Nepal National Health Accounts

Transcription

1 Nepal National Health Accounts 2006/ /2009 Government of Nepal Ministry of Health and Population Policy, Planning and International Cooperation Division Health Economics and Financing Unit

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3 Nepal National Health Accounts

4 Published by: Ministry of Health and Population Government of Nepal Copyright Ministry of Health and Population This document may be freely copied and distributed on the understanding that full acknowledgement is made to the Ministry of Health and Population, Health Economics and Financing Unit. Recommended Citation: Shrestha BR, Gauchan Y, Gautam GS, Baral P (2012). Nepal National Health Accounts, 2006/ /09, Health Economics and Financing Unit, Ministry of Health and Population, Government of Nepal, Kathmandu. Contact For further information on the study please contact Health Economics and Financing Unit Policy Planning and International Cooperation Division Ministry of Health and Population Ramshahpath, Kathmandu, Nepal ppicd@mohp.gov.np Tel:

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7 Preface The importance of accounting for health care expenditure cannot be overstated. Program design, resource allocation and monitoring will all be undermined if the expenditure data they rely on is inaccurate or simply unavailable. Nepal s health system cannot continue to improve without consistent and reliable data to work with, and national health accounts (NHA) are therefore critical in responding to existing and future policy challenges. Recognizing their importance in the formulation of a health-care financing strategy, the Ministry of Health and Population (MoHP) established the Health Economics and Financing Unit (HEFU) in The creation of the HEFU provided the institutional set-up to proceed with the development of NHA, and in 2004 the MoHP developed a Nepal National Health Accounts (NNHA) Framework to guide the development of subsequent NHA. In accordance with the NNHA Framework two rounds of NHA have been produced (in 2006 and 2009), covering a six-year period from 2000/01 to 2005/06. The production of NHA on a regular basis is meant to track total health expenditure (THE) and provide evidence to help policy-makers, nonal stakeholders, and managers to make better decisions in their efforts to improve the health system. The two rounds of NHA produced so far in Nepal have contributed to tracing the overall pattern of expenditure in the health sector. By providing systematic, comprehensive and consistent health expenditure data, NHA could also assist in monitoring health financing system and the level of financial protection. As in the previous rounds, the present National Health Accounts (NHA) have been developed based on the Framework for Nepal NHA, and covers the period from fiscal year 2006/07 to 2008/09. It tracks total health expenditure in Nepal, crossstratifies and then categorizes by provider, source and function on an annual basis. Its main goal is to inform policy makers and others on the magnitude and profile of health spending in Nepal. Fundamental policy questions that the current NHA addresses are: (a) which funding sources contribute how much for health, (b) which are the important agents in health care delivery and what is the volume of their expenditure, and (c) how are the funds for health distributed across different services, interventions and activities in the Nepali health system?

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9 Table of Contents Acknowledgements Preface Executive Summary Chapter I: Total Health Expenditure Trends in Total Health Expenditure Total Health Expenditure in relation to GDP Trend in Per Capita Total Health Expenditure 2 Chapter II: Health Expenditure by Financing Agents Total Health Expenditure by Agents/Providers Government Health Expenditure by Agents/Providers Non- Health Expenditure by Agents/Providers 5 Chapter III: Health Expenditures by Financing Sources Total Health Expenditure by Financing Sources General Government Financing Private Sector Financing External Sector (rest of the world) Financing 10 Chapter IV: Health Expenditure by Functions Total Health Expenditure by Functions General Government Expenditure by Functions Private Sector Financing by functions External Sector Financing by Functions 15 Chapter V: Health Expenditure by Providers Healthcare Providers in Nepal Total Health expenditure by Providers 17 Chapter VI: Out-Of-Pocket Expenditure OOP Expenditure by Financing Providers OOP Expenditure by Functions OOP Expenditure by Providers 22 Chapter VII: Technical Notes Background and data sources Review of Public Expenditure on Health Surveys of Public and Private Facilities Survey of Pharmaceutical Companies Surveys of the NGOs and INGOs Health expenditure made outside the country and on insurance Limitations References Annexes 29-57

