Transcript Mason and Miller health expenditure projections

International Symposium on
Demographic Change and Policy Response
13-14 November 2014, Beijing, China
INDIA’S PROPOSED UNIVERSAL HEALTH COVERAGE
POLICY: EVIDENCE AND IMPLICATIONS FOR AGE
STRUCTURE TRANSITION EFFECTS AND FISCAL
SUSTAINABILITY
M.R. Narayana
Institute for Social and Economic Change
Bangalore, India
13 November 2014
Gratitude
• Professors Ronald Lee and Andrew Mason for the
opportunity to present and participate in this
international symposium, and for professional help
and encouragement
• Professor Sang-Hyop Lee for constructive suggestions
• Professor Young Jun Chun for valuable technical
guidance and support for calculation of GA for India
• Dr Tim Miller and Dr Carl Mason for providing me
with health expenditure projections for India based
on Lee-Carter model on forecasting mortality rates
Recent works
• WHO. (2013). Research on Universal Health
Coverage. World Health Report 2013, World
Health Organization (Luxembourg)
• Stabile, Mark., and Thomson, Sarah. (2014).
The Changing Role of Government in
Financing Health Care: An International
Perspective, Journal of Economic Literature,
52(2), 480-518
Table 1: Public health expenditure in India: 2000-01 to 2012-13
Year
Public health expenditure
Total
(INR
billion)
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13*
Share of health
expenditure in
aggregate public
expenditure (%)
300
315
329
364
415
485
557
644
759
936
1071
1185
1411
Share of States
(%)
79.14
77.87
76.60
76.15
75.70
75.17
75.83
72.24
71.69
69.53
67.51
68.85
72.83
Share of revenue Total
expenditure (%)
89.84
89.72
89.46
89.24
87.49
87.34
86.91
85.35
84.70
87.05
89.48
88.08
67.13
4.84
4.59
4.51
4.61
4.78
4.75
4.70
4.71
4.59
4.75
4.70
4.66
4.79
Share of
health
expenditure
in GDP (%)
Revenue
4.90
4.66
4.47
4.44
4.67
8.03
7.75
7.66
6.89
7.59
7.91
7.76
6.22
1.38
1.34
1.30
1.28
1.28
1.31
1.30
1.29
1.35
1.44
1.38
1.32
1.39
India’s current policy proposal for
Universal Health Coverage (UHC)
• High Level Expert Group on Universal Health Coverage (HLEG),
instituted by India’s Planning Commission: 2011
• UHC refers to equitable access for all in the country to affordable,
accountable, appropriate and assured quality health services (promotive,
preventive, curative and rehabilitative) regardless of income level, social
status, gender, caste or religion of persons.
• The goal of the UHC is to ensure universal entitlement for every citizen to
a National Health Package (NHP) of essential primary, secondary and
tertiary health care services that will be funded by the government.
• Under proposed UHC, people have a choice of facilities provided by public
sector or contracted-in private providers (i.e. NGOs and non-profits). The
private providers who opt for participation in the UHC would be required
to provide at least 75 percent of out-patient and 50 percent of in-patient
services to all in the NHP. The cost of these services is proposed to be
reimbursed by the government.
Proposed financing of UHC
• (a) Increase the share of public expenditure by Central and State
governments from 1.2 per cent in 2011-12 to 2.2 per cent of GDP in 201617 and to 3 per cent by 2022;
• (b) Use general taxation as the principle source of health care funding; and
• (c) Not to use insurance companies or any other independent agencies to
purchase health care services on behalf of the government.
• In terms of per capita public expenditure, the increase in public health care
spending (at 2009-10 prices) is projected to grow from INR675 in 2011-12,
INR1975 in 2016-17 and INR3450 in 2022.
• This projection (without age specificities) is based on the assumptions that
total (public + private) health expenditure would remain at 4.5 per cent of
GDP, a real growth rate of GDP at 8 per cent at 2009-10 prices and
projected population totals by the Registrar General of India.
Key policy issues in India’s proposed UHC
• Key research gaps in the current proposals to India’s UHC
policy are lack of explicit recognition and inclusion of
• (a) age specific demand for the UHC by young, working and
elderly population;
• (b) impact of age structure transition on changes in this age
specific demand for UHC
• (c) sustainability of current fiscal policies in the presence of
expected UHC policy and projected health expenditures
These gaps are the key policy imperatives /issues for research in
this paper.
Research questions
• Does demand for health services under a UHC Policy vary across ages? If
so, which of the age groups (young/working/elderly) is highest demander
of the services?
• Does age structure transition in India’s population from 2005 through 2050
and beyond have implications on demand issues in question (1) above? If
so, can the changes in size of demand (or demanders) be distinguished by
the age groups and over time?
• What are the health expenditure requirements for implementation of a
proposed UHC policy? How can such expenditures be projected in future?
• What are fiscal options to financing a UHC policy in question (3) above?
