustainability Indicator * Financing of vaccines by the borrower. Part of the crisis of the immunization program during the mid-1990s arose because the Bolivian government ceased to finance the purchase of vaccines. The Ministry of Finance now recognizes that it needs to finance vaccines to make the program sustainable. It has added a line item to the national budget to give transparency to this process and it has created a tax to the social security agency (the Caja Nacional de Salud) earmarked for vaccines. With a baseline of only US$50,000 and after missing the target for 1999, the government reached its target for The budget for 2001 includes the full amount targeted for 2001:US$ 3.5 million for vaccines. Institutional Innovations The second trigger to move from APLI to APL2 was to introduce institutional innovations in the five areas described below. The conclusion of the assessment is that this trigger was met successfully. Implementation of Performance Agreements. Annual Performance Agreements (PA), setting targets for each of the nine Departments of Bolivia have been implemented since The PAs are signed by the Minister of Health, the Regional Health Director and, since 2000, by the representatives of the main donor agencies with projects in the signatory region. In 1999, eight agreements were signed; in 2000 nine agreements were signed. These PAs set targets for the region, including 10 performance indicators (those discussed above and two related to the EE) and three process variables related to decentralization and institutional strengthening. The PAs are evaluated semi-annually by the Ministry of Health. Basic Health Insurance (Seguro Bdsico de Salud - SBS). The SBS was created by Decree of Dec 31, 1998, and regulations were issued by Ministerial Resolution No of May 7, The SBS builds on the National Maternal and Child Insurance program created in It is a system by which municipalities set aside 6.4 percent of the tax revenues transferred to them by the central government to finance 75 priority interventions (to be expanded to 92 in 2001) for the population with no access to Social Security or private insurance in order to make them free of charge to the user. Participating health facilities keep records of services provided and present invoices to their corresponding municipality for reimbursement. Municipalities audit the records of services. The system is regulated by the Ministry of Health, which establishes the priority interventions to be financed, sets the rate of reimbursement, and manages the information system. While all 314 municipalities participate in the SBS, there is a concern about the sustainability of the SBS because participation is voluntary. The government plans to make the SBS compulsory as part of future legislation concerning decentralization. As continuation of SBS is crucial for APL2, a legal covenant will be introduced to the Development Credit Agreement allowing the suspension of disbursements in the event that a significant number of municipalities abandon the system [Annex 13 describes key features of the SBS]. The Second Generation Expanded Program of Immunization. After the program had successfully reached coverage levels of over 80 percent for DPT3, solved key bottlenecks in the cold chain in 1999, and 12

19 controlled a persistent measles outbreak in 2000, vaccines against Haemophilus influenza type b, Hepatitis-B, mumps and rubella were added to the basic immunization package. The new scheme can probably be sustained thanks to the aforementioned arrangements by the Finance Ministry to ensure financing for vaccines. Investment Mechanisms for the Health Sector. The MAR (Mecanismo de Asignacion de Recursos) was launched as a new investment scheme focusing on actions to reduce maternal and infant mortality. Its novel features compared to previous schemes were i) resource allocation was based on a weighted formula taking into account local human development indices (70 percent) and population (30 percent), thus prioritizing poorer municipalities; ii) all stakeholders (the community, the health sector and the municipality) participated in diagnostic assessments and in the definition of local priorities; and iii) resource allocation was directed not only to strengthening the supply side, but also to subprojects designed to increase the demand for services. Treatment Protocols. IMCI is a protocol for the integrated management of illness in children under 5, developed by WHO and adapted to the Bolivian context by PAHO. The Mother-Baby Package, originally developed by international institutions for countries with high maternal mortality, improves key aspects of maternal and newborn care in less developed settings. Both protocols were implemented in the course of 1999 and 2000 and integrated into the SBS. Progress in disbursements While only 30 percent of the credit had been disbursed by May 2001, approximately half of the remaining funds had been committed, with contracts signed. By July 2001, it is expected that an additional 30 percent of the remaining funds will have been committed. This high level of commitments leaves little financing available for the new activities planned for APL2. With higher disbursements expected to begin in July 2001, it is timely to approve APL2, aiming to have it become effective in January Having the second phase in place soon may also obviate the delays usually associated with transitions between government administmtions (2002 will be an election year and the new government will be inaugurated in August 2003). Triggers for APL3 In keeping with this APL's emphasis on results, achievement of the performance targets for 2005, listed in Annex IA, would trigger initiation of the third phase. These triggers were chosen to measure progress in coverage, quality and equity of health services. Progress in mainstreaming the institutional innovations promoted by the project would also translate into a set of triggers for the next phase. Thus: * Performance Agreements will continue to be signed and monitored for all regions and at least three large municipalities; * The SBS will continue to be utilized as an instrument to finance basic health care for the poor. Within the framework of decentralization, it will continue to be implemented by municipalities and regulated by MSPS. Financial controls and audits will have been strengthened. * EXTENSA (the National Program for the Expansion of Coverage of the SBS) will have deployed no less than 150 health teams combining indigenous community agents and health professionals in underserved locations and financing of the new teams will become absorbed into national budgets in a fashion consistent with the process of decentralization; * The new vaccines would be incorporated into the national schedule of vaccines with nationwide coverage and would be fully financed by the government; and * An equitable system to finance municipal investments in basic health will be put in place, along with clearly defined financing mechanisms. 13

20 C: PROJECT DESCRIPTION SUMMARY Indicative Bank- % of Component Sector Costs % of financing Bank- (US$MN) Total (US$MN) financing 1. Coverage and Quality Institutional % improvements of the SBS and Development empowerment of Communities 2. Local Capacity to respond to Institutional % health needs of the population Development 3. Monitoring of Performance Institutional % Indicators and Project Coordination Development Total % % Total Project Costs Interest during construction Total Financing Required % % 1. Proiect components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown) Component I. Coverage and Quality improvements of the SBS and empowerment of Communities A. Strengthening policy development, regulation and monitoring of the SBS, by supporting: improvement of the quality of information on the production of services and on the health status of the population; the development of new policies and the management and supervision of the SBS; and the implementation of activities that empower indigenous users of the SBS. B. Strengthening National Health Programs for Mothers and Children, by supporting: the continued implementation of the Second Generation of the Expanded Program of Immunizations and the preparation and implementation of multi-donor support programs for IMCI, MBP, Nutrition and medical waste management at the primary level. Component HI. Local Capacity to respond to health needs of the population A. Assignment of health teams to expand the coverage of the SBS, by supporting: the management of EXTENSA (the National Program for the expansion of coverage of the SBS) including targeting techniques to assign the new health teams; the financing, training, and light-equipping of health teams consisting of community workers and itinerant professionals in underserved areas; and technical assistance to municipalities to implement the new teams; B. Investment sub-projects to expand the coverage of the SBS; these sub-projects would finance civil works and equipment required to make an effective use of the new health teams assigned to currently underserved areas. Component m. Monitoring of Performance Indicators and Project Coordination Performance Agreements assigning resources and setting targets for the expansion of coverage will be signed with regions and selected municipalities and periodically monitored. 14

21 The main items to be financed under the different components are: IA - technical assistance; IB - vaccines, technical assistance and inputs for the multi-donor support programs; IIA - health teams' salaries and bonuses, light equipment for health teams, technical assistance for municipalities; IIB - subprojects consisting of civil works, equipment and technical assistance. 2. Key policy and institutional reforms supported by the project The project will help consolidate decentralization of the health system in Bolivia within a framework of policy guidance and regulation provided by the Ministry of Health. To this end, the project will assist the MSPS and selected municipalities with: > Prioritization of health interventions relevant to the poor, (i) by ensuring financing for the interventions of the SBS (through the earmarking of municipal expenditures and assuring central government funds for vaccines and other public health interventions and; (ii) by developing schemes based on the use of community agents and itinerant health professionals to reach remote and culturally diverse populations; > Decentralization in a framework that allows local governments greater flexibility in implementing national priorities. At the same time, the project will strengthen the Ministry of Health's capacity to design policies and provide incentives for the implementation of these priorities. 3. Benefits and tareet population Like Phase I, Phase II of the APL will benefit all Bolivian children under 5 and all mothers using public health services thanks to the strengthening of the Basic Health Insurance program (SBS). The national programs sub-component will continue to a) strengthen the Expanded Immunization Program, by incorporating new vaccines, and b) re-direct current efforts in nutrition to focus on children under 2 throughout the country. Municipal governments will benefit from the strengthening of municipal networks that will improve their administrative and management capacity in the framework of decentralization and help them design health projects. The local capacity-boosting component will increase the effectiveness and efficiency of the health services by reinforcing the decentralization process, enhancing problem-solving skills at the departmental and district level, and improving information and financing systems. The main long-term benefits will be improved welfare arising directly and indirectly from the reduction of mortality and the burden of disease. Benefits would also include more effective use of public and donor funds. The focus of the National Program on Coverage Extension on under-served segments of the population living primarily in poor rural areas with dispersed, indigenous populations and marginal-urban areas will also help make public spending in the health sector in Bolivia more equitable and, eventually, reduce the large and growing disparities in health status observed between the rich and the poor in the country. In Bolivia, close to one hundred municipalities (1/3 of the total) have a population of under 5,000 inhabitants, 50 municipalities have a Human Development Index below 0.350, and 81 percent of the population in rural areas speak an indigenous language. The target population for the program is 25 percent of the total population (about 2 million people), with a special focus on mothers and children under 5. This 25 percent of the population would be covered gradually over the four years of the project. Target communities would benefit from the delivery of the prevention, promotion, treatment and rehabilitation services included in the Basic Health Insurance program. They will also benefit from the training of community health promoters and volunteers: a component that will be institutionalized and given the necessary tools and inputs to enable those trained to perform community health activities. 15

22 4. Institutional and implementation arrangements Implementation period: Four years (APL 2) Executing agencies: The proposed implementation arrangements are similar to those successfully utilized in phase I of this APL. The Ministry of Health through the Health Reform Unit (Unidad de Reforma de Salud -URS) of the General Office of Health Services (Direccidn General de Servicios de Salud -DGSS) would carry out the project in accordance with an operational manual approved by the Bank. Key instruments for execution of the project would be: (i) annual operating plans to be used by all departmental and district level implementing agencies; and (ii) performance agreements committing all prefectures and selected municipalities to the achievement of agreed upon health results. The Bolivian Productive and Social Investment Fund (Fondo Productivo y Social-FPS) would execute health subprojects under a Subsidiary Agreement between the Ministry of Finance, the Ministry of Health and FPS on terms and conditions to be approved by the Bank. The immunization and health system development activities will receive technical assistance from PAHO. Operational Manual. The project will use an operational manual covering all aspects of project implementation, including but not limited to: organizational and management structures, supervision and evaluation mechanisms; targeting and other criteria for resource allocation; eligibility criteria for health subprojects, and measures to be taken to ensure that the environment will not be negatively affected; procedures for the formulation of annual implementation plans; financial, accounting and auditing procedures; disbursement and procurement procedures and standard bidding documents; and a menu of eligible investments. The subsidiary agreement to be signed with the FPS will require it to utilize the operations manual. Monitoring and Evaluation Arrangements. This project is using a performance-driven DCA similar to the one piloted during phase I of this project. The agreement is strict in the achievement of targets in the eight performance criteria of Annex l(a). In order to convey the message about the need to obtain results, the MSPS will sign and monitor performance agreements focusing on the performance criteria with prefectures and selected municipalities. The MSPS will be responsible for project monitoring. Progress reports, including monitoring indicators, will be sent by the MSPS to the Bank every six months. Impact Evaluation. Project outputs (including the performance indicators of Annex I a) will be monitored using SNIS data. Project outcomes, including the evolution of IMR and MMR will be evaluated by comparing the results of the Demographic and Health Survey (DHS) of 1998 with the results from the census of 2001 and the DHS of These data will largely provide an evaluation of the results of Phase I of the APL. Phase 2 outcomes will be evaluated on the basis of a DHS survey to be carried out in Procurement The procurement of works, goods and consultant services will be carried out in accordance with the Bank's Guidelines for Procurement (dated January 1995, revised January and August, 1996, September 1997 and January, 1999), and the Guidelines for Selection and Employment of Consultants (January 1997, revised September 1997), as well as by the provisions stipulated in the Credit Agreement. These procedures are detailed in Table A of Annex 6. The supervision of procurement and hiring processes will be the responsibility of the MSPS and the FPS (in the case of the health subprojects), for all resources transferred under its administration. The specific procedures will be detailed in the Operational Manual and include the use of Standard Bidding Documents. 16

23 Financial Management A Financial Management Assessment performed in the URS determined that the unit has in place accounting and internal control systems, that accord with accounting standards that reliably record and report all assets, liabilities and financial transactions of the project; and that provide sufficient information for managing and monitoring project activities. Although a 4-A certificate (Eligible for PMR- Disbursements) has been issued for URS, the Project is still disbursing under traditional disbursement procedures (SOEs) until transition is agreed on with the Bank. During APLI, the URS complied with the financial covenants of the Credit 3244-BO and presented annual financial and external audit reports acceptable to the Bank, no serious internal control observations have been reported. The FIS was the implementing agency for the sub-project component. It was also assessed favorably in the first phase of the APL but, given the poor audit results of the FIS and its conversion into the new social investment fund known as the FPS, a financial management assessment was performed to update the Bank's knowledge of its predecessor (FIS) and an action plan agreed (the action plan is included in Annex 6). A 4-B certificate has been issued for FPS. Financial Reporting.: Both implementing agencies will present annual financial statements with an external audit report acceptable to the Bank, and in the case of the FPS entity financial statements and audit are required. The financial statements will be prepared in accordance with the Guidelines and TORs for Audits of Projects with Financing by the World Bank in LAC The URS and the FPS will develop the capacity and present to the Bank on a quarterly basis Project Monitoring Reports ( PMRs) comprising project financial reports, project progress reports and project procurement reports. The models for the PMRs are presented in the Project Financial Management Manual ( Exposure Draft February 1999) and were agreed to by the implementing agencies. The reports comprise the following: Financial Report 1-A Project Sources and Uses of Funds 1-B Uses of Funds by Project Activity 1-C Project Balance Sheet ( where accrual accounting is used) I -D Project Cash Withdrawals 1 -E Special Account Statement 1-F Project Cash Forecast Project Progress Report 2-A Output Monitoring Report ( Contract Management) Procurement Management Report 3-A Procurement Process Monitoring ( Goods and Works) 3-B Procurement Process Monitoring ( Consultant' Services) 3-C Contract Expenditure Report ( Goods and Works) 3-D Contract Expenditure Report ( Consultants' Services) Audit Arrangements. Independent external auditing firms, satisfactory to the Bank, will be hired to carry out annual audits of the. project (both the URS and FPS). Bank Guidelines, will be used by external auditors. Audit reports will be presented to the Bank no later than six months after the closing date of the 17

24 previous fiscal year. Both implementing agencies will have auditors appointed before project effectiveness. Auditing fees for the Ministry of Health Component are incremental expenses and are included in Category of Consulting Services in the DCA. No provision is made for financing project or entity audits of the FPS. D: PROJECT RATIONALE 1. Project alternatives considered and reasons for reiection > Postponing the second phase in order to prepare it with the future administration. This option was rejected (i) because the high priority attached by the PRSP to the activities supported by this project suggest that they enjoy widespread support across the political spectrum; and (ii) to reduce the risk of delays during the change of government, which could interrupt activities, such as immunizations which require continuity. > Piloting the new model of health delivery before launching it as a National Program. There have been many NGO-supported projects implementing "family and community health" models at a small scale -- many of these have had local success and provided useful lessons. However, international experience shows that a second generation challenge for governments is taking those local experiences to scale. Taking successful pilot projects to scale requires confronting problems of largescale management, monitoring, contracting, political patronage and availability of health personnel. EXTENSA would be implemented through a process of measured growth, allowing it to learn as it expands, but it would not begin as a "pilot project". > Focusing APL2 in hospital-level maternal interventions. Obstetric services in hospitals need substantial improvements to become able to provide comprehensive essential obstetric care (ceoc). The government struggled with three options: (i) Expand the SBS on an "extensive margin" by focusing APL2 on assigning resources to underserved locations; (ii) expand SBS on an "intensive margin" by focusing on hospital obstetric services; and (iii) attempt to do both things simultaneously. The first option was chosen as the route to have the greatest impact on child mortality and poverty in the short-run, despite the need to deal with peri-natal mortality issues (which would require investments in hospitals). The third option was not chosen to avoid overburdening the local capacity for project implementation. Investments in ceoc would become a central activity of APL3. 18

25 2. Maior related projects financed by the Bank and/or other development agencies (completed, oniyoin2r and planned) I Latest Supervision (Form Largest Projects Project 590) Ratings (Bank-fina ced projects only) Bank-financed * Integrated Health Development (PROISS) - Cr. S S 2092 (Closed Dec. 1998). Integrated Child Development Project (PIDI) Cr. S s 2531 US$ 30mn (Closes Dec. 2001). Rural Water and Sanitation Project s s (PROSABAR) - Cr US$20 (closes June 2001) * Equity and Quality Education Strengthening Project US$75 (closes Dec. 2002) S S. Decentralized Energy, Information and Communications Technology for Rural Transformation (in preparation) Other Agencies IADB. PSF (Basic services and institutional strengthening program) US$44mn (closed June 2001). PROAGUAS - (Basic Sanitation Small Municipalities) US$55mn - in execution * Escudo Epidemiol6gico y Apoyo a la Reforma de Salud - Endemic Disease Project). Total of US$45mn Execution has been very slow since it began in USAID. PROSIN - Integrated Health Project. US$39mn. Provides mother and child services mainly through NGOs Holland * Essential Medicines Program - US$Omn - 70% executed. IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) Of the 86 existing health-related projects with external financing, only those larger than US$10 million are included in the above table. Other important activities in the sector are being financed by DFID, JICA, Canada, GTZ, Belgium, and various UN agencies. In the context of the CDF, there has been an increased effort to coordinate these numerous projects. In preparation for the 2000 CG and also within the CDF framework, several sector ministries, with the support of international cooperation agencies, have attempted to prepare public investment "organizational matrices," or tables showing bilateral and multilateral investments for each strategic objective and key activity in their sector. The idea is to construct a map of existing funding, relate it to the Government's sectoral strategies, and then proceed to rationalize investments by shifting financing from where there has been too much to where there is too little. The Ministry of Health has been using this organizational matrix as a guide to where new resources should be assigned. The investments planned in the second phase of the Health Reform Program address the financing gaps shown in the matrix. Only 2.2 percent of external resources are 19

26 currently assigned to local capacity-building despite the current effort to decentralize health management, and only eight percent of total investment goes to health promotion. The second phase of the APL focuses specifically on strengthening local capacity, by supporting the SBS at the local level and by increasing community based health promotion activities. This is not only consistent with the needs identified in the planning matrix, but also with the results of "National Dialogue 2000." In addition to financing insufficiently supported priority areas, APL2 aims to continue APLI's efforts to improve donor coordination. APLI 's support to the SBS had a catalytic role in the sector by providing a common policy framework within which most mother and child care projects now operate. Coordination has also significantly improved in the area of immunizations as donors now support a medium-term program (developed in preparation for APLI), instead of providing isolated emergency support for the purchase of vaccines. IMCI and MBP protocols received support from APLI and today constitute the chief focus of inter-donor coordination committees. APL2 will continue along these lines and aims to help the Government redirect donor funds into priority areas by: (i) supporting EXTENSA, which the Government wants to promote as a multi-donor effort, and participating in the development of multidonor plans of action for four priority areas that now suffer from some duplication of effort: IMCI, MBP, Nutrition and medical waste management. 3. Lessons learned and reflected in proposed project design The project design reflects lessons learned from international interventions in countries with high mortality rates and from the Bank's experience with the Bolivian health sector. International lessons on expanding coverage During the 1990s, Brazil, Mexico, and Peru successfully launched programs to expand coverage of basic health care to their poor population in peri-urban and in rural areas. The largest is Brazil's Family Health Program, which expanded coverage to 36 million people in 4,500 municipalities using 10,000 Family Health Teams and plans to reach 70 million people by Mexico's Program for the Expansion of Coverage reached 8 million people in 874 municipalities and employed 15,000 health workers in Peru's Basic Health for All deployed 12,000 health workers in remote locations. World Bank loans support these programs in Mexico and Peru, and a new loan will support the Brazil Program. While each of these programs has features of its own, they share three crucial features. First, the three programs were national government initiatives. Each of these countries had piloted ways to deliver primary care in underserved areas with support from NGOs. These pilots had been useful to test delivery systems, but had only reached a national scale after being developed as government programs. Second, the three programs use community agents of one kind or another. In Brazil, where this is most developed, the agents are hired from the community where they will work and reside and are paid a minimum salary. In these programs, agents do not substitute for health professionals as they did in traditional Latin American projects. Instead they work in teams with the professionals, bridging cultural differences, emphasizing prevention, and organizing demand in such a way as to optimize the use of carefully programmed visits by itinerant professionals. Third, all three countries designed their programs using methods of recruitment of new health workers that obviated rigid civil service requirements. The three countries pay workers in these programs better than many civil servants by adding a significant premium to assignments in difficult locations and they use short-term contracts that can be extended in return for meeting performance criteria. This combination was needed to avoid the common problem of staff recently hired for difficult locations moving into hospital locations soon after obtaining job stability. Mexico and Brazil have now decentralized these workers. In Mexico, the states have signed coordination agreements guaranteeing continuity of the program for at least 10 years. In Brazil, the Federal Government transfers special funds for this program to participating municipalities. 20

