The impact and cost-effectiveness of user fee exemption by contracting out essential health package services in Malawi.

Objectives: To examine the impact and cost-effectiveness of user fee exemption by contracting out essential health package services to Christian Health Association of Malawi (CHAM) facilities through service-level agreements (SLAs) to inform policy-making in Malawi.

Methods: The analysis was conducted from the government perspective. Financial and service utilisation data were collected for January 2015 through December 2016. The impact of SLAs on utilisation of maternal and child health (MCH) services was examined using propensity score matching and random-effects models. Subsequently, the improved services were converted to quality-adjusted life years (QALYs) gained, using the Lives Saved Tool (LiST), and incremental cost-effectiveness ratios (ICERs) were generated.

Findings: Over the 2 years, a total of $1.5 million was disbursed to CHAM facilities through SLAs, equivalent to $1.24 per capita. SLAs were associated with a 13.8%, 13.1%, 19.2% and 9.6% increase in coverage of antenatal visits, postnatal visits, delivery by skilled birth attendants and BCG vaccinations, respectively. This was translated into 434 lives saved (95% CI 355 to 512) or 11 161 QALYs gained (95% CI 9125 to 13 174). The ICER of SLAs was estimated at $134.7/QALYs gained (95% CI $114.1 to $164.7).

Conclusions: The cost per QALY gained for SLAs was estimated at $134.7, representing 0.37 of Malawi's per capita gross domestic product ($363). Thus, MCH services provided with Malawi's SLAs proved cost-effective. Future refinements of SLAs could introduce pay for performance, revising the price list, streamlining the reporting system and strengthening CHAM facilities' financial and monitoring management capacity.