Limitations in financing health systems

Conference “Innovations in Health Financing”

Eduardo González PierMexico City, April 2004

Central message:

How to align a financing scheme in order to achieve the objectives of health systems?

Contents

1. Responsibilities, objectives and

components of health systems

2. Alternative financing

3. Risk allocation and payment mechanisms

4. Conclusions

Responsibilities Objectives

Health

Governance

Financing

Income generation

Adequate care

Production of goods and services

Financial Protection

Responsibilities and objectives of health systems

• Prevention• Diagnosis• Treatment• Rehabilitation

Individual health care (medical attention)

• Governance• Information and

research• Community health

services

Public goods

Health Assets

Classification of health assets

• Epidemiolo-gicalsurveillance

• Environmental Services

• Group services• Community

outreach• Cooperation

during disaster

Responsibilities and objectives of health systems

Cancellation of risks

Service

Governance Health MinistriesF

ina

nc

ing

Fund raising

Vertical role alignment in accordance with each institution

Responsibilities and components Head

AffiliationRisk

grouping

Fund allocation

Plural

CommunityServicesIndividual health services

1 er N.

2 do N.

3 er N.

Level of investment in health

Total health expenditure share of GDP (2000)

Source: World Health Report 2002

0%

2%

4%

6%

8%

10%

12%

14%E

cua

do

r

Nic

ara

gu

a

Gu

ate

ma

la

Pe

rú

Mé

xico

Re

p.

Do

m

Co

sta

Ric

a

Bo

livia

Ho

nd

ura

s

Ch

ile

Re

ino

Un

ido

Esp

añ

a

Jap

ón

Au

stria

Ita

lia

Bra

sil

Din

am

arc

a

Au

stra

lia

Arg

en

tina

Co

lom

bia

Ale

ma

nia

Uru

gu

ay

EU

Public investment in health

Source: World Bank, 2000 and WHO, 2000.The GNP per capita variable was used as an approximation to the GDP per capita.

-

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

2,0 3,0 4,0 5,0 6,0 7,0 8,0 9,0 10,0 11,0

Ln(PIB per cápita)*

Gas

to t

ota

l en

sal

ud

/PIB

CRICA

COL DIN

BOL

CHIN

PERU

BRACHI

MEX

URU

ARG

ESP

RU

FRA

EUA

AUST

AUS

ALE

ITA

CAN

JAPON

Sources of pressure on a financial reform: Change and complexity

Pressures on expenditure and greater financial

needs

epidemiolo-gical transition

economic transformation

political change (democratization)

technological / organiza-tional innovation

greater role of womenin formal economy

increased level of education

urbanization

demogra-phic

transition

Contents

1. Responsibilities, objectives and

components of health systems

2. Alternative financing

3. Risk allocation and payment mechanisms

4. Conclusions

1. Taxes

pocket-money

payroll (social security)

pre-payment

Evaluation of alternatives: fund raising

local

federal

2. Private expenditure

Gasto público Pre-pago Gasto de bolsillo

Structure of health expenditure

0

10

20

30

40

50

60

70

80

90

100C

hile

EU

Uru

guay

Méx

ico

Bra

sil

Col

ombi

a

Arg

ent

ina

Per

ú

Bol

ivia

Aus

tral

ia

Can

adá

Aus

tria

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lia

Ale

man

ia

Fra

ncia

Esp

aña

Cos

ta R

ica

Japó

n

Din

amar

ca

Rei

no U

nid

o

Po

rcen

taje

Source: WHO, 2001.

Note: Public expenditure includes government expenditure, international subventions and from non governmental organizations, as well as social security funds. Source: World Bank, 2000

Fiscal revenue/GDP

50403020100

Pu

blic

ex

pen

dit

ure

in h

ea

lth

/GD

P 10

8

6

4

2

0

VEN

URU

EURU

SUI SUE

ESP

POR

PER

NORNZ NL

MEX

ITIRL

GRE

ALE

FR

FIN

CZCHCR

COL

CHI

BOL

BEL

AUSAUST

ARG

Level of investment in health

1. Equality in financing

5. Choosing capacity

3. Efficiency (allocation and system)

4. Accountability

Evaluation of alternatives: criteria

2. Meeting needs

6. Macro-efficiency

7. Political acceptance

8. Sustainability / stability (political andeconomic)

Evaluation of alternatives: sources vs criteria

Federal taxes

Local taxesPayroll taxes (social

security)

Private pre-

payment

Pocket-money

expenditureEquality in financing

Meeting needs

Allocation efficiency

++++++++

-+/---

Political acceptance

Economic stability

Political stability

System efficiency

Accountability

Choosing capacity

Macro efficiency

+++

---

+/-

+++----

--

+++

++++

-

+/-

-----

-- -

-----+/-

+/-

++++++++

+/-

-

++

++

-+++/-

++ +++

+/-++-/+

+++

+++

------------

Contents

1. Responsibilities, objectives and

components of health systems

2. Alternative financing

3. Risk allocation and payment mechanisms

4. Conclusions

Responsibilities Objectives

Health

Governance

Financing

Income generation

Adequate care

Production of goods and services

Financial protection

Responsibilities and objectives of health systems

Payment mechanisms

• General budget

• Budget by line-item

• Capitation

• Payment according to diagnosis / result (intermediate)

• Payment for services

Sources of income vs payment mechanisms

General budget

Budget by line-item

Capitation Payment according to diagnosis /

result

Payment for services

General tax

Local tax

Payroll tax

Private pre-

payment

Pocket-money

expenditure

Incentives

Mechanisms

Prevention Activity Care / quality Cost containment

General budget ++ - - +/- +++Budget by line-

item +/- - - +/- +++Capitation +++ - - ++ +++Payment

according to diagnosis

+/- ++ ++ ++

Payment for services +/- +++ +++ ---

Payment mechanisms and incentives for suppliers

Source: World Report on Health 2000, WHO

• Prevention• Diagnosis• Treatment• Rehabilitation

Individual health care (medical attention)

• Governance roles• Information and

research• Community health

services

Public goods

Healthassets

Classification of health assets

• Epidemiolo-gical surveillance

• Environmental services

• Group services• Community

outreach• Cooperation

during disasters

Public goods Health care

to the community to the individual

General budget

Budget by line-item

Capitation

Payment by diagnosis

Payment for service

Payment mechanisms vs types of health assets

Contents

1. Responsibilities, objectives and

components of health systems

2. Alternative financing

3. Risk allocation and payment mechanisms

4. Conclusions

Responsibilities Objectives

Health

Governance

Financing

Income generation

Adequate care

Production of goods and services

Financial protection

ConclusionsObjectives of health systems

Alternative financing

Conclusions: How to align a financing scheme in order to achieve the objectives of health systems?

Payment mechanisms

Incentives for service

suppliers

Incentives forservice

suppliers

Immediate results

Final objectives