Health Financing in South Asia

Transcription

1 Health Financing in South Asia South Asia Regional Forum on Health Financing Maldives, June 2-4, 2010 George Schieber World Bank South Asia Region

2 Outline of Presentation Health Financing Functions, Objectives, and Models Revenue Collection and Tax Policy Fiscal Space and Macroeconomic Management Risk Pooling Purchasing Global Experiences

3 Health Financing Functions, Objectives, and Models

4 Countries Need to Focus on Health Financing Functions and Objectives, not Generic Models Functions Objectives Revenue collection raise sufficient and sustainable revenues in an efficient and equitable manner to provide individuals with a basic package of essential services which improves health outcomes and provides financial protection and consumer satisfaction Pooling Purchasing manage these revenues to equitably and efficiently create insurance pools assure the purchase of health services in an allocatively and technically efficient manner Source: Gottret and Schieber, Health Financing Revisited, World Bank 2006

5 Financing Decisions Involve Difficult Trade-offs Political Criteria Efficiency Health Outcomes Affordability Financial Protection Consumer Satisfaction Equity Sustainability

6 Given Multiple Health Financing Goals, a Multi-Pillar Approach May be Appropriate Source: Preker et al. (eds), Global Marketplace for Private Health Insurance, World Bank, 2010.

7 But Multi-Pillar Systems Can Be Quite Complex: Lots of Luck President Obama

8 The Benefit Package and Public Financing of Certain Health Services are Key Financing Functions Collection Pooling Purchasing Basic Benefit Package Breadth Scope Depth Sustainable Equitable Efficient Affordable Public BBP Criteria Health Outcomes Financial Protection Consumer Satisfaction Source: Musgrove 1996, HFR 2006, WHO 2000, World Bank, Kutzin forthcoming Cost-effectiveness Externalities Public Goods Catastrophic Costs Poverty Equity Rule of rescue Political

9 Cost Effectiveness is One Important Criterion How much health will a million dollars buy? Service or Intervention Cost Per DALY (US$) Estimated DALYs Averted Per Million US$ Spent Expanding immunization coverage with standard child vaccines , ,000 Taxing tobacco products , ,000 Performing coronary artery bypass surgery in high risk cases** >25,000 <40 Using antiretroviral therapy that achieves high adherence for a large percentage of patients ,000-3,000 Detecting and treating cervical cancer ,000-60,000 Source: Disease Control Priorities in Developing Countries, second edition, 2006, Tables

10 Most SA Countries for Their Income and Health Spending have Lower Disease Burdens Per Capita than Comparators Afghanistan Better than average Worse than average DALYs per 100,000 Relative to Income and Spending, 2004 Maldives Bhutan Nepal Sri Lanka India Pakistan Bangladesh Better than average Worse than average Performance relative to income per capita Source: World Development Indicators (2010), WHO (2010), & Royal Monetary Authority (2009) Note: both axes log scale

11 Better than average Worse than average Performance relative to health spending per capita Better than average Worse than average But Performance on Specific Health Outcomes is More Mixed Infant Mortality Maternal Mortality Global Comparisons of Infant Mortality versus Income and Total Health Spending, 2008 Global Comparisons of Maternal Mortality Relative to Income and Spending, 2005 Afghanistan Maldives Afghanistan Bhutan Maldives Nepal India Bhutan India Pakistan Bangladesh Pakistan Sri Lanka Nepal Bangladesh Sri Lanka Better than average Worse than average Performance relative to income Better than average Performance relative to income per capita Worse than average Source: World Development Indicators, WHO, & Royal Monetary Authority, 2009 Note: both axes log scale

12 Worse than average Better than average Although Most Countries Perform Better than Comparators for Life Expectancy Global Comparisons of Life Expectancy Relative to Income and Spending, 2008 India Bhutan Bangladesh Pakistan Sri Lanka Nepal Maldives Afghanistan Worse than average Performance relative to income per capita Better than average Source: World Development Indicators (2010), WHO (2010), & Royal Monetary Authority (2009) Note: both axes log scale

13 Outcomes are Dependent on Education Adult female literacy versus Income ( ) Sri Lanka Maldives Bangladesh India Nepal Pakistan Bhutan GDP per capita, US$ Sources: WDI, WHO Note: x-axis log scale Female literacy rate and GDP per capita data are for latest year available

14 % of households with catastrophic expenditure (logarithm) Financial Protection and Equity are Also Important BBP Outcome Criteria and High SA Levels of OOP Imply High Levels of Impoverishment Where out-of-pocket spending is less than 15% of total health spending, few households face catastrophic payments out-of-pocket payment in total health expenditure % (logarithm) OECD others Source: Kutzin et al., Implementing Health Financing Reform: Lessons from Countries in Transition, WHO, forthcoming.

