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Global Health Care Financing Trends:Lessons for Asian Countries
Ajay TandonSenior Economist
Global Practice for Health, Nutrition, and PopulationWorld Bank
Washington, DC, USAE-mail: [email protected]
Jakarta April, 2015
Global Health Financing Landscape
Large variations in health expenditures: from ~US$15 in Eritrea, DRC to over ~US$9,000 in Norway, Switzerland, USA; Indonesia: US$108.
Range: ~2% of GDP (Myanmar) to ~18% of GDP (USA); Indonesia: ~3% of GDP.
Variations also in how health expenditures are financed:<20% public in Sierra Leone, Georgia to >90% public in Cuba, Timor-Leste; Indonesia:~40% public.
Lao PDRCambodia
Vietnam
South AfricaRussia
JapanAustralia
United States
India
ChinaMalaysia
Brazil
Korea
Myanmar
IndonesiaPhilippines
Thailand
525
100
500
2500
US$
Source: WDI
Total health expenditure per capita, 2012
Health is a Growing Share of the Economy
Health’s share of GDP hasgenerally increased by 1%point of GDP since 1995.
Changes in income, demography, epidemiology, technology, etc., are contributory factors.
Health industry prominent source of employment and revenues (including from medical tourism, remittances, pharmaceutical/medical equipment trade).
GlobalEAP
Indonesia
12
34
56
78
Shar
eof
GD
P(%
)
1995 1998 2001 2004Year
2007 2010 2012
Source: WDI
Total health expenditure share of GDP, 1995-2012
How is Health Expenditure Financed?
Five different health financing models:
Tax-financing (Beveridge) Social health insurance (Bismarck) Out-of-pocket (OOP) Private health insurance Community-based insurance
Each model is associated with different instrumentsfor revenue generation, pooling, and purchasing ofhealth services; Rarely do we see a “pure” form existin a country.
Sources of Health Expenditure Change asIncome Rises
2%14%
Tax40%
OOP44%
SHI Private/NGO SHI7%
6%
Tax45%
OOP41%
Private/NGO
SHI21%
9% Private/NGO
Tax39%
OOP31%
SHI26%
8% Private/NGOTax44%
OOP22%
Low income Lower middle income
Upper middle income High income
Source: WHO
Total health expenditure by source, 2012
Health Financing is a Means to an End
UHC is now a prominent policy objective across most developing countries.
UHC is about ensuring that everyone has access to quality health care services as needed without facing undue financial hardship.
Health financing is not only about how much money is expended by the health sector but also about how efficiently and equitably resources areraised, pooled, and allocated to achieve desired health system objectives such as UHC.
UHC is Not About Insurance Card Distribution…
Access to family planning At least 4 ANC visits Measles immunization Improved water source Adequate sanitation Non-use of tobacco Skilled birth attendance Anti-retroviral therapy
TB case detection and treatment rate
Hypertension treatment Diabetes treatment Incidence of catastrophic
health expenditure Incidence of impoverishment
resulting from high levels of health expenditure
WHO-WB Measurement FrameworkRecommended UHC Indicators
UHC ≠ Social Health Insurance
UHC is a health system objective not a health financing model, and social health insurance is not a necessary precondition for attaining UHC.
Some countries are attaining UHC usinggovernment general-revenue supply-side financing(Sri Lanka, Malaysia, Fiji).
Many other countries are attaining UHC using hybrid models: government general-revenue demand-side financing to augment supply-side financing with or without social health insurance.
Health Financing for UHC
Reducing dependence on OOP payments – andincreasing the share of pooled sources of financing -- is key for attaining UHC.
OOP payments are regressive and inequitable and increasethe extent and risk of impoverishment resulting from largehealth care expenditures.
OECD: <20% of total health expenditures is OOP (in line with WHO recommendation); Indonesia ~45% is OOP.
Pooling share can be increased either by increasing the share of health expenditure that is general-revenue and/or mandatory insurance financed.
Health Financing Economy
Health financing reforms(e.g., social health insurance) can increase labor costs and encourage informality.
Informality and poverty canresult in higher fiscal burden(e.g., for financing UHC).
Rising health care costs –due to ageing, NCDs, technology, pharmaceuticalprices – can threaten sustainability of health financing reforms and theeconomy.
