Financial protection - TU Berlin · household’s OOP payments are so high relative to its available resources that the household foregoes the consumption of other necessary goods

Financial protection

Reinhard Busse*

Peter Agyei Bafour**

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

Financial protection (FP)

• Does use of health services lead to financial hardship?

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

Equity in financing

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

214 November 2019 Financial protection

Why is health care financing important? Twogoals


Financial protection

• refers to how far people are protected from the financial consequences of illness

• is achieved when payments made to obtain health services do not expose individuals to financial hardship and do not threaten living standards

”Fair financing in health systems means that the risks each household faces due to the costs of the health system are distributed according to ability to pay rather than to the risk of illness: a fairly financed system ensures financial protection for everyone.” (World Health Report 2000)

• Public, usually pooled [BLUE]

• Private [WHITE]

– Private/ voluntary health insurance (partly pooled)

– Out-of-pocket

• Direct expenditure [LEFT/ BEHIND BLUE BOX; a / b]

• (Formal) Cost sharing [ABOVE BLUE BOX; c]– Fixed co-payments/ user fees

– Co-insurance (a percentage)

– Deductible

– Cap (per service/ year)

• Informal payments


Important to distinguish concepts (and terms)

(a) Breadth: who is covered?

(b) Scope: which benefits are covered?

Public expenditure on health

Extend to uninsured

Include other benefits

Reduce cost-sharing


Cost-sharing = (c) Depth of coverage

(c) Depth: what proportion of the benefit cost is covered?


Main forms of (formal) cost-sharing

Costs of service

Co

st-s

har

ing

Fixed co-payment/user fee (e.g. 100)

0 1.000

NB: “cost-sharing” requires payment from pooled resources, i.e. coverage!



Costs of service

Co

st-s

har

ing


Co-insurance (e.g. 20%)

0 1.000



Costs of service

Co

st-s

har

ing



0 1.000

Deductible (e.g. 100% upto 300, 0% afterwards)




Summary: main forms of (formal) cost-sharing

Costs of service

Co

st-s

har

ing



0 1.000

Deductible (e.g. 100% upto 300, 0% afterwards)


• Economic crises in many developing countries in the 1980s

• Washington consensus

– Reduce public expenditures

– Introduce market based reforms

– Strongly promoted by World Bank and IMF, demanding structural adjustment programs


A history of user charges: background

• Health care quality in public sector is bad

→User charges can improve resource availability at providers

→(availability of medications, materials)

→Can improve quality

→Will increase public health service utilisation

• User charges can reduce costs and improve efficiency of resource use

→ too much focus on hospital care

→ will free resources for basic services and for the poor who should be exempted


World Bank arguments

• reduce excess (inappropriate) demand caused by full insurance (moral hazard)

• contains costs/ expenditure

• raises revenue

• directs people to more cost-effective use


More general: Arguments for cost-sharing


What do we know about cost-sharing?

Argument for cost-sharing Evidence

Reduce inappropriate use?Yes, but reduce appropriateuse too: no selective effect

Contain total / public spending?

No evidence of long-term cost control: elasticity, other costs,

intensity, prices, costs driven by supply

Raise revenue? Yes, but not much

Steering?Maybe, in specific contexts: involves

removing user charges

Everyone else does itDo they? Does that make it

the right thing to do?

Conventional indicators of financial protection(Wagstaff, 2009)

• Focus on the extent to which health payments are catastrophic and impoverishing

– Catastrophic expenditure: occurs when a household’s OOP payments are so high relative to its available resources that the household foregoes the consumption of other necessary goods and services (different % levels are used)

– Impoverishment: occurs when OOP payments push households below or further below the poverty line


Measuring financial protection I


Catastrophic payments (vs. % OOP) within Europe

In countries with higher OOP →more households

with catastrophic expenditure


Catastrophic expenditures (vs. OOP) globally

Source: Xu et al. 2007

• SDG 3.8: Achieve UHC, including financial risk protection, access to quality essential health-care services and access to […] essential medicines and vaccines for all

• Indicators

− 3.8.1: Coverage of essential health services

− 3.8.2: Financial protection when using health services

(originally: number of people covered by health insurance or a public health system per 1,000 population)


Monitoring Achievement of UHC as part ofSDGs

• Catastrophic spending on health → SDG indicator 3.8.2

– Proportion of the population with large household expenditure on health as a share of total household expenditure or income (e.g. greater than 10% or 25%)

• Impoverishing spending on health → related to SDG 1.1.1

– Out-of-pocket spending pushes households below the poverty line (here: $1.90 or $3.10).