15 Malaysia (1999) Taiwan (2000) Indonesia (2006) Thailand (2002) Hong Kong (2000) Sri Lanka (1997) Philippines (1999) Indonesia (2001) Korea (2000) Nepal (1996) India (2000) China (2000) Bangladesh (2000) Vietnam (1998) % of households exceeding thresho Poorest quintile share of subsidy Hong Kong 2002 Sri Lanka 2004 Thailand 2002 Malaysia 1996 Vietnam 2003 Bangladesh 2000 Mongolia* India 1996 Indonesia 2006 Indonesia 2001 Gansu (China) 2003 Zhejiang (China) 2003 Heilongjiang (China) 2003 Shanxi province (China) 2003 Financial Protection and Equity Need to be Improved in the Region Catastrophic Payments Public Hospital Subsidies Poorest quintile share of public hospital inpatient subsidies 18% 16% 14% 12% 10% 8% 6% 4% Percent of households exceeding the share 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2% 0%.of non-food exp 25%.total exp 10% Source: Van Doorslaer et al., 2006, 2007

16 Summary of Public Policy Challenges for Designing Benefit Packages and an Appropriate Public Financing Role 1. How to prioritize? What criteria should be used? 2. How to reach consensus (with medical profession, with members of society, with interest groups)? 3. What is done with services not included in the package? 4. How to go through the transition process? 5. How to provide the package? 6. What s the cost of the package? 7. What will be the health impact of the package? 8. How to finance the basic package? 9. Who is the beneficiary of public subsidies? 10. How are public subsidies channeled? Source: WBI

17 Financing Needs to Deal with Revenue Collection, Risk Pooling, Management and Payment Source: World Bank Revenue Pooling Resource Allocation Collection or Purchasing (RAP) Service Provision Private Public Taxes Public Charges/ Resource Sales Mandates Grants Loans Private Insurance Communities Government Agency Social Insurance or Sickness Funds Private Insurance or Community-based Organizations Employers Individuals And Households Public Providers Private Providers Out-of-Pocket

18 NHS Systems Systems financed through general revenues, covering whole population, care provided through public providers Strengths Pools risks for whole population Relies on many different revenue sources Single centralized governance system has the potential for administrative efficiency and cost control Weaknesses Unstable funding due to nuances of annual budget process Often disproportionately benefits the rich Potentially inefficient due to lack of incentives and effective public sector management Source: Gottret and Schieber, Health Financing Revisited, World Bank 2006

19 Source: Gottret and Schieber, World Bank 2006 Social/Mandatory Health Insurance Systems with publicly mandated coverage for designated groups, financed through payroll contributions, semi-autonomous administration, care provided through own, public, or private facilities Strengths Additional health revenue source As a benefit tax, there may be more willingness to pay Removes financing from annual general government appropriations process Generally provides covered population with access to a broad package of services Often has strong support from population Can effectively redistribute between high and low risk and high and low income groups in the covered population Often serves as the basis for the expansion to universal coverage Weaknesses Poor are often excluded unless subsidized by government Payroll contributions can reduce competitiveness and lead to higher unemployment Can be complex and expensive to manage, which is particularly problematic for LICs and some MICs Governance and accountability can be problematic Can lead to cost escalation unless effective contracting mechanisms are in place Often provides poor coverage for preventive services and chronic conditions Often needs to be subsidized from general revenues

20 Community-Based Health Insurance Not-for-profit prepayment plans for health care, with community control and voluntary membership, care generally provided through NGO or private facilities Strengths Community-run and not-for-profit Membership is voluntary Promotes pre-payment Plays a role in mobilizing additional resources, providing access and financial protection in LICs Risk sharing is usually from the well to the sick If premiums are based on income, there can also be risk sharing from the better off to the poor CBHI can be a helpful complement but is not a substitute for NHS or SHI systems Weaknesses Heterogeneous in terms of populations covered, regulation, and benefits provided Providing access and financial protection are limited due to the small size of most schemes The financial sustainability of most schemes is questionable CBHI schemes generally do not reach the very poor Their impacts on care delivery are quite limited Should be encouraged only where more comprehensive health financing arrangements cannot be implemented on a large scale Source: Gottret and Schieber, World Bank 2006

21 Voluntary Health Insurance Financed through private voluntary contributions to for- and non-profit insurance organizations, care provided in private and public facilities Strengths As a prepayment and risk pooling mechanism is generally preferable to out of pocket expenditure May increase financial protection and access to health services for those able to pay When an active purchasing function is present it may also encourage better quality and costefficiency of health care providers Weaknesses Associated with high administrative costs Not effective in reducing cost pressures on public health financing systems May be inequitable without public intervention either to subsidize premiums or regulate insurance content and price Has the potential to divert resources and support from mandated health financing mechanisms Applicability in LICs and MICs requires well developed financial markets and strong regulatory capacity Source: Gottret and Schieber, World Bank 2006

