Paying for Performance in the Battle Against Anemia: Pilot Study

Problem

Despite China’s rapid economic development, prevalence rates of iron deficiency anemia among children in China’s poorest rural areas range between 25% and 60% - implying more than 10 million affected children (MoH, MoST and NBS 2004, Chen et al. 2005, Wang 2007). Anemia leads to compromised ability to learn and poor physical growth, which may impair children’s ability to perform in school and ultimately result in retarded cognitive, motor, and academic ability. Consequently, childhood anemia is strongly (negatively) correlated with educational outcomes, such as grades, attendance and attainment (Bobonis 2004, Stoltzfus 2001, Halterman et al. 2001). Anemia may also therefore limit children’s opportunities for social and economic mobility and be an important contributor to the intergenerational transmission of poverty (Bobonis 2004).

If the problem is so great, why have few corrective steps been taken when inexpensive, highly efficacious and accessible interventions exist? Misalignment between supplier incentives and the ultimate social objective of good population health may be an important explanation for this phenomenon. Performance pay by rewarding providers for achieving health improvement without specifying how it should be done also creates much stronger incentives for creativity and innovation. Doing so returns decision-making authority to local providers, allowing them to fully utilize their superior knowledge of what is likely to work (and not to work) in local settings. 

Our research presents evidence on the effectiveness of rewarding providers for better health outcomes by studying the impact of financial incentives for primary school principals on anemia reduction among students in rural China. 

Goals

We aim to determine whether performance pay incentives for providers lead to better health outcomes.

Anemia compromises the energy and attention needed for effective learning. How will the local providers be motivated to help these children?

Approach

Sampling and Randomization

We randomly selected rural Chinese primary schools in Ningxia and Qinghai, two provinces with high anemia rates. All participants were fourth or fifth grade students. We then randomly assigned study schools to one of three experimental arms.

Experiment Arms/Interventions

1. Information-Only (Control): We provided three types of information to principals: (a) the share of enrolled students who are anemic, (b) descriptions of efficacious methods for reducing anemia, and (c) details about anemia’s relationship to school attendance, educational performance, and cognitive development. 
2. Information + Earmarked Operating Budget Subsidy (hereafter termed “Subsidy”): The subsidy schools were given 1.5 RMB per student per day for nutrition-related expenses. We also provided exactly the same information to principals as in Control schools.
3. Information + Earmarked Operating Budget Subsidy + Anemia Reduction Incentive (hereafter termed “Incentive”): For these schools, 150 RMB was given to principals for each student who did not have anemia at follow-up compared to baseline. These schools also received the same information and subsidies as the Control and Subsidy schools.

Data Collection

• Primary School Surveys: We collected information from principals about (a) nutritional characteristics of school meals, (b) use of anemia-related nutritional supplements and (c) school characteristics.  We also measured student hemoglobin concentrations. During follow-up, we also gathered information about strategies principals had pursued to reduce anemia among students.

• Household Surveys: We visited each child’s home and interviewed their parents, collecting information about (a) household socio-economic characteristics, (b) individual health behaviors, and (c) nutritional characteristics of household meals.

Data Analysis

• We analyzed how student hemoglobin concentrations changed in our Subsidy and Incentive arms relative to the Control arm
• We examined behavioral responses to each intervention arm. Specifically, we tested for (a) differential approaches of principals to reduce anemia, (b) changes over time in the composition of meals at home, and (c) changes in school budgetary allocation.

Evaluation

We obtained hemoglobin concentration measurements from the students at baseline and follow-up to determine whether the interventions might make any difference in reducing anemia and affecting behavioral responses.

Results

Larger Changes in Hemoglobin Concentrations and Dependence on Test Score Incentives in the Subsidy and Incentive Groups than in Control

• The Subsidy and Incentive schools had higher increases in hemoglobin levels from baseline to follow-up relative to Control schools
• Test score initiatives led to increases in student hemoglobin levels in the Subsidy group and even greater increases in the Incentive group  

Different Behavioral Responses to Interventions Depend to Some Extent on Behavior Type

• Incentive school principals were somewhat more likely than Subsidy school principals to pursue strategies focused narrowly on delivering iron (providing vitamins and iron-fortified foods) rather than improving nutrition more broadly (providing meat and vegetables)
• No significant differences across the intervention types in changes to home diet

  

• No significant differences across the intervention types in how usual operating funds were distributed 

Significance and Contributions

We report evidence that primary school principals with incentives for good test scores make better use of subsidies to reduce anemia – and direct rewards for anemia reduction nearly doubles their impact. Understanding financial incentives’ synergies with motives and incentives already present may enable them to produce substantial population health gains.