Measuring financial protection


Data availability


Catastrophic health spending worldwide

• 1


Time trend in catastrophic healh spending

Were Africansbetter

protected in the year 2000?


Global and regional trends in catastrophic payments: SDG indicator 3.8.2

11.7% of the world’s population

2.6% of the world’s population

Source: WHO and IBRD/World Bank (2017) Tracking Universal Health Coverage: 2017 Global Monitoring Report.


Impoverishment due to out-of-pocketspending


Impoverishing OOP spending

Germany

Czechia

Estonia

Latvia

User fee in ambulatory careintroduced abolished


Saksena P, Hsu J, Evans DB (2014) Financial Risk Protection and Universal Health Coverage: Evidence and Measurement Challenges. PLOS Medicine 11(9): e1001701. https://doi.org/10.1371/journal.pmed.1001701http://journals.plos.org/plosmedicine/article?id=10.1371/journal.pmed.1001701

High correlation betweencatastrophic expenditure

and impoverishing spending

http://journals.plos.org/plosmedicine/article?id=10.1371/journal.pmed.1001701

Criticism (Moreno-Serra, Millett, Smith, 2011)

• Constructed solely on the basis of OOP medical expenditures reported in household surveys

• Poorer individuals often cannot afford to use health services and therefore report very low or no health spending (in case they have to forgo necessary medical treatment due to costs)

• Sole focus on incurred spending may provide misleading picture of financial protection

True … but (Saksena et al., 2014)

• Coverage with essential health services is measured when measuring effective coverage.

• Therefore, no need to incorporate impact of financial barriers on utilization into any indicator of financial risk protection.


Measuring financial protection II

• Ideally:

– Measure effective coverage (proportion of people in need of services who receive services of sufficient quality to obtain potential health gains)

– Include range of services (promotion, prevention, curative services, rehabilitation, palliation)

– Cover main health areas (RMNCH, infectious and non-communicable diseases, injuries)

– Disaggregate index for inequality dimensions


Measuring coverage of essential healthservices

Selection based on:• Relevance

(disease burden, availableinterventions)

• Measurablecoverage and clear target

• Data availabilityacross countries (also for equityanalysis)

• Easy tocommunicate


Selected tracer indicators

Note: Indicators missing in the equation wereexcluded because of data limitatons

Data on inpatientand outpatientservice use is

unavailable for LMIC

Data on coveragewith diabetes

care unvailable


Data availability


Coverage of essential health servicesworldwide


Coverage of essential health services worldwide


Global trends in service coverage of selectedindicators


Tools to improve financial protection

• Higher proportions of prepaid and public funds for health care in preference to OOP payments

• Pooling of funds (share financial risks of illness across all members of pool) in preference to OOP payments Population Providers

Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

prepaid

public

Resource pooling & allocation

Collector Third-party payer


OOP expenditures as fraction oftotal health expenditures, 2014

Source: World Health Statistics 2017

Low income

Lower middle income= countries with highest OOP

Uppermiddle income

High income

India

China


Out-of-pocket expenditures

…and better health policies

... decrease with higher government health expenditures

More public spending

• Financial protection concerns how well the population is protected from the costs of health care

• Financial protection of health systems is usually measured in terms of catastrophic and impoverishing expenditures

• Catastrophic expenditures are present when OOPs consume a large share of household income/expenditure

• Impoverishing expenditures are present when OOPs push household into poverty

• OOPs (→ and catastrophic and impoverishing expenditures) can be reduced through more public spending on health


Conclusions

Documents

Financial protection - TU Berlin · household’s OOP payments are so high relative to its available resources that the household foregoes the consumption of other necessary goods