Transcript Presentation

Health Sector PERS
PEAM Course
March 2005, Washington, D.C.
George Schieber
Health Policy Advisor
Human Development Network
Organization of Presentation
•
•
•
•
•
•
•
Health Systems Reform Basics
Underlying Health Dynamics
Health Expenditures
Fundamentals of Health Financing
Provider Payment
Health Reform Issues
Implementation
Health Systems Reform Basics
Objectives of Health Systems
•
•
•
•
Improve health status of population
Assure equity and universal access
Provide financial protection
Be efficient from macroeconomic
and microeconomic perspectives
• Assure quality of care and consumer
satisfaction
Achieving Change in HNP
Behavior of Individuals/Households
Income
Education
Water
Sanitation
Nutrition
Macroeconomic
Environment
Performance of Health System
•Clinical Effectiveness
•Accessibility and Equity
•Quality and Consumer Satisfaction
•Economic Efficiency
Health Status Outcomes
•Fertility
•Mortality
•Morbidity
•Nutritional Status
Health Care System
Delivery Structure
•Facilities (public & private)
•Staff (public & private)
•Information, Education, &
communication
Institutional Capacity
•Regulatory & Legal Framework
•Expenditure & Finance
•Planning & Budgeting Systems
•Client & Service Information/Accountability
•Incentives
Governance
Projects and Policy Advice
Why Public Intervention?
• Health services with collective benefits
(public verses personal health services)
• Redistribution/Equity
• Health insurance market failures
• Other market failures in the direct
consumption and provision of health
services
The Five 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
FINAL OUTCOMES FOR HEALTH SECTOR PERFORMANCE
SATISFACTION
Underlying Health Dynamics
Transmission Mechanism Between
Health & Income,
Growth
Buys more health
services & Wealth
Improves life styles
Reduces job-related risks
Buys more education and other
human capital-related services
Health
Improves political stability,
investment climate, and productivity
Reduces medical spending
Reduces fertility
Increases labor supply and
female labor force participation
Increases saving
Increase in the years of
healthy life expectancy
Source: Salehi, 2004
Income
Wealth
Growth
Some Empirical Evidence
• 10% increase in life expectancy at birth leads to
0.35% increase in the economic growth rate
(CMH).
• Increases in health status accounted for 17% of
the increase in productivity gains (NBER).
• Effectiveness of spending in improving health
outcomes also depends on the policy and
institutional environment with poor policy and
institutional environments resulting in little gain,
and conversely (WB).
MDG Approach to Investments in
Health
Extreme Poverty
•Halve, between 1990 and 2015,
the proportion of people whose
income is less than $1 a day.
•Halve, between 1990 and 2015,
the proportion of people who suffer
from hunger.
Safe Water & Sanitation
•Halve by 2015 the proportion of people without
sustainable access to safe drinking water.
•By 2020, achieve significant improvement in the
proportion of people with access to sanitation.
Child & Maternal Health
•Reduce by two thirds, between 1990 and 2015,
the under-five mortality rate.
Primary & Girls' Education
•By 2015, boys and girls
everywhere complete a full course
of primary schooling.
•Eliminate gender disparity in
primary and secondary education,
preferably by 2005, and in all levels
of education no later than 2015.
•Reduce by three quarters, between 1990 and
2015, the maternal mortality ratio.
Communicable Diseases
By 2015, halt and begin to reverse
the spread of:
•HIV/AIDS
•Malaria &
•Other major diseases.
Investments are Needed
Across Many Sectors to Achieve MDGs
% growth government health spending
% reduction U5MR 1990-2015
0%
0%
3%
5%
8%
10%
13%
15%
5% economic growth
-10%
& 2.5% female education growth
-20%
& 2.5% roads growth
& 2.5% water & sanitary growth
-30%
-40%
-50%
-60%
-70%
& 2.5% growth in all
Policies and Institutions Do Matter
Elasticities of MDG Outcomes with Respect To Government Health
Spending
CPIA Index
1.00
2.00
3.00
3.25
3.5
4.00
4.50
5.00
Under Five
Mortality
0.799
0.507
0.215
0.142
0.069
-0.077
-0.223
-0.369
Maternal
Mortality
-0.622
-0.654
-0.687
-0.695*
-0.703*
-0.720*
-0.736*
-0.752*
Underweight
Children Under
Five
TB
Mortality
0.13
-0.087
-0.305
-0.360
-0.414
-0.523*
-0.632*
-0.740*
0.651
0.276
-0.098
-0.192
-0.285
-0.472
-0.659*
-0.847*
* Statistically significantly different from zero at 90% confidence level
Source: World Bank, 2003
Cost-effective Interventions are Key to the MDGs
•
•
•
•
•
Which interventions to choose?
