Sustainable Health Sector Financing

Transcription

1 Sustainable Health Sector Financing High Level Forum on the Health MDGs in Asia- Pacific Tokyo, Japan, June 2005 George Schieber Health Policy Advisor Human Development Network

2 Outline of Presentation Demographic, epidemiological, and nutrition transitions will have profound effects on future population health needs and health system configurations. Future demographic and economic prospects could impair financial sustainability. Financial sustainability and meeting MDG/MDG+ targets will depend on future economic growth, domestic resource mobilization, external assistance, and getting better value for money by targeting the poor and improving public spending efficiency. Countries in the EAP and SA regions face complex reform agendas to deal with underlying public health, delivery system, financing, and sustainability problems. 2

3 Policy Baselines in EAP and SA Economic indicators Health outcomes Under-five mortality Per capita GDP Average GDP rate (deaths per Life expectancy at Annual population (current $US) growth per capita 1,000 births) birth growth rate (%) Region/Income Group East Asia & Pacific Europe & Central Asia 2, Latin America & Caribbean 3, Middle East & North Africa 2, South Asia Sub-Saharan Africa Low income Lower middle income 1, Upper middle income 5, High income 27, Source: World Bank WDI

4 Health Expenditures in EAP and SA, 2002 Regions & Income Levels Per capita GDP (current $US) Per capita GNI (current $US) Per capita health expenditures ($US)* Country Weighted** Total health expenditures (% GDP) Public (% total health expenditures) Social security expenditures (% total public health expenditures) Private (% total health expenditures) Out-of-pocket (% private health expenditures) External (% total health expenditures) East Asia & Pacific Eastern Europe & Central Asia 2,417 2, Latin America & the Caribbean 3,243 3, Middle East & North Africa 2,175 2, South Asia Sub-Saharan Africa Low-income countries Lower middle-income countries 1,381 1, Upper middle-income countries 5,275 5, High-income countries 27,074 27,186 3,039 1, Notes: *All figures weighted by population, per capita health expenditures include country weighted averages in a separate column Source: World Bank **All figures calculated using World Bank World Development Indicators, with the exception of country weighted per capita health expenditures and social security expenditures, which are based upon the Statistical Annex of the World Health Organization's 2004 World Health Report 4

5 Demographic, Epidemiological and Nutrition Transitions

6 EAP Total, Working Age and Elderly Populations are Growing Rapidly Ages MALES 2000 FEMALES Source: World Bank Source: World Bank 6

7 SA Populations are Growing Rapidly Ages MALES FEMALES Source: World Bank (in 000s) Source: World Bank 7

8 Demographic Change East Asia & the Pacific South Asia Demographic Indicators Population (millions) Population change since 2000 (%) Urban (%) Population by age groups # Children under 5 years % # Of Youth under 15 years % # Women of childbearing age % # Labor force participation % # Elderly above 60 years % Source: World Bank 8

9 Demographic Change East Asia & the Pacific South Asia Demographic Indicators Population growth rate (%) Life expectancy at birth (years) Total Crude birth rate Crude death rate Total fertility rate Infant mortality rate (deaths per 1,000 live births) Under-five mortality rate (deaths per 1,000 live births) Maternal mortality ratio (maternal deaths per 100,000 live births) (Year 2000 estimate) Source: World Bank 9

10 The Nutrition Transition is Taking Its Toll (Over-nutrition and Obesity in EAP, as % of total population ) BMI > 25 BMI > % 3.8% 7.2% 4.4% 7.3% 50.4% 1.4% 14.5% 16.2% 0.7% 11.4% 6.8% 23.9% 28.6% 2.1% 17.0% 23.3% 13.2% 25.0% 32.4% Male Female Male Female Male Female Male Female Male Female Male Female China (1997) Laos (1994) Malaysia (1996) Philippines (1998) Thailand (1996) Fiji (1993) Source: Standing Committee on Nutrition/World Health Organization. 5th Report on the World Nutrition Situation: Nutrition for Improved Development Outcomes. United Nations. March

