Wulifan Joseph Kwame PhD Student in Public Health: (Health Economics & Health Financing Unit) KAAD-Africa Seminar Date: 2 nd Oct, 2013.

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1 Wulifan Joseph Kwame PhD Student in Public Health: (Health Economics & Health Financing Unit) KAAD-Africa Seminar Date: 2 nd Oct, 2013 Topic HEALTH CARE FINANCING IN GHANA: IMPLICATIONS FOR ACHIEVING UNIVERSAL HEALTH COVERAGE OUTLINE 1. Universal Health Coverage (UHC) 2. Health care financing in Ghana 3. Health Insurance concept & Management Sources of funds & income categorise Who registers & how much is paid? Regional & National enrolment levels Provider Payment system in place Current Income/expenditure summaries & implications 4. Schemes challenges & Way forward for sustainability Universal Health Coverage WHO Universal Health coverage (UHC) talks about 3-dimensions of health-height, Breadth & depth as captured by the WHO 2010 report. Universal Health coverage is one of the central issues in global health. Recent negative effects of Health care system across developing countries often based on the out-of-pocket payment prompted discussions on the need to invest in increasing UHC which is seen as an essential step towards achieving equity in health. UHC emphasizes on; - Pooling prepaid funds collected on the basis of ability to pay. 1

2 - Using these funds to ensure that quality health care services are available & accessible. - Limiting exposure to risk of catastrophic expenditure. Moving towards UHC Moving towards Universal health coverage entails expanding current coverage rates. Fig-1 This means expanding current coverage rates in 3-aspects. 1. Breadth (this has to do with the proportion of people who enjoy social health protection, often defined as effective access to affordable quality health care and financial protection in case of illness) 2. Depth of coverage (range of health services that are necessary to address people health needs) 3. Height (proportion of health care cost covered through pooling and prepayment mechanisms) Evidence from Developing Countries indicates the way towards coverage differ across countries depending on socio-economic, demographic and cultural circumstance. Ghana adopted the National Health Insurance concept in 2003 with the view of moving towards UHC. 2

3 Before National Health Insurance concept in 2003 in Ghana Many health care financing options have been explored and experimented by the government of Ghana since independence till date. Among them include the cash and carry which existed since the 1980 s to Health Insurance which was piloted in 2001 and finally enacted into law in 2003 (NHI Act 650 of 2003). Health Care Financing in Ghana has gone through a chequered history. Immediately after independence in 1957 health care provided to the people was free in the public health facilities. Financing of health in the public sector was, therefore, entirely through tax revenue. The sustainability of this form of financing became questionable as the economy began to show signs of decline and there were competing demand on the same source. The world economic recession in the early 1980 s led to heavy pressure on provision of social amenities. This led to drastic reduction in government s expenditure on health care. This mid 1980 s therefore witnessed a withdrawal of health care subsidies. (MOH 2004). What is important to note was that the general tax revenue did not allow for a percentage earmarked for health as we now have in the case of VAT funds earmarked for education and health. This situation continued until 1985 when the Government introduced the user fees for all medical conditions except certain specified communicable diseases. This free health care policy was badly implemented in that, although communicable diseases were supposed to have been exempted, in practice no one enjoyed this facility. Also a guideline for implementing was not provided and no conscious system was designed to prevent possible financial leakages. In the ensuing years the standard of health care provision fell drastically. There was acute shortage of essential drugs in all the public health facilities. Most importantly, the introduction of the user fees resulted in the first observed decline in utilization of health services in the country (MOH, 2004). In spite of this the government went ahead to institute full cost recovery for drugs as a way of generating revenue to address the shortage of drugs. The payment mechanism put in place was termed Cash and Carry. The implementation of the Cash and Carry compounded the utilization problem by creating a financial barrier to health care access especially for the poor. It is estimated that out of the 18% of the population who require health care at any given time, only 20% are able to access it. Implying that about 80% of Ghanaians who need health care cannot afford it. Hospitals at the time became death traps due to the cash and carry system introduced (GLSS, 2000; MOH Policy Framework, 2004). The government noting the problems associated with the Cash and Carry system initiated action to replace this out-of-pocket payment for health care at the point of service. Hence, the National Health Insurance Act 650(2003). 3

