Health financing for UHC: why the path runs through the Finance Ministry and PFM rules

Transcription

1 Health financing for UHC: why the path runs through the Finance Ministry and PFM rules Joseph Kutzin, Coordinator Health Financing Policy, WHO Meeting on Fiscal Space, Public Finance Management, and Health Financing 9-11 December 2014, Montreux, Switzerland

2 Main messages up front Principles/directions for reform of health financing for UHC Predominant reliance on compulsory sources Link funding to priority services and/or populations Use resources efficiently to sustain progress Context of high informality in LMICs (even with growth) Implies that general budget revenues will be main source Therefore, effective engagement of Health with Finance authorities essential on both level of budget funding and rules governing their use The next frontier of the health financing reform agenda 2

3 IMPLICATIONS OF UHC FOR PUBLIC POLICY ON HEALTH COVERAGE 3

4 UHC was not invented in 2010 Emerged in particular after 2 nd World War Push for social cohesion in Europe Concept of human security in Japan WHO constitution highest attainable standard for all And later Alma Ata Health for All Universal Declaration of Human Rights, includes right to medical care Embedded in many national constitutions South Africa Section 27, Mexico right to health protection, many others 4

5 Shift to UHC implied profound change in rationale for public policy on health coverage Health insurance emerged in Europe as a condition of labor (first formalized as public policy under Bismarck) Increasing labor productivity (industrialization) Reducing labor radicalism and unrest Thus, social (compulsory) health insurance for wage earners After 1945, universal coverage : affordable access to health services as a condition of citizenship or human/ constitutional right Implies a shift away from a purely (direct) contributory approach Also implies compulsion or automatic entitlement Thus, health coverage for the entire population, with explicit policies to fund coverage for the non-salaried population 5

6 Well, it should have implied a new approach to financing, but Most advice coming to low and middle income countries was largely based on following Europe s historical path In particular, starting insurance with the formal sector Improved access and financial protection for the better off Initially covered groups defend their interests, benefits and subsidies, and concentrate scarce skills on their behalf Reinforces and exacerbates existing social inequalities Also inefficiency (duplication) as countries established separate pooling and purchasing arrangements by revenue source 6

7 20 years ago in Thailand: inequalities because schemes served the workers at the expense of the people 1, Public insurance expenditure per capita, 1992 Civil Servants Social Security Low Income Elderly Vol health card Baht per capita Source: Prescott (2004)

8 Key lesson for health financing reformers: Beveridge and Bismarck are dead Labels like social health insurance or tax-funded systems are not helpful for understanding what a country is actually doing or the options available Sources are not systems Functional approach more useful Disaggregated view of collection, pooling, purchasing, benefits, and wider governance arrangements Relevant to countries at all income levels, but particularly important for countries with large informal sectors And many countries are now overcoming their fragmented legacy and coordinating different funding sources, channeling general budget revenues into a distinct purchasing agency, etc. 8

9 SOME RELEVANT LESSONS FROM FINANCING REFORM EXPERIENCE 9

10 No amount of wishing or hoping will make this go away No nation achieves universal coverage without subsidization and compulsion. Victor Fuchs (1996). What every philosopher should know about health economics. Proceedings of the American Philosophical Soc 140(2), p.188. Compulsion refers to revenue source (i.e. some form of taxation, including, of course, for subsidies) and basis for entitlement (mandatory/automatic) No country gets to UHC relying principally on VHI Adverse selection is part of the physics of health financing Compulsion or automatic entitlement is essential Issue is compulsory vs voluntary, not public vs private (the word community is not enough to combat adverse selection) 10

11 But context of high informality poses critical challenges to realizing the Fuchs conditions Hard to mobilize tax revenues, especially from direct taxes, particularly employer-employee SHI contributions 11

12 What George told us in 1997 is still true Lower income countries tend to suffer from poor tax collection Harder to tax rural and informally employed populations Implications for health spending: More private; more out-of-pocket; more regressive Data approximately 1994 Country income group Government revenues as % GDP Private as % of total health spending Low 20% 53% Middle 31% 43% High 42% 33% Source: Schieber and Maeda data Country income group Government spending as % GDP Private as % of total health spending Low 25% 58% Middle 32% 45% High 41% 30% Source: WHO estimates for 2012, countries with population > 600,000

13 So for low- and middle-income countries (and some high income as well) Major challenge to mobilize tax revenues to move towards predominant reliance on compulsory sources The main domestic source of public funding must be general budget revenues with indirect taxes often as the main source This leads us directly to importance of dialogue with MOF on the level of funding, the budget process, etc. 13