10 List of Tables Table 1.1 Total health expenditure and annual growth rates (2000/ /09) 1 Table 1.2 Total health expenditure in relation to GDP and TGE 4 Table 1.3 Per capita THE and GDP, 2000/01 to 2008/09 5 Table 2.1 Total health expenditure by financing agents/providers 4 Table 2.2 Total health expenditure by agents/units 5 Table 2.3 Total non- health expenditure by agents/providers 6 Table 3.1 Total health expenditure by financing sources, 2003/ /09 7 Table 3.2 General health expenditure by financing source, 2006/ /09 9 Table 3.3 Private health financing by source, 2003/ /09 9 Table 3.4 External sector financing by sources, 2003/ /09 10 Table 4.1 Total health expenditure by functions, 2003/ /09 12 Table 4.2 Total financing by functions, 2006/ /09 13 Table 4.3 Total private sector financing by functions, 2006/ /09 14 Table 4.4 Total external sector financing by functions, 2006/ /09 15 Table 5.1 Key Healthcare Providers in Nepal 17 Table 5.2 Total health expenditure by providers 2003/ /09 18 Table 6.1 Total out-of-pocket expenditure by agents/providers 20 Table 6.2 Out-of-pocket expenditure by functions 21 Table 6.3 Total out-of-pocket expenditure by providers 22 Table 7.1 Selection of districts for the survey of health facilities 24 Table 7.2 Sample size of health facilities 25 Table 7.3 Description on survey of pharmaceutical producers and importers 25 Table 7.4 Sample size of NGOs and INGOs 26 List of Figures Figure 1.1 Trend of Total Health Expenditure 1 Figure 1.2 Total health expenditure in relation to GDP and TGE 2 Figure 1.3 Trends in per capita THE and GDP 3 Figure 3.1 Trend of total health expenditure by financing sources, 2000/ /09 7 Figure 3.2 Composition of total expenditure by financing sources, 2008/09 8 Figure 3.3 Trend of health expenditure as percent of GDP by financing sources, 2000/ /09 8 Figure 4.1 Trend of total health expenditure by functions, 2000/ /09 11 Figure 4.2 Composition of total health expenditure by functions, 2008/09 13 Figure 4.3 Composition of general financing by functions, 2008/09 14 Figure 4.4 Composition of private sector expenditure by functions, 2008/09 15 Figure 4.4 Composition of external sector expenditure by functions, 2008/09 16 Figure 5.1 Trend of total health expenditure by providers, 2000/ /09 18 Figure 5.2 Composition of total health expenditure by providers, 2008/09 19 Figure 6.1 Composition of out-of-pocket expenditure by agents/providers, 2008/09 20 Figure 6.2 Composition of out-of-pocket expenditure by functions, 2008/09 21 Figure 6.3 Composition of out-of-pocket expenditure by providers, 2008/09 22

11 Acronyms DDC DoHS EDP GDP HEFU MoF MoHP NGO NLSS NNHA NPR OECD OOP SHA TGE THE USD VDC WB WHO District Development Committee Department of Health Services External Development Partners Gross Domestic Product Health Economics and Financing Unit Ministry of Finance Ministry of Health and Population Non Governmental Organization Nepal Living Standard Survey Nepal National Health Accounts Nepalese Rupees Organization for Economic Cooperation and Development Out-Of-Pocket System of Health Accounts Total Government Expenditure Total Health Expenditure United States Dollars Village Development Committee World Bank World Health Organization

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13 Executive Summary Nepal s total health expenditure (THE) grew by 45.6%, from NPR 36.0 billion in 2006/07 to 52.5 billion in 2008/09. During the eight years between 2000/01 to 2008/09, THE in Nepal increased by an average growth rate of 11.8% in nominal terms, and 4.9% in real terms. As a percentage of GDP, THE accounted for 4.9% in 2006/07, and 5.3% in years 2007/08 and 2008/09. Per capita spending on health increased by 40.1% over two years from NPR 1,363 in 2006/07 to 1,910 in 2008/09. The Ministry of Health and Population and its subordinates, and retail sales outlets and suppliers of other medical goods are the two important agents of expenditure on health. These two category of agents shared 26.0% and 24.2% of THE respectively in 2008/09. Private hospitals, clinics and labs is the third important cluster of providers sharing 16.3% of THE. Within the total public health expenditure, MoHP and its subordinates are predictably the dominant category sharing 76.1%. The remaining 23.9% is shared by other ministries, health facilities and local bodies. Similarly, out of the total private health expenditure, share of suppliers of retail sales outlets and other medical goods remained the highest (38.1%) followed by hospitals, clinics and labs (24.0%) and medical colleges and schools (12.5%). The major sources of finance for THE include the private sector, general and rest of the world. Of these sources, the private sector remains the main source of health finance in Nepal, comprising 60.5% of THE in 2008/09. Additionally, more than 90% of private financing was household out-of-pocket (OOP) expenditure which accounts for 54.8% of THE. The general is the second largest financing source, making up 21.0% of THE for 2008/09. Rest of the world (which includes official donor agencies, INGOs and all other foreign sources of finance), is placed in third with 18.9% of THE. In terms of the functional purposes of health expenditures, the largest shares of THE are accounted for by curative care services and medical goods dispensed to outpatients, respectively representing 31% and 28% of THE in 2008/09. These two categories are followed by preventive and public health services, and health-related functions respectively accounting for 17% and 16% in 2008/09. Capital formation and education and training of health personnel are two major components sharing two-third of total expenditure on health related functions. Looking at the trends over the years, medical goods dispensed to outpatients have shown a declining share while preventive and public health services are on the rise in relation to THE. Composition of health expenditure by functions is quite different among the three main sources of health finance. Curative care services comprised almost half (49%) of the total general health expenditure in 2008/09. In contrast to this, medical goods dispensed to outpatients remained the dominant component in private sector expenditure (45%) while preventative and public health services shared the largest proportion (41%) of total health expenditure by rest of the world. While classifying THE by providers, provision and administration of public health programmes accounted for 32.3% of THE in 2008/09. Among other providers, retail sales outlets and other providers of medical goods are 26.1%, hospitals are at 17.1% and providers of ambulatory health care make up 13% of THE. During the period from 2006/07 to 2008/09 the percentage shares of provision and administration of public health programmes, and ambulatory health care providers remained almost constant. However, shares of retail sales outlets and other providers of medical goods in THE has evidently slightly declined. This report also classifies total OOP expenditure by agents, functions and providers. Retail sales outlets and suppliers of other medical goods, and private hospitals, clinics and labs are the main recipients of OOP payments, respectively sharing 47.2% and 29.5% of the total OOP expenditure in 2008/09. Similarly, a large percentage of total OOP payments made by households were on medical goods dispensed to outpatients (48.6%) and curative care services (29.2%) while classifying by functions.

