Transcript Health Financing Revisited

Overview of Health
Financing
Senior Policy Seminar
Bangkok, Thailand
February 28 – March 1, 2007
George Schieber
Human Development Network
Key Messages
1. Underlying demographics, epidemiology, and economic
situations determine underlying ‘needs’ and ability to
meet those needs
2. Reforms must be tailored to individual country
circumstances – no magic bullets or one size fits all
solutions exist
3. Policies should be based on the economic principles of
equity, efficiency, affordability and sustainability which
underlie the revenue collection, risk pooling, and
purchasing functions of health financing
4. Financing reforms must be accommodated within a
country’s current and future ‘fiscal space’
Outline of Presentation
• Underlying demographic and
epidemiological trends
• Health spending patterns
• Health financing functions and models
• Aid effectiveness and absorptive capacity
• Implementation Issues
• Challenges and lessons
Demographic and
Epidemiological Trends
Demographics and Epidemiology
• Population, size, structure, epidemiology, and growth
determines:
– current and future underlying health ‘needs’ which have
important implications for financing, public and curative health
programs, and delivery systems
– potential size of the labor force
– size of ‘dependent’ populations (e.g., aged and youth) to be
supported by working populations
• The interdependence of demography/EPI factors with
geography, industry and labor force structure, general
economic management and industrial policy, and overall
political economy factors has important implications for
the types of public and private tax and non-tax
mechanisms that can be employed to finance the overall
government budget and the health sector.
Causes of Death Vary Greatly by Country
Income Level
EAP MDG Attainment
East Asia and Pacific
24 countries
by number of countries
100%
50%
T
T
P
T
0%
T
T
T
T
T
Achieved
1
On track
2
Off track
3
Seriously off track
4
No data
5
-50%
T - Thailand
-100%
Poverty
Malnutrition
Completion
Source: World Bank, DEC, 2006
Gender
Child
mortality
Births
Water
Sanitation
Population Projections, Thailand
2025
2005
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
Males
6
Females
Females
4
2
0
Percent
2
4
6
Demographics
Thailand
Demographic Indicators
Population (thousands)
2005
2025
62,732
68,850
Population change since 2005 (%)
Urban (%)
9.8%
32
Population by age groups
# Children under 5 years
4,522
4,247
%
7.2%
6.2%
# of Youth under 15 years
13,847
12,781
%
22.1%
18.6%
# Women of childbearing age
15,793
13,821
%
25.2%
20.1%
# Labor force participation
35,725
%
80.2%
# Elderly above 60 years
6,456
13,678
%
10.3%
19.9%
Demographics
Thailand
Demographic Indicators
2000-2005
2020-2025
0.7
0.3
Life expectancy at birth (years)
69.4
73.7
Crude birth rate
15.1
12.6
Crude death rate
7.8
9.3
Total fertility rate
1.3
1.5
24.7
13.4
29.5
16.3
Population growth rate (%)
Infant mortality rate (deaths per 1,000 live
births)
Under-five mortality rate (deaths per 1,000 live
births)
Maternal mortality ratio (maternal deaths per
100,000 live births) (Year 2000 estimate)
44
Dependency Ratios in EAP Will Not Present
a Major Challenge in the Future
Solomon Islands
Cambodia
Lao PDR
Vanuat u
Papua New Guinea
Tonga
Philippines
M icronesia, Fed. St s.
2020
Kiribat i
Samoa
2000
Viet nam
M alaysia
M ongolia
M yanmar
Fiji
Indonesia
China
Korea, Dem. Rep.
Thailand
0
20
40
Dependency Ratio: The ratio of the economically dependent part of the population to the
productive part; arbitrarily defined as the ratio of the elderly (ages 65 and older) plus the young
(under age 15) to the population in the working ages (ages 15-64).
60
80
100
Source: World Bank
NCDs and Injuries Account for
Seventy Percent of Thailand’s BOD
Burden of Disease (DALYs) in the Thailand - 2002
Injuries
13%
Non-communicable
diseases
57%
Communicable,
maternal, and
perinatal
30%
Source: World Health Organization
Future Aging Will Affect Total Health
Expenditures in Certain EAP Countries
Source: World Bank
Health Spending
Patterns
Health Expenditures, 2004
(population-weighted)
Under-5
Regions & Income Levels
Per capita GDP
($US)
Per capita
health
expenditures
($US)
Per capita
health
expenditures
($USPPP)
East Asia & Pacific
Eastern Europe & Central Asia
Latin America & the Caribbean
Middle East & North Africa
South Asia
Sub-Saharan Africa
1,457
3,801
3,777
1,833
611
732
64
249
271
103
27
45
239
552
608
270
131
119
4.4
6.6
7.3
5.6
4.6
6.3
39.8
67.6
51.0
48.8
18.8
42.1
51.0
26.5
36.3
46.3
76.1
46.3
0.5
1.1
0.7
1.1
1.6
6.8
70
69
72
69
63
46
37
34
31
55
92
168
Low-income countries
Lower middle-income countries
Upper middle-income countries
High-income countries
World
533
1,681
5,193
33,929
6,523
24
91
339
3,812
658
105
298
689
3,606
771
4.7
5.4
6.7
11.2
10.1
23.9
47.3
57.6
60.3
59.0
70.0
42.9
30.3
14.9
17.9
5.5
0.7
0.7
0.0
0.2
59
70
69
79
67
122
42
28
7
79
Total health
Public (% total
expenditures (%
health
GDP)
expenditures)
mortality rate
Out-of-pocket External (% total
Life Expectancy (per 1,000 live
(% total health
health
births)
expenditures) expenditures) at birth (years)
Source: World Development Indicators, IMF Government Finance Statistics
Notes: Per capita indicators weighted by population, ratio indicators by ratio denominator
Revenue and GDP data reflect averages between 2000 and 2004.
Out-of-pocket health spending in Sub-Saharan Africa excludes South Africa, which, if included, changes the estimate to 26 percent of total health spending.
Key Expenditure Facts
•
Public spending accounts for less than 25% percent of total health spending
in LICs, some 50% in MICs but over 60% in HICs:
→
•
Public spending on health is some $10 per capita in LICs, over $100 in MICs,
and $2000 in HICs:
→
•
Policy-makers need to focus on improving formal risk pooling mechanisms in order to
provide financial protection and protect the poor.
Social health insurance accounts for some 2% of all health spending in
LICs, 20% in MICs, and 30% in HICs:
→
•
Policy-makers in LICs will be challenged to provide an essential package of basic
services.
Out-of-pocket payments account for 70 percent of health spending in LICs,
40 percent in MICs and 15 percent in HICs:
→
•
Policy-makers need to focus on private spending as well as public.
Policy-makers in LICs need to carefully evaluate whether they have the enabling
conditions in place for SHI to succeed.
While external sources on average account for only some 6 percent of total
health spending in LICs, in over 20 African countries, it accounts for more
than 30 percent:
→
Policy-makers in LICs and MICs need to keep focused on internal sources of finance,
as these sources account for the bulk of their health revenues.
Comparison of Health Insurance Schemes in Thailand, 2002
Characteristic
CSBMS
SSS
UCS
1.1 Beneficiaries
Fringe benefit
Compulsory
Social welfare
1.2 Model
Public reimbursement
Public contracted
Public contracted
1.3 Covered population
Government employees and their dependants
Private sector
People not covered by
Employee>1
CSBMS or SSS
1 Scheme Nature
2 Benefit Package
2.1 Ambulatory services
Public only
Registered public and private
Registered public and private
2.2 Inpatient services
Public
Registered public and private
Registered public and private
2.3 Choice of provider
Free of choice
Registration required
Registration required
2.4 Conditions included
Comprehensive package
Non work related illness
Comprehensive package
2.5 Conditions excluded
No
15 conditions
12 conditions
2.6 Maternity benefits
Yes
Yes
Yes
2.7 Annual physical check -ups
Yes
No
Yes
2.8 Prevention and health promotion
Yes
Health education, immunization
Yes
2.9 Services not covered
Special nurse
Private bed and special nurse
Private bed and special nurse
3.1 Source of funds
General tax
Tripartite, 1% of payroll each
General tax
3.2 Financing body
Ministry of Finance
Social Security Office
National Health Security Office
3.3 Payment mechanism
fee-for-service(>2000 baht)
Capitation( 1500 baht)
Capitation for OP;DRG for IP(1,202baht)
3.4 Co-payment
Yes: at public and private hospital
Maternity, emergency
Yes, 30 baht per visit
, IP private clinic only for life-threatening care
if beyond ceiling
2106 baht
519 baht
3 Financing
3.5 Per capita tax subsidy
Source: Bureau of Policy and Strategy, 2005, Wibulpolprasert, 2007.