4 Health Insurance Act 650 (2003) The Act established the following schemes; District Mutual Health Insurance Scheme Private Mutual Health Insurance Schemes Private Commercial health Insurance Schemes. These are all regulated by the National health Insurance Council Context/Settings Fig-2. Global Fig-3. Regional boundaries Fig-4. Districts (Schemes) Ghana has a population of 25,545.9 which grows at a rate of 2.2%, with total fertility rate (TFR) of The human economic index (HDI) among the 187 Countries internationally HDI ranks it at 135 th in Life expectancy is 64.6 years. Expenditure for the Health sector constituted 5.22% of GDP in 2010.(World Bank, 2012 and USAID report, 2012) For easy administration the 10 administrative regions were demarcated into 110 districts in 1988/89. In 2006, 2008 and 2012, new 28, 32 and 46 additional districts respectively were carved out bringing the total number to 216. Currently, 155 schemes are operational in 155 4

5 district capitals including the 45 schemes that were piloted before the nationwide roll out in 2003 (NHIA briefing 2012) Scheme funds The source of funds for the schemes is from the following: 1. Premium from subscribers mainly from the informal sector workers 2. 2½ National health Insurance (NHI) levy charged on all goods /commodities that attract value added tax (VAT). This is charged, deducted and paid to NHIA 3. 2½ Social Security & National Insurance Trust (SSNIT) deducted from formal sector workers who pay Social Security. It is deducted monthly workers monthly contribution and paid into NHIA account. 4. Government of Ghana (GoG) fund, allocated by parliament occasionally. 5. Returns from investments, these are funds/profits accruing from NHIA investments. Table-1. Premium Levels Name of Group Category Who they are Amount Annually(GH ) Core poor A Who are unemployed and do not receive any identifiable & constant Free income(expect support for survival) Very Poor B Adult who are unemployed but receive identifiable & consistent financial support from sources of low income poor Adult who are employed but receive low returns for their efforts & unable to meet their basic needs GH 7.20 Middle D Adults who are employed & able to meet their basic needs GH Income Rich E Adults who are able to meet their basic needs & some of their wants Very Rich F Adults who are able to meet their basic needs & most of their wants GH The Act 650 established the above premium categories. The new amended Act 850 still maintains that subscribers pay graduated premium with the minimum - GHȼ7.20 maximum as GHȼ In fact for now there is no one-time premium. Premiums vary from one district to the other and that implies we do not have a uniform premium payment system in the country. For example, in the Upper West Region, Premium is GHȼ8.00 while in some parts of the country subscribers pay as high as GHȼ25.00.No scheme per the records shows subscribers paying the GHc

6 Current scenario at Regional levels The current figures from the Authority reflect the following proportions of the population are covered/have valid/active ID cards. Table-2. Regional populations and level of coverage so Region Population Coverage 2010 (%) Coverage 2011 (%) 1.Ashanti 4,780, Brong-Ahafo 2,310, Central 2,201, Eastern 2,633, Greater Accra 4,010, Northern 2,479, Upper East 1,046, Upper West 702, Volta 2,118, Western 2,376, Total Population/ National coverage 24, 658, The figures below show active members, income sources & expenditure proportions for the Premium payment is limited only to people in the informal sector (people who are not in formal employment). Others are exempted from the payment of premium as seen below. They only pay processing fees of either GHȼ2.00 for renewal or GHȼ4.00 when you are registering fresh. LEAP means Livelihood Empowerment against Poverty Programme. Ghana designed its National Social Protection Strategy focusing on LEAP, which is based on the Growth and Poverty Reduction Strategy II (GPRS II) of the country. The Programme starts with a five-year pilot experience in which the main components are conditional and unconditional cash transfers to orphan and vulnerable children (OVC), the elderly above 65 years old and the disabled. In the next five years (2015) the Programme aims to reach about 160,000 families living in extreme poverty. Table 3. Exempt category, Active ID members, Income and Expenditure. Exempt category Active members (2011) Income by source Expenditure (2011) 1.Children under 18yrs 2.Pregnant women 3.Indigents or core poor or LEAP beneficiaries 4.Adults 70yrs and above 5.SSNIT Contributors 6.SSNIT Pensioners 1.< 18 yrs = 49.7% 2.Informal sector =36.4% 3.SSNIT contributors=4.5% 4.70+yrs = 4.9% 5.Indigents (18-69yr) =4.2% 1.NHI Levy =72.7% 2.SSNIT =17.4% 2.Premium =4.5% 3.Investment =5.3% 4.Others =0.13% 1.Claims paid =72.2% 2.Fixed Asset =1.5% 3.ID Cards =1.3% 4.NHIA Expenses =4.0% 5.Logistics to schemes=2.6% 6.Support to MOH =18.4% 6

