Lao PDR

There is no main strategic purchasing unit, as healthcare purchasing remains largely passive.

In principle, National Health Insurance (NHI) payments to service providers is output-based. The National Health Insurance Strategy 2017–2020 outlines the National Health Insurance Bureau (NHIB)’s role in fund pooling and strategic purchasing. This is reiterated in the updated NHI Strategy 2021-2025. However, this function has not been fulfilled. Performance formulas do not yet include population needs and quality aspects. Weak contractual agreements and claims management systems also hinder the NHI’s strategic purchasing functions.

While the NHIB falls under the MOH and only has limited autonomy, it does rely on a separate account. This gives it some flexibility over fund disbursement.

Medicines and vaccines (national level)
Food & Drug Department, Ministry of Health
Lao National Immunization Program
UNICEF, Gavi, Global Fund, other external aid
National Health Insurance Bureau, MOH

Medicines and vaccines (subnational level)
Provincial Health Offices (PHOs)

Medical equipment and consumables (national level)
Department of Finance: only for large-scale equipment investments
Ministry of Health: major medical devices
UNICEF, Gavi, Global Fund and other external aid: for immunisation, TB/HIV programmes
UNFPA: for family planning products

Medical equipment and consumables (subnational level)
Provincial Health Offices (PHOs)

Healthcare services 
National Health Insurance Bureau, MOH
Department of Finance: salaries
Private healthcare institutions

Healthcare support services
Department of Finance: facility investments
Provincial Health Offices (PHOs)

The National Health Insurance Bureau (NHIB) under the Ministry of Health (MOH) is the largest purchaser of health services in Lao. The NHIB uses capitation to fund health centres and outpatient hospital admissions and case rates to fund inpatient hospital admissions. Previously, health facilities relied on Revolving Door Funds (RDFs) in the purchasing of drugs. This mechanism lacked efficiency and was replaced by the NHIB, which also covers drug payments.

For healthcare services: the National Health Insurance (NHI) scheme was established in 2016 and has come to merge the three previous social health insurance schemes. Coverage is currently at over 94% of the population. Nonetheless, out-of-pocket spending remains high at 41.8%. The majority goes toward public facilities, as the private health sector in Lao accounts for under 10% of health spending. The public health system in Lao is divided among three administrative levels (central, provincial, and district) and four service provider levels (central, provincial, district, and health center).

For healthcare goods: the government is in charge of procuring major medical devices, health infrastructure development and pharmaceuticals. Development partners including GAVI, UNICEF, UNFPA and others are also highly involved in procuring supplies, most often for vertical programmes (e.g. family planning, HIV, TB). Development partners cooperate with the Lao PDR government to co-fund health programmes.

Purchasing of individual health services has now been consolidated into the National Health Insurance (NHI) scheme, under the Ministry of Health (MOH). Previously there were separate health insurance schemes for those in the formal sector managed by the National Social Security Fund (NSSF-SASS and NSSF-SSO).

With the vast majority of citizens working in the informal sector, this left a great coverage gap. Health protection was introduced for informal workers and the poor under the voluntary Health Equity Fund (HEF) and Community Based Health Insurance (CBHI) schemes. All schemes were made mandatory and consolidated into the NHI by 2019.

The purchasing of healthcare goods including drugs, devices and supplies is led centrally by the MOH. However, some items/equipment are purchased directly by Provincial Health Offices (PHOs).

External donors are still involved in purchasing for immunisation programmes and other vertical health programmes, e.g. UNFPA for family planning and the Global Fund for HIV/TB. However, the plan is for the Lao government to take increased responsibility and thus reduce the share of donor-funded programmes.

The purchasing of individual healthcare services has been successfully centralised under the National Health Insurance (NHI) scheme, and the challenge is now to reduce out-of-pocket payments.

There is an intention to reduce the share of external aid in purchasing public health programmes and related supplies, including immunisations. The government aims to gradually take on a larger share of funding for such programmes, especially in graduating from GAVI vaccine funding.

• National Health Insurance Bureau (Ministry of Health)
• Ministry of Health (other departments)
• Ministry of Finance
• External donors

According to Decree 470/PM which set up the National Health Insurance Bureau (NHIB), the NHIB should use set criteria for payment to healthcare institutions. However, this is largely not done due to weak financial management.

The Ministry of Health (MOH) and Provincial Health Offices (PHOs) also do not use clear criteria in the funding of health facilities or infrastructure projects for health.

