Growth Forecasts and Sustainability for Kosovo s Mandatory Health Insurance Fund

Transcription

1 MACROCONFERENCE The MacroConference Proceedings Growth Forecasts and Sustainability for Kosovo s Mandatory Health Insurance Fund Edmond Muhaxheri RIT Kosovo (A.U.K); Faculty of Economy, University of Tirana Abstract After years of planning, 2017 marks the start of Kosovo s mandatory health insurance fund (HIF); following the law passed in This paper extends on Bislimi and Muhaxheri (2012) and Muhaxheri and Meksi (2014) on using most recent data. Medium-Term Expenditure Framework data are used to estimate actual growth forecasts for use in comparing different scenarios for funding HIF versus the hypothetical growth scenarios. A comparison drawn between low, moderate and optimistic growth scenarios, and using actual growth forecasts is measured using single factor ANOVA, resulting in an insignificant average difference between all four outcomes, thus confirming the robustness of the model developed by Bislimi et al. (2012) in estimating financial sustainability for a health insurance fund. Keywords: Growth Forecasts, Sustainability, Kosovo s Mandatory Health Insurance Fund 1. Introduction Being the most recent post-conflict country in the dissolving of former Yugoslavia, Kosovo has had a considerable number of challenges laid out in its path. Of pivotal importance is its healthcare system which lags behind its neighbours. Unfavourable health indicators highlight Kosovo s healthcare plight and emphasize the significance of having a mandatory health insurance fund (HIF) in place. To add another dimension setting up of HIF aligns Kosovo with United Nations Millennium Development Goals, in improving overall wellbeing of its citizens. In line with other post conflict countries Kosovo has sunk itself in deep divisions of how best to manage its national income, and as such one of the biggest losers has been it health sector. Deterioration of Kosovo s healthcare system goes beyond its 1999 conflict, spanning at least two decades, having its roots in the lack of investment during the years leading to the fall of Yugoslavia (Shuey et al., 2002). Yugoslav - communist health system had many advantages that were unrivalled even by industrialized western countries. However, the soviet-era type health care 34

2 system had its caveats it was supply driven and not needs driven (Shakarishvili, 2003). During stable economic growth it achieved excellent universal healthcare coverage, but economic downturns emphasized, among others, its over-utilization which was unsustainable. Post 1999, Kosovo has emerged with no clear vision for the future to remedy the short term needs, and to set out the long-term goals. The health system has continued to be underfunded and mismanaged, with people been forced to pay large out-of-pocket payments due to widespread rumours of corruption, in order to receive the much needed healthcare (Bislimi et al., 2006). This underfunding has left many poor families at the risk of financial catastrophe 1. In 2005 WHO estimated that approximately 44 million households faced catastrophic expenditures, and more than 100 million were impoverished by paying for health services in absence of adequate protection, with the very poor being the most at-risk groups (Rivera et al., 2006). The authors highlight the case of Bolivia (one of the poorest Latin American countries, where the health reform started in This highlights just the pick of the iceberg that needs tackling in order to overhaul Kosovo s healthcare system, with financial constraints being one of the key points to address. However, numerous studies have shown that achieving a universal healthcare is not a one size fits all approach (WHO Technical Brief for Policy Makers, #1, 2005; England healthier than the US, article published by the BBC, 2011), and that it takes many years to achieve universal healthcare (Carrin et al., 2005). For example, Savedoff (2004) points out that Great Britain passed its National Insurance Contribution act in 1911, but its universal [tax-supported] healthcare system only started after the second world war; whereas it took Germany 2 over a century to achieve universal coverage (from 10% coverage in 1882, to 35% in 1914, up to 85% in 2002). Despite hurdles that a country may experience in establishing a health insurance scheme, both from a technical and time it takes to start operating 3, Bislimi and Muhaxheri (2012) showed how Kosovo can afford and should make bold strides in addressing the need for increased and sustained financing of its healthcare system. Overall tax-burden on both employees and employers (both private and public) was insignificant due to Kosovo s low tax-base. Similarly, HIFs effects on labour market were considered to be minor due to Kosovo s low-reservation wage. The rest of the paper continues with introducing an explanation of Bislimi and Muhaxheri methodology; then proceeds onto current projections. The paper finishes with comparisons and conclusions. 2. Health Financing and Sustainability In general there are four types of financing a health care system: (i) tax financed system (TFS) with funding coming directly from the government budget, (ii) from health insurance fund (HIF) 1 WHO defines financial catastrophe as when copayments equal 40% of non-subsistence income. 2 Germany is regarded as the birthplace of the universal healthcare system. 3 For example, UK National Insurance Act was passed 1911, but the National Health Service (NHS) only started in