14 Another important message: you can t just spend your way to UHC To sustain progress, need to ensure efficiency and accountability Strategic purchasing as a critical strategy for this linking the allocation of resources to providers to information on their performance and/or the health needs of those they serve So ideally, systems should pay for services, and design incentives for efficient use of resources But most public finance systems can only pay for buildings and inputs and tend to be more concerned with accounting than economics 14

15 A cautionary tale from central Asia: the response to success of the Kyrgyz reforms Initiation of Single Payer reform in 2001, in 2 regions Definition of guaranteed benefit package for entire population, including formal co-payments and exemptions Eliminated pool fragmentation and separated purchaser from providers, sourced mainly from budget revenues Change in the purchasing methods to population and output based payment, linked explicitly to benefit package Gradual increase of provider autonomy in management Year 1 results Reduction of informal payments, growing awareness of benefits Efficiency gains through massive downsizing of unneeded infrastructure enabled reduction of fixed costs 15

16 The public sector financial management response, Year 2 Reforms were successful: improved efficiency (lower fixed costs) and transparency (reduced informal payments) But (although evolving), overall budget formation with MOF had not yet changed sufficiently Budgets still prepared according to number of beds So 2002 budget envelope was reduced (fewer beds interpreted as "less need, so efficiency gains were punished) Success in formalizing informal payments also rewarded Newly visible revenues taken into account in budgeting, causing reduction in public funding, punishing transparency But this did lead to dialog with MOF to align these systems in the future

17 Strategic purchasing and PFM arrangements To address limited funding, MOH develops priorities through its strategies and plans Prioritizes services (e.g. RMNCH, HIV, NCDs, etc.) and/or populations (e.g. poor) Key issue for public finance systems: is it possible to match public revenues for health to the defined priorities, or is system constrained to use line-item budgets? The problem of line-item budgeting & expenditure control Payment does not match priority services & populations Result: priorities merely declarative, breaking trust with population because no means to connect payment to promises 17

18 Sufficiently flexible PFM is a pre-condition for integrating strategic health purchasing PFM systems and processes (budget formation, expenditure control and reporting) must be sufficiently flexible to enable provider payment systems to move from paying a building for all services provided in it, to... paying for either specific services or for services provided to specific individuals Key implementation step is therefore ability to match/target health budget funds to priority services (e.g. MCH) and/or populations (e.g. poor), so that defined priorities can be realized (purchased) in practice 18

19 In conclusion: where thinking through health financing for UHC is leading us Moving towards compulsory sources means more reliance on general government budget revenues Improving purchasing means making these budget revenues much more flexible than in most public finance systems Means thinking outside our historical boxes, and intensive dialog with public finance authorities on both the level and flexibility of the budget allocations, while at the same time ensuring (output-oriented) accountability for the use of scarce public funds 19

20 From UHC to PFM: the implications of a rights-based approach to health financing Coverage as a right Foundation for UHC Towards compulsory sources What the evidence tells us General gov t budget is main source Context of informality Strategic purchasing Efficiency key to sustaining progress Align PFM & HF to sustain progress Flexibility and new forms of accountability 20

21 EXTRAS IF NEEDED 21

22 A simple summary of promising directions for progress on financing reforms Health financing element Revenue sources and contribution mechanisms Pooling Purchasing Benefit design and rationing policies Stewardship of financing Desirable attributes/directions for reform Towards predominant reliance on compulsory sources of funds (i.e. various forms of direct and indirect taxation) Reducing barriers to redistribution (fragmentation), increasing diversity of health risks within pools Establishing and strengthening incentives for efficiency and quality in purchasing mechanisms Promoting use of cost-effective services and limiting out-of-pocket burden, especially for the poor, and the alignment of these declared policies with other aspects of the system (particularly purchasing) Unified, coherent, goal-driven, and evidence-informed governance arrangements in the financing system 22

23 Pooling & Purchasing Functions Separated by Revenue Revenue Collection National Budget Local Budget Payroll Tax Donor Funds Private Funds Pooling of Funds Purchasing Separate or vertical pooling & purchasing arrangements by revenue source increases fragmentation Providers Population

24 For example, VHI under the label of CBHI in West Africa: low enrollment, small pools, insignificant funding impact Burkina Faso Benin Mali Togo Number of CBHIs Number of beneficiaries % population covered with CBHI Ave. beneficiaries per CBHI Ave. contribution per capita (XOF) % Total Health Expenditure 256, , ,000 16, % 1.5% 3.1% 0.3% 1, , ,000 3,000 2,500 1, % 0.25% 0.4% 0.04% Source of slide: Alexis Bigeard, WHO West Africa Intercountry Support Team