Transcript Financing of Health Systems: restrictions and opportunities

Financing of Health Systems:
restrictions and opportunities
International Conference on Innovations
in Health Financing
Mexico City, April 2004
Carlos Noriega
Financing of Health Systems:
restrictions and opportunities
1. Introduction
2. Objectives
3. Health expenditures: need and demand
4. Health financing:
a. Collection
b. Risk - Pooling
c. Contracting
5. Policy Options and Opportunities
Mexico faces critical public health challenges in the near term:
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Improving health status
Reducing health inequalities
Demographic transition
• Some of the challenges emerged as a consequence of
deficiencies in the national health system.
• Despite recent reforms, some issues remain to be
defined.
• How should the national health system be financed?
• Conceptual analysis and international experience
should bear on the policy response.
In designing a national health system the following issues
need to be addressed:
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How much financing is required?
From what sources?
What is the role of government?
Which services are to be included?
In strengthening an existing national health system the
questions are inverted:
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What can be done with available financing?
Is the structure of financing adequate?
Can the government do any better?
Should the basket of services be modified?
Financing of Health Systems:
restrictions and opportunities
1. Introduction
2. Objectives
3. Health expenditures: need and demand
4. Health financing:
a. Collection
b. Risk - Pooling
c. Contracting
5. Policy Options and Opportunities
Set guiding principles for financing
a national health system
Hypothesis
It is as important the amount of financing as the structure of
collection and the mechanism for allocating the resources
Two major premises
1. The financing scheme is, simultaneously, a major
instrument of economic and social policies.
2. Principles cannot ignore the current economic, social and
political environment
Financing of Health Systems:
restrictions and opportunities
1. Introduction
2. Objectives
3. Health expenditures: need and demand
4. Health financing:
a. Collection
b. Risk - Pooling
c. Contracting
5. Policy Options and Opportunities
How much to spend?
The gap between need and demand for health services may be
explained by:
• Legal and regulatory framework
• Budget restrictions
• Market failure
• Information costs and asymmetries
• Financial market costs
• Externalities
Health expenditures
•Form of investment in human capital
•Impact welfare and economic growth
Health expenditures should respond to health
considerations as well as to overall economic growth
and development goals
DALY´s
EVISA VS. HEALTH EXPENDITURE AS % OF GDP
78
68
EVISA
México
58
48
38
28
0
3
6
9
12
15
Health expenditure as % of GDP
EVISA VS. HEALTH EXPENDITURE PERCAPITA (US$)
78
68
EVISA
México
58
48
38
28
0
1
2
3
4
Health expenditure per capita (US$)
5
(X 1 00 0)
Life Expectancy
LIFE EXPECTANCY VS. HEALTH EXPENDITURE AS % OF GDP
Life expectancy
84
74
México
64
54
44
34
0
3
6
9
12
15
Health expenditure as % of GDP
LIFE EXPECTANCY VS. HEALTH EXPENDITURE PERCAPITA (US$)
Life expectancy
84
74
México
64
54
44
34
0
1
2
3
4
Health expenditure per capita (US$)
5
(X 1 00 0)
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México spends relatively little in health as compared to
other countries with similar income per capita in the
region
Daly´s in Mexico are relatively higher as compared to
other countries with similar levels of health expenditures
(% of GDP and $/pc)
At low levels of expenditure more spending contributes
to a higher health level
At higher levels of expenditure more spending
contributes marginally or even negatively to the health
level
México still can improve health levels by spending more
Developing countries need to confer a higher priority
to health expenditures to promote welfare and growth.
Financing of Health Systems:
restrictions and opportunities
1. Introduction
2. Objectives
3. Health expenditures: need and demand
4. Health financing:
a. Collection
b. Risk - Pooling
c. Contracting
5. Policy Options and Opportunities
I. Sources of financing
From the point of view of efficiency
Moral Hazard
Once insured, there are incentives to engage in a
more risky behaviour and to use in excess health
services
Adverse Selection
Asymmetric information may lead riskier
households/persons to seek affiliation
Rule of thumb: control population in order to charge
according to risk
From the point of view of equity
Individual
Society-Pooling
Financing
Out of pocket
General Revenue
Risk burden
Pay per event
Social Insurance
Inequitable
Equitable
Rule of thumb: favor pooling of risks and of financing
Dilemma: is there a conflict between efficiency and
equity?
DALY´s vs Out-of-pocket expenditures as % of total health expenditures
EVISA VS. OUT OF POC KET HEALTH EXPENDITURE AS % OF TOTAL HEALTH EXPENDITUR E
78
68
EVISA
México
58
48
38
28
0
20
40
60
80
1 00
Out of pocket health expenditure as % of total health expenditu re
component effect
21
GDPpc has a
positive impact on
DALY´s
11
1
-9
-1 9
-2 9
0
1
2
3
4
5
(X 1 00 00 )
GDP per capita
component effect
15
Out-of-pocket
expenditures have
a negative impact
on DALY´s
5
-5
-1 5
-2 5
0
20
40
60
80
1 00
Out of pocket health expenditure as % of total health expenditu re
Source: WHO, Sample of 191 countries, 2002
International evidence does not support the dilemma
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More equitable financing reinforce efficiency of health
systems
Equity goals may be pursued as part of the financing
scheme
Equity goals should be made transparent to ensure
they are effectively achieved
II. Federal-Local
Federal financing
Equity: Inter-regional transfers
Efficiency: More effective risk-pooling
Local financing
Alignment of incentives
Transparency and accountability
Closer links expenditure / collection
Challenges for local operation
Increase coverage
Autonomy for managing programs
Flexibility to adapt content of basic package of services
Responsibility in a decentralized financing scheme
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Local governments differ greatly in their contribution to
health financing of open population
BCS
Local financing for open population
(% of total public spending, 2002)
1600.00
60
50
Camp