How to transfer them to many countries?
How to implement them to scale?
How much will they cost?
What kind of supporting environment is
needed?
• Can we monitor their impact?
Growth Is Not Enough
Percent living on
$1/day
Primary completion rate
(%)
Under-5 mortality rate
Target
2015 growth
alone
Target
2015 growth
alone
Target
2015 growth
alone
East Asia
14
4
100
100
19
26
Europe and
Central
Asia
1
1
100
100
15
26
Latin
America
8
8
100
95
17
30
Middle
East and
North
Africa
1
1
100
96
25
41
South Asia
22
15
100
99
43
69
Africa
24
35
100
56
59
151
Sources:WDR 2004, Devarajan 2002. Notes: Average annual growth rates of GDP per capita assumed are: EAP 5.4; ECA 3.6; LAC 1.8;
MENA 1.4; SA 3.8; AFR 1.2. Elasticity assumed between growth and poverty is –1.5; primary completion is 0.62; under-5 mortality is –0.48.
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
Health Policy Baselines
Economic indicators
Health outcomes
Life
expectancy
at birth 2002
Population
growth rate,
1990-2002
(percent)
Health
expenditures
per capita,
(2000)
Public health
expenditures
(% of total
health exp.,
2000)
54
65
1.4
44
38
-0.9
34
70
0.1
108
73
3,176
1.2
32
70
1.4
262
47
2,265
1.3
52
68
2.2
115*
46*
South Asia
467
3.2
99
61
2.1
21
20
Sub-Saharan Africa
463
-0.3
153
49
2.2
29
43
High income
26,942
1.6
7
78
1.0
2735
59
Middle income
1,870
1.7
33
70
1.2
115
51
453
2.2
137
53
2.1
21
25
Region/income group
East Asia & Pacific
Europe & Central Asia
Latin America &
Caribbean
Middle East & North
Africa
Low income
Per capita
GDP (2002
$US)
Average per
capita GDP
growth,
1990-2002
(percent)
Under-five
mortality,
2001 (per
1,000)
980
6.1
2,384
Health expenditures
Source: World Bank, WDI 2003
* MENA figures do not include GCC
Underlying Demographics Will Drive Needs/Demands
But Also Have Profound Effects on Economies
2000
High Income
Low Income
75+
7 0 -7 4
6 5 -6 9
6 0 -6 4
5 5 -5 9
5 0 -5 4
4 5 -4 9
4 0 -4 4
3 5 -3 9
3 0 -3 4
2 5 -2 9
2 0 -2 4
1 5 -1 9
1 0 -1 4
5 -9
0 -4
50000
2020
Middle Income
25000
0
25000
50000
200000
100000
0
100000
200000
200000
100000
0
100000
200000
200000
100000
0
100000
200000
200000
100000
0
100000
200000
75+
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
50000
25000
0
25000
50000
Notes: Population figures in millions according to standard age stratifications. Projections by World Bank staff.
Demographic impact of HIV/AIDS: Botswana
Population of Botswana with and without AIDS 2020
with AIDS
without AIDS
80
70
60
50
40
30
20
10
0
140
120
100
80
60
40
20
0
20
Thousands
Thousands
Source: U.S. Census Bureau 1999
40
60
80
100
120
140
By 2020, Non-communicable Diseases and Injuries Will
Account for 78% of the Total Disease Burden in Lowand Middle-Income Countries
Low- & Middle-Income Countries, 2001
Injuries
13%
No nco mmunicable
Co mmunicable
Diseases
44%
Low- & Middle-Income Countries, 2020
Diseases
44%
Injuries
21%
Co mmunicable
Diseases
22%
Total: 1,373 million DALYs
(92% of global total)
No nco mmunicable
Diseases
57%
Total: 1,228 million DALYs
(88% of global total)
Source: Mathers, Colin D., Claudia Stein, Doris Ma Fat, Chalapati Rao, Mie Inoue, Niels Tomijima, Christina Bernard, Alan D Lopez, and
Christopher J.L. Murray. 2002. Global Burden of Disease 2000: Version 2 methods and results. Global Programme on Evidence for
Health Policy Discussion Paper 50. World Health Organization, Geneva.