3 contributions, (iii) co-payments, and (iv) donations. Healthcare may be financed by one or more of the above, with the name given depending on dominating form of financing. TFS and HIF are similar, only difference being that HIF has earmarked contributions (taxation). Based on these criteria Kosovo has a tax-financed system. Method developed by Bislimi and Muhaxheri is based upon the following assumptions and initial inputs: Kosovo population is approximately 1,939,225 and grows with an annual growth of 1.18% (Kosovo 2011 census), 2016 GDP was 6.4bn (MTEF ), Cost of the benefit package is estimated at 245 for contributors and 150 for those that are covered by the government, Public sector employment is assumed to grow at 1% per annum, Overall employment is assumed to grow at a rate of 3% per annum (IMF), Average annual earnings are 3,500 expected to grow in line with GDP, Health spending is expected to grow in line with GDP, Public sector employees are 82,773 (Kosovo budget 2017), Total employment is 313,000 (Pensions and Savings trust), Only family coverage are considered as the only viable options, with single or couples coverage deemed as unsustainable, Finally, a new variable CPM (covered persons multiplier) is introduced, to allow for the assumptions that only 20% of households in Kosovo have 2 people or more employed, with the rest having only one person in employment. The above result in the following scenarios for three different economic outlooks, 3% growth (low), 4% (moderate), and 5% (optimistic). 36

4 Table 1. Low Economic Growth Scenario Low Economic Growth (3%), Family Insurance, Public Employment with 1% Annual Increase Year Population GDP Average Wage Cost of health package Employment Covered Persons Total Cost Total Employment: % from private sector % of average wage Non - Cost for Non ,939, , ,000 1,472,352 76,685,000 74% 7.0% 466,873 70,030, ,962, , ,390 1,516,523 81,355,117 74% 7.0% 445,586 68,842, ,985, , ,062 1,562,018 86,309,643 75% 7.0% 423,243 67,352, ,008, , ,024 1,608,879 91,565,900 75% 7.0% 399,808 65,532, ,032, , ,284 1,657,145 97,142,264 76% 7.0% 375,244 63,351, ,056, , ,853 1,706, ,058,228 76% 7.0% 349,512 60,777, ,080, , ,738 1,758, ,334,474 76% 7.0% 322,572 57,775, ,105, , ,951 1,810, ,992,943 77% 7.0% 294,381 54,307, ,130, , ,499 1,865, ,056,913 77% 7.0% 264,898 50,334, ,155, , ,394 1,921, ,551,079 78% 7.0% 234,079 45,812, ,180, , ,646 1,978, ,501,640 78% 7.0% 201,877 40,695,866 Table 2. Moderate Economic Growth Scenario Moderate Economic Growth (4%), Family Insurance, Public Employment with 1% Annual Increase Year Population GDP Average Wage Cost of health package Employment Covered Persons Total Cost Total Employment: % from private sector % of average wage Non - Cost for Non ,939, , ,000 1,472,352 76,685,000 74% 7.0% 466,873 70,030, ,962, , ,390 1,516,523 82,144,972 74% 7.0% 445,586 69,511, ,985, , ,062 1,562,018 87,993,694 75% 7.0% 423,243 68,666, ,008, , ,024 1,608,879 94,258,845 75% 7.0% 399,808 67,459, ,032, , ,284 1,657, ,970,075 76% 7.0% 375,244 65,847, ,056, , ,853 1,706, ,159,144 76% 7.0% 349,512 63,785, ,080, , ,738 1,758, ,860,075 76% 7.0% 322,572 61,223, ,105, , ,951 1,810, ,109,313 77% 7.0% 294,381 58,107, ,130, , ,499 1,865, ,945,896 77% 7.0% 264,898 54,379, ,155, , ,394 1,921, ,411,643 78% 7.0% 234,079 49,975, ,180, , ,646 1,978, ,551,352 78% 7.0% 201,877 44,824,086 37

5 Table 3. Optimistic Economic Growth Scenario Optimistic Economic Growth (5%), Family Insurance, Public Employment with 1% Annual Increase Year Population GDP Average Wage Cost of health package Employment Covered Persons Total Cost Total Employment: % from private sector % of average wage Non - Cost for Non ,939, , ,000 1,472,352 76,685,000 74% 7.0% 466,873 70,030, ,962, , ,390 1,516,523 82,934,828 74% 7.0% 445,586 70,179, ,985, , ,062 1,562,018 89,694,016 75% 7.0% 423,243 69,993, ,008, , ,024 1,608,879 97,004,078 75% 7.0% 399,808 69,424, ,032, , ,284 1,657, ,909,911 76% 7.0% 375,244 68,416, ,056, , ,853 1,706, ,460,068 76% 7.0% 349,512 66,911, ,080, , ,738 1,758, ,707,064 76% 7.0% 322,572 64,841, ,105, , ,951 1,810, ,707,690 77% 7.0% 294,381 62,133, ,130, , ,499 1,865, ,523,366 77% 7.0% 264,898 58,706, ,155, , ,394 1,921, ,220,521 78% 7.0% 234,079 54,469, ,180, , ,646 1,978, ,870,993 78% 7.0% 201,877 49,325,448 In each of the three provided scenarios a total of 7% (3.5% employee + 3.5% employer) contribution is achieved; in line with provisions set out in Kosovo s law on health insurance. The above tables provide a range of projections over a ten-year period, more importantly including the total number of persons covered by HIF, total cost (total amount of contributions), share of private sector contributions, total number of persons expected to be covered by the government and costs associated with it. Given that private sector employment is expected to grow faster than the public sector one, the overall share of contributions shifts towards the private sector (from 74% in 2016 to 78% in 2026), thus relieving pressure from the government. Different economic growth models show the overall annual amount of contributions, with notable differences by year 2026; million for low growth, million for moderate growth, and million in optimistic growth. 3. Forecasted Growth Scenario This part adjusts the above scenarios for (non-static 4 ) forecasted growth. Forecasted GDP growth rates were achieved using the following logarithmic formula: y t = ln(x t ) Rather than assuming low (3%), moderate (4%), and optimistic (5%) growth scenarios, forecasts are determined and then those rates are used. 38

