Health Financing Reform for UHC - World Health Organizationextranet.searo.who.int/meetings/UHC2016/Shared Documents...Kwon: HC Fin Reform for UHC 11 4. Purchasing and Payment System

1

Health Financing Reform for UHC

WHO SEARO, Delhi

April 1, 2016

Prof. Soonman KWON, Ph.D.

Chief of Health Sector Group (Tech Advisor) Asian Development Bank

Kwon: HC Fin Reform for UHC 2

I. Context of Asian Countries

Health Expenditure as a % of GDP (Asia) in 2013

3

0

1

2

3

4

5

6

7

8

Pe

rce

nta

ge

of

GD

P

Government health spendig Private health spending

Source: WHO Global Health Expenditure Database (accessed 23 March, 2016)

4

In addition to huge out-of-pocket payment

- Low economic growth and huge informal sector

- 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

- Low performance of public providers

Kwon: HC Fin Reform for UHC


Risk of top-down approach (covering the formal sector first in Social Health Insurance (SHI)):

-> May crowd-out resources from the public delivery

Should pay more attention to financial protection of the poor: Minimize the catastrophic expenditure for health and impoverishment due to illness

GOAL: Maximize the role of public pre-paid financing such as tax and SHI (Social Health insurance) and minimize out-of-pocket (OOP) payment

Concern: Over-optimism about SHI, neglect the importance of public health care delivery

6 THE: Total Health Expenditure, SHI: Social Health Insurance

Public Financing (Mix) for Health Care, 2013

Source: WHO Global Health Expenditure Database (accessed 23 March, 2016)


II. Major Issues in

Health Care Financing Reform

8

1. Challenges of Tax-based Financing in Asian Countries

Direct tax in low-income countries is not as progressive

as in high-income countries (due to tax evasion) - Indirect tax in low-income countries is not as

regressive as in high-income countries Tax financing based on local governments is likely to be

geographically inequitable due to the lack of adequate equalizing (risk sharing) mechanisms

Equity of tax-based health care financing in low-income

countries also depends on - Availability: delivery system in disadvantaged areas - Quality and responsiveness of the public delivery

system Kwon: HC Fin Reform for UHC

2. Challenges of SHI in Asia

Problem of income assessment and premium collection for the self-employed or informal sector

- Informal sector is big -> Covering the formal sector first and extending to the informal sector faces challenges

Majority of the formal sector is small business

-> Due to mandate of employer contribution, compliance is a challenge even in the formal sector

Institutional capacity of the purchaser is crucial

9 Kwon: HC Fin Reform for UHC

10

3. Crucial Role of Service Delivery and

HRH (Human Resource for Health)

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

Virtuous circle or vicious circle?

- Quality of primary care system -> Gate-keeping

-> Effective delivery system -> Financial sustainability

- Low quality of care may result in by-pass, lower

participation or higher drop outs

Health insurance reduces financial barrier to health and increases demand, which may increase the supply of private sector delivery in the long run?:

Passive privatization -> Good news and bad news


4. Purchasing and Payment System

Key Question: Purchase which services from which provider for which amount and method of payment

Role of purchasing

- SHI can contribute to the efficiency of public providers: theory and reality?

- In many rural areas of low-income countries, there is little choice of providers -> challenges to purchasing

If public providers are inefficient or of low quality, is it because of the lack of incentives or the lack of resources?

- Governments often allow public hospitals to behave like profit maximizers (i.e., abuse of financial autonomy)


4. Purchasing and Payment System (continued)

Strengthening public-sector delivery system, especially primary health care system, is a key to the quality and sustainability of financing system, regardless of tax or SHI

- Low quality primary care system: inefficient (by-pass and cost increase) and inequitable (e.g., rural area)

Financial incentives for health care providers have crucial effects on quality and cost

- Level of pay: Too low pay leads to dual practice

- Method of pay: FFS vs. Prospective payment system (capitation, case-based payment)


5. Pooling for Effective Purchasing

Single pool is more efficient than multiple pools:

lower administrative costs, greater bargaining power of the purchaser relative to providers

- Can start with multiple pools but with minimum differences in benefit package and uniform provider payment system-> Can function as a virtual single pool in terms of purchasing

- Risk adjustment across schemes, considering the enrollee characteristics/risks (gender, age) and fiscal capacity of schemes


5. Pooling for Effective Purchasing (continued)

Pooling of budget allocation and SHI reimbursement to public providers:

To maximize purchasing power of SHI agency, budget needs to be channeled to the purchaser (rather than direct allocation to public hospitals) as premium subsidy for vulnerable population

- Politics?: MoF, MoH

- Governance and accountability of HI agency?: relationship between MoH and HI agency, separation of purchasing and provision

- Fiscal autonomy of public hospitals?: pros and cons


15

6. Benefits (Service) Package

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

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

Potential Tradeoffs among population coverage, benefit coverage, financial protection

- Too generous benefits coverage and high premium may deter the extension of population coverage and has negative effects on sustainability

- Too limited benefit coverage leads to limited financial protection


16

6. Benefits Package (continued)

Benefits design issues (examples)

- Need exemption of copayment for the vulnerable

- Ceiling on OOP payment rather than ceiling on benefits

- Guaranteed access (zero copayment) for essential care

- Higher copayment for non-compliance with referral system

Benefit coverage of medicines

- Major portion of OOP payment and financial burden in low-income countries

- Procurement, price regulation, reimbursement, benefits package decisions or listing

- Should encourage generic (not brand-name) prescription Kwon: HC Fin Reform for UHC

7. Role of Government Misperception that government can much reduce its role

when SHI is introduced But the role of government is still (or even more) crucial

in SHI (e.g., subsidy, price regulation, regulation of provider behavior, etc.)

-> Need more nuanced or sophisticated intervention -> In many Asian countries, private sector in growing in

cities, but there is very little regulation of the quality and safety of the private health sector



III. Challenges of

the Informal Sector

1. Pure Contribution

Many informal sector people are poor in low-income countries

- Boundary between the informal sector and the poor is no clear

- Difficult to assess the capacity to pay

Premium contribution of the informal sector

- High cost of contribution collection

- Funds from the contribution of the informal sector is usually small: many health insurance systems charge lump-sum premium (not related to income) from the informal sector


2. Pure Subsidy

Rapid extension of population coverage

- Do not have to worry about the differentiation of poor and non-poor informal sector

Potential informalization of (formal) labor force: if formal sector contributes but informal sector are subsidized

Fiscal capacity of the government?


3. Mix of Contribution and Subsidy

Incentive for the informal sector to join

- If they join, government provides subsidy (like a matching fund)

- May have to exclude (self employed) professionals from the subsidized group

Compromise of pure contribution and pure subsidy

How to determine the subsidy level?: local context


22

* Final Thoughts *

Asian countries should

- Have a political and financial commitment

- Focus on the poor first (bottom-up approach): Financial protection for the poor

- Pay attention to the financial incentive of providers and payment systems for them

- Not neglect the empowerment of public sector delivery

(Should strengthen primary care system)

- Not copy other systems. Rather deliberate on what works, what doesn’t, and why

- Health care financing and UHC is a means, not the ends of health policy and system