Global Distribution of Health Expenditures
Global Distribution of Health Expenditures
2001
Low &
middle
income
12%
High
income
88%
Total global health ex penditure
$3,059 billion US
Low- and middle-income countries, 2001
M id d le
East &
N ort h
A f r ica
9%
So ut h
A sia
8%
East A sia
& Pacif ic
23%
Sub Sahar an
A f r ica
5%
Lat in
A mer ica &
t he
C ar ib b ean
39%
Total health ex penditure
$356 billion US
Eur o p e &
C ent r al
A sia
16 %
Interventions Must Address Inequities in
Outcomes (Deaths per 1,000 live births)
Source: Analysis of Demographic and Health Survey data, WDR 2004
Health Expenditures
An accounting perspective of the production of health
The proposed OECD approach
Where Do We Start: National Health Accounts
Coverage and access to services
•Physical
environment;
•Life Style;
•Other socioeconomic factors
Utilisation of
health services
(personal and
collective)
Modification of
health status
Resources
Input into
health services
•
•
•
•
Manpower
Health facilities
Intermediate products
Medical knowledge
and technology
Health
needs
Cost = Price x
Volume
Population health
status
• mortality
• morbidity and QOL
• Earnings
• Fees
• Capital
Investment
• Training/education
• Investment into
medical facilities
• Medical R&D
• Perceived health
status
• Impairment, Disability,
Handicap
• Multi-dimensional
health status
• Disease-specific morbidity
Expenditure on health by
establishments of providers
• composite health
measures
e.g. health expectancies
Source: OECD
Expenditure on health
by functions
• public health services
• personal services and goods, by
• age group
• disease (ICD)
• ATC (pharmaceuticals)
• DRGs (inpatient care), etc.
Sources of
Financing
(intermediate
and ultimate
financing)
EXPENDITURE PERFORMANCE Can
Be Measured in Many Ways
•
LOCAL CURRENCY
– Point in time or changes over time
– Total nominal spending
– Share of GDP
– Public verses private
– Public health share of all public expenditures
– Administrative expense share
– Type of service
– Capital vs. recurrent
– Nominal per capita
– Real/Volume (health deflator)
– Real/Opportunity Cost (general price deflator)
•
NUMERAIRE CURRENCY--exchange rates/purchasing power
parities (GDP, health)
Health Expenditures in Jordan, 1998-2003
Year
1998
1999
2000
2001
2002
2003
Public expenditures
228
234
246
271
282
302
Private expenditures
221
244
291
315
365
425
Total expenditures
449
478
537
586
647
727
Public as % of total
51
49
46
46
44
42
Public expenditures
48
48
49
53
53
55
Private expenditures
47
50
58
61
69
78
Total expenditures
94
98
107
114
121
133
Public expenditures
68
67
69
74
75
78
Private expenditures
66
70
81
86
97
110
Total expenditures
133
138
150
160
171
187
Public expenditures
145
148
155
167
170
178
Private expenditures
141
155
183
195
221
250
Total expenditures
286
303
338
362
391
428
As % of GDP
7.9
8.1
8.7
8.9
9.6
10.1
As % of GNDI
6.7
6.8
7.1
7.4
7.7
..
Health expenditures, nominal (million JD)
Per capita expenditures, nominal (JD)
Per capita expenditures, nominal (US$)
Per capita expenditures (PPP$)
Total health expenditures
Source: Jordan Public Expenditure Review Health Sector , Health Sector Task Force, World Bank 2004
Higher GDP Means a Higher Share of
GDP is Devoted to Health
16.0%
Health Expenditure (% of GDP)
14.0%
Palestine
12.0%
Lebanon
Iran
Jordan
10.0%
8.0%
S. Arabia
UAE
Djibouti
Tunisia
6.0%
Bahrain
Yemen
4.0%
Kuwait
2.0%
Syria
0.0%
100
Egypt
Morocco
Algeria
1,000
Per Capita GDP, US$
Source: World Bank, WDI, 2003
Oman
10,000
Qatar
100,000
Evolution of Budgetary Expenditures on Health
Year
1998
1999
2000
2001
2002
2003
228
234
246
271
282
302
197
197
195
215
234
244
32
37
51
56
48
59
MOH Health Insurance Directorate
24
25
25
29
38
37
RMS Health Insurance Fund
8
12
18
24
9
19
228
226
232
258
271
279
JD
48
48
49
53
53
55
US dollars
68
67
69
74
75
78
International PPP dollars
145
148
155
167
170
178
48
46
46
50
51
51
As % of Central Government Budget (budget law)
10.9
11.5
12.0
12.3
12.3
11.9
As % of Consolidated Central Government Budget
10.9
11.5
11.6
12.2
12.0
11.1
As % of Consolidated Public Sector Budget
9.5
9.8
10.0
10.5
10.2
9.6
As % of Consolidated General Government Budget
9.0
9.3
9.5
10.0
9.6
9.1
As % of GDP
4.1
4.1
4.1
4.3
4.2
4.3
As % of GNDI
3.4
3.3
3.2
3.4
3.4
..
