Financing Health Care and Economic Issues

Financing Health Care and Economic

Issues

Overview and Objectives• 7 weeks of GH 511 – Where are we now?• A message on health systems strengthening…• History of health policy, economic policies,

and aid for health• Elements of health care reform• 3 health financing functions with specific focus

on revenue collection• Share your perspectives and experiences

Your Experiences with Health Care Reform and Financing

• What different types are used in the countries where you have been?

• How have they worked?

• Challenges with implementation?

Need MONEY and PEOPLE who know how to LEAD and MANAAGE

Determinants of Global Health

Interests of rich

Status of women

Land tenure

Debt-SAPs

Weak governments

Militarism

Imperialism

Poverty

Disparity

Access to education

Job conditions

Gender issues

Civil strife

Malnutrition

Water

Sanitation

Housing

Health care services

Health behaviors

DiarrheaPneumoniaPerinatal conditionsHIVInjury MalariaMeasles

Underlying Proximate DiseasesIntermediate

Global and national

National and community

Family Individual

Health Care Systems

• Complex systems consisting of:– Health care consumers = people in need of health

care services– Health care providers = people who deliver health

care – Systematic arrangements for delivering health

care = public and private agencies that organize, plan, regulate, finance, coordinate services

Health care can be “catastrophically costly” and need can be unpredictable

Six Building Blocks of a Health System

Source: Strengthening Health Systems to Improve Health Outcomes, WHO’s Framework for Action – WHO 2007

System Inputs Overall Goals/Outcomes

5 Fundamental Questions

1. What are the boundaries of health systems?2. What are health systems for?3. How do we characterize the architecture of a

health system?4. How can we tell when a health system is

performing well?5. How do we relate architecture to health

system performance?

Six Building Blocks of a Health System

Source: Strengthening Health Systems to Improve Health Outcomes, WHO’s Framework for Action – WHO 2007

Purposeful change aimed at improving health system performance for:

System Inputs

What do we mean by health systems that are...

Equitable?• Ability-to-pay determines financing contributions • Use of services is based on need for care

Efficient?• How well a health system achieves the desired health

outcome given available resources

Responsive?• Protects one’s dignity and autonomy

Able to offer social and financial protection?

History of Health Care Reform

1970s: Primary Health Care as Health Care Reform

1980s: Structural Adjustment Programs - reduction of public budgets, global concern about health care

– Bamako Initiative– USAID Health Care Reform initiatives– Privatization

1993: World Bank – Investing in Health

What’s next?

1945 1955 1965 1975 1985 1995 2005

1945 1955 1965 1975 1985 1995 2005

Debt & SAPs

IMF & World Bank

Debt Crisis

Structural Adjustment Programs

Health Policies

Equity Oriented Strategies

PHC and Selective PHC

WB Health Sector Reform(1978) Alma Ata

Chronology of Policies

Aid for Health

PEPFAR

GFATM, GAVI

Foundation $$

(2000) World Health Report

& MDGs

Child Survival

• USAID – Family Planning• Disease-specific funding

Challenges to Scale Up Services

Source: WHO expert consultation on “Positive Synergies Between Health Systems and Global Health Initiatives (GHIs)” – May 2008

Reform & Financing Caveats

Ideology – Based on Market Principles (1990s - World Bank)

Typical Components of Health Care Reform

58th World Health Assembly (2005)• Adopted the resolution 58.33 on “Sustainable health

financing, universal coverage and social health insurance:”

• Urges WHO’s member states to:– Ensure that health financing systems include

prepayment and risk sharing mechanisms; – Avoid catastrophic health-care expenditure;– Work towards universal coverage = secure access for

all to appropriate preventive, curative and rehabilitative services at an affordable cost

Source: Carrin G, Mathauer I, Xu K, Evans, B. Universal coverage of health services: tailoring its implementation, Bulletin of the WHO, November 2008, 86(11).

What is Health Financing?

SCHEIBER, G. "Financing Health Systems" Chapter 12, pp 225-242 in Disease Control Priorities in Developing Countries, 2nd Edition. New York: Oxford University Press 2006.