22 Evidence on User Fees is Mixed Fees for publicly provided services Strengths Generate additional revenue with which to improve health care quality Increase demand for services owing to the improvement in quality May reduce out-of-pocket and other costs, even for the poor, by substituting public services sold at relatively modest fees for higher-priced and less accessible private services Promote more efficient consumption patterns by reducing spurious demand and encouraging the use of cost-effective health services Encourage patients to exert their right to obtain good quality services and make health workers more accountable to patients When combined with a system of waivers and exemptions, serve as an instrument to target public subsidies to the poor and to reduce the leakage of subsidies to the non-poor Weaknesses Are rarely used to achieve significant improvements in quality of care, either because their revenue generating potential is marginal or because fee revenue is not used to finance quality gains Do not curtail spurious demand because in poor countries there is a lack, not an excess, of demand Fail to promote cost-effective demand patterns because the government health system fails to make costeffective services available to users Hurt access by the poor, and thus harm equity, because appropriate waivers and exemption systems are seldom implemented; where they are, the poor get discriminated against with lower quality treatment Source: Gottret and Schieber, World Bank 2006

23 Revenue Collection and Tax Policy

24 Revenues Can Come From Many Sources Source: Preker et al. (eds), Global Marketplace for Private Health Insurance, World Bank, 2010, Chapter 2.

25 There are Numerous Types of Taxes Source: : Allan, The Theory of Taxation,1971

26 Tax System Criteria Revenue adequacy and stability: the tax should raise a significant amount of revenue, be relatively stable, and be likely to grow over time Efficiency: minimizes economic distortions Equity: should be fair in terms of the treatment of different income groups Ease of collection: should be simple to administer Political acceptability: transparency, broad diffusion, and clarity about the uses of the tax promote acceptability Source: IMF

27 Domestic Resource Mobilization is Much More Limited in MICs and LICs Regions Total Revenue as % of GDP Tax Revenue as % of GDP Social Security Taxes as % of GDP Early 2000s Americas Sub-Saharan Africa Central Europe, Baltics, Russia & Other Former Soviet Republics Middle East & North Africa Asia & Pacific Small Islands (Pop. < 1 million) Low-income countries Low middle-income countries Upper middle-income countries High income Countries Source: IMF

28 Revenue share of GDP (%) SA Revenue Effort is Generally Low Revenue share of GDP versus GDP per capita Maldives Pakistan Nepal Bangladesh Bhutan India Sri Lanka Afghanistan GDP per capita (current US$) Sources: WDI; WHO Note: both axes log scale Data are for latest available year Note: Revenue figures exclude grants

29 Social Security Expenditures on Health as % of THE Financing Sources Differ Widely by Region (Share of Tax and Social Insurance Revenues in Sources of Total Health Financing, LMIC Regional Averages 2005) 40% 35% Social Security and General Government Expenditure on Health- LMIC Regional Averages (2005) ECA 30% 25% 20% 15% LCR 10% MNA 5% SAR EAP 0% AFR 0% 10% 20% 30% 40% 50% 60% 70% General Government Expenditure on Health (less Social Security) as % THE Source: Langenbrunner et al., Health Financing Note East Asia and Pacific Region, forthcoming.

30 Dedicated taxes for health % total health expenditure Many Different Types of Revenues are Used to Finance Health in ECA (Sources of Health Financing by ECA Country, 2004) HR EE BAMK RO PLHUSI Predominantly dedicated tax CZ YU LT SK BG LV Predominantly general revenue RU MD GE KG AL AZ TJ AM UZ UAKZ BY General revenue for health % total health expenditure Source: Kutzin et al., 2010, forthcoming; WHO (2008); Health Systems in Transition reviews, national NHA reports, Health Compulsory Insurance State Agency Latvia (2005), Murauskienė (2007), Voncina (2007), World Bank (2006a, 2006b, 2008), World Bank (2005). Note: a For Latvia, 2003 data was used to illustrate collection mechanism in place until January Dedicated tax refers to both payroll taxes earmarked for health (mandated contributions by employers or employees, the self-employed, pensioners and the unemployed, and other vulnerable groups to social security, explicitly labeled to health) and income tax revenues earmarked for health. General revenue allocation includes funding allocated through the general budget for programs (such as public health programs) as well as transfers from government to social security institutions or national health insurance schemes, which are labeled to health, e.g., on behalf of vulnerable groups. Key (country abbreviations based on internet domain names): AL: Albania, AM: Armenia, AZ: Azerbaijan, BA: Bosnia-Herzegovina, BG: Bulgaria, BY: Belarus, CZ: Czech Rep, EE: Estonia, GE: Georgia, HR: Croatia, HU: Hungary, KZ: Kazakhstan, KG: Kyrgyzstan, LT: Lithuania, LV: Latvia, MD: Moldova, MK: Macedonia, PL: Poland, RO: Romania, RU: Russia, YU: Serbia and Montenegro, SK: Slovakia, SI: Slovenia, TJ: Tajikistan, UA: Ukraine, UZ: Uzbekistan.