Health budget allocation varies by province and no clear calculation formula is in use. Budgets are generally based on historic allocations or lack accounting mechanisms altogether.

For individual healthcare services, Decree 470/PM (2012) outlines rules for the fund management of the NHI. The main financial principle outlined in the Decree is that of “[ensuring] the right, transparency and auditable manner concerning the transaction of the National Health Insurance Fund.” On the ground, however, financial management is challenging due to manual book-keping and fragmented monitoring of funds. The government is working to improve the NHIB and wider MOH’s governance of funds.

In terms of provincial funding, the Sam-Sang decentralisation policy in Lao mandates that provincial governments are responsible for government funding allocations at the provincial level. A proposal has been developed to prohibit the reallocation of funding for health and education. However, legislation for this has yet to be developed.

Numerous stakeholders are involved in healthcare finance processes in Lao.

The Ministry of Finance (MOF) is responsible for overall budget planning. With advice from the MOF, the Cabinet determines the overall budget envelope. The Ministry of Planning and Investment (MOPI) is also highly involved. It has authority over capital investment decisions, gives guidance on funding from external partners and prepares the Public Investment Program. The health sector is organised into three administrative levels: central, provincial (through Provincial Health Districts, PHDs) and district (through District Health Offices, DHOS). The Ministry of Health (MOH) is responsible for the management of health services, health sector planning and health human resources. Within the Ministry of Health (MOH), the central annual budget for health is the Department of Finance and the Department of Planning and International Cooperation.

In budget planning, DHO budget plans are prepared through formal or informal requests from health centres; consolidated at the provincial level; and submitted to the MOH and MOF. The total budget is approved annually by the National Assembly. Once funds are distributed to districts and provinces (normally on a quarterly basis), they are allocated to health centres for the implementation of health programmes.

Following the Sam-Sang decentralisation policy, district and provincial health officers are increasingly involved in health budget planning. Provincial governments have more autonomy over staff planning and the preparation of provincial and district health budgets. However, MOF restrictions limit the provinces’ availability to reprioritise budgets, e.g. for the repair of some medical equipment. Moreover, the central government’s allocation of funds to provinces does not necessarily reflect their health needs. While lower-level Health Centres should be consulted on budget priorities, this is not done in practice; PHOs consult with DHOs and hospitals but rarely with lower-level facilities.

The National Health Insurance Bureau (NHIB) is responsible for revenue collection and pooling; financial transfers to District Health Insurance Bureaus (DHIB) and Provincial Health Insurance Bureaus (PHID); and contracting and payment mechanisms.

Considering the variety of healthcare stakeholders involved, including external donors, the MOH has consolidated sector coordination into five working groups: 1) governance, management, and coordination; 2) human resources for health; 3) planning and finance; 4) service delivery; and 5) monitoring and evaluation.

The main agency responsible for strategic purchasing is the National Health Insurance Bureau (NHIB), as the single purchaser of individual healthcare services for the population. The NHIB is led by a Director and is part of the Ministry of Health (MOH). The NHIB’s mandate expressly covers purchasing functions, which are intended to be strategic i.e. in the adjustment of payment mechanisms and payment rates and monitoring & evaluation. However, the NHIB’s financial management needs to be improved for all these functions to be realised. There are plans to transform the NHIB into a semi-autonomous agency with more independence in decision-making from the MOH.

Decree 470/PM (2012) instituted a legal framework for the merger of pre-existing health insurance funds (both voluntary and mandatory) into one single fund, the National Health Insurance (NHI). The National Health Insurance Strategy 2017 – 2020 defined the vision of the NHI for the initial period following the National Health Insurance Bureau (NHIB)’s implementation in 2016. This was updated through the National Health Insurance Strategy 2021-2025. This updated strategy maintains the general direction of the NHI but calls for legislative updates which would establish the NHIB as a semi-autonomous body, as well as improved governance mechanisms.

The Ministry of Health (MOH)’s Food and Drug Department (FDD) is responsible for the safety and affordability of medicines. The 2003 National Drug Policy supports drug consumer protection and affordability of essential medicines. The 2000 Law on Drugs and Medical Products governs the manufacture, import/export, sales, utilisation and pricing of pharmaceutical products and ensures the safety and affordability thereof. The law places the Ministry of Health (MOH) in charge of developing a list of drugs approved for sale within Lao and a list of controlled drugs.