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15 Nepal National Health Accounts 1 CHAPTER I Total Health Expenditure 1.1 Trends in Total Health Expenditure Nepal s expenditure on health has increased markedly in recent years. Total health expenditure for the fiscal year 2006/07 is NPR 36,019 million, which is 3.5% higher than that of the preceding year. In subsequent years, it increased by more than 20% and reached NPR 43,613 million in 2007/08, and NPR 52,526 million in 2008/09. The trend of THE since 2000/01 is shown in figure 1.1 below in both current and constant prices. It is worth noting from the outset that total expenditure on health may have been over-estimated in the last round of NHA, owing to duplication in data reporting by different agencies as realized during data triangulation for this report. This particularly applies to the estimates of public sector spending, which affect the composition and trend of THE over the years Figure 1.1 Trend of Total Health Expenditure The annual change in nominal THE has remained positive every year, and its annual increase averaged 11.8% to reach NPR 52,526 million in 2008/09 from NPR 21,953 million in 2000/01. Nonetheless, inflation-adjusted THE declined during two consecutive years, 2005/06 and 2006/07. Thus, THE increased by almost 45% during the span of eight years and reached NPR 31,661 million in real terms in 2008/09. Likewise, the average annual growth rate of real THE remained 4.9% during the eight years from 2000/01 to 2008/09. The size and annual percentage change of THE, both in current and constant prices, are shown in table 1.1 Table 1.1 Total health expenditure and average growth rates, 2000/ /09 Fiscal Year In million NPR Annual % change Current Constant Current Constant 2000/01 21,953 21, /02 23,960 23, /03 24,913 23, /04 30,650 27, /05 32,960 27, /06 34,796 27, /07 36,019 26, /08 43,613 30, /09 52,526 31, Average annual growth rate Note: Fiscal year in Nepal starts from mid July

16 2 Nepal National Health Accounts 1.2 Total Health Expenditure in relation to GDP The ratio of THE to gross domestic product (GDP) provides an indication of the proportion of overall economic activities contributed by the health sector in the country. Except for the year 2006/07, the ratio of THE to GDP has remained between 5% and 6%. However, this figure does not show a smooth trend over the years. From 5.0% in 2000/01, the share of THE in GDP went up to record 5.7% in 2003/04. Thereafter it stepped down to its lowest level of 4.9% in 2006/07, and again climbed up to 5.3% in the subsequent years. Figure 1.2 Total health expenditure in relation to GDP and TGE THE as % of GDP as % of GDP as % of TGE THE as % of TGE / / / / / / / / / Fiscal year Similarly, the percentage share of THE in total expenditure (TGE) also increased from 27.5% in 2000/01 to 34.3% in 2003/04 after which it started declining and reached 23.9% in 2008/09. The trends of THE in relation to GDP and TGE are shown in figure 2.2 above and table 2.3 below. The following table also shows volume of GDP and TGE, both of which have also more than doubled between 2000/01 and 2008/09. Table 1.2 Total health expenditure in relation to GDP and TGE Fiscal year Gross domestic product Total expenditure Total health expenditure In million NPR In million USD In million NPR In million USD as % of GDP as % of TGE 2000/01 441,519 5,980 79,835 1, /02 459,443 5,976 80,072 1, /03 492,231 6,328 84,006 1, /04 536,749 7,274 89,443 1, /05 589,412 8, ,560 1, /06 654,084 9, ,889 1, /07 727,827 10, ,605 1, /08 815,658 12, ,350 2, /09 988,053 12, ,662 2, Trend in Per Capita Total Health Expenditure The trends of per capita THE and GDP are shown in figure 1.3 below. Per capita THE has followed more or less the same growth pattern of per capita GDP.