31 Social Security Expenditures on Health as % of THE And in EAP and SA Countries (Share of Tax and Social Insurance Revenues in Total Health Financing, EAP: 2005, SA: 2008) Social Security and General Government Expenditure on Health-EAP Countries 25% CHN MNG 20% 15% 10% 5% 0% LAO VNM AF * PHL IN * KHM Predominantly social insurance financed PK * IDN BG NE SR * * * WSM TLS TON PNG SLB 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Government Expenditure on Health (less Social Security) as % of THE MYS THA VUT FJI MA * Predominantly tax financed BH * Source: Langenbrunner et al., Health Financing Note East Asia and Pacific Region, World Bank, forthcoming. Modified by the addition of SA countries in red with 2008 NHA data.

32 Fiscal Space and Macroeconomic Management

33 What is Fiscal Space? Overall fiscal space (IMF definition): Fiscal space refers to the availability of budgetary room that allows a government to provide resources for a desired purpose without any prejudice to the sustainability of a government s financial position. Definition does not specify fiscal space for what, e.g., there is no sector specification generally presumed to be for some meritorious purpose, or for financing public investments for aiding economic growth. Strong link to the notion of financial sustainability. Financial sustainability is the capacity of governments, in future, to finance desired expenditure programs, service its debts, and ensure its solvency. Source: Heller 2006, Tandon et Cashin, Assessing Public Expenditure on Health From a Fiscal Perspective, World Bank, forthcoming.

34 Sources of Fiscal Space Overall fiscal space (increase as % of GDP) Grants Efficiency Borrowing Revenue Can be visualized as a diamond plot with the axes representing the amounts from different sources

35 Health Sector-Specific Sources of Fiscal Space Earmarked taxes may be an option Often criticized from a public finance perspective, but tend to be a popular option used by countries some argue earmarking is important when governance is weak. Thailand has employed sin taxes to fund health promotion. Ghana has 2.5% VAT for health insurance fund. India employs an education cess. Bhutan has a 1% payroll tax but the funds don t flow to the MOF, not a specific health funding source. Thailand, Australia, the US, and Korea, are examples of countries that have successfully implemented earmarked taxes on tobacco and used the revenues for public health purposes. Mandating social health insurance may be an option If the pool of premium-paying population is large, this may be a means to raise public funds for health. Difficult option to implement in countries with large informal sectors. Source: Tandon and Cashin, forthcoming

36 SA Future Growth Situation is Reasonable Annual economic growth rates Actual: ; Projected: Maldives Bhutan India Bangladesh Nepal Pakistan Sri Lanka Year Source: IMF World Economic Outlook Note: Projections for Nepal start in 2009

37 But Revenue Effort is Not Projected to Increase in Most SA Countries (Revenues as Share of GDP) circa 2008 circa Source: IMF Article IV Consultation Reports 2009, Figures are revenues plus grants.

38 External Debt will Still Be Problematic for a Number of SA Countries (External Debt as Share of GDP) cira 2008 circa Source: IMF Article IV Consultation Reports, 2009, 2010.

39 Can SA Countries Count on Continued External Assistance? (External Assistance as a Share of Total Health Spending) Source: WHO, NHA 2010

40 Expenditure share of GDP (%) Can Health Spending be Reprioritized as Some SA Countries Give a Lower Priority to Health than Other Public Programs? Government revenues and expenditures, Sri Lanka Pakistan Afghanistan Nepal India Bangladesh Bhutan Overall government expenditure Maldives Maldives Afghanistan Bhutan Nepal Sri Lanka Bangladesh India Pakistan Public expenditure on health Revenue share of GDP (%) Source: WDI Note: both axes log scale Data for latest available year

