Transcript Cash Systems: China

Health Systems: Two Dimensions
Is financing private or public?
Is provision of services private or public?
Countries differ in both dimensions.
Fig. 11.1. The Effect of Cost Sharing With and Without
Physician-Induced Demand
Fig. 11.2. The Effect of Implementing Health Insurance on
Growth of Health Expenditure: Partial Equilibrium versus
General Equilibrium Analysis
Fig. 11.3 The Five Control Knobs for Health Sector
Reform
Source: Roberts, Hsiao, Berman, et al. (2004), p. 27. Reproduced by
permission of Oxford University Press.
Fig. 11.4. The Relationship between GDP Per Capita
and the Public Financing Share
Source: Public financing share is from 2006 the World Health
Report; GDP per capita is from 2007 World Development
Indicators (Sample Size=166); and the regression line is
calculated by authors.
Table 11.6. Comparative Health Indicators in Average Low- And
Middle-Income Countries, India, and China, 2003
Fig. 11.6. The Relationship between Public Financing Share and
Public Supply Share
Share of Public Supply (%)
Poland
100
Canada
Turkey
90
Norway
Denmark
Finland United Kingdom
Czech Republic
80
Portugal
Italy
Mexico
70
Greece
Spain
France
New Zealand
Austria
60
50
Germany
Australia
40
United States
30
Japan
Taiwan
20
10
Korea
0
0
10
20
30
40
50
60
70
Share of Public Financing (%)
80
90
100
FOUR QUADRANTS IN COUNTRY HEALTH
SYSTEM CLASSIFICATION SCHEME
Upper Right Quadrant : High on public financing from general tax
revenue and from ear-marked payroll taxes and high on public
provision (hospital provision): Great Britain; Canada;
Scandinavian countries
The Lower Right Quadrant : High public provision, but largely
privately financed (high share of patient out-of-pocket
payments=“cash systems”): China; India; many low-income
countries
The Lower Right Quadrant : High shares of private financing (largely
out of private health insurance) and private provision: U.S.
The Upper Left Quadrant: Public financing (often public single
payer) and private provision: Germany; Japan; South Korea;
Taiwan among others. Also, Medicare and Medicaid in U.S.
CRITERIA FOR JUDGING HEALTH SYSTEM
PERFORMANCE
Efficiency
Expenditure risk protection
Equity
TYPES OF EFFICIENCY
“X-efficiency” (due to Harvey Leibenstein): produce output unit
with the least possible number of inputs
Allocative efficiency 1: Output set at point at which marginal
benefit equals marginal cost of service
Allocative efficiency 2: Set inputs so that ratio of marginal
products equals ratios of input prices. If an input price
rises, holding everything else constant, use less of it.
HOW IS OUTPUT MEASURED IN HEALTH
CARE?
Hospital days, admissions, “adjusted” admissions
Physician visits, relative value units produced
Health measures: lives saved, QALYs gained, DALYs
reduced, disease-specific measures, e.g., viral load
(HIV/AIDS), diarrhea cases averted
PRIVATE FINANCING OF 2 TYPES
Cash system
Private insurance—most efficiency enhancing if high
deductibles, high coinsurance, very high copays if
have copays at all, no tax subsidies of health
insurance premiums; private insurers compete on
quality of plan and premiums (price)
GENERALIZATIONS
Cash system ranks high on efficiency, but poor on expenditure
risk protection and equity measures.
Without expenditure risk protection motive, health insurance
would probably not be common. (Widespread existence of
health insurance has led to high expenditure risk.) We do not
have universal coverage for dishwasher repair; Consumer
Reports recommends that consumers eschew extended
contracts.
Proposals for competition in health insurance desire to have
cake (risk protection) and eat it too (efficiencies).
GENERALIZATIONS, CONT.
Case for private sector seems to be more compelling for
financing than for provision.
Extent to which increase in expenditure risk reduces
individual welfare depends on individual’s degree of
risk aversion.
In insurance systems, there is a tradeoff between lower
expenditure risk and increased moral hazard.
CASH SYSTEMS: OVERVIEW
Cash systems very common in low- and middle-income
countries
Out-of-pocket payments for personal health care services
as percent of household non-food consumption:
Bangladesh (11%); India (11%); Vietnam (13%); Hong
Kong (3%); Malaysia (2%); Thailand (3%); China (5%)
Typically private financing/provision overlaid on top of
public financing/provision system often of low quality
CASH SYSTEMS: INDIA
Health sector 6% of GDP of which 4.5% of GDP private.
Alternative estimates presented in chapter (p. 485).
Health indicators are somewhat better than low-income
countries overall, but lower than middle-income
countries, including China.
Funding by Indian states 2X that of national government.
CASH SYSTEMS: INDIA, CONT.