1275 baht
Thailand NHA
THAILAND : National Expenditure on Health
(Bhat)
A. RATIOS AND LEVELS
1998
1999
2000
2001
2002
2003
2004
I. Expenditure ratios
3.7
3.5
3.4
3.3
3.4
3.3
3.2
General government expenditure on health (GGHE) %
THE
54.8
54.8
56.1
56.3
60.2
61.6
62.1
Private expenditure on health (PvtHE) % THE
45.2
45.2
43.9
43.7
39.8
38.4
37.9
GGHE % General government expenditure
11.4
10.5
10.8
10.3
11.8
13.6
12.5
Social security expenditure on health % GGHE
29.0
29.5
30.2
34.4
30.8
32.0
31.5
Net out-of-pocket spending on health (OOPs) % PvtHE
78.2
76.4
76.8
75.7
76.3
74.8
74.0
Private prepaid plans expenditure on health % PvtHE
11.6
12.6
12.8
13.6
13.4
14.6
15.0
0.0
0.0
0.0
0.1
0.2
0.3
n/a
THE per capita at exchange rate (US$)
69
71
68
62
68
76
83
GGHE per capita at exchange rate (US$)
38
39
38
35
41
47
52
THE per capita at international dollar rate
220
217
223
226
242
260
274
GGHE per capita at international dollar rate
121
119
125
127
146
160
170
Total expenditure on health (THE) % GDP
Externally funded expenditure on health % THE
II. Per capita levels
Many Countries Spend Less than Expected on
Government Health Programs
8
Domestically Financed Government Health Spending as % of GDP
Croatia
7
Czech Republic
6
Tunisia
Colombia
Panama
5
Lesotho
Belarus
Solomon IslandsTurkmenistan
Bolivia
4
2
1
0
Estonia
Jordan
Namibia
El Salvador
Turkey
Samoa
Lebanon
Armenia
Algeria Tonga
Kyrgyz Republic
Paraguay
Papua New Guinea
Peru
Zambia
Moldova Zimbabwe Jamaica
Bulgaria
The
BurkinaGambia,
Faso
Guatemala
China
Djibouti
Ghana
Egypt,
Arab Rep.
Mali
Guinea
Philippines
Rwanda
Vanuatu
Morocco
Vietnam
EritreaTogo
Ecuador
Chad
Sudan
Pakistan
Cote
Cameroon
D'Ivoire
Haiti
Georgia
Burundi
Malawi
Indonesia
Nigeria
Uganda
0
2,000
Costa Rica
Dominica
Honduras
Mongolia
3
Slovak Republic
Hungary
Uruguay
Macedonia, Fyr
4,000
Fi
Botswana
Latvia
Brazil
6,000
Chile
St. Kitts And Nevis
Mexico
Oman
Mauritius
Malaysia
8,000
Per capita income PPP
PPPPPP PPP
Saudi Arabia
Poland
South Africa
Thailand
Gabon
Dominican Republic
Argentina
10,000
12,000
14,000
Life Expectancy and GDP
Life Expectancy vs GDP per capita
90
Life Expectancy
80
Thailand
70
60
50
40
30
10
100
1,000
GDP per capita
10,000
100,000
Infant Mortality and GDP
Infant Mortality Rate (per 1,000 live
births)
Infant Mortality vs GDP per capita
200
180
160
140
120
100
80
60
40
Thailand
20
0
100
1000
10000
GDP per capita
100000
Child Mortality and GDP
Under-5 Mortality (per 1,000 live
births)
Child Mortality vs GDP per capita
300
250
200
150
100
50
Thailand
0
100
1,000
10,000
GDP per capita
100,000
Total Health Spending (% of GDP)
and GDP
Total Health Expenditure
(percentage of GDP)
Total Health Expenditure vs GDP per capita
18
16
14
12
10
8
6
4
2
0
Thailand
10
100
1000
GDP per capita
10000
100000
Public Health Spending (as % of
GDP) and GDP
Public Health Expenditure
(percentage of GDP)
Public Health Expenditure vs GDP per capita
16
14
12
10
8
6
4
2
0
Thailand
10
100
1000
GDP per capita
10000
100000
Public Share of Total Health
Spending and GDP
Government Health Expenditure
(percentage of THE)
Public Health Expenditure vs GDP per capita
120
100
Thailand
80
60
40
20
0
10
100
1000
GDP per capita
10000
100000
Private Share of Total Health Spending
and GDP
Private Health
Expenditure (percentage
of THE)
Private Health Expenditure vs GDP per capita
100
80
60
40
20
Thailand
0
10
100
1000
GDP per capita
10000
100000
Total Health Spending Per Capita and
GDP
Total Health Expenditure
per capita (exchange rate)
Total Health Expenditure per capita vs GDP per capita
10000
1000
100
Thailand
10
10
100
1000
GDP per capita
10000
100000
Infant Mortality and Public Health
Spending Per Capita ($PPP)
Infant Mortality Rate
(per 1,000 live births)
Infant Mortality vs Public Health Spending
200
150
100
50
Thailand
0
1
10
100
1,000
Public Health Spending per capita (PPP)
10,000
Infant Mortality and Total Health
Spending Per Capita ($PPP)
Infant Mortality Rate
(per 1,000 live births)
Infant Mortality vs Total Health Spending
250
200
150
100
50
Thailand
0
10
100
1000
Total Health Spending per capita (PPP)
10000
Health Financing
Functions and Models
Thailand Financing System
Source: Tangcharoensathein and Pitayarangsarit, 2003, Wibulpolprasert, 2007.
Health Financing Functions and
Objectives
Functions
Revenue
Collection
Objectives
raise sufficient and sustainable
revenues in an efficient and
equitable manner to provide
individuals with both a basic
package of essential services and
financial protection against
unpredictable catastrophic financial
losses caused by illness and injury
Pooling
manage these revenues to equitably
and efficiently pool health risks
Purchasing
assure the purchase of health
services in an allocatively and
technically efficient manner
Financing Needs to Deal with Revenue Collection,
Risk Pooling, Management and Payment
Revenue
Collection
Public
Taxes
Public Charges/
Resource Sales
Pooling
Resource Allocation
or Purchasing (RAP)
Government
Agency
Social Insurance or
Sickness Funds
Public
Providers
Private Insurance or
Community-based
Organizations
Private
Providers
Mandates
Grants
Loans
Private
Service
Provision
Private
Insurance
Communities
Out-of-Pocket
Employers
Individuals
And Households
Basic Packages: An Effort at Setting Priorities
Modern and traditional medicine offer a very large and growing number of
health interventions. But with the limited availability of public resources, not
all can be publicly afforded.
Include?
Include?
Select a limited set of
health interventions,
that you can finance
with available
resources, and that
maximizes health
status.
Include?
Include?
Maximum
possible
health status
Source: Bitran
Set of interventions
Include?
Why Consider Basic Packages?
• Growing sense that main health problems
remain only partly tackled.
• Current resources spent “otherwise” would
result in greater health gains.
• In social or private health insurance, benefits
package must be made explicit: people pay a
known premium in exchange for a known
coverage, or set of benefits. Enrollees want to
know their rights explicitly.
• Under social insurance, resource allocation is
accomplished through basic benefit design
Source: Bitran
44
Characteristics of Most BBPs
• Positive lists of services
• Negative lists (e.g., services not covered –
cosmetic surgery)
• Certain catastrophic conditions (e.g., renal
disease, cancer)
• All services covered (but generally
rationed by supply constraints)
• Separate packages for different groups
Inclusion and Exclusion List of Expensive
Healthcare Interventions of the UCS
•
Inclusive List
–
–
–
–
–
–
–
–
–
–
–
–
Chemotherapy for specific cancers
Radiation therapy for specific cancers
Open heart surgery including prosthetic
cardiac valve replacement
Percutaneous Transluminal Coronary
Angioplasty (PTCA)
Coronary Artery Bypass Grating
(CABG)
Stent for treatment of Atherosclerotic
Vessels
Prosthetic hip replacement therapy
Prosthetic shoulder replacement
therapy
Neurosurgery, e.g. craniotomy
Antifungal treatments for cryptococcal
meningitis
Antiretroviral treatment for patients
Living with HIV/AIDS
Source: NHSO 2004, Wibulpolprasert, 2007.