41 A Fiscal Space Analysis for Rajasthan, India Fiscal Space Source Key Information Prospects for Fiscal Space Macroeconomic conditions 2.1% GSDP growth rate Elasticity of state health spending to GSDP=0.83 Global financial crisis reducing revenues Limited Re-prioritization of health in the government budget Health sector-specific resources Health sector-specific grants and foreign aid Efficiency gains Pressure to keep deficit low 4.1% share of health in state budget Large share of state budget nondiscretionary Inter-fiscal transfers (other than NRHM) have been de-linked from health spending priorities Prices on alcohol and tobacco products are already high, and consumption is concentrated among the poor. As much as 92% of the labor force is informal, and 42% of the population lives on a $1 a day or less, which would not provide a sufficient base for a contributory health insurance system. User charges from the top quintile of the population alone could generate significant resources The size of the country makes the magnitude of aid required for impact impractical. Weak absorptive capacity 60% of NRHM funds tied to 15 different fragmented programs 70%of state health budgets are consumed by salaries and non-discretionary Absenteeism in public sector primary health centers 40-50% Limited Limited to Moderate Limited Source: Tandon and Cashin, Assessing Public Expenditure on Health From a Fiscal Perspective, World Bank, forthcoming Good

42 Risk Pooling

43 In Practice, Countries Use Different Organizational Arrangements for Risk Pooling MOH/NHS Social insurance Insurance schemes Multiple competing private insurance Community risksharing arrangements Single Multiple Indemnity Managed care Source: Baeza, World Bank

44 Source: World Bank Risk Pooling and Prepayment Risk pooling enables the spreading of risks over a large number of people as large unpredictable risks at the individual level become predictable when averaged over a large number of individuals Risk pooling enables the averaging of health risks over all pool members and provides the opportunity for redistribution among high and low risk pool members This averaging of risks coupled with prepayment of these average treatment costs are the basis of insurance Insurance enables pool members to face a predictable upfront small average payment, rather than a large unpredictable payment Thus insurance provides ways to finance risks equitably and efficiently across members of varying risk profiles and income levels: In risk rated private insurance, the prepaid premium reflects the average predicted risk of pool members, thus enabling the sharing of risks among high and low risk individuals in the pool In a public system, pre-payment through public revenues further allows the separation of payments from expected medical risks and individuals abilities to pay, and thus enables redistribution from high to low income individuals as well as from low to high risk individuals

45 What do We Mean by Risk Pooling? Cross-subsidy from low-risk to high-risk (risk subsidy) Cross-subsidy from rich to poor (equity subsidy) Cross subsidy from productive to non-productive part of the life cycle Low risk High risk Poor Rich Produ ctive Nonproduc tive Health risk Income Age Source: Baeza, World Bank

46 Insurance Can Be Complex Adverse selection occurs when sicker than average individuals enroll in competing public or private health insurance plans This can destabilize insurance markets through premium spirals if healthier individuals disenroll Insurers react by trying to screen out such high risk individuals by: requiring medical exams examining claims history having waiting periods excluding pre-existing conditions from coverage refusing insurance coverage These instabilities can be offset by: regulation of insurers marketing insurance to groups formed for other purposes (e.g. employment) having a mandatory public insurance program Source: World Bank

47 Source: World Bank Insurance Encourages Overuse of Services When individuals have free access to services, they tend to overuse services This phenomenon is known as moral hazard It is present in both public and private insurance Insurance design features to mitigate moral hazard include: cost sharing limits on benefits frequent renewability utilization management

48 Do Insurance Market Instabilities Necessitate Public Financing? Public financing can: Private insurance can: pool risks over the entire population eliminate adverse selection and medical underwriting problems still face cost problems due to moral hazard segment health risks by underwriting groups preclude economic losses from coercive taxes allow for greater consumer choice Source: World Bank

49 Purchasing

50 Why is Purchasing Important? Purchasers need to assure access to covered services and financial protection for their beneficiaries, and providers have to be willing to supply them. Purchasing has both supply and demand side dimensions. Purchasing is complex because of the tradeoffs among cost, quality, and access. Efficiency and equity of purchasing determines health outcomes, levels of financial protection, overall health costs, and fiscal sustainability. Efficiency gains are a de facto source of revenue generation. Government intervention/oversight is needed due to market failures in health and accountability to their citizens and donors. Source: World Bank

51 A Critical Question is: Who Bears Risk? PROVIDER PAYER Fee-For Service Capitation Source: Langenbrunner 2007

52 Who Bears the Risk Depends on How Providers Are Paid Unit of payment: individual service per visit/encounter per day per admission per episode of illness all (or a defined set of services) for a provider for a fixed period of time (i.e., salary or global budget) all (or a defined set of) services for an individual for a fixed period of time (i.e. full or partial capitation) based on results (P4P) Level of payment providers costs providers charges administratively set by payor negotiated competitive bidding Source: World Bank

53 Continuum of Payment Bundling And the Organizational Features of the Health Care System Global Payment Outcome measures; large % of total payment Global Case Rates Blended FFS/Care Management fee Less Feasible More Feasible Care coordination and intermediate outcome measures; moderate % of total payment Continuum of Rewards for High Performance Fee-for- Service Small practices; unrelated hospitals Independent Practice Associations; Physician Hospital Organizations Continuum of Organization Fully integrated delivery system Simple process and structure measures; small % of total payment Source: Adapted from A. Shih, K. Davis, S. Schoenbaum, A. Gauthier, R. Nuzum, and D. McCarthy, Organizing the U.S. Health Care Delivery System for High Performance, The Commonwealth Fund, August 2008.