27 Lessons Learned in APLI The project design builds upon the experience of APLI. Key lessons incorporated into the project design are: * Developing a results-oriented culture: This requires the use of a limited number of clearly defined indicators with realistic targets. Indicators need to be few to avoid a loss of focus. They need to be monitored using a consistent methodology and they need to be available in a periodic basis to allow monitoring and the implementation of corrective actions. * Use of Incentives. Reaching targets requires providing incentives for local actors. APLI made local authorities accountable by requiring them to specific targets specified in the Performance Agreements. It used the SBS to provide "market" incentives for providers and for users to reach the targets. * Taking into account the cultural barriers created by ethnic diversity. Cultural diversity remains the greatest challenge for improved health of the poor in Bolivia. APLI began to bridge the cultural barrier with the use of the activities described in annex 12. These activities need to be developed in greater depth to succeed in overcoming the cultural barrier. * Developing Partnerships. The immunization program was successfully revamped thanks to a strong partnership established between the Bank and PAHO. PAHO provided technical support for the government and the Bank emphasized the financial and institutional aspects. This partnership was sustained during the whole period of project preparation and implementation of APLI. Similar efforts are needed in other areas. * Limited Capacity. APLI focused on a few priority activities and emphasized capacity development. This allowed to avoid overburdening the limited capacity of participating institutions (MSPS, municipalities, districts) and simultaneously created capacity for a slightly more ambitious agenda to be developed under APL2. 4. Indications of borrower commitment and ownership * The Government has successfully met the triggers for APL2 (see section B4) * The MoF presented a Sector Policy Letter restating its interest in this project as part and parcel of the PRSP (see Annex I 1). The letter also states the MoFs commitment to financing of vaccines and of EXTENSA. * The Government has attached high priority to this project in the context of the CAS discussions; * All municipalities are participating in the SBS and all regions are signing performance agreements reflecting the objectives of the program; * The MSPS has put together a strong team of counterparts for implementation of this project. 5. Value-added of Bank support in this pro ject * Strengthening coordination of interventions across sectors and ensuring a holistic view of health status development based on results; * Ability to leverage project results in the overall development objectives; * Networking and knowledge management capabilities to learn from other countries undergoing similar processes and other sectors of the Bolivian economy; * Mobilization of high-quality technical assistance for institutional improvements; * Ability to mobilize resources and encourage donor coordination. 21

28 E: SUMMARY PROJECT ANALYSIS 1. Economic (see Annex 4a) Net present value (NPV): US$85,000 Internal Rate of Return: IRR 10% Phase 11 of the Health Reform Program in Bolivia is expected to contribute to improve the health status of about 300,00 children below age 5 in Bolivia's poorest areas. The project is expected to save approximately 12,500 deaths between 2002 and While there is expected to be some reduction in maternal mortality, the absolute number of deaths averted is small (maternal mortality being a rare event). The NPV of the investment is about US$85,000 and its IRR 10%, figures which indicate that the project would pay back the investments over the four years period of the loan. Results of Monte Carlo simulations indicate that the expected positive results of the project are robust to different of assumptions of project impact. In addition, the focus of the project on basic health care services for under-served populations and among them the special emphasis on indigenous populations living in rural areas and selected marginal-urban areas will improve the equity of government spending in the health sector and ultimately contribute to reduce the large differences in health status between the poor and non-poor in Bolivia. 2. Financial (see Annex 4b) Public health expenditure in Bolivia totals less than I percent of GDP, compared with a Latin American average of 3-4 percent. Over the medium run, the project and the policies supported by it will increase public expenditure in this area by 0.1 to 0.2 percent of GDP. Increased public expenditure will be incurred under four main headings: (i) Vaccines. The project will continue to rebuild the immunizations program and the Treasury will continue to increase its participation in financing up to US$5.5 million by That amount is expected to be maintained over time, and to suffice for the purchase of all needed vaccines; (ii) Human resources for remote locations. The project will annually allocate up to US$4.2 million by 2004 to finance the hiring of new health teams and the Government will increasingly absorb these costs and raise them to US$5 million in 2006; (iii) SBS. Municipalities finance these outlays. They spent an estimated US$8.1 million in 2001 and are expected to increase expenditure on SBS to around US$12 million by 2005 and US$14 million by 2008; (iv) Operations and Maintenance of subprojects. These outlays depend on funds from municipalities, departments, and communities. Funding from municipalities is included in the SBS, and is enforceable through the requirement that all municipalities receiving subprojects sign an agreement with the Treasury requesting that a larger fraction of transfers be earmarked for health (and deposited in a health-only account). Funds from regional governments are less likely to be available and have not been included in the estimation. The estimates are presented in Annex 4b and are based on the projections for the growth of GDP and of fiscal expenditure used in the PRSP. Project activities are found to have a small and manageable fiscal impact, while total public health ratios remain low in comparison with other Latin American countries. * Central Government expenditure on health remains fairly constant as a fraction of GDP and increases only slightly (by about one percentage point) as a fraction of central government expenditure; * Total government expenditure (including municipal expenditure) on health remains fairly constant as a fraction of GDP; * Municipal spending on health grows as a fraction of total government spending on health. 22

29 3. Technical The appropriateness of (i) the protocols for mother and child care; (ii) the coverage and payment mechanisms of the SBS; and (iii) the proposed logistics of the immunization program were analyzed and found to be satisfactory. Details can be found in the project files. 4. Institutional Significant project management capacity has been developed during the first phase of the APL. Project management capacity is strong at the central level and variable at the departmental and municipal levels. Local planning and management capacity will be strengthened as needed. Technical assistance will be provided to strengthen the capacity of departments, municipalities, and communities to absorb new health teams and to prepare, appraise, and supervise subprojects. Institutional capacity is better than in 1998 in relation to the proposed work program in the EPI, but continues to require special support. PAHO will provide technical assistance in the form of five long-term consultants. 5. Social (see Annex 12) Bolivia has significant ethnic and cultural diversity, with 57 percent of the population belonging to Quechua, Aymara and other smaller native groups in While there is no specific information about the coverage of health services to indigenous groups, they are known to be a large part of the population without basic health services. Because most of the non-native population (43 percent) already had access to services prior to the recent expansion of coverage achieved by the SBS, it is likely that most of this expansion has been among the native population. Despite this, a key challenge of the health service remains to increase coverage to the indigenous populations. APLI made significant efforts to achieve this aim, including: (i) incorporating the results of anthropological studies in the SBS health care protocols (including traditional drugs at the primary level of care); (ii) formalizing agreements with two of the largest indigenous organizations to implement the SBS in indigenous areas with monitoring by an indigenous health committee, financing the establishment of pharmaceutical funds, purchasing motorboats, training indigenous health workers as nursing auxiliaries, and granting civil service posts for indigenous staff trained as auxiliary nurses; (iii) supporting the Willaqkuna project, which combines occidental and traditional medicine and has assigned Willaqkuna representatives to supervise matemity services in 10 hospitals; (iv) developing the Pregnant Women 's Bill of Rights based on focal groups that included indigenous women; and (v) implementing user satisfaction surveys in 40 urban hospitals. APL2 will continue these efforts and engage in new activities in four key areas: (i) formally incorporating communal agents as members of health teams; (ii) implementing the practice of having health professionals co-sign the Pregnant Women's Bill of Rights with pregnant women during their first prenatal consultation, (iii) training the newly created Health Advocates to be community representatives for health issues in various government bodies; and (iv) expanding the use of user satisfaction surveys to rural hospitals and to the first level of care and introducing questions to link satisfaction to ethnic background. 6. Environmental (see Annex 15) Environmental category: A [X] B C A review of medical waste management was prepared by PAHO as part of the preparations for APL2. It found that there are serious problems in medical waste management in hospitals but that important progress is being made at the primary care level -- partly as a result of interventions of APL I. At the hospital level, waste management practices are deficient. The MSPS is attempting to improve this situation with new legislation, and some of the larger municipalities are undertaking projects for their main hospitals, but much more will need to be done. This APL focuses on first and second level health establishments, and substantial progress has been 23

30 achieved at those levels. Specifically, the activities financed by Phase I of the loan in support of the Expanded Program of Immunization have improved medical waste management. The introduction of combined vaccines (pentavalent) has reduced medical waste and the issuing of biosecurity norms and training has benefited not just EPI practices, but also other practices at the postlcenter level. Safe containers for waste management are now widely available. The review recommended that the efforts of APLI be sustained, with continued implementation of the waste management activities of Phase I, and that new activities be introduced, including the development of medical waste guides and manuals for the Basic Health Insurance program for use in posts/centers, training, and supervision. These activities will be implemented as part of component I of APL2. Additionally, component I will also contribute to the preparation of a multi-donor action plan for medical waste at the primary level and will contribute to financing part of the costs of that plan. 7. Participatory Approach (see Annex 12) Primary beneficiaries have been consulted through focus groups and through satisfaction surveys of indigenous women in areas of high child mortality. These instruments will be used annually to monitor satisfaction with the services supported by the project. Communities, municipalities, departments, donors, and NGOs have also been consulted in numerous meetings (around 20 in La Paz and participating departments) at which the objectives and proposed procedures of the project were discussed. A municipal constraints assessment carried out in fifteen municipalities analyzed the problems with nutrition programs with beneficiaries, service providers and local leaders. It is on the basis of this local analysis that the community based promotion of healthy growth and development has been designed. For more details, see Annex Financial Management (see Annex 6) A Financial Management Assessment performed in the URS within the Ministry of Health for the first phase of the Project determined that the unit has in place accounting and internal control systems that accord with accounting standards that reliably record and report all assets and liabilities and financial transactions of the project; and provide sufficient information for managing and monitoring project activities. The project unit (URS) has complied with the financial covenants of the Credit 3244-BO and presented annual financial and external audit reports acceptable to the Bank, no serious internal control observations were reported. The FIS was the implementing agency for the other components and it was also assessed favorably in the first phase of the APL but the 1999 project and entity audits which were presented to the Bank in December 2000 contained serious qualifications arising from weaknesses in the internal control. FIS undertook a special review by Arthur Anderson to identify all weaknesses and hired PriceWaterhouse Coopers to prepare all reconciliations and adjusting entries which led to the successful resolution of the major audit qualifications and the timely and reliable closing of the 2000 project accounts. The FIS was absorbed by a new social investment fund known as the FPS, the procedures and systems of the FIS remain in place so a financial management assessment was performned to update the Bank's knowledge of these and the action agreed which is presented in Annex 6 to the PAD. The flow of funds will, in the case of the URS, be direct to a Special Account and from there to dedicated fiscal or operating account in local currency for immediate disbursement to suppliers. Where the suppliers are contracted by the regional offices these will operate from advances made by the URS under arrangements for full documentation of the advances to be made to the central unit within the same month of the advance, it is on the basis of this documentation that charges will be made to the project expense 24

31 accounts and reported to the Bank. In the case of the FPS, the flow of funds will also be made direct to a Special Account and transferred from this to a dedicated fiscal account for disbursement in local currency to suppliers. These accounts will operate from the central offices and disbursements will be effected on behalf of the regional offices on the basis of prior presentation of full documentation and request for payment to a specified supplier. Any funds advanced to municipalities, as proposed under the deconcentration, will be booked as advances until full documentation is presented. While the implementing units require full documentation prior to booking of sub-project expenditures or sub-components expenditures to the project expenses there is no significant financial management risks, changes to these arrangements which may be implied with the decentralization will be reviewed closely by the Bank. F: SUSTAINABILITY AND RISKS 1. Sustainability The health program contains several components with significant recurrent cost implications. One is the Basic Health Insurance program (Seguro Basico de Salud -SBS), which is financed by the municipalities. Continued financing of SBS by municipalities is a necessary condition for success of the Health Sector Reform Program. The SBS recently celebrated its second anniversary and is widely considered one of the most successful programs of this government. Considering the high regard with which this program is held and the fact that with enhanced HIPC resources municipalities are likely to receive approximately 50 percent more funds over the next 15 years than they are receiving today, continued financing for the SBS is likely. However, participation in this program by municipalities is voluntary. Hence, a legal covenant is included in APL2 allowing the Bank to suspend disbursements in the event that this practice is discontinued by municipalities covering over 20% of the population. The government plans to make participation in SBS compulsory in future legislation concerning decentralization. A second component with recurrent cost implications is the program designed to expand coverage of the SBS. This program requires financing for the salaries of community health agents and doctors. The estimated annual cost is in the range of US$5 million to US$10 million, depending on the targets set for the program. Exactly who will assume the recurrent costs of this program is currently a pending issue, as the question of the timing of the transfer of responsibility of management of human resources from the national level to the municipalities is under discussion. There are several options here that will be discussed over the course of the second phase. One option would be to continue considering the program a national program and finance it from the national treasury. As public health expenditure in Bolivia is very low (around one percent of GDP), compared to a Latin American Average of 3-4 percent, there would appear to be scope to absorb the additional costs. A second option would be to pass the responsibility on to the municipalities. This may be risky as the experience with decentralization in other countries has shown that local governments sometimes underinvest in health and education and overinvest in highly visible physical infrastructure. However, the decentralized system of fiscal transfers in Bolivia includes a set of conditional transfers from the national governments to municipal governments to finance projects selected by local governments from a menu of options presented to them. These transfers, managed by the Directorio Unico de Fondos, are attractive to the municipalities since they do not have to pay the full cost of the investment. It would be possible to restrict access to these additional resources to those municipalities that have maintained minimal coverage levels of health and education, financed out of their own funds. This possibility would have to be discussed during implementation. A third option might be to create a trust fund from international donor funds that would invest in Bolivia in much the same way as the pension funds operate. The interest from the trust funds could be used to pay the recurrent costs of this program to extend services to the poor. At present, there are approximately 25

32 $265 million of donor commitments undisbursed across some 65 different projects. The Ministry does not have the capacity to make use of all these resources immediately. If half of the undisbursed commitments could be reassigned to the trust fund, this would be sufficient to guarantee the financing of the recurrent costs. Again, the pros and cons of this approach would have to be weighed against the alternatives in the course of implementation. Ensuring sustainability of this program is a trigger for the Bank to approve APL3. A third component is immunization. This would be financed as a national program and the Government's development policy letter agreed to finance the recurrent costs of the immunization program with National Treasury funds. Apart from the information system, the other components of the project dealing with the strengthening of SBS management involve more investment costs than recurrent costs. They would be fully financed by combining resources from the World Bank, the Government and other donors. 2. Critical Risks (reflecting assumptions in the fourth column of Annex 1) Risks Risk Rating Risk Minimization Steps Deterioration of the macroeconomic and political M The PRSP initiative and agreements with the situation that could compromise resources for the IMF and the CAS provide a strong incentive to sector or decrease the government's presence in the maintain macroeconomic policies and dedicate sector, resources to the sector. Insufficient coordination among Bolivian H Development of a strong partnership between institutions to achieve a holistic approach to health reformers in the Bolivian Government, Bank, status development. and other donors. National Government abandons its policy to finance M Include sustainability of these interventions in EPI and/or EXTENSA. Municipalities abandon the Bank's dialogue concerning PRSP and in the policy of automatically earmarking funds to related credits. SBS Weak capacity of EPI. M Emphasize the need to maintain the newly formed team. Maintain efforts of donor coordination. Technical assistance from PAHO is formally committed for the next 4 years. Health Sector donors do not join in support of the H The Bank's dialogue on human resource issues policies of EXTENSA promotes these policies, partly by disseminating similar international experiences Lack of active participation by municipalities in H Be proactive with technical assistance for project management. municipalities and emphasize the use of PAs The new government does not attach priority to the M Dialogue under the PRSP likely to maintain the objectives and policies supported by the credit. high profile currently attained by the objectives and policies supported by the credit. High rotation of key personnel in the Ministry and S Maintain dialogue to minimize the rotation of the PCU. Ministry personnel and to maintain high technical standards for staffing of URS. TOTAL RISK M/S Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 26

33 G. MAIN LOAN CONDITIONS 1. Effectiveness conditions (i) Adoption of an operational manual acceptable to the International Development Association; and (ii) publication of a Supreme Decree establishing EXTENSA. 2. Condition of disbursements for components executed by the FPS (i) Adoption by the FPS of an operational manual, acceptable to the Bank; and (ii) signing of a Subsidiary Agreement acceptable to the Bank between the Ministry of Finance, MSPS and FPS. 3. Event of Suspension * The Bank may suspend disbursements if the borrower suspends the automatic earmarking of SBS to municipalities covering 25% of the population or more. * The Development Credit Agreement specifies that this project will be monitored using the performance indicators of Annex IA, and that if three or more of the eight indicators miss their annual targets, the Bank and the Government shall determine remedial measures, and that the Bank would have the right to stop further disbursements. H. READINESS FOR IMPLEMENTATION 1. (a) The engineering documents for the first year's activities are complete and ready for the start of project implementation X (b) Not Applicable 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. X X 3. The project implementation plan has been appraised and found to be realistic and of satisfactory quality 4. The following items are lacking and are discussed under loan conditions (section G): (a) (b) Adoption of operational manuals by FPS and MSPS; and Publication of a Supreme Decree establishing EXTENSA. 27

34 I. COMPLIANCE WITH BANK POLICIES The project complies with all r,elevant Bank policies. C L. Task Team Leader, niel Cotlear, LCSHD h~~~~~ Sector De r, Xavier Coll, LCSHD Country Director, Isabel Guerrero, 6C 28

35 Annex 1: Project Design Summary Bolivia: Health Sector Reform Program - Phase II Narrative Summary Proposed Targets and Key Monitoring and Critical Assumptions Indicators Evaluation I. Sector-related targets: * Accelerated reduction in the DHS * Macroeconomic * Poverty alleviation, as infant mortality rate stability. measured by * Continuity and improvements in health consistency in the outcomes development of health policy- II. Program Development * Infant mortality rate reduced DHS * Allocation of sufficient Objectives. ( ): from 67 per 1,000 live births resources from national * Accelerated reduction in 1997 to 48 per 1,000 live National Census 2001 and municipal of infant mortality rates births by the end of the governnents; program (2008) * Establishment of National Program for Coverage Extension (EXTENSA) * Investment rate in water, sanitation and education does not decrease Project Development * Coverage of institutional SNIS * Government interest in Objectives (FY2001- births attended by trained the health sector reform FY2005) health personnel increased is maintained after the (see targets, definitions and * Retention of pregnant SNIS change of government baseline in Annex 1(a)) women in prenatal control * Effective coordination increased in technical assistance * Early neonatal hospital SNIS and cofinancing, mortality reduced especially of the EPI * Number of cases of SNIS * Health personnel adopts pneumonia attended in model requirements service increased * Other stakeholders * % < 7 years with 3 iron SNIS accept the new strategy doses increased to expand SBS * Coverage of pentavalent vaccine * Number of municipalities with pentavalent vaccine SNIS coverage of less than 80% reduced SNIS * Domestic financing of vaccines increased * Continued use of automatic earmarking of funds for SBS MoF --Review of budget by municipalities execution MoF - Treasury report 29

36 Narrative Summary Proposed Targets and Key Monitoring and Critical Assumptions Indicators Evaluation IV. Results of Phase II * Improved estimates of SNIS * Correct incentives are in of the project (2002- health indicators available place 2005) 1. Coverage and quality * regularly Financial audits of SBS DGSS records. Human resources are improvements of the health available regularly DGSS records available in a timely manner services and empowerment * SBS funds fully executed in of communities * 70% of municipalities Priority innovations for SBS DGSS records * Medium to high commitment of 1. A. Strengthening of the designed DGSS records municipalities Basic Health Insurance program * Publication of protocols for SBS interventions DGSS records * The project successfully - Information systems * Percentage of districts and reaches out to indigenous - Administration of the SBS municipalities that carry out communities - Supervision of the quality of SBS activities a a CAI each semester Accreditation and licensing DGSS records - Community Empowerment of primary providers implemented DGSS records * Number of Pregnant Women's Bill of Rights signed DGSS records * Number of Defense Advocates trained 1. B. National Programs * Share of suspect measles Surveillance * National funding. EPI 11 cases with adequate blood sample >80% * continues to increase Multi-donor * AFP rate for < 5 year Surveillance cooperation continues 1/100,000 to improve * EPI's logistical software EPI's records implemented in 80% of localities * Multi-donor programs DGSS records produced and monitored for * IMCI, MBP, Nutrition, nutrition activities, IMCI medical waste and medical waste management management DGSS records * 60 % of community agents trained and supervision activities carried out at mid term, including pathological residues and nutritional practices 11. Local capacity to * Targeting completed DGSS records Adequate support and respond to health needs of * At least 80% of TA requests DGSS records capacity building at local the population for identified municipalities level 11. A. National Program of completed * Investment needs for DGSS records EXTENSA is endorsed by municipalities Coverage Extension identified municipalities completed * 100% of programmed DGSS records I municipalities provided with I 30

37 Narrative Summary Proposed Targets and Key Monitoring and Critical Assumptions Indicators Evaluation resources, training, support. and monitored * Percentage of SEDES and DGSS records districts included in EXTENSA that carry out a CAI each semester >80% 11. B. Investment * Percentage of municipalities DGSS records Increased speed of subprojects to expand the included in EXTENSA investment approval and coverage of the SBS presenting FPS projects execution mechanisms >40% * Percentage of FPS FPS records subprojects completed within projected time > 50% III. Project Coordination * Percentage of SEDES that DGSS records Interest by sub national and Performance sign performance parties Agreements agreements with MSPS =100% * Percentage of Districts included in EXTENSA that sign performance agreements with SEDES =100% * At least 80% of SEDES with a PA show compliance rate higher than 80% * At least 80% of districts with a PA compliance show rate higher than 80% V. Project Components and Subcomponents: I. Increase the coverage and US$ 7.5 million Progress Report quality of health service Disbursement Report networks, and empowerment of communities. * Strengthening the Basic Health Insurance * National Programs II. Strengthen local capacity to respond to health US$ 24.5 million Progress Report necessities Disbursement Report * National Program of Coverage Expansion) * Municipal Investments for infrastructure related to NPCE improvement 111. Project Coordination US$ 3 million Progress Report and Performance Disbursement Report Agreements 31

38 Annex l(a): Project Design Summary Bolivia: Health Sector Reform Program - Phase II Performance Benchmarks As in Phase I, the project's success in meeting its objectives will be based on achievement of the performance benchmarks described below. It is expected that some of these benchmarks will not be reached in any given year. During negotiations it was agreed that the project would be considered successful if for the year under review at least five of the eight indicators reach their target. If they do not, the Bank and the Government would need to decide on the corrective actions required and the Bank would have the right to suspend disbursements. Performance Indicators Baseline Performance Benchmarks Observed Projected* I. Coverage of births attended by trained 52 % 54% 54% 58% 61% 65% health personnel 2. Complete prenatal care attendance 33 % 38% 54% 58% 61% 65% 3. Early neonatal hospital mortality (per ,000 live births) 4. Number of pneumonia cases attended 112, , , , , ,000 in health services 5. % of children < 7 years with 30 iron 0-2 % 2-5% 10% 15% 25% 35% doses 6. DPT/HIB/Hepatitis B vaccine 65 % 75% 85 % 87 % 90 % 90 % coverage with 30 doses 7. Number of municipalities with 72** DPT/HIB/Hepatitis B vaccine coverage less than 80% 8. National financing of vaccines (million of $) I I * Notice that the projected value of most performance indicators for 2001 exceed target values fixed in Phase I **Number of municipalities with DPT3 vaccine coverage of less than 80% Complementary Provisions 1. Scope: The coverage for all indicators is nationwide, except for Indicator 3 which refers to the 10 hospitals with the greatest number of births.. 2. Source and methodolog. The source for all indicators is the SNIS except for Indicator 8, for which the source is the Ministry of Finance's executed budget. In Indicator 6 the HIB vaccine was introduced in July For the next years of the project, only the Pentavalent vaccine rate will be used. In indicator 7, the number of municipalities for the year 2000 (72) is for DPT vaccine. For subsequent years it will be replaced by the number of municipalities with pentavalent vaccine coverage of less than 80 percent. 3. Adiustment to Baseline Data: The performance benchmarks are calculated on the basis of 32

39 Annex 1(a): Project Design Summary baseline data for If at a future date the Borrower shows to the satisfaction of the Association that it is necessary to adjust the baseline data, the corresponding performance benchmarks may be adjusted in such manner as shall be acceptable to the Association. 4. Definitions: 1. Coverage of births attended by trained health personnel: Numerator: Births attended by trained health personnel. Denominator: Total number of expected births. 2. Complete Prenatal Care Attendance: Numerator: Number of pregnant women with four prenatal care controls. Denominator: Number of pregnant women with first prenatal care control. 3. Early neonatal hospital mortality (per 1,000 live births) in the ten largest public maternities: Numerator: Number of deaths during the first seven days of life in the ten largest matemities. Denominator: Total number of live births reported in the ten largest maternities. 5. % of children < 2 years with 30 iron doses Numerator: Number of children < 2 years with 30 iron doses Denominator: Total number of children < 2 years 6. Coverage of third dose of DPT/HIB/Hepatitis B vaccine: Numerator: Number of children of less than one year of age who received three doses of DPT/HIB/Hepatitis B vaccine. Denominator: Total number of children of less than one year of age. S. National financing of vaccines: expenditure on vaccines and syringes financed by the Borrower from sources other than external grants or loans. 33

40 Annex 2(a): Project Description Bolivia: Health Sector Reform Program - Phase II To help achieve the targets described in Annex IA, the project will support activities grouped under the same three components that received support from phase I of this APL: 1. Coverage and quality improvements of the health services and empowerment of communities II. Strengthening local capacity to respond to health needs; and III. Monitoring of Performance Indicators and Project Coordination Component I: Coverage and quality improvements of the health services and empowerment of communities. (US$ 39.3 million) Component I would support activities for two areas: A. Strengthening of the Basic Health Insurance (SBS) program; and B. Support for national health programs related to mother and child care. A. Strengthening of the Basic Health Insurance The performance indicators for this project measure coverage and quality in the implementation of key SBS interventions. To be successful the SBS requires: (i) better information on the production of services and the health status of the population; (ii) active management and monitoring of incentives for health providers; (iii) monitoring of the quality of the services provided, and (iv)more effective empowerment of the indigenous users of the SBS to overcome the challenges of interculturality. This sub-component would finance support for information systems, the Administration of the SBS, the implementation of quality monitoring and activities to empower SBS beneficiaries. Support for Information Systems. The main source of information on the production of health services in Bolivia is SNIS (Sistema Nacional de Informaci6n de Salud). After receiving support from several projects, today, in terms of the presentation and timeliness of its data, SNIS compares favorably with information systems in other Latin American countries. Despite this achievement, for the purposes of this project it has two important shortcomings. First, it reports information about the production of services by health providers, but it does not directly deal with coverage or with outcomes for the population. Second, the information is not subject to external controls and local administrators have incentives to exaggerate the effectiveness of the services they are responsible for. This activity would address these shortcomings by: (i) financing surveys and operational research to measure outcomes, including cofinancing with other donors the Demographic and Health Survey planned for 2002, the implementation of local surveillance committees for maternal and infant mortality, and the follow-up of mortality cases identified by the population census planned for 2001; and (ii) financing mechanisms to strengthen the reliability of SNIS by introducing external controls including cluster surveys, interviews with community leaders, and certification of in-hospital mortality statistics by user committees. Outputs of this subcomponent would include: Availability of infant and maternal mortality estimates, produced with a methodology that allows the determination of trends in mortality and the estimation of mortality rates for different income groups; and more reliable estimates for the performance indicators of annex la of this project. Support to the Administration of the SBS. The SBS is implemented by the municipalities, which finance and manage the municipal accounts used to pay for the services covered by the SBS. The MSPS has a policy-setting and regulatory role vis-a-vis the SBS. The policy-setting role is applied by establishing the 34

41 Annex 2(a): Project Description microeconomic incentives for providers, for instance by defining the interventions covered in the SBS benefit package, the reimbursement rate, and the payment mechanisms used to reimburse the services. The MSPS is currently considering ways to: induce greater use of high priority interventions (e.g. by rewarding mothers who complete a pre-natal cycle or attend nutrition-related workshops and by rewarding providers who successfully retain mothers who complete the pre-natal cycle), develop new service delivery methods (e.g. itinerant health professionals for rural areas), help small municipalities to pool resources, create mechanisms for inter-municipal payments (when a hospital in one municipality serves beneficiaries from another municipality), incorporate providers outside the public sector (such as NGOs or hospitals in the social security system), and link the SBS with other health insurance schemes. MSPS's regulatory role over the SBS is exercised by assisting municipalities in the control of the appropriate and effective use of SBS municipal funds. In recent months there have been a number of accusations of misuse of SBS funds, mostly because funds have been used to pay interventions not included in the SBS package, but also because of alleged over-invoicing. At present controls are conducted manually. A control software is being designed (financed by Phase I of this APL). Once implemented, the software will not only identify irregularities but also accelerate payment to health providers by municipalities. [The SBS is described in more detail in Annex 13]. This sub-component would support these initiatives by: (i) providing technical assistance, studies and small grants for pilots to: design and monitor new SBS payment mechanisms to induce greater use of priority interventions and the establishment of new ways to deliver services; the pooling of municipal resources; the development of mechanisms for intermunicipal; payments, and the expansion of health insurance coverage among the poor; and (ii) implementing the SBS software and carrying out financial audits of the SBS in selected municipalities. The project would finance computers (where needed), training, supervision, and extemal audits. Outputs of this sub-component would include: i Improved payment mechanisms for use by the SBS with incentives for improved applications of the IMCI, MBP and nutrition protocols; for itinerant professionals; and for referrals; * Periodic monitoring reports on SBS disbursements and SBS-financed production of services; * SBS software implemented in selected municipalities; and * Financial audits of the SBS in selected municipalities. Support for supervision of the quality of SBS activities. SBS covers 92 interventions comprising those recommended by the second generation EPI, IMCI, MBP and the national TB and malaria programs.. The SBS technical protocols are based on recommended practices of those programs. Additional protocols are planned in areas related to nutrition, appropriate disposal of medical waste, and other key areas of the SBS. There are also plans to develop accreditation and licensing procedures for health providers operating under the SBS. This subcomponent would finance: (i) the development of norms and procedures related to the appropriate management of nutrition, waste disposal, and other SBS practices; their publication, and training of key staff in their use; and (ii) the implementation of supervision activities to ensure compliance with these rules and other safety and ethical practices. Outputs of this sub-component would include: * Issuance of protocols for SBS interventions; and * Implementation of a system for supervising the quality of SBS activities. Support for community empowerment activities. Ethnic diversity is a significant obstacle for health care in Bolivia. Annex 12 describes the context, the activities financed by Phase I of this APL and the activities proposed for Phase 2. This subcomponent would: (i) finance the dissemination of the rights of indigenous people as users of the health care system. This would include Information, Education and Communication (IEC) activities and the publication of the Pregnant Women's Bill of Rights (Carta de Derechos de la Mujer Embarazada) in Aymara, Quechua and Guarani; focus groups of women and health 35

42 Annex 2(a): Project Description workers would discuss the local implementation of the Carta and complaint mechanisms would be established; (ii) train and equip Health Advocates (Defensorias de Salud, i.e.community representatives who oversee compliance by health providers with the rules of the SBS); (iii) implement and publish user satisfaction surveys that identify the ethnic background of respondents; and (iv) finance national and regional meetings of the National Indigenous Health Council. Outputs of this sub-component would include: * Publication, distribution and publicity for the Carta de Derechos de la Mujer Embarazada and other forms of IEC; * Health Advocates trained and established in selected municipalities; and * Strengthened dialogue on health policy between government agencies and indigenous organizations. B. Support for National Programs for mothers and children I.Supportfor the Second Generation Expanded Immunization Program (see more details in Annex 14). During , immunization coverage fell due to (a) institutional weaknesses of the country's health system in general and that of the Expanded Program on Immunization, in particular; (b) insufficient and inconsistent allocation of funds by the govemment, relying mostly on funds from external cooperation; and (c) lack of a sustained social communications strategy. Also, Bolivia lagged behind the rest of the Americas in the incorporation of Haemophilus influenzae type b vaccine (HIB), which in other countries had proved to be a potentially powerful factor in reducing infant mortality. During , with the support of PAHO, other donor agencies, and Phase I of this APL, the Govemment reversed the downturn trends by implementing a medium-term immunization plan that introduced the Second Generation Expanded Program of Immunization (EPI). Immunization coverage with three doses of DPT reached 89 percent in 2000 and the measles outbreak of is now under control. Key elements during Phase I of the Project included: agreement with the Ministry of Finance on the need to increase domestic financing of vaccines f, strengthening the management of the EPI Unit, completing the introduction of new vaccines (including HIB), consolidating the implementation of rapid response brigades (Brigadas de Acci6n Rapida - BEAR), and improving the surveillance system. Phase II of this APL will continue supporting the implementation of the medium-term plan by strengthening: (i) the management capacity of the EPI Unit in the MSPS, including technical assistance for: activities related to monitoring the execution of the national budget for vaccines and the use of appropriate procedures for purchases, the implementation of a logistical management software to track deliveries of inputs and the state of the cold chain, a study on the effectiveness of EPI's communications strategy in indigenous areas, and the supervision of practices related to medical waste management; (ii) the introduction of the new vaccines, including the purchase of vaccines (on a declining basis - see section on sustainability), and purchases of simple equipment for regional training offices; and (iii) the improvement of information and surveillance systems, including active institutional and community searches of vaccine preventable diseases and the implementation of vaccination coverage surveys to verify the quality of administrative reports on coverage. 2. Support for quality improvements in priority national programs related to the SBS. In recent years, partly through the efforts of Phase I of this APL, Mother and Child programs have been revamped. Treatment of children under 5 is now done using Integrated Management of Childhood Illness (IMCI) protocols. The original WHO protocols were adapted to Bolivian needs by PAHO and adopted by the MSPS. They were also supported by numerous other donors and NGOs that have now have developed effective systems of institutional coordination. Pregnancy and birth now benefit from the Mother Baby Package (MBP), as adapted to Bolivian circumstances by MotherCare (a USAID-financed organization) and other NGOs. Large-scale programs offering training in the appropriate use of IMCI and MBP are currently under way, and the MSPS is launching an evaluation effort to assess the impact of these initiatives so far. A World Bank team has produced a report on the status of nutrition in Bolivia and has 36

43 Annex 2(a): Project Description made recommendations for the improvement of nutritional interventions. This report is currently under discussion with the Government and other donors. Multi-donor coordination efforts are also under way in the area of nutrition, and there is a systematic effort to improve the nutritional impact of food programs, strengthen their educational impact, improve their targeting, and reduce duplication. There are several initiatives to improve medical waste management in hospitals, including drafting of new legislation. The Expanded Program of Immunizations, partly with support from Phase I of this program, has also introduced significant improvements in the management of waste at the primary level (See Annex 15). In collaboration with other government and donor initiatives, Phase I of this APL successfully placed these programs on the national agenda, launched the initial activities for the design of technical protocols, and organized large-scale training programs. At present there is a need to evaluate the progress achieved, identify gaps for further work, agree with other donor agencies on a division of labor and a system of coordination, and then to fill any financing gaps. There is also a special need to boost MSPS capacity to monitor the effectiveness of the large training programs under way. At the moment it only measures the inputs (number of workers or community members trained). Implementation of this component would involve: (i) supporting the evaluation of existing IMCI, MBP, nutrition and medical waste management programs at the primary level; (ii) developing multi-donor plans of action to strengthen these programs; (iii) financing activities for which there is a financing gap; and (iv)establishing in the MSPS a system for monitoring and evaluating the effect of training activities. Outputs of this sub-component would include: - Contributions to multi-donor plans in IMCI, MBP, nutrition and management of medical waste at primary-level facilities; v Identification of financing gaps in these areas; and * Establishment of a system to evaluate the impact of training activities. Component II. Stren-thening local capacity to respond to health needs (US$27.9 million) Component II would support activities for two areas, which are discussed further below. A. Support for the expansion of coverage of the SBS; and B. Investment sub-projects to expand the coverage of SBS. A. Support for the expansion of coverage of the SBS. During coverage of the SBS improved significantly in those areas where services already existed. While this included those poor municipalities where services are available, underserved areas have benefited less. During the 1990s there were many attempts to expand coverage into underserved areas, mainly through investments in infrastructure and equipment. Many of those investments remain underutilized today because health workers have not been assigned to those areas, or if they were hired for these locations, soon after becoming public employees they moved into hospitals and other attractive locations. A few pilot projects, generally supported by NGOs, have emphasized different techniques to reach underserved locations with human resources. Successful experiences include San Lorenzo, Yotala, and Challapota. However, these pilot schemes have not been expanded and in some cases even after several decades continue to function as local projects benefiting a small population. Mexico, Brazil, and Peru have struggled with the challenge of taking similar experiences to a national scale and have found ways to do so. Bolivia now plans to replicate this experience by adopting two key features of those programs (see lessons learned). First, these programs make use of health teams, consisting of the use of local community agents (indigenous where relevant) combined with itinerant health professionals and auxiliary nurses. The community agents live in the community, provide a cultural bridge in ethnically diverse contexts, and focus on preventive and health promotional activities and on organizing the demand for professional services. Health professionals work in an itinerant fashion, visiting each location with predetermined schedules that allow target groups (such as mothers, school children, infants, etc.) to 37

44 Annex 2(a): Project Description access their services effectively. Second, in all these countries, the expansion has been based on hiring health workers outside the rigid norms and regulations of the civil service. Health workers are hired using short-term private contracts that pay relatively high bonuses for difficult locations and stipulate performance criteria for success in the job. Renewal of contracts is based on success in meeting the performance criteria. This component would support the establishment of a National Program for the Extension of Coverage of the SBS (Programa Nacional de Extensi6n de la Cobertura del SBS - EXTENSA). The details of the program would be defined during implementation. The Government expects this component to become part of a multi-donor effort in support for the Program. There would be project activities at the national and at the regional levels. As explained in the main text of the PAD, the institutional arrangements in the health sector are in a state of flux. Currently, responsibilities for health provision are split between municipalities and SEDES (Servicios Departamentales de Salud). The Government is seeking to transfer all responsibility to the municipalities in a voluntary process that is expected to take three years. The project will have to support EXTENSA in varied and changing local institutional arrangements. The component would: * Support the management of EXTENSA, including: (i) identification of the priority areas for the expansion of coverage, using criteria that combine poverty and cost-effectiveness; (ii) design of work protocols for community agents and itinerant health professionals and promotion of crossfertilization activities across regions; (iii) management of the contracts and monitoring of team performance. e Finance and train human resources. The expansion of human resources would be financed by a combination of: (i) funds from the HIPC - these are expected to average US$90 million over the next 15 years, and according to a draft law currently under debate, a certain proportion of those resources could be earmarked for the decentralization of human resources in health; (ii) grants and concessional credits from external donors - these would be phased out as the Government phases in to finance the program from its own resources; and (iii) government revenues. Training would be required for community agents, auxiliary nurses and health professionals in the new arrangements for health delivery. * Finance basic equipment and inputs. Basic equipment for the health teams would include communications equipment, bicycles and other light transportation, basic medical instruments and inputs, and educational material. The establishment of teams would also require small investments in works such as the rehabilitation of health posts or the installation of latrines. * Support local implementation of the new health teams. Local plans would be prepared and discussed with the relevant parties (SEDES, municipalities, mancomunidades ) in all locations to which the new teams are assigned in order to ensure that the additional resources respond to local needs and are integrated into the existing supply of services. Where relevant, local plans would include the preparation of feasibility studies for investment sub-projects that municipalities could present for financing to the FPS (see next sub-component). Outputs of this component would include: * The establishment of a small management unit for EXTENSA charged with planning and monitoring the expansion of coverage; * The establishment of health teams in underserved areas selected on the basis of criteria that combine poverty and epidemiological need; * Training, basic equipment and inputs issued to the new health teams; 38

45 Annex 2(a): Project Description * Local health plans developed in selected locations incorporating the new health teams into the existing health networks; and * Feasibility studies for sub-projects developed in selected municipalities and mancomunidades. These subprojects would be submitted to the FPS for financing (see next sub-component); B. Investment sub-projects to expand the coverage of SBS This subcomponent will be a key operational instrument to support municipalities and mancomunidades in the expansion of coverage. It will finance investment projects as well as activities designed to strengthen social communication, training or management.. This sub-component will be executed by the FPS. The law regulating the assignment of funds to municipalities is currently being debated in Congress. The draft law proposes pre-assigning annual budgetary ceilings to each municipality according to a formula based on population and poverty. Municipalities would then allocate these resources for use in social and productive sectors. The FPS would finance the municipal entitlements from several sources. Municipalities who choose to use their budgetary allocation for health sector investments would draw from the proceeds of the Health Sector Reform II credit. The following menu of subprojects would be eligible for financing under the credit: * Equipment for community agents and itinerant professional: Transport equipment, including mobile first-level medical, dental, and laboratory equipment; communication equipment; ambulances; * Strengthening of primary level services: Rehabilitation and equipment of health posts and centers, training of health personnel to raise their capacity, IEC, social communication campaigns, and other types of promotional activities to ensure beneficiary participation in the program and its cultural adequacy; * Nutrition: Community outreach programs and integrated nutritional education packages for early childhood and mothers to complement clinical services provided under the SBS; * Prevention and treatment of prevalent communicable diseases in the area: Equipment, inputs training and social communication to increase the ability of local facilities to detect and control of top priority communicable diseases identified in the health plans at an early stage; * Environmental health: Small-scale treatment and rehabilitation of water supply, supply of latrines, and management of medical waste. Component III. Monitorine of Performance Indicators and Proiect Coordination (US$3.1 million) The project will be executed at local levels of the health system, particularly in SEDES, districts, municipalities, and health establishments. Project coordination is described in Annex 2(b). Monitoring and evaluation will be key activities in this project. The URS will maintain a system (based on the SNIS) to monitor project progress. Specialized studies will also be carried out as needed. Performance Agreements (PA), which have been designated as the primary instrument of supervision and strategic control, as represented by contracts signed between authorities seeking to achieve shared objectives. These PAs will allow authorities from distinct levels of the health system to coordinate their actions for sectoral and project objectives and will strengthen supervision mechanisms by: (i) operationalizing ministerial policy directives to the SEDES and health establishments, particularly with regard to the SBS and the fortification of local health networks; and (ii) explicitly assigning resources to expected results. The activities to support PA implementation include: (i) training of staff involved in the system of contracts-ministry, SEDES, districts, health establishments, municipalities, NGOs, and other actors and relevant organizations; and (ii) support for the supervision and monitoring of these instruments. 39

46 Annex 2(b): Project Description Bolivia Health Reform Program Phase II Introduction: Project Management The Health Sector Reform Program approved by the Bank in 1999 and in effect since December of that year (APL 3244-BO) is currently executing Phase I. What follows is a project description for Phase II of the APL. It adopts essentially the same approach as that used for the successful implementation of the project in Phase I. It is important to point out that the project began with an Executing Unit that came under the Ministry of Health and Social Welfare (MSPS) but was not part of its organizational structure. To achieve closer coordination it was later merged, through Ministerial Resolution No. 381 of July 25, 2000, into the General Office of Health Services (DGSS). The Pan American Health Organization (PAHO) supported the design of the project and will also support its implementation through technical assistance in supervising the EPI and EXTENSA components (components IB and IIA). It will, additionally, finance the hiring of five epidemiologists to support implementation at the departmental level. Period of Execution: Four years Executinf AFencies: The project continues with the same two executing units it had in the first phase, namely: The General Office of Health Services (DGSS) of the MSPS X The Productive and Social Investment Fund (FPS, formerly FIS). Replicating the first phase model, the Productive and Social Investment Fund (FPS, formerly FIS) will execute the Health Subprojects component (component IIB) under a subsidiary agreement acceptable to the Bank to be signed by the Ministry of Finance, the MSPS, and the FPS. The subsidiary agreement will be valid for one year and will include performance indicators measuring the effectiveness of FPS operations. Overall Coordination of the Project As in the first phase, the MSPS will be responsible, through the DGSS, for carrying out the project in accordance with an Operational Manual approved by the BANK. Maintaining continuity with the first phase, the DGSS will coordinate implementation of the project with the other agencies, based mainly on construction of a single Annual Operating Plan (POA), which includes the budget. With respect to overall coordination, the DGSS will be responsible for the following: * Promoting the project locally; * Administering the project (developing systems for monitoring its impact and physical progress, financial management, and preparation of semi-annual implementation reports); Supervising execution of the investments carried out by the municipalities through the FPS; Supervising project execution; Ensuring compliance with the Bank's Procurement Guidelines 40

47 Annex 2(b): Project Description - Management * Seeing that financial, procurement, and other audits required by the Bank are conducted (as well as those required by the FPS); a Coordinating supervision missions with the Bank; * Organizing project impact assessment. As in Phase I, the DGSS will maintain an organizational structure in keeping with its functions and responsibilities in implementing the project. Whereas in the first phase, the DGSS had five small, decentralized units to coordinate with the prefects, municipalities, and other local agents, in the second phase there will be nine such units (Phase I covered only five departments, while Phase II covers nine departments). Execution of Subcomponents DGSS: The DGSS of MSPS will be responsible for executing the following components and subcomponents: * L.A Strengthening the administration of the Basic Health Insurance; * I.B Support for National Health Programs related to mother and child care; II.A Support for the expansion of coverage of the SBS; and * HI Monitoring of Performance Indicators and Project Coordination The DGSS will be responsible for managing all financial resources for the above-mentioned components, with the exception of the purchasing of vaccines, which will be done through PAHO's Rotating Fund, as stipulated in Annex 6. Given that vaccination activities and others relating to the EPI and the National System of Health Information are the purview of Directorates other than the DGSS, the DGSS will coordinate them through Management Agreements that include target fulfillment commitments. These agreements are intemal arrangements among MSPS directorates. MSPS will establish the National Extension of Coverage Program (EXTENSA), which will come under the DGSS. FPS: Following the first phase model, the FPS will execute Subcomponent II B (Investment sub-projects to expand the coverage of SBS). The FPS is part of the Consolidated Directory of Funds [Directorio Unico de Fondos - DUF ], the body that will be responsible for administering the mechanisms through which funds are allocated and transferred to the municipalities. Execution of this subcomponent will follow the rules contemplated in the New National Compensation Policy, according to which municipalities are responsible for inviting project proposals, evaluating them, and awarding contracts. The DUF will pre-allocate funds to each municipality based on a mathematical formula (which takes into account poverty and demographic indicators) and present a menu of projects eligible for financing according to criteria set by the ministry in that sector. In the health sector, that means the MSPS. After considering its allocation, the menu of projects, and the eligibility criteria, each municipality is responsible for submitting the projects it would like the FPS to finance. Disbursements to the municipalities will be made through a Special Account of the FPS, with the FPS 41

48 Annex 2(b): Project Description - Management monitoring the municipalities' procedures. The rate of counterpart financing for the extension of coverage subprojects will be determined by the FPS in accordance with the National Compensation Policy. The FPS will be responsible for registering these investments in the Vice Ministry of Public Investmnent and for managing the municipality counterparts. For Health Sector Reform Program funding provided by the Bank and transferred to the FPS, the proposed project cycle is as follows: * Invitation to submit project proposals. The FPS will from time to time issue invitations to the municipalities or municipality networks (mancomunidades) to submit project outlines. * Registration. Municipal governments would present their project outlines on pre-printed FPS forms, and following the guidelines and the menu of eligible projects. * Pre-evaluation. Pre-evaluation of the outlines consists of verifying that they meet the eligibility criteria and the objective pursued by the project. * Pre-agreement on allocation of funds. Once the project outline is approved, the FPS will notify the applicant of the result of its pre-evaluation and, through a "pre-agreement," will guarantee funding for project execution. * Final design. Armed with that pre-agreement, the applicant may access pre-investment funding by the FPS or by the Project to finance the final draft of the project. * Evaluation and approval. The projects will be evaluated by the FPS departmental teams and approved by the technical Boards of Directors for Departmental Projects based on approval criteria to be agreed upon by the FPS and the MSPS. * Execution. Approved projects will be put out to tender by the beneficiaries, who shall be responsible for the entire process, which will be audited by the FPS and monitored by the DGSS. Operational Manual The project will use an Operational Manual, based on the current one, that will cover all aspects of project implementation, including, inter alia: organizational structure; supervision and evaluation; targeting and other criteria for the distribution of resources; eligibility criteria for extension of coverage subprojects; environmental conservation measures; procedures for drafting the annual operating plans; financial, accounting and audit procedures; disbursement and procurement procedures and Standard Bidding Documents; and a menu of short term investment options. Presentation of a revised operational manual satisfactory to the Bank will be a condition of effectiveness of phase II of the credit. The Subsidiary Agreement with the FPS will require the use of another Operational Manual, drafted by the FPS, which clearly describes the relations between the FPS and the municipalities, and the responsibilities of each. The Manual should include in its stipulations quarterly financial and physical progress reports. Presentation of an FPS operational manual satisfactory to the Bank will constitute a condition of disbursement for activities executed by FPS. Annual implementation review and proiect supervision. The Bank's supervision schedule shall include at least three missions in the first year of implementation, one of which will be the Annual Project Implementation Review, conducted jointly with the MSPS, and the FPS. The project will require close supervision by the Bank and by PAHO for the four years of project execution, involving at least two missions, one of which will correspond to the Annual Review Mission. The Bank has received a letter from PAHO stating its commitment to provide support for project supervision during the implementation period. The Review Mission in the fourth year will include an examination of the trigger indicators for phase III of the APL and a complete evaluation of the project as 42

49 Annex 2(b): Project Description - Management part of the APL program. It will also put forward recommendations for execution of the third phase of the Reform Program. Monitorine and Evaluation. As in the first phase, the Credit Agreement specifies that this project is to be evaluated using the performance indicators of Annex la and that if three or more of the eight indicators miss their annual targets, the Bank may demand that the project be restructured. To ensure that the project meets its targets, the MPSP will sign management agreements with prefects and selected municipalities, taking into account the eight established indicators. The DGSS will be responsible for monitoring the project and progress reports containing the performance indicators will be sent to the Bank every six months. 43

50 Annex 3: Estimated Project Costs Bolivia: Health Sector Reform Program - Phase II Project Cost by Component Total (US$ million) 1. Coverage and Quality improvements of the SBS and 39.3 Empowerment of Communities 2. Local Capacity to respond to health needs of the 27.9 population 3. Monitoring of Performance Indicators and Project 3.1 Coordination Total Baseline Cost 70.3 Physical Contingencies Price Contingencies Total Project Costs 70.3 Interest during construction -- Front-end fee NA Total Financing Required 70.3 Project Cost by Category Total (US$ million) Works 3.0 Goods 43.4 Consultant Services 7.6 Health Workers 13.5 Operational costs 2.8 Total Project Costs 70.3 Interest during construction -- Front-end fee NA Total Financing Required

51 Annex 4(a): Economic and Equity Analysis Bolivia: Health Sector Reform Program - Phase II INTRODUCTION The present analysis attempts to quantify the monetary benefits that will be generated by the second phase of the Health Sector Reform Program in Bolivia during its implementation and compares them to the projected costs in order to estimate the number of deaths averted by the project, the Net Present Value of the investment and its Internal Rate of Return. As explained in detail in Annex 2a the project will help improve equity and quality of health services in Bolivia. Health and monetary benefits are assumed to derive entirely from Component IIA (Extension of Coverage - PRONEC). We assume that the target (uncovered) population of the project is 25% of the total population in the country. The process of extension of coverage will happen gradually: 15% of the uncovered population will be reached in 2002, 35% in 2003, 65% in 2004 and 100% in For children 0-5, we focus on deaths due to pneumonia and diarrhea. For mothers, we focus on deaths due to complications in the delivery process. Since the activities carried out by the other components are also necessary for an efficient implementation of Component IIA, the cost of all components are included in the analysis. In this analysis, all the economic benefits are related to deaths averted. No attempt to calculate the benefits from a reduction in morbidity is made for three reasons First, given the high level of mortality in Bolivia, scarce resources should first go to averting deaths before they are directed to reducing morbidity. Second, the calculation of economic benefits only from deaths averted can be interpreted as representing a lower bound on the true benefits. If the estimated internal rate of return appears sufficiently high to justify the project even at this lower bound, it is not necessary to undertake the more complicated analysis of determining the benefits from the reduction in morbidity. Third, the economic analysis of Phase I only included benefits associated to reduction in mortality. The section is structured as follows. We start with outlining the methodology used to estimate the economic benefits of the extension of coverage component. We then present the result of cash-flow analysis, including the Net Present Value (NPV), the Internal Rate of Return (IRR) and the total number of deaths averted. Then, through Monte Carlo simulations we test the robustness of our estimates to the uncertainty of the project success in reaching the uncovered population. Finally, we present an analysis of equity for selected health indicators using both individual and aggregate data. ESTIMATION OF BENEFITS For both children and mothers, the estimation of benefits involves 3 steps: a) Definition of a mortality model in function of parameters that are affected by the project (coverage, incidence of disease, treatment patterns and mortality rates); b) Estimation of the number deaths with and without the project; c) Attribution of an economic value to deaths averted. 45

52 Annex 4(a) Definition of Mortality Models For diarrhea, the annual number of deaths depends on the number of children 0-4, the number of episodes per child per year, the proportion of cases with dehydration, the proportion of cases that are taken to health center and the mortality rates for cases that are taken to the health center and for cases that are not. The flow-chart below illustrates the model. The value of the parameters for such model with and without the project can be found in the following sub-section. The parameters assumed to be affected by the project are highlighted. The same process is repeated for pneumonia and maternal mortality. ChildrenO0-4 Episodes that ORT at health L Epiodes of i gd the the center diarrhe per child health ceter Total nunrber Proportin of A%lratt t of episodes :episodes lako + nrvnus to tliebtalth i treatrnen: Proportion of cenbr episodes with dehydration Total e ppoion Mortality rate f caes dehydration 0Ptioo4f rrn taknto6 ft Deah Episodes that do riot gd the the health cetter Mortaliy rate For pneumoni4, the annual number of deaths is a function of the number of children 0-4; the incidence of pneumonia, the proportion of children who receive treatment and the mortality rates for cases with and without treatment. I Children 0-4 l Inieve Incidencc Infected netdchlr- childre~~~~~n receivirng - - Mortality rate i rated ~~% with treatrrent. stratment, n Children 0-4 with pneumtonia treatment ~~~~~~~ treathsn ~ Mortality ratc 46

53 Annex 4(a) For maternal mortality, the annual number of deaths depends on the annual number of deliveries, the coverage of institutional deliveries and the mortality rates for attended and unattended deliveries. % Attended by Mortality rate medimlly trained 01 NonInstitutional deliveries % Attended by Mortality rate medically trained personnel In order to validate the model, epidemiological and behavioral data from the 1998 Demographic and Health Survey, the SNIS and other countries with similar level of socioeconomic development were used to predict the number of deaths due to diarrhea, pneumonia and pregnancy complications for year 2000 and compare it with the observed number of deaths due to these causes in the same year. Estimation of the number deaths with and without the project The tables below present the scenarios with and without the project for each of the three sub-components (diarrhea, pneumonia and maternal mortality). The highlighted rows show the values for the parameters that are expected to be affected by the project. For each of the three sub-components the project is assumed to have an incremental effect on most of the parameters that define the mortality patterns under examination so that only in 2005 the beneficiary population will have similar epidemiological and behavioral patterns as those observed in the whole Bolivia in year

54 Annex 4(a) CHILDREN 0-4 Beneficiary Population Total 1,239,403 1,268,405 1,298,085 1,328,461 Non-covered (25%) 25% 25% 25% 25% Cumulative proportion reached by the project 15% 35% 65% 100% Beneficiaries 46, , , ,115 Diarrhea No Project Episodes per child /o with dehydration 15% 15% 15% 15% Total episodes with dehydration 24,401 58, , ,360 Proportion that visit health center 15.0% 15.0% 15.0%/o 15.0% ORT at home 83% 83% 83% 83% Mortality rate 0% 0% 0% 0% Deaths ORT at health center 14% 14% 14% 14% Mortality rate 0% 0% 0% 0% Deaths Intravenous treatment 3% 3% 3% 3% Mortality rate 3.6% 3.6% 3.6% 3.6% Deaths Proportion that do not go to health center 85.0% 85.00/a 85.00/% 85.0% liity rate 3.6% 3.6% 3.6% 3.6% gdeaths 747 1,783 3,389 5,335 [FOTAL DEATHS 751 1,793 3,407 5,364 twith Project / with dehydration 15% 15% 15% 15% Total e isodes with dehydratiot 20, I $ S0i'w 1. x,,,,t6 i. $ W_ 00S t lt 0; ORT at home 83% 83% 83% 83% Mortality rate 0% 0% 0% 0% Deaths ORT at health center 14% 14% 14% 14% Mortality rate 0% 0% 0% 0% Intravenous treatmeit 3% 3% 3% 3% Mortality rate 3.6% 3.6% 3.6% 3.6%.,'0 ;' t}0,,0g', 3.. >.\.^.. Deaths SG0%0,, Deaths 565 1,136 1,775 2,466 TOTAL DEATHS 571 1,156 1,823 2,549 Deaths averted by the project ,585 2,816 l lkse}'''m id''ts 48

55 Annex 4(a) Pneumonia 2002_ No Project Incidence 4.5% 4.5% 4.5% 4.5% Children with pneumonia 2,091 4,994 9,492 14,945 With treatrnent 55.0/ 55.0% 55.0/o 55.0/ Mortality rate 3.0% 3.0% 3.0%f/. 3.0% Deaths No Treatment % 45.0/ 45.0% Mortality rate 75.0%/5 75.0% 75.0% 75.0h Deaths 706 1,686 3,204 5,044 TOTAL DEATHS 740 1,768 3,360 5,291 With Project Children with monia 1,859 4,439 S Mortality rate 3.0% 3.0% 3.00/ 3.0X. Deaths Mortality rate 75% 75% 75% 75% Deaths TOTAL DEATHS ,164 1,355 Death saved by the project ,196 3,936 MATERNAL MORTALITY Beneficiary Population Tohl Expected Deliveries 289, , , ,876 Non-covered (25%) 25% 25%/o 25% 25% Cumulative pmportion reached by the project 15% 35% 65% 100%/ Beneficiaries 10,841 25,S88 49,204 77, }

56 Annex 4(a) Institutional deliveries 20% 20% 20% 20% Mortality rate Deaths Non-institutional deliveries 80% 80% 80% 80% Mortal ity rate Deaths TOTAL DEATHS With Project Mortality rate Deaths Mortality rate Deaths FOTAL DEATHS Death saved by the project Attributing an Economic Value to Deaths Averted In accordance to the Human Capital Approach, the economic benefits of averting a death of a mother or a child are assumed to be the present discounted value of the income that person would earn during their added lifetime. In both cases, the discount rate was set at 10 percent. Per capita GDP is currently estimated to be around US$1,050. The particular assumptions used to calculate the economic benefit to averting the death of a mother are as follows. Women are assumed to be working and to have an additional 29 years of earning income (reflecting the assumptions that the woman would otherwise have died at age 31 and would be expected to work until age 60). The children are assumed to begin work at age 18 and work until age 60. The base income is assumed to grow 1.5 percent per year. Summary of Health Benefits Overall, the project is expected to save about 12,500 deaths among children below age 5 and little less than 300 maternal deaths. ESTIMATION OF COSTS We use the information contained in Annex 3 (Estimated Project Costs). CASH FLOW ANALYSIS The table below presents the details of cash-flow analysis Total Benefits $1,348,332 $5,144,148 $13,371,795 $24,080,669 Total Costs $8,809,690 $10,939,360 $12,254,021 $8,243,895 Net Benefits ($7,461,358) ($5,795,212) $1,117,774 $15,836,774 NPV (10%) $84,046 IRR (10%) 10% / 50

57 Annex 4(a) Under the assumptions outlined above, the NPV of the Extension of Coverage component of Phase II is approximately US$85,000 and its IRR 10%, figures which indicate that the project would pay back the investments over the four years period of the loan. MONTE CARLO SIMULATIONS The following table presents results obtained from Monte Carlo simulations in which the population reached by the project has a uniform distribution ranging between 10% and 15% in 2002, 25% and 35% in 2003, 50% and 65% in 2004, and 80% and 100% in We present the results for the IRR and the number of deaths averted among children less than 5. The rate of growth of GDP per capita is also assumed to have a uniform distribution with values ranging between 1.5% and 3.0% every year. 3 IRR Deaths Averted to Children less than 5 Mean 20% Mean 11,024 SD 14% SD 489 Percentiles Percentiles 0% -10% 0% 9,734 10% 1% 10% 10,376 20% 5% 20% 0 10,591 30% 10% 30% 10,740 40% 14% 40% 10,875 50% 190/0 50% 11,008 60% 24% 60% 11,163 70% 29% 70% 11,316 80% 33% 80% 11,481 90% 40%/o 90% 11, % 56% 100% 12,165 The percentiles provide information on the distribution on the results. The table suggests that there are sizable retums to the project. In 70% of the trials the IRR is larger than 10%. In 100% of the trials the number of deaths averted to children less than 5 is above 9,500. EQUITY ANALYSIS IN SELECTED HEALTH INDICATORS Individual Data We use individual data from the 1994 and 1998 Demographic and Health Surveys to show how the value of five selected maternal and child health indicators varies across income quintiles. The selected indicators are (1) Infant Mortality Rate; (2) Total Fertility Rate; (3) Percentage of children stunted; (4) Percentage of women receiving antenatal care by a medically trained person; (5) Percentage of women delivering birth to a medically trained person. The table below shows that inequality in health between the rich and the poor has increased between 1994 and 1998 in Bolivia for two of the three outcome indicators - IMR and TFR. In particular two processes are observed. First, although IMR has improved for both the rich and poor, the change has been larger among the rich. Second, the Total Fertility Rate has declined among women in the richest income quintiles but has increased among women in the poorest income quintile. Consequently, the difference observed between the health indicators among the poorest and the richest has increased during the period. The gap has declined very slightly for the third health status indicator - proportion of children 3 The Bolivian Strategy for the Reduction of poverty estimates an average GDP growth of 5.2% between 2001 and

58 Annex 4(a) stunted - and has decreased for the two process indicators. It is worth noticing that the 1994 value among the richest for both the percentage of women receiving antenatal care by a medically trained person and the percentage of women delivering birth to a medically trained person was already very high (92.8% and 96.5% respectively). If sustained over time, such changes are likely to result into a narrowing of the gap in health outcome indicators between the rich and poor in the next DHS. Selected Maternal and Child Health Indicators Quintile Infant Mortality Rate Change Difference between Quintile I and Quintile 5 in 1994 = 76.9 Difference between Ouintile I and Quintile 5 in 1998 = 81.0 Total Fertility Rate _ Change Difference between Quintile I and Quintile 5 in 1994 = 4.8 % Children Stunted Difference between Quintile I and Qui tile 5 in 1998 = 5.3 I _ I Change Difference between Quintile I and Quintile 5 in 1994 = 33.8 Difference between Quintile I and Quintile 5 in 1998 = 33.2 Antenatal Care Visits to Medically Trained Person Change Difference between Quintile I and Quintile 5 in 1994 = 69.8 Difference between Quintile I and Quintile 5 in 1998 = 56.5 Delivery to a Medically Trained Person Change Difference between Quintile I and Quintile 5 in 1994 = 85.1 Difference between Quintile I and Quintile 5 in 1998 = 78.1 Source: DHS 1994, 1998 Municipal Data We use municipal data from the National Health Information System (SNIS) on coverage for the following two indicators: i) institutional deliveries, and ii) complete cycle of antenatal care, for the years 1996 to Data is analyzed by quintiles according to municipal Human Development Index (HDI) obtained from the 1992 Census. The table below shows the following patterns: * The gap in health coverage between the rich and poor municipalities increased between 1996 and 1999 for both indicators. * The gap in health coverage between the rich and poor municipalities decreased between 1999 and 2000 for both indicators. However, the gap in 2000 was higher than in 1996 by 1% for institutional deliveries and by 2% for antenatal care. 52

59 Annex 4(a) Municipal level Health Indicators by HDI, Quintiles by Municipal HDI I ~~ ~~2-3 4 S Average IDH OA Coverage of Institutional Deliveries % 18% 16% 26% 35% % 26% 24% 37% 49% % 31% 28% 38% 48% Difference between quintile I and quintile 5 in 1996 = 18% Difference between quintile 1 and quintile 5 in 1999 = 25% Difference between quintile I and quintile 5 in 2000 = 19% Complete Cycle of Antenatal Care Visits % 21% 21% 30% 28% % 26% 29% 32% 37% % 37% 35% 38% 40% Difference between quintile I and quintile 5 in 1996 = 5% Difference between quintile I and quintile S in % Difference between quintile I and quintile 5 in 2000 = 7% Source: Grupo Equidad - MSPS using data from SNIS Conclusions Both analyses show that there has been an increase in inequality in the second half of the 1990s. Aggregate municipal data suggests that the trend of increasing inequality may be initiating a reversal at the end of the decade. Considering that the observed reversal of the trend and decrease in inequality occurred between 1999 and 2000, it may be partially attributed to the implementation of the Seguro Basico de Salud, which enabled more people from poorer municipalities to gain access to health services. However, both individual and aggregate data indicate that the rich still have much greater access to health services and benefit from a better health status than the poor. Therefore, poverty targeted policies such as extension of coverage to underserved areas are a necessary step to reduce health inequalities. 53

60 Annex 4(b) Public Expenditure in Health Bolivia: Health Sector Reform Program - Phase II (in millions of $US) Withtout Project Phase 2 (Phase 1) - A. Central Govemment Expenditure in Health (exclude inmunizations) - - Domestic Other External Sources _ Health Reform Program (APL1) - World Bank B. Inmunizations C. Municipal Govemment Expenditure in Health = D. Total Public Expenditure in Health With Project Phase 2 A. Central Government Expenditure in Health (exclude inmunizations) - Domestic Of which Government counterparto EXTENSA - Other External Sources Health Reform Program (APL1& APL2) - World Bank Of which WB financing for EXTENSA _ B. Inmunizations C. Municipal Govemment Expenditure in Health D. Total Public Expenditure in Health Increased Expenditures A. Central Government Expenditure in Health (exclude inmunizations).. _ B. Inmunizations C. Municipal Govemment Expenditure in Health D. Total Public Expenditure in Health Of which: 54

61 C. Municipal Govemment Expenditure in Health D. Total Public Expenditure in Health Of which: Financed by the Credit and Cofinanciers _ Financed by Central Government _ Financed by the Municipalities EXTENSA Memo Items in millon $us _. Gross Domestic Product (GDP) 8,555 8,339 8,547 8,889 9,289 9,754 10,24210,754 11,31311,924 12,580 13,271 14,001 Total Public Expenditures (TPE) 2,652 2,560 2,786 2,551 2,545 2,692 2,888 3,000 3,145 3,446 3,459 3,650 3,850 Without Project A + B / GDP 0.8% 1.0% 0.8% 0.9% 0.8% 0.9% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% A + B / TPE 2.7% 3.1% 2.4% 3.1% 3.1% 3.1% 3.0% 3.0% 3.0% 2.8% 2.9% 2.9% 2.8% E/GDP 0.9% 1 0.9% 1.0% 0.9% 1.0% 1.0% 0.9% 0.9% 0.9% With Project A + B I GDP 0.8% 1.0% 0.8% 0.9% 0.9% 1.0% 1.0% 1.0% 0.9% 0.9% 0.9% 0.8% 0.8% A + B /TPE 2.7% 3.1% 2.4% 3.1% 3.3% 3.6% 3.5% 3.5% 3.2% 3.0% 3.1% 3.1% 3.0% E/GDP 0.9% 1.0% 0.9% 1.0% 1.0% 1.1% 1.1% 1.1% 1.0% 1.0% 1.0% 1.0% 0.9% Increased Central Government Expenditure 0.0% 0.0% 0.0% 0.0% 0.2% 0.4% 0.4% 0.4% 0.2% 0.1% 0.1% 0.1% 0.1% TPE _ Increased Public Expenditure / GDP 0.0% 0.0% 0.0% 0.0% 0.3% 0.5% 0.5% 0.5% 0.3% 0.3% 0.3% 0.2% 0.2% Source: Unidad de Reforma de Salud, based on information provided by Contaduria General del Estado, UDAPE, INE, MSPS, VIPFE. NOTES: Information formsps for2000 ispreliminary. Execution by the MSPS was low; investmentprojects executed41%and 95%ofrecurrentcosts. The MSPS budget is for 2001 The rate of growth of GDP was taken from the PRSP, as well as the percentage of total public health expenditures over GDP The rate of growth of public spending was used for estinates of spending at the central level. SBS execution for 1999 was calculated based on bank reports from the treasury. Central govemment spending excludes spending on pensions and includes salaries of health workers, 55

62 Annex 5: Financial Summary Bolivia: Health Sector Reform Program - Phase II Years Ending: 2005 (in US$ million) TOTAL Total Financing Required Project Costs Investment Costs Recurrent Costs Total Project Costs Interest during construction Front-end Fee NA NA NA NA NA Financing Sources IDA Government Other Donors Totld Poject Financing Notice: This table includes the costs of, and financing for, the whole immunizations program. 4 Includes vaccines, operative expenses and cost in health personnel. 56

63 Annex 6: Procurement and Disbursement Arrangements Bolivia: Health Sector Reform Program - Phase II A. Procurement Arran2ements Procurement for the proposed project would be carried out in accordance with World Bank "Guidelines: Procurement Under IBRD Loans and IDA Credits", published in January 1995 (revised January/August 1996, September 1997 and January 1999); and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" published in January 1997 (revised in September 1999 and January 1999), and the provisions stipulated in the Loan Agreement. The Ministry of Health through the PCU and the Fondo Nacional de Inversion Productiva y Social (FPS), will supervise all procurement action under the project, based on agreed procurement procedures as defined in the Operations Manual. The Procurement Operations Manual will include, in addition to the procurement procedures, the Standard Bidding Documents to be used in each case, as well as contracts to be awarded on the basis of quotations. Where no relevant standard contract exists, other standard forms acceptable to the Bank shall be used. Procurement methods: The methods to be used for the procurement described below, and the estimated amounts for each method, are summarized in Table A. The threshold contract values for the use of each method are fixed in Table B. Procurement of Works Works procured under this project could include the rehabilitation of existing hospitals, and small works for minor expansion and rehabilitation of health facilities and sanitary posts; cold storage rooms for vaccines; solid and liquid waste disposal systems for health service centers and septic chambers and latrines at the national and municipal levels, totaling approximately US$2.0 million equivalent. Major contracts for works with estimated prices of $3.0 million equivalent or more are not foreseen. Contracts estimated to cost less than US$3.0 million equivalent but more than $250,000 equivalent per contract may be procured using National Competitive Bidding (NCB) procedures, and using standard national bidding documents (Ex-DONPA) agreed on with the Bank for Bolivian public agencies in Small works, estimated to cost less than US$250,000 equivalent per contract, may be procured on the basis of at least three quotations received in response to a written invitation, which will include a detailed description of the works, including basic specifications, the required completion date, a basic form of agreement acceptable to the Bank, and relevant drawings, where applicable. Procurement of Goods Goods procured under this project will include cold chambers, cold chain supplies; medical instruments and equipment for new and existing medical facilities, vaccines and syringes for immunization campaigns and endemic disease control programs; transportation equipment such as vehicles, boats, motorcycles and bicycles for coverage extension of rural health services; computer equipment for municipal health networks; micro drinking water systems and septic chambers, general office furniture, and administrative and educational equipment and furniture totaling US$13.6 million equivalent. To the extent possible, contracts for these goods will be grouped into bidding packages of more than $200,000 equivalent and 57

64 Annex 6: Procurement and Disbursement Arrangements procured following International Competitive Bidding (ICB) procedures, using Bank-issued Standard Bidding Documents (SBDs). Contracts with estimated values below this threshold per contract may be procured using National Competitive Bidding (NCB) procedures and standard national bidding documents, namely Ex-DONPA, agreed on with the Bank for Bolivian public agencies in Contracts for goods which cannot be grouped into larger bidding packages and estimated to cost less than US$50,000 per contract may be procured using shopping (national /intemational) procedures based on a model request for quotations acceptable to the Bank. Vaccines and syringes for immunization campaigns will be procured under contracts signed with PAHO, and the use of a rotating fund mechanism and conditions set forth in agreements to be signed with the MSPS. The total estimated funding for the purchase of vaccines and syringes amounts to $32.0 million and the Bank is financing $2.29 million which provides for approximately 7.0% of the total. PAHO will purchase goods in an open unrestricted competitive market and following Bankapproved procedures, and will submit annual market surveys for BANK review as a means of providing evidence of using competitive market prices. Although Cuba is a PAHO country member, it is not an eligible country for provision of vaccines or any other goods financed out of BANK proceeds. Selection of Consultants Consulting services will be contracted under this project for the provision of technical assistance in the following areas of expertise: design and implementation of health service networks and coverage extension at rural areas; health diagnosis studies; diagnoses of managerial and financial capacity at municipal health districts; health network operations and ex-post evaluations; quality improvement of national health services; mother mortality surveillance; applied research on mother mortality based on the National Census on Housing and Population's results; conducting of a national health survey (ENSA); design and implementation of information education campaigns; and expert procurement services on bidding and selection processes. Other consultant services of a specialized nature to be contracted are: financial, procurement, performance, and medical practice audits; specialized studies on project progress monitoring and performance agreement-based impact evaluation; technical supervision of subprojects executed under the investment component; long-term consultants for project implementation and coordination and specialized training tasks. These services are estimated to cost $3.64 million equivalent and would be procured using Bank-issued Standard Request for Proposals documents whenever advertisement of Expressions of Interest in Development Business is required. For consultant service contracts with an estimated price below the threshold of US$200,000 equivalent, the standard national documents for Request for Proposals, namely Ex-DONPA, agreed on for Bolivia will be used. Firms All contracts for firms would be procured using QCBS except for small and simple contracts estimated to cost less than $100,000 equivalent, as provided in the procurement plan agreed for implementation. Individuals Specialized advisory services would be provided by individual consultants selected by comparison of qualifications obtained from at least three candidates and hired in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines. Operational Costs Operating costs incurred by the MSPS's PIU for project coordination, monitoring and evaluation purposes will be financed under this category of costs. Operating costs items will be procured using 58

65 Annex 6: Procurement and Disbursement Arrangements the URS administrative procedures agreed on in the Operations Manual. The National Coverage Extension Program component envisages extending the provision of health services to remote and rural areas with current and/or additional staff. During implementation of the component, operational expenses of the implementing unit related to project coordination and field supervision tasks will be financed under this credit. Health Workers The implementation of the National Program for Coverage Extension component foresees the provision of health services through increased participation of the MSPS's staff and incorporation of additional workers at rural areas. Current Ministry staff will receive in addition to their salaries, a bonus as an incentive for providing services in rural areas. When hiring additional staff, the project will provide for payments of salaries and transportation and food-related expenses. Health Subproiects Activities under this category will be implemented by FPS and directly executed by participating municipalities, on a demand-driven basis, and aim to improve physical and operational conditions of health facilities and services at the municipal level involving procurement of goods and civil works and consultant services. Civil works activities will include the expansion and rehabilitation of health service facilities and sanitary posts to be procured under contracts awarded through the use of NCB and PSW procedures as indicated in Table B of this annex. Procurement of goods foresees the acquisition of vehicles, computers, medical instruments and equipment, general office furniture, and administrative and educational equipment under contracts awarded with the use of NCB procedures and price comparison (Shopping) of quotations obtained from at least three qualified national or international suppliers, as provided in Table B of this annex. Consultant services will be required for training related activities to community members (community agents) and health facility staff, and for carrying out of information, education and communication campaigns. All consultant services will be provided by firms and selected, to the extent possible through the use of the Quality Cost Based Selection (QCBS) provided in Table B of this annex. Prior review thresholds The proposed thresholds for prior review are based on the procurement capacity assessment of the project implementing units and are summarized in Table B. In addition to this prior review of individual procurement actions, the plan and budget for the PIU operating costs will be reviewed and approved by the Bank annually. (B) Assessment of the afency's cadacity to imdlement urocurement At the central level of Government, the supervision of procurement and hiring of consultant services will be the responsibility of the Ministry of Health (MSPS) through the Health Reform Unit of the General Office of Health Services(DGSS in Spanish) and the FPS (in the case of physical investment), for all resources transferred under its administration. The MH's PIU is satisfactorily staffed by a Project General Manager, who at the same time is the Health General Service Director; a Technical Manager; and an Administrative/Financial Manager. The Technical Unit is staffed with a total of eight professionals assigned to different areas of expertise like health service quality (3 officers), monitoring (I officer), equity (3 officers) and regional development (I officer). The Administrative/Financial Unit is staffed with staff professionals in charge of the accounting/financial management/disbursement (I officer), procurement (2 officers) and managerial development (1 officer) areas. 59

66 Annex 6: Procurement and Disbursement Arrangements The Operations Manual agreed with the Bank will include, in addition to procurement procedures, the Standard Bidding Documents to be used for each procurement method provided set forth in Table B below, as well as model contracts for works and goods procured on the basis of three quotations and shopping respectively, and for employment of individual consultants. A capacity assessment of both PIUs to implement procurement actions for the project was conducted during the appraisal mission in April 16-27, 2001 and the reports of findings and recommendations cleared by the LAC RPA Office on April 24, The assessment reviewed the organizational structure of each PIU involved in project coordination and monitoring and the interaction between the Procurement Officers and implementing units within the MSPS and the FPS. An analysis of project beneficiary entities that will be directly involved in project execution at the department and municipal levels was carried out also. The capacity assessment identified weaknesses and risk factors for implementing and executing agencies that are spelled out in the reports of findings. Specific actions to address weaknesses and risks are proposed in the action plan attached to each report. Some issues related to weaknesses observed in procurement are being addressed and corrective measures being implemented within the MSPS under the APC 1" stage that is also managed by this agency. Likewise, under the Bolivian investment funds' current restructuring process, which led to the merging of the FIS and other Funds in the new Directorio Unico de Fondos (DUF), the FPS (Ex- FIS) is carrying out specific tasks to solve several issues highlighted in the agency capacity assessment. The risks identified in the assessment include, among others: (i) the possibility of interference from inexperienced procurement staff in procurement management at the FPS, as a result.of the aforementioned restructuring process, and at health regional offices and health districts; (ii) unrealistic procurement planning at health regional offices and districts due to weak capacity to use this planning tool; (iii) the need to improve procurement filing at both central and department levels of the FPS as they do not currently have the organization or the capacity to undertake filing tasks properly; and (iv) the lack of an integrated management information system in place at the FPS to support project monitoring and supervision at different stages of the project cycle. The PIUs have had discussions with the Bank project team on measures to be taken for addressing those risks. They are presented in the action plan included in each agency capacity assessment report. They would involve: (i) promoting a Bank procurement training program for the less experienced staff; (ii) providing support and guidance to health regional offices in SEDES, health districts, and municipalities in the preparation of regional POAs and procurement plans and discussing both plans with the BANK; (iii) hiring a consultant at the FPS to design and help implement a professional filing system, including the enhancement of project document management and routing; and (iv) expediting the completion and implementation of an integrated management information system for adequate monitoring and control of procurement and administrative tasks at the FPS. The monitoring of procurement actions by project implementing agencies and the carrying out of procurement audits are key activities envisaged in the action plan, with a specific allocation of human and financial resources. Ex-post reviews of contracts awarded under this project are foreseen with Bank procurement specialists. Document filing is to improve after the new system is implemented and is expected to comply with the Bank's requirements. The new system will specify the procurement documents to be filed, the PIU staff who would have access to the files, and the internal security measures for record-keeping. The overall project risk for procurement is AVERAGE. Although the overall risk assessment assigned to the project for managing procurement is AVERAGE, due to present risk factors observed at the FPS, a high-risk-equivalent-level threshold was assigned for prior review of civil works contracts. A weak capacity to administer procurement functions at the 60

67 Annex 6: Procurement and Disbursement Arrangements departmental and municipal levels is a major key factor in establishing such level of risk. The lack of an integrated management information system for project monitoring, supervision, and reporting; and a filing system for organization and management of project procurement documents, both acceptable to the Bank, are also key criteria for this recommendation. In the context of the PSAC Project preparation, DUF recently submitted an Operations Manual to the BANK to be implemented by both the FPS and the FNDR The Manual indicates that a Project Administration System (SAP) together with a Financial and Administration System, both under development, will make up the integrated management information system. It is foreseen that this system will be implemented in the second semester of As to the filing system, a consultant firm/individual should be hired by the end of July 2001 and completion and implementation of such a system expected by end Currently, processing of disbursements can be managed with SOEs or through the LACI system. In the latter case, the MSPS's PIU is ELIGIBLE for PMR-based disbursements on procurement reporting grounds. (C) Procurement Plan At an early project preparation stage, the Borrower's agencies developed a preliminary procurement plan for project implementation, which provided the basis for the aggregate amounts for the procurement methods (per Table A). This plan should be approved by the RPA and a copy should be in the project files. At the beginning of each- calendar year, and every six months thereafter, the Borrower shall update the Procurement Plan, including a detailed procurement schedule for the forthcoming semester and a preliminary plan for the subsequent semester. (D) Monitorinn and Progress Reporting Beginning with the completion of each fiscal year of project implementation, the PIUs will prepare annual implementation reports (achievements, component implementation status and possible issues with remedial actions). These reports will include an updated Annual Operation Plan (POA) for the implementation of project components during the corresponding fiscal year. The POA will be in turn the basis for the preparation and submission of the procurement schedule. (E) Frequency of Procurement Supervision In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the PIU report recommended carrying out two full supervision missions, including one special supervision mission for procurement ex-post review/audits) and field visits. Based on the overall risk assessment (AVERAGE), the annual ex-post review analysis should cover a sample of not less than I in 5 contracts signed. Financial Management and Disbursement Arrangements The proposed IDA credit would be disbursed over the project's implementation period of about four years (plus six months to disburse on outstanding commitments), to be completed by December 30, The project closing date would be June 30, 2006 (six months after completion date). Disbursements would be made against the following categories (i) Civil works; (ii) Goods; (iii) Technical Assistance; (iv) Operating costs; and (iv) Health Worker Salaries. See Table 6(c) for allocation of Loan Proceeds. 61

68 Annex 6: Procurement and Disbursement Arrangements Retroactive Financing The approximate amount to be financed retroactively is US$3.5 million. However, all retroactive financing is expected to be within the maximum period of 12 months prior to the expected date of Credit Agreement signing, as stated in the DCA. Financial management Assessments and Action Plan Financial management assessments for both implementing entities have been conducted and the assessments are included in the project permanent files (see Annex 8). As described in Section 4, an Action Plan was prepared for the FPS implementing entity, as follows below: (i) Decentralization process. It was agreed that once the procedures for decentralization of administrative and financial functions to regional offices are defined and preparation of manual is completed FPS should submit them to the Bank for its no objection. The date for this will depend on the date for changes in current delegation of authority, no action is required if while the current arrangements apply. (ii) Accounting system. In relation to the accounting system and the financial information prepared, FPS has to consider the following issues: Separate Accounts. We could verify that in general, separate accounts have been established for each agreement. However, it is important that the accounting system provide balances by credit/trust fund agreement for all the accounts that record the use of special account funds (e.g. advances to contractors, counterpart funds) and permits the preparation of proper reconciliation using the balances and information of the accounting records. It was agreed the modifications to the accounting system will be made by the end of 2001 so that these operations will carry credit specific codes. Counterpart funds. FPS should strengthen the internal controls over the use and collection of counterpart funds as well as their recording in the accounting system and the reports that may need to be produced to permit preparation of financial statements required by the Bank. It was agreed that counterfunding will be booked separately by credit by the end of Local currency bank account. Currently FPS uses one local currency bank account to which transfers from the different special accounts are made. Separate sub-accounts for each agreement have been established in the accounting chart to control funds by credit/trust agreement. It is important to mention that the reconciliation process carried out as of December 31, 2000 determined the exact and correct balances of each one of these separate accounts the entity, now, has to implement all the mechanisms and procedures sub-account records regarding each one of the credit/trusts are kept up-todate and reconciled. It was agreed that separate fiscal accounts ( local currency accounts) will be used for each bank credit/trust fund by the end of Withdrawal Applications and Special Account For project execution purposes, two Special Deposit Accounts (SA) would be opened and maintained in US Dollars at the Banco Central de Bolivia (Central Bank of Bolivia) on terms and conditions satisfactory to the BANK: one of them to be used by the URS within the Ministry of Health (Special Account A), and the other to be used by the FPS (Special Account B). Financing of SA operating charges will be charged to Operating Costs where they are related to specific payments out of the SA. Deposits into the Special Accounts and replenishments up to the authorized allocations set out in the DCA and the disbursement letters, would be made initially on the basis of Applications for 62

69 Annex 6: Procurement and Disbursement Arrangements Withdrawals (Form 1903) accompanied with the supporting and other documentation as specified in the Disbursement Handbook. Once transition to PMR-based disbursements for PCU is agreed upon(as described hereafter), replenishment applications should be submitted at quarterly (or other agreed period) intervals, and must be accompanied by the PMRs. PMR Reporting The project implementing agencies have agreed to prepare Project Management Reports in accordance with the guidelines presented in Project Management Manual ( Exposure Draft February, 1999) and will present these quarterly to the Bank. The URS has already this capacity and FPS will incorporate the reporting requirements in the changes to the systems to be developed in It is clear that the Implementing Units have the option to move to PMR based disbursements once both agencies have demonstrated a clear capacity and familiarity with the related reports and are both certified by the Bank to use this option. Financial Audit Arrangements An independent external audit firm, acceptable to the Bank, would be hired to carry out annual audits of the project in accordance with terms of reference acceptable to the Bank and consistent with relevant Bank publications regarding auditing. Certified copies of the audit reports would be furnished to the Association no later than six months after the closing date of the previous fiscal year. Additionally, an entity audit is required for the FPS. Auditing fees for the Ministry of Health Component are incremental expenses and are to be covered by Consulting Services, no provision is made for financing FPS projects or entity audit fees. 63

70 Annex 6: Procurement and Disbursement Arrangements Annex 6, Table A: Project Costs by Procurement Arrangements (in US$ million equivalent) Expenditure Category Procurement Method Total Cost ICB NCB Other NBF 1. Works I (a) For all components except a/ 1.19 subprojects of Component II(B) (0.00) (0.00) (1.19) (1.0) (b) For subprojects of Component (B) (.36) (1.14) (1.50) 2. Goods (a) For all components except /b subprojects of Component II(B) (2.70) (1.50) (2.29) (6.49) (b) For subprojects of Component II(B) (0.00) (2.00) (1.75) (3.75) 3. Consultant Services (a) For all components except 6.81 c/ 6.81 subprojects of Component II(B) _ (6.81) (6.81) (b) For subprojects of Component _II(B) (0.75) (0.75) 4. Health Workers (13.5) (13.5) 5. Operational Costs l (1.20) (1.20) Total l (2.70) (3.6) (28.44) (35.0) Note: N.B.F. = Not Bank-financed (includes elements procured under parallel co-financing procedures, consultancies under trust funds, any reserved procurement, and any other miscellaneous items). The procurement arrangements for the items listed under "Other" and details of the items listed as "N.B.F." need to be explained in footnotes to the table or in the text. Figures in parenthesis are the amounts to be financed by the Bank loan/ida credit Footnotes a/ Three quotations (i.e.: Small works procured under lump-sum, fixed-price contracts awarded on the basis of quotations obtained from three (3) qualified domestic contractors in response to a written invitation. The award shall be made to the contractor who offers the lowest price quotation for the required work, and who has the experience and resources to complete the contract successfully). b/ Shopping (National and International). Contracts awarded in accordance with the methods described in paragraphs 3.5 and 3.6 of Section III in the Procurement Guidelines b/ PAHO: contracts awarded for supply of vaccines and syringes in an amount not less than $200,000 equivalent and conducted by PAHO/WHO. PAHO will procure vaccines and syringes in an open unrestricted competitive manner consistent with Bank procedures for goods and will charge a fee for the cost of the services. Bank financing provides for 7.0% of overall costs of an immunization program over a four-year period estimated to cost $40.0 million with co-financing of the GOB and donors countries. c/ Consultants' Services. Contracts awarded to firms using Quality-and-Cost-Based selection (QCBS) and Least Cost selection (up to an aggregate amount of $50,000) and to individual consultants in accordance with paragraphs 5.1 to 5.3 of the Consultants Guidelines (up to an aggregate amount of $11,220,000). or: c/ Consultants' Services. Details provided in Table A-1 64

71 Annex 6: Procurement and Disbursement Arrangements Annex 6, Table Al: Consultant Selection Arrangements (in US$ million equivalent) Consultant Selection Method Total Cost Services (including Expenditure contingencies) Category QCBS QBS SFB LCS CQ Other N.B.F A. Firms (3.20) ( ) () (0.05) ( ) ( ) ) (3'-97) B. Individuals _ ( )_ ( ) ( ) ( ) ( ) ~~~~~~~~(3.59) () (1 1.2) Total (3.20) ( ) ( ) (0.05) ( ) (4.31) ( ) (7.56) Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed. Figures in parenthesis are the amounts to be financed by the Bank loan. 65

72 Annex 6: Procurement and Disbursement Arrangements Annex 6, Table B: Thresholds for Procurement Methods and Prior Review Expenditure Contract Value Procurement Contracts Subject to Category (Threshold) Method Prior Review US $ US $ millions 1. Works = > 3,000,000 ICB All < 3,000,000 but NCB All >250,000 < = 250,000 Three Quotations Prior Review: twice-yearly review (PSW) of procurement plan. As provided in the Other Methods of As provided in the Procurement Procurement Plan Procurement Plan 2. Goods = >200,000 ICB All <200,000 but > 50,000 NCB Each contract with estimated price of $100,000 or more < = 50,000 Local! Prior Review: twice-yearly review International of Procurement Plan Shopping (L/I S) As provided in the Other Methods of As provided in the Procurement Procurement Plan Procurement Plan 3. Consultants As provided in the QCBS Prior Reviev for Consultants: All (Firms) Selection Plan TORs, short lists and full review of technical and final evaluation reports of each contract estimated to cost $100,000 or more. QCBS Prior review for Consultants: twice-yearly review of Selection Plan under agreed TORs. As provided in the Other Methods of As provided in the Selection Plan. Selection Plan Selection (Individuals) IC (See Section V Prior Review for Consultants: All of Guidelines) (TOR, contract, CV) of each contract estimated to cost $35,000 equivalent or more. Post Review for Consultants: random sample of contracts estimated to cost less than $35,000 equivalent. IC (See Section V of Guidelines) Total value of contracts subject to prior review: $7.62 (19%) Prior Review for Consultants: twice-yearly review of Selection Plan under agreed standard TORs. I'ercentagestiinated over a tolal amount ol $ million which( does not cotisikier S29.75 million from donor coonilries. 66

73 Annex 6: Procurement and Disbursement Arrangements Overall Procurement Risk Assessment: High= AverageX Low Frequency of procurement supervision missions proposed: One every 6 month(s) (includes one special procurement supervision for post-review) reviewing a sample of I in 5 contracts signed. Annex 6, Table C: Allocation of Loan Proceeds Expenditure Category Amount in US$ Financing Percentage thousands equivalent* 1. Civil Works - For all components except subprojects under Component % ll(b) - For subprojects under Component II(B) Goods -For all components except subprojects under Component % of foreign II(B) expenditures 77% of local expenditures - For subprojects under Component l(b) Consulting Services - For all components except subprojects under Component % II(B) - For subprojects under Component II(B) Health Workers: staff bonuses and salaries, and 13.5 For expenditures transportation and food expenses made on or before December 31, 2002: 100%; for expenditures made after December 31, 2002 but on or before December 31, 2004: 80%; and thereafter: 60% 5. Incremental Operating Costs: operational expenses for % project coordination, monitoring and supervision _ Total Project Costs 35.0 Unallocated 0.0 Total 35.0 * The exchange rate for SDRs is: USD for 1 SDR 67

74 Annex 7: Project Processing Budget and Schedule Bolivia: Health Sector Reform Program - Phase II Project Schedule Planned Actual (At final PCD stage) Time taken to prepare the project (months) 2.5 months First Bank mission (identification) 04/23/ /23/2001 Appraisal mission departure 05/23/ /23/2001 Negotiations 05/29/ /28/2001 Planned Date of Effectiveness 12/30/ Prepared by: Ministry of Health Preparation assistance: none Bank staff who worked on the project included: Name Daniel Cotlear Evangeline Javier John Lincoln Newman Cynthia Lopez Judith McGuire Michele Gragnolati Ruth Levine Marian Kaminskis Charles Griffin Rudolf Van Puymbroeck Amie Batson Adam Wagstaff Jerker Liljestrand David Varela Xiomara Morel Paul Sisk Keisgner Alfaro Luis Perez Manuel Vasquez Valdes Hernan Rosenberg Gina Tambini Osvaldo Barrezueta Pablo Aguilar Specialty Task Team Leader Country Sector Leader Program Coordinator/Resident Representative Health Specialist Nutrition Specialist HNP Economist Senior Health Economist Project Assistant Health Sector Manager Peer Reviewer Peer Reviewer Peer Reviewer Peer Reviewer Legal Counsel Financial Management Specialist Financial Management Specialist Procurement Specialist Health Consultant - Public Health Health Consultant (PAHO) - Human Resources PAHO Staff- Health Systems PAHO Staff- Immunizations PAHO Staff- Immunizations PAHO Staff - Environmental Health 68

75 Annex 8: Documents in the Project File Bolivia: Health Sector Reform Program - Phase II ARMA PINANGIA AbNMMS1'A1*A CODIGO NOMBRE DEL DOCUMENTO IAUTOR ANO DE TIPO DE ELABORACION DOCUMENTO FIN-01 COMPROMISOS DE GESTION (DOCUMENTO TEORICO) LIC. FRANCISCO ARDAYA seo-98 el FIN-02 COMPROMISOS DE GESTION SUSCRITO CON ARA CHUQUISACA Y EN NEGOCIACION CON COCHABAMBA LIC. FRANCISCO ARDAA oc-98 _ B FIN-03 PRESUPUESTO POR COMPONENTES DEL PROYECTO LIC. FRANCISCO ARDAYA nov-98 Bl FIN-04 CONVENIO TIPO PARA FIRMA DE COMPROMISOS DE LIC. FRANCISCO ARDAYA GESTION.nov-98 Bl FIN-05 COMPROMISOS DE GESTION - DOCUMENTO DE LIC. FRANCISCO ARDAYA Bl DIFUSION,-8D FIN-O6 ORGANIZACION ESTRUCTURAL Y PROCESOS URS E ING. JORGE TECNICOS DEL PROYECTO CAVERO nov-98 BI FIN-07 ESTRUCTURA FINANCIERA Y ORGANIZACION TECNICA URS Y LIC WiLFORD DEL PROYECTO PACHECO nov-98 Sl FIN-08 PROCESOS GENERALES. PROCESOS DE URS Y LIC WILFORD COMPROMISOS DE GESTION Y PROCESOS PACHECO ADMINISTRATIVOS DEL PROYECTO nov-98 Bl FIN-09 INFORMEVALUACION ANUAL DE 6 INDICADORES 1999 LIC.TATIANA RUILOBA mar-00 Bl FIN-10 MUNICIPIOS EN RIESGO 1999 LIC TATIANA RUILOBA mar-00 Bl FIN-11 INFORMEVALUACION ANUAL DE 11 INDICADORES LIC.TATIANA RUILOBA mar-01 Bl FIN-12 MUNICIPIOS EN RIESGO 2000 LIC.TATIANA RUIL6BA mar-01 Bl FIN-13 DOCUMENTO INDICADORES 2001 LICTATIANA RUILOBA mar-01 Bl FIN-14 COMPROMISOS DE GESTION - DOCUMENTO DE LIC. TATIANA RUILOBA..DIUSO noy-00 Bl FIN-15 COMPROMISOS DE GESTION 1999 _GSS mar-99 Bl FIN-l6 COMPROMISOS DE GESTION 2000 DGSS mar-00 Bl FIN-17 INSTRUMENTOS DE EVALUACION DE COMP.DE OPS I (3ESTION OPS mar-01 Bl FIN-18 INFORME DE EJECUCION FINANCIERA DEL PROYECTO LIC. FRANCISCO ARDAYA mar-01 Bl FJIN MODULO ADMINISTRATIVO PARA LA GESTION LIC. XIMENA SANCHEZ mar-01 Bl DESCONCENTRADA RECURSOS DE GENERCION I LOCAL mar-01 Si IJ-20 IS1SEMA DE LOGISTICA -PAI LIC. XIMENA SANCHEZ mar-01 Bl FJN-21 SISTEMA DE CONTROL - SBS ILIC. XIMENA SANCHEZ mar-01 el IN-22 IGESTION LOCAL DEL SBS ILIC. XIMENA SANCHEZ mar-01 Bl CODIGO,ANODE TIPODE NOMBRE DEL DOCUMENTO AUTOR ELABORACION DOCUMENTO PAI-1 PAI42 PAI-03 PAI-04 PAI4-5 PAI4-6 PROYECTO DE APOYO A LA REFORMA DE SALUD -SUB- TERCERA MISION DEL COMPONENTE PROGRAMA AMPLIADO DE BANCO MUNDIAL INMUNIZACION SeP-98 B INFORMEVALUACION DE PROGRAMA AMPLIADO DE MINISTERIO DE SALU DE INMUNIZACIONES BOLIVIA Y OPS Oct-98 ES INFORME DE ASESORIA TECNICA EN EL AREA DE ING. VICTOR GOMEZ -OPS CADENA DE FRIO nov-98 ES PLAN QUINQUENAL DEL PROGRAMA AMPLIADO DE MINISTERIO DE SALU DE INMUNIZACIONES BOLIVIA Y OPS nov-98 ES ROBERTHO BORTH, JUAN EVALUACION PROGRAMA AMPLIADO DE INMUNIZACION CARLOS MALLO Y VIRGILIO PRIETO nov-98 E DOCUMENTO DE PAII (INFORME DE PROGRESO DEL PLAN QUINOUENAL) PAI mar

76 Annex 8: Documents in the Project File AND DE TIPO DE CODIGO NOMBRE DEL DOCUMENTO AUTOR ELABORACION DOCUMENTO INF401 DOCUMENTO EJECUTIVO SOBRE INFRAESTRUCTURA SUSSY BAZAN, XIMENA FISICA, EQUIPAMIENTO Y RECURSOS DE UNIDADES DE LOURDES MONCADA Y SALUD INF402 CRITERIOS DE LA POBLACION POR MUNICIPIOS ING CRISTIAN PEREIRA S. MONICA SARAVIA dir97 ES INF-03 ANALISIS DE LA POBLACION BOIVIANA POR MUNICIPIOS ING CRISTIAN PEREIRA S. mar-98 Bl INF-04 INF45 INF-04 INF4-7 PROYECTO DE FORTALECIMIENTO DE INFRAESTRUCTURA Y EQUIPAMIENTO DE LOS ING CRISTIAN PEREIRA S. SERVICIOS DE 1ER NIVEL Y HOSPITALES DE DISTRITO _ PRESENTADO A LA UNION EUROPEA mar-98 Bli DOCUMENTO DEL FONDO CONCURSABLE DE ING CRISTIAN PEREIRA S. INVERSION EN SALUD IFOCSIS) Y FIS iun MODIFICACION DEL DOCUMENTO DEL FOCSIS A LA ING CRISTIAN PEREIRA S. PROPUESTA DE MECANISMOS DE ASIGNACION DE Y FIS RECURSOS MAR YFIS ocd-98 Bl GUIA DE FORMULACION DE PROYECTOS DEL FOCSIS ING CRISTIAN PEREIRA S.L INF48 ADECUACION DE LA GUIA DE FORMULACION DE ING CRISTIAN PEREIRA S. PROYECTOS DEL FOCSIS Y FIS ot-98 Bl INF4OS ING CRISTIAN PEREIRA S. CRITERIOS DE ELEGIBILIDAD PARA EL FOCSIS IN FIS PER BlS INF-10 PROPUESTA PRELIMINAR FOCC DR. FERNANDO CISNEROS PROPUESTA PRELIMINAR INF-i 1 ANALISIS DE CRIrERIOS DE ELEGIBILIDAD ING CRISTIAN PEREI RA S. INF-12 FOCC ~ ~ ~ ' FIS unm-98 ESi DETALLE DEL CICLO DE PROYECTOS DEL MAR ING CRISTIAN PEREIRA S. Y FIS se -9 SIL INF413 RESUMEN DEL PROYECTO PILOTO EN HOJAS ING. CRISTIAN PEREIRA S EJECUTIVAS 98 B INF-14 DOCUMENTO DE DIFUSION Y PRESENTACION DEL MAR ING. CRISTIAN PEREIRA S IMECANISMO DE ASIGNACION DE RECURSOSt od_-98 Bl INF-15 PROPUESTA DE PILOTAJE ING CRISTIAN PEREIRA S nov-98 el INF-1 ING CRISTIAN PEREIRA S. GUIA DE P RES ENTAC ION DE PROY ECTOS Y FIS nov-98 INF-17 INFORME MAR (MECANISMOS DE ASIGNACION DE ING CRISTIAN PEREIRA S. _ RECURSOS EN SALUDO YFIS m-01 Bl 70

77 Annex 8: Documents in the Project File AREA SAW- Aho DE TIPO DE CODIGO NOMBRE DEL DOCUMENTO AUTOR ELABORACION DOCUMENTO SAL-01 BASE DE DATOS Y ANALISIS DE ESTRUCTURA DE COSTOS EN EL AREA MATERNO tnfantil CARLOS JUANES, FERNANDO RIVERO, MERCADO Y RAMIRO LA FUENTE nw-97 ES SAL-02 CALIDAD DE LA ATENCION DEL PARTO EN LOS MIGUEL ANGEL DISTINTOS NIVELES DE RESOLUCION EN BOLIVIA FERNANDEZ jul-98 ES SAL-03 PROPUESTA DE ASPECTOS OPERATIVOS ESCENCIALES PARA IMPLEMENTAR UN FONDO CONCURSABLEN EL GUIDO MONASTERIOS MARCO DEL PROYECTO DEL MINISTERIO CON EL BANCO MUNDIAL jul-98 ES SAL-04 TENDENCIAS Y CONDUCTAS EN LA UTILIZACION DE RAMIRO MAMANI, ESTHER MOLDES Y FANNY SERVICIOS DE SALUD CORNEJO iui-98 ES SAL-0s SAL-06 SAL-07 SAL-O8 SAL-09 TENDENCIAS Y CONDUCTAS EN LA UTILIZACION DE RAMIRO MAMANI, ESTHER SERVICIOS DE SALUD-TRABAJO DE MOLDES Y FANNY COMPLEMENTACION SATISFACCION DEL USARIO CORNEJO nov-98 ES CHARLES BEDREGAL, EVALUACION DEL SISTEMA NACIONAL DE SALUD- MILENKA ROSSEL, OLGA SOLIZ, MERY LOREDO, NUEVO MODELO SANITARIO BOLIVIANO HENRRY ZABALETA Y. "VICTOR ZAPATA nov-98 ES DOCUMENTO DE CHALLAPATA DOCUMENTO CHALLAPATA DE LIC MARINA CARDENAS- SALUD marql. SAL. ~~~~ABRIR SALUD FAMILIAR Y COMUNITARIA (ABRIR-SALUD) LIC MARINA CARDENAS- ma SAL DOCUMENTO DE SAN LORENZO DR. GERMAN CRESPO- CANA A mar-01 SA SAL-10 SALUD FAMILIAR Y COMUNITARIA (CANADA) CANADA rnar-01 SAL SAL-t1 MAPA NACIONAL DE SALUD MATERNA Y NEONATAL d00 inap ES SAL-12 PLAN NACIONAL DE SALUD MATERNA Y NEONATAL UNAP dic-00 Bl OTRASAREAS CODIGO NOMBRE DEL DOCUMENTO AUTOR ABO DE TIPO DE OTR-1 MARCO INSTITUCIONAL LIC. MARCELO BARRON oct-98 Bl OTR-02 PROYECTO DEL DS SEDES LIC. MARCELO BARRON oct-98 Bl OTR-03 PLAN DE COMUNICACION SOCIAL LIC. FRANCO CLAVIJO oct-98 ES OTR-04 DOCUMENTO DE MATRIZ ORDENADORA DR. GUIDO MONASTERIOS nov-00. B OTR45H06~ MATRIZ ORDENADORA LLENADA DR. GUIDO MONASTERIOS dic-00 Bl OTR4fs MATRIZ DE SEGUIMIENTO AL PES DR, GUIDO MONASTERIOS en%01 Bl OTR407 UCAP-UNIDA DE DOCUMENTO DE CARRERA SANITARIA CAPACITACION RRHH MSPS mar-01 Bl OTR-B EL PROCESO DE REFORMA DE SALUD DR. FERNANDO LAVADENZ B OTR-09 LEY DEL SEGURO UNIVERSAL DE SALUD EQUIPO MSPS-SENADO dic00 BI OTR-10 D.S. DE CONTRATOS DE GESTION MSPS jun-99 Bl OTR-1I DIRECCION GENERAL DE PROPUESTA DE R.M. CONGRESO BOLIVIANO DE SALUD SERVICIOS DE SALUD- MSPS mar-0l Bl OTR-12 PROPUESTA MSPS A DUF (POLITICA NAL. DE COMPENSACION DE LA INVERSION MUNICIPAL) MSPS mar-01 B OTR-13 INFORME DEL SNIS SNIS abr-01 OTR OTR-14 MODULO DE CAPACITACION PARA EL USO DE WNZIG 10PS OTR 71

78 Annex 8: Documents in the Project File Af4O DE TlPO DE CODIGO NOMORE DEL DOCUMENTO AUTOR ELABORACION DOCUMENTO SBS-01 COBEURAS LARINA CARDENAS mas98 Bl S-042 PROYECTO DE DECRETO SUPREMO SBS MARINA CARDENAS mav-98 Bl SBS3-0 ANALISIS TECNICO FINANCIERO DEL PAI MARINA CARDENAS,m,a-09 Bi SBS-04 ESTIMACION DE COSTOS DE LAS PRESTACIONES DEL MARINA CARDENAS ago-98 Bl SBS SBSS05 SEGURO BASICO DE SALUD -DOCUMENTO DE MARINA CARDENAS oct-98 Bl DIFUSIONY DOCUMENTO DE DISCUSI6N SBS46.o MUNICIPIOS MARINA CARDENAS oct-de Bl SBS-07 CONVENIO TIPO PARA PREFECTURAS Y GOBIERNOS MARINA CARDENAS oct-98 Bl IMUNICIPALES CON SBS SBS-08 CONVENIO TIPO PARA AUTONOMIZACION DE MARINA CARDENAS oct-98 Bl HOSPITALES CON SBS Y RS SBS-09 CALCULO FINANCIERO DEL IMPACTO DEL SBS MARINA CARDENAS nov-98 Bl SBS-10 ESTUDIO DE CUENTAS NACIONALES DE GASTO EN EQUIPO HARVARD jun-98 ES SALUD EN BOLIVIA -PROYECTO HARVARD SBS-11 MEJORAMIENTO DE LA CALIDAD DE ATENCION. EQUIPO UNICEF Y MSPS may-98 Si ESTANDARES E INDICADORE SBS SBS-12 PROGRAMA DE COMUNICACION EDUCATIVA - SBS EQUIPO UNICEF Y MSPS mav-98 SBS PRIMERAS CAUSAS DE NOTIFICACION EQUIPO UNICEF Y MSPS may-98 Bl ENFERMEDADES TRANSMISIBLES Y DANOS DE SALUD- SBS SBS-14 MANUAL DE NORMAS TECNICAS DE ATENCION A LA EQUIPO UNICEF Y MSPS may-98 Bl NINEZ-SBS_ SBS-15 INSTRUMENTAL Y EQUIPO DE LABORATORIO EQUIPO UNICEF Y MSPS may-98 B1 NECESARIO POR NIVEL DE ATENCION-SBS SBS-16 ESTIMACION DEL COSTO DEL INSTRUMENTAL Y EQUIPO EQUIPO UNICEF Y MSPS may-98 BI == MEDICO-SBSS SBS-17 MANUAL DE NORMAS TECNICAS DE PROMOCION Y EQUIPO UNICEF Y MSPS may-98 BI I IREHABILITACIONUTRICIONAL-SBS SBS18 TPAQUETE DE MEDICAMENTOS E INSUMOS SBS 1EOUIPO UNICEF YMSPS mv-98 il SBS-19 MANUAL DE NORMAS TECNICAS DE LABORATORIO, EQUIPO UNICEF Y MSPS may-98 Bl MANUAL DE PROCEDIMIENTOS ADMINISTRATIVOS Y MANUAL DEL COMITE NACIONAL DE COORDINACION idel SBS SBS-20 MANUAL DE NORMAS TECNICAS DE ATENCION A LA EQUIPO UNICEF Y MSPS may-98 Bl MUJER SBS-21 DETERMINACION DE COSTOS DE MEDICAMENTOS E EQUIPO UNICEF Y MSPS may-98 Bl INSUMOS DEL SBS ISBS22 GUIA PARA LOS USUARIOS SBS EQUIPO UNICEF Y MSPS m3v-98 Bl SBS-23 DOCUMENTO DE LINEAS ESTRATEGICASBS EQUIPO SBS m r41i Bl ISBS.24 r IACTUALIZACION DE COSTOS DEL SBS GRUPO EQUIDAD mr1l Rl SBS-25 ESTUDIO DE COSTOS DEL SBS (PHRI PHR _mr-01 ES SBS-26 DOCUMENTO DE RONDAS MEDICAS IUIPO SBS mar-01 il ISBS-27 IGUIA TECNICA DE MANCOMUNIDADES NICOLE SCHWAB _ m-il.b wai ISBS-2 ROPUESTA OSERVATORIO EQUIDAD COLE SCHWAB mar-0 B SBS-29 fdocumentops DE CUENTAS NACIONALES lops *br41. Bl 72

79 Annex 8: Documents in the Project File ARMA &ALWFStLCA CODIGO NOMBRE DEL DOCUMENTO AUTOR ANOR DE ELA130RACION SP-41 SP42 SP-03 SP-04 SP-05 SP-06 SP-07 SP-08 SP-O9 SP-10 SP-11 SP-12 TIPO DE DOCUMENTO INFORME SOBRE CONSTITUCION DE REDES DE VICTOR ZAPATA, OLGA SERVICIOS Y COBERTURAS ALCANZADAS EN LOS SOLIZ, LISBETH ROSSEL Y PRIORIZADOS DEL MODELO DE ATENCION MERY LOREDO nov-97 ES GUIA DE IMPLEMENTACION PERFIL DE PROYECTO LIC MARIA LUISA SALINAS mar-98 Bl PLAN ESTRATEGICO DE SALUD WARNES, SANTA CRUZ, COLCAPIRHUA, COCHABAMBA, EL ALTO Y LA PAZ PLAN NACIONAL IMCI PLAN REGIONAL IMCI, LA PAZ, CBBA Y SANTA CRUZ MA.LUISA SALINASma-8 EQUIPO TECNICO NACIONAL IMCI NACIONAL jun-9 B1 LIC. MARIA LUISA SALINAS APERTURA PROGRAMATICA PAQUETE MATERNO LIC MA.LUISA SALINAS NIONATAL _98 B ul PLAN NACIONAL PAQUETE MATERNO NEONATAL (MBP EQUIPO TECNICO ) NACIONAL MUJER-NINO seq-98 Bl PLAN DEPARTAMENTAL PAQUETE MATERNO NEONATAL EQUIPO TECNICO DEPTAL LPZ.CBBA.SCZ (MBP 99/01) _ MUJER-NINO se_-98 Bl PLAN NAL. ATENCION INTEGRAL DE ENFERMEDADES PREVALENTE DE LA INFANCIA (IMCI)SALINAS 0se-98 Bl PLAN DEPTAL LA PAZ, CBBA Y SCZ ATENCION INTEGRAL DE ENFERMEDADES PREVALENTES DE LA LIC MA.LUISA SALINAS (IMCI) _oct98 _NFANCIA BI INFORME PRELIMINAR "ESTUDIO RED OBSTETRICA Y EQUIPO DE NEONATAL LPZ. CBBA Y SCZ CONSULTORES nov-98 Si REDES PUBLICAS DESCENTRALIZADAS Y GRUPO EQUIDAD COMUNITARIAS DE SALUD EN BOLIVIA abr-01 Bl SP 13 CONTRATO DE GESTION DEL H. 3OLIVIANO HOLANDES GRUPO EQUIDAD.. : = rn~~~~~~~~~~~~~~~~~~~~~~~~~av-00 Bl SP-14 GESTION AUTONOMA DE HOSPITALES ORA. MA ELENA ZABALA mar-o1 BI SP-ii.EVALUACION MUNICIPAL DRA. MA ELENA ZABALA mar-01 Bl SP.16 DR. ANTONIO SARAVIA V., MANUAL DE PROCEDIMIENTOS DEL PSF DRA. MA.CECILIA PRIETO 6B. PSF/BID Bl SP-17 REDES DE SERVICIOS SOCIALES PARA EL DESARROLLO DE LA SALUD MATERNA Y NEONATAL mav40 Sl SP-18 OBSERVATORIO DE CALIDAD LIC. MA.LUISA SALINAS mar-01 Sl SP-19 EVALUACION DE HOSPITALES LIC. TATIANA RUILOBA mar-01 Bl SP-20 AUDITORIA DE RECETAS UNAMEL mar-00 Bl SP-21 DOCUMENTO DE EXTENSION COMUNITARIA (ESPANA) ES I 73

80 Annex 9: Bolivia Statement of IFC and World Bank Loans and Credits Bolivia: Health Sector Reform Program - Phase II Bolivia Statement of IFC's Held and Disbursed Portfolio As of 12/31/00 (In US Dollars Millions) Held Disbursed FY Approval Companv Loan Equity Ouasi Partic Loan Equitv Ouasi Partic 1976/88/90/91/95/98 BISA /92/94/96/00 COMSUR Caja Los Andes Central Aguirre Electropaz GENEX Illimani Inti Raymi Mercantil-BOL /89 Minera Telecel Bolivia Total Portfolio: ApDrovals Pending Commitment Loan Equity Ouasi Partic 2001 TelecelIl Banco Ganadero Total Pending Commitment:

81 Annex 12: Status of Bank Group Operations (Operations Portfolio) As of April 13, 2001 Closed Projects: 61 IBRD/IDA * Total Disbursed (Active) of which has been repaid 0.00 Total Disbursed (Closed) 1, of which has been repaid Total Disbursed (Active + Closed) 1, of which has been repaid Total Undisbursed (Active) Total Undisbursed (Closed) 2.07 Total Undisbursed (Active + Closed) Active Proiects Last PSR Supervision Ratin! Orieinal Amount in US$ Millions Project ID Project Name Dev. Obiectives ImR. Progress Fiscal Year IBRD IDA GRANT Cancel. P ABAPO-CAMIRI HIGHWAY S S P BO- EDUCATION QUALITY S S P BO- EDUCATION REFORM S S P BO- HEALTH REFORM HS HS P BO- INTEGRATED CHILD DEV S S P ENV.IND.& MINING U U P FIN DECEN & ACCT S HS P HYDROCARBON SECTOR SOCIAL & ENV. (LIL) S S P INDIGENOUS PEOPLES DEVELOPMENT P INST REF (OLD CIV S) S S P LAND ADMINISTRATION S S P PARTICIP RURAL INV. S U P RD MAINT S S P REG REFORM ADJ CREDI S S P REGULATORY REFORM & PRIVATIZATION (TA) S S P RURAL WTR & SANIT S S P Sustainability of Protected Areas Overall result Result

82 Annex 10: Bolivia at a Glance Bolivia: Health Sector Reform Program - Phase II Bolivia at a glance Latin Lower- POVERTY and SOCIAL America middle- Bolivia & Carib. income Daveaopmernt diamond Pooulabon. mid-year (millions) Life expectancy GNP Der capita (At/as method, US$) GNP (Atas method, US$ billions) Average annual growth, Population (%) Labor force%) GNP Gross per - - pnmary Most recent estimate (latest year available, ) capita enmrlmenl Povertv (% of oonulation below national oovertv linel 67 - Urban pooulation (% of tota/ powulation) Life exoectancv at birth (vears) Infant mortality (oer live births) Child malnutrition (% of children under 5) Access to safe water Access to improved water source (% of DoDulation) Illiteracy (% ofoodulation aae 1S+) Gross ormarv enrollment (% ofschool-aqeoooulabon) livia Male Lower-middle-income group Female KEY ECONOMIC RATIOS and LONG-TERM TRENDS Economic ratlos GDP 1US$ billions) Gross domestc investmentlgop Exports of goods and serviees/gdp I Trade Gross domestc savings/gdp Gross nabonal savings/gdp T Current account balance/gdp Interest payrments/gdp ,Domestc _ Investment Total debt/gdp Savings Total debt service/exports Present value of debt/gdp 57.9 Present value of debt/exports Indebtedness (average annual growth) GDP rbolivia GNP per capita Lower-miMle-ioome group Exports of goods and services STRUCTURE of the ECONOMY Growlh of Invsment and GDP (%) (%/ of GDP) 40 Agriculture Industry Manufacturing Servces t Private consumption General aovemmentconsumrtron GDJ -OGW Imports of goods and services Growth of esperta and Imporb (%) (average annual growth) Agriculture 20 Industry.. 0 Manufacturing Services.. 0 v Private consumpton General oovemment consumdtion Gross domestic investment Imports of goods and services Exports -*Imports Gross national product Note; 1999 data are preliminary estmates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.

83 Bolivia PRICES and GOVERNMENT FINANCE Innation [%) Domestic pnces Vnlto( (% change) Consumer prices Implicit GDP deflator Govemment finance (% of GDP, includes curent grants) o Current revenue B 9 Current budget balance GDPdeflator CPI Overall surplus/defiat., TRADE (US$ 1979 milfions) FEport and Import levels [USS mill.) (UJSS millbons) Total exports (fob) 723 1,105 1,051 2,000 Tin Zinc Manufactures jjjjjj Total imports (cio 662 1, ' Food Fuel and energy.. Capital goods. Export Drice index (1995=100) B Import price index (1995=100) 79. Exports U Imports Terms of trade (1995=100) BALANCE of PAYMENTS Current account balance to GDP (%) (USS mxillions) Exports of goods and services B ,356 1,311 0 Imports of goods and services 1,129 1,026 2,201 1,989 Resource balance Net income Net current transfers Current account balance ' Financing items (net) Changes in net reserves B Memo: Reserves including oold (USS millions) , Conversion rate (DEC. iocal/uss) 3.O0E EXTERNAL DEBT and RESOURCE FLOWS (US$ millions) Composition of 1999 debt (USS mill.) Total debt outstanding and disbursed 2,556 4,132 6,090 6,170 IBRD IDA ,045 1, Total debt service IBRD IDA Composition of net resource flows 68 Official grants Official creditors Private creditors Foreign direct investment Portfolio equity World Bank program Commitments A - IBRD E- Bilateral Disbursements B - IDA D - Olher multilateral F - Pnvate Principal repayments C - IMF G - Short-term Net flows Interest payments Net transfers Development Economics 916/00 77

84 Annex 11: Letter of Development Policy Bolivia: Health Sector Reform Program - Phase II La Paz, Bolivia, May 30, 2001 Mr. James Wolfensohn President The World Bank 1818 H. Street, NW F 1227 Washington, D.C Dear Mr. Wolfensohn: I am very pleased to present you with this health sector policy letter, containing the primary strategies that our country seeks to implement through the second phase of the Health Reform Program, currently being negotiated with the World Bank. The central tenets of the health reforrn program are set our in the "equity pillar" of the Bolivian Government's anti-poverty plan ( ), which framed the strategies in the first phase of the APL. The objectives of the equity pillar are to improve the living conditions of the population, particularly those living in poverty. The second phase of the Health Reform Program continues in this line within the framework set by the Bolivian Strategy for Poverty Reduction (EBRP), elaborated on the basis of inputs from all actors of society voiced during the National Dialogue Bolivia continues its close relationship with the Bank, through the Country Assistance Strategy (CAS), whose main variable is the accelerated reduction of infant mortality. Targets established for the first phase of the APL for infant and maternal mortality, and set out in the government's Strategic Health Plan are still valid: infant mortality should fall from 67 deaths per 1,000 live births in 1997, to 48 per 1,000 live births in Correspondingly, maternal mortality should be reduced from 390 deaths per 100,000 live births in 1997, to 320 per 100,000 in In order to reach the objectives set forth, as well as to measure both effort and impact, Bolivia will continue to place great emphasis on systematically monitoring results. The first phase of the program was successful in expanding the coverage and improving the quality of services included in the Basic Health Insurance in those areas where there are enough human resources for the effective supply of services. The second phase of the APL will use the same objectives, indicators and monitoring style, based on the results of the first phase. The new element introduced by the second phase consists in the support for a Program for the Extension of Health Coverage (EXTENSA). This program will focus on poor areas and work through health teams including community agents, auxiliary nurses and itinerant professionals. This component corresponds to the first priority set out by the Bolivian Strategy for Poverty Reduction (EBRP). The second phase will consist of the implementation of the following priority components: i) Coverage and quality improvements of the Basic Health Insurance (SBS) and empowerment of communities a. Strengthening policy development, regulation and monitoring of the SBS, by supporting the improvement of the quality of information, and the implementation of activities that empower 78

85 Annex I1: Letter of Development Policy ii) iii) b. indigenous users of the SBS. c. Strengthening national health programs for mothers and children, by supporting the continued implementation of the Second Generation of the Expanded Program of Immunizations and IMCI, MBP, nutrition and waste management programs. Strengthening local capacity to respond to health needs of the population a. Support to the National Program for the Extension of Health Coverage (EXTENSA), through assignment of health teams. b. Investment subprojects to expand the coverage of the SBS. Monitoring of Performance Indicators and Project Coordination. The areas of intervention proposed for the second phase of the Health Reform Program are aligned with Government-defined policies, as set forth in Supreme Decree (the Health Services Department Regulations) dated November 27, 1998, and Supreme Decree (creation of the Basic health Insurance) dated January 25, In addition, the government commits itself to the creation of EXTENSA through a Supreme Decree, no later than October Ist EXTENSA will contract human resources in health for areas with low coverage, using private short term contracts renewable according to performance. To make financing sustainable in the long term, the government will assign US$ I million in 2004, US$ 2.5 million in 2005 and US$ 4.9 million every year starting in 2006, for the EXTENSA program. EXTENSA could be financed through HIPC funds destined to human resources in health that are not transferred to municipalities (during the transition period until municipalities become responsible for decentralized health workers). Alternatively, the Government could solicit financing for this purpose from the World Bank and other donors. In addition, to ensure the continued financing of the SBS, the government commits itself to continue negotiations that will ensure the functioning of the automatic earmarking of 6.4% of municipal funds received from central government disbursements for the SBS. In order to facilitate a higher level of compliance with the Reform Program, the Government is committed to continue increasing domestic financing for vaccinations through annual increases of 0.5 million dollars, starting with 4 million dollars in 2002, until reaching the amount necessary to cover the full cost of the second generation Expanded Program of Immunizations (5.5 million dollars). With regard to Performance Agreements and decentralization, Bolivia will assume, with great political commitment, the application of agreements and management contracts, reinforcing the effective supervision and compliance with these agreements and thereby consolidating the generation of a resultsbased institutional culture and commitment to health at all levels that was initiated in phase one of the APL. Within this framework, we ratify our regard for the World Bank, and our commitment to assume the proposals and obligations presented above. We thank you for your consideration of the foregoing. Respectfully yours, Jose Luis Lupo Minister of Finance Republic of Bolivia 79

86 Annex 12: Participation and Social Communication Strategies Bolivia: Health Sector Reform Program - Phase II Multiculturalism is one of the greatest challenges of the health sector in Bolivia. This Annex describes how Phase I of the Project has addressed the issue of multiculturalism and what steps are proposed to strengthen the focus on participation for Phase II, including information, education and communication strategies. It concludes by listing monitoring and evaluation activities. Participation in health is understood as the active and conscious involvement of the population in activities to prevent and treat disease in the community. Considering the importance and value of multiculturalism and multiethnicity in the country, the project intends to promote participation that takes into account the communities' sociocultural context and practices and taps all the social mobilization mechanisms to be found in the different political, social, economic and religious structures of the country. Social Communication strategy is understood as the development and implementation of instruments that promote social participation. Health Inequality in Bolivia Bolivia is characterized by a wide variety of ethnic groups, which account for 57.1 percent of the total population. In rural areas, 80.7 percent of the population is native, whereas the corresponding figure is 44.9 percent in urban areas. While there is no specific information about the coverage of health services to indigenous groups, they are known to be a large part of the population without basic health services. Because most of the non-native population (43 percent) already had access to services prior to the recent expansion of coverage achieved by the SBS, it is likely that most of this expansion has been among the native population. Despite this, a key challenge of the health service remains increasing coverage to the indigenous populations. Participation Activities carried out in Phase I Phase I of the project included several activities designed to provide services to indigenous and native populations, based on the recommendations of anthropological studies of performance and trends in the utilization of health services and interaction with suppliers, undertaken as preparatory research in Aymara and Quechua population groups. The conclusions were summarized in the PAD for Phase 1. The following steps, in particular, were taken during APL 1: (i) incorporating the results of anthropological studies into the SBS attention protocols (including traditional drugs at the primary level of care); (ii) formalizing agreements with two of the largest indigenous organizations to implement the SBS in indigenous areas with monitoring by an indigenous health committee; (iii) supporting the Willaqkuna project which combines occidental and traditional medicine and has assigned Willaqkuna representatives to supervise maternity services in 10 hospitals; (iv) developing the Pregnant Women's Bill of Rights by using focal groups which included indigenous women; and (v) implementing user satisfaction surveys in 40 urban hospitals. a) Anthropological research: The project financed an anthropological study in two rural indigenous communities in order to investigate the reasons for the low demand for health services and the community's attitude with regard to health. The study emphasized the fact that many of the most rural areas with a high percentage of indigenous population are well organized by their own social and cultural standards and have strong community ties that have to be taken into account in the project's extension of coverage strategy. The study also points to State prejudices, in the supply of health 80

87 Annex 12: Participation and Social Communication Strategies services, against traditional medicine and indigenous farming communities, which hamper any attempts to incorporate elements of traditional medicine and to tap its social and other potential. These conclusions were taken into account when it came to defining the SBS, IMCI, and MBP protocols, which now incorporate culture-friendly practices, and in some municipalities the eligibility for SBS reimbursement of traditional medications for the first level. b) Contacts between the Ministry and organizations representing indigenous and native peoples. MSPS has formalized agreements with the two main organizations representing indigenous people: the Confederaci6n Indigena de Pueblos Originarios de Bolivia - CIPOB, which was created in 1995 and represents the ethnic groups from the Bolivian lowlands, and with the Confederaci6n Sindical (nica de Trabajadores Campesinos de Bolivia (Bolivian Farm Workers Trade Union Confederation - CSUTCB) which represents the rural Aymara population. Following several meetings conducted by the MSPS with around 100 leaders from these organizations, in 2000 the National Indigenous Health Council was established to join the MSPS in overseeing the implementation of the Basic Health Insurance and the Epidemiological Shield - to the indigenous peoples of Bolivia. An agreement was signed between the Council and the MSPS. The main points of the agreement and extent of compliance so far are as follows: * Training of Indigenous Human Resources: In order to enhance the capacity of public health services to respond to indigenous health needs, the project awarded 30 scholarships to train members of indigenous groups from three regions in the country as Nursing and Basic Sanitation Auxiliaries at schools in Cochabamba and Camiri. The MSPS also undertook to finance 10 scholarships for training indigenous doctors in Cuba. * Granting of civil service posts for indigenous staff trained as Auxiliary Nurses. The project is committed to financing six of the 16 guaranteed positions. a Traditional Medicine: The project has agreed to find ways to incorporate traditional medical practices in the SBS. * Equipment, medical inputs andfinancing. Motorboats, financing for pharmaceutical rotating funds, and financing for gasoline have been provided by the project. c) Support for the Willaqkuna project. This project seeks to combine occidental and traditional medicine. APL1 financed 10 scholarships for the Postgraduate Degree in Intercultural Education in Potosi, which aims to enhance the skills of health professionals in indigenous areas. d) Studies and experiences of related projects operating under the SBS: * The ABRIR (British Assistance for Health Reform - DFID): Based on an empirical survey of the community's perception of its health needs, a training program for State health personnel has been developed that incorporates the community's own perspectives with regard to its health needs. The survey was conducted by two anthropologists who lived in the community of Challapata for two years. * The Lorenzo Project (Canadian Society): A participatory community assessment of health problems was conducted on the basis of meetings with the communities, house calls, and the preparation of PHC and domestic violence folders aimed at achieving accurate monitoring of families and segments of the population at risk by means of comprehensive, personalized family health care. e) Pregnant Women's Bill of Rights (CDME): Focal groups and surveys of women from different parts of the country were conducted to garner information on their expectations when giving birth and on the way they are treated in health facilities. The surveys included questions related to the cultural 81

88 Annex 12: Participation and Social Communication Strategies customs of women during delivery. The Pregnant Women's Bill of Rights was based on the findings of the study. f) User satisfaction surveys: User satisfaction surveys were conducted in 40 urban hospitals and the surrounding community. The surveys included questions on the client's expectations, the facility's physical resources, and the diligence and quality of the health care provided. Proposals for Phase II Phase 11 of the project proposes to strengthen the equity focus through institutionalization of social participation, especially in indigenous communities, with concrete actions that lead to structural changes. Phase II of the project proposes to develop the following activities: a) Training of Rural Community Health Agents. Rural Community Health Agents may be empirical midwives, traditional healers, or other community leaders involved in health issues. Their role is twofold: i) to carry out health prevention and promotion activities in the community, and ii) to provide a link to the formal public health sector. They can perform the second role because they usually are indigenous, bilingual, and have information on and access to both formal and traditional health practices. The project proposes to reach out towards rural community health agents and provide them with training. In addition, the Project will develop a system of Itinerant Health Professionals, to complement and improve the activities of the Rural Community Health Agents, with whom they will coordinate their visits. b) Implementing the Pregnant Women's Bill of Rights. This involves: i) dissemination of the CDME in Spanish, Aymara, Quechua and Guarani; ii) strengthening of health facilities to ensure that they are in a position to respect the rights established; iii) ensuring that health professionals read the Bill to women during prenatal care controls; and iv) signing of the Bill by both the Health Professional and the pregnant woman. c) Health Advocates[Defensores de Salud]. The MSPS established Health Advocates through the Ministerial Decree of September 1999 Defensores are community representatives who disseminate health information in the community and collect their people's suggestions and complaints in order to enrich the dialogue with the public health sector. The project proposes to strengthen the Health Advocates and use them as a link to improve the participation of communities and lead to an improvement in the quality of services. APL2 aims to train 500 Defensores. d) Coordination with Indigenous Organizations to improve participation, understanding and mutual respect. The MSPS will continue to coordinate with the National Indigenous Health Council to ensure that the interests of all ethnic groups are adequately represented in the development of national health policies and their implementation. Specifically, MSPS plans to have a Willaquna representative in each large hospital in Bolivia by Information, Education, and Communication in Bolivia During the past five years, there have been several successful experiences of IEC in Bolivia, including MotherCare's IEC strategy for safe motherhood, which targeted providers as well as communities, and the Sexual and Reproductive Health IEC strategy of the Johns Hopkins University Center for Communication Programs, which used participative performances to raise awareness in rural communities on reproductive issues. Both institutions coordinated with Basic Health Insurance in order to exploit synergies. 82