Public Health Expenditures, nominal
(Millions of JD)
Budget
Off-budget
Public Health expenditure, real
(millions of 1998 JD)
Per capita health expenditure, nominal
Per capita health expenditure, real (1998 JD)
Public health expenditures
Source: Jordan Public Expenditure Review Health Sector , Health Sector Task Force, World Bank 2004
Government Health Financing by Source of Funds
Year
1998
1999
2000
2001
2002
2003
MOH
135
137
144
154
170
182
RMS
57
65
70
77
67
77
36
32
33
39
45
43
228
234
246
271
282
302
MOH
135
133
142
153
165
168
RMS
57
63
66
74
64
71
36
31
31
37
43
40
228
227
239
264
273
279
MOH
59
58
58
57
60
60
RMS
25
28
29
29
24
25
Other public
16
14
13
14
16
14
Total
100
100
100
100
100
100
Nominal (million JD)
Other public
1
Total
Real (1998 million JD)
Other public
Total
1
(% of total)
Source: Jordan Public Expenditure Review Health Sector , Health Sector Task Force, World Bank 2004
Recurrent and Capital Expenditures on Health
(million JD)
Year
1998
1999
2000
2001
2002
2003
170
188
199
219
229
248
Wages, salaries and allowances 1
87
88
95
104
107
112
Operational expenses 2
80
96
98
108
103
123
..
..
29
33
27
34
4
4
6
8
184
134
58
46
48
51
53
54
Construction
28
30
30
33
32
28
Machinery and equipment
5
4
6
3
4
8
Maintenance and rehabilitation of buildings
2
4
4
3
3
3
75
80
81
81
81
82
Wages, salaries and allowances
38
38
38
38
38
37
Operational expenses
35
41
40
40
37
41
12
12
10
11
Recurrent
Pharmaceuticals
Transfers
3
Capital
Recurrent (% of total)
Pharmaceuticals
Transfers
2
2
2
3
6
4
Capital (% of total)
25
20
19
19
19
18
Construction 5
12
13
12
12
11
9
Machinery and equipment5
2
2
2
1
1
3
Maintenance and rehabilitation of buildings
1
1
1
1
1
1
Source: Jordan Public Expenditure Review Health Sector , Health Sector Task Force, World Bank 2004
Public Health Expenditures by Program
Year
1998
1999
2000
2001
2002
2003
Administrative and supportive services
6
5
6
6
7
8
Human resources development
3
3
3
3
4
4
Primary health care/medical centers and services
49
48
51
54
51
60
Secondary health care/hospitals
171
176
186
208
220
230
Total
228
234
246
271
282
302
5
6
6
7
Nominal (million JD)
Real (millions of 1998 JD)
Administrative and supportive services
6
5
Human resources development
3
3
3
3
4
4
Primary health care/medical centers and services
49
47
48
51
50
56
Secondary health care/hospitals
171
170.7
176
198
212
213
Total
228
226
232
259
271
279
Administrative and supportive services
2.4
2.3
2.3
2.3
2.3
2.5
Human resources development
1.4
1.3
1.3
1.3
1.4
1.4
Primary health care/medical centers and services
21.4
20.8
20.8
19.8
18.2
19.9
Secondary health care/hospitals
74.8
75.6
75.6
76.6
78.0
76.2
Total
100
100
100
100
100
100
(% of total)
Source: Jordan Public Expenditure Review Health Sector , Health Sector Task Force, World Bank 2004
Public Health Spending Varies Widely By Income Level
(Per Capita GDP vs. Public Health to GDP Ratio)
Croatia
Public health expenditures (% of GDP)
10.0
Czech Rep.
