Trends in Health Financing in LMICs

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Trends in Health Financing

in LMICs

ADB May 22, 2015

Soonman KWON, Ph.D.

Professor and Former Dean, School of Public Health Seoul National University, Korea

President-elect, Korean Health Economic Association

President, Korean Gerontological Society

Kwon: Trends in HC FInancing

Disclaimer: The views expressed in this paper/presentation are the views of the author and do

not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board

of Governors, or the governments they represent. ADB does not guarantee the accuracy of the

data included in this paper and accepts no responsibility for any consequence of their use. Ter

minology used may not necessarily be consistent with ADB official terms.

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1. Resource Generation

Low economic growth and huge informal sector, along with high OOP pay and low performance of public providers

- Economic development does not necessarily lead to (formal sector) employment, either

- Contribution-based financing and implicit cross-subsidy from the formal to informal sector may not work well -> Need to use (income or consumption) tax, too

- Risk of top-down approach (covering the formal sector first) of SHI

- Regressivity of consumption tax (e.g., Ghana) or progressivity of income tax?


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Health Expenditure as a % of GDP and Financing Mix in Asia and the Pacific

Source: WHO, 2011 Kwon: Trends in HC FInancing

HC Fin in Low and Middle-income Countries

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Kwon: Trends in HC FInancing 5

2. Challenges of the Informal Sector

Without government subsidy to the poor and informal sector, universal coverage is very difficult through SHI

- Full subsidy to the poor

- Full or partial subsidy to the informal sector

E.g., China, Mongolia vs. Philippines, Vietnam

Premium contribution of the informal sector

- Boundary between the informal sector and the poor is blurred in many low-income countries

- High cost of premium collection

- Funds from the premium of the informal sector is usually small

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3. Role of Service Delivery

UHC requires a infrastructure of service delivery and health workers to provide quality health care

Efficiency in service delivery makes it less costly to achieve UHC and is a key to financial sustainability

- Crucial role of primary care for cost-effective health care delivery

Health insurance reduces financial barrier to health and increases demand, which can increase the supply of private sector delivery (often big hospitals):

- Over-specialization of medical providers?

- Fiscal autonomy of public hospitals: pros and cons

- Passive privatization -> Good news and bad news


4. Pooling: Single Payer/Purchaser

Single insurer system is more efficient and equitable

Single Purchaser

- Single purchasing through uniform benefits package and provider payment across multiple schemes: potential political costs, vested interests (those who currently enjoy generous benefits)

- Pooling of SHI and tax financing, in the case of public hospitals

-> incentive for the Ministry of Health or the relationship between MoH and insurance agency?

7 Kwon: Trends in HC FInancing

5. Purchasing and Payment System

Role of purchasing

- SHI or demand-side financing can contribute to the efficiency of public providers

- Need financial autonomy of public hospitals to maximize the purchasing power

- In many rural areas of low-income countries, there is little competition among providers (i.e., little choice of providers) -> challenges to effective purchasing

Provider Payment

- Prevalence of FFS: huge demand inducement

- Capacity issues in the implementation of prospective payment system (e.g., DRG-based payment)


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6. Benefits Package

The decision on which services to cover at which level of patient cost sharing should be based on objective criteria through a transparent process

- Economic evaluation (HTA: H Technology Assessment)

- Inherently priority setting process associated with value judgment: cost-effectiveness alone is not enough

Pharmaceuticals

- Major source of OOP pay in many LICs

- Role of HC financing in production, distribution, benefits decision (listing), pricing of medicines


7. Governance of HC Financing System Strong role of a single ministry can avoid the potential

coordination problem across ministries, and help health insurance serve the goal of health policy

Dilemma - When the majority of hospitals are public, MoH as a

purchaser may not be effective: no separation of purchasing and (service) provision

- Independent HI agency working closely with MoH: Korea, Taiwan, Japan, Philippines - Social security agency: Vietnam (PM), Mongolia (MoL) - MoLW (formal sector) and MoH (informal sector): China


8. Challenges of Population Aging

Health systems in LICs are not well placed to respond to population aging and an increase in NCDs

- Financial barrier for older people to access care

- Overreliance on hospital care from primary to long-term care, exacerbated by weak gatekeeping and referral system

- Most countries have no long-term care system, beyond hospitals and the family

- Expenditure on medicines is excessive, due to over-prescription and inefficient procurement -> Impact on older people who tend to rely more on medication


Old-Age Dependency (65+/(20-64))

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Proportion of Countries in which NCD-Related Services and Treatments are covered by Health Insurance

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Source: WHO, Global Status Report on Noncommunicable Diseases 2010, Geneva: World Health Organization, 2011

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School of Public Health, Seoul National University

WHO Collaborating Center for Health System and Financing

Secretariat, (WHO-OECD) Asia Pacific Network for Pharmaceutical Policy and Financing

KOICA: Health Insurance in Vietnam, Nepal, etc.

KOFIH

- Health Insurance in Ghana, Ethiopia

- Short-term Training for officers in NHIA of Ghana and Ethiopia

- Short-term Training for MOH officers in Indonesia, Ecuador, Peru, Paraguay, Tanzania

NHIS and HIRA: One-year Training of Senior Officers

Ministry of Finance: Health system review of Myanmar, Algeria


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THANK YOU !!!

Prof. Soonman KWON

[email protected] (Seoul National Univ.)

http://plaza.snu.ac.kr/~kwons (Homepage)

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Trends in Health Financing in LMICs