Health Financing Functions


NGOs

FBOs

3 Health Financing Functions• Revenue collection:

– Process by which the health system receives money

• Pooling of resources:– Accumulation and management of revenues to share

financial risk associated with health interventions– Prepayment allows pool members to pay in advance, relieves

uncertainty and provides access to compensation if a loss occurs

• Purchasing:– Mechanisms used to purchase and provide services from

public and private providers

3 Health Financing Functions• Raise sufficient and sustainable revenues in an

efficient and equitable manner to provide:– Basic package of essential services– Financial protection against financial loss due to illness or

injury

• Managing revenues to equitably and efficiently pool health risks

• Ensuring the purchase of health services in an allocatively and technically efficient manner


Fiscal Sustainability


Domestic Resources for Health Care in Lower-Income Countries (LICs)

Source: WHO expert consultation on “Positive Synergies Between Health Systems and Global Health Initiatives (GHIs)” – May 2008

Health Outcomes and Health Spending

Source: World Development Indicators, 2007

Infant Mortality Rate vs. Total Spending per CapitaInfant Mortality Rate vs. Total Spending per Capita

Public Finance Challenge

Environmental sanitation

Family Planning

Vector control

Maternal and Child Health

OP hospital referrals

Health center OP curative

OP hospital self-referrals

2nd class IP care

VIP IP care

Kidney dialysis

Open heart surgery

Cosmetic surgery

Water supply

Pure Public Goods

Pure Private Goods

Curative

Preventive

Government policy dictates most resources flow here

Actual funding ends up here

RichPoor

Pop IV Project

Health Care Spending in Ghana

85%

Selection of Services to be Financed


Family Planning

Vector control





2nd class IP care

VIP IP care

Kidney dialysis

Open heart surgery

Cosmetic surgery

Water supply

Pure Public Goods

Pure Private Goods

Curative

Preventive

Pop IV Project

The richThe poor

BASIC PACKAGE

$34/p/year

Sub-Saharan Africa Expenditures on Health (1997-2000)

Recommended expenditure: >$34/capita (CMH)

Source: World Bank, World Development Report (2004)



Key Issues of Revenue Collection

• Mobilize enough resources to finance expenditures for basic public and personal health services WITHOUT resorting to public sector borrowing (Tanzi and Zee 2000)

• Raise revenues equitably and efficiently• Various types of organizations eventually

receive funds • Conform with international standards


Types of Revenue Collection

• Out-of-pocket payments (ex. user fees)• Tax-based financing• Social Health Insurance (SHI)• Voluntary private insurance• Community-based financing

Types of Prepayment

Prepayment makes risk sharing possible…

User Fees

User Fees

• Characteristics:– Pay as you go - no risk pooling– Incentive effects– More resources directly for health

• Evidence:– Can raise significant revenue– Frequent misuse of collected funds– Frequent poor design and planning– Highly political and controversial

Source: Lagarde, M and Palmer, N. The impact of user fees on health service utilization in low- and middle-income countries: how strong is the evidence? Bulletin of the WHO, November 2008, 86(11).

General Taxation• Characteristics:

– Usually collected by the Ministry of Finance – as main source of revenue and serves the general population.

– Mobilizes funds from everyone regardless of their health status, income, or occupation

– Pools health risks across a large contributing population

• Evidence:– Mildly regressive to progressive – Inequitable access for the poor– Reducing individual responsibility for one's own health?

Source: Tax Based Financing for Health Systems: Options and Experiences, Discussion Paper #4, World Health Organization (2004).

Social Health Insurance (SHI)

• Characteristics:– Mandatory participation– Large risk pools– Social solidarity

• Evidence:– Covers people primarily in formal sector– May increase disparities between income groups

Voluntary Private Health Insurance

• Characteristics: – Risk pooling– Payment based on ability and risk– Access based on payment

• Evidence:– Generally not pro-poor– High-risk subscribers dropped or pay more– Rich capture more benefits

Community-Based Financing• Bamako Initiative (1987) = “Women and children’s

health through funding and management of essential drugs at the community level”