17 Nepal National Health Accounts 3 Figure 1.3 Trends in per capita THE and GDP Per capita GDP 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - Per capita GDP Per capita THE 2000/ / / / / / / / /09 Fiscal Year 2,500 2,000 1,500 1, Per capita THE Per capita THE realized a compounded growth rate of 9.1% between the period from 2000/01 to 2008/09 which is slightly higher than that of per capita GDP. While the per capita THE more than doubled from NPR 948 in 2000/01 to NPR 1,910 in 2008/09, per capita GDP increased from NPR 19,071 to NPR 35,747 during the same timeframe. Table 2.3 presents per capita THE and GDP in USD. Per capita THE was equivalent to USD 13 in 2000/01, and reached USD 25 in 2008/09. Table 1.3 Per capita THE and GDP, 2000/ /09 Fiscal Year Per capita THE Per capita GDP NPR USD NPR USD 2000/ , /02 1, , /03 1, , /04 1, , /05 1, , /06 1, , /07 1, , /08 1, , /09 1, , Compounded annual growth rate

18 4 Nepal National Health Accounts CHAPTER II Health Expenditure by Financing Agents 2.1 Total Health Expenditure by Financing Agents/Providers Health expenditure by financing agents is presented in this chapter. As shown in table 2.1, retail sales outlets & other medical goods suppliers is the major provider sharing slightly more than one-fourth of THE. This is followed by MoHP including its subordinate organizations, spending 24.2 % of THE in 2008/09. However these two categories of agents have shown reverse trends; share of retail sales outlets and other medical goods suppliers is on the rise, while that of MoHP and its subordinates is decreasing. Private hospitals, clinics and labs jointly share 16.3% of THE. Table 2.1 Total health expenditure by financing agents/providers Agents/providers In million NPR As % of THE 2006/ / / / / /09 MoHP and its subordinates 7,438 9,841 12, MoHP hospitals/facilities 1,659 2,268 2, Ministries other than MoHP 1,293 1,648 2, University hospitals Local bodies Private insurance agencies State owned enterprises Employers of private firms Private hospitals, clinics and labs 5,458 7,266 8, Medical colleges/schools 3,647 3,963 4, Retail sales outlets & other 11,101 12,090 13, medical goods suppliers NGOs 1,512 1,006 1, INGOs 2,295 3,065 3, Providers based outside the country 690 1,179 1, Total 36,019 43,613 52, Health expenditure by agents/providers has been presented separately for and non- expenditure in the subsequent sections of this chapter. In doing so, external financing for health is reported partly in expenditure and partly in non- expenditure depending on the agents that spend external funds. Financing by official donor agencies is accounted as expenditure, while financing by INGOs and other sources of foreign funds are found to be spent via non- agents/providers.

19 Nepal National Health Accounts Government Health Expenditure by Agents/Providers Different agents/providers are involved in providing healthcare services using funds. Central and external partners are the main sources of financing expenditure on health in Nepal. Those agents/providers are listed below. MoHP and its subordinates Health facilities under MoHP Ministries other than MoHP University hospitals Local bodies Private hospitals The trend of spending in the review period remained encouraging. From the level of NPR 9,997 million in 2006/07, it jumped to NPR 16,729 million in 2008/09, an increase of around 67%. As a result, total health expenditure constituted 31.8% of THE in 2008/09 which is higher by 4 percentage points as compared to that in 2006/07. Table 2.2 Total health expenditure by agents/units Agency/provider In million NPR As % of total health expenditure 2006/ / / / / /09 MoHP and its subordinates 7,438 9,841 12, Health facilities under MoHP 968 1,310 1, Ministries other than MoHP 1,293 1,648 2, University hospitals Local bodies Private hospitals/facilities Total health 9,997 13,203 16, expenditure Total health expenditure as % of THE Total health expenditure as % of GDP More than 75% of the total health expenditure was spent by MoHP and its subordinates, while 12.5% was spent by the ministries other than MoHP in 2008/09, as shown in table 2.2 above. University hospitals, local bodies and private hospitals also spend sector funds but their share is very low, jointly contributing 2% of total health expenditure. Total health expenditure as % of GDP increased from 1.4% in 2006/07 to 1.7% in 2008/ Non- Health Expenditure by Agents/Providers The following are the different agents/providers which have been delivering healthcare services while attracting non- expenditure on health. Public facilities Private insurance agencies Employers of private firms State owned enterprises Private hospitals, clinics and labs Medical colleges/schools Retail sales outlets & other medical goods suppliers NGOs and INGOs Providers based outside Nepal

20 6 Nepal National Health Accounts Total non- health expenditure in Nepal rose by 38% in two years period from 2006/07 and reached NPR 35,796 million in 2008/09. However, the share of total non- expenditure in THE slightly decreased from 72.2% in 2006/07 to 68.2 in 2008/09 which is shown in the table below. Table 2.3 Total non- health expenditure by agents/providers As % of total non- health In million NPR Agents/providers expenditure 2006/ / / / / /09 Public facilities , Private insurance agencies Employers of private firms State owned enterprises Private hospitals, clinics and labs 5,458 7,265 8, Medical colleges/schools 3,647 3,963 4, Retail sales outlets & other medical 11,101 12,090 13, goods suppliers NGOs 1,512 1,006 1, INGOs 2,295 3,065 3, Providers based outside Nepal 690 1,179 1, Total non- health 26,022 30,410 35, expenditure Total non- health expenditure as % of THE Total non- health expenditure as % of GDP Retail sales outlets & other medical goods suppliers are found to be the largest agent sharing 38.1% of total non- health expenditure in 2008/09. This is followed by private hospitals, clinics and labs, then medical colleges and schools respectively sharing 24% and 12.5% of total non- health expenditure. In contrast, private insurance agencies, state owned enterprises and employers of private firms jointly shared less than 3%. Details of this are shown in the table above