•
Exclusive List
–
–
–
–
–
Renal replacement for patients with
end stage renal disease
Organ transplantation
Cosmetic surgery
Infertility treatment
The Difficulties in Establishing
Prioritizing Rules for Basic Package
• SHI and National Health Services are
established to achieve several goals: health
gains, redistribution, protection against financial
risks and public satisfaction
• What are the proper trade-offs between the
different goals?
• Who should decide these trade-offs?
Source: Modified from Hsiao, 2005
Nine Criteria for Establishing a BBP
for Public Spending on Health Care
Catastrophic Cost
Poverty
Externalities
Vertical
Equity
Cost Effectiveness
Public Goods
Horizontal
Equity
Rule of Rescue
Public Demands
Key:
Efficiency criteria
Equity or Ethical Criteria
Political Criterion
Source: P. Musgrove
Decision Tree for Public Resource
Allocation
Yes
Cost-Effective?
No
Public
Good?
No
Significant
Externalities
Yes
No
Yes
No
Adequate
Private Demand?
Yes
Contributory
Insurance
Appropriate?
No
Yes
Catastrophic
Cost
No
Yes
Beneficiaries
Poor?
Public?
Do Not
Subsidize
Finance
Publicly
Private?
Source: P. Musgrove
Yes
No
(Regulated)
Private Market
Criteria for Establishing a BBP
•
•
•
•
•
•
•
•
•
Equity considerations – focus on poor who face the highest disease burden
Burden of disease – DALYs, DALEs, QALYs, YLL, etc., (i.e., 6 major
communicable diseases -- AIDS, TB, malaria, measles, diarrheaol disease
and acute respiratory infections -- account for over 60% of global
communicable disease burden and 80% of the mortality gap between rich
and poor countries)
Cost-effectiveness -- need to maximize health impacts given limited
resources
Public goods and externalities – individual decisions will result in under
consumption
Risk pooling -- improve overall welfare through better predictability of large
unforeseen expenditures
Existing capacity to deliver – resource constraints and time to fix them
Linkages across services at different levels of the system
Budget rigidities – may need to change budget processes
Transaction costs – administrative costs incurred in changing service mix
and/or delivering BBP
Method and Measurements to Prioritize
Resource Allocation for A Single Goal
• Method: Cost-effectiveness; CB
• Measurements
Health gains—QALY, DALY, IMR
Risk Protection—% impoverished,
(Wagstaff)
Public satisfaction—public surveys
Cost-Effective Method
• The use of cost-effectiveness or similar techniques,
although this is only a departing point that needs
social validation.
• The problem of cost-effectiveness, as it has been
used: limited knowledge of marginal costs and
benefits, particularly non-pecuniary B&C, may lead
one to underestimate the cost-effectiveness ratio
Cost Of Demand Promotion And Compliance
Must Be Included Here
Cost-effectiveness
Ratio
Cost Of Provision
=
----------------------------------------------Effectiveness Of Provision
Source: Modified from Hsiao, 2005
Measuring the Burden of Disease: Combining
Premature Mortality and Disability: The DALY
Method
•
•
•
•
1993 onward: World Bank and World Health Organization promoted use of
DALY method to set priorities in health with cost-effectiveness analysis
(CEA) (where DALYs were a measure of effectiveness) and thus to
construct basic packages.
There were objections within and outside the World Bank in 1993 when the
Bank’s WDR 1993 “Investing in Health” was published.
Objections based on 2 grounds:
– DALY method violates individual utility maximization; and
– Providing catastrophic coverage is an important policy objective which
improves individual utility, but inconsistent with cost-effectiveness
prioritization (which uses DALYs or any other measure of effectiveness).
Example, coverage for some expensive hospital care of low costeffectiveness may be desired by individuals.
Still DALYs concept is useful to measure the BOD and is therefore
explained next. Also, many countries are currently basing their priorities on
cost effectiveness and DALYs.
Source: Hsiao, 2005
The Wish: Basic Packages May Help Improve
Allocative Efficiency
• A second objective in defining a basic package:
improving allocative efficiency
– This requires that explicit criteria be adopted to
improve allocations.
– The process of prioritizing public health spending thus
becomes more transparent.
– Of course, none of this will work, or make any public
policy sense, unless there is demand for newly
offered services
Source: Hsiao 2005
Economic Evaluation of Health Technology in
the United Kingdom: The Case of the National
Institute of Clinical Excellence (NICE)
• Rationale for economic evaluation of health
technologies and drugs in the UK
– Concerns over the high cost of new
technologies and drugs
– Local variations in the availability of certain
treatments becomes a political issue
The Role of the National Institute for
Clinical Excellence (NICE) in the UK
• Created in 1999 to appraise the clinical and cost
effectiveness of health technologies as referred by the
Dept of Health
• Provides a transparent decision-making process
regarding what the National Health Service (NHS)
should fund in order to maximize health gains (as
measured in QALYs) in the UK
• NHS organizations must take NICE’s recommendations
into account when planning and delivering care, but
NICE has no power to enforce
• Similar systems exist in Australia, New Zealand, and
Canada, but NICE is unique by assessing a broad range
of interventions: pharmaceuticals, medical devices,
diagnostic techniques, surgical procedures, other
therapeutic technologies, and health promotion activities
• It also has a formal appeals process
How NICE Makes Decisions
• The two most important factors are:
1) incremental cost effectiveness ratio (ICER)
– Measures how much more money is needed to achieve one
more QALY for a given intervention compared to the relevant
alternative
2) Cost effectiveness threshold
– When the government has a fixed budget, this
represents:
• Value of willingness to pay for one more QALY
• Opportunity cost (QALYs lost) when another government
treatment is displaced
• Shadow price of the budget constraint
• Decision making requires both ICERs and the
specification of a threshold
The Value of the Cost Effectiveness
Threshold
• The true value of the threshold is unknown and
‘searching’ for it (which is what happens in reality) is a
second-best solution
• In practice, NICE tends to use £ 20,000 – £30,000 as the
range of acceptable thresholds
• Examples of some interventions that have been accepted
Intervention
Condition
ICER
Imatinib
Chronic myeloid
leukemia
£26,000
Riluzole
Motor neuron disease
£39,000 (most expensive
ever approved)
Implementation Bottlenecks Must Be
Addressed
•
•
•
•
•
Human resource constraints
Constraints to physical accessibility
Supply and logistical problems
Technical and organization capacity constraints
MBB (Marginal Budgeting for Bottlenecks), a
resource allocation tool, can be used to estimate
the costs of removing system-wide impediments
to service delivery
Source: A Soucat , W.V. Lerberghe, F. Diop , S. N. Nguyen and R. Knippenberg, Marginal Budgeting
For Bottlenecks: A New Costing Tool and Resource Allocation Practice to Buy Health Results,
World Bank, November 2002.
Summary of Arguments in Favor of
Basic Benefit Packages
• In sum, it is hoped that the adoption of
basic packages can lead to:
– Greater public accountability
– Higher allocative efficiency
– Better productive efficiency
– More equitable access to services
Hsiao, 2005
What is Done With Services Not
Included in the Package?
• Continue to finance some out of public budgets,
but with heavy rationing
• Discontinue public financing: only those with
ability to pay can obtain such services
• Services not covered in public package can be
included in optional privately-financed packages
Source: Hsiao 2005
What´s the Cost of The Package?
• Estimation of unit costs
• Supply and demand response and affect
on unit costs
• Marginal bottleneck for budgeting (MBB)
approach
• Demand forecasts
How to Finance the Package(s)?
• All general revenue
• Some general revenue subsidies, other taxes,
and some private financing by those with ability
to pay
• Is financing of the benefits package compulsory
for all?
• Is private financing used to enhance available
funding, promote efficient use of services and/or
cross-subsidize the poor with contributions
made by the non-poor?
Summary of Policy Challenges for
Designing Benefit Packages
1.
2.
How to prioritize? What criteria should be used?
How to reach consensus (with medical profession, with
members of society, with interest groups)?
