must develop safeguards to reduce moral hazard. Frequently used methods include coinsurance (required contributions from the insured individual for his or her coverage) and deductibles (an initial amount per illness episode which must be paid by the insured iuidividual before the insurance covers the remainder of expenses). While co-insurance and deductibles reduce the danger of moral hazard, they may also discourage insured individuals from seeking care in a timely manner, which can result in larger health care costs later on. (2) A second potential problem facing insurance systems is adver.e selection. Adverse selection occurs when individuals at greater risk of illness are enrolled in an insurance program in lqrger proportions than they are found in the general population. Individuals at greater risk or illness are more likely to desire insurance, since losses from illnesses are more certain events for them. However, if premiums are calculated based on the statistical probability of illness in the general population, an over-enrollment of individuals who are at greater risk of illness will cause costs to be greater than revenue, thus threatening the financial viability of the system.

The case studies in this report analyze how successful insurance has been in spreading risks of financial losses associated with catastrophic illness, and in increasing the financial resources available to pay for health care services. The studies also discuss the factors influencing demand for insurance and analyze evidence of moral hazard and adverse selection.

# C. HEALTH SECTOR ORGANIZATION AND FINANCING IN ZAIRE

Although Zaire was left with an extensive health care infrastructure at the time of independence, the health care system deteriorated progressively until in 1977, less than 10% of the population had access to primary health care services. (3) Starting in the 1970's, however, pilot projects were begun which promoted primary health care services such as basic curative care, vaccinations and prenatal care through the establishment of networks of health centers, each network centered around a reference hospital. Often, these hospitals and health centers were managed by a church.

In 1975, these projects became the model for a national proposal to create a decentralized system of *health zones." Each would be organized around a reference hospital and contain 10 to 20 satellite health centers, providing integrated primary and secondary-level health care services to populations of approximately 100,000 residents. The proposal became part of Zaire's Five Year Health Plan in 1982, and has been implemented with the support of the Government of Zaire (GOZ), the churches, and many international donors. As of 1989, over 100 of the 306 proposed health zones have been established and are functioning well. In 1987, over 46% of Sh: population had access to primary health care services (3). Appendix I provides a morr, detailed explanation of the organization and management structure of the health zones.

Zaire has a range of health care financing systems. The most commoa form of health care financing is user fees, which are administered in a number of ways. A 1986 study of ten health zones revealed that nine zones charged fees per episode of illi ess to financing ambulatory curative care. (4) With this payment system, follow-up consultations were provided at no additional charge. In three of these nine zones, drugs and laboratory test were also included in the episode price.

In most health zones, the price of inpatient care is calculated according to the number and types of services and procedures provided (drugs, exams, bec. days, etc.). The per-case pricing methodology in practice at Bwamanda Hospital (described in the first case study in Section II) is encountered less frequently.

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