Transcript Health Reform Challenges:

Health Reform Experiences Future Challenges in the
European Region
Armin Fidler
The World Bank
Open Health Institute Presentation
and Discussion at the Summer School,
Moscow, July 2004
Objective of Presentation and Discussion:
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Outline what happened to health systems
in the OECD over the last decade
Illustrate the choices and tensions which
arise from the organization of health
systems
Highlight fiscal affordability and questions
of long-term sustainability
Provide an outlook on some of the future
challenges for health systems, such as
ageing (example of Austria).
Discuss the relevance of these OECD
experiences for Russia in the long term.
Gross National Income Per Capita (PPP)
12,000
Central Europe
10,000
8,000
6,000
4,000
Baltic States
Western CIS
Bulgaria and Romania
Other SouthEastern Europe
Central Asia
Caucasus
2,000
0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Total health expenditure as % of GDP
EU-15: 8.9 (2001)
Central, South East Europe & Baltics: 5.8 (2001)
<= 12
<= 10
<= 8
<= 6
<= 4
<= 2
No data
Impact of Early Reforms in the Last Decade
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Slowly improving health status but low user
satisfaction
Separation of funding from supply, Social
Insurance
High growth rates of (mostly private) providers
and increase in providers revenue
Devolution of ownership structure of hospitals
From budget to fee-for-Service to budget caps
Funding fragmentation creates considerable
administrative costs (>3%)
Comparatively low health care wages curtail
even higher growth of expenditures
Public Health collapse
Which Values? Evidence versus Ideology
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Social solidarity
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Focus on fairness
and equity
Explicit crosssubsidy
Social protection
Universal Access,
not related to income
Role of state usually
important
State capture?
Most prevalent in
OECD
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Individual responsibility
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Focus on efficiency
Little cross-subsidy
Limited Access
Stratification by income
Individual risk rating
Limited risk pooling
Consumer protection?
US Model and attempts
in FSU
Sources and Management of Health
System Revenues
Public
Revenue Source
Taxes
Public Charges
Sales of Natural
Resources
Management
Providers
Government
Agency
Social Insurance /
Sickness Funds/Obras
Public
Mandates
Private
Grants
Private Organizations /
Insurers
Borrowing
Employers
Charity
Out-of Pocket
Private
Insurance
Individuals
Private
Expenditure Reduction Versus Fiscal Sustainability
 Expenditure = short-term, emergency measure
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Fiscal sustainability = measures, known to
persist, compatible with political + economic
incentives
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Reduced services
Improved operational efficiency
Institutional measures (restructuring) that don’t rely
on political discretion (e.g., on amount of state
subsidy to loss-makers)
Have built-in incentives – for instance, to modulate
future excessive demand for, or supply of, services
(e.g., co-payments)
Values/consensus matter for political
sustainability (and incentives)
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Medium-term consensus framework to match
medium-term fiscal framework
Growth Rates of Public Expenditure on
Health Care and Total Public Expenditure
25
20
15
10
5
0
BE
DK
DE
EL
ES
FR
IE
IT
LU
NL
AT
PT
FI
SE
-5
average annual increase in public expenditure on health care, 1999-2002*
average annual increase in total government expenditure, 1999-2002*
UK
EU-15
Dynamic Issues
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How low can public health expenditures go?
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How can contingent liabilities be contained?
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Values matter here – how much should individuals
pool their resources and risk (through budget), or
assume individual responsibility?
For example, government guarantees of commercial
debt, if not properly provisioned for, can de-rail
expenditures in future.
How can the revenue base be maintained?
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High payroll tax rates, in an integrated labor market,
can lower employment growth
 Through shifting economic activity from one
country to another
 Through driving employment to untaxed
informal economy
Evaluating Fiscal Effect of Reforms:
A Simple FrameworkLow
Predictability
High CostEfficiency
Low CostEfficiency
High
Predictability
0.55
Income inequality, 1994 - 2001
(Gini coefficients)
0.50
0.45
Georgia
Moldova
Russia
0.40
Estonia
Serbia and Montenegro
Kyrgyzstan
0.35
Azerbaijan
Romania
Poland
0.30
0.25
0.20
Hungary
Accounting of Health Production
• Physical
environment
• Life style
Utilization of health
services
(personal &
collective)
• Other socio-economic factors
Modification of
health status
Health
needs
Population Health Status
•mortality
• morbidity and QoL
•Perceived
health status
•Impairment, disability,
handicap
•Multi-dimensional
health status
•Disease-specific
morbidity
Resources
Input to health
services
•Manpower
• Health facilities
• Intermediate products
•Medical knowledge &
technology
Cost = Price x
Volume
• Earnings
• Fees
• Capital
Investment
•Training/education
• Investment into
medical facilities
• Medical R & D
Expenditure on health by
establishments of providers
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
& ultimate
financing)
Structural Problems
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Long-term fiscal sustainability threatened at
already high levels of expenditure and debts
Consumer demand will continue to rise
New technologies as cost drivers
Excess capacity/distribution of resources
Over- consumption
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Drugs (highest in OECD at 25%), sick leave
Ageing (disability and social cases in acute
care)
Inefficiencies at the continuity of care-interface
Cost-efficiency at Microeconomic Levels
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Demand Side
 Cost sharing
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Austria: 70/30%
Public/Private
(20%=OOPP)
Supply Side
 Purchaser-Provider
Split
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Issue = Payment
systems
Limits on coverage
of statutory package
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Create competitive
supplementary
insurance market
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Public agency (NICE in
UK; ANDEM in France)
Provider Competition
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DRG, Capitation, etc.