6 Where yt = forecasted GDP growth at time (year) t xt = time (year) code value, with first forecasted x1 = 1 Resulting forecasted values are in table 4, with a goodness of fit of R 2 = Table 4. Forecasted GDP Growth Rates (%) Year Year Code Forecasted Growth Rate (%) Based on forecasted growth rates, ceteris paribus, simulation of the HIF financing yielded the outcomes presented in table 5. By year 2026, total annual contributions into the health insurance fund are expected to be around 153.0, marginally greater moderate growth scenarios. Table 5. Forecasted Economic Growth Scenario Forecasted Economic Growth, Family Insurance, Public Employment with 1% Annual Increase Total Employment: Year Population GDP Average Wage Cost of health package Employment Covered Persons Total Cost % from private sector % of average wage Non - Cost for Non ,939, , ,000 1,472,352 76,685,000 74% 7.0% 466,873 70,030, ,962, , ,390 1,516,523 81,987,001 74% 7.0% 445,586 69,377, ,985, , ,062 1,562,018 87,748,473 75% 7.0% 423,243 68,475, ,008, , ,024 1,608,879 93,969,050 75% 7.0% 399,808 67,252, ,032, , ,284 1,657, ,669,326 76% 7.0% 375,244 65,651, ,056, , ,853 1,706, ,888,826 76% 7.0% 349,512 63,625, ,080, , ,738 1,758, ,659,411 76% 7.0% 322,572 61,117, ,105, , ,951 1,810, ,013,490 77% 7.0% 294,381 58,062, ,130, , ,499 1,865, ,009,305 77% 7.0% 264,898 54,405, ,155, , ,394 1,921, ,671,367 78% 7.0% 234,079 50,066, ,180, , ,646 1,978, ,064,691 78% 7.0% 201,877 44,974,920 Final step in analysis is to draw a comparison between predicted total annual contributions Total Costs for all four scenarios to see if there is a significant difference in average amount of contributions expected over a ten-year period. Hypothesizing that all means are equal 39

7 a single factor ANOVA test was used, with a significance level of 5%. The outcome of the test yielded a p-value of 0.752, which indicates that with at least 95% confidence or at most 5% error, the average expected amounts for a ten-year period for all four scenarios are not different from one another. Output of the results is shown in Exhibit 1. Exhibit 1 One Way ANOVA Output 40

8 4. Conclusion This paper shows that simulating scenarios developed by Bislimi and Muhaxheri, using forecasted GDP growth rates does not result in significantly different annual total contributions means expected over a ten-year period. Thus, proving the robustness of the methodology used and providing the Kosovo authorities with an invaluable tool for estimating future income generated by direct contributions into its mandatory health insurance fund. 41

9 References [1] Bislimi, and Muhaxheri. Financial Sustainability of a Health Insurance Fund for Kosovo, May [2] Carrin, Guy; Social Health Insurance in Developing Countries; A Continual Challenge, [3] Carrin, Guy and James, Chris, Reaching universal coverage via social health insurance: key design features in the transition period Health financing policy: Issue paper, [4] Falk, I. S., The Economic Issues of Compulsory Health Insurance: Comment, The Quarterly Journal of Economics, Vol. 66, No. 4. November [5] Fifty-seventh World Health Assembly: Sustainable health financing, universal coverage and social health insurance, may [6]Glied, Shery. Health Care Financing, Efficiency, and Equity, NBER Working Paper Series, March [7] Good Practices in Health Financing Lessons from Reforms in Low and Middle Income Countries, The World Bank, [8] Governing Mandatory Health Insurance Learning from Expereince, The World Bank, [9] Health Sector Strategy , Ministry of Health, Government of Kosovo, November [10] Health Statistics 2015, Kosovo Agency of Statistics. [11] Law on Health Insurance, Assembly of Kosovo, [12] Medium-Term Expenditure Framework , Government of Kosovo 42