Conditional Cash Transfers and the Health Sector

Rogelio Gómez Hermosillo, Founder and former National Coordinator, Oportunidades
James Riccio, Director, Low-Wage Workers and Communities Policy Area, MDRC, New York City
Michelle Adato, Senior Research Fellow, International Food Policy Research Institute

"Any discussion about dealing with magic bullets is not appropriate, there are no such things in the social sciences", argued Rogelio Gómez Hermosillo founder and former National Coordinator of Oportunidades, at a September 25, 2008 conference cosponsored by the Wilson Center's Global Health Initiative and Mexico Institute. Drawing on their domestic and international experiences with conditional cash transfers, an incentive-based model that provides beneficiaries with cash in exchange for modified health and education behavior, Hermosillo, along with his colleagues James Riccio and Michelle Adato, presented challenges and progress with this finance strategy often regarded as the "magic bullet" out of poverty.

Packaging Conditional Cash Transfer Programs

Rogelio Gómez Hermosillo opened the event by outlining the growing increase of conditional cash transfer programs in the developing world, highlighting the features and methodology behind the model's success. "There is no recipe for successful conditional cash transfers", explained Hermosillo. Rather the ingredients for such programs include a multi-dimensional "package" that must be tailored to each country's unique reality.

According to Hermosillo, the basic design features for an effective conditional cash transfer "package" include a target population; defined behaviors to be conditioned; behavior compliance evaluation; a paying agency; and third-party program assessors. While these features are indeed necessary, Hermosillo emphasized that all governments must first consider whether this type of program is the best strategy for their country and if there is sufficient supply capacity to respond to the hoped-for increase in demand for education, healthcare and/or other services.

As witnessed in the success of Oportunidades and many similar programs throughout the developing world, conditional cash transfer programs accelerate positive health care behavior. In Mexico, Oportunidades successfully decreased the prevalence of anemia by 20 percent, reduced the average number of sick days for adults, and increased preventative healthcare visits with physicians. Conditioning participants to positively modify their health behavior in exchange for payment is not a "magic-bullet" out of poverty and it is imperative that governments work across sectors to share in the responsibility of the programs success.

"We are not conditioning citizens; the government should guarantee rights. This is a tool to make effective the natural right for education, health, and economic stability," said Hermosillo. In Mexico, policymakers have responded positively to conditional cash transfer programs, however Hermosillo shared that there needs to be a real commitment from "top government officials in the Ministry of Health and Ministry of Education to emphasize that this is a tool used not to condition folks, but to make a difference", not only in the lives of participants, but for the entire country and economy.

Safety Net in New York City

Conditional cash transfers have inspired regional and national governments alike. After witnessing the effects of Mexico's Oportunidades firsthand, New York City's Mayor Michael Bloomberg implemented Opportunity NYC: Family Rewards Program. In the United States, the idea of co-responsibility and mutual obligations is not a new concept: social welfare programs such as Medicare and Medicaid have been executing elements of conditional cash transfers for years. However, unlike Oportunidades which serves as the principle safety net for low-income families, the Family Rewards Program is "layered" on top of existing social programs and provides participants with new money for achieving obligations without replacing transfers received through government programs.

On average, families earned an additional $2,617 per year, thereby alleviating hardship and increasing economic opportunities for participants. Focusing on preventative healthcare and parental engagement this cash transfer program provides financial incentives to families for maintaining healthcare coverage and visiting physicians for non-emergency and dental checkups.

Building human capital for future generations is pivotal to breaking the cycle of poverty and parents are rewarded not only for their ability to sustain employment, but also for his or her child's standardized testing scores. James Riccio explains that, "The program is trying to influence how parents engage in their child's education" so future generations may have a chance to escape poverty. Currently, the Family Rewards Program is a privately funded pilot study. However, with evidence from this and other pilot studies in other US cities, policymakers may be more apt to fund this new type of social program.

Challenges & Future Research for Conditional Cash Transfers

In order to fully appreciate the overall impact of conditional cash transfers, Michelle Adato has utilized quantitative and qualitative research methods to examine the model's effectiveness and its interaction between nutrition, health, poverty and education in Latin America and Turkey. Highlighting the influence of social-cultural ideals, participant expectations, and gender roles, Adato shared how conditional cash transfer programs not only influence health and education, but also empower women. "Money that gets into the hands of women tends to be spent (more often) on children's basic needs than the same amount of money going to men," said Adato. Enabling women to control cash incentives may increase the overall health benefits for participating families.

However, Adato cautioned that additional research is needed to better understand how fears of modern medicine and cultural beliefs relate to program outcomes. As regional and national governments implement conditional cash transfer programs they will be faced with the challenge of balancing their unique regional contexts. She concluded, however, that the shared responsibility of participants, community organizations, and policymakers may be a critical component of a new recipe out of poverty.

By Calyn Patzer
Gib Clarke, Global Health Initiative Senior Program Associate, Environmental Change and Security Program, 202-691-4292