National Health Accounts (NHA) Development and Institutionalization: Philippines Country Experience. Rachel H. Racelis Draft: September 2008

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1 National Health Accounts (NHA) Development and Institutionalization: Philippines Country Experience 1. Background Information 1.1 NHA Estimates Rachel H. Racelis Draft: September 2008 The earliest comprehensive estimates of health expenditures in the Philippines were first presented in studies done in 1987 (providing estimates for the years ) and in 1991 (providing estimates also for 1985.) each described later. The first set of what could be referred to as National Health Accounts or NHA for the Philippines was estimated for the year 1991 and became available in The NHA estimates for the years were officially released by the Philippine national government in The Philippine NHA series now spans 16 years, from 1991 to The 2006 NHA was released recently by the national government. 1.2 Context of NHA Development The development of NHA in the Philippines was initiated in the early 1990 s when there was a general effort by the national government to reform its policy and decision making processes. A national policy stated in the Medium Term Philippine Development Plan was to strengthen information and research-based decision making and implementation in government. In conformance with this national policy, the Department of Health (DOH) launched in September 1990 a program called Health Policy Reform Initiative which sought to improve the processes and institutions for formulating, implementing and evaluating policy reforms in the health sector. A number of research projects were carried out by the DOH in collaboration with partner research institutions and funding agencies from in support of this program. NHA development activities were started in 1992 in one of these DOH projects, the Health Finance Development Project (HFDP) implemented with support from the United States Agency for International Aid (USAID). The purposes of HFDP were to develop Philippine capacity for research-based policy formulation and to establish mechanisms for interactive and participative health policy process. The HFDP took a comprehensive approach to achieve their purposes which involved among others the development of a national research agenda for health, development of statistical systems for health policy, setting up of organization structures within the DOH to guide and sustain the health policy process, and capacity building/training of policy makers, policy researchers, and other stakeholders involved in the health policy process. Training activities included orientation visits abroad, seminars and workshops and participation in short-term training courses. Thus, as an HFDP activity, a comprehensive approach was also adopted for NHA development that involved not only NHA system development, but also the development of institutions and national capacities to produce NHA and the building of capacities to use NHA 1

2 for policy making purposes. Institutionalization of the NHA therefore included both the use/integration of NHA into the policy process and the regular production of NHA. 1.3 History of NHA Institutionalization and Other Related Developments The descriptions provided in this section are taken from Racelis, et. al. (2006). Early efforts to estimate national health expenditures In 1987, the Asian Development Bank commissioned a study to estimate national health expenditures for the period as a case study to be presented to the Regional Seminar on Health Care Financing in Manila in that year (Integrated Health Care Services 1987). Unfortunately, the study did not document the methodology used in detail so that it was difficult to assess the results and to replicate the effort. In 1991, a second attempt to estimate national health expenditures (with more details of uses of funds) was undertaken for the year 1985 by the Research Triangle Institute and the University of the Philippines School of Economics or UPSE (Solon et al. 1992). Similar to the 1987 work, this study was also difficult to replicate because many of the data sources used by the study were not fully documented. Moreover, many assumptions used in estimating specific expenditure items and their assignment to specific financing source were not made explicit. While these two studies did not significantly impact on policies at that time, they contributed to increasing the awareness and sensitizing health sector stakeholders about the need to pay attention to the financial dimension of the health sector. The studies demonstrated how useful health financing data are and what these can reveal. NHA system development, institution development and capacity building In 1992, a joint effort to develop and institutionalize NHA in the Philippines was initiated by the DOH HFDP (Herrin 1992.) Two other institutions were directly involved in the project, the University of the Philippines School of Economics UPSE (through its Health Policy Development Program or HPDP) and the National Statistical Coordination Board (NSCB). In 1993, an NHA Inter-Agency Committee was convened to formally involve key institutions in NHA development. These institutions included those expected to have a continuing role in NHA estimation (e.g., data generators such as the NSCB, the Commission on Audit, and the National Statistics Office) and in the use of NHA results (e.g., DOH and PhilHealth.) Said committee was later reconstituted as the NHA Technical Working Group, which was eventually subsumed under the Inter-Agency Committee for Health Statistics, a regular committee that oversees all government-generated statistics related to health. Between 1993 and 1995, the HFDP initiated the creation of a health policy unit within the DOH and sponsored the training of its staff particularly on health care financing. The policy unit was created to ensure that information and evidence-based decision making will continue even 2

