In keeping with the results of country-level studies, Boone and Zhan (2006) conclude that educated parents demand health services and that these services will be forthcoming from the private market. Educated parents may well be better able to induce a supply of quality medical care from the private market. They might even be better able, or better motivated, to ensure good governance procedures within the public sector, thereby improving both the quality of publicly delivered medical care and the reliability and adequacy of public infrastructure.

In the OECD countries the evidence on the impact of health spending on health status is tenuous. Bunker, Frazier, and Mosteller (1994) suggest that the main effect of health care is on the quality of life and well-being, as measured by increases in activity and mobility. This indirect evidence suggests that health care plays a key role by providing information (about lifestyle and prevention) and reducing morbidity.

# **_Country-Level Evidence on the Effectiveness of Health Care Spending: The Importance of Institutions_**

Examining why the link between health spending and health status is so tenuous is easiest at the country and health facility level, where institutional issues can be fully explored. Limited data and research on the subject complicate the design of effective policies, but evidence is beginning to emerge on the nature of health institutions in developing and transition countries and the kinds of services that they support. Our reading of the literature suggests that the more severe constraints on improving health through the delivery of health care in developing countries are institutional and include the provision and enforcement of basic performance incentives and cost containment. This section discusses some recent evidence on these topics and their relevance for institutional strengthening to improve health status.

Access to health care has improved markedly in the last two decades, but the quality of public health care services has been examined only recently. For the most part it has been found wanting. Recent evidence suggests that ineffective incentives and lack of accountability undermine the public provision of health services, leading to underperformance and substandard care (Lewis 2006). This may help to explain why public spending shows minimal effects on health status. Jack and Lewis (2004) attribute the shortcomings to government failure, effectively “government interventions that have gone wrong.” Institutions in health care are important but understudied. The lack of sound institutions undermines health investments and leads to ambiguous evidence on the relationship between health care services and health status. Accepted indicators of health care performance such as hospital infection rates, utilization statistics, or surgery survival rates are rarely collected even where required, for lack of some combination of oversight, regulation, and enforcement. This applies in middle-income countries as well as poorer ones. Indirect indicators of poor performance that are increasingly relied on in the absence of more direct measures include provider absenteeism, lack of basic medical supplies and drugs, poor management of purchases, corruption in selling public positions, leakage of funds, and under-the-table payments by patients, all of which highlight the nature of the performance lapses that undermine effective service delivery (Lewis 2006).

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