3-15% of population has private health insurance. Health
insurance (estimates vary by studies).
Individual market shares of private insurers too low to
influence price and quantity of care (unlike U.S.).
Half of hospitals public; 1/5 of clinics public.
Major systems of medicine coexist: allopathic; ayurveda,
unani, siddha, homeopathy.
Quality of care issues raised (see the Das and Hammer
study).
CASH SYSTEMS: CHINA
China has lower out-of-pocket percentage but percent
still high.
Was not the case before 1978 with introduction of
market-oriented reforms; out-of-pocket payment
minimal 1949-78—central planning era.
Equal access during central planning era contributed to
improved population health.
CASH SYSTEMS: CHINA, CONT.
Market-oriented reformsdismantling of rural commune
system; conversion of many state-owned to private
enterprises.
In 2003, 44% of urban and 79% of rural residents lacked
health insurance. On several indicators, health of urban
residents was worse than rural residents in 2006, but
consensus seems to be that health was worse in rural
than in urban areas overall.
Share of out-of-pocket payments in total health
expenditures increased from 20.4% in 1978 to 60% in
2000 and remained high post year 2000.
CASH SYSTEMS: CHINA, CONSEQUENCES OF
TRANSITION TO CASH SYSTEM 1978+
1. Increased expenditure risk: According to 1 study, in
2003, 14% of urban and 16% of rural population
incurred catastrophic medical expense, i.e., >30% of
family’s housing spending less subsistence food
expenditure.
2. Increased gap population health in urban v. rural areas.
3. Overall slowdown in population health improvement after
1978.
Fig. 11.7. The Sources of Health Care Financing in China, 19782005
Source: Huang and Yang. (2009)
NEW HEALTH INSURANCE PROGRAMS IN
CHINA
New Cooperative Medical Scheme for rural population.
Urban Resident Basic Medical Health Insurance Scheme
for urban uninsured.
Medical Assistance for the poorest and most vulnerable
populations in rural and urban areas.
U.S. HEALTH CARE SYSTEM
Before 1930s, U.S. had cash system
1930s: Evolution of nonprofit health insurance plans.
Service benefits v. indemnity benefits. Define each.
Commercial for-profit v. Blues nonprofit status
1940s: Implementation of tax subsidy of employer-provided
health insurance premiums
Individual v. group health insurance
MANAGED CARE
Began with Kaiser plan in 1940s
Health care providers have financial incentive to control
health care utilization and expenditures—“supply side
cost-sharing” (in contrast to “demand side cost-sharing”
Prerequisite for managed care to control cost growth
without reducing quality substantially is
consumer/patient choice of health plan (“exit voice”).
MANAGED COMPETITION
Leading proponent Alain Enthoven
Concept became popular in 1990s; key elements in Clinton
Heath Care plan of 1994 (“Hillarycare”)
Attributes of managed competition on consumer side: free
choice of health plan; consumer pays full cost for higher
quality plan at margin. Receives fixed dollar subsidy to
cover premium cost in part (may be health risk
adjusted).
MANAGED COMPETITION, CONT.
Quality dimensions considered by consumers in choice of
heath plan: provider network size and composition;
quality of providers; access—geographic, time of day,
appointment delays, etc., types of care covered (above
standard benefits package)
MANAGED COMPETITION, CONT.
Attributes of managed competition on health plan (insurer
side): must have ability to exclude certain providers—
“selective contracting;” ability to structure benefits to
attract enrollees, subject to minimum benefit structure
constraints imposed by law/regulation; ability to set
premiums; ability to market but subject to constraints on
“creamskimming” of good health risks.
MANAGED COMPETITION, CONT.
Attributes of managed competition- sponsor; sponsor may
be employer; sponsor makes fixed dollar premium
contribution (may be risk-adjusted)==creates price
elastic demand for individual health plans offered by
sponors; sponsor offers multiple plans.
BACKLASH AGAINST MANAGED CARE
Consumers did not like restrictions on utilization.
Providers certainly did not like the restrictions either and
were able to gain political support from consumers.
“Choice of care should be made by you and your doctor,
not by some big HMO.”
Providers did not like downward pressure of fees. Explain
relationship to selective contracting.
BACKLASH, CONT.
No political inclination to eliminate tax subsidy of employerprovided premiums. “Obamacare” does include tax on
“Cadillac plans.” “But there you go again raising taxes. I
do not like higher taxes like you do. But don’t touch my
Medicare.”
Some argue that rise in personal health care expenditures
as % of GDP a natural phenomenon. Welfare-maximizing
society would select a high share (e.g., Hall and Jones,
Quarterly J. of Economics, 2007).
COMPARISONS BETWEEN SINGLE AND
MULTIPLE PAYERS
Cost shifting
Patient selection
Spillover effects