7 Providers Payment Mechanisms used in Ghana Ghana adopted the following payment systems ((i) Fee for Service (ii) The Ghana DRG system (iii) Capitation (Pilot state) and recently put capitation under pilot in Ashanti Region to be rolled out in the whole country. These methods are explained briefly below. Itemized Fee for service In an itemized fee for service provider payment method, the provider typically lists the different services that they have provided for the client and the cost of each service and requests payment. To use an illustration from day to day life, it is rather like picking up the items you want from a supermarket shelf and then going to the payment counter for the individual cost of each item to be entered into the cash register and added up so that you pay your final bill. The difference between purchasing health care services by fee for service and purchasing items in the supermarket is that because of the specialized knowledge of the health service provider, which the client or patient often does not share, the service provider chooses the items for the client. The advantage of the itemized fee for service payment method is that the provider has no incentive to leave anything off the shopping list. Whatever they think the client needs will go into the list of items supplied unless the client does not have the ability to pay. The disadvantage of itemized fee for service is that because, the provider is also often the owner of the shop and also the one choosing the items to be purchased for the client; it is possible for the provider to provide unnecessary services, medicines and diagnostics to maximize profit. Experience all over the world shows that fee for service payment methods can lead to very rapid inflation of costs and threaten the sustainability of health insurance. Countries such as Germany that use Fee for Service successfully in their health insurance scheme, often devise very complicated methods to counteract this tendency and control cost inflation. At the start of the National Health Insurance Scheme implementation Ghana was using itemized fee for service to pay for everything including medicines. In 2007/08 the system was reformed to use a diagnostic related groupings payment for service, but medicines continued to be paid for by itemized fees for each medicine supplied. 7

8 Diagnosis Related Groupings (DRG) In the DRG payment method, related diagnoses are grouped together and the average cost of treatment in that group determined. Providers are paid this average cost according to the diagnosis they give their client. Many developed countries e.g. USA and U.K, use DRG as part of their payment systems. Currently Ghana uses the DRG system to pay for services to insured clients while continuing to pay for medicines by an itemized fee for each medicine supplied. Under the Ghana DRG system providers have to fill claims forms for reimbursement after providing the services. The claims made by the providers are checked (vetted) for accuracy and genuineness by the schemes and the NHIA before payment. The process is administratively complicated and makes a heavy demand on the time of both provider and scheme staff and the NHIA. This often creates delays in reimbursement. The DRG payment method also still holds some incentives for cost escalation though what is known as creeping. This is observed all over the world where DRG is used and is not unique to any one country. In creeping the provider may deliberately give a diagnosis that attracts a higher fee e.g. instead of diagnosing simple malaria they diagnose complicated malaria. Generally however cost inflation under a DRG payment system are less than under an itemized fee for service system. Under the Ghana DRG system medicines at all levels continue to be paid for by an itemized fee for medicine payment method and the potential of major cost escalation remains strong. Capitation Capitation is a provider payment method in which providers are paid, typically in advance, a pre-determined fixed rate to provide a defined set of services for each individual enrolled with the provider for a fixed period of time. The amount paid to the provider is irrespective of whether that person would seek care or not during the designated period. The fixed amount is typically expressed on a Per Member Per Month (PMPM) basis. The member refers to active NHIS subscribers assigned to the accredited providers. Under this payment system, the member or subscriber selects a preferred primary provider (PPP) to provide all the services under the capitation basket in exchange for the capitation rate. The capitation basket refers to the services and medicines that are to be paid for by the per capita rate. The total capitation amount is transferred to the provider at the beginning of the service period. The amount is calculated based on the total number of active members who have selected a given provider. 8