800.00
400.00
0.00
4.00
40
%
Col
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Ags
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
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
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 Oax
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 Chis
  NL

BC

Gro
SLP
Tlax  Tabs



Jal

Mor
Mich  DF

Gto 
Pue
30
20
10
0
Ver
8.00
POBLACION ABIERTA
Mex

12.00
Ta
tr i ba s
to
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Ve ra
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Ch cru
ih z
ua
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Ta nal
m oa
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or
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Co o
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Ba Du a
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Ca g o
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1200.00
Di
s
GASTO PERCAPITA EN SALUD

Health programs for open population:
• Federal in nature,
• Operated by local governments
• Financed mostly by federal government
To improve efficiency incentives need to be realigned:
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Increase local financing
Provide operational autonomy to local governments
Financing of Health Systems:
restrictions and opportunities
1. Introduction
2. Objectives
3. Health expenditures: need and demand
4. Health financing:
a. Collection
b. Risk - pooling
c. Contracting
5. Policy Options and Opportunities
I. National health system
In terms of risk pooling, health systems may, in principle, be
classified as follows:
Universal
Coverage
Single pool
Multiple pools
Partial
Coverage
United Kingdom
Costa Rica
Switzerland
Mexico
In most countries legislation ensures universal coverage, yet
in practice health systems fall into one of these categories.
Advantages of a single pool of risks:
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Better compensation of risks
More transparency for pooling financial resources
Reduce administrative costs
Centralized contracting of inputs and services
Advantages of multiple pools of risk:
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Decentralization stimulates standardization
Efficiency gains of adecentralized scheme
Marginal compensation gains for very large populations
International experience seems to indicate that single systems
perform better.
Overall Health
System Position
WHO
Country
System
3
Norway
Single
6
France
Single
7
Canada
Single
8
Netherlands
Single
9
United Kingdom
Single
15
United States
Multiple
19
Spain
Multiple
33
Chile
Single
41
Colombia
Single
45
Costa Rica
SIngle
51
Mexico
Multiple
65
Venezuela
Multiple
Challenges to implement effective risk-pooling in the presence
of various national health institutions:
• Portability of rights
• Standardization of public contributions
• Management of financial reserves
• Standardization of services
• Standardization of quality of services
Recommendation:
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Migrate to a single health system with effective
financing and risk pooling,
In the short run implement a gradual process of
separation of financing/provision in existing
public health institutions
II. Public-Private
Two major issues need to be answered:
1. Nature of the service
The false debate
PUBLIC (?)
PRIVATE (?)
Compulsory affiliation
Voluntary affiliation
Non-profitable
Profitable
Centralized
De-centralized
Comprehensive coverage
Partial coverage
Regulated
Non-regulated
Risk-pooling
Health-services provision
GOAL
INSTRUMENT
ACTION
Long term perspective
Compulsory affiliation
Creation of operative and
actuarial reserves
Universal coverage
Public contribution
(subsidies for the poorest
and worst risks)
Regulation for “bad risks”
(pre-existencias)
Efficiency and Quality of
health services
Competition in the
provision of services
Cost containment
Competition
Hard budget restriction
• International experience shows a variety of solutions
• Services not necessarily have to be provided by the public sector.
Ultimate criterion: allow private participation on efficiency grounds
