Health Financing for Universal Coverage: Principles and Lessons Learned

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1 Health Financing for Universal Coverage: Principles and Lessons Learned Joseph Kutzin, Coordinator Health Financing Policy, WHO BTC Health Sector Days 3 December 2012, Brussels

2 Overview Core concepts Universal coverage Health financing policy Health financing for universal coverage Implications for public policy on health coverage Some lessons from country experience Performance-based financing: part of the universal coverage agenda? Summary: principles guiding WHO s approach to health financing policy 2

3 CORE CONCEPTS: UNIVERSAL HEALTH COVERAGE (UHC) 3

4 Definition: Financing for Universal Coverage "Financing systems need to be specifically designed to: Provide all people with access to needed health services (including prevention, promotion, treatment and rehabilitation) of sufficient quality to be effective; Ensure that the use of these services does not expose the user to financial hardship World Health Report 2010, p.6 4

5 Definition embodies specific aims (universal coverage objectives) Equity in service use; Quality; and Financial protection for all For everyone? Sounds utopian and unattainable 5

6 Think of UHC is a direction, not a destination No country fully achieves all the coverage objectives And harder for poorer countries But all countries want to Reduce the gap between need and utilization Improve quality Improve financial protection Often, it translates into reducing explicit inequalities in benefits and funding per capita between groups Mexico, Thailand, South Africa using this as political driver of their reform agendas Relatedly, UHC as a means to the end (or the embodiment) of having fairer societies Thus, moving towards Universal Coverage is something that every country can do

7 he concept also implies that more than health financing reforms are needed for UHC Health financing policy directly affects financial protection Financing and other parts of the health system (service delivery, human resources, medicines, technologies) combine to influence service utilization Health financing is only a complementary instrument for influencing quality (service delivery, human resources/ medical education, medicines, technologies, information) Health financing one part of overall health system; requires strong governance to ensure all the pieces fit together 7

8 CORE CONCEPTS: HEALTH FINANCING 8

9 Health financing policy, Moldova 2004 Sources of premium income, Jan-Mar 2004 employer/employees 22% Is it okay to fund insurance in this way? Why/why not? state budget 72% self-employed 6% Source: Report of the National Health Insurance Company, Chisinau, 200

10 What is the content of health financing policy/systems? Classifications or models National Health System (Beveridge Model) Social Health Insurance System (Bismarck) Doesn t help: sources are not systems (but may be politically valuable) Functions and policies Collection Pooling Purchasing Benefits and rationing Part of all health financing systems, regardless of label Understand systems (and reform options) in terms of functions, not labels or models 10

11 Beyond Beveridge and Bismarck Labels like social health insurance or tax-funded system or community-based health insurance, etc., are not helpful for understanding (but may have political value) Functional approach more useful Disaggregated view of collection, pooling, purchasing, benefits, and wider governance arrangements No magic bullets need to coordinate various elements Relevant to countries at all income levels, but particularly important for countries with large informal sectors We observe a mix, with many countries coordinating different funding sources, channeling general budget revenues into a distinct purchasing agency, etc. (Thailand, India, Ghana, Rwanda, Kyrgyzstan, Moldova, ) 11

12 What kinds of choices need to be People Revenue collection Pooling Purchasing Service provision People and also this: made? Reforms to improve how the health financing system performs This Breadth, depth and scope of coverage; level and distribution of utilization, extent of catastrophic and impoverishing payments

13 Core messages No magic bullets it takes coordination among the pieces to make things work don t let fascination with the latest fad take too much attention away from the heavy lifting that real reform requires Avoid isolated approaches just free care or just results-based payment unlikely to work schemes should be assessed in terms of their contribution to system/population objectives, not merely on whether they are financially sustainable There are a lot of policy choices and opportunities, even if context is not optimistic for raising a lot more money We can anticipate specific needs for policy coherence (e.g. benefits, purchasing, and provider autonomy)

14 HEALTH FINANCING FOR UNIVERSAL COVERAGE 14

15 Universal Coverage for health services is not a new concept 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 Now embedded in many national constitutions, e.g. South Africa Section 27 ; Mexico right to health protection 15

16 Shift to UHC implied profound change in how we think about health insurance 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 16

17 iven this foundational shift, it should have plied a new approach to financing, but Most advice coming to low and middle income countries was largely based on following Europe s historical path Approach based on a conceptual flaw with serious consequences in developing countries 17

18 Following the historical path of western Europe problematic Starting insurance with the formal sector Improves access and financial protection for the better off Historically in western Europe, coverage grew with economic development, growing formalization of the economy and high employment Today, however, developing country governments face decisions on the rationing of scarce medical technology that Western governments did not face a century ago The initially covered groups defend their interests, demand more benefits and subsidies, and concentrate scarce administrative skills on their behalf Exacerbates inequalities, fragments the system, and is very difficult to undo 18

