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Ignorance about the costs, case loads and case mixes of different hospitals within the public health system constitutes an important obstacle to reforming health care spending in many developing countries. National (tertiary) hospitals generally receive significantly larger budgets, per patient, than lower-level (district) hospitals. One reason for these differential allocations is the widely held belief that national hospitals treat persons with more difficult illnesses and persons who are more severely ill than do other, non-national, hospitals. This belief is but a presumption and one that warrants investigation. This paper analyzes expenditures among public hospitals in El Salvador over a 12-year period to address this question. While controlling for patient morbidity, outputs and other characteristics, district hospitals are found to be substantially underfunded relative to national hospitals. Four policy options to redress this situation are examined.

Most Latin American social security institutes are direct providers of medical care services to their beneficiaries. As many of the institutes have developed serious financial problems over the course of the last decade and a half, they have come under increasing attack for (a) exacerbating inequalities in access to and use of health care, (b) further heightening the geographic overconcentration of services, (c) focusing a disproportionate amount of resources on high technology, curative care to the near total exclusion of primary health care, and (d) being administratively top heavy and, more generally, inefficient. In the past few years, many Latin American countries have begun searching for methods to ameliorate these problems. This paper analyzes three recent efforts, all of which involve some degree of privatization: (1) El Salvador's partial privatization of specialty physician outpatient consultations, (2) Peru's minor surgery and its decentralized ambulatory care programme, and (3) Nicaragua's "administrative services only' approach wherein social security beneficiaries choose to join a certified public or private provider organization for one year, and, on behalf of the individual, social security pays the organization a fixed, annual, per capita fee to provide all health care for the enrollee. The paper also identifies political and technical considerations, as well as health care market characteristics that have shaped these efforts and that condition their likelihood of success, including: the size, composition, level of capacity utilization, degree of organization and geographic distribution of private sector resources; relative prices in the private vis-a-vis the public sector; and the size and nature of the private health insurance market. Other Latin American countries would do well to examine these factors and characteristics before embarking on efforts to reform their own social security health care delivery systems.

Since the early 1980s, the Ministries of Health of most Developing Countries have been plagued by significant and persistent resource shortages. One response of many Third World countries to this health financing crisis has been to turn to user fees. This article presents a case study of the evolution of public health care system fees in El Salvador in the decade of the 1980s. Since 1980 falling levels of real funding of the Ministry of Health of El Salvador have resulted in falling supplies of drugs, materials and equipment throughout the public health system, and have contributed to declining utilization levels of public health facilities. Local public health providers and their community health boards (patronatos) have responded to this crisis by creatively institutionalizing decentralized, revolving accounts based on 'voluntary' user fees for ambulatory care, collected and retained at individual facilities. This article describes the legal foundations, organization, functioning, incentive structures, financial performance, and the institutional development of El Salvador's local user fee systems.

This study analyzes the causes and effects of the persistent underfinancing of recurrent costs in the Ministry of Health (MOH) of El Salvador over the past decade. Causative factors identified and discussed include (1) a functionally unintegrated MOH structure--consisting of (a) the autonomous hospitals and (b) the remainder of the Ministry; (2) the functional isolation of the Ministry's planning department from its budgetary department; (3) the use of historical-budget based decision-making--in lieu of more explicitly goal oriented resource allocation and planning criteria; (4) donor agencies' funding of infrastructure construction projects, coupled with their unwillingness to financially support the recurrent costs such projects ultimately give rise to; and finally, (5) the civil war and its associated economic dislocation, altered central government funding priorities and general state of disarray. The effects of persistent underfinancing of recurrent costs in El Salvador are the growing proportion of the MOH budget being consumed by outlays for personnel at the expense of virtually all other budgetary categories; the shortages of drugs and general medical supplies in public health facilities; and reduced levels of utilization of those facilities from what would otherwise be expected; all of which together imply a reduced level of both productivity and effectiveness of the public health care system. Policy implications and recommendations are briefly noted.