11 The Nutrition Transition is Taking Its Toll (Overnutrition and Obesity in SA, as % of total population ) 5.9% 1.8% 0.3% 0.6% 4.7% 4.9% 11.6% 18.9% Male Female Male Female India (1998) Pakistan (1990/1994) Source: Standing Committee on Nutrition/World Health Organization. 5th Report on the World Nutrition Situation: Nutrition for Improved Development Outcomes. United Nations. March

12 Road Traffic Accidents Will Increasingly Take Their Toll in EAP and SA 12

13 25 The Tobacco Plague Thrives in EAP and SA (Deaths (% of total) attributable to tobacco use by Region, estimates for 1990 and 2020) % of all deaths Established Market Economies Former Socialist Economies of Europe India China Other Asia and Islands Sub-Saharan Africa Latin America & the Caribbean Middle Eastern Crescent Source: Murray CJL, Lopez AD

14 SA (India) Confronts High HIV Prevalence Rates, EAP Must Be Vigilant 14

15 Risk Factors Are Present Rising incidence of STDs Presence of vulnerable groups: migrant workers, refugees, sex workers, MSMs, tourists High number of injecting drug users (IDUs) Gender inequality High unemployment rates Urbanization and migration Large young populations 15

16 EAP and SA Countries Will Confront a High Disease Burden of NCDs and Injuries India China Other Asia & Islands % 9% 51% 73% 12% 19% 50% 10% 40% Noncommunicable diseases Communicable diseases % 19% 24% 79% 16% 4% 66% 16% 17% Injuries Source: Murray & Lopez, Lancet

17 Future Demographic and Economic Prospects Could Impair Financial Sustainability

18 Fertility is Declining and Life Expectancy is Increasing Source: IMF 18

19 There Will be Fewer Workers to Support an Increasingly Elderly Population Source: IMF 19

20 Dependency Ratios in EAP Will Not Present a Major Challenge in the Future Solomon Islands Cambodia Lao PDR Vanuatu Papua New Guinea Tonga Philippines Micronesia, Fed. Sts. Kiribati Samoa Vietnam Malaysia Mong olia Myanmar Fiji Indonesia China Korea, Dem. Rep. Thailand Source: World Bank Dependency Ratio: The ratio of the economically dependent part of the population to the productive part; arbitrarily defined as the ratio of the elderly (ages 65 and older) plus the young (under age 15) to the population in the working ages (ages 15-64). 20

21 Changing Dependency Ratios Will Not Be a Major Challenge in SA Bhutan Afghanis tan Maldives Pakistan Nepal Bangladesh India Sri Lanka Source: World Bank Dependency Ratio: The ratio of the economically dependent part of the population to the productive part; arbitrarily defined as the ratio of the elderly (ages 65 and older) plus the young (under age 15) to the population in the working ages (ages 15-64). 21

22 EAP and SA Face Different Labor Force Growth Situations 4% 3% 3% 2.5% 3.1% 2.5% 2.6% 2% 2% 1.5% 1% 0.6% 1% 0% EAP ECA LAC MENA SA SSA Source: World Bank 22

23 Future Aging Will Affect Total Health Expenditures in Certain EAP Countries 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% Change in total pop. + aging factor Change in total pop. Source: World Bank 23

24 Future Aging Will Affect Total Health Expenditures in Certain SA Countries 80% 70% Change in total pop. + aging factor Change in total pop. 60% 50% 40% 30% 20% 10% 0% Source: World Bank 24

25 10 8 Future GDP Growth Is Unlikely To Generate Sufficient Revenues to Meet the MDGs Real GDP Growth by Region, Percent Year EAP SA LAC ECA SSA MNA Source: World Bank 25

26 Improving Health Outcomes Means Targeting the Poor and Increasing Spending Efficiency

27 Poverty Is a Problem in EAP and Especially SA (Populations Living on less Than $2 Per Day) % Share of Population Million Region EAP , ECA LAC MENA SA ,064 SSA Total ,477 2,735 Source: World Bank 27

