Equity in financing - TU Berlin · 2019-11-15 · • Equity in financing concerns how the burden...

Health Care Financingmodule, 6-15 November 2019

* Department of Health Care Management (WHO Collaborating Centre for Health Systems Research and Management), Technische Universität Berlin, Germany & European Observatory on Health Systems and Policies** School of Public Health, KNUST, Kumasi, Ghana

Equity in financing

Reinhard Busse*

Peter Agyei Bafour**

Financial protection (FP)

• Does insufficient FP lead to unmet needs? (→ accessibility)

• Does use of health services lead to financial hardship?

Equity in financing

• Who bears the financial burden of paying for health services?

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Why is health care financing important? Twogoals

Third-party Payer

ProvidersPopulation

Collector of resources

Resource pooling & allocation

Principles for fair financing

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Steward/ Regulator

Fair financing:Contributions according

to ability to pay

Purchasing/paymentaccording to need

(and quality)

3

• World Health Report 2000: „health care [financing] is perfectly fair if the ratio of total health contribution to total non-food spending is identical for all households, independently of their income, their health status or their use of the health system.”

• Two concepts are important:

– Vertical equity: people with a greater ability to pay should pay more

– Horizontal equity: people with similar resources should contribute similarly to the health system

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Fair financing and equity in financing

progressive

proportional

(everybody

same %)

regressive

Direct tax

Wage-related contribution

Private insurance

premium; user fee

income ($)

health

funding

($)

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Equity in financing

Progressive: individuals withgreater abilitycontribute a larger proportion of theirincome than do individuals with lowerability to pay

Regressive:individuals with greater abilitycontribute a lowerproportion of their incomethanindividuals with lower ability to pay

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Equity in financing in Tanzania

Source: Mtei G et al. Health Policy Plan. 2012;27:i23-i34

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How do you analyze equity in financing moresystematically?

= Financing Incidence Analysis

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Step 1: different sources of revenue

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Step 2: analyzing progressivity of different sources I

Distribution of consumption

(ability-to-pay; socio-economic status)

Progressive

Cumulative share of population

Cumulativeshare of

payments

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Progressive

Regressive

Step 2: analyzing progressivity of different sources II

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Step 2: analyzing progressivity of different sources III

Regressive Kakwani Index = twice the

area betweenLorenz and

Concentrationcurve

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Step 3: Bring it together in the KakwaniIndex

Kakwani Index: + = progressive; - = regressive

Figure 1: Kakwani Indices for financing sources in Ghana, South Africa, and Tanzania. A negative index shows a regressive financing mechanism and a positive index a progressive mechanism. *Contributions by the informal sector in Ghana (although legislation requires all Ghanaians to join the national health insurance scheme, membership is effectively voluntary for people outside the formal sector); contributions to private health-insurance schemes in South Africa; and contributions to the Community Health Fund and related schemes in Tanzania. †Mandatory insurance in Ghana includes only the contributions by formal-sector employees. ‡General taxes refer to the combination of direct and indirect taxes

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Kakwani indices for financig sources in Ghana, South Africa and Tanzania

Source: Mills, Anne, et al. "Equity in financing and use of health care in Ghana, South Africa, and Tanzania: implications for paths to universal coverage." The Lancet 380.9837 (2012): 126-133.

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Kakwani indices for the four main financing sources in sub-Saharan Africa and Asia-Pacific

VHI and OOPs are regressive

Tax and SHI areprogressive

Kakwani indices for total health financing sources in sub-Saharan Africa and Asia-Pacific

In most countries health care financing isprogressive

Is thatenough?

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Third-party Payer

ProvidersPopulation

Collector of resources

Resource pooling & allocation

Principles for fair financing

Equity in financing 14 November 2019

Steward/ Regulator

Fair financing:Contributions according

to ability to pay

Purchasing/paymentaccording to need

(and quality)

17

Benefit Incidence Analysis:

1. Ranking the study population by a living standard measure

2. Assessing the rate of utilisation of different types of health services

3. Estimating the unit cost of each type of service

4. Multiplying the utilisation rates and unit costs to determine the amount of subsidy

5. Total subsidy = Total costs minus total OOP paid byhouseholds

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How do you analyze equity of benefits?

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Distribution of benefits

“…overall health-service benefits favoured the rich in all three countries, with services being most pro-rich in South Africa “

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Distribution of health financing benefits

PHC maybepro-poor?

Hospital care clearly pro-rich

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Tools to improve equity in financing

• Assure a high proportion of public (taxes and SHI) financing for health

• Assure activepurchasing accordingto population healthneeds→ not ability topay.

Population Providers

Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

Active

purchasing

Resource pooling & allocation

Collector Third-party payer

• Equity in financing concerns how the burden of health care financing is distributed across the population.

• Financing Incidence Analysis analyses this distribution.

• Evidence shows that health care financing is slightlyprogressive in most countries, incl. in low- and middle incomecountries.

• Taxes and SHI are progressive, OOP and VHI are regressive

• To understand the redistibutive effect of health care, it‘simportant to look also at the incidence of benefits.

• Most studies show that the incidence of benefits is pro-rich.

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Conclusions