PROJECT INFORMATION DOCUMENT (PID) DECISION MEETING STAGE. Ministry of Health, Ghana Ghana

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized PROJECT INFORMATION DOCUMENT (PID) DECISION MEETING STAGE Project Name Health Insurance Project Region AFRICA Sector Compulsory Health Finance (100%) Project ID P Borrower(s) GOVERNMENT OF GHANA Implementing Agency National Health Insurance Council (NHIC) Republic of Ghana Ghana Ministry of Health, Ghana Ghana Environment Category [ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined) Date PID Prepared April 9, 2007 Date of Appraisal April 5, 2007 Authorization Estimated Date of Board June 21, 2007 Approval 1. Key development issues and rationale for Bank involvement Report No.: AB3035 Context: In 2003, the Ghanaian Parliament approved the Health Insurance Act 650 and in 2005 the National Health Insurance Scheme (NHIS) was officially launched. Health insurance was part of a broader policy to improve access to health care for the poor and improve financial sustainability of the health system. In particular, the NHIS was intended to eliminate the system of user-fees ( cash and carry ) which was limiting access to health services for the poor. These user fees are thought to have contributed to recent stagnation in key health indicators such as child mortality. Ghana s implementation of the Insurance Act through revenue collection and membership registration over the past year reflects the Government s commitment to improving financial sustainability of the health sector and protecting the population against the impoverishing effects of illness. Revenue collection mechanisms have been established through a National Health Insurance Levy which is a 2.5% consumption tax, mandatory payroll deductions of 2.5% of the 17.5% Social Security and National Insurance Trust (SSNIT) contributions for formal sector workers; and a graduated premia for the informal sector. Currently District Mutual Health Insurance Schemes (DMHIS) are operating in all 123 districts with an overall coverage of 18% of the population registered, exceeding the 10% targets set for this point in time during the implementation process. A majority of those registered belong to the exempt group, including children under 18, the elderly (over 70), and indigents, which are identified by the DMHIS. Indigents represent 2.1% of those registered, exceeding the 0.5% target.

2 The project would provide critical support during the next phase of implementation. It will ensure that future developments remain financially sustainable and consistent with the priorities set out in the CAS, GPRS, Africa Action Plan and other key documents such as the Bank-wide sector strategy and Africa specific health sector strategy. This includes promoting human resource development and reinforcing the Bank s work in securing access to health care by the poor and other vulnerable populations to basic health service delivery programs. The proposed project is also consistent with the recently adopted health financing strategy by the African region of the WHO. The following describe key policy issues that require technical assistance: x x x Poor coordination among stakeholders, and lack of concrete governance arrangements and responsibilities for NHIS implementation. Decisions made by the National Health Insurance Council (NHIC) affect the operations and policies of all the health care providers of the Ghana Health Service (GHS), the Christian Health Association of Ghana (CHAG), private sector, and quasi-governmental groups. However, there has been limited coordination, both among the provider groups and between the providers and the NHIC in resolving key policy and implementation issues. This has led to gaps between the Information and Communication Technology (ICT) planned by the NHIS and the different Information Technology (IT) employed by providers; cost-shifting risks due to the split financing arrangements between the MOH and NHIC; fragmented tariff schedules and non-standardized drug lists which limit providers control over their main cost drivers; weak provider performance incentives; and difficulties phasing out MOH subsidies for the uninsured exempt who seek health care services. Challenges to maintaining financial sustainability of the NHIS and the DMHISs. Many existing NHIS policies were determined in order to implement the scheme quickly, encourage enrollment, and appeal to political constituents. As a consequence the premiums were set with regard to income levels and are not actuarially-based; there are no disincentives in place to prevent excessive use of health care services; the benefit package includes 95 percent of all illnesses; and the exemption policy creates incentives for greater enrollment of exempt than nonexempt categories of the population. There are social welfare gains from the current revenue collection, benefits package and exemption policies. However, these policies further strain the financial sustainability of the NHIS. Already, many of the district-level schemes that are fully operational are running deficits. Based on ILO estimates, the NHIF s balance should remain positive for the first few years of implementation and may continue to do so as long as Ghana maintains strong economic growth, and the enrollment of the exempt does not increase beyond the Scheme s ability to expand its subsidies to the exempt. Poor management of public expectations of NHIS. The NHIS s viability is influenced by public approval. The NHIS has focused primarily on increasing public awareness of the NHIS in order to encourage registration. However, implementation constraints and limited public outreach have contributed to poor public understanding of how the system works thereby engendering negative public opinion about the NHIS. According to the GHS, patients have started to use services needlessly and demand services not covered by the insurance system, demonstrating their lack of understanding of the NHIS. At the same time, there is negative media coverage resulting from the NHIS implementation constraints. The NHIS has to improve its public relations in order to effectively respond to public complaints while managing expectations.