28 Economic Growth Is Not Always Pro-Poor Poor Negative Growth Inequality Rises Positive Growth/Inequality Rises Anti-Poor Broadly Shared Not Pro-poor By Any Yrs g g20 Yrs g g20 Recession Growth Definition Yrs g g20 Poland Korea, Rep Costa Rica Iran, Islamic Rep Taiwan, China Tanzania Slovak Republic Hong Kong China Bulgaria Niger Singapore Panama Sierra Leone China Nigeria Zambia Malaysia Dominican Republic Estonia Thailand El Salvador Latvia Mauritius Senegal Russian Federation Brazil Ethiopia Colombia Mexico Ecuador Philippines Chile Peru Negative Growth/Inequality Falls Pro-Poor Recession Yrs g g20 Pro-Poor Biased Growth Positive Growth/Inequality Falls Yrs g g20 Yrs g g20 Guyana Gabon Trinidad & Tobago Jordan Indonesia India Belarus Tunisia Bangladesh Madagascar Egypt, Arab Rep Nepal Source: L. Cord, J. Lopez, and J. Page, Pro-Poor Growth and Poverty Reduction World Bank, August Ghana Jamaica Sri Lanka Honduras Hungary Bolivia Turkey Venezuela, RB Pakistan

29 Economic Growth and Poverty Reduction Do we know what works? Poverty reduction can be achieved by economic growth and/or by changing the distribution of income While growth in itself is not a sufficient condition for poverty reduction, it is a critical enabling factor for significant reductions over time Most poverty reduction is in those countries that have experienced sustained periods of economic growth and those with lower initial levels of inequality and poverty A 1% rate of growth in average household income or consumption drops the poverty rate from between 0.6% to 3.5% Financial development, trade openness and increases in the size of government are associated with higher growth but increases in inequality, ceteris paribus Recent studies suggest that policy makers should focus on sectors, regions, and factors of production dominated by the poor; redistributive spending focused on the HD assets of the poor; and gender inequalities as there is evidence that improvements in these areas as well as lower inflation lead to both growth and progressive redistribution Source: WB, PREM, Poverty Reduction Group 29

30 Interventions Must Address Inequities in Outcomes (Infant Mortality Rates in EAP and SA) (Income quintiles, lowest vs. highest) Bangladesh ( ) India ( ) Cambodia (2000) Indonesia (1997) Source: World Bank Lowest income quintile Highest income quintile 30

31 Interventions Need to Address Inequities in Access to Health Services (Income quintiles, lowest vs. highest) 47 Bangladesh 67 Full basic coverage of childhood immunizatio ns 2 30 Skilled attendance at delivery 29 Cambodia 68 Full basic coverage of childhood immunizatio ns Skilled attendance at delivery Source: World Bank Lowest income quintile Highest income quintile 31

32 Share of government health expenditure (%) Interventions Must Address Inequities in Public Spending on Health India Vietnam Poorest Quintile Richest Quintile Source: World Bank 32

33 Higher Public Spending on Health Does Not Guarantee Better Access for the Poor Source: World Bank 33

34 Higher Public Spending on Health Does Not Necessarily Mean Better Health Outcomes 150 Under-5 mortalty rate 2000 (Log difference between actual and predicted by GDP per capita x100) Lao PDR Thailand Pakistan Cambodia Indonesia India Philippines Nepal Malaysia Bangladesh Vietnam Sri Lanka China Papua New Guinea Per capita public spending on health 1990s average (Log difference betw een actual and predicted by GDP per capita x100) * Public spending and child mortality rate are shown as the percent deviation from rate predicted by GDP per capita Source: Spending and GDP from World Development Indicators database. Under-5 mortality from Unicef 2002`, WDR

35 Many Countries Spend Less than Expected on Government Health Programs 8 Domestically Financed Government Health Spending as % of GDP Lesotho Solom on Islands Turkm enistan Belarus Tunisia Colombia Panam a Macedonia, Fyr Bolivia Dominica Jordan Nam ibia Honduras Mongolia El Salvador Turkey Sam oa Lebanon Kyrgyz Republic Arm enia Paraguay Algeria Tonga Papua New Guinea Peru Zam bia Moldova Zim babwe Jam aica Bulgaria Burkina Gam Faso bia, The Guatem ala China Djibouti Mali Guinea Ghana Egypt, Arab Rep. Rwanda Philippines Vanuatu Vietnam Morocco Eritrea Chad Togo Ecuador Cote CamD'Ivoire Sudan Pakistan Haiti eroon Burundi Georgia Malawi Indonesia Nigeria Uganda Fi Thailand Gabon Dominican Republic Botswana Latvia Brazil Croatia Costa Rica Estonia Poland South Africa Chile Mexico Malaysia Mauritius Slovak Republic Hungary Uruguay Argentina Saudi Arabia St. Kitts And Nevis Om an Czech Republic 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Per capita incom e PPP 35