54 Checklist for New Payment Systems Means Getting the Incentives Right to Deal With Cost, Access, and Quality Enable and encourage providers to deliver accepted procedures of care to patients in a high quality, efficient, and patient-centered manner Support and encourage providers to invest, innovate, and take other actions that lead to improvements in efficiency, quality, and patient outcomes and/or reduced costs Not encourage or reward overtreatment, use of unnecessarily expensive services, unnecessary hospitalization or rehospitalization, provision of services with poor patient outcomes, inefficient service delivery, or choices about preference-sensitive services that are not compatible with patient desires Not reward providers for under treatment of patients or for the exclusion of patients with serious conditions or multiple risk factors Not reward provider errors or adverse events Make providers responsible for quality and costs within their control, but not for quality and costs outside their control Support and encourage coordination of care among multiple providers, and should discourage providers from shifting costs to other providers without explicit agreements to do so Encourage patient choices that improve adherence to recommended care processes, improve outcomes, and reduce costs of care Not reward short-term cost reductions at the expense of longer-term cost reductions and should not increase indirect costs in order to reduce direct costs Not encourage providers to reduce costs for one purchaser by increasing costs for other purchasers, unless the changes bring payments more in line with costs for both/all payers Minimize the administrative costs for providers in complying with the payment system rules Multiple payers should align standards and methods of payment to avoid unnecessary differences in incentives for providers. Source: Miller as cited in Langenbrunner et al. 2009

55 Key Purchasing Messages 1. There is no right method 2. Purchasing systems must be tailored to the institutional realities of each health system encompassing both the demand and supply sides 3. Policy-makers need to be concerned about effects across different governmental levels, provider types, different payors (i.e., public, private HI, OOP) as well as overall health spending 4. Policy-makers must monitor the effects of alternative purchasing systems on cost, access, and quality MIS is critical Source: World Bank

56 Global Experiences

57 LIC Policy Challenges What is the role of the public sector in health financing? How can sufficient revenues be raised to afford a basic package of essential services? What can the Government do to provide financial protection against the impoverishing effects of catastrophic illness costs -- Is pooling of resources possible? What is the role of user fees Should existing user fees be abolished? Source: Gottret and Schieber 2006

58 LIC Policy Challenges (2) Are annual health plans and budgets couched in a results-based framework with appropriate M&E indicators? How can countries assure harmonization of donor procedures and alignment with national priorities and processes? How can absorptive capacity be improved? What are the most effective methods for creating fiscal space, dealing with cross-sectoral and macroeconomic tradeoffs, and aligning health policies with PRSPs and MTEFs?

59 Source: Gottret and Schieber 2006 Challenges in Middle-Income Countries Achieve universal coverage Improve financial protection Increase health system efficiency In the context of: High out-of-pocket payments Limited revenue-raising capacity Fragmented financing systems Inefficient purchasing arrangements

60 Good Practice Health Coverage Expansion Reforms Chile, Columbia, Costa Rica, Estonia, Kyrgyz Republic, Sri Lanka, Thailand, Tunisia, and Vietnam Success defined in terms of large increases in the breadth and depth of coverage and financial protection These countries have significantly expanded coverage (i.e., breadth, scope, and depth) through NHS, SHI, and private health insurance systems have average or below average health spending and little, if any, external aid have better than average health outcomes Source: Gottret, Schieber and Waters, Good Practices in Health Financing, 2008

61 Estonia - Classic SHI Model Eligibility Residence in Estonia and paying contributions (employee) or eligible without contributions (e.g. children, pensioners) or contributions paid by state Institutions Supervisory board comprised of fifteen representatives - five from the state, employers and beneficiaries. This oversees the Management Board a body with three to seven members which oversees EHIF operations and regional departments Payroll Taxes 13% of employee s wages paid entirely by employers and self-employed individual s earnings. Subsidizes most of the 49% of population non-contributors Social Insurance Funds Estonian Health Insurance Fund (EHIF) General Revenues Paid by state on behalf of 4% of enrollees Benefits/Cost-Sharing Cash benefits dental care, pharmaceuticals Benefits in kind health prevention and promotion, physician services, specialist care, long-term care. Exclusions include cosmetic surgery and alternative therapies. Statutory limited cost-sharing for specialist visits and bed-days. Contracting and Provider Payment Public and private inpatient and outpatient specialist services: capped cost-volume contracts set the financial frames; fee-for-service, visit fees, per diem, DRGs are basis for reimbursement of single cases. Extra-billing is allowed only for services not included in the benefit package. Contracting and Provider Payment Public and private family practitioners: a combination of capitation and fee-for-service, lump sum to cover fixed costs, quality bonus