3 x Difficulties providing effective coverage for the poor and exempt indigents. Although the purpose of the NHIS is to provide a pro-poor alternative to the Cash and Carry system, there are still problems with identifying and registering indigents who are exempt from coverage; registering poor informal sector workers who may still find the income-based premium levels too high; finding a financially sustainable solution for subsidizing the exempt groups; and phasing out the MOH exemptions policy. Both the insurance schemes and the providers have faced constraints that have contributed to implementation delays and negative public opinion of the NHIS. Constraints include: Delays and inconsistencies in issuing health identity cards to those who are registered. While nearly 7.7 million people have registered with the NHIS, only about 4 million have received their health identity (ID) cards. Health ID cards allow NHIS registered members to exercise their entitlements covered under the insurance package. The NHIS lack of administrative capacity is the main source of the delays, limiting the number of registered members who can access their entitled services. These delays are contributing to public opinion that reform has been slow and ineffective. Inadequate technical tools for processing and reimbursing claims. Similar to the financial management problems in other sectors, Ghana s accounting, recording and reporting systems are paper-based. The paper-based system is time intensive and has contributed to significant delays for providers to accurately bill schemes and for schemes to reimburse providers. From a review of provider reimbursement in two regions, the average time taken for providers to submit claims is 4 weeks and to receive payments from the Schemes is 2.5 months. In addition, only about 40 to 60 percent of claims submitted were reimbursed. The paper-based system also makes it difficult to profile the trends in the claims made by providers in order to check outliers for potential fraudulent activity. This further delays the time taken to process insurance information and can reduce data accuracy. The NHIS ICT Network Platform has started to address this problem with provisions for technical hardware and the GHS is in the process of developing a software package to handle billing and patient records keeping. However, the planned hardware and software packages have not been designed with coordination between the provider groups and the NHIC and may be inadequate and incompatible. Insufficient administrative, managerial and technical human capacity. Ghana s health insurance system will require skilled labor for schemes and providers to manage and administer the new health insurance system. Ghana has a shortage of workers with the necessary skills for running a health insurance system. NHIS has introduced extra administrative overheads in health facilities. In addition to the insufficient technical tools, providers are too understaffed to handle the increased workload due to requirements for claims processing. When the NHIC introduces its ICT network platform and providers start to develop their IT solutions, Scheme and provider managers and administrators will also need to employ technical know-how. The decentralized nature of the insurance system will require this knowledge set at both the district and central levels. Rationale for Bank involvement The Bank already has a significant involvement in health policy in Ghana. Expanding this involvement to include health financing policy is important for several reasons. First, the Bank is committed to helping client countries address poverty and achieve the Millennium Development Goals (MDGs). Although the