3 after the completion of the HFDP. This unit is now called the Health Policy Development and Planning Bureau. Around this same time, other capacity-building and training activities were carried out with support from HFDP and the World Bank s International Health Policy Program (IHPP). The Health Economics Program of the UPSE was established, eventually producing competent Filipino health economists. Regular seminars were held at the DOH for mid-level to top-level officials, to learn from international experts invited for the purpose. Study visits abroad and enrollment in short-term programs were also supported. All these activities expanded technical expertise at the DOH and also created a local pool of experts outside of the DOH. Also between 1993 and 1995, the NHA conceptual framework and design were discussed in various meetings and workshops organized by the HFDP (Herrin 1993; Herrin et al.1993; NSCB 1993). The first set of NHA estimates for 1991 became available in 1994 (Racelis and Herrin 1994) and was first presented in an international conference in Mexico City in May 1996 (Herrin et al. 1996). Concepts, definitions, data sources, and estimation methods used to generate the NHA were carefully documented (Herrin et al. 1995; Racelis and Herrin 1995.) Contents of these documents were eventually incorporated into the Philippine NHA manual. Institutionalization of NHA production, NHA uses and further development In 1995, the HFDP officially ended but the UPSE/HPDP NHA team continued to provide technical assistance and training to the NSCB until 1999 to ensure the institutionalization of NHA production (Racelis 1995.) The final set of estimates for 1991 through 1997 was approved by the NSCB Executive Board and officially released in Since then, the NSCB has been producing the NHA annually. A number of important activities had benefited from the usefulness of NHA estimates. They served as the basis for determining the health sector reforms needed in the country (Solon et al. 1999; DOH 1999; DOH 2004). The NHA series were also used to examine health expenditure patterns before and after the decentralization of public health care services (Schwartz et al. 2000). The NHA methodology has also been applied in the estimation of specific components of national health expenditures, including provincial health expenditures and family planning expenditures. These applications were presented in an international conference in 2001 (Racelis and Herrin 2001). The NHA series, together with survey data on health facility utilization and health insurance coverage, were also used to estimate health expenditures for the elderly in the Philippines (Racelis et al. 2003). Motivated by additional data needs for policy analysis and planning, the DOH had proposed changes to the NHA design as early as The DOH thus initiated the Philippine NHA Development Project to improve and extend the usefulness of the Philippine NHA. The project was implemented by the DOH from 2004 to 2005 with support from the World Health Organization (WHO) and in collaboration with the NSCB and Philippine Institute for Development Studies (PIDS). 3

4 Through this Project, methodologies were developed and a manual prepared for the 2005 Revised Philippine NHA. The revised NHA consisted of 5 tables (3 main tables and 2 special tables) and were estimated for the year However, there has been no further work based on the revised NHA structure. In 2007, the NSCB revised the methodology for estimating the household our-of-pocket component of the NHA. The activity was supported by the WHO. The NSCB presently continues to use the original NHA design and the Philippine NHA series now covers 16 years, from 1991 to There are still discussions on-going about how to proceed regarding the two sets of NHA design. 2. Key Elements of NHA Institutions in the Philippines 2.1 NHA Production Philippine NHA design and methodology The original NHA design and methodologies were developed in a consultative manner through various meetings and workshops organized by the HFDP. The meetings were participated by representatives from the DOH, NSCB, PhilHealth, Association of HMOs in the Philippines and other agencies, particularly including NHA input data producers and potential users of NHA. The consultative approach was adopted to make the NHA (1) useful and policy relevant (i.e., data needs of various stakeholders were revealed in the meetings), (2) methodologies transparent and acceptable, and (3) to establish links among institutions that would be involved in NHA production (the core group of institutions was later on constituted the Inter-Agency Committee for NHA.) During the NHA developmental phase (through HFDP), the Philippine NHA estimation manual was drafted and an MS Excel estimation tool developed, both documenting the NHA design and methodologies agreed on. The manual and estimation tool ensured that the NHA would be estimated consistently every year. The original NHA design was simple, consisting of one main table and two classification dimensions. Following the Philippine NHA Development Project in 2005, a new NHA manual was drafted along with a corresponding NHA estimation tool. Both of these can be used to guide the estimation of the NHA in their new formats, consisting of 3 main tables and 2 special tables. But as mentioned previously, the NSCB continues to use the original NHA design and that discussions are still on-going about how to proceed with the two sets of NHA designs. The input data for the Philippine NHA were chosen based on three considerations: frequency and timing of availability; accessibility; and purpose of the report (or data compilation) to indicate stability of the data source. Since most of the input data are obtained from government agencies, accessibility had not been a problem especially after arrangements with members of the Inter-Agency Committee for NHA had been formalized. In terms of timing and regularity, most of the reports (containing the NHA input data) were prepared annually and 4