The 2006 Vientiane Declaration of Aid Effectiveness aims to harmonise development partners’ support with national development policies, including health. Following the declaration, a Sector-wide Coordination (SWC) mechanism for health was implemented alongside the MOH to coordinate donor aid.

Various Decrees aim to strengthen the rural health sector workforce. The 2010 Financial Incentive Decree No. 468 intended to provide salary bonuses of up to 50% to civil servants (including health workers) based in rural areas, though the degree of implementation is unclear. The 2011 Ministry of Health Decree No.103 mandated that newly-graduated medical students serve three compulsory years of service in rural health facilities. The Decree also outlined non-financial incentives such as promotions and further training.

The regulations governing public finances are as follows:

The 2018 Law on Public Debt Management (regulating government securities and public debt); the 2015 Law on the State Budget (outlining state budget matters); the 2015 Law on Public Investment; the 2019 Decree on the Management and Utilization of Official Development Assistance.

The Ministry of Planning and Investment (MPI)’s Law on Investment Promotion regulates capital investment. The MPI reviews capital investment proposals from ministries and provincial offices (including the Ministry of Health) and submits them to the Government and National Assembly for approval.

The Public Financial Management Strengthening Program, supported by various development partners, aims to improve Lao’s PFM by reforming budgeting, taxation, accounting, reporting, public procurement and treasury.

The 2004 Decree on Government Procurement of Goods, Construction, Maintenance and Services (also known as the Public Procurement Rules and Regulations) sets the rules and format for public procurement. This includes provisions on open, competitive, fair and predictable procurement prices and the open publication of tenders. Other documents governing procurement are Implementation Rule and Regulations (IRR) no.0063; the 2009 Procurement Manual; and the 2004 Procurement Decree no. 03.

In general, after undergoing open and competitive bidding processes, bidders are required to deliver on any resulting contracts. The procuring agency must publish information relating to the award of a contract, including reasons for rejection of unsuccessful bidders.

Government procurement of vaccines and drugs must follow general guidelines from the Public Procurement Rules and Regulations. However, the Ministry of Finance (MOF)’s annual procurement of vaccines through UNICEF’s Supply Division is exempted from these guidelines.

The MOH’s Food & Drug Department (FDD) – specifically the Medical Products Supply Centre (MPSC) – conducts centralised procurement of medicines and supplies. Drugs are stocked in a Central Warehouse in Vientiane and delivered to facilities, sometimes with considerable delay. There are four regional distribution centres and various provincial warehouses. Beyond this central procurement, hospitals may conduct their own purchasing of certain medicines with local government approval. Lower-level Health Centres (HCs) cannot conduct their independent purchasing.

There are off-budget projects in health infrastructure. Unsolicited, uncompetitive project proposals are sometimes received from private construction firms on a build-now-pay-later basis.

In theory, contractors who have signed a contract with a government agency but make no effort to implement it will be reported and terminated. However, there is no specific Ministry of Health (MOH) department to oversee health sector legislation. This leaves an enforcement gap in various areas, i.e. budgeting, pharmaceuticals, health workforce etc. Therefore, while numerous health sector regulations are in place, their implementation is often lacking.

The MOH’s Food & Drug Department (FDD) is growing its capacity for post-marketing surveillance of pharmaceuticals to ensure patient safety. This includes preparing SOPs for the reporting of adverse drug reactions.

Performance-based incentives are in their early stages.

Lao’s Health Sector Development programme, most recently updated in 2021, involves performance-based disbursements from the Asian Development Bank. Disbursement-linked indicators (DBI) are used at the central and provincial level. There are considerations to include performance-based financing in district primary care under the Sam-Sang (3-Builds) model.

The change of National Health Insurance Bureau (NHIB) payments to health centres from capitation to case-based in 2017 was an example of a move toward performance-based financing.

USAID is providing assistance to Lao to expand performance-based provider payment mechanisms. This is currently under development and includes financial and non-financial incentives, increased autonomy at the provincial/district/facility level and the ability to use funds to improve infrastructure.

The Health and Nutrition Services Access project (HANSA), developed by the World Bank and Global Fund alongside the Lao Government and other partners, involves performance-based incentives. It links fund disbursement to the achievement of agreed-upon indicators.

Healthcare services: The Health Sector Reform Strategy 2015-2025 has enhanced the monitoring of Lao’s health sector performance by setting clear goals and objectives. Provincial and central HSR committees have been established to monitor performance and roadmaps have been developed alongside performance-based schemes.

The Ministry of Health (MOH) has provided training on results-based planning and performance assessments to central and provincial health planners.