4 share of public expenditure allocated to the health sector has increased, in absolute terms spending on health care in Ghana remains very low. More and better spending in targeted programs will be critical to achieving the MDGs. Yet options for funding health care through general revenues are limited. Contributory health insurance provides additional financial resources, a method of improving risk management and a way to target the poor through selective premium subsidies. Second, the Bank is committed to supporting countries pursue good fiscal policies that promote growth and avoid corruption. This is important for overall economic development but also because ultimately it is economic growth that will lead to higher incomes, better health and more resources devoted to health care. The introduction of contributory health insurance has serious implications for the tax burden on low income groups, labor market costs, and international competitiveness. The international community has extensive experience in all of these areas which could be helpful to the government in designing a health insurance scheme that will respond to both economic and health policy objectives. Finally, the conclusions of past analytical reports published by the World Bank and the International Labor Organization outline the need for reforms to address a range of critical issues in accountability, management capacity and governance. The project provides an opportunity to provide needed support in these areas. 2. Proposed objective(s) The overall project development objective is to strengthen the financial and operational management of the National Health Insurance Scheme. The project will contribute to maintaining the National Health Insurance Scheme s financial sustainability within a medium-term time horizon by: (i) strengthening the policy design and implementation capacity of the National Health Insurance System in addressing core ongoing policy issues related to contribution collection, risk equalization and provider payment mechanisms; and (ii) improving the purchasing functions of the NHIC, and District Mutual Health Organizations and improving the billing function of the provider network. In latter cases this will be achieved by training and the introduction of financial and operational management tools that will allow the NHIC, DHMIS, other purchasers, and provider network to improve the efficiency of their financial management. The beneficiaries of the Health Insurance project are (i) the National Health Insurance Council which will have improved processes for management oversight of the National Health Insurance Scheme and therefore greater control over the financial balance; (ii) the District Mutual Health Insurance Schemes which will have streamlined mechanisms for local level administration; (iii) the provider network including the Ministry of Health Institutions, GHS, CHAG, other quasi-governmental organizations and private providers which will have improved financial management and administrative mechanisms to improve management performance; and (iv) the Ghana Institute for Management and Public Administration, the Kofi Annan Centre for Information Technology and other training centers that will provide training in executive leadership, management and information technology. 3. Preliminary description Component A: Policy Development ($1.6 million) Implementing an insurance system is an ongoing process. Although Ghana has already introduced a National Health Insurance Scheme, it still faces a number of policy challenges to ensure that: population coverage will continue to expand; the premium structure is consistent with both equity and efficiency objectives; risk management systems provide adequate financial

5 protection to prevent impoverishment at the time of illness; equalization programs ensure equity in both financing and access to services; and the way provider incentives to promote both quality care and efficient use of scarce financial resources. The project would support further policy development and implementation in the following areas: A.1. Governance of NHIS implementation, including maintaining a pro-poor focus A.2. Communication strategies to manage public expectations and increase uptake A.3. Standardizing fee schedules and drug lists A.4. Performance based provider payment mechanisms A.5. System for handling fraud and abuse Component B: Information and Communication Technology (ICT) ($8.7 million) The NHIS is already in the process of implementing an extensive ICT network platform that will support many of the core health insurance functions. Additional support is needed to ensure that the provider network interfaces in an efficient and effective way with the planned NHIS ICT Network Platform. This component will strengthen the back office of the provider network so that they will be able to carry out functions such as eligibility determination, tracking patients, bulk billing, and other standard accounting and financial management functions. The component will also attempt to standardize the provider-insurance interface so that the NHIC does not have to deal with multiple inconsistent provider interfaces. The project would support development and implementation of the provider interface in the following areas: B.1. Providers ICT strategy development B.2. Local Area Network development for larger providers B.3. Technical hardware not covered under ICT Network B.4. Software development for providers Component C: Management Training ($4.7 million) Current staff working in the Ghana health sector and NHIS do not have the training or skills needed to run a modern health insurance system. In some cases existing staff can be re-trained to perform the new management and ICT technical functions. In other cases staff who are not able to learn would need to be redeployed and new staff with appropriate skills will need to be hired. There is also a need to develop capacity in monitoring and evaluation. This component will strengthen the actuarial analysis capacity of the NHIC, financial management of premiums, payment mechanisms, liquidity management, utilization management and other related activities needed to secure the long-term financial sustainability of the health insurance system. The project would support training and capacity building in the following areas: C.1. Management training for providers and schemes managers who work with the NHIS C.2. Training in ICT with a particular focus on the technical requirement of the NHIS C.3. Core Analysis Capacity in health insurance related activities 4. Safeguard policies that might apply

6 None are required but later on should project involves land acquisition, construction, or potential environmental or social impacts, we will consult ASPEN. 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 24 INTERNATIONAL DEVELOPMENT ASSOCIATION Contact point Contact: Alexander S. Preker Title: Lead Economist, Health Tel: (202) Fax: Total 39