HTA
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Selective Contracting
Payment systems
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Gate keeping GPs
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Good attempts in CZR
Management
Decentralization
 HR policies
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Challenges: Financial Sustainability
of Health Systems
 Major cost pressures
 new
medical technologies, incl. drugs
 ageing society
 pressure to increase salaries of health care
personnel (in particular in new EU countries)
 people’s expectations rise (EU)
 need to replace and maintain infrastructure
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Focus: Eastern Europe
 public
sector bears most of financial risk (92%
of health care expenditure is public)
 excessive and expensive hospital capacity
 uncommonly high utilization of health services
Emerging Evidence on What May Work (1)
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Balance between public and private finance
co-payments for publicly paid services
 privately paid services – cross-subsidy
 some risks can be shifted to private risk pools
 equity should be over-riding concern
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Provide financial incentives for efficiency and
quality
pooling funds
 active purchasing
 performance based funding of health care
providers
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Strengthen Primary Health Care
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gate keeping
Emerging Evidence on What May Work (2)
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Contain drug costs
no single solution, all available instruments used
 broad reference pricing, regulating wholesaleretail margins, substitution for generics,
prescription guidelines and monitoring,
feedback to physicians, drug budget holding for
group GPs
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Proactive policies to optimize hospital capacity
Management and governance reforms of health
care providers
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Decentralisation; autonomy; privatization
Other policies to improve quality and access
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evidence based medicine
The Need for Cross - Subsidization
$
Average lifetime
healthcare costs
for a person
Need for
subsidy
A
Capacity to
contribute for
a person on
average
Age
Pooling of Revenues... Equalizes Inequities
Cross-subsidy from
low-risk to highrisk
Low
risk
High
risk
Health risk
Cross-subsidy from
rich to poor
Poor
Rich
Income
Cross subsidy from
productive to nonproductive part of
the life cycle
Productive
Nonproduc
tive
Age
Determinants of Austrian Health Care
Expenditure (IHS Study)
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Demand Factors
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Increasing share of people 65+ increases health
expenditure noticeably.
Higher number of deaths increases health expenditure
slightly.
Increasing life expectancy of the elderly is reducing
health expenditure (compression of morbidity).
Supply and Policy Factors
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Increase in the number of radiologists (proxy for
technology) increases health expenditure somewhat
(supplier induced demand).
Rise in acute-care beds leads to rising health care
expenditure.
High level of health expenditure leads to lower
growth rates of health expenditure.
In Austria, there is one youth for each
person older than 65 now...
100%
14%
16%
25%
80%
60%
65+
62%
68%
40%
61%
20%
24%
17%
14%
1970
2000
2030
0%
...but in 2030, there will be two
elderly for each youth.
15-65
<15
Health Expenditures Last Year of Life
USA: 20-30% (Scitovsky, Capron
1986)
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UK: 29% of hospital costs
(Seshamani, Gray 2003)
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A: 10-18% of public hospital costs
(Riedel, Hofmarcher 2002)
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Austrian Model: „Resistant policy“
leads to higher health GDP share
Forecast of health care expenditure in percent of GDP, 2000 to 2020
14,0
neutral
12,0
progressive policy
10,0
resistant policy
8,0
6,0
4,0
2,0
0,0
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
Austrian Model: Supply and Demand
Factors and Expenditure Growth
Scenario „neutral“, growth rates in percent
Long-Term Care Funding/Coverage
Country
Service
Funding
A
Nursing Home
Personal Home care
General Taxation Universal
D
Nursing Home
Personal Home care
Contributions
IRL
Nursing Home
Personal Home care
General Taxation Means-tested
L
Nursing Home
Personal Home care
General Taxation Universal
Contributions
NL
Nursing Home
Personal Home care
Contributions
E
Nursing Home
Personal Home care
General Taxation Means-tested
S
Nursing Home
Personal Home care
General Taxation Universal
UK
Nursing Home
Personal Home care
General Taxation Means-tested
Coverage
Universal
Universal
In Summary and for Discussion:
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In emerging market economies and in OECD
health expenditures grow faster than GDP,
resulting in fiscal pressures
Fiscal pressures stimulate a debate about how to
finance sustainably the health sector, including
the role of the State versus the citizen.
Values, history and community expectations
matter in this debate
Dual task of functioning health system:
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Focus on externalities for society: public health;
Social protection for individuals against catastrophic
events
Reform can never stop – as exogenous factors
emerge and societal demands and values change