• Characteristics:– Start up funds for basic equipment, provision of basic

drugs, support costs

– Drug charges to recover expenditures – as seed capital and for replenishment

– Community health committees



Pooling and Purchasing

New Health Care Reforms?• Changing role, size, spending in public sector• Transfer of responsibility to, promote expansion

of and regulate NGO services• Addressing the nearly universal difference

between policies and actual expenditure• Integration of services (IMCI, IMAI, IMPAC)• Operations (health systems) research

Community-Based Health Insurance (CBHI)

• Principles:– Small risk pools– Social solidarity on small scale

• Evidence:– Can enhance financial access to limited care– Primarily curative oriented– Geographic inequities (closer is better)– Government’s re-distributive role important– Generally failed to meet expectations

CBHI Evidence BaseGeneral:• evidence base is limited in scope and questionable in quality• the effects are small and schemes serve only a limited section of the population

Specifics:• strong evidence CBHI provides some financial protection by reducing out-of-pocket

spending• moderate strength evidence that such schemes improve cost-recovery. • no evidence that schemes have an effect on the quality of care or the efficiency with

which care is produced• these types of community financing arrangements are, at best, complementary to other

more effective systems of health financing. • Regarding the costs and the benefits of various financing options, the current evidence

base is mute on this point

Ekman B. Health Policy Plan. 2004 Sep;19(5):249-70.

Decentralization

• Transfer of fiscal, administrative, and/or political authority for planning, management and service delivery to lower levels of government.

• Most often done for reasons beyond health

• One pure model does not exist

Fiscal Decentralization

Defines the:• Financial relations between national and sub-national

units of government.• Authority to collect and use revenue• Direction and size of inter-governmental resource flows• Division of power for taxation• Means by which national resources are adjusted to

match local expenditure responsibilities• How national resources flow to achieve equity

Decentralization - Uganda

* Source: Measure Project Akin, John, Paul Hutchinson and Koleman Strumpf “Decentralization and Government Provision of Public Goods: The Public Health Sector in Uganda” March 2001

Your Experiences with Decentralization

• Do local levels have resources that correspond to their increasing authority?

• What are the impediments to effective management at a local level?

• Has decentralization reduced corruption?

BASIC PACKAGE

Where do CBHI schemes fitWhere do CBHI schemes fit


Family Planning

Vector control





2nd class IP care

Tertiary IP care

Kidney dialysis

Open heart surgery

Cosmetic surgery

Water supply

Pure Public Goods

Pure Private Goods

Curative

Preventive

Pop IV Project

The richThe poor

CBHI Schemes

now

Public / private collaboration in curative service delivery

SHI -

public/private provision

Financing: Filling the gapsFinancing: Filling the gaps

Pure Public Goods

Pure Private Goods

Curative

Preventive

Pop IV Project

Self-financing Pre-pmt Schemes

The richThe poor

Pure private provision + service contracts

Public provision & finance

Subsidized pre-pmt Schemes

Organizational Forms Ministry of health, usually heading a large network of public providers organized as anational health service, relying on general taxation – collected by the ministry offinance – as the main source of revenue, and serving the general population.

Social security organization (single or multiple, competing or not), mostly relying onsalary-related contributions, owning provider networks or purchasing from externalproviders, and serving mostly their own members (usually formal sector workers).

Community or provider based pooling organization, usually comprising a small pooling/purchasing organization relying mostly on voluntary participation.

Private health insurance fund (regulated or unregulated), mostly relying on voluntarycontributions (premiums), which may be risk-related but are usually not income related, and are often contracted by an employer for all a firm’s employees.

Health Care Reform

• Not enough funds for basic care• Misallocation - 80% of resources tend to go toward richest

10% of population, urban/rural inequities. For example, surgery for cancers rather than FP, treatment of TB, STI.

• Inequity - poor lack basic access to HCare • Inefficiency – in allocation of health workers, purchase of

drugs • Inadequate recurrent budgets - lack of maintenance; logistic

problems; poor quality services; low productivity, poor access

• Little control over local resources – peripheral health facilities often have disproportionately low resources for population served

Life Expectancy and Health Spending

Source: World Development Indicators, 2007

Documents

Financing Health Care and Economic Issues