19 Compounding the scheme-itis problem Having first created an SHI scheme for the 5-10% of the population that is in the formal sector Countries recognized the need to cover the poor, and so often created low-income cards, i.e. targeted schemes What to do about the remaining 20-80% of the population? Not in formal sector Not the poorest, but hard to tax directly their income or earnings A common response has been to invest a lot of time and effort (and money) to encourage people to join communitybased health insurance (CBHI) schemes 19

20 What have we found? In most countries, even where participation is officially compulsory, it is de facto voluntary Not surprisingly, these health schemes have not been more effective then the tax authorities in raising money from persons outside the formal sector of the economy And with health raising its own money, MOF doesn t have to CBHIs generally suffered the fate of voluntary health insurance everywhere: low coverage (perhaps a few exceptions) Many journal articles published saying that despite only reaching 1-5% of the target population, it is a success, and anyway shortcomings are the fault of those who didn t enroll, as they obviously don t understand health insurance At best, where there are truly no alternative sources, CBHI may have substituted for OOPS for those who enrolled.

But why does CBHI seem to work in Rwanda?

2012. Government led from central to local, and not

demand and supply sides; contributions important but

21 But why does CBHI seem to work in Rwanda? (hint: go beyond the label) Source of slide: Makaka Government led from central to local, and not NGO response system failure Heavily subsidized on demand and supply sides; contributions important but no main source Compulsory Pooling across schemes and whole country

22 Some things we have learned from both experience and economic theory No country gets to UHC relying principally on voluntary health insurance Some who can afford it won't join, and some can t afford it Compulsion or automatic entitlement is essential Issue is compulsory vs voluntary, not public vs private Because there are always some who can t contribute directly, al countries with universal population coverage rely on general budget revenues (in whole or in part) And the larger the informal sector, the greater the need for using general revenues (but sources are not systems!) To sustain progress, need to ensure efficiency and accountabilit Strategic purchasing as a critical strategy for this (and also for capaci strengthening, given the linkage between information and resource allocation)

23 And fragmentation is an obstacle to equitable progress towards UHC A system is fragmented when there are barriers to the redistribution of prepaid funds Fragmentation of pooling limits the ability to crosssubsidize Can only cross-subsidize within pools, not between pools (unless there is central re-distribution mechanism) Fragmentation is a concern in virtually all health financing systems Especially when you divide the population into different schemes with different benefits and funding levels per capita So while we want more pre-payment, we don t want more pre-payment schemes if this means more fragmentation 23

24 Early 21st century pathways to UHC Thailand merged several different schemes into one, funded from general revenues, using quasi-public purchasing agency Overcame most but not all fragmentation across schemes, and progressively working to equalize benefits across them Increased service use while reducing catastrophic payments Mexico addressing its legacy of a fragmented and unequal system by creating a budget-funded insurance program for a defined list of high-cost services for the entire population creating a program of "popular insurance" for informal sector funded largely by central budget transfers to the States, which in turn are responsible for enrolling the population Also reducing gap in per capita funding and benefits across schemes

25 ore examples: slight differences in details ue to differences in starting points/contex Ghana and Rwanda have explicit coordination of bottomup and top-down financing mechanisms to create a virtual national pool, with general revenues as main source Gains in utilization and financial protection Kyrgyzstan and Moldova centralized pool of budget funds, combined with new payroll tax, changed from input- to output-based payment, and increased provider autonomy Impressive gains in geographic redistribution and efficiency Chile (through the AUGE program) and Burundi (through its PBF mechanism) link purchasing to explicit benefits Demonstrable gains in use of defined priority services 25

26 These countries took a functional approach to health financing policy Recognized that the source of funds need not determine how money was pooled, how services were purchased, nor how benefits were specified They shifted their thinking from schemes to system Pooled together or coordinated use of different revenue sources (in fact, so do Germany, Japan, Netherlands, Czech Rep, etc.) Introduced elements of performance-related payment from the prepaid funds to address specified utilization or efficiency issues Progressively increased the size of the compulsory prepaid funds while reducing the barriers to redistribution within it New organizations and institutional arrangements were key enablers/agents of change 26

27 A DETOUR ON PERFORMANCE- BASED FINANCING 27

28 BF, strategic purchasing and the agenda f health financing for universal coverage Efficiency (more health for the money) as one of the key pathways to Universal Coverage identified in WHR2010 Strengthening purchasing is a key to building domestic health financing systems It means using information on provider performance or population health needs to drive resource allocation Builds capacity; people have to analyze and use this information for decision-making Changes system culture, shakes up bureaucratic inertia RBF PBF P4P etc. are all examples of strategic purchasing 28

Poverty headcount LE at birth 8.4 mn $400 69.