3. What is done with services not included in the package?
4. How to go through the transition process?
5. How to provide the package?
6. What’s the cost of the package?
7. What will be the health impact of the package?
8. How to finance the basic package?
9. Who is the beneficiary of public subsidies?
10. How are public subsidies channeled?
1. Revenue Collection
Domestic Resource Mobilization is
Much More Limited in MICs and LICs
Regions
Social Security
Total Revenue Tax Revenue Taxes as % of
as % of GDP as % of GDP
GDP
Early 2000s
Americas
Sub-Saharan Africa
Central Europe, Baltics, Russia & Other
Former Soviet Republics
Middle East & North Africa
Asia & Pacific
Small Islands (Pop. < 1 million)
20.0
19.7
16.3
15.9
2.3
0.3
26.7
26.2
16.6
32.0
23.4
17.1
13.2
24.5
8.1
0.8
0.5
2.8
Low-income countries
Low middle-income countries
Upper middle-income countries
High income Countries
17.7
21.4
26.9
31.9
14.5
16.3
21.9
26.5
0.7
1.4
4.3
7.2
Thailand Central Government Domestic Resource
Mobilization
(revenues as a percentage of GDP)
0.2
0.18
0.16
0.14
0.12
Total
Tax
0.1
0.08
0.06
0.04
0.02
0
2001
2002
2003
Source: IMF, 2006. 2005 and 2006 are projections.
2004
2005
2006
Some Countries Could Make Greater Domestic
Resource Mobilization Efforts
Central govn't revenues (%GDP)
60
50
Fiji
40
Thailand
30
Malaysia
Bhutan
20
Indonesia
10
Nepal
Pakistan
China
India
Philippines
0
10
100
1000
10000
100000
GDP per capita ($US)
Source: IMF
Thailand: Composition of Tax Revenues:
2006
(as percent of GDP)
20
18
16
Total revenues
Non tax
Tax
Income and profits
Consumption
International Trade
Other
14
12
10
8
6
4
2
0
Source: IMF 2005
Tax System Criteria
• Revenue adequacy and stability: the tax should
raise a significant amount of revenue, be
relatively stable, and be likely to grow over time
• Efficiency: minimizes economic distortions
• Equity: should be fair in terms of the treatment
of different income groups
• Ease of collection: should be simple to
administer
• Political acceptability: transparency, broad
diffusion, and clarity about the uses of the tax
promote acceptability
1a. Fiscal Space and
Macroeconomic Management
Essential Elements of the Fiscal Policy
Framework
• Overall fiscal balance—reflects its link to the
government’s net financing requirements and to the
external current account, but ultimately need to examine
other key fiscal indicators
• Ensure that fiscal policy well coordinated with monetary
policy to ensure limited inflation
– This imposes limits on magnitude of seignorage
creation;
– Also imposes limits on how much credit to be
provided to the government
– Avoid crowding out of the private sector
– Concerns for fiscal sustainability/solvency
• Particularly if limited size of domestic financial
markets, need to be cautious about expansion in
size of domestic debt
Source: Heller
Debt Sustainability Considerations
•
•
•
Debt sustainability framework one tool to assess whether government has
capacity to finance external debt—concessional or nonconcessional
– Also, inclusion of domestic debt in order to judge the sustainability of a
government’s overall debt sustainability framework.
– Leads to focus on primary balance—to judge whether debt to GDP
ratio will remain stable
Judging magnitude of implicit debt; contingent liabilities
– Government can seek to encourage private sector involvement in
creation of public infrastructure or delivery of public services through
public-private partnerships—but does this lead to contingent liabilities
that enhances the government’s vulnerability to a fiscally unsustainable
position
– Social Insurance obligations: e.g., government civil service pension
schemes
Judging overall deficit exclusive of grants: in a world of scaled up aid
flows—even grants—need to be aware of how dependent government
expenditure programs are to potential shortfalls in external assistance
– Implications of sizeable increase in grants as proportion of total expenditures
Source: Heller
Other Fiscal Indicators
• Focusing on current balance (golden rule)
• Determine extent of government savings
• Safeguard investment at times of fiscal consolidation
• Take account of the fact that investments create assets (which may
match debt liabilities on the balance sheet)
• But biases against investments in human capital
• For resource-rich countries, take account of fact that oil
is nonrenewable and consumption reduces government
wealth; Use nonoil-fiscal deficit: judging the extent of
reliance on oil resources; capacity to finance domestic
outlays in the absence of oil receipts
Source: Heller
Dutch Disease Considerations
• With aid scaling up, an additional consideration:
– Concern that higher aid inflows will be spent but not
absorbed; experience observed in mature stabilizers
– In this case, one observes that reserves are built up
to avoid nominal exchange rate appreciation, but that
higher aid-financed spending comes at expense of
efforts to sterilize implied increase in the domestic
money supply:
• What gets crowded out? Other nonaided government
sectors? Private sector?
– Is it possible that too much aid—coupled with
remittances—might through its exchange rate effects
jeopardize long-run growth
Source: Heller
Future GDP Growth by Region
10
Real GDP Growth by Region
8
Percent
6
4
2
0
1990-2000
-2
2001
EAP
2002
SAR
Year
2003
LAC
Source: World Bank, Global Economic Prospects and the Developing Countries, 2005, 2006
2004
ECA
2005
SSA
2006-15
MNA
Real GDP Growth in the Thailand
(%)
7
6
5
4
Real GDP
3
2
1
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: IMF 2005. 2005-10 figures are projections based on medium term scenario
Source: World Bank
Vietnam
Vanuatu
Tonga
Thailand
Sri Lanka
Solomon Islands
Samoa
Philippines
Papua New Guinea
Pakistan
Nepal
Mongolia
Maldives
Malaysia
Lao PDR
Indonesia
India
Fiji
China
Cambodia
Bhutan
Bangladesh
Some Countries Face Difficult External Debt
Repayment Problems
(External Debt as % GNI, 2003)
160%
140%
120%
100%
80%
60%
40%
20%
0%
Thailand Debt to GDP Ratios:
2001-2010
0.6
0.5
0.4
External
Public Sector
0.3
0.2
0.1
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: IMF 2005. Figures for 2005-2010 are projections.
Fiscal Space* is Needed
*Budgetary room that allows a government to provide resources for a desired
purpose without any prejudice to the sustainability of its financial position
Aid
Expenditure
Ef f iciency
Revenue
Borrow ing
• Estimates of revenue effort may suggest that an additional several percent of GDP could be raised through domestic revenue measures.
•
•
•
•
Additional grants from donors are unlikely.
Spending efficiency can be improved.
Macroeconomic and debt management may suggest that new borrowing over the period should be limited.
Seignorage (govt prints money which it loans to itself) is yet another, but generally limited, mechanism for creating fiscal space.
Source: World Bank, PREM:, 2007.
The Fiscal Space Debate
• Ultimately a cataloguing of potential public resources for
spending on meritorious public goods without
jeopardizing macroeconomic stability
–
–
–
–
–
–
–
Higher tax burden-rates or improved administration
Cutting other expenditures
Enhance effectiveness of spending
Seignorage creation
Domestic borrowing
External grants
External loans
• Considerations on debt sustainability, crowding out, and
macro stability remain limiting factors
Source: Heller
Critical Concerns in Fiscal Space -1
• Decisions today MATTER: One must consider
the future spending implications of current
spending programs
– Some expenditure programs, once started, effectively
preempt future fiscal space
• May be ripple effects of policies to enhance
absorptive capacity (e.g., financial incentives for
scarce professionals). Supplementing wages in
one sector can distort the wage scale in relation
to other public sector employees. This could
effectively absorb some fiscal space.
Source: Heller
Critical Concerns in Fiscal Space -2
• Be cautious about confusing the issue of
fiscal space with other constraints to a
scaling up of programs
– Governance limits
– Absorptive capacity limits Corruption
– Concern about vulnerability associated with
excessive dependency on external donors
Source: Heller
Critical Concerns in Fiscal Space -3
• What are implications of new debt cancellation initiative
for the fiscal space debate?
– Will create some fiscal space—freeing up of resources
previously used for debt service (interest and amortization)—but
note that much of the debt being canceled was at concessional
rates already and one would need to estimate whether any offset
in terms of reduced flow of grants/concessional loans from
IMF/Bank
– In principle, enhances capacity of countries to engage in new
borrowing—Risks and Vulnerabilities here
– But, does not mean that the productivity of the expenditure
financed by loans is unimportant—now more than ever need to
avoid the problems of the past in terms of unproductive wasteful
borrowing
Source: Heller
Critical Concerns in Fiscal Space - 4
– Particular caution about borrowing,
particularly on nonconcessional terms, for
recurrent type expenditure programs with
benefits only realizable over the long-term
– There will be many temptations from creditors
to provide new loans
– Emphasizes need for prudential debt
management/expenditure assessment
procedures
Source: Heller
Fiscal Sustainability is Critical
• 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.