21 Nepal National Health Accounts 7 CHAPTER III Health Expenditures by Financing Sources 3.1 Total Health Expenditure by Financing Sources Total health expenditure consists of funds from different financing sources. Among these, the largest single source of health care financing in Nepal is the private sector. The private sector contributed more than 55% of THE while the rest came from general and rest of the world. The trends are shown in figure 3.1 below. Figure 3.1 Trend of total health expenditure by financing sources, 2000/ /09 Percent / / / / / / / / /09 Fiscal Year Private Sector General Rest of the world Table 3.1 Total health expenditure by financing sources, 2003/ /09 Code Source 2003/ / / / / /09 NS1 General 5,312 6,535 8,239 6,670 9,056 11,031 NS2 Private sector 18,857 19,936 19,333 23,664 27,279 31,771 NS9 Rest of the World 6,481 6,489 7,224 5,685 7,278 9,724 Total 30,650 32,960 34,796 36,019 43,613 52,526 Percentage share NS1 General NS2 Private sector NS9 Rest of the World Total Financing source-wise expenditure data and their proportions in THE are shown in table 3.1.

22 8 Nepal National Health Accounts Figure 3.2 Composition of total expenditure by financing sources, 2008/09 Rest of the world 19% General 21% Private sector 60% Figure 3.3 shows the trend of health expenditure by financing sources in relation GDP. Share of private sector expenditure as percent of GDP ranged between 3.0 to 3.5% while the share of general and rest of the world hovered around 1% of GDP. However, none of these trends are smooth, reflecting the erratic nature of financing over the years. Nonetheless, part of the fluctuation in the financing might also be explained by methodological variations in carrying out different rounds of NHA. Figure 3.3 Trend of health expenditure as percent of GDP by financing sources, 2000/ /09 As % of GDP / / / / / / / / /09 Fiscal Year Private sector General Rest of the world The detailed breakdown of health expenditure by financing sources is presented in the following sections 3.2 General Government Financing General financing is the sum of financing made by central and local. Central includes different ministries and providers which deliver health care services to the people. Similarly, local include District Development Committees (DDCs), Village Development Committees (VDCs) and municipalities. Most of the general financing on health is undertaken by the central and general tax revenue is the main source of finance for the. Table 3.2 below shows general financing with the sources borne by each individual agency. The percentage share of general tax revenue in total general expenditure remained around 97% during the study period (2006/ /09). The vast majority of this is channelled through MoHP. Local in Nepal is represented by 75 District Development Committees (DDCs), 3,199 Village Development Committees (VDCs) and 58 municipalities. The local bodies are entitled to spend a part of their budget on the provision of

23 Nepal National Health Accounts 9 health-care services at the district and sub-district level. Public health facilities existing at the local level are the main providers through which local finance on health is spent. The percentage share of local bodies in general expenditure remained very small, accounting for only around 3%. Table 3.2 General health financing by sources, 2006/ /09 Financing sources In million NPR As % of THE 2006/ / / / / /09 NS1.1.1 Central 6,439 8,766 10, MoHP including hospitals/ 5,051 6,932 8, facilities Other Ministries including university hospital 1,387 1,834 2, NS1.1.2 Local VDC Municipality DDC NS1 Total general expenditure 6,670 9,056 11, Private Sector Financing Private financing is the predominant funding mechanism in Nepal s health system. This consists of private household OOP expenditure, social insurance enterprises, other insurance enterprises, non-profit institutions (NGOs) and corporations. Out of total private financing, OOP expenditure alone accounts for 90% of throughout the review period 2006/ /09, almost at the same level as in the previous years covered by the NHA (2000/ /07). Non-profit institutions remained the second largest source, contributing 6.2% of total private financing in 2008/09, with slight fluctuations during the review period (2006/ /09). Corporations in Nepal are broadly divided into five categories: financial, industrial, social services, commercial and public utilities. Almost all these corporations have health-related expenditures. Most of them operate their own health-care facilities to provide health-care services, primarily offering ambulatory health-care to the employees and their families. Several provide medical benefits in the form of reimbursement of actual hospitalization costs or treatment costs of their staff. These expenditures constitute roughly 3% of total private sector financing during the review period. The expenditure by corporations is mainly in the form of reimbursement of health expenditure by staff. Total private health financing is presented in the table 3.3 below by financing source. Table 3.3 Private health financing by source, 2003/ /09 Financing sources 2003/ / / / / /09 Social insurance enterprises Private enterprises Private household OOP 17,071 17,740 17,325 21,460 25,310 28,779 Non-profit institutions 1,398 1,392 1,484 1,578 1,088 1,981 All corporation Total 18,857 19,936 19,333 23,664 27,279 31,771 Percentage share Social insurance enterprises Private enterprises Private household OOP Non-profit institutions All corporation Total