5 the reports for a particular year were generally available the following year. Reports tend to be stable sources of data when these are accomplished either because they are required by law or because they necessarily have to be produced in the course of the operations of agencies. For stability of data sources, those eventually selected for use in NHA estimation included the following types: (1) documents necessary for national budget preparation and summary reports; (2) documents necessary for audit of government agencies and summary reports; (3) other financial reports of operations that have to be regularly accomplished and submitted to government monitoring agencies (such as the Securities and Exchange Commission and the Insurance Commission) or presented to agency boards; and (4)regular national household and other surveys mandated by law. A data constraint in Philippine NHA is that some of the pilot surveys done for the year 1994, to fill NHA data gaps, had not been repeated since. These pilot surveys include the following: (1) NHA Rider to the 1994 Census of Establishments; (2) Survey of health expenditures of private schools; and (3) Survey of community-based health organizations. While no updates are available, some parameters used in NHA estimation (e.g., average health spending estimates) are still based on results of these surveys, corrected only over the years for inflation. The agency, NSCB, that produces the Philippine NHA also produces the National Income Accounts and is the agency in-charge of the country s statistical system. Validity checks and verification of various data used specifically in the NHA are done by the NSCB in the course of its general statistical compilation work since most of the NHA input data are also being used for other statistical work such as National Income Accounts. For example, expenditures data from the household expenditure surveys are corrected for underreporting when used in the National Income Accounts. The same correction factor used in the Income Accounts was adopted in the estimation of household health expenditures in the NHA. Institutional arrangements The decision about where to house NHA production was also arrived at through the same consultative approach used to determine the design and methodologies of the Philippine NHA system. The choices came down to two institutions, namely, the DOH and the NSCB, but the final choice was NSCB. The arguments presented are discussed below. First, it was pointed out that there can be a conflict of interest if the DOH was to produce the NHA. That is, DOH being the agency in the country tasked with accomplishing reforms in the health sector including health financing reforms, questions can arise in the public s mind about whether there will be proper representation of facts by an agency wanting to show results and the same agency producing the statistics reporting such results. Second, NSCB was created by a Presidential Executive Order in 1986 (EO No. 5, Series of 1986), and reorganized in 1987 (EO No. 121, Series of 1987), to be the highest policy making and coordinating body on statistical matters in the Philippines. Provisions in these Executive Orders gave NSCB many advantages in the production of NHA and, more importantly, also gave the means by which institutionalization of NHA compilation could be accomplished. 5

6 Section 8 of EO No. 121 gives NSCB the authority to create inter-agency committees (IACs) to assist it in the exercise of its functions. The NSCB Executive Board approved NSCB Resolution No. 8, Series of 1995 Creation of an Inter-Agency Committee on the National Health Accounts to officially engage various agencies of the government in the production of NHA. The IAC-NHA was created as an interim arrangement to undertake the compilation of the Philippine NHA until its institutionalization at the NSCB. Subsequently, a NSCB Memorandum Order No. 001, Series of 2002 stated (1) that in fact the annual compilation of the Philippine NHA has been institutionalized at the NSCB, (2) that the IAC-NHA was being dissolved, (3) that the Inter-Agency Committee for Health Statistics (IAC-HS) was being created, and (4) that the compilation and dissemination of health statistics, including NHA, will be under the supervision of the new IAC-HS. Additionally, Section 16 of EO No. 121 authorizes NSCB to designate the statistics that should be collected as part of the national statistical system and Section 18 provides for the timely release of such designated statistics based on NSCB s statistical calendar. The Philippine NHA has been designated to be part of the national statistical system and its annual release has been a regular entry in NSCB s Advanced Release Calendar since Finally, an advantage of the NSCB is that Section 5 of EO 121 allows NSCB to establish mechanisms for allocating statistical responsibilities and designating periodicity and content of data submitted to them. This provision makes it possible for NSCB to systematically obtain all the data it needs for its statistical work including NHA work. Institutional capacity and resources for NHA The statistical expertise of the NSCB staff was another factor that made NSCB a good choice to locate NHA activities. As the institution regularly undertaking the estimation of the country s National Income Accounts, the staff of the NSCB could readily understand NHA, especially when viewed as a component or as a satellite account of the National Income Accounts. They were also already familiar with many of the sources of data for the NHA. NHA work was lodged in an existing Division at the NSCB and specific NHA tasks assigned to existing staff. The resources used for NHA production basically includes the time allocated by the staff of the unit, the Health, Nutrition and Population Division, to NHA work. The collection of NHA input data, as mentioned previously, is facilitated by a provision in EO 121 and does involve significant staff time. 6