62 Estonia Lessons Learned (Classic SHI Model) The reform from a Soviet NHS to a SHI model was carefully planned and enjoyed strong support from the medical community Health insurance system design (revenue collection, budgeting) was in line with overall prudent fiscal policy and supported development of formal employment sector The health financing reform benefited from economic growth Streamlining revenue collection through the Estonian Tax Board (since 1999) allowed EHIF to focus on purchasing health care for its beneficiaries A single risk pool and clear regulatory framework have allowed the EHIF to be an efficient administrator of SHI funds and perform as an effective purchaser Transparent regular reporting has played an important role in limiting SHI spending to available revenues Strategically designed out-of-pocket payments in conjunction with social insurance can play an important role in the sustainability of health care financing

63 Sri Lanka Classic NHS Model Eligibility Citizenship gives entitlement to free universal care OOP Benefits/Cost-Sharing General Tax Revenue Private voluntary health insurance Medical benefit schemes/ Group medical insurance schemes All government health services including inpatient, outpatient, community health services, and HIV/AIDs drugs. National Health Service Public providers ranging from primary care to hospital-provided tertiary care Private providers mainly providing outpatient care by medical officers working off-duty Provider payment Public providers are largely paid based on budgets and staff are salaried Provider payment Private health care providers are paid by fee-for-service

64 Sri Lanka Lessons Learned (Classic NHS Model) Democratic accountability can ensure that health systems are responsive to the needs of the poor. Fair access to all should be a priority goal of health systems. Health systems must provide the poor with insurance against catastrophic illness. Efficiency in health service production is more important than resource mobilization in overcoming resource constraints. Pessimism about the relative inefficiency of public service production is as unwarranted empirically as it is theoretically. Use of consumer quality differentials in a dual public-private system can be a more effective mechanism for targeting health subsidies than explicit targeting.

65 Thailand MHI Model Universal Health Insurance: 2007 tax UCS CSMBS SSS contribution 47 million population 5 million population 9 million population NHSO Comptroller General SSO capitation $US 65/capita fee-for-service $US 150/capita capitation $US 70/capita public/private providers services private room nonessential drug insurees, right holder

66 Thailand Lessons Learned (MHI Approach) Dos Gradual but determined and progressive reform Flexible implementation Decentralization Transparency and accountability Involvement of private providers, CSOs, and local government Adequate parallel investments in human and physical infrastructure HRH need to be involved, nurtured, and supported Don ts Too rapid expansion of the depth of coverage without adequate consideration of the financial and health services burden Too rapid, aggressive, and inflexible reform Too aggressive social marketing, which can create unrealistic expectations and demands Underestimating the effect of the growth of the private sector Overusing financial incentives to solve HRH problems and underestimating the importance of non-financial motivation, social recognition, and fairness

67 Success Factors in Good Practice Health Coverage Expansion Reforms Institutional and Societal Factors Strong and sustained economic growth Long-term political stability and sustained political commitment Strong institutional and policy environment High levels of population education Policy Factors Implementation Factors Coverage changes accompanied by carefully sequenced health service delivery and provider payment reforms Good information systems and evidencebased decision-making Strong stakeholder support Efficiency gains and copayments used as financing mechanisms Flexibility and mid-course corrections Commitment to equity and solidarity Health coverage and financing mandates Financial resources committed to health, including private financing Consolidation of risk pools Limits to decentralization Primary care focus Source: Gottret, Schieber, and Waters, Good Practices in Health Financing, World Bank, 2008 Note: Countries included in the study -- Chile, Columbia, Costa Rica, Estonia, Kyrgyz Republic, Sri Lanka, Thailand, Tunisia, and Vietnam

68 Financing Health in High-Income Countries From community-based voluntary insurance Formal public insurance funds Social or national health insurance systems 13 of 25 HICs use general revenue-based approaches, 9 have SHI, 3 mixed approaches Aided by political will and economic growth Changes focus on efficiency gains Source: Gottret and Schieber, Health Financing Revisited, 2006

69 Some Recent Evidence from the Technical Literature Comparisons of SHI vs General Tax Financing Overall OECD ECA Single vs Multiple Payor Approaches in Europe Issues Summary of the General Evidence from Europe