24 10 Nepal National Health Accounts 3.4 External Sector (rest of the world) Financing This includes spending from official donor agencies, international non-profit agencies (INGOs) and all other foreign funds. Their assistance is a significant source of financing in Nepal s health and population sector. It is particularly important in certain areas, such as family health, safe motherhood, family planning, immunization, tuberculosis and leprosy control, STDs, prevention and management of communicable diseases, and capital formation for health-care provider institutions. Table 3.4 below shows external sector contributions to the health sector. Table 3.4 External sector financing by sources, 2003/ /09 Code Source 2003/ / / / / /09 NS9.1 Official donor agencies 2,672 2,099 2,759 3,165 4,114 5,685 NS9.2 International non-profit 3,802 4,383 4,455 2,360 3,155 3,947 agencies NS9.3 All the other foreign funds Total 6,481 6,489 7,224 5,685 7,278 9,724 Percentage share NS9.1 Official donor agencies NS9.2 International non-profit agencies NS9.3 All the other foreign funds Total Like other sources of financing, health expenditure from the external sector has continuously increased over the last three years. It rose from NPR 5,685 million in 2006/07 to NPR 9,724 million in 2008/09. The share of official donor agencies, which consists of multilateral and bilateral agencies, remained at the top and accounted for 58.5% in 2008/09. International nonprofit agencies are placed second, with their contribution accounting for nearly 41% of the total external financing in 2008/09.

25 Nepal National Health Accounts 11 CHAPTER IV Health Expenditure by Functions 4.1 Total Health Expenditure by Functions Trend of total health expenditure by health-care functions is given in Figure 4.1. Health expenditure is divided into seven groups by health-care functions. These include curative care service, rehabilitative care services, long-term nursing care, ancillary health-care services, medical goods dispensed to out-patients, preventive health-care and public health services, health programme administration and health insurance and health-related functions. Capital formation and education and training activities are major components of health related functions. As no expenditure information on rehabilitative care services and long-term nursing care were available, this has been reported as none. Figure 4.1 Trend of total health expenditure by functions, 2000/ /09 50 Percent / / / / / / / / /09 Fiscal Year Curative care services Ancillary health care services Medical goods dispensed to outpatients Preventive health care and public health services Health programme administration and health insurance Health-related functions In THE, medical goods dispensed to out-patients formed the largest component until 2006/07. Since then, curative care services have constituted the highest share surpassing the expenditure on medical goods dispensed to out-patients. No concrete explanation for the declining share of medical goods dispensed to out-patients can be given, but the increasing share of domestically produced pharmaceuticals (which are relatively cheaper), might be a contributing factor. The vast majority of medical goods are allopathic medicine, with non-allopathic medicine making up a much smaller portion as usual. The third largest amount of expenditure was seen in preventive and public health services followed by health-related functions. The combined share of these two components are 33.6%, with 17.3% going to preventive and public health services, and 16.3% going to health related functions in 2008/09. Preventive health-care and public health services includes family health and reproductive health services, prevention and management of communicable disease, immunization, water and food-borne disease control, tuberculosis and leprosy control, STDs, vector-borne disease and so on. A large proportion of the expenditure is seen in prevention and management of communicable disease, family planning and reproductive health services out of total expenditure on in preventive and public health services. Details of THE by function are shown in the table 4.1 below.

26 12 Nepal National Health Accounts Table 4.1 Total health expenditure by functions, 2003/ /09 Code NNHA Functions 2003/ / / / / /09 NF1 Curative care services 5,097 5,940 6,070 10,213 12,911 16,398 NF2 Rehabilitative care services NF3 Long-term nursing care NF4 Ancillary health care services NF5 Medical goods dispensed 10,667 10,917 9,189 11,564 12,585 14,436 to outpatients NF6 Preventive health care 5,086 5,149 6,090 6,113 6,802 9,078 and public health services NF7 Health programme administration and health insurance 3,494 3,924 4,512 2,349 2,928 3,682 NR Health-related functions 5,877 6,397 8,344 5,525 8,094 8,540 Total 30,650 32,960 34,796 36,019 43,613 52,526 Percentage share NF1 Curative care services NF2 Rehabilitative care services NF3 Long-term nursing care NF4 Ancillary health care services NF5 Medical goods dispensed to outpatients NF6 Preventive health care and public health services NF7 Health programme administration and health insurance NR Health-related functions Total Health-related functions are associated with capital formation of health-care provider institutions: education and training of health personnel, research and development in health, drinking water and sanitation, administration, provision of social services to those living with disease and impairment, and all other health-related expenditures. A large proportion of healthrelated spending by function goes to capital formation of health-care provider institutions, followed by education and training of health personnel. Health programme administration and health insurance constitutes around 4% of the total health expenditure throughout the review period 2006/ /09. This component mainly comprises of administration of health and private health administration and health insurance. Figure 4.2 provides the composition of total health expenditure by broad functions.