Implementation and Capacity Issues Substantially
Influence Fiscal Policy Approaches
•
•
This has not been a talk about public expenditure management, revenue
administration, or capacity for fiscal policy management. But these factors
largely determine the quality of the fiscal policy that can be implemented in
a given country and the relevance of the various types of fiscal “rules” that
govern fiscal policy.
Most governments rely on some form of fiscal rules to government fiscal
policy management to some extent:
–
–
–
–
–
–
Cash rationing
Limiting access to government bank credit
Limiting the overall budget deficit share in GDP or the primary deficit
Golden rules
Observance of debt thresholds (Maastricht)
Focusing on fiscal sustainability
• Taking account of implicit liabilities; contingent liabilities; government guarantees
•
But the capacity of fiscal administration will largely determine how
sophisticated are the fiscal rules that can be used and the quality of
fiscal policy
Source: Heller
2. Risk Pooling
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
Insurance Can Be Complex
•
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
3. Purchasing
Efficient Purchasing is Essential
•
•
•
•
•
•
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
Public Spending Efficiency Could be
Improved
(Log difference between actual and predicted by GDP per capita x100)
Under-5 mortalty rate 2000
150
100
Lao PDR
Papua New Guinea
50
Thailand
0
Pakistan
Cambodia
Indonesia
India
Philippines
-50
Malaysia
Nepal
Bangladesh
China
-100
Vietnam
-150
-150
-100
-50
Sri Lanka
0
50
100
150
Per capita public spending on health 1990s average
(Log difference betw een actual and predicted by GDP per capita x100)
* 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
4. Major Health Financing
Models
Major Health Financing Models
• National Health Service -- systems financed through general
revenues, covering whole population, care provided through public
providers (General revenues dominate financing in some 106 of
191 countries)
• Social Health Insurance -- systems with publicly mandated coverage
for designated groups, financed through payroll contributions, semiautonomous administration, care provided through own, public, or
private facilities (Over 60 countries have established SHI systems)
• Community-Based Health Insurance -- not-for-profit prepayment
plans for health care, financed through private voluntary
contributions, with community control and voluntary membership,
care generally provided through NGO or private facilities
• Voluntary Health insurance -- financed through private voluntary
contributions to for- and non-profit insurance organizations, care
provided in private and public facilities
• User Fees – charges to individuals for publicly provided services
Evolution of Health 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
Social
Health Insurance
Model
Gov’t Budget
Private
Insurance
Model
Source: Modified from A. Maeda
Major Health Financing Models
Model
National Health
Service
Revenue
Source
Groups
Covered
Pooling
Organization
Care
Provision
General
revenues
Entire
population
Central
government
Public providers
Social Health
Insurance
Payroll taxes
Specific
groups
Semiautonomous
organizations
Own, public, or
private facilities
Communitybased Health
Insurance
Private
voluntary
contributions
Contributing
members
Non-profit plans NGOs or private
facilities
Voluntary Health Private
Insurance
voluntary
contributions
Contributing
members
For- and nonprofit insurance
organizations
Private and
public facilities
None
Public and
private facilities
(public facilities)
Out-of-Pocket
Individual
Payments
payments to
(including public providers
user fees)
Major Health Financing Models
Model
National Health
Service
Revenue
Source
Groups
Covered
Pooling
Organization
Care
Provision
General
revenues
Entire
population
Central
government
Public
providers
Social Health
Insurance
Payroll taxes
Specific groups
Semiautonomous
organizations
Own, public, or
private facilities
Communitybased Health
Insurance
Private voluntary
contributions
Contributing
members
Non-profit plans
NGOs or private
facilities
Voluntary Health Private voluntary Contributing
contributions
members
Insurance
For- and nonprofit insurance
organizations
Private and
public facilities
Individual
Out-of-Pocket
payments to
Payments
(including public providers
user fees)
None
Public and
private facilities
(public facilities)
What is a NHS?
Systems financed through general revenues, covering
whole population, care provided through public providers
Three main features:
1.
Funding comes primarily from general revenues.
•
2.
Provide medical coverage to the whole population.
•
3.
Taxes, other public revenues from sales of natural resources,
sales of government assets, public tolls, borrowing and grant
assistance, earmarked taxes or funds from local authorities.
Health care coverage is considered an attribute of citizenship.
Usually deliver health care through a network of public
providers.
•
•
•
MoH heads a large network of public providers organized as a
national health service.
Facilities are owned by the government, and health personnel are
public employees.
However, some countries reimburse or contract with private
providers.
NHS Systems
Systems financed through general revenues, covering whole
population, care provided through public providers
Strengths
– Pools risks for whole
population
– Relies on many different
revenue sources
– Single centralized
governance system has
the potential for
administrative efficiency
and cost control
Weaknesses
– Unstable funding due to
nuances of annual budget
process
– Often disproportionately
benefits the rich
– Potentially inefficient due to
lack of incentives and
effective public sector
management
Major Health Financing Models
Model
National Health
Service
Revenue
Source
General
revenues
Social Health
Insurance
Payroll taxes
Communitybased Health
Insurance
Private voluntary
contributions
Groups
Covered
Entire population
Specific
groups
Pooling
Organization
Central
government
Semiautonomous
organizations
Care
Provision
Public providers
Own, public,
or private
facilities
Contributing
members
Non-profit plans
NGOs or private
facilities
Voluntary Health Private voluntary Contributing
contributions
members
Insurance
For- and nonprofit insurance
organizations
Private and
public facilities
Individual
Out-of-Pocket
payments to
Payments
(including public providers
user fees)
None
Public and
private facilities
(public facilities)
What is Social Health Insurance?
Systems with publicly mandated coverage for designated groups,
financed through payroll contributions, semi-autonomous
administration, care provided through own, public, or private facilities
Most common features and principles:
1. Membership is publicly mandated for a designated
population.
– Occurs through an incremental process.
– From existing employer-based insurance schemes to
compulsory schemes for specific employment groups to
SHI.
2. Direct link between the payment of contributions to
finance the system and the receipt of medical care
benefits.
– Only contributors have the right to access specific items of
care.
– “There is a public commitment to take and give under
prescribed conditions stipulated by laws and regulations.”
(Ron, Abel-Smith, and Tamburi 1990).
What is Social Health Insurance? (2)
3. Social solidarity is essential.
– Implies a high level of cross-subsidization across
the system, between rich and poor, low-risk and
high-risk people, and individuals and families
4. Management of social health insurance
involves some degree of autonomy from the
government, often through quasiindependent organizations in charge of the
system and in principle the organization has
to maintain its own financial solvency.
Social Health Insurance
Systems with publicly mandated coverage for designated groups,
financed through payroll contributions, semi-autonomous
administration, care provided through own, public, or private facilities
Strengths
•
•
•
•
•
•
•
Additional health revenue source
As a ‘benefit’ tax, there may be
more ‘willingness to pay’
Removes financing from annual
general government appropriations
process
Generally provides covered
population with access to a broad
package of services
Often has strong support from
population
Can effectively redistribute between
high and low risk and high and low
income groups in the covered
population
Often serves as the basis for the
expansion to universal coverage
Weaknesses
•
•
•
•
•
•
•
Poor are often excluded unless subsidized
by government
Payroll contributions can reduce
competitiveness and lead to higher
unemployment
Can be complex and expensive to
manage, which is particularly problematic
for LICs and some MICs
Governance and accountability can be
problematic
Can lead to cost escalation unless
effective contracting mechanisms are in
place
Often provides poor coverage for
preventive services and chronic conditions
Often needs to be subsidized from general
revenues
Major Planning Issues (1)
•
•
•
•
•
Covered population/eligibility
Enrollment/premium collection
Benefit package
Costing/financing
Macro organization
Public, Semi-public, Private non-profit,
for-profit
Monopoly or competition
• Payment/contracting systems
Source: Hsiao, 2005
Non-Formal Sector Groups Pose a Serious Challenge on
Universality, Equity, and Financing Grounds
Income
High
Employment
Status
Employed or Retired in Formal Sector
- Government
- Private
Employed in Informal
Sector
Self-Employed
Farmers
Unemployed
Retired
Source: Hsiao, 2005
Middle
Low
Poor
Source: Hsaio
Source: Hsaio
Source: Hsaio
Major Planning Issues (2)
• Administrative systems
– Eligibility card and enrollment
– Premium collection and accounting
– Claim card
– Monitoring quality and cost
– Management information
Source: Hsiao, 2005
Administration
• Costs of premium collection and
targeting
• Transparency of its operations and
performance
• Accountability to regulators and
enrollees
• Compliance with law when operated
by private insurers
Source: Hsiao, 2005
The Governance of Social Health
Insurance Arrangements
– Stewardship or policy/regulatory
– Oversight
– Institutional
Source: World Bank
SHI Governance Indicator (1)
Stewardship: Who, how and through which regulation are the following
defined:
• Coverage:
• Benefit package
• Consumer protection: risk selection, renewability clauses, transferability of
rights, complaints and sanctions.