Healthcare goods: The monitoring of goods remains passive, with the Ministry of Health (MOH)’s Food & Drug Department (FDD) responsible for addressing safety complaints about pharmaceuticals and devices. While enforcement remains limited, guidelines have been developed for reporting on adverse drug reactions and training has been provided to healthcare workers on case monitoring.

Patients may file ad-hoc complaints on the quality of healthcare services to healthcare providers. If unresolved, these should be filed to the Ministry of Health (MOH) where the Department of Inspection and the Department of Healthcare are responsible for investigating complaints. Formal complaints can also be filed to the National Assembly, which will provide feedback to the MOH and to the institutions involved. In practice, this process can be strengthened and formalised to empower patients.

The 2016 “Five Good, One Satisfaction” policy details five service-related requirements for health service providers (e.g. diagnosis, treatment). However, no indicators to track improvement and mechanisms to provide feedback have been associated with this policy.

There are no set feedback mechanisms from purchasers to suppliers of pharmaceuticals, healthcare support services, devices etc.

Each sector – including the health sector – sets its targets through five-year planning cycles. The National Assembly is the body responsible for monitoring the implementation of sector plans. It has agreed upon a set of 10 core indicators to track health system performance. The indicators are largely focused on maternal & child health and include:

• Maternal Mortality Rate
• Infant Mortality Rate
• Under 5 Mortality Rate
• Wasting
• Stunting
• Skilled Birth Attendance
• Clean Water
• Latrine
• Vaccination
• National Health Insurance

The Sector-Wide Coordination (SWC) mechanism – created by the Ministry of Planning and Investment (MPI) to harmonise donor aid in the health sector – also conducts monitoring of the sector’s strategic plan implementation. The Ministry of Health Steering Committee has oversight on the progress of Lao’s Health Sector Development Plan (HSDP).The Health Information Division in the MOH also publishes annual health sector progress reports. Data for these analyses is largely collected through the District Health Information System 2 (DHIS2). The DHIS2 collects data from health facilities and health programmes at all levels. It also generates quarterly and annual reviews of progress against the HSDP. Financial data is largely not included in health system performance analyses. However, the MOH is planning the production of annual National Health Accounts.

On the National Health Insurance (NHI) side, data is collected on utilisation (e.g. access to vaccines, skilled birth attendance) and health outcomes (e.g. malaria, maternal mortality). The Lao expenditure and consumption survey has been used to show that accessibility has increased thanks to the NHI and catastrophic spending has decreased. However, data on quality needs to be further defined and collected. The Lao Expenditure and Consumption Survey has been used to show that accessibility has increased thanks to the NHI and catastrophic spending has decreased.

Lao has made great progress in data management systems for health. Rollout of the District Health Information System 2 (DHIS2) started in early 2014 and was finalised by 2015. The DHIS2 collects Health Management information System (HMIS) data from facilities at all levels, from local Health Centres to larger hospitals. It also consolidates data from various national health programmes and subprogrammes (e.g. MNCH, TB, Malaria and HIV) and contains data on human resources, National Health Insurance (NHI) and national surveys. The server for the DHIS2 is hosted under the Ministry of Posts and Telecommunications (MPT). Data was initially collected in an aggregated format but collection of individual patient data has since increased.

Data quality and data analysis capabilities remain challenging despite the success of the DHIS2. For example, many hospitals still use manual data collection, limiting the availability of individual hospital data.

The collection of financial data must also be strengthened. Currently, the National Health Insurance (NHI) cannot use DHIS2 data to reimburse hospitals due to lacking financial and individual patient information. The NHIB uses its own simpler system based on ExcelView to make case-based payment calculations.

The National Health Information Strategy and Action Plan 2018–2025 outlines plans for the continued development of health information systems. This aims to support the achievement of UHC and SDGs through harmonised data.

Government budget allocation to provinces is still mostly based on historic trends rather than strategic decision-making. A formula-based approach considering population size, service utilisation and funding considerations would be necessary to inform strategic purchasing decisions.

Generally, data from DHIS2 is used to guide decisions on future investments. However, DHIS2 does not capture financial data. This limits the government’s ability to introduce performance-based financing and to budget more strategically.

The National Health Insurance Bureau (NHIB) conducts a year-end annual review to inform the following year’s budget request. This takes into account not only past year spending, but also how much funding is needed to improve the system – for example, infrastructure development according to broader government plans on what to develop within the health sector.

No information was found on specific indicators.