Rich-Poor Differences in Health Care Financing · rich to poor Poor Rich $ $ Cross subsidy from...

Role of Communities and thePrivate Sector

Alexander S. PrekerWorld Bank

October 28, 2003

Rich-Poor Differences inHealth Care Financing

Revenue Pooling Resource AllocationCollection or Purchasing (RAP)

Flow of Funds Through the SystemPr

ivat

ePu

blic

Taxes

Public Charges

Mandates

Grants

Loans

PrivateInsurance

Communities

Out-of-Pocket

PublicProviders

PrivateProviders

Service Provision

GovernmentAgency

Social Insurance orSickness Funds

Private InsuranceOrganizations

Employers

IndividualsAnd Households

• Collecting Pre-Paid Revenues

• Pooling of Funds and Sharing of Risks

• Allocating Resources and Purchasing

Origins of Rich-Poor DifferencesIn Financing Child Health

• Collecting Pre-Paid Revenues

• Pooling of Funds and Sharing of Risks

• Allocating Resources and Purchasing

Origins of Rich-Poor DifferencesIn Financing Child Health

Low-Income Countries HaveWeak Capacity to Raise Revenues

Tota

l Gov

ernm

ent R

even

ues

as %

GD

P� The tax structure in many

low-income countries isoften regressive.

0

20

40

60

80

100

Per capita GDP (Log scale)10,000 100,0001,000100

� Governments in manycountries often raise lessthan 5% of GDP in publicrevenues; and

Low Income Pattern: Direct ChargesRevenue Pooling Resource AllocationCollection or Purchasing (RAP)

Priv

ate

Publ

ic

Taxes

Grants

Out-of-Pocket

Service Provision

Total Expenditure on Health CarePercent of GDP

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Mozam

bique

Ethiopia

Uganda

Rw

anda

Kenya

Average

Zambia

Tanzania

Malaw

i

South Africa

HE % of GDP

Public Expenditure on Health CarePercentage of Total Public Expenditure

0%

2%

4%

6%

8%

10%

12%

14%

Rw

anda

Mozam

bique

Uganda

Kenya

Ethiopia

Average

Tanzania

Malaw

i

Zambia

South Africa

PHE % Tot.Govt EXP.

• Collecting Pre-Paid Revenues

• Pooling of Funds and Sharing of Risks

• Allocating Resources and Purchasing

Origins of Rich-Poor DifferencesIn Financing Child Health

What do We Mean by Pooling?

AgeR

esou

rce

endo

wm

ent

Health risk

Res

ourc

e en

dow

men

t

Cross-subsidy fromlow-risk to high-risk

Lowrisk

Highrisk

$

$

Income

Res

ourc

e en

dow

men

t

Cross-subsidy fromrich to poor

PoorRich

$

$

Cross subsidy fromproductive to non-productive

part of the life cycle

Productive

Non-produc

tive

$

$

Low Income Patterns: FragmentationRevenue Pooling Resource AllocationCollection or Purchasing (RAP)

Priv

ate

Publ

ic

PublicProviders

PrivateProviders

Service Provision

Less Pooling of Revenues inLow Income Countries

Share of world’s 1.3 billion living onless than US$1 day indicated by

size of blue bubbles

0

1

2

3

4

5

6

7

8

9

10

1 500 999 1498 1997 2496 2995 3494 3993 4492 4991 5490 5989

HH

exp

endi

ture

as

mul

tiple

of

PL

Pov line = 1789870 dongs/day Pre OOP HH incomePost OOP HH income

Out-Of-Pocket (OOPs) ExpenditureAnd Poverty Without Risk Sharing

0 5 10 15 20 25 30 35 40

KERALA

TAMIL NADU

KARNATAKA

ANDHRA PRADESH

HARYANA

ORISSA

MAHARASHTRA

ALL INDIA

NORTH EAST

WEST BENGAL

MADHYA PRADESH

GUJARAT

RAJASTHAN

PUNJAB

UTTAR PRADESH

BIHAR

Percent Falling Into Poverty

Hospitalization Causes ImpoverishmentSupply Side Subsides are not Enough

• Collecting Pre-Paid Revenues

• Pooling of Funds and Sharing of Risks

• Allocating Resources and Purchasing

Origins of Rich-Poor DifferencesIn Financing Child Health

Benefit Incidence: The Rich Get More Public Benefits(All India, 1995-96)

10.1%13.4%

17.8%

25.6%

33.1%

0.0%

10.0%

20.0%

30.0%

40.0%

Poorest20%

2nd Middle 20% 4th Richest20%

Income Quintiles

Shar

e of

the

Publ

ic S

ubsi

dy

• It provides financing

• It provides access to quality services

• It increases consumer satisfaction

The Private Sector is Important

Who Pays for Health in India?

Private Insurance

0%

Private Investment

3%Public-States

14%

Public-Centre4%

Private Out-of-pocket79%

Source: NSSO; CSO; 1995-96Data

Out-of-Pocket Health Payments and Household IncomeAll India (1995-96): The Poor Contribute Significantly

0.0

100.0

200.0

300.0

400.0

500.0

600.0

Poorest20%

20%-40% Middle20%

60%-80% Richest20%

Per C

apita

Priv

ate

Spen

ding

(Rs.

)

Out of Pocket to Public Facilities Out of Pocket to Private Facilities

Service Delivery: People Use Public and Private Sectors(All India, 1995-96)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Outpatient Care

Hospitalization

InstitutionalDeliveries

Antenatal Care

Immunizations

Public-Private Sector Shares

Public Private

Responsiveness:Little Satisfaction in Andhra Pradesh (2000)

But Private Sector Outperforms Public Sector

0 10 20 30 40 50

Waiting time

Doctor’s manner

Doctor’s skills

Nurse’s manner

Nurse’s skills

Explanation of care

Overall visit

Percent Satisfied or Very Satisfied

Public Private

But Without Subsides the Poor Get Less:Proportion of Institutional Deliveries, All India (1995-96)

73%

68%

63%

53%

36%

0 10 20 30 40 50 60 70

Poorest 20%

20%-40%

Middle 20%

60%-80%

Richest 20%

Percent of Births Delivered at Health Facilities

Public Private

• Increased Targeting of Public Resources

• Increased Private Sector Participation

• Increased Financial Protection

• Increased Subsides for the Poor

• Communities often Play an Important Role

Urgent Need for ChangeAt the Global Level

The End