70 Single, Competing, and Multiple Purchasers in European Health Systems Source: Evetovits, WHO 2010

71 Comparisons of SHI and General Tax Financing As far as revenue collection is concerned, SHI systems have a smaller tax base, and introducing SHI may reduce resources available for health if the finance ministry reduces its allocation of tax revenues to health in line with projected (not actual) SHI revenues. The incentives to contribute in many SHI systems are weak, reflected in high rates of nonenrollment and evasion in contributions. Unlike general revenues, SHI tends to be regressive, and while the implications of the choice between the two for employment levels is not clear-cut, it does seem clear that SHI financing may contribute to the informalization of the economy. As far as risk-pooling is concerned, SHI systems typically take decades to achieve universal coverage with coverage rates for the formal sector often below 100%; major problems involved in enrolling informal sector workers; and, coverage of the poor being erratic and problematic with errors of both inclusion and exclusion. As a result SHI systems sometimes have multiple risk pools with different benefit packages and different contribution rates, even after ex post risk-equalization payments. Despite claims that SHI allows for competition between insurance schemes, resulting in downward pressure on administrative and health-care costs, in practice, cost reductions by individual schemes are often achieved largely through risk-selection, which even the most sophisticated ex ante risk equalization schemes are unable to prevent. As far as the purchasing and provision of health care is concerned, a purchaser provider split and strategic purchasing can just as easily be achieved under a tax-financed system as under a SHI system. Source: A. Wagstaff, Social Health Insurance Reexamined, JHE, 2009.

72 Transition from Tax Financed Systems to SHI in OECD Countries Increases per capita health spending by 3-4 percent Reduces the formal sector share of employment by 8-10 percent Reduces total employment by as much as 6 percent For the most part has no significant impact on amenable mortality, but for one cause-breast cancer among women-social health insurance systems perform significantly worse, with 5-6 percent more potential years of life lost. Source: Wagstaff, Social Health Insurance vs. Tax-Financed Health Systems - Evidence from the OECD, World Bank, 2009.

73 Impacts of SHI Adoption in ECA SHI adoption per se increased government health expenditure per capita. SHI has impacted on how physical resources are used, by reducing average hospital length of stay and increasing bed occupancy rates and hospital admissions. Much of the extra spending caused by SHI adoption would appear to have resulted in more costly admissions and/or extra spending elsewhere in the health system including: the higher salary share of costs resulting from health professionals support of SHI; costs incurred undertaking new activities (e.g. collecting contributions, writing contracts with providers) or that existing activities became more costly (e.g. more tests being administered on in-patients, more expensive drugs being given, etc.); less comprehensive and less well integrated public health and prevention programs resulting in extra admissions (i.e., for infectious diseases) and extra costs; and, gaps in coverage may also be part of the explanation as some groups seem to have fallen through the coverage net, and there is anecdotal evidence that some formal sector workers wait to enroll until they get sick. The transition to SHI has not caused general improvements in health outcomes (morbidity or amenable mortality) for ECA countries. SHI adoption did not always lead to provider payment reform and even when it did sometimes did so with a lag, because some non-shi countries reformed the way they paid hospitals as well. Source: A. Wagstaff and R. Moreno-Serra, Europe and Central Asia s Great Post-Communist Social Health Insurance Experiment: Aggregate Impacts on Health Sector Outcomes, JHE (28) 2009.

74 Single vs Multiple Insurance Systems: Good Use of Ones Monopsony Power May be Easier Than Managing Competition Source: P. Schneider, Competition and Health Insurance, Knowledge Brief, Vol 10, August 2009, World Bank

75 Does the Evidence Support a Move From Single to Multiple-Payer Systems Source: Evetovits, WHO 2010

76 The Road to Universal Coverage: Lessons Learned Economic growth most important factor Strong political commitment, management and administrative capacity also critical Voluntary and community-based financing help build public confidence in prepaid schemes Pool risk as coverage expands: the critical issue is risk pooling, whether SHI or NHS is ultimately chosen is of secondary importance Evaluate at each stage Source: Gottret and Schieber, Health Financing Revisited, 2006

77 Conclusion: General Financing Challenges There is no one right financing model. System financing must be sustainable --meaning that future economic growth generates sufficient levels of income for decent living standards and external debt solvency. LICs face difficult tradeoffs between financing essential services and providing financial risk protection -- prioritization is critical. For low income countries receiving large amounts of external assistance, there are serious questions of absorptive capacity as well as their ability to finance from domestic resources both future recurrent and capital costs. Most MICs are challenged to provide universal coverage, reduce fragmentation among risk pools, and improve purchasing efficiency. The critical issue is risk pooling, whether SHI or NHS is ultimately chosen is really of secondary importance. The critical condition regarding the speed of evolution to universal coverage is the level of income and its rate of growth. Evidence also suggests that the ability to administrate is a key enabling factor for success. Models need to be tailored to individual country circumstances.