• Financing: Contribution rate, co-payments, subsidies
• Provision: Provider selection, provider payment mechanism, tariff, provider
accreditation and registration,
• Prudential: Entry requirements, exit mechanisms, sanctions and appeals,
reserves, investment of reserves, external and internal audit requirements.
Oversight: Who is responsible and what is the capacity for enforcing the
above
Source: World Bank
SHI Governance Indicator (2)
Institutional: What is the Board composition, how
defined, how selected, how often rotated and what
are the institutional arrangements for the following:
•
•
•
•
•
•
•
•
Oversight body
Board of Directors
Chief Executive/President/Director General
Internal Auditing Unit
External Audit
Medical Comptroller
Management Information System
Operational Manual
Source: World Bank
Principles of SHI Governance
Governance of SHI arrangements must follow the following
principles:
•
•
•
•
•
Transparency and Rule of Law: Regulatory rules are clear, known to all
stakeholders, create an even playing field and limit discretionary actions.
Consistency: Predictability of regulation and actions stemming from the
regulation (regulations are enforced across time and do not change with
every change of government).
Accountability and responsiveness: Holding decisions makers
accountable and controlling corruption.
Inclusiveness, participation and consensus oriented. Rules and
regulations are generated openly and with participation of all stakeholders,
generating appropriate consensus. The implementation of the rules also
allow for appropriate appeals protecting the rights of all stakeholders.
Efficiency and effectiveness. This means that the governance
arrangements to be established must be enforceable (effective) at a
reasonable cost (not impose a heavy burden on the regulated).
Source: World Bank
Five Key Structural Decisions
• Single unified fund or multiple funds?
• Separate risk pooling for different population groups?
• Benefit package: one tier of several tiers?
• Agency to manage SHI: Government (MOH, MOLSS,
new agency) or non-profit private organizations?
• Assure and improve health services delivery
– Will SHI deliver health services directly?
– Will SHI act as an active prudent purchaser or simply reimburse?
• Competition: among insurance plans? Among providers?
• Payment
Source: Hsiao, 2005
Determinants of SHI Costs
• Services included in benefit package
• Coinsurance, deductible, copayment and
maximum caps
• Expected demand for covered services (by
age, sex, income, and region)
• Payment methods and level
• Expected supply of services
• Administrative costs and contingency Rx
Source: Hsiao, 2005
Reality Test
• Is the contribution rate acceptable to the public and different
organized interest groups such as business federation and labor
unions?
• Can the low-income workers “afford” the contribution rate?
• How much subsidy is required for the poor and near poor?
• How will this subsidy be financed – general revenue contributions,
new earmarked taxes, investment earnings, drawing down reserves,
and/or cross subsidization from contributions of other enrollees?
• What are the economic impacts?
Source: Modified from Hsiao, 2005
Enabling Conditions for
Social Health Insurance
• A growing economy and level of income able to absorb
new contributions
• A large payroll contribution base and, thus a small informal
sector
• Concentrated beneficiary population and increasing
urbanization
• A competitive economy able to absorb increased effective
wages arising from increased contributions
• Administrative capacity to manage rather complex
insurance funds and issues such as management of
reserves, cost containment, contracting and others
• Supervisory capacity to overcome some of the market
failures such as moral hazard and risk selection as well as
other important matters such as governance and
sustainability
• Political consensus and will
There is a Long Road to Universality
100%
80%
Thailand
60%
Colombia
40%
Philippines
Kenya
Ghana
20%
0%
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Source: Hsiao, 2005
Major Health Financing Models
Model
Revenue
Source
Groups
Covered
Pooling
Organization
Care
Provision
General
revenues
Entire population
Central
government
Public providers
Social Health
Insurance
Payroll taxes
Specific groups
Semiautonomous
organizations
Own, public, or
private facilities
Communitybased Health
Insurance
Private
voluntary
contributions
National Health
Service
Contributing
members
Non-profit
plans
NGOs or
private
facilities
Voluntary Health Private voluntary Contributing
contributions
members
Insurance
For- and nonprofit insurance
organizations
Private and
public facilities
Individual
Out-of-Pocket
payments to
Payments
(including public providers
user fees)
None
Public and
private facilities
(public facilities)
What is CBHI?
Not-for-profit prepayment plans for health care, with
community control and voluntary membership, care
generally provided through NGO or private facilities
Three common features:
1. Affiliation is based on community membership, and
the community is strongly involved in managing the
system.
–
Linked by geographic proximity, same profession, religion,
ethnicity, or any “other kind of affiliation that facilitates their
cooperation for financial protection” (Jakab and Krishnan
2004).
2. Beneficiaries are excluded from other kinds of
health coverage.
3. Members share a set of social values.
Community-Based Health Insurance
Not-for-profit prepayment plans for health care, with
community control and voluntary membership, care
generally provided through NGO or private facilities
Strengths
•
•
•
•
•
•
•
Community-run and not-for-profit
Membership is voluntary
Promotes pre-payment
Plays a role in mobilizing additional
resources, providing access and financial
protection in LICs
Risk sharing is usually from the well to
the sick
If premiums are based on income, there
can also be risk sharing from the better
off to the poor
CBHI can be a helpful complement but
is not a substitute for NHS or SHI
systems
Weaknesses
•
•
•
•
•
•
Heterogeneous in terms of populations
covered, regulation, and benefits
provided
Providing access and financial
protection are limited due to the small
size of most schemes
The financial sustainability of most
schemes is questionable
CBHI schemes generally do not reach
the very poor
Their impacts on care delivery are quite
limited
Should be encouraged only where more
comprehensive health financing
arrangements cannot be implemented
on a large scale
Major Health Financing Models
Model
Revenue
Source
Groups
Covered
Pooling
Organization
Care
Provision
General
revenues
Entire population
Central
government
Public providers
Social Health
Insurance
Payroll taxes
Specific groups
Semiautonomous
organizations
Own, public, or
private facilities
Communitybased Health
Insurance
Private voluntary
contributions
Contributing
members
Non-profit plans
NGOs or private
facilities
Voluntary Health
Insurance
Private
voluntary
contributions
National Health
Service
Individual
Out-of-Pocket
payments to
Payments
(including public providers
user fees)
Contributing
members
For- and nonprofit
insurance
organizations
None
Private and
public
facilities
Public and
private facilities
(public facilities)
What is Voluntary Health Insurance?
Financed through private voluntary contributions to for- and nonprofit insurance organizations, care provided in private and public
facilities
• Voluntary health insurance is defined as any health
insurance that is paid for by voluntary contributions.
• In reality, most private health insurance markets are
voluntary.
– Important to identify whether the voluntary scheme is a primary
or additional source of health care funding.