9 This negotiated fee is set for a specific period of time under contract. Once the initial contract period expires, the fee may be renegotiated by either party. A physician that is compensated under this method receives a fixed monthly payment for each plan member; regardless of the number of times that patient requires the physician's services or the amount of health care expenses he incurs during this visit. Health insurance companies feel that the capitation method of compensation will help control the costs of health care, since providers will not likely recommend unnecessary procedures if they are responsible for the cost of these services. Some people feel that this may also result in a lack of proper care from their primary care providers. The fee amount is pre-determined using actuarial data that provides both the physician and the insurance company with a supposedly fair and balanced payment based on the needs of the average patient. Many insured members may rarely see their doctor, but their doctor is paid by the insurance company for being listed as that patient's primary provider, even if no services are provided. Other patients will cost the doctor far more than his compensation for accepting that patient, but capitation fees he receives from the healthier patients will offset this burden. Theoretically, capitation promotes preventive health care and more interaction between doctor and patient. Since the physician may suffer a financial loss if a patient becomes ill due to lack of preventive health care, he has more to gain by emphasizing early treatments or preventions well in advance of increased risks. When your doctor, who is under capitation contract, encourages you to lose weight, exercise and quit smoking, he is not only concerned about your physical well-being, he is also concerned about his financial well-being. A good primary care physician will place his patient's health as a priority over his costs in maintaining your health, but it is often difficult to determine true intentions. Some health care providers are part of a global capitation' network in which a large group of health care providers ban together to negotiate for higher capitation fees. Collectively, the insurance companies may be more willing to negotiate higher fees for this network, since the number of participating providers accessible to their plan members is an important factor in acquiring new plan members. Under global capitation contracts, the insurance company pays one large monthly sum to the global network, who then divides payment to the providers that are part of that larger network. Capitation is a well-established provider payment method in several countries high as well as middle income - and Ghana, in introducing capitation is walking a tried and tested road that many other countries have already successfully walked. The British National Health Service has used capitation for decades. The British system has become more complicated over time with several generations of reform but the basic principle is one of capitation. Thailand which is lauded internationally as a middle income country that now successfully covers virtually all its citizens with health insurance, uses capitation as the base of its provider payment system and reserves methods such as DRG for the higher referral level. Chile and Estonia are other examples of middle income countries using capitation as one of their provider payment methods; and that have been successful in attaining universal or near universal coverage with health insurance. 9

10 Income/expenditure ( ) Table-4. Income and Expenditure from 2005 to 2011 Year Income (GHc Million) Expenditure (GHc Million) difference Scheme challenges Identifying poor Un-authorized co-payment Perceived quality of care Political bad-mouthing DD & SS side Moral hazard Adverse selection Fraud & Abuse Cost escalation Limited health infrastructure Limited Health personnel Clandestine payment by formal sector works, meanwhile they aren t paying for the insurance premium (They are free riders) Moral hazard: It is the tendency of individuals, once insured, to behave in such a way as to increase the likelihood or size of the risk against which they have insured. Can be classified into 'supply side Moral hazard' (when the doctor provides unnecessary care because the patient is insured) or 'demand side moral hazard' (when the patient demands unnecessary care because he is insured)- (Weber 1994, Framework for Health Insurance-Gov t of India 2005). Simply put, moral hazard is the tendency of those insured to use the services more intensively than if they were not insured. Such often-unnecessary use results in over consumption and imperils the financial viability of the insurance system (Atim, 1998). Moral hazard behaviour of insured persons presents a permanent threat to the financial sustainability of schemes. As insurance lowers the price of care at the point of use and removes barriers to access, utilization of health facilities will increase (Jutting, 2000). Surely, a desirable effect, given the current under-utilization of health facilities in developing countries, but health care cost may grow far more rapidly than resources mobilized through contributions. An effect, which can easily jeopardize a scheme s financial viability. Moral hazard is different from fraudulent use of the services because it relates mainly 10

