DESCRIPTION The program will (i) support the government to increase the number of HEF and free MNCH beneficiaries, and to implement health-related human resource and financial management reforms; and (ii) support chronologically sequenced reforms in line with the HSRS implementation plan. The proposed modality combines a programmatic approach designed to support government reforms with a TA loan to build national and subnational capacity to implement reforms. The programmatic approach is designed to provide more effective and flexible ways to translate complex structural reform objectives into implementable policy actions. The programmatic approach comprises two subprograms that facilitate a concerted policy dialogue on the basis of an agreed policy matrix related to key health governance reforms and sector priorities. The program policy matrix includes reforms completed prior to consideration of subprogram 1 by the ADB Board of Directors, and indicative triggers for subprogram 2 to facilitate continuous dialogue with the government (Appendix 4). Subprogram 1 supports policy reforms to achieve the program's four outputs. Further reforms in these key policy areas are foreseen to be supported under subprogram 2. The MOH and the government began undertaking the key subprogram 1 reforms in August 2013, and all 15 policy measures required for subprogram 1 have been completed. Subprogram 2 specifies 11 triggers (prior actions that are to be completed before submission to the Board) that need to be completed by July 2018. These triggers will advance the accomplishments achieved under subprogram 1. PROJECT RATIONALE AND LINKAGE TO COUNTRY/REGIONAL STRATEGY To make health services accessible to the poor, the government has introduced Health Equity Fund (HEF) schemes across the country. HEF is a social protection scheme, targeting the poor as identified by village and district authorities. In 2014, the HEF schemes covered about 109,000 poor families, or about 45% of all poor households. The government uses the revenues generated by major hydroelectric investments to finance the social protection schemes, in conjunction with development partners. The government has also implemented a free maternal, neonatal, and child health care (MNCH) scheme, financed by a combination of government revenues and external assistance. However, the implementation, financial management, and monitoring mechanisms for these schemes differ, depending on the funding source. The government has established common rules, procedures, and management systems for the schemes to harmonize their implementation under the National Health Insurance Bureau, and increase the number of beneficiaries. This will be the first step in moving towards providing health insurance to 80% of the population, which is a targets of the HSRS. The midterm review of the Asian Development Bank (ADB) Strategy 2020 recommends expanding operations in the health sector to 3% 5% of ADB's annual approvals. ADB's country partnership strategy, 2012 2016, for the Lao PDR includes support to public financial management in the health sector. The program is included in ADB's country operations business plan, 2015 2017 for the Lao PDR, and is aligned with the operational plan for health, 2015 2020. ADB has supported health system development through several TA projects and programs focusing on governance and public financial management. Previous ADB health projects and programs focused on infrastructure and staff capacity development in selected provinces, and helped to improve the health facility network and access to health services in these areas. Those interventions contributed to (i) establishing health service standards, (ii) provincial planning and budgeting, (iii) increasing the recurrent budget, (iv) human resource development, (v) MNCH policies, and (vi) financial management; ADB also has supported the HSRS through policy advisory TA that helped MOH develop a draft plan to implement health sector reforms. IMPACT Universal health coverage achieved by 2025 (Health Sector Reform Strategy) CONSULTING SERVICES The consulting services are required to (i) facilitate project management and implementation, and (ii) strengthen the institutional and operational capacity of the executing agency. One accounting firm will provide financial management and accounting services for the TA loan and support the financial management and accounting reforms at sub national level. One consulting firm will support the impact assessment of the HEF and free MNCH schemes. Both firms will be hired using consultant quality selection as (i) highly specialized expertise is required for the assignment and recruitment of boutique consulting firms that provide depth of expertise in specific areas is contemplated; and (ii) few consultants are qualified to carry out the assignment. A total of 3 international consultants and 7 national consultants will be employed under the project, comprising 42 person-months of international consultants and 183 person-months of national consultants. All the consultant assignments are very specific and cover different fields of competence. The timing of the consultants' recruitment and outputs will have to be adjusted to the roll out of the health sector reforms. To ensure high quality of consultants, flexibility, and to ensure strong EA's ownership of consultant's outputs, individual consultants will be recruited by EA using individual consultant selection. The EA has demonstrated its ability to recruit individual consultants. From 2010 to 2014, EA hired 8 international and 18 national consultants using individual consultant selection under the 3 different ADB projects. PROCUREMENT Procurement will be undertaken in conformity with ADB's Procurement Guidelines (April 2015, as amended from time to time) and the engagement of all consultants will be undertaken in conformity with ADB's Guidelines on the Use of Consultants (March 2013, as amended from time to time). In addition, procurement for equipment will use and follow the Government's Standard Operating Procedures (SOP) for Externally Financed Projects. Should there be any discrepancy between the SOP and the ADB's Guidelines, then ADB's Guidelines shall prevail. Shopping procedures will be used for contracts for procurement of works and equipment worth up to $100,000 and National Competitive Bidding for packages above $100,000. Before the start of any procurement, ADB and the Government will review the public procurement laws of the central and state governments to ensure consistency with ADB's Procurement Guidelines (April 2015, as amended from time to time).

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