making use of available instruments
2. Co-existence of providers: substitute vs. complement
Role
Condition
Mechanism
Substitute
Large group
Capitated reversal of
contributions
Complement
Nature of risk not
prioritary for public
health
None
Basic Package
Basic care
Complementary
Package
Public
Secondary care
Tertiary care
Private
This outcome enhances efficiency in the system and allows for
public resources to be focused where they cannot be
substituted by the private sector.
Financing of Health Systems:
restrictions and opportunities
1. Introduction
2. Objectives
3. Health expenditures: need and demand
4. Health financing:
a. Collection
b. Risk - Pooling
c. Contracting
5. Policy Options and Opportunities
Basic services provided
Classical Universalism: Provide and finance everything for everybody
New Universalism: If services are to be provided for all, then not all
services can be provided.
Defined basket of basic services
Gains in efficiency:
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Costs: standardization allows for economies of scale
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Certainty on rights of affiliates
Simplification of processes: planning, training, monitoring,
supervision
Sharpening the scope of public responsibilities
Gains in equity:
Affiliates receive similar benefits (avoids undue transfers)
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Increase coverage
Constraints:
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Budget Restriction
Extend coverage
Recommendations:
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Reach a consensus on public health priorities
Establish cost-effectiveness criteria to define a basket of
basic services
Coordinate among existing public health institutions to
transit to that basket of basic services
Financing of Health Systems:
restrictions and opportunities
1. Introduction
2. Objectives
3. Health expenditures: need and demand
4. Health financing:
a. Collection
b. Risk - Pooling
c. Contracting
5. Policy Options and Opportunities
Policy Options and Opportunities
Funding:
Increase total funding to health (2-3% of GDP in 5-10 years)
Increase public financing (budget and tax reform)
Increase and uniform contributions by local governments
Channel out-of-pocket resources to pre-paid schemes
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Pooling:
Conform a national pool (contract with capitated payments)
Voluntary affiliation to complementary private services
Separation of financing/provision of health services
Allow private participation in complementary services
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Contracting:
Move towards a basket of basic services
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Consensus on public health priorities
and health financing
Collection Riks-Pooling
Efficiency
Equity
Contracting
Universal Coverage
Goal
Instrument
Actions
Funding
Increase total resources by 23% of GDP in 5-10 years
Federal Government raises
contributions and explicit
subsidies
Tax and budget reform
Local governments increase
contributions and uniform them
across regions
Tax and budget reform
Channel out-of-pocket
resources into a pre-paid
scheme
Transform current assistance
programs into insurance
programs
Seguro popular de salud, Seguro
de salud de familia, voluntary
affiliation (IMSS, ISSSTE)
Establishment of a single
national pool
Pool contributions and
subsidies
Coordinate (merge) existing
national and local social security
institutions (IMSS, ISSSTE,
ISSSTESON, ISSSTELEON, etc.)
Split funding and provisioning
Contract through capitated
payments
Internal reforms of existing
national and local social security
institutions
Allow private participation for
complementary services
Legal and regulatory reforms
Pooling
Contracting
Define a basic package of
services
Legal and regulatory reforms
Define services based on costeffectiveness criteria
Financing of Health Systems:
restrictions and opportunities
International Conference on Innovations
in Health Financing
Mexico City, April 2004
Carlos Noriega