11 to the fact that, to those insured, the price of using the service is often much lower than the actual price of the service especially in the absence of co-payments and deductibles (Atim, 1998). Furthermore, some provider payment mechanisms like fee-for-service reimbursement give incentives for the provision of unnecessary and expensive treatment to insured patients implying that moral hazards could also emanate from the provider side. Adverse selection: There is the tendency of those who are at greater risk of falling ill (high risk), or who are already ill, to subscribe to the insurance scheme in greater numbers than those who are less at risks -low risks (Atim, 1998). Voluntary scheme is also prone to adverse selection problems, when the people most likely to join a voluntary scheme are high-risk individuals such as the chronically ill, who anticipate a high need for care. Due to this self-selection, the claims made to a scheme will exceed its revenue if contributions are based on the average risk in the community. As a consequence the premiums will have to be raised and insured persons with a relatively lower risk than other members would drop out of the scheme, and would therefore increase the health care cost per insurance member (Chollet and Lewis, 1997). Fraud and abuse: This describes the situation where the insurance system is open to the dangers of free riding, that is, individuals would want to enjoy the scheme s benefits without bearing the cost involved. Some individuals who are not entitled to services may use the identity cards of those entitled to services, particularly where identity cards do not bear pictures of members, to receive the benefits without paying for them. If no effective system of checking identities is in place, knowing whether the benefit is due them or not is difficult. Insurance is particularly open to such risks, because people often perceive that somebody else is paying for the services, not the direct user of the services, which arguably gives incentive for abuse. Other forms of fraud and Abuse is where scheme officials connive with providers to raise claim forms for payment into personal accounts. Cost escalation: This denotes increasing cost to the Scheme. This situation arises where providers cause increase in care costs by prescribing expensive and unnecessary treatment, prolonging the hospital days of insured members and so on. Other factors that escalate cost include the behaviour of Scheme members through fraud and abuse as explained earlier and covariant risks. Community-Based Health Insurance schemes are often small size and cover only a limited area making them especially prone to covariant risks. A person s risk of needing care is not independent from his or her neighbor s health: the risk of falling ill are correlated especially in cases where mutual disaster hits a certain region or village. The fact that such disasters can rapidly deplete the financial reserves of the scheme calls for public-private partnerships, either in the form of reinsurance contracts with private insurance companies or as an agreement with public institutions that can provide subsidies to minimize defects (Jutting, 2000) 11

12 Way forward Expand benefit package to cover recommended aspects for the D & F categories holders Nationwide rollout of capitation reduce over billing Instant ID cards & Biometric system (June, 2013and has just been launched) Electronic submission/mgt of claims Establish claims processing units Cost containment measures (2010 & Claims Reduced from 18%-11%) Decoupling formal sector workers from SSNIT lump sum payment monthly payment and shift that to contributors directly from their monthly pension contributions Countries wishing to adapt Ghana s concept and has visited Ghana so far include Kenya, Cameroun, Cote d ivoire, Nigeria, Sierra Leone, Gambia and Tanzania the latest to visit on 12 th September, Conclusion From the above figures and discussion the road seem rough, but with absolute commitment and dedication from individuals, leadership and management, Ghana is closer to achieving universal health coverage in the near future. References 1. Atim, C. et al (2001). A survey of Health Financing Schemes in Ghana. Abt Associates Inc. Bethesda, USA. 2. NHIA (2012), Media briefing in Accra, Ghana , 2010, 2011, NHIA Annual Reports. 4. Republic of Ghana (2003). Act of Parliament: The NHI Act, 2003 (Act 650 & 850) amended. 5. MoH (2002) Framework for Establishing NHIS, Accra, Ghana 12