7 2.2 NHA Dissemination and Policy Uses General dissemination The annual Philippine NHA estimates are disseminated through various means. An annual NHA report is prepared by NSCB. This report is posted on the NSCB website. Hard copies of the report are also printed as NSCB publications and are for sale. Summary statistics from the NHA are published in another annual publication of the NSCB, the Philippine Statistical Yearbook, which is for sale in hard copy and in CD form. The NHA is also presented at the annual National Health Research Forum of the DOH. Institutional user of NHA Presently, the primary institutional user of NHA is the DOH and its attached agencies including PhilHealth (Philippine Health Insurance Corporation). Awareness, understanding and eventually capacity to use NHA for policy analysis and formulation were gradually built-up at the DOH, over the same period that the NHA system was also being developed. An understanding of the financial dimension of the health sector at the DOH brought recognition of the usefulness of the NHA for health policy-making. But of greater importance was the creation of an institutional structure that ensured the perpetuation of information and evidence-based decision making at the DOH. That is, a health policy unit, the Health Policy Development and Planning Bureau, was created within the DOH. This unit uses NHA information along with a wide range of other health-related data as input to their policy research, planning/targeting and monitoring functions. NHA uses Information from the NHA provided part of the argument that led to the passage the National Health Insurance Act of The NHA was also used as key guide in the formulation of the DOH s Health Sector Reform Agenda of and the implementing framework of the FOURmula ONE for Health of More regular uses of NHA by the HPDPB (as mentioned above) include target setting and the monitoring of the impact of health sector reforms that have been implemented. Some of the targets in the Health Sector Reform Agenda with regard to health care financing and the allocation of health resources by uses were expressed in terms of a desired configuration of the NHA. Examples of these targets include among others: 1. expansion of the National Health Insurance Program (PhilHealth) to increase share of PhilHealth (from 9%) to 30% of total national health spending 2. related to (1), reduce the share of out-of-pocket expenditures (from 46%) to 20% of total national health spending 3. shift of national and local government spending towards priority public health programs, regulation and governance to increase share of the indicated expenditure items (from 10%) to 20% of total national health spending 7

8 The long series of Philippine NHA now makes tracking of accomplishments over time possible. Impact on health policies The impacts of NHA on health policies in the Philippines also came in the form of lessons learned by health policy makers. First, the NHA as a data system is an important addition to the information on the Philippine health sector. As a result of this additional information, the scope of concerns addressed by health policies had expanded to include more financing related concerns as evidenced by the reforms identified in the Health Sector Reform Agenda and, more concretely, by the passage of the National Health Insurance Act of Second, the NHA not only provided information on the financial aspect of the of the health sector, but also introduced a comprehensive view of the sector to Philippine policy makers. The NHA showed that health policies are not limited to the use of government spending as policy instrument. Third, the NHA made policy makers aware that health policy actions are interconnected through the financial dimension. The types of reforms identified in the Health Sector Reform Agenda reflect the second and third lessons learned from the NHA. 2.3 Role of Donors and International Organizations The development of the Philippine NHA from the very beginning and up to the present had been made possible by financial and technical assistance provided by a donor and an international organization. The HFDP, which initiated the development of the NHA system and supported the institutionalization of both the production and use of NHA, was funded by the USAID. The Project provided support for NHA work from 1992 to Then in the NHA design was revised through the Philippine NHA Development Project funded by the WHO. In 2007 the methodology for estimating household out-of-pocket health expenditures was examined and revised through a project funded by WHO and implemented by the NSCB and DOH. 3. Conclusion There are a number of lessons that can be learned from the Philippines NHA experience. A very important factor that had influenced the direction of NHA development in the Philippines was the general environment within which this work had taken place. The NHA activity was started at a time when there was a general effort by the national government to reform its policy making processes, more specifically to strengthen information and researchbased decision making and implementation in government. The development of the NHA, a tool for informing decision making, had fitted right into the broader effort at reforming health policy making. The establishment of the NHA as part of the general health policy reform was therefore generally accepted and widely supported. But in addition to general acceptability and support for NHA, there were also some specific factors that had contributed to the successful institutionalization of the production of NHA in the Philippines. These include the following: 8