• If a proposed UHC policy is entirely pubic-funded, non-means tested and
non-contributory, can it be sustained by current fiscal policies? If not, what
are additional conditions required to attain fiscal sustainability under the
proposed UHC policy?
Objective of this paper is to offer plausible answer to the above questions
Methodology
Combined methodology of NTA, health expenditure
projections and GA
Measurement of UHC – NTA methodology
• A measure of age profile of UHC is calculated by combining
the age profiles of public and private health consumption.
• This age profile is also a measure of observed demand for
UHC in the benchmark year 2004-05
• Consistent with the current policy proposal on UHC from
consumption side
GA methodology – Young’s spreadsheets
• Two version based on different GDP projections
• One version based on Mason-Miller public health expenditure
projections
Mason and Miller health expenditure projections
• Mason and Miller apply the Lee-Carter model on forecasting age specific
mortality rates, and show how the level and shape of spending changes as
GDP/capita rises.
• The projection model shows the transition in health care spending by age as
countries become wealthier. That is, poorer countries are projected to
adopt the health care spending patterns observed in the richer countries
(OECD countries)
• They assume that this transition takes place as GDP per capita
increases. That is, as India's GDP per capita moves toward the levels
observed in the high-income countries, its age pattern of spending in health
care will also come to resemble that of the richer countries. This is called
convergence scenario
• The convergence scenario is obtained by using data from 18 NTA
countries – projection results are sent to all researchers in these countries
Figure 2: MM projected public health expenditure, India, 2004-2100
60.00
50.00
40.00
30.00
20.00
10.00
Young
Working
Elderly
2099
2094
2089
2084
2079
2074
2069
2064
2059
2054
2049
2044
2039
2034
2029
2024
2019
2014
2009
0.00
2004
Percent of total of public expenditure
70.00
Table 2: Comparison of public health expenditure projections for India
Projected per capita public Projected
per
capita Projected per capita total
Year of
health expenditure (INR)
private health expenditure health expenditure (INR)
projection
(INR)
Planning
Commission
(2011)
MM
Projections
(2014b)
Planning
MM
Planning
MM
Commission Projections Commission Projections
(2011)
(2014b)
(2011)
(2014b)
2011-12
675
546
1825
2014
2500
2536
2016-17
1975
726
1750
2834
3725
3560
2021-22
3450
1056
1725
4174
5175
5229
Fiscal sustainability
• Using GA methodology, fiscal sustainability of current fiscal
policies is defined by Generational Imbalance (GI)
• GI is measured by the difference in present value of net
payment of future generation and newborn (or age-0 cohort
in the benchmark year) divided by the present value of net
payment of the newborn.
• Current fiscal policies are sustainable if the value of GI is less
than zero. This means that the lifetime net payment of future
generation is smaller than that of current generation.
• Thus, to restore the long term budgetary balance, tax burden
should be reduced, or transfer benefits should be increased,
in future.
Table 3: Sustainability of current fiscal policies: Basic results of baseline models
Model
Main assumptions
Computed value of GI
GDP growth
rate (1)
GDP growth
rate (2)
Baseline Model 1
Real interest rate = 8.13%
Productivity growth rate =3.01%
97.75
111.15
Baseline Model 2
Same as Baseline Model 1 except
population age structure in 2005
remains the same for all years
64.98
64.98
Baseline Model 3
Same as Baseline Model 1 except the
productivity growth rate = 1.5%
89.01
104.05
Baseline Model 4
Same as Baseline Model 2 except the
productivity growth rate =1.5%
100.83
100.83
Baseline Model 5
Same as Baseline Model 1 except the
interest rate = 12%
97.60
113.60
Baseline Model 6
Same as Baseline Model 2 except the
interest rate = 12%
115.49
116.49
Table 4: Sustainability of current fiscal policies under a UHC for India
Model
Main assumptions
Computed value of GI
GDP growth
rate (1)
GDP growth
rate (2)
UHC Model 7
Real interest rate = 8.13%
Productivity growth rate =3.01%
360.99
437.98
UHC Model 2
Same as UHC Model 1 except that
population age structure in 2005
remains the same for all years
242.66
242.66
UHC Model 3
Same as UHC Model 1 except that
the productivity growth rate =1.5%
465.47
561.62
UHC Model4
Same as Baseline Model 2 except
that the productivity growth rate
=3.01%
Same as Baseline Model 1 except the
interest rate = 10%
470.51
470.51
525.25
632.00
Same as Baseline Model 2 except the
interest rate = 10%
561.41
561.41
UHC Model 5
UHC Model 6
Sensitivity of sustainability
Is fiscal sustainability sensitive to
• health expenditure projections?
• Assumptions on generosity of public
expenditure on social welfare expenditure
and/or health expenditure?
