Dr Phua Kai Hong, AB cum laude SM (Harvard), PhD (LSE) Lee Kuan Yew School of Public Policy National University of Singapore

Health Systems Financing in Asia

Current Trends and Issues in Health Care Financing in Asia

•  Predominantly out-of-pocket expenditure in WHO SEARO and WPRO (Asia-Pacific)

•  Growth in social insurance and less taxation in WPRO region (eg Korea, China, Vietnam)

•  Increasing catastrophic expenditure and impoverishment due to healthcare spending (China and transitional economies)

•  High expenditures for drugs and diagnostics (50-60 % of total health budget in China)

•  Strong fundamentals and driving forces for increasing demand and consumption

Comparative Health and Expenditure in Selected Asian Countries (WHO Report 2000)

$/capita (Int $) Public/Total %GNP %Pop>60 DALE

Japan 2373 (1759) 80.2 7.1 22.6 74.5 Korea 700 (862) 37.8 6.7 10.2 65.0 China 20 (74) 24.9 2.7 10.0 62.3 India 23 (84) 13.0 5.2 7.5 53.2

Singapore 843 (750) 35.8 3.1 10.3 69.3 Brunei - (857) 40.6 5.4 5.0 64.4 Malaysia 110 (202) 57.6 2.4 6.5 61.4 Thailand 133 (327) 33.0 5.7 8.5 60.2 Philippines 40 (100) 48.5 3.4 5.6 58.9 Indonesia 18 (56) 36.8 1.7 7.3 59.7 Vietnam 17 (65) 20.0 4.8 7.5 58.2 Myanmar 100 (78) 12.6 2.6 7.4 51.6 Cambodia 21 (73) 9.4 7.2 4.8 45.7 Laos 13 (53) 62.7 3.6 5.2 46.1

Health Expenditure % GDP Per capita 1.  France 9.8% $2,369 2.  Italy 9.3% $1,855 3.  San Marino 7.5% $2,257 4.  Andorra 7.5% $1,368 5.  Malta 6.3% $551 6.  Singapore 3.1% $876 7.  Spain 8.0% $1,071 8.  Oman 3.9% $370 9.  Austria 9.0% $2,277 10.  Japan 7.1% $2,373

Health Systems Performance WHO Rankings 2000

WHO Health Systems Performance Assessment

• Health Attainment (Effectiveness) • Responsiveness (Efficiency) - basic amenities, social support, respect, confidentiality, autonomy, choice, communications •  Fairness in Financing (Equity) - distribution of risks, social protection

Effects of Health Care Financing and Payment Systems

•  EQUITY Who pays? Who benefits? - Distribution - Access •  EFFICIENCY Supply & Demand - Allocation - Production •  EFFECTIVENESS Outcomes - Quality of Care - Health Status

Comparative Health Expenditure in Selected Developed Countries

U.S.

Germany Canada Japan U.K.

Singapore

Year

Some Reasons for Singapore’s High Ranking and Low Expenditure

• Relatively high GNP growth in denominator •  Lower consumption due to age structure

(age-adjusted projection up to 6-8% of GNP) •  Strong budgetary controls on public spending •  Absence of comprehensive health insurance • Government subsidies for public health and

differential pricing for personal consumption •  ? Cost-sharing and co-payment system

Health Expenditures as % of GDP in East Asian Economies (2000)

•  National Health Insurance Systems Japan 7.1 Korea 6.7 Taiwan 5.0 •  National Health Service Systems Hong Kong 4.7 Malaysia 2.4 Singapore 3.1

Healthcare Expenditure in East Asia

Japan 7.1 80 : 20 Taiwan 5.0 66 : 34 Malaysia 2.4 58 : 43 Hong Kong 4.7 54 : 46 Korea 6.7 38 : 62 Singapore 3.1 36 : 64

% GNP Public:Private

Asian Health Care Financing Systems With Universal Coverage •  Social Health Insurance - Japan, Republic of Korea, Taiwan, Thailand •  National Health Service

- Singapore, Hong Kong, Malaysia, Sri Lanka Without Universal Coverage •  Social Health Insurance

- China, Vietnam and transitional economies

•  National Health Service - India, Indonesia and other developing countries

Selected Health Care Financing - Social Health Insurance Models

•  JAPAN Universal health insurance (1922/1939) NHI Law amended (1984/1990) Trial DRG/PPS in 10 Hospitals (1/11/1998) Long term care insurance (1997/2000) •  KOREA Universal health insurance (1976/1989) Health Care Reform Committee (1994/1997) K-RDRG Pilot Program (1997-1998) •  TAIWAN Universal health insurance (1995) Partial DRG system (from 1998) Cost-containment measures (from 2000)

Selected Health Care Financing – National Health Service Models

•  SINGAPORE National Health Plan (1983) Medisave/Medishield/Medifund (1984/1990/1993) Review Committee on National Health Policies (1992) White Paper on Affordable Health Care (1993) Casemix Funding (1999) Eldercare Fund/Eldershield (2000/2002) Enhanced Medishield/Private Insurance (2005) •  HONG KONG Scott Report (1985) Consultation Paper - Towards Better Health (1993) Harvard Consultant’s Report (1999) Consultative Paper - Lifelong Investments in Health Care(2000) Proposal for Supplementary Private Insurance (2010)