9.0
Sweden
8.0
7.0
Lithuania
Lesotho
Djibouti
6.0
5.0
Tanzania
4.0
Botswana
3.0
2.0
Qatar
1.0
Philippines
Bangladesh
0.0
100
India
1,000
Per capita GDP ($US)
Source: World Bank,WDI, 2002
Libya
10,000
Trinidad
100,000
Child Mortality Varies Widely for Given Income Levels
(Per capita GDP vs. Under-5 Mortality Ratio)
Sierra Leone
Under-5 Mortality Rate (per 1,000 live births)
350
300
Angola
250
200
Botswana
150
Eritrea
100
50
Qatar
Indonesia
0
Lithuania
10
100
1000
Per capita GDP, US$
Source: World Bank,WDI, 2002
10000
100000
UK
Child Mortality Varies Widely for Given Public Health Spending Levels
(Public Health to GDP Ratio vs. Under-5 Mortality Ratio)
Sierra Leone
Under-5 Mortality Rate (per 1,000 live births)
350
300
Angola
250
Eritrea
200
Botswana
150
100 Qatar
50
0
Indonesia
0
1
2
Lithuania
Source: World Bank,WDI, 2002
3
4
5
6
UK 7
Public health expenditures (% GDP)
8
9
10
Higher Public Spending on Health Does
Not Guarantee Better Access for the
Poor
Source: WDR 2004
Higher Public Spending on Health Does Not
Necessarily Mean Better Health Outcomes
* 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 2004
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 lowincome 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
Fundamentals of Health
Financing
Health Financing Functions
•
•
•
•
Revenue Collection
Pooling of Health Risks
Purchasing of Services
Provision of Services
Health Financing Objectives
• Raising ‘sufficient’, affordable and sustainable revenues
in an efficient and equitable manner
• Managing these revenues to equitably and efficiently
pool health risks among high and low risk individuals,
rich and poor, and over individuals’ life cycles
• Providing individuals with adequate financial protection
against catastrophic financial losses due to illness and
injury
• Assuring the purchase and provision of health services
in the most allocatively and technically efficient manner
Financing Reforms Need to Deal with Revenues, Risk
Pooling, Management and Payment
Revenue
Collection
Public
Taxes
Pooling
Resource Allocation
or Purchasing (RAP)
Government
Agency
Public Charges/
Resource Sales
Mandates
Grants
Social Insurance or
Sickness Funds
Public
Providers
Private Insurance or
Community-based
Organizations
Private
Providers
Private
Loans
Private
Insurance
Communities
Out-of-Pocket
Service
Provision
Employers
Individuals
And Households
Public Financing Sources
 Taxes
 Sales of natural resources
 User charges
 Mandates
 Grant assistance
 Borrowing
 Efficiency Gains
Private Financing Sources

Private insurance

Direct out-of-pocket purchase

Grant assistance

Borrowing

Charitable contributions
Issues in Taxation
 Economic efficiency
 Equity
 Administrative simplicity
 Revenue generation potential
 Flexibility
 Transparency
How Much Can Developing Countries Afford?
(Central Government Revenues and Tax Revenues as a % of GDP, circa
2001)
Total
From tax
revenues
East Asia & Pacific
Europe & Central Asia
Latin America & Caribbean
Middle East & North Africa
South Asia
Sub-Saharan Africa
15.7
25.5
21.6
27.0
18.0
21.2
15.5
22.3
17.7
18.5
11.3
16.7
High-income
Middle-income
Low-income
31.0
25.0
17.6
26.0
20.0
14.1
Region/income group
Note: Regional aggregates include low-income
(GNI per capita < $745) and middle-income ($745
> GNI per capita < $9,206) countries
Source: IMF, 2003
Future GDP Growth Will Be Modest
10
Real GDP Growth by Region
8
Percent
6
4
2
0
1991-2000
2001
2002
2003
2004
2005
2006-15
-2
Year
-4
EAP
SAR
LAC
ECA
SSA
MNA
Source: World Bank, Global Economic Prospects and the Developing Countries, 2004
Risk Pooling and Prepayment
• 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
• Risk pooling enables the averaging of health risks over all pool
members 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 income 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
– In a public system, pre-payment whether through social security
or general revenue contributions allows the separation of
payments from expected medical risks and thus enables
redistribution from high to low income individuals
What do We Mean by Risk Pooling?
