Sustainable Health Care Financing in the Republic of Palau

Financing health care is challenging and costly in the Pacific developing member countries (DMCs) of the Asian Development Bank (ADB). Financing sources are limited, and are dominated by general tax revenues. In the face of fiscal constraints, national health systems have been perennially underfunded, limiting the quality and equitability of health care. These problems, common to all developing countries, are compounded in most Pacific DMCs by their small, dispersed populations and by health care needs that are growing faster than in other regions.

Equitable delivery of quality basic social services, especially health care, is essential for sustainable development. Many countries in the Pacific region are devoting attention to reform of health care financing arrangements with the aim of relieving funding constraints, achieving funding sustainability, and improving the quality and equitability of service delivery.

The Republic of Palau has for some time been among the Pacific DMCs looking to reform its health-care financing arrangements, with reform proposals dating back to 1995. Health-care delivery in Palau was satisfactory in many respects, but the cost was high and unsustainable. Efforts to reform financing arrangements came in 2008 with the emergence of a small group of dedicated national leaders that guided the undertaking. This group's vision of how reform should advance was tempered with pragmatism in transforming that vision into a workable scheme for health care financing. Complementing the group's vision and talents, in 2008, ADB approved provision of technical assistance for sustainable health care financing. Improvements in social services, institutions, and public financial management have been shown to enhance development outcomes and contribute to sustainable development, all of these being strategic goals of ADB assistance to the Pacific region.

This policy brief describes the successful development in 2008-2009 of draft legislation aimed at reforming health-care financing in Palau, and its enactment by the legislature and signature by the President of the country in 2010. The brief was prepared by ADB to disseminate experience and lessons learned in Palau that may be found applicable elsewhere in the Pacific, in keeping with ADB's Pacific Approach 2010-2014.