9 1. need for information, specifically information to help identify areas of reform in health financing this need became the primary rationale for the production of NHA to continue and be carried out on a regular basis 2. the NHA design was kept relatively simple requiring modest amount of manpower and using mostly existing institutionally generated data made the Philippine NHA easy to maintain 3. the estimation procedures and data sources were carefully documented in a Manual and in an estimation tool (MS Excel) so that if there was any turnover in among NHA staff, the new staff assigned could readily be trained on the methodology using both tools; and 4. the original Inter-Agency Committee for NHA had set a good foundation by establishing firm links between NSCB and the NHA input data producers.- and the new Inter-Agency Committee for Health Statistics has continued the task of facilitating agency linkages A number of factors have also made the integration of NHA use into policy making, planning and monitoring functions of government possible. These include the following: 1. NHA has continuously provided information needed by policy makers and other users, and periodic revisions to the NHA design has maintained its policy relevance 2. NHA estimates are consistent because a standard set of estimation procedures are applied and the estimates are credible because these are produced by a reputable institution; and 3. NHA estimates are released on a regular basis and their use can therefore be built into routine planning and monitoring functions. The development of the Philippine NHA is expected to continue in the future. As indicated by the recent developmental work, these can involve changing the NHA design and/or changing some of the estimation methodology. Demand for new types of information (e.g., the financing sources dimension) and the availability of new data sources are some of the factors that can drive further development of the Philippine NHA. 9

10 References Department of Health (DOH) Administrative Order No Implementing Guidelines for FOURmula ONE for Health and Framework for Health Reform Health Sector Reform Agenda, Philippines : HSRA Monograph No. 2. Manila: Office of the Secretary, Department of Health. Herrin, A.N National health accounts: design, data and estimation issues. Paper prepared for the Health Policy Development Program-UPecon Foundation Conference on Pesos for Health: Assessing Health Care Financing Reform Possibilities, Metro-Manila., 1-3 September Towards health policy development in the Philippines. HFDP Monograph No. 1. Manila: Department of Health, Health Finance Development Project. Herrin, A.N., R.H. Racelis and NHA Team National health accounts of the Philippines: design and definitions. Quezon City: UPecon Foundation, Health Policy Development Program. Herrin, A.N., O. Solon and NHA Team National health accounts, health care financing and health sector performance. Paper prepared for the Health Policy Development Program-UPecon Foundation NHA Seminar Series, Quezon City, 14 July. Herrin, A.N., O. Solon and R.H. Racelis, The development of national health accounts of the Philippines. Paper presented at the International Conference on National Health Accounts, International Health Policy Program (IHPP)/World Bank, Mexico City, May. Integrated Health Care Services, Inc Health care financing in the Philippines: a country study. Report prepared for the Asian Development Bank. National Statistical Coordination Board (NSCB) Philippine National Health Accounts [online at Linkage of the proposed framework of the national Health accounts and the system of national account. Paper prepared for the Health Policy Development Program- UPecon Foundation Conference on Pesos for Health: Assessing Health Care Financing Reform Possibilities, Metro-Manila, 1-3 September. Racelis, R.H National health accounts of the Philippines: institutionalization plan. Quezon City: Health Policy Development Program /UPecon Foundation, School of Economics, University of the Philippines. Racelis, R.H. and A.N. Herrin National health accounts (NHA) and further applications of the NHA methodology in the Philippines: provincial health accounts and family planning 10

11 expenditure accounts. Paper presented at the Regional Conference on NHA and Health Sector Reform in Asia, Asia-Pacific Health Accounts Network (APHAN) and the International Health Policy Program (IHPP)-World Bank, 9-11 May, Mactan, Cebu City National health accounts of the Philippines: data and estimation procedures. Quezon City: Health Policy Development Program /UPecon Foundation, School of Economics, University of the Philippines National health accounts of the Philippines: partial estimates as of November Paper presented at the Pesos for Health Part Two Conference: Emerging Results of Current Research on Health Care Reform, DOH-Health Finance Development Project and UPecon Foundation, 8-9 December, Quezon City. Racelis, Rachel H., Fe V. N. Dy-Liacco, Raquel Sabenano, Mylene Beltran and Thiel Manaog. "The National Health Accounts of the Philippines: Continuing Development and New Findings." Philippine Journal of Development, 33:1 & 2, First and Second Semester Racelis, R., G. Russo and A. Mason Baseline estimates of health care expenditures of older persons: Philippines, Aging Populations: Health Systems and Policy Reform Project. Honolulu: East-West Center. Schwartz, J.B., R. Racelis and D.K. Guilkey Decentralization and local government health expenditures in the Philippines. Working Paper No Measure Evaluation Project. Carolina Population Center. Chapel Hill: University of North Carolina. Solon, O., A.N. Herrin, R.H. Racelis, M.G. Manalo, V.N. Ganac and G.V. Amoranto Health care expenditure patterns in the Philippines: analysis of national health accounts, The Philippine Review of Economics and Business 36(2):