• Primary functions (OECD 2004):
– the main source of health coverage for a population or
subpopulation (primary)
– coverage of the same services or benefits as the public system
(duplicate) (although the providers and timely access to, quality,
and amenities of the services may vary)
– coverage of cost sharing under the public system
(complementary)
– coverage of services uncovered by the public system
(supplementary)
Voluntary Health Insurance
Financed through private voluntary contributions to for- and
non-profit insurance organizations, care provided in private
and public facilities
Weaknesses
Strengths
•
•
•
As a prepayment and risk pooling
mechanism is generally preferable
to out of pocket expenditure
May increase financial protection
and access to health services for
those able to pay
When an “active purchasing”
function is present it may also
encourage better quality and costefficiency of health care providers
•
•
•
•
•
Associated with high administrative
costs
Not effective in reducing cost
pressures on public health financing
systems
May be inequitable without public
intervention either to subsidize
premiums or regulate insurance
content and price
Has the potential to divert
resources and support from
mandated health financing
mechanisms
Applicability in LICs and MICs
requires well developed financial
markets and strong regulatory
capacity
Major Health Financing Models
Model
Revenue
Source
Groups
Covered
Pooling
Organization
Care
Provision
General
revenues
Entire population
Central
government
Public providers
Social Health
Insurance
Payroll taxes
Specific groups
Semiautonomous
organizations
Own, public, or
private facilities
Communitybased Health
Insurance
Private voluntary
contributions
Contributing
members
Non-profit plans
NGOs or private
facilities
Voluntary Health Private voluntary Contributing
contributions
members
Insurance
For- and nonprofit insurance
organizations
Private and
public facilities
National Health
Service
Out-of-Pocket
Payments
(including public
user fees)
Individual
payments to
providers
N/A
None
Public and
private
facilities
(public
facilities)
User Fees are Only a Small Share of
Total Consumer Payments
Fees for publicly provided services
Evidence on User Fees is Mixed
Fees for publicly provided services
Strengths
– Generate additional revenue with which
to improve health care quality
– Increase demand for services owing to
the improvement in quality
– May reduce out-of-pocket and other
costs, even for the poor, by substituting
public services sold at relatively modest
fees for higher-priced and less accessible
private services
– Promote more efficient consumption
patterns by reducing spurious demand
and encouraging the use of cost-effective
health services
– Encourage patients to exert their right to
obtain good quality services and make
health workers more accountable to
patients
– When combined with a system of
waivers and exemptions, serve as an
instrument to target public subsidies to
the poor and to reduce the leakage of
subsidies to the non-poor
Weaknesses
– Are rarely used to achieve significant
improvements in quality of care, either
because their revenue generating
potential is marginal or because fee
revenue is not used to finance quality
gains
– Do not curtail spurious demand
because in poor countries there is a
lack, not an excess, of demand
– Fail to promote cost-effective demand
patterns because the government
health system fails to make costeffective services available to users
– Hurt access by the poor, and thus harm
equity, because appropriate waivers
and exemption systems are seldom
implemented; where they are, the poor
get discriminated against with lower
quality treatment
Aid Effectiveness and
Absorptive Capacity
Aid Effectiveness Issues
ODA is Rising But is Far Short of What is Needed to
Meet MDG (0.54) and Monterrey Commitments (0.70)
To meet 2010 commitments (ODA of US$130 billion per year), need an average increase of about 8% per year
Source: OECD DAC database.
Much of the Increase in Aid is Not Directed to
Financing the Incremental Costs of Meeting the MDGs
80
% of net ODA
70
60
50
40
30
20
10
0
1980
1990
Debt Forgiveness Grants
2000
Technical Cooperation
Administrative Costs
Program and Project Aid
Emergency and Food Aid
Source: Sundberg and Gelb 2006.
In 2005, ODA peaked at US$ 106.5 billion -- most of this increase was due to debt relief and exceptional mobilization in
response to the Tsunami and the Kashmir earthquake
ODA is the Main Source of External Finance for SSA, Twice as Large as
FDI and Nearly Four Times the as Large as Remittances
Total long-term
flows of $41 billion
in 2003
Total long-term
flows of $340
billion in 2003
Source: World Bank. Global
Monitoring Report. 2005.
Donor Aid for Health has Increased
Significantly
16
14
US$ billions
12
Private non-profit
10
Other multilaterals
Development banks
8
UN agencies
Bilateral agencies
6
4
2
0
2000
2005
year
Source: Michaud 2007
Where Does All the Aid Go?
On average, for every $1 disbursed by donors to our
14 case study countries, we estimate:
•Not recorded in balance of payment
•Recorded in BOP but not in Govt spending
•Aid earmarked to specific projects
•Budget support
$0.30
$0.20
$0.30
$0.20
•1990s structural adjustment provided a larger share of
aid as general budget resources.
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 may reduce
domestic resource mobilization efforts
Basic Problems in Current ODA System
• Lack of global governance and policy coherence
• Lack of predictability of funding and large differences between donor
commitments and disbursements at the country level generate
problems of macroeconomic management and planning
• There is a growing concern about the ‘verticalization’ of aid and the
need to focus holistically on health systems as opposed to specific
diseases or interventions
• Large numbers of new actors and donors and the plethora of ‘new’
aid instruments (e.g., SWaps, PRSPs, PRSCs, PRGFs, MTEFs,
etc.) create problems of management and coordination at both the
global and country levels and generate transactions costs and
absorptive capacity constraints
• Lack of responsiveness and flexibility of aid to sudden problems and
crises
• Little accountability of donors for the absence of results and lack of
M&E systems which are needed to ensure that the additional
resources are being used as prioritized and achieving results
• A significant portion of aid is off-budget and often doesn’t even enter
into the balance of payments or the government’s budget
• Countries need to create ‘fiscal space’ to absorb these large
increases in external assistance, a potentially problematic situation
given IMF fiscal ceiling
Donor Commitments for Health are Volatile
and Unpredictable
Try managing this…
Absorptive Capacity
Constraints
Donor Collaboration is a Challenge
GTZ
WHO
CIDA
UNAIDS
RNE
INT NGO
3/5
UNICEF
Norad
WB
Sida
USAID
T-MAP
MOF
UNTG
CF
DAC
GFCCP
PRSP
PEPFAR
GFATM
HSSP
MOH
PMO
MOEC
SWAP
CCM
CTU
NCTP
CCAIDS
NACP
LOCALGVT
CIVIL SOCIETY
PRIVATE SECTOR
Source: WHO: Mbewe
Bilateral Donor Support to Tanzania, 2000-2002
Source: Foreign Policy, Ranking the Rich 2004
Vertical Aid Distorts Priorities
Community
Management
Case
management
Drug
Use
HIV/AIDS
Nutrition
Skilled birth
attendance
New born care
Malaria
PMTCT
Health
system
Source: WHO, Mbewe
Maternal
health
Safe and
Supportive
Environment
Fragmentation in
international effort
….
Absorptive Capacity Constraints are
Multi-Dimensional
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
The Face of the HRH Crisis
RECRUITMENT
ATTRITION
Pre-service training
-Clinical vs Managerial
-Specialist vs polyvalent
-Death
-Professional vs volunteer
-Braindrain: loss vs gain
-Pension
Social Franchising
DISTRIBUTION
-Geo: rural vs urban
RETENTION
-Monetary: salary vs allowances
-Level: central vs service delivery
-Secondary: housing, transport,
communication, electrification, child
education, training opportunities etc.
-Sector: public vs private
-HR management
-Type: key-staff vs others
What Donors and
Countries Need to Do
What is Needed?
•
•
•
•
•
•
•
•
A “Needs Assessment” which identifies systemic constraints and
implementation bottlenecks for the delivery of essential services and the
required process to address them;
Capacity development plans linked to policy and institutional needs
including assessing complementarities with other sectors, analyzing the role
of non-state partners (NGOs, civil society, and the private sector), and
integrating national health systems with global programs;
Improve the interface between MOF and MOH as co-leaders working
with other relevant ministries;
Ensure consistency between health sector development plans, SWAps,
the overall budget including cross-sectoral trade-offs and the
macroeconomic framework, in consultation with the IMF;
Apply the Paris Principles of aid effectiveness to the health sector in
country-specific circumstances including harmonization and alignment
behind government strategies and processes, managing for results, and
mutual accountability;
Better align donor and country perspectives through better global
governance/policy coherence, providing increased aid through general
budget support, and countries improving their PSM;
Strengthen systems of management for results, including monitoring
and evaluation, appropriate indicators, and mutual accountability; and,
Determine major financing gaps and potential additional funding
resources, eventually adjusting the plans to available resources and
capacity to deliver.
What Will Donors Have to Do?
• Improve global governance and policy coherence
through donors reconciling their foreign policy goals
and aid modalities with country needs
• 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
• Assess effectiveness and appropriateness of new
financing instruments
• Offer consistent policy advice
• Focus on achieving results
• Submit to common assessment of their own
performance and being accountable
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 current public spending and enhance
resource mobilization efforts
• 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.
• Integrate 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
Implementation Issues
Policy Questions (1)
 To what extent will the reform increase insurance
coverage?
 What would be the effect on taxes, premiums, and
public subsidies?
 What would be the effect on public and private
insurers, employers, and households?