27 Nepal National Health Accounts 13 Figure 4.2 Composition of total health expenditure by functions, 2008/09 Health programme administration and health insurance7% Health-related functions 16% Preventive health care and public health services 17% Curative care services 31% Medical goods dispensed to outpatients 28% Curative care services 31% 4.2 General Government Expenditure by Functions Curative care services absorb the majority of general financing by function, with a consumption of almost half. Table 4.2 below shows spending on curative care services has therefore increased by around 67% between 2006/07 and 2008/09. Table 4.2 Total financing by functions, 2006/ /09 Code Functions Amount (million NPR) As % of total financing 2006/ / / / / /09 NF1 Curative care services 3,242 3,837 5, NF2 Rehabilitative care services NF3 Long-term nursing care NF4 Ancillary health care services NF5 Medical goods dispensed to outpatients NF6 Preventive & public health 1,568 1,835 2, services NF7 Health program administration , & health insurance NR Health- related function 1,038 2,439 2, Total 6,670 9,056 11, Preventive and public health services are the second biggest recipient, with 22% of general expenditure going towards this. At the opposite end of the scale, rehabilitative care services, long-term nursing care, ancillary health services and medical goods dispensed to outpatients receive a combined share of less than 1%.

28 14 Nepal National Health Accounts Figure 4.3 Composition of general financing by functions, 2008/09 Health- related function 19% Health program administration & health insurance 10% Preventive & public health services 22% Curative care services 49% Medical goods dispensed to outpatients 0% Ancillary health care services 0% 4.3 Private Sector Financing by Functions Private sector financing presents a rather different picture. As show in table 4.3, the most striking difference between private sector financing and that of general is 45.3% spent on medical goods dispensed to outpatients in 2008/09. However, this is a slight decrease from previous years, down from 48.7% in 2006/07 and 46.0% in 2007/08. Curative services come in second with around 27.5% share of expenditure (an increased share of roughly 5% since 2006/07), followed by healthrelated functions with 11.6%. Table 4.3 Total private sector financing by functions, 2006/ /09 Code Functions In million NPR As % of total private sector financing 2006/ / / / / /09 NF1 Curative care services 5,266 7,163 8, NF2 Rehabilitative care services NF3 Long-term nursing care NF4 Ancillary health care services NF5 Medical goods dispensed to 11,520 12,539 14, outpatients NF6 Preventive & public health 2,392 2,170 2, services NF7 Health programme administration and health insurance 1,111 1,508 1, NR Health- related function 3,153 3,643 3, Total 23,664 27,279 31,

29 Nepal National Health Accounts 15 Figure 4.4 Composition of private sector financing by functions, 2008/09 Health program administration & health insurance 6% Preventive & public health services 9% Health- related function 12% Curative care services 27% Ancillary health care services 1% Medical goods dispensed to outpatients 45% 4.4 External Sector Financing by Functions Table 4.4 Total external sector financing by functions, 2006/ /09 Code Functions In million NPR As % of total external sector financing 2006/ / / / / /09 NF1 Curative care services 1,706 1,911 2, NF2 Rehabilitative care services NF3 Long-term nursing care NF4 Ancillary health care services NF5 Medical goods dispensed to outpatients NF6 Preventive & public health 2,153 2,797 3, services NF7 Health programme administration and health insurance NR Health- related function 1,334 2,012 2, Total 5,685 7,278 9, External sector expenditure is heavily focused on preventive and public health services, with around 41% of spending going on this function. This has increased steadily between 2006/07 and 2008/09, rising from NPR 2,153 million to NPR 3,966 million. Health-related functions and curative care services make up roughly 52% of expenditure, with a 29% and 23% share respectively. Spending on health-related functions has risen during the study period, from 23.5% to 28.7%, while curative care services expenditure has fallen by around 7%. This leaves just over 7% for all other functions, an overall decrease on previous years, and of which the vast majority is spent on health program administration and health insurance.

30 16 Nepal National Health Accounts Figure 4.5 Composition of external sector financing by functions, 2008/09 Health- related function 29% Curative care services 23% Ancillary health care services 0% Health program administration & health insurance 7% Preventive & public health services 41% Medical goods dispensed to outpatients 0%

31 Nepal National Health Accounts 17 CHAPTER V Health Expenditure by Providers 5.1 Healthcare Providers in Nepal Healthcare providers in Nepal can be divided into three broad categories: public, private, and NGOs. Table 5.1 identifies the key health providers according to these categories. The total expenditures as specified by the NNHA framework are given in table 5.2. Table 5.1 Key Healthcare Providers in Nepal Public Sector Private for profits NGOs/INGOs Ministries and their subordinates (provision and administration of public health programmes) Central hospitals (general and specialized hospitals Specialized and general hospitals NGO and community hospitals including civil, military and police hospitals) Regional and district hospitals Nursing homes and care centres Mission hospitals University-teaching hospitals and medical colleges Medical colleges and trainings centres NGO clinics Primary health care centers General practitioners and traditional healers Health posts, sub health posts Retail outlets for drugs and other medical goods Outreach and urban health clinics Polyclinics and other private clinics Diagnostic laboratories Diagnostic laboratories Local bodies State owned enterprises and other employers of private firms Each of the providers health expenditure has risen over the review-period (2006/7 2008/09). Four categories of providers account for most health expenditure: provision and administration of public health programme (32.3%), retail sales outlays and other providers of medical goods (27.5%), all hospitals (16.5%) and providers of ambulatory health care (12.8%). Trend and composition of health expenditure by provider according to ICHA categories is presented in figure 5.1 and table 5.2. Some major changes can be observed in the trend of health expenditure by provider since 2006/07, which are mainly due to methodological factors rather than changes in the expenditure pattern as such. This is primarily affected by the definition of provision and administration of public health programmes, which unlike in the last NHA reports, also includes expenditure on provision of public health programmes as defined in the framework for Nepal NHA. 5.2 Total Health Expenditure by Providers At the hospital level total expenditure grew by 70% from NPR 5,160 million in 2006/07 to NPR 8,792 million in 2008/09, with the majority of this going to tertiary and secondary hospitals. Expenditure made in psychiatric hospitals is found to be statistically insignificant. Likewise, a very small amount has been spent in primary hospitals.