36 Observations on Current Spending Patterns There are large global inequities in health spending among countries There are large variations in health spending among countries at the same income level There are large variations in health outcomes among countries even for the same health spending and income levels There are large variations within countries in health spending, access, and outcomes for the poor vs. non-poor The private share of health spending, which averages 75% for low-income countries, decreases as countries incomes increase There are clearly large differences in the efficiency of health spending related to both allocative ( doing the right things ) and technical ( doing things right ) efficiency 36

37 EAP and SA Countries Face Complex Health Reform Agendas

38 Selective Issues Institutions matter Need to work across-sectors Health reform priorities in EAP and SA Financing Pooling arrangements Payment of medical care providers 38

39 Policies and Institutions Do Matter Elasticities of MDG Outcomes with Respect To Government Health Spending CPIA Index Under Five Mortality Maternal Mortality Underweight Children Under Five TB Mortality * * * * * * * * * * * Statistically significantly different from zero at 90% confidence level Source: World Bank 39

40 Investments are Needed Across Several Sectors to Optimize Outcomes % growth government health spending % reduction U5MR % -10% -20% -30% -40% -50% -60% -70% 0% 3% 5% 8% 10% 13% 15% 5% economic growth & 2.5% female education growth & 2.5% roads growth & 2.5% water & sanitary growth & 2.5% growth in all Source: World Bank 40

41 Efficiency of health system Delivery Financing Public health Health Reform Priorities Developing capacity by employing multi-disciplinary skilled staff. Collecting on a continuous basis necessary data for decision-making (e.g., national health accounts; epidemiological data to monitor the MDGs). Coordinating policy-making among multiple public bodies and private stakeholders at all geographic levels. Decentralizing management to regional and local levels. Assuring appropriate numbers, mix, and geographic distribution of human and physical resources. Implementing effective quality assurance systems Assuring that overall system capacity corresponds to underlying needs, affordability and efficiency. Reform pharmaceutical sector. Assuring access to affordable public and personal health services by effective risk pooling through public and private financing mechanisms. Assuring that such mechanisms (e.g., general revenues, payroll taxes, user charges, premiums) are equitable (based on ability to pay), efficient (minimize distortions to the economy), and simple to administer. Developing, testing, and implementing new methods to pay medical care providers (e.g., global budgets, capitation, DRGs, etc.) that contain incentives for access, efficiency, and quality for public and private providers. Better targeting of interventions on the poor & to cost-effective treatment & prevention of communicable diseases (e.g. ARI, CDD, AIDS, malnutrition) as well as non-communicable diseases & injuries. Implementing effective culturally sensitive reproductive health policies. Implementing effective environmental and occupational health policies. 41

42 Health Financing Functions and Policies Functions revenue collection Policies raise sufficient and sustainable revenues in an efficient and equitable manner to provide individuals with both a basic package of essential services and financial protection against unpredictable catastrophic financial losses caused by illness and injury; pooling manage these revenues to equitably and efficiently pool health risks; purchasing assure the purchase of health services in an allocatively and technically efficient manner. 42

43 Financing Reforms Need to Deal with Revenues, Risk Pooling, Management and Payment 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 43

44 Health Financing Policies Encompass All Five of the Control Knobs for Health Sector Reform THE FIVE CONTROL KNOBS FOR HEALTH SECTOR REFORM FINANCING PAYMENT ORGANIZATION REGULATION PERSUASION INTERMEDIATE OUTCOMES HEALTH STATUS FINANCIAL RISK PROTECTION SATISFACTION FINAL OUTCOMES FOR HEALTH SECTOR PERFORMANCE 44