Cross-subsidy from
low-risk to high-risk
Cross-subsidy from
rich to poor
(risk subsidy)
(equity subsidy)
Low
risk
High
risk
Poor
Health risk
Rich
Income
Cross subsidy from
productive to non-productive
part of the life cycle
Produ
ctive
Nonproduc
tive
Age
Risk Selection Can Destabilize Insurance
Markets
•
•
•
Adverse selection occurs
when sicker than average
individuals enroll in competing
public or private health
insurance plans
This can destabilize insurance
markets through premium
spirals if healthier individuals
disenroll
Insurers react by trying to
screen out such high risk
individuals by:
– requiring medical exams
– examining claims history
– having waiting periods
– excluding pre-existing
conditions from coverage
– refusing insurance coverage
•
These instabilities can be
offset by:
– regulation of insurers
– marketing insurance to
groups formed for other
purposes (e.g. employment)
– having a mandatory public
insurance program
Insurance Encourages Overuse of
Services
• This phenomenon known as moral hazard results
because of the tendency for insurance to increase
the probability of the occurrence of the event that is
being insured against
• It is present in both public and private insurance
• Insurance design features to mitigate moral hazard
include:
– cost sharing
– limits on benefits
– frequent renewability
– utilization management
Do Insurance Market Instabilities
Necessitate Public Financing?
 Public financing can:
– pool risks over the
entire population
– eliminate adverse
selection and
medical underwriting
problems
– still face cost
problems due to
moral hazard
 Private insurance can:
– segment health risks
by underwriting groups
– preclude economic
losses from coercive
taxes
– allow for greater
consumer choice
A Model of the Evolution of Health Care
Financing Systems
Low Income
Countries
Patient
Out-ofPocket
Social Insur
Gov’t Budget
Community
Financing
Middle Income
Countries
High Income
Countries
Priv. insur
Patient Outof-Pocket
Patient Outof-Pocket
National Health
Service Model
Social Insur
National
Health Insurance
Model
Gov’t Budget
Private
Insurance
Model
Source: Modified from A. Maeda
Some Experience
• There is no one ‘right’ model
• Need to tailor model used to individual country
circumstances
• Need minimal numbers of individuals for effective risk
pooling
• The larger the number of separate funds, the higher
the administrative costs and potential for
fragmentation
• Unless all funds employ the same provider payment
rules, both access for certain groups and efficiency
will be compromised
• Government can collect the revenues and set the
rules, but contract to private fiscal agents/insurers
(known as Third Party Administrators – TPAs) to
administer the program
The Financing Challenge
• System financing must be sustainable --meaning that future
economic growth generates sufficient levels of income for decent
living standards and external debt solvency
• LICs are largely concerned with financing essential services, while
MICs are more focused on also assuring financial protection and
universal coverage
• 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 domestic resources both future
recurrent costs directly financed by time-limited grants as well as
current and future recurrent costs generated by externally funded
investments
• Meeting virtually unlimited population demands will be impossible for
most countries. Services will be rationed
• Achieving MDG/MDG+ goals, improving equity, and targeting the
poor will require focused policies
• Evidence-based policy-making, effective management, and
monitoring and evaluation are necessary conditions for success
Provider Payment
Fundamental Issues
•
•
•
•
•
•
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, 2003
Flows of Funds to Medical Care
Providers
PUBLIC AND PRIVATE
‘INSURANCE’ PROGRAMS
PAYMENTS FOR SERVICES
DIRECT PROVIDER
REIMBURSEMENT
APPROACHES AND
CONTRACT ARRANGEMENTS
PROVIDERS
OF CARE
INDEMNITY
MODEL
METHOD, UNIT, AND LEVEL
OF PAYMENT HAVE INCENTIVES
FOR PROVIDERS THAT AFFECT:
PATIENTS
TYPE, NUMBER AND QUALITY
OF SERVICES PROVIDED
FLOW OF SERVICES
Incentives To Providers
Depend On How They Are Paid
•
•
Unit of payment:
– individual service
– per visit/encounter
– per day
– per admission
– per episode of illness
– all (or a defined set of services) for a provider for a fixed period of time (i.e.,
salary or global budget)
– all (or a defined set of) services for an individual for a fixed period of time (i.e. full
or partial capitation)
Level of payment
– providers costs
– providers charges
– administratively set by payor
– negotiated
– competitive bidding
Need To Monitor
• Costs
• Quality
• Access
• Impacts across different provider types
• Impacts across all public and private payors
including those paying out of pocket
Difficult to Control Spending Without a
Single Set of Payment Rules
DELIVERY
SYSTEM
PUBLIC FACILITIES
AND PHYSICIANS
PRIVATE FACILITIES
AND PHYSICIANS
BUDGET
FEE SCHEDULES
CHARGES
SOURCES OF
INSURANCE
COVERAGE
PUBLIC
PRIVATE
UNINSURED
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)
Indirect mechanisms
•
Employing payment incentives to encourage
treatment of patients in primary or ambulatory care
•
Introducing user charges and co-payments
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
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
Health Reform Issues
Some Generic Health Reform Priorities
Efficiency of
health system
• 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.
