drivers of health spending growth and the sustainability of three major social health insurance...

Drivers of Health Spending Growth and the Sustainability of Three Major Social Health Insurance

Programs in the Long Run

Junqiang LIU, ProfessorSYSU

[email protected]

Combined coverage

Growth Trend of THE

If this trend holds-------

THE is predicted to reach:RMB 10326 billion in 2020, RMB 53136 billion in 2030 ,RMB 273429 billion in 2040.

Sustainability

① Looking back: health cost growth in the past three decades.

② Look beyond: what will happen to BHIE, BHIR and NCMS?

③ Policy options: How effective are they?

1. Dynamics of health cost growth

• Decomposition method• Pt+1 * Qt+1 – Pt * Qt

• = (Pt+1 * Qt+1 – Pt+1* Qt) + (Pt+1* Qt – Pt * Qt) • = Pt+1 * (Qt+1 – Qt) + (Pt+1 – Pt) * Qt

• = Pt+1 * ΔQ + ΔP * Qt

Measurements

• Scope of research: Chinese hospitals • Price: the average cost of inpatient and

outpatient services as their prices. • Utilization: the number of outpatient services

provided by hospitals divided by population. • We adjust the inflation using the consumer

price index, and all amounts are presented in 2012 RMB.

Proportion of medical spending paid to hospitals in THE

Inpatient services

Outpatient services

Average utilization levels

Explanations

• 1. health insurance coverage• (1) rural areas• (2) urban areas• 2. health reform:• (1) financial incentives• (2) government contribution to hospitals• (3) compensation method

Proportion of uninsured people, %

Year Urban Rural Overall

1993 27.3 84.1 69.9

1998 44.1 87.3 76.4

2003 50.4 79.0 77.9

2008 28.1 7.5 12.9

Source: Center for Health Statistics and Information of Ministry of Health, 2004, 2010.

Structure of hospital revenues

Composition of outpatient service spending

2. Why Actuarial Projection?•1. Simulating & estimating the cash flow of basic health insurance fund in the future and proving warning for the health insurance fund.•2. If the health insurance fund will incur surpluses in the future, the government can adjust the policies in advance and estimate the impact of each policy.•3. Doing actuarial projection can ensure the solvency of health insurance fund and improve the sustainability of health insurance system.

Actuarial Hypothesis•1. The starting age for participating in BHIE, BHIR and NCMS are set at 20, 0 and 0 respectively. The maximum age for all three programs is set at 100.•2. The retirement ages are set at 60 for males and 55 for females.•3. The administration cost of the three programs is covered by governmental budget.•4. We assume that BHIE has a block model design, which means that the medical savings accounts (MSAs) cover outpatient costs and social pooling funds cover inpatient costs. In this study, we only analyze the social pooling funds of BHIE. Similarly, we only consider the social pooling funds of BHIR and NCMS.•5. