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March 30th, 2016
Health • Technology • Finance

Health payments in India

The Indian state of Bihar, one of the poorest in India, had a problem with its unreliable manual payments to health workers and to the beneficiaries of health incentives. Its State Health Society asked the IFC to come up with a solution. With the help of the Gates Foundation and others, a web-based payments system was implemented to automate the payments process and ensure that individuals received their much-needed money on time.

The initiative

A diagnostic study to look at three health programmes, including the Revised National Tuberculosis Control Programme (RNTCP), was commissioned by the IFC and the Bill and Melinda Gates Foundation in September 2010. The objectives of the study were to:

  • Analyse the payments processes.
  • Review Bihar's financial inclusion environment.
  • Provide recommendations to the SHS on improving the efficiency and transparency of health payments.

It included “interviews and focus-group discussions with more than 285 people including health officials at the state, district and block levels, health workers, health program beneficiaries, private providers, technical experts, development organizations, and financial service providers.” [1]

The study found that the existing G2P payment processes were completely manual, extremely time-consuming for all stakeholders, and lacked a proper separation of functions between recording the events that entitled recipients to the incentive payments and the approval and processing of these payments.

It also found that medical personnel spent a lot of time, conservatively estimated at 25 to 30 percent of their working hours, on payment-related administrative tasks, which could have been much better spent on the delivery of health services. The administrative processes and programme guidelines for health workers and officials were unclear. The payment process was labour-intensive and lacked transparency, and raised serious issues about the payment of incentives.

Based on the study's findings, the SHS adopted a comprehensive approach to G2P health payments. It decided to implement an automated web-based system, the Health Operations Payment Engine (HOPE), as a means of making G2P payments.

HOPE's objectives for the three health programmes evaluated in the study were threefold:

  • Automating “the recording, verification, and computation of incentive payments”. [2]
  • Centralising payment processes
  • Moving cheque and cash based payments to electronic funds transfer (EFT) based payments.

The next phase was to launch HOPE pilot projects in three districts in Bihar, to refine the system with a view to implement it throughout the state.

The challenge

In Bihar, 80 percent of its 110 million total population still live on less than a dollar a day. Unsurprisingly, Bihar ranks lowest of the Indian states for its health indicators. Government to Persons (G2P) payments, which were largely manual and cash-based, were inefficient, with frequent delays of several months in the transfer of payments. The payments were to health workers and to women receiving financial incentives for participating in health initiatives, such as child immunisation programmes.

As it indicated in its tender document for an evaluation study of the problem, the State Health Society (SHS) in Bihar was worried about bottlenecks in the delivery system, which led to delays in paying funds to recipients and undermined the overall effectiveness of the state's incentives and health programmes.

The public impact

HOPE (now known as PFMS - Public Financial Management System) started making live payments in five districts in April 2014, By June 2015, it had already processed incentive payments to the value of INR11 million. An evaluation of the initial impact of the programme revealed that it freed up to a third of all medical practitioners' time for delivering health services.

The improvements in its G2P health payments to providers and recipients of services will also serve to enhance the environment for implementing the Gates Foundation's other health-related investments in Bihar.

Stakeholder engagement

There was strong internal engagement from Bihar’s SHS, as well as external NGO stakeholder support from the World Bank, the International Finance Corporation (IFC) and the Gates Foundation, which funded the G2P payments project.

Political commitment

The SHS initially raised concerns about the G2P payment system and initiated work on solving the delivery problems. Also, in terms of coordination and management, it was supported by the Bihari state government. India’s National Rural Health Mission (NRHM) lent its support, as indicated by P.K. Pradhan is special secretary and mission director: “efficient, transparent, and accountable payment mechanisms are needed to enforce program guidelines, specifically ones relating to phased payments for beneficiaries,” he said. “IFC’s proposed solution, HOPE, should be taken beyond Bihar to other Indian states."

Public confidence

The IFC and the Gates Foundation are well regarded in the state of Bihar and in India generally, as both the entities are known for their work in the social sector.

Clarity of objectives

The initiative stated clear objectives – health payments, financial inclusion and the effectiveness of health programmes. It focused on addressing the pressing issue of delays in Bihar’s G2P payment system. However, the objectives set at the outset were not measurable.

Strength of evidence

The HOPE system was piloted in three districts in Bihar (East Champaran, Patna and Sheikhpura) and it was used to process specific payments (such as the salaries of contractual NRHM staff). After the pilot programme was completed, implementation began in the remaining districts of Bihar over a two-year period.

Feasibility

The G2P payments project received funding from the Gates Foundation and the IFC has been responsible for its implementation. This meant that there was a good level of confidence that it would be piloted successfully in the initial three districts, and that it would eventually be possible to extend it to all 38 districts in Bihar.

Management

The IFC had skilled programme managers involved in the project and conducted its partnerships well, for example, with the Gates Foundation, which funded the project, and with the Population Council, which carried out independent evaluation of the G2P payments project.

Measurement

The IFC partnered with an NGO, the Population Council, for an independent evaluation of the G2P payments project. The evaluation examined and measure the effectiveness of the project in achieving its objectives on health payments, financial inclusion and effectiveness of health programs.

To support the evaluation was collected from HOPE's management information system (MIS) and from other MIS, such as those of the centralised health sys and SHS. Taken together, this data indicated the impact of the G2P payments programme.

Alignment

The interests of the major stakeholders – the IFC, the Gates Foundation, the World Bank, and Bihar’s SHS – were extremely well aligned. They were united in their aims to analyse and solve the problem of Bihar’s G2P payments system.

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