Delivery
• 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.
Financing
• Assuring access to affordable public and personal health services and provide financial protection 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.
Public health
• Better targeting of interventions on the poor and to cost-effective treatment and prevention of
communicable diseases (e.g., ARI, CDD, AIDS, malnutrition) as well as non-communicable diseases
and injuries.
• Implementing effective culturally sensitive reproductive health policies.
• Implementing effective environmental and occupational health policies.
How Much ‘Should’ Be Spent for a Basic
Package of Essential Health Services
• A few health conditions are responsible for a high
proportion of the world’s health deficit
• These conditions largely affect the poor
• Cost-effective health interventions to deal with these
conditions exist;
• CMH proposes universal coverage for programs of
essential interventions to be funded by public and donor
contributions
• The costs per capita would be on the order of $34 per
capita according to CMH
How Can the Financing Gap Be Filled?
• Improve equity and efficiency of current spending in
terms of focusing on cost-effective interventions
targeted to the poor provided through an efficient
health care delivery system
• Undertake appropriate investments in other health–
related sectors
• Improve domestic resource mobilization
• Try to re-allocate private spending for optimal public
purposes including appropriate user charges
• Obtain increased donor support and debt forgiveness
through the adoption of effective macroeconomic and
health sector strategies through PRSPs, MTEFs,
SWAPS, Global Funds, etc.
But Rapid Gains Are Possible
• Promote economic growth
• Application of known and emerging
interventions
• Changes in national policies, capacity
building, and increased financial support
• Strengthen health systems
• Initiate complementary actions across sectors
(education, water, energy, transport)
• Enhance donor mobilization and
harmonization
ODA is Rising But is Well Short of What is Needed. Donors Need to Raise
Their Post-Monterrey Commitments and Extend Them Beyond 2006
2003 US$ billions
Percent
120
0.35
0.32
ODA as % of donors' GNI(right axis)
100
0.30
0.30
0.25
0.25
80
0.20
T otal ODA (left axis)
60
0.15
40
0.10
T otal ODA to SSA (left axis)
20
0.05
0
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0.00
Prospects for ODA in 2006 and 2010 are based on DAC members’ post-Monterrey announced
commitments. Not all DAC members have made commitments beyond 2006.
Source: OECD DAC database.
ODA is the Main Source of External Finance for SSA, Twice as Large as
FDI and Nearly Four Times the as Large as Remittances
All Developing countries excluding S S A
SSA
9%
55%
42%
17%
25%
5%
32%
15%
Official flow s
FDI
Remittances
Other private
Total long-term flows of $41 billion in 2003
Official flow s
FDI
Remittances
Other private
Total long-term flows of $340 billion in 2003
Aid Effectiveness
• Aid has diminishing returns;
• There are limits to country absorptive capacity;
• Aid is fungible overall (can offset budget contributions) and among
sectors;
• Aid achieves better results in good policy environments;
• Aid requires ownership by countries (e.g., donor imposed
conditionalities rarely work);
• Aid is related to increased investments and growth;
• Debt repayments have a negative impact on economic growth;
• Aid has high transaction costs for countries;
• Aid makes governments accountable to donors as opposed to their
citizens
• Aid in the form of grants instead of loans reduce domestic resource
mobilization efforts
• Some macroeconomists argue that investments in infrastructure will
yield higher returns in terms of growth than investments in health
and education
Absorptive Capacity Defined
Macro
Macro National
Government
Fiscal
instruments/allocative
mechanisms
Service delivery/ local
government
Institutional
Debt
sustainability.
Monetary and fiscal
policy instruments.
Competitiveness, Dutch
disease.