Note: Under assumption all agriculture employment is informal
Country Informal employment
(2010)
Population living on$2-a-day
Philippines 86% 43%Indonesia 78% 53%Vietnam 74% 46%Thailand 65% 5%
Government Financing is Key Even UnderSocial Health Insurance Models
Non-contributory coverage for the poor.
Expansion of coverage to the non-poor informalsector is a key challenge: voluntary enrollment even with subsidized premiums have led to adverseselection problems.
Countries such as Thailand have expanded coverageto informal sector by government general- revenuefinancing.
Health’s Share of Government Budget
IndonesiaBrazil
Thailand China
India
Rwanda
Myanmar
Philippines
010
2030
Shar
e(%
)
Share of government expenditure on health, 2012
Costa Rica
Countries with a population of less than 250,000 have been excluded Source: WHO
Some Stylized Empirical Trends
LAC highest share; SAS lowest share; EAP and SSA sharesgrowing.
Across countries, health’s share of government expenditures isgenerally higher among richer countries, albeit economic growth and conducive macro-fiscalconditions don’t always result in re-prioritization towards health.
Large variations in prioritization to health across countries even after controlling for income.
LAC
SSAECA
SAS
EAP
MNA
68
1012
1416
1995 1998 2001 2004Year
2007 2010 2012
Source: WHONote: Countries with population less than 250,000 excluded
Health share of government expenditure across regions, 1995-2012
Empirical work on prioritization has been sparse; Econometric analyses suggests that factors such as democratization, lower levels of corruption, ethno-linguistic homogeneity, and more women in public office are correlated with higher shares of public spending on health; however, these findings are not robust and are sensitive to model specification.
Efficiency considerations are important: efficiency is in itselfa source of effective fiscal space; but can also be important forattracting additional public resources.
Evidence from case studies suggests that country-specific political economy considerations are key, and that results-focused reform efforts – in particular efforts to explicitly expand the breadth and depth of health coverage as opposed to efforts focused only on government budgetary targets – are more likely to result in sustained and politically-feasible prioritization of health.
How to Re-Prioritize Health?
Two Sets of Country Examples
Vietnam: government health spending to increase at a higher rate than increase in total government expenditure. Enshrined as legal decree, resulted in increase in prioritization. Brazil: matching earmarks for health spending at both federal and local government levels.Thailand: 2001 commitment to UHC, some indications that re-prioritization for health occurred concomitantly with a decline in military expenditure.
Thailand
PhhilippinesBrazil
India
Vietnam
Indonesia
05
1015
20
Sha
re(%
)
1995 1998 2001 2004 2007Year
20102012
05
1015
20
Sha
re(%
)1995 1998 2001 2004 2007
Year20102012
Source: WHO
Share of government expenditure on health, 1995-2012
Expansion in Social Health Insurance Not Always Associated with Declining OOP
2030
4050
60
OOP share of total health spending
Outpatient
Coverage
10
Per
cent
(%)
Coverage and OOP share
Inpatient
0.0
05.0
1.0
15.0
2.0
25.0
3
Inpa
tient
0
.02
.04
.06
.08
.1.1
2.1
4.1
6
Per
cent
(%)
Outpatient and inpatient utilization
Source: WHO; SUSENAS
Steady increase in proportion of population covered, especially since 2005; rise in outpatient/inpatient utilization rates but OOP share of total health spending has remained high.
1995-2011
1995 1998 2001 2004 2007 2010 1995 1998 2001 2004 2007 2010
Year Year
OOP Spending Remains High Despite RisingSocial Health Insurance Coverage in Many
Countries
OOP share
Coverage
1030
5070
90
1030
5070
90
Per
cent
(%)
1995 1998 2001 2004Year
Source: W HO
2007 2010
1030
5070
90
Per
cent
(%)
OOP share
OOP share
Coverage
1995 1998 2001 2004 2007 2010Year
Source: W HO
Philippines
OOP share
Vietnam
Coverage
1995 1998 2001 2004 2007 2010Year
Source: W HO; China Health Service Report
China
1030
5070
90
Per
cent
(%)
1995 1998 2001 2004 2007Year
Source: W HO
2010
Thailand
In Summary
Health financing is a means to an end; health financing is not only about the level of health expenditures, it is also about how resources areraised, pooled, and allocated to attain UHC.
Issues of government financing and re-prioritizationof health within the government budget are key forattaining UHC.
More focus is needed on health service coverage and financial protection, not just on how much is being spent and how many cards have been distributed.