89 Annex 12: Participation and Social Communication Strategies Phase I. IEC Activities Activities designed to foster participation were accompanied by an awareness campaign strategy designed to induce changes of behavior both in communities and users and among health providers. The following activities were carried out in 2000: a) For the SBS, there was a publicity campaign to launch it on local radios in 60 percent of the municipalities, in Quechua, Aymara, and Guarani, as well as in the mass media, and a six-month-long follow-up campaign on the country's principal radio networks (Panamericana and Fides) and on the ATB television network. Campaigns to issue SBS I.D. cards were conducted in nine departments. Together with the Chagas program, the SBS also published a record of traditional Bolivian music as a tool for disseminating information about developments in the field of health. b) A march of 10,000 people was organized to launch the new EPI vaccines in Potosi. Departmental authorities, native groups, and schools all took part. c) The health fair in Oruro established itself as an annual event. This year there were 15 musical groups and some 6,000 participants. d) A three-year communication strategy was devised in , comprising six stages (analysis; strategic design; development, testing, revision, and production of publicity spots; management, execution, and monitoring; impact assessment; and arrangements to ensure continuity). This is the first time such a strategy has been employed in the health sector. Although it was designed for the EPI, its impact extends to all mother and child services. IEC Strategy for Phase II Experience acquired during the first phase of the project suggests the need to focus on sustainable, ongoing strategies, rather than on campaigns, which, even though they reach a wide audience, are isolated and in the long run ineffective. Moreover, the first phase concentrated on dissemination and information processes that can change what people know but not their attitudes. For the latter, educational communication is required. For that reason, in the second phase, the social communication plan contemplates including four components aimed at inducing people to change their attitudes and take more care of their health, to exercise their rights with respect to health, and to achieve gender equity: a) Educational Communication: Providing people, through interpersonal and impersonal mechanisms and using formal and informal formats, with guidelines and encouragement on adopting forms of behavior conducive to health. b) Alternative Communication: Providing encouragement and support for people to communicate better and more extensively with each other and with health officials, by using mainly indigenous and traditional, interpersonal means, supplemented by appropriately tailored use of modem mass media, in an egalitarian framework of dialogue and participation. c) Social Mobilization: Carrying out a set of promotional activities designed to achieve intense, coordinated involvement of institutions representing broad segments of society in efforts to attain established health priorities as promptly as possible. d) Community Organization: Carrying out a set of promotional activities designed to induce local political, economic, cultural, and religious leaders and community groups to play a leading, selfdetermined role in decision-making and activities conducive to better health, above all at the municipality level. 83

90 Annex 12: Participation and Social Communication Strategies By applying these strategies, the project aims to consolidate the capacity of the health sector at the local level and to foster participation by the population in health interventions and strategies. Nevertheless, for the aforementioned communication strategies to work, interinstitutional communication networks have to be forged that are capable of supporting ongoing, sustainable efforts geared to ensuring that the desired changes in the behavior patterns of providers and of the population in general are effected as soon as possible. Monitoring and Evaluation Strategies The project will conduct the following activities: - Gather information about the number of CDMEs that have been signed in each municipality. - Carry out user satisfaction surveys that identify the ethnic background of respondents systematically, including rural areas of the country, which have so far been neglected. Ensure the development and implementation of feedback mechanisms to process the information stemming from such surveys. - Monitor the number of community health visits by itinerant professionals in high-risk municipalities (low coverage, high dispersion, high percentage of indigenous population). - Monitor the number of bilingual Community Health Agents trained to work in high-risk municipalities. 84

91 Annex 13: The Basic Health Insurance (Seguro Bdsico de Salud - SBS) Bolivia: Health Sector Reform Program - Phase II History and proposed phases The Basic Health Insurance (SBS) was developed to give the population free access to a basic package of preventive and curative services, with the objective of reducing the high maternal and child mortality rates as well as the duration and severity of the main causes of morbidity and mortality in the country. Its implementation in 1999 represents the second step of a phased process aiming at the creation of a universal health insurance in Bolivia. A first step had been taken with the implementation of the Mother and Child Insurance (Seguro Nacional de Maternidad y Niniez), created in 1996 and offering free access to a package of 26 services targeted at pregnant women and children under 5. The SBS expanded the package and the target population, and introduced changes in several other dimensions including financing and administration. The table below presents the three phases culminating in the implementation of a universal insurance, and identifies the progress made with the SBS in each dimension. Phases/ 1. Mother and Child II. Basic Health Insurance III. Universal Health Insurance Dimensions Insurance (SNMN) (SBS) Targeted risk Mother and child Most of the life cycle risks Whole life cycle and all risks of covered including mother and death. Integral focus on major child, reproductive and sexual injuries. health, vectors, malnutrition, and chronic diseases like TB. Health focus Medical, recuperative Prevention, promotion and Promotion, prevention, repair. recuperation and rehabilitation; emphasis in family health and healthy lifestyles. Package of 26 cost effective 75 Cost-effective interventions Expanded, integral basic package services interventions (minimal (basic package) including cost effective mother and child package) Expanded to 92 in 2001 interventions. Geographical Municipalities Health districts (networks Departmental and national ( health setting including 2 levels of complexity) networks including 3 levels of Main provider Public sector complexity) Public sector, Social Security and Multiple providers selected NGOs and Churchdependent facilities Funding 3.2% of municipal funds 6.4% of municipal funds Multiple sources with % assigned received from central tax received from central tax according to the cost of the transfers transfers plus funds from package. Social Security is departmental and national levels. included. Administrator/ DILOS: 311 administrators Administrative/paying structures Departmental administrative Payer organized around organized around health structures and/or national payers municipalities; informality, networks (93 Districts) based on 3 level health networks lack of accountability Payment Fee-for service Fee-for-service with added Capitation mechanism incentives. Barriers to be Economic barrier Economic, socio-cultural and All barriers including geographic, eliminated geographic barriers. through focus on health networks. Social Participation subsidized by Participation without subsidy of Participation without subsidies, Security the public sector. inputs in primary health care. with capitation in PHC and other Participation levels. 85

92 Annex 13: The Basic Health Insurance (Seguro Basico de Salud- SBS) Objectives The SBS is the principal instrument of the Bolivian Health Reform, which aims to reduce maternal and infant mortality in the country and prevent endemic diseases, while strengthening institutions. The insurance's specific objectives are to: i) reduce the cost barrier for users; ii) improve incentives for providers; iii) separate the roles of financing and provision, iv) ensure a basic package of benefits; v) assign specific responsibilities per jurisdiction; vi) use the payment mechanism as an incentive; and vi) introduce competition and include other sub-sectors. Benefit package The benefit package of the SBS was designed in such a way as to include cost-effective interventions that would target the main causes of infant mortality (diarrheas and acute respiratory diseases as well as malnutrition and inadequate perinatal care) and maternal mortality (hemorrhage and infections linked to unsafe deliveries and complications from unsafe abortions). In addition, cost-effective interventions targeting the main causes of morbidity in the country (STDs, cholera, malaria and TB) were included. The covered interventions are listed below. Interventions aimed at children under 5 Interventions aimed at pregnant women - Neonatal Asphyxia - Pre and postnatal care - Local bacterial infections (babies < 2 months) - Deliveries (including induction and cesarean - Regular vaccination (MMR, BCG, Pentavalent, sections) Polio) - Pre-eclampsia / eclampsia - Severe bacterial infections (Sepsis, Meningitis, - Hemorrhage in the li half of pregnancy Pneumonia, Dysentery) (prevention and care) - Acute respiratory diseases - Hemorrhage in the 2 nd half of pregnancy - Diarrhea - Puerperal hemorrhage and infections - Nutrition and development (anemia, parasitism) - Sepsis Interventions aimed at the general population Laboratory analyses, including: blood group - Family planning (including counseling and and Rh, complete hemogram, urine analyses, contraception methods) baciloscopia (tuberculosis), glicemia, creatinine, - Treatment of STDs (syphilis, gonorrhea, bilirrubin, transaminasas, proteinuri\ia, clymidia, triconomiasis and candidiasis) gotaggruesa (malaria), RPR (syphilis) - Malaria (ambulatory and hospital treatments) - Tuberculosis (treatment for children and adults) Auxiliary services - Cholera (ambulatory and hospital treatments) Echogram - Simple incubator (5 days) Other expenses covered - Transport of obstetric emergencies - Visits by health personnel to communities without access to health facilities Financing system The SBS is financed with a fixed 6.4% of the municipal funds received from the central government's decentralized tax revenue. These funds are assigned to the country's 314 municipalities on a per capita basis and deposited in a special account earmarked for the SBS. Under this modality, financing of the SBS is not based on user's salary conditions, their participation in the labor market or other assumptions relating to family structure, age, gender or ethnicity; SBS financing is of a liquid and accumulative nature, even when not spent during the budgetary period. 86

93 Annex 13: The Basic Health Insurance (Seguro Basico de Salud - SBS) Payment Mechanism Payment is based on fee for service reimbursement by municipal governments. Considering the country's low coverage of health services, this modality was chosen to encourage an increase in the uptake of services. Each intervention is assigned a reimbursement rate, based on the cost of selected direct inputs and updated on a yearly basis through a Ministerial Resolution. Each facility registers the number of interventions it performs on a monthly basis and sends this informnation to the district, which consolidates production data for the health network and sends it to the corresponding municipal government. Municipalities then reimburse the facilities, via the district, for the amount corresponding to the number of interventions performned in their jurisdiction. Prices and Cost The reimbursement rates of the SBS interventions are based primarily on the cost of drugs and medical supplies, including the average cost of a day's hospitalization in a public facility, when relevant. Other direct and indirect costs are not taken into account because: i) the country's divided decentralized system establishes that human resources in health are paid for by the departmental level, and ii) the municipalities are responsible by Law to pay for basic services and patient alimentation in their facilities. Therefore, while costs are taken into account, the estimation of the rate of reimbursement stresses incentives for priority interventions. For example, in the case of deliveries, one third of the reimbursement rate corresponds to an added incentive. Role of the MSPS's Administrative Unit The role of the MSPS's central SBS administrative unit is to set norms, technical and administrative procedures, update reimbursement rates, and coordinate activities with departmental directors for follow up, technical and administrative evaluations. Issues with Data The district is in charge of reviewing the production reports it receives from its facilities before sending them on to the municipal govemments. Municipalities, in turn can perform production audits when deemed necessary. However, due to low technical skills in the health sector, many municipalities do not have the capacity to audit production in facilities. On the other hand, because municipalities are autonomous by Law, until recently, financial information about inflows and outflows of the SBS accounts were not available at departmental or national levels. It ensued that municipalities could divert these funds to non-sbs or even non-health spending (and many have done so), without the MSPS being able to exert control. Recently, a system was put into place whereby the MSPS can access information of monthly disbursements and balances of each municipal SBS account. Still, the MSPS does not have regular access to monthly production information by individual facility for all SBS interventions. The National Health Information Service (SNIS) reports production by facility, but only for 14 of the 92 SBS interventions. To remedy this, a software is being designed that will cross SBS production information by facility and health network with disbursements and balances of municipal SBS accounts. Future challenges One of the challenges for the future is to implement the SBS software. This will enable both the national and departmental levels to control production and financial flows of the country's health networks. Another challenge, which also relates to improved control by the MSPS, is the performance of financial audits in municipalities and financial and medical audits in facilities, to certify the veracity of declared production data and ensure that financial flows are exempt of fraud. Progress has been made to incorporate NGO and Church-dependent providers into the SBS health 87

94 Annex 13: The Basic Health Insurance (Seguro Bdsico de Salud- SBS) network. However, greater effort is needed for the integration of multiple providers. Social Security (SS) facilities provide SBS services. However, the links between the public sector and Social Security need to be developed and contracting mechanisms introduced in places where one sector is providing services for users affiliated to the other sector. Similarly, the Elderly Insurance (Seguro de Vejez), whose services should be provided by the SS facilities, is not available in rural areas and the SBS needs to consider how to coordinate with the SS for this group of users. 88

95 Annex 14: Support to the Medium-Term Immunization Plan - Phase I and Phase II Bolivia: Health Sector Reform Program - Phase II Summary This annex describes the actions taken during the period of implementation of the first phase of the APL to strengthen the management, financing and field presence of the national immunization program in Bolivia, and the results of those actions. In addition, it lays out the additional strengthening required, which would be supported in part under the second phase of the APL. Background Starting in 1996, the immunization program in Bolivia was showing signs of trouble. Immunization coverage had been declining as a result of (a) institutional weaknesses of the country's health system and that of the Expanded Program on Immunization; (b) insufficient and inconsistent allocation of funds by the government, relying mostly on funds from external cooperation; and (c) lack of a sustained social communications strategy. In the field, activities had also deteriorated due to the lack of support from regional authorities. As coverage of traditional EPI vaccines was falling, Bolivia was also lagging the rest of the Americas in the incorporation of Haemophilus influenzae type b vaccine-a product that has demonstrated its contribution to the reduction of infant mortality in other countries. Recognizing the importance of reversing the erosion in immunization coverage, the Government of Bolivia, the World Bank and the Pan American Health Organization agreed to focus on strengthening the program under Phase I of the APL. During project preparation, the national immunization program was evaluated and a medium-term immunization plan was developed to address key problems along three broad lines of action. These lines of action were: (1) institutional strengthening of the Expanded Immunization Program to improve adoption and implementation of immunization policies; (2) strengthening of health services to improve vaccination coverage and introduction of new vaccines; and (3) strengthening of the information and surveillance systems. The following report outlines the activities during Phase 1 carried out under each line of action, achievements of the last two years, and areas that still require strengthening. PHASE I ( ). Revamping of the National Immunization Program and Incorporation of New Vaccines 1. Institutional strengthening of the Expanded Program on Immunization (EPI) to improve adoption and implementation of immunization policies. Under Phase I of the APL, progress was made in establishing a long-term commitment to domestic, public sector financing of the immunization program, and to strengthening essential management functions. On the financing front, the Ministry of Finance introduced a line item into the national budget, so that the allocation of funding for vaccine purchase is made more transparent. Importantly, the Ministry of Finance also established a tax on Bolivia's Social Security Agency (Caja Nacional de Salud), with the proceeds earmarked for the purchase of vaccines. With respect to management strengthening, improvements occurred at the central and departmental levels, as well as in coordination between those two levels. The profile of the EPI work was elevated by the program being constituted as a unit that reports to the General Office of Health Services 89

96 Annex 14: Support to the Medium-Term Immunization Plan - Phase I and Phase 11 within the Ministry of Health; on a periodic basis it reports directly to the Minister of Health. The central EPI team was strengthened with the addition of three professionals and five support staff, as well as short-term technical assistance. New administrative and procurement processes have been established. Vaccine purchases are under the responsibility of the Directorate of Administration and the Vice-Minister. An automatic inventory control system for vaccines and syringes has been developed and is being implemented. With immunization targets included within performance agreements, lines of communication between the center and departments have been strengthened and specific responsibilities have been established to reinforce accountability. Departments share responsibility in the efforts to achieve high immunization coverage and to reduce the number of municipalities reporting low vaccination coverage. Quarterly evaluation meetings between national and departmental levels are held, and quarterly supervisory visits at all levels are being conducted. In addition, a Technical Advisory Committee has been formed at national and departmental levels, in which Bolivia's scientific societies participate. To aid in effective planning, a national KAP study has been carried out detailing the differences of the eco-regions, ethnographic groups and urban-rural population. The results of the KAP study are being used for the development of the permanent information, education and communication (IEC) strategy. 2. Strengthening of health services to improve coverage and introduce new vaccines. Under Phase I of the APL, field capacity for routine administration of immunization and emergency response was increased. In addition, effective new vaccines were also added to Bolivia's immunization schedule. Across the country, EPI teams and the departmental level were strengthened with the addition of one nurse and the assignment of rapid response brigades, known by their Spanish acronym, BEAR. One hundred and twenty bilingual vaccinators were hired, trained and equipped to support vaccination and surveillance activities in every department. In addition, departmental teams have been trained to identify and respond to municipalities with low coverage, and five PAHO-financed epidemiologists have been detailed to the country's critical departments. The national immunization schedule has been expanded to include vaccination against HIB and hepatitis B, and vaccination against yellow fever has been included in endemic zones. Measles vaccine has been replaced by a combined vaccine against measles, mumps and rubella (MMR). Furthermore, the combined vaccine of HIB, DPT and hepatitis-b has been introduced as a pentavalent vaccine in July Other important improvements include the implementation of basic bio-safety practices, with the acquisition of safe boxes for the disposal of syringes and needles, and the development of a biosafety manual. The cold chain has been renovated, including the updating of a national warehouse and the construction of five departmental warehouses. Where needed, local equipment has been renovated and storage capacity has been increased as required by the new vaccines. 3. Strengthening the information and surveillance systems. The critical immunization program functions of surveillance, data collection and analysis were strengthened in many ways under the first phase of the APL. For example, national committees responsible for the analysis of information are being strengthened at all levels. Rapid monitoring of immunization coverage has been implemented. Active search for vaccine-preventable diseases now occurs in 1,236 health establishments (50,000 diagnoses reviewed), and 73,587 community leaders and people in the community have been 90

97 Annex 14: Support to the Medium-Term Immunization Plan - Phase I and Phase 11 interviewed as part of a community based informal surveillance system. Several other important new systems have been put into place. A registration book for vaccinations outside health services was printed and distributed. Training in daily registration of doses applied and monthly consolidation of information was given to the health personnel at all levels. Weekly monitoring of surveillance indicators, monthly monitoring of coverage by municipalities and implementation of corrective measurements have all been accomplished. Sentinel hospital have been identified for the surveillance system of HIB type b and hepatitis B. Finally, collaboration with the Directorate of Epidemiology was established, to improve the notification and implementation of the surveillance system alert system. Financing under the Phase I Implementation of the medium-term immunization plan was co-financed by the Government of Bolivia, international specialized agencies, and the World Bank, under the Phase I APL. As shown in Figure 1, corresponding to improvements cited above, spending on immunization increased from a total of US$2.4 million in 1999 to an estimated US$11.6 million in At the same time, Government of Bolivia allocations for vaccines and other program inputs more than doubled, increasing from US$1.15 million in 1999 to an estimated US$3.5 million in 2001 (see Figure 2). Figure 1. Immunization Program Expenditures, ~ ~ Year IIQ Vaccines * Other inputs 91

98 Annex 14: Support to the Medium-Term Immunization Plan - Phase I and Phase 11 Figure 2. Immunization Program Financing by Source, _:= Year GOB U WB loan 0 Other agencies Results. As shown in Table 1, the first phase has yielded demonstrable results. Immunization coverage (as measured by DPT3) increased from 75 percent in to 89 percent in Coverage with pentavalent3 has reached 65 percent in Importantly, the number of municipalities with low DPT3 coverage has been reduced from 212 to 72. And, after missing its financing target for 1999, in 2000 the Govemment of Bolivia was able to mobilize its target level of US$3 million for procurement of vaccines in Performance Benchmarks under Phase I I = - Phase I Indicator Baseline (96-98) Target I Achieve Target Achieve Target Immunization coverage DPT3 75% 82% 87% 89%* Immunization coverage Pentavalent3 65% 75% A Municipalities with DPT3 coverage < 80% * # Municipalities with Pentavalent3 coverage < 80% Financing of vaccines by the Govemment (US$ millions) Source: SNIS, EPI Ministry of Health Bolivia * Since pentavalent vaccine was introduced in July 2000, DPT3 was still used as indicator for year However, pentavalent will replaced DPT3 as indicator starting from

99 Annex 14: Support to the Medium-Term Immunization Plan - Phase I and Phase 11 PHASE II (2002-5). National Coverage and Financing of New Vaccines On March 29, 2001, the Government of Bolivia and members of the Inter-agency Coordinating Committee signed a Memorandum of Understanding endorsing the Second Generation Expanded Program on Immunization (EPI-II). They recognized the achievements made during Phase I of the APL, and identified areas to be strengthened in Phase II. During Phase II, it is proposed that EPI-II continue on three lines of action, focusing on critical elements for future success. These are outlined briefly below. 1. Institutional strengthening of the EPI to accelerate the adoption and implementation of immunization policies. The activities under this line of action would include: ensuring national financing of vaccines and syringes with progressive input from the Government and simultaneous approval of a Vaccine Law; maintenance of national and regional teams (including communication and transportation); development and implementation of an electronic system for administrative processes to ensure appropriate utilization of resources; and equipping of three regional EPI offices for training and coordination, and cold chain rooms. Operational investigations would be strengthened to identify missed opportunities for vaccination in establishments, and to evaluate the impact of new vaccine introduction. In addition, the application of bio-safety norms would be monitored. 2. Strengthening of health services to improve coverage and support for the consolidation of new vaccine introduction. Under Phase II, introduction of pentavalent, MMR and yellow fever would be consolidated through training, supervision, as well as the use of IEC strategies based on the information obtained during the KAP investigation. These strategies would become the framework for all communication and education activities throughout the network of health services, and will be evaluated on a periodic basis. An incentive system would be created for all those who distinguish themselves in EPI work: health workers, staff municipalities and prefecturas. Local initiatives that strengthen immunization through health services will be promoted, using the strategy that reduces missed opportunities for vaccination. Monitoring of municipalities at risk would continue on an ongoing basis and immediate action would we taken at the department level in those municipalities reporting low vaccination coverage. PAHO would also continue financing five epidemiologists to be assigned to critical departments. 3. Strengthening of information and surveillance systems. Phase II of the APL would support continued quality control mechanisms for epidemiological surveillance, such as active institutional and community searches of vaccine preventable diseases and rapid monitoring of vaccination coverage. Training and supervision, using the continuing education approach and auditing of the quality of the information would remain important components of the Phase II. In addition, tools to facilitate the analysis of EPI information at all levels would be promoted. These activities would all be carried out in conjunction with the SNIS and the Unit of Epidemiological Surveillance. At the end of the Phase II, a vaccination coverage survey will be carried out to validate administrative data. Financing of Vaccines Phase II and beyond. Building on the experiences of Phase I, a structured plan for phasing in Government support, and phasing out external support, would be implemented. As shown in Figures 3 and 4, during Phase II, specific attention would be given to financing new vaccines that were introduced in the vaccination schedule during the Phase I. The financial contribution by partners would decrease on an annual basis, until the third year. The Government, on the other hand, would increase national financing towards the procurement of vaccines in amounts of US $500,000 annually, until it covers the total amount at the end of the project. 93