Changing Features of the Singapore Health Care System

Mixed Public-Private Health Care Market • Choice of private and public systems • Competition and integration between public,

private and voluntary sectors •  Appropriate mix of financing methods • Co-payment at the point of consumption •  Selective insurance to avoid moral hazard •  Targeted public subsidies to address inequity • Government benchmarks for prices & quality

Public-Private Health Expenditure in Singapore (1965-2000)

Singapore Health Statistics – Past and Present

1980 2005 •  Life expectancy 70 years 80 years •  Infant mortality 12/’000 2.5/’000 •  Aged/total population 5 % 9 % •  Public hospital mix 85 % 80 % •  Health expenditure/GDP 3 % 4 % •  Health expenditure/ 6 % 7 %

government budget •  User fees recovered / 3 % 60%

public expenditure

Singapore’s Hybrid Health Care Financing

Seeks to avoid either extremes - Welfare State Tax-funded/ Social insurance - ‘Free’ services -  Low quality -  Inefficiency

Free Market Fee for service Private insurance - Moral hazard - Adverse selection - Inequity

Healthcare Financing Strategies

Instill personal and family responsibility (Cost-sharing)

+ Ensure future sustainability with ageing and avoid inter-generational problems

(Savings) +

Enhance risk-pooling and social protection (Insurance)

+ Target subsidy and equitable distribution

(Taxation)

Medisave

Medishield

Medifund

PRIMARY CARE

ACUTE CARE

CATASTROPHIC (LONG TERM CARE)

Financing Method

Private Payment

Compulsory Savings

Social/Private Insurance

PUBLIC SUBSIDIES Source: Dr. Phua Kai Hong

Taxes PUBLIC HEALTH SERVICES

(Eldershield)

(Eldercare fund)

Health Care Financing in Singapore

Public Hospitals: Bed Distribution

Health Care Financing Reforms - The Unfinished Agenda

1983  Blue Paper – National Health Plan 1984 Medisave 1990 Medishield 1993 Medifund 1993 White Paper - Affordable Health Care 2000 Eldercare Fund 2008  Eldershield 2005 Enhanced Medishield/Private Insurance 2017  Means Test (Targeted Public Subsidies) 2018  ?

The Singapore Health Care Model •  Singapore’s health system ranked extremely high •  Reputation for high quality, choice and efficiency •  Equity risks covered by subsidies and safety nets •  Fully funded medical savings with social insurance

to finance increasing needs of ageing population •  Balance between health care supply and demand

with pricing and subsidy, while containing costs •  Goals of efficiency, equity, quality and sustainability

to be maintained by appropriate public-private mix in provision, financing, regulation and education

Similar Approaches to Old Age Security and Health Care Financing

World Bank’s 3 Pillars for Old Age Security •  Redistribution (Taxation) •  Savings •  Insurance Singapore’s 3M for Health Care Financing •  Medisave (avoids inter-generational transfers) •  Medishield (pools risks for catastrophic care) •  Medifund (subsidizes the poor and indigent)

4 8 12 16 20 24 28

0

2

4

6

8

10

12

14

France Switzerland

Russia Germany

Italy

Finland

Norway Sweden

Belgium

United Kingdom

Denmark

Spain Portugal

Greece

Japan

Ireland

New Zealand

Australia

Canada

United States

Hong Kong

Taiwan

Korea

Malaysia Singapore

Hea

lth E

xpen

ditu

re a

s %

of G

DP

Aged Dependency Ratio (>65/Aged 15-64)

Health Expenditures and Ageing

Population Ageing: Impact on Health Expenditure

• Health expenditure will increase with growing proportion of the aged

• Health expenditure will increase with longer survival of the aged population

• Health expenditure will increase with widening periods of morbidity and disability before death

Population Ageing Trends by 2030

Health and Long Term Care Financing in Japan

•  Universal health insurance 1922-1939 •  National Health Insurance (1961) •  Health Service Law for the Aged (1982/1986) •  National Health Insurance amendments 1984-1990 •  The Golden Plan / New Golden Plan (1990) - 10 -Year Gold Plan for the Development of Health

and Welfare Services for the Elderly •  Public Long Term Care Insurance Act (1997) -

implemented in 2000 - 50% insurance (40 years and above) - 50% general taxation

Health and Long Term Care Financing in Singapore

FINANCING METHOD •  Personal savings •  Compulsory savings •  Catastrophic

insurance •  Disability insurance •  Endowment •  Taxation

3-M SYSTEM + 2E

•  MEDISAVE (1984) •  MEDISHIELD (1990) •  + ELDERSHIELD(2002) •  MEDIFUND (1992) •  + ELDERCARE FUND

(2000)

Special Conditions in Asia

•  Fastest pace of economic transition •  Highest rates of population ageing and

population growth •  Great propensity for savings •  Strong traditional family support systems

Old age security and health care financing must contend with such considerations