 How much choice will consumers have regarding
insurer and provider?
 To what extent would the scope and depth of
covered benefits change?
Policy Questions (2)
 What would be the effect on employment?
 What would be the effect on the level and rate of
growth of aggregate health spending?
 What would be the effect on health outcomes?
 What would be the effect on the delivery system?
 What would be the effect on financial and physical
access to care?
 What would be the effect on quality of care?
 What would be the effect on equity, poverty
reduction, and financial protection?
Global Policy Scenarios
• An accurate picture of the current health system
(i.e., the baseline or base case) is needed
including data on health spending, insurance
coverage, and availability and use of services.
• Projections of the future health system assuming
no changes are needed so that policy-makers can
understand the need for reform and its design
aspects.
• Projections of the future system after the reform
are needed so that policy-makers and the public
can understand the likely effects of the reform.
Informational Needs
• Need to analyze reform proposal impacts on
insurance coverage rates, health expenditures,
and financing sources
• Need information on the costs -- ‘premiums’ -- to
cover different groups
• Need information on: current distribution of HI
coverage, health status and socio-economic
characteristics of those covered and not
covered, and information on health expenditures
and current sources of payment
Data Needs for Assessing Reform
Proposal Impacts
Epidemiology
Households
Outcomes
Providers
Utilization
Insurers
Employers
Expenditures
Determining ‘Premium’ Levels
• Socio-economic and epidemiological status of
individuals
• Benefit package
• Current service use
• Demand effects/behavioral response to lower
out-of-pocket costs
• Supply side response (usual assumption of
infinite elasticity)
• Cost containment policies
Implementation Issues for Health
Insurance Systems
•
•
•
•
•
•
•
•
•
Issues in establishment of funds
Defining the benefit package
Determining eligible groups
Estimating actuarially sound premium levels
Determining financing sources
Defining revenue collection mechanisms
Developing administrative systems
Defining transition steps to new system
Developing and implementing monitoring and
evaluation procedures
Challenges and Lessons
LIC Policy Challenges
• What is the role of the public sector in health
financing?
• How can sufficient revenues be raised to afford
a basic package of essential services?
• What can the Government do to provide
financial protection against the impoverishing
effects of catastrophic illness costs -- Is pooling
of resources possible?
• What is the role of user fees – Should existing
user fees be abolished?
LIC Policy Challenges (2)
• Are annual health plans and budgets couched in
a results-based framework with appropriate M&E
indicators?
• How can countries assure harmonization of
donor procedures and alignment with national
priorities and processes?
• How can absorptive capacity be improved?
• What are the most effective methods for creating
fiscal space, dealing with cross-sectoral and
macroeconomic tradeoffs, and aligning health
policies with PRSPs and MTEFs?
LIC Policy Realities (1)
• Countries are behind with respect to the MDG goals -progress requires more aid and budget support in aiddependent countries.
• Most countries focus on a "health services strategy", not
a multi-sector "health strategy".
• Broad agreement exists on health priorities.
• Accountability for results is not always supported by
control of the resources necessary to achieve them.
• Cost estimates should address institutional constraints
and be prepared in a form that can be mapped to
budgets and support resource bids.
• Strategies need explicit analysis of links between costs,
outputs and outcomes
LIC Policy Realities (2)
• Fiscal constraints are binding, particularly in lowincome countries.
• Tax revenue is hard to raise; external aid has not
risen to required / expected levels.
• Fiscal sustainability for health implies working on all
fronts of the fiscal deficit – increasing tax revenue,
donor grants, debt relief, and reallocating across
sectors.
• Policies, institutions, and capacity are important.
• Public health expenditure needs to be well- targeted
and allocated to high impact interventions proven to
work.
LIC Policy Realities (3)
• Minimum standards of public expenditure management
need to be attained before any health strategy can be
effective.
• In good practice cases, the PRSP identifies spending
priorities in consultation with sectors, MTEF/budget
process shifts resources towards them, reviews and
adjusts each year in light of performance.
• Capacity problems can be managed if bottlenecks are
tackled in a logical sequence, avoiding large
"earmarked" commitments that distort priorities.
LIC Policy Realities (4)
• All donors should join in sector coordination and provide
commitment and disbursement data in the same format
Govt requires.
• Where Govt has a sound strategy, the first call on donor
funds should be to fully fund it.
• Donors need to commit early enough to inform budget
preparation.
• Countries need to coordinate macro- & sector-level
policy dialogue, & rely on sector reviews to review &
monitor sector-level actions.
Challenges in Middle-Income Countries
• Achieve universal coverage
• Improve financial protection
• Increase health system efficiency
In the context of:
•
•
•
•
High out-of-pocket payments
Limited revenue-raising capacity
Fragmented financing systems
Inefficient purchasing arrangements
Many Reform Options
• NHS, SHI, private/voluntary health
insurance
– Some combination of these
• Lessons learned from other countries
• Form of insurance schemes less important
than overall goals
Policy Recommendations (1)
To improve revenue collection, risk pooling,
and service purchasing:
• Develop efficient and equitable revenue
collection
– Finance health with domestic revenues and funding
sources
– Structural reform for payroll collection, tax system
• Increase risk pooling
– Pool 40% of health spending that is OOP
– Integrate informal sector workers into coverage
schemes
– Consolidate risk pools
Policy Recommendations (2)
• Design appropriate benefit package
– Balance breadth and depth
• Spend wisely to expand coverage
– Consider incentive-based payment
mechanisms and service purchasing reform
• Improve services and coverage for very
poor and vulnerable
Success Stories (1)
• Universal coverage: Korea and Taiwan
– Legislation created social health insurance (Korea: 1989; Taiwan: 1995)
– Aided by economic growth (Korea) and strong political incentive
(Taiwan)
– Expansion of small social security schemes
– Timeline: 10 years +
– Current coverage: >90% of populations in both countries
• Reducing fragmentation: Colombia
– Legislation mandated private sector participation in SHI (1993)
– Universal coverage for entire population
– Risk selection problems: major restructuring needed to resolve perverse
incentives
– Current coverage: ~62% of population
Success Stories (2)
• Financing, purchasing, payment, and quality: Estonia
and Slovenia
– Estonia
•
•
•
•
National health insurance (1991) financed with 13% wage tax
Aided by institutional capacity and government commitment
Risk pool consolidation
Reforms in provider and hospital payment, service contracting
– Slovenia
• National health insurance (1993) financed with 13.25% payroll tax
• Aided by institutional, managerial, and administrative capacity;
impending EU status; stakeholder buy-in
• Supplementary voluntary insurance to cover co-payments
• Health information system reform
• Quality of care improvement through standard of care guidelines
Financing Health in High-Income Countries
From community-based voluntary insurance
↓
Formal public insurance funds
↓
Social or national health insurance systems
• 13 of 25 HICs use general revenue-based
approaches, 9 have SHI, 3 mixed approaches
• Aided by political will and economic growth
• Reforms focus on efficiency gains
The Road to Universal Coverage:
Lessons Learned
• Economic growth most important factor
• Strong political commitment, management and
administrative capacity also critical
• Voluntary and community-based financing help
build public confidence in prepaid schemes
• Pool risk as coverage expands: the critical issue
is risk pooling, whether SHI or NHS is ultimately
chosen is of secondary importance
• Evaluate at each stage
Conclusion: Financing Challenges
•
There is no one ‘right’ financing model.
•
System financing must be sustainable --meaning that future economic
growth generates sufficient levels of income for decent living standards and
external debt solvency.
•
LICs face difficult tradeoffs between financing essential services and
providing financial risk protection -- prioritization is critical.
•
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.
•
Most MICs are challenged to provide universal coverage, reduce
fragmentation among risk pools, and improve purchasing efficiency.
•
The critical issue is risk pooling, whether SHI or NHS is ultimately chosen is
really of secondary importance.
•
The critical condition regarding the speed of evolution to universal coverage
is the level of income and its rate of growth. Evidence also suggests that the
ability to administrate is a key enabling factor for success.
•
Models need to be tailored to individual country circumstances.
Financing Issues in Thailand
• Is the revenue base equitable and efficient?
• Are the BBPs well-designed from allocative
efficiency and equity (net incidence)
perspectives?
• Are risks pooled equitable and efficiently?
• Are the current schemes financially sustainable?
• If not, how would you reform the revenue bases?
• What changes are needed to harmonize the
schemes?
• What information is lacking?