Table 5: Sustainability of current fiscal policies under MM health
expenditure projections for India
Model
Main assumptions
Computed value of GI
UHC (MM) Model 1
Productivity growth rate=3.01%
Real interest rate = 8.13%
-37
UHC (MM) Model 2
Same as MM Model 1 except that the
productivity rate is reduced to 1.5%
80
UHC (MM) Model 3
Same as Baseline Model 2 and the
interest rate = 10%
70
Table 6: Generational Accounts and its composition based on Mason-Miller
health care expenditure projections for India,
Generation’s age in
2004-05
0 (New born)
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
Net payments
(INR in ‘000)
311.239
316.138
310.317
301.615
288.879
279.871
256.717
232.287
207.989
182.529
156.851
130.435
101.562
75.658
53.188
37.941
28.418
15.378
15.762
Table 6: Generational Accounts and its composition based on Mason-Miller
health care expenditure projections for India,
Composition (INR in ‘000)
Transfers
Health
Education
-28.067
-27.964
-24.021
-18.001
-9.810
-0.064
-0.054
-0.045
-0.036
-0.027
-0.018
-0.010
-0.002
0.000
0.000
0.000
0.000
0.000
0.000
-7.451
-8.020
-8.618
-9.136
-9.603
-10.097
-10.360
-10.263
-9.873
-9.162
-8.256
-7.224
-5.914
-4.687
-3.453
-2.206
-1.079
-0.174
-0.159
Cash
-16.747
-19.342
-22.613
-27.589
-34.603
-34.112
-36.169
-37.685
-37.546
-36.816
-35.062
-35.273
-35.653
-36.362
-35.717
-33.234
-26.174
-21.247
-14.781
Income
tax
28.962
30.423
30.935
31.414
31.558
30.790
28.675
25.507
21.752
17.398
12.781
8.134
3.880
2.266
1.407
0.803
0.438
0.223
0.099
Payments
Corporation
Indirect
tax
taxes
55.365
224.805
59.412
226.040
61.771
218.141
64.475
207.097
67.694
192.280
70.756
174.077
72.527
156.723
72.033
140.802
69.545
125.941
66.631
110.311
63.825
93.653
61.387
77.494
55.554
62.222
46.571
50.262
36.875
39.978
29.994
31.019
22.461
23.289
12.104
18.122
9.151
15.684
Non-tax
revenues
54.371
55.589
54.722
53.354
51.364
48.522
45.376
41.937
38.206
34.194
29.929
25.927
21.475
17.608
14.098
11.564
9.483
6.350
5.608
Table 6: Generational Accounts and its composition based on Mason-Miller
health care expenditure projections for India,
Future generation
197.569
Generational imbalance (%)
-37.00
Sustainability gap (%)
-9.10
Net payments as % of lifetime income
1.1. Current (newborn) generation
27.70
1.2. Future generation
11.60
Table 6: Generational Accounts and its composition based on Mason-Miller
health care expenditure projections for India,
Required adjustments by tax burden and transfer payments
Generations
Current generation
Future generation

2010

2020

2030
Tax adjustment (%)
Tax and transfer adjustment (%)
-388.0
-185.9
-45.4
-39.5
-41.8
-33.7
-43.0
-35.0
-44.1
-36.4
Table 7: Required adjustments in unsustainability scenarios, India
Indicators
Generational imbalance (%)
Sustainability gap (%)
Net payments as % of lifetime
income
1.1. Current (newborn) generation
1.2. Future generation
Baseline Model 1
97.75
1.98
UHC Model 1
360.99
6.26
11.3
14.9
4.9
14.9
Required adjustments by tax burden and transfer payments
Generations
Tax
Tax and
adjustment transfer
(%)
adjustment
(%)
Current generation
255.0
162.7
Future generation
11.5
7.3
 2010
11.1
7.0
 2020
11.2
7.1
 2030
11.3
7.2
Tax
adjustment
(%)
804.7
36.4
35.1
35.4
35.7
Tax and
transfer
adjustment
(%)
453.5
19.9
19.2
19.4
19.6
Sensitivity for generosity of public expenditure
• We recalculated the GA models in Table 1 for different values
of income elasticity of public expenditure on health.
• Our findings suggest that if the policy makers set this elasticity
at 0.64 or less for all the baseline models 1 and 0.75 or less for
all the baseline models 2 in Table 1.
• On the other hand, UHC models need simultaneous
adjustments in income elasticity of public expenditure on
social welfare expenditure and health expenditure.
• In particular, UHC models 1 (2) require adjustments for
income elasticity of social welfare expenditure at 0.70 (0.90)
or below and health expenditure at 0.40 (0.35) or less.
Major conclusions and implications
• The methodology of NTA, MM health expenditure projections and GA are
useful to offer new insights in to the current policy proposals on UHC in
India . These insights include:
• Age specific demand for health expenditure/consumption
• Measurement of UHC in terms of age profile of total health consumption
• Impact of age structure transition on demand for health services in general
and UHC in particular
• Determination of fiscal sustainability by current and projected public health
expenditure
• Determination of fiscal sustainability in the context of expected reform on
UHC
• Developing plausible options for consideration for policy makers
THANK YOU