32 18 Nepal National Health Accounts Figure 5.1 Trend of total health expenditure by providers, 2000/ /09 Percent / / / / / / / / /09 Fiscal Year All hospitals Providers of ambulatory health care Retail sales outlays & other providers of medical goods Provision & administration of public health programs General health administration & Insurance Other industries Table 5.2 Total health expenditure by providers 2003/ /09 Code Providers 2003/ / / / / /09 NP1 All hospitals 5,788 6,277 7,246 5,160 6,581 8,792 NP2 Nursing and residential care facilities NP3 Ambulatory Health Care 5,505 6,142 6,852 4,622 5,450 6,710 providers NP4 Retail sales outlays & other providers of medical goods 10,656 10,922 9,190 11,564 12,585 14,436 NP5 NP6 Provision & administration of public health programs General health administration & Insurance 4,885 4,973 6,263 11,245 14,293 16,963 3,175 4,013 4,613 2,730 3,515 4,317 NP7 Other industries(rest of the Nepalese economy) NP9 Rest of the world ,179 1,297 Total 30,650 32,960 34,796 36,019 43,613 52,526 Percentage share NP1 All hospitals NP2 Nursing and residential care facilities NP3 Ambulatory Health Care providers NP4 Retail sales outlays & other providers of medical goods NP5 NP6 Provision & administration of public health programs General health administration & Insurance NP7 Other industries NP9 Rest of the world Total

33 Nepal National Health Accounts 19 Expenditure on providers of ambulatory health-care grew by 45% from NPR 4,622 million in 2006/07 to NPR 6,710 million in 2008/09. Ambulatory health-care provides services directly to outpatients who do not require inpatient care. Of the total expenditure on ambulatory health care providers, out-patient care providers and general out-patient care providers are the most significant. Within the expenditure on retail sales outlays and other providers of medical goods, pharmacies claim the largest share. It is worth noting that a large proportion of health expenditure has gone to provision and administration of public health programmes, mostly spent by the public sector providers. Figure 5.2 Composition of total health expenditure by providers, 2008/09 Rest of the world 2% General health administration & Insurance 8% All hospitals 17% Provision & administration of public health programs 32% Retail sales outlays & other providers of medical goods 28% Providers of ambulatory health care 13% Expenditure at providers based outside the country (health care provided by non-residents of Nepal to residents of Nepal) has ranged between 1.8% and 2.7% during the period 2003/04 to 2008/09. In 2008/09, the percentage share of the rest of the world in total health expenditure constituted 2.5%.

34 20 Nepal National Health Accounts CHAPTER VI Out-of-Pocket Expenditure 6.1 Total OOP Expenditure by Financing Agents/providers As the table below shows, retail sales outlets and other medical goods suppliers absorb the vast majority of OOP expenditure at 47.2%. While this figure is still high, it does represent a decrease from 51.5% in 2006/07, totalling NPR 13,572 million in 2008/09. The second largest area of OOP expenditure is in private hospitals (including clinics and labs), at just under 30%. This area of spending has grown throughout the study period, from NPR 5,387 million in 2006/07 to NPR 8,478 in 2008/09. Table 6.1 Total out-of-pocket expenditure by agents/providers Agents/providers In million NPR As % of total OOP expenditure 2006/ / / / / /09 MoHP- central and specialty hospitals MoHP- regional, zonal and district hospitals MoHP- PHCC, HP, SHP and labs Employers of private firms Private hospitals, clinics and labs 5,387 7,187 8, Private colleges/schools 3,643 3,958 4, Retails sales outlets and other medical 11,050 12,024 13, goods suppliers External providers (cross border) 690 1,179 1, Total private household (OOP) expenditure 21,460 25,310 28, Total OOP expenditure as % of THE The share of total out-of-pocket expenditure in THE is also presented in the table above which shows decreasing trend. The declining share of OOP in THE may be attributed to the abolition of registration fees in accordance with the s free essential health-care policy, and free delivery services at public and non-profit health facilities combined with increase in general expenditure on health Figure 6.1 Composition of out-of-pocket expenditure by agents/providers, 2008/09 External providers (cross boarder) 5% MoHP- central and specialty hospitals 3% Retails sales outlets and other medical goods suppliers 47% MoHP- regional, zonal and district hospitals 1% Private hospitals including clinics and labs 29% MoHP- PHCC, HP, SHP and labs 0% Private colleges/schools 15%