29 xample of Burundi: PBF as a step towards UHC and coherent health financing policy Population GNI per Poverty headcount LE at birth 8.4 mn $ % 49 years Literacy rate 67% THE per (% of private) $47 (62%)

30 Selective free care as a form of coverage expansion 2006: President declares abolition of user fees for pregnant women and under-5's Initial large increase in utilization, as desired But absence of fee revenues led to rapid depletion of inputs, complaints from health workers about increased workload, and then informal payments Problems led to development of a solution a more comprehensive approach to reform 30

31 Making the promise real in Burundi Linking ( performance-based ) payment to benefits Payment linked to facility-level indicators on services for underfive's and pregnant women Linking benefits to payment kept the benefits of fee revenue for providers (flexible and rapid use) while eliminating access barriers It reflects a move towards real strengthening of the national health financing system Simply declaring a package without first having (or concurrently introducing) a mechanism to pay for it results in an unfunded mandate Undermines transparency and confidence in the system Sequencing matters: need a payment mechanism before you can successfully realize and sustain entitlements

32 As with health insurance schemes, think from scheme to system with PBF PBF/RBF should not be run like a "scheme" or "project", but as a step in the process of moving systems towards more strategic purchasing Long-term capacity building for the purchaser (and investing in understanding by the providers) is much more important than trying to "prove" whether or not it works (because we know that passive budgeting or unmonitored fee-for-service does not work) 32

33 A bad RBF project is run by donors (or institutionalizes the idea that the money for these incentives will be managed separately) overdoes the financial incentives in a way that can't be sustained by the government is only interested in "proving it works" in the short run, rather than always acting with the intent to move from scheme to system overwhelms domestic capacity with too many new things to monitor does not address the institutional platform that will, in the future, be required to attract and retain the people with the necessary skills to be good purchasers

34 SUMMING UP: PRINCIPLES OF OUR APPROACH TO HEALTH FINANCING POLICY 34

35 Orient policy towards objectives, not simply t implement a scheme Health financing arrangements UC intermediate objectives Universal Coverage goals Equity in resource distribution Utilization Need Health Financing Efficiency Quality Transparency and accountability Universal financial protection

36 ore specific objectives of health financing for universal coverage The goal of universal coverage may be seen as a means to the ends of improving health (and equity in health) and financial protection Financing instruments can directly influence Equity in service use Financial protection Quality (less so) Financing instruments can act on intermediate aims Promote equity in distribution of resources Promote transparency and accountability Improve efficiency to enable greater attainment of all of these 36

37 2. Sources are not systems Effective policy, and policy analysis, requires thinking in terms of functions rather than models Source of funds does not have to determine how they are pooled, how providers are paid, and how benefits and copayments are specified German citizens are not somehow more insured than British citizens just because they use a different source of funds and call their systems by different names Labels/models Can be politically useful in particular contexts as a communications tool ( we are changing to an insurance system ) But should not restrict our thinking about the choices that need to be made with respect to pooling, purchasing, benefits, etc. 37

38 . We are not selling a model; always need to tailor to country context There is no blueprint: must understand country s own starting point (current arrangement of functions and policies), context (fiscal, administrative, political, social) and the policy objectives goals to develop a realistic, comprehensive and effective reform plan This does not mean, however, that anything goes in health financing for universal coverage Certain approaches are clearly not consistent with moving towards UHC and may actually compromise it 38

39 Another way of saying it: : insuring the population as a core objective All financing systems (other than pure out-of-pocket) are systems of insurance assess performance by how well they do this job, not by what they are called WHO is committed to the objectives of health financing reform, but not to any particular institutional form or model Similarly, our core conceptual foundations are universal. We don't have separate concepts for low, middle, and high income countries (but of course, because the starting point and other aspects of context differ, so will the relevance of different policy choices) 39

40 ore message: towards Universal Coverag requires moving from scheme to system Operational principles to guide progress Explicit complementarity of different funding sources Focus on reducing fragmentation and expanding pool size (more prepayment, not more prepayment schemes) Recognize that real progress will require an explicit role (and often, increased levels) for general revenues Create unified information platform across all schemes to lay foundation for universal financing system More money and larger pools not enough: need to move towards strategic purchasing to address inefficiencies and make progress on defined, measurable objectives by linking payment to core benefits (e.g. free deliveries) Accompany implementation with research and analysis to develop country-specific solutions 40

41 Thank you 41

Overview messages. Think of Universal Coverage as a direction, not a destination

Overview messages. Think of Universal Coverage as a direction, not a destination Health Financing for Universal Coverage: critical challenges and lessons learned Joseph Kutzin, Coordinator Health Financing Policy, WHO Regional Forum on Health Care Financing, Phnom Penh, Cambodia Overview