Health Care Financing Reform in Ethiopia: A Path to Sustainable Financing While Improving Quality and Equity


Health Care Financing Reform has allowed health facilities to retain and use their revenue for health service quality improvements. Hospitals and health centers in the three big regions started to retain revenue in 2005-2006, and now it is being rolled out to all regions as a national program. As a result of revenue retention, health facility budgets have improved significantly. In 2011, the revenue retained accounted for an average of 36.3 percent of the total health budget in 146 health centers.

The increase in revenue at the health facility level has enhanced the quality and availability of services.

  • Greater availability of essential medicines
  • Increased procurement and maintenance of essential diagnostic and health services delivery equipment
  • Improved health facility infrastructure
  • Increased water and electricity supply in health facilities

Improved quality of health care has in turn improved citizens’ perceptions of health services, improved the performance and satisfaction of health professionals, and enhanced the overall functioning and performance of the health system. The implementation of the new fee waiver system, which targets underserved populations, protects the poor and promotes equity within the system. The standardization and promotion of exemption schemes extends the reach of key preventive and health promotive programs which reduce disease burden. Other important achievements of the reforms include: improved health facility governance, increased outsourcing of nonclinical services in public hospitals, improved capacity in financial management, and increased utilization of health care through the piloting of health insurance schemes.