Exchange rate
management.
Physical and human
Social/cultural/political
Administrative,
Stable national political
management, and planning institutions, power-sharing
skills, trained technicians, mechanisms, social stability.
sector specialists.
PEM (budget
Sector management skills. Cultural norms, weak institutions,
preparation/execution,
power sharing mechanisms
accounting, treasury,
audit, etc.)
Connectivity and
communications networks.
Administrative
capacity.
Legal framework.
Local government
institutions, private
sector capacity.
Road accessibility, water
control, geography. Local
government skills and
capacity.
Cultural norms, ethnic, caste,
class, relations.
Local power structures.
Constraints to Improving Access to Health Interventions
Constraints to Improving Access to Health Interventions
Level of Constraint
I. Community and
Household Level
Type of Constraint
Lack of demand for effective interventions
Amenability of Additional Funds to
Reduce Constraints
High
High
Barriers to use of effective interventions (physical, financial, social)
II. Health Services
Delivery Level
Shortage and distribution of appropriately qualified staff
High
Weak technical guidance, program management and supervision
High
Inadequate drugs and medical supplies
High
High
Lack of equipment and infrastructure, including poor accessibility of health services
III. Health Sector Policy
and Strategic
Management Level
Low
Weak and overly centralized systems for planning and management
Weak drug policies and supply system
Medium
Inadequate regulation of pharmaceutical and private sectors and improper industry
practices
Medium
Lack of intersectoral action and partnership for health between government and civil
society
Low
Low
Weak incentives to use inputs efficiently and respond to user needs and preferences
IV. Public Policies
Cutting Across Sectors
V. Contextual and
Environmental
Characteristics
Reliance on donor funding that reduces flexibility and ownership
Low
Donor practices that damage country policies
Low
Government bureaucracy (civil service rules and remuneration; centralized
management system; civil service reforms)
Low
Poor availability of communication and transport infrastructure
High
Governance and overall policy framework
Low
Corruption, weak government, weak rule of law and enforceability of contracts
Political instability and insecurity
Low priority attached to social sectors
Weak structures for public accountability
Lack of free press
Physical environment
Climatic and geographic predisposition to disease
Physical environment unfavorable to service delivery
Source: Olivera et al 2001
Low
Predictability and Longevity of ODA
Must Be Improved
Try managing this…
Donor Commitments as a percentage of Total
Health Expenditure
Percentage of Total Health Expenditure Financed
by External Sources
25
100
80
Mauritania
60
Tanzania
40
Mali
20
Eritrea
0
1997 1998 1999 2000 2001
20
Guinea
15
Benin
10
Burundi
5
Liberia
0
1997 1998 1999 2000 2001
Fiscal Space
• 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 domestically
or externally
– seignorage
– grants
Source: Heller, 2005
Fiscal Sustainability Definitions
• 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
What Will Donors Have to Do?
• Harmonize procedures (procurement, financial mgt,
monitoring & reporting) in order to improve impacts
and reduce donor and country transactions costs
• Provide increased and predictable long term
financing
• Finance recurrent costs
• Offer consistent policy advice
• Submit to common assessment of their own
performance
What Does This Mean for Countries?
•
•
•
•
•
•
•
•
Develop credible strategies and plans to foster economic growth, deal with
implementation bottlenecks, and reach MDGs as part of PRSPs, SWAPs,
MTEFs, and public expenditure programs
Improve governance including giving voice to communities, consumers and
openness to NGOs and private sector
Enhance absorptive capacity through decentralization, efficient targeting
mechanisms, and institutional reforms including having a clear fiduciary
architecture and open reporting of results
Improve equity and efficiency of resource mobilization and commit resources
Middle income countries need to make the commitment to develop and
implement effective health reform strategies relying on evidence-based policy,
best international practice, and MDG+ goals and indicators
Develop financing, management, and regulatory mechanisms for equitable and
effective pooling of insurable health risks as a necessary concomitant to MDG
and CMH intervention choices.
Integrating vertical programs into a well functioning health system to maximize
health-specific and cross-sectoral outcomes and reduce transactions costs
Monitor and evaluate results
A Shared Global Approach
• Build on existing funding modalities
• Use and further improve existing plans and
mechanisms at the country level
• Address inequities within countries
• Scale up cost-effective interventions
• Tackle critical implementation constraints
• Apply a multi-sectoral approach
• Focus on results
• Country orientation, but global action is also
needed