45 Revenue Sources Chosen Have Important Efficiency, Equity, Affordability, and Sustainability Implications Taxes Sales of natural resources User charges Mandates Grant assistance Borrowing Private insurance Out of pocket payments Charitable contributions Efficiency gains 45

46 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 46

47 Early 2000s Domestic Resource Mobilization is More Limited in MICs and LICs Regions Total Revenue as % of GDP Tax Revenue as % of GDP Social Security Taxes as % of GDP 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

48 Some EAP and SA Countries Could Make Greater Domestic Resource Mobilization Efforts 60 (Central Government Revenues and Tax Revenues as a % of GDP, circa ca 2001) Central govn't revenues (%GDP) 50 Fiji Malaysia Bhutan 20 Indonesia 10 Philippines Nepal India Pakistan China GDP per capita ($US) Source: IMF 48

49 ODA is Rising But is Well Short of Monterey Commitments and Amounts Needed to Meet the MDGs 2003 US$ billions 120 ODA as % of donors' GNI(right axis) Percent T otal ODA (left axis) T otal ODA to SSA (left axis) Source: OECD DAC database. Prospects for ODA in 2006 and 2010 are based on DAC members post-monterrey announced commitments. Not all DAC members have made commitments beyond

50 Risk Pooling and Prepayment are Critical for Assuring Financial Protection and Equity Risk pooling enables the establishment of insurance as large unpredictable risks at the individual level become predictable when pooled over a large number of individuals and provides the opportunity for redistribution among high and low risk pool members Prepayment provides protection against unpredictable large losses and redistribution between high and low risk and high (risk subsidy) and low income (equity subsidy) individuals: In risk rated private insurance, the premium reflects the average predicted risk of pool members, thus enabling pool members to face a predictable upfront payment and poor risks across high and low risk groups In a public system, pre-payment whether through social health insurance or general revenue contributions allows the separation of an individual s premium payments from expected medical risks, and thus enables redistribution from high to low income individuals by basing payments on ability to pay 50

51 What are the Elements of 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 nonproductive part of the life cycle $ Resource endowment $ Low risk $ High risk Resource endowment $ $ Poor Rich Resource endowment Productive $ Nonproductive Health risk Income Age Source: Baeza 51

52 Ability to Pool Risks Depends on the Financing Approach Adopted Private Private { Self-pay, Medisave Private Insurance Self Reliance Public Mixed Public { Community Financing Social Insurance Government Revenue Risk Pooling Risk Pooling Source: W. Hsiao 52

53 Enabling Conditions for SHI A growing economy and level of income able to absorb new contributions A large payroll contribution base and, thus a small informal sector Concentrated beneficiary population and increasing urbanization A competitive economy able to absorb increased effective wages arising from increased contributions Administrative capacity to manage rather complex insurance funds and issues such as management of reserves, cost containment, contracting and others Supervisory capacity to overcome some of the market failures such as moral hazard and risk selection as well as other important matters such as governance and sustainability Political consensus and will 53

54 Community Based Health Insurance Strengths Weaknesses CBHI schemes are typically communityrun, not-for-profit, pre-payment plans with voluntary membership and quite heterogeneous in terms of populations covered, benefits, regulation, and management. CBHI can play a role in mobilizing additional resources, providing access and financial protection in LICs, where high levels of out-of-pocket payments, uncertainty concerning financial flows from donors, large rural and informal sector populations, and weak tax capacity result in limited levels of formal medical protection. Risk sharing is usually from the well to the sick but if premiums are based on income, there can also be risk sharing from the better off to the poor. The impacts of CBHI in terms of 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. Their development should be favored by governments and donors only in contexts where more comprehensive and sophisticated health financing systems cannot be implemented on a large scale. CBHI schemes should always be regarded as a complement to and not as a substitute for NHS or SHI systems. 54

55 Voluntary Health Insurance Strengths VHI is a private financing mechanism to improve risk pooling. VHI as a risk pooling and prepayment mechanism is generally preferable to out of pocket expenditure. VHI 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 cost-efficiency of health care providers. Weaknesses In many OECD countries, VHI is associated with high administrative costs and has proven quite ineffective in reducing cost pressures on public health financing systems. For there to be efficient and equitable VHI, countries must have well-developed financial markets and a strong regulatory capacity, raising questions about applicability in LICs and some MICs. VHI may be a rather inequitable way of financing without a public intervention either to subsidize premiums or regulate insurance product content and price. It also has the potential to divert resources and support from mandated health financing mechanisms. 55

56 Evidence on User Fees is Mixed Some recent studies have shown that, where user fees have been removed, demand by the poor has in some places increased, whereas in others it has dropped. Some studies have found demand to be price inelastic; yet, others have found it to be price elastic. A key variable is what is done with user fee revenues, specifically whether or not they are used to finance improvements in health care quality at the local level. Evidence shows that, where the revenue has been kept locally and spent on drugs or salary improvements, quality of care has improved considerably, thus leading to increased demand and improved welfare for both poor and non-poor patients. There seems to be growing evidence that the demand for health care is more priceresponsive among the poor (Indonesia, Peru), and therefore the need to find wellfunctioning waiver systems for better targeting public subsidies toward the poor remains a priority. Evidence has also accumulated from Africa, Asia, and Latin America showing that the adoption of effective waiver systems by poor countries is possible, albeit difficult. Evidence has also shown that the implementation of user fees can lead to quality improvements, but that such a link is not automatic and requires careful design and implementation. 56

57 Risk Adjusters are Necessary Concomitants to All Private and Some Social Health Insurance Systems Risk segmentation in health insurance markets due to adverse selection and medical underwriting can result in the sickest individuals being denied access to affordable health insurance and/or care Without risk adjustment plans have no financial incentives to specialize in treating people with certain illnesses or conditions; to support different levels of care Can mitigate these problems by risk assessment and risk adjustment ex ante or ex post Risk assessment means of predicting the deviations of each individual s expected costs from the average enrollee s costs Risk adjustment the method used to compensate a health plan according to the amount of risk it assumes, making it possible to compensate insurance plans according to the risks of the enrollees they take on Source: Rogal and Lee and Rogal 57

58 Fiscal Space May be Needed to Accommodate Increased Spending Fiscal space is: 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 Fiscal space can be created by: tax measures and better administration reducing lower priority expenditures borrowing from domestically or externally seignorage grants Source: Heller,

59 160% Some Countries Face Difficult External Debt Repayment Problems (External Debt as % GNI, 2003) 140% 120% 100% 80% 60% 40% 20% 0% Source: World Bank 59 Bangladesh Bhutan Cam bodia China Fiji India Indonesia Lao PDR Malaysia Maldives Mongolia Nepal Pakistan Papua New Guinea Philippines Samoa Solom on Islands Sri Lanka Thailand Tonga Vanuatu Vietnam

60 Fiscal Sustainability is Critical Generally defined in terms of self-sufficiency -- over a specific time period, the responsible managing entity will generate sufficient resources to fund the full costs of a particular program, sector, or economy including the incremental service costs associated with new investments and the servicing and repayment of external debt. The capacity of the health system to replace withdrawn donor funds with funds from other, usually domestic, sources The sustainability of an individual program is defined as capacity of the grantee to mobilize the resources to fund the recurrent costs of a project once the investment phase has ended A softer definition is that the managing entity commits a stable and fixed share of program costs 60

61 A Model of the Evolution of Health Care Financing Systems Low Income Countries Patient Out-of of- Pocket Social Insur Gov t Budget Community Financing Middle Income Countries Priv. insur Patient Out- of-pocket Social Insur Gov t Budget High Income Countries Patient Out- of-pocket National Health Service Model National Health Insurance Model Private Insurance Model Source: Modified from A. Maeda 61

62 Some Experience There is no one right financing model. LICs face difficult tradeoffs between financing essential services and providing financial risk protection -- prioritization is critical. Most MICs are challenged to provide universal coverage, reduce fragmentation among risk pools, and improve purchasing efficiency. In terms of the HIC evolution to universal coverage: most countries started with communitybased voluntary arrangements which were then gradually extended to compulsory social insurance for certain groups and finally reached universal coverage either as nationwide social health insurance schemes or as tax-financed national health services. As the critical issue is pooling, whether SHI or NHS is ultimately chosen is really of secondary importance. The critical condition regarding the speed of this evolution 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. The larger the number of separate funds, the higher the administrative costs and potential for fragmentation and selection bias. Unless all funds employ the same provider payment rules, both access for certain groups and efficiency will be compromised. 62

63 Targeting the Poor and Determining the Benefit Package are Also Critical A few health conditions are responsible for a high proportion of a country s health deficit These conditions largely affect the poor Cost-effective health interventions to deal with these conditions exist Universal coverage does not guarantee that the poor will get access to needed services Government must decide which benefits are covered through targeted public health programs and which are covered through social and/or private insurance programs 63

64 Policy Challenges of Benefit Packages 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 is 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: Bitran 64

65 Provider Incentives Always Matter The small pox so fatal and so general amongst us is here entirely harmless by the invention of engrafting. I am patriotic enough to take pains to bring this useful invention into fashion in England; and I should not fail to write to some of our doctors very particularly about it, if I knew any of them that I thought had virtue enough to destroy such a considerable branch of revenue for the good of mankind. But that distemper is too beneficial to them,. Lady Mary Wortley Montague, Letter 31, Adrianople, Ottoman Empire, April 1,

66 Fundamentals of Provider Payment What care will be produced? How will care be produced? How much care will be produced? What level of quality will be produced? To whom will care be offered? What kinds of care and how much will consumers demand /access? By what method, how much, and by whom will providers be paid and/or consumers reimbursed? Source: Modified from Rena Eichler, WB,

67 Provider Payment Systems are One of Many Approaches for Improving Efficiency Supply side approaches Demand side approaches Indirect mechanisms Changing behavior via reimbursement mechanism Changing market structure and behavior by changing overall ownership (e.g., privatization of hospitals and facilities) Using global budgets, possibly in combination with other efficiency targets (e.g., staffing) Changing care delivery Adopting treatment protocols Introducing performance management (e.g., setting targets for length of stay, promoting day surgery) Implementing business process reengineering Adapting cost-reduction and efficiency targets Planning approaches Implementing hospital closure and reconfiguration programs Indirect mechanisms Employing payment incentives to encourage treatment of patients in primary or ambulatory care Introducing user charges and co-payments Demand management Initiating an appropriateness and utilization review Introducing evidence-based purchasing, specifying explicit rationing of treatments, specifying a basic package of interventions Developing primary care substitutes Promoting social and domiciliary care Strengthening disease prevention activities Adopting managed care or disease management Source: M. Henscher 67

68 Factors Affecting Feasibility of Efficiency Improvements Source: Hensher, CMH 68

69 Want Systems to be Performance-Based Measures of consumer satisfaction/responsiveness Standardized surveys, exit interviews, transparency of waiting lists Measures of institutional capacity Implementation of a financial management system Measures of access Example: operating hours Measures of preventive care Number of enrollees that have a prepared annual health plan Breast cancer screening (mammograms) Cervical cancer screening (pap smears) Retinal eye exams for diabetics Well-child exams Childhood immunizations Source: Rena Eichler, WB,

70 Want Systems to be Performance-Based Measures of effective management of chronic cases: Percentage of diabetics with controlled lipid levels (LDL levels less than 130mg/dL) Measures of hospital quality Infection rates Measures of health education: Percentage of enrolled smokers who participate in smoking cessation workshops Measures to control excessive utilization: Percentage of prescriptions that are generic Source: Rena Eichler, WB,

71 The Financing Challenge Financial sustainability and meeting MDG/MDG+ targets will depend on future economic growth, domestic resource mobilization, external assistance, and getting better value for money by targeting the poor and improving public spending efficiency. 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 future domestic resources the expenditures financed by these external grants. Evidence-based policy-making, good institutions, effective management, multi-sectoral approaches, and monitoring and evaluation are necessary conditions for success. Donors need to get their acts together by increasing the amounts of aid, assuring predictability and longevity, and coordinating procedures. 71

72 Spare Slides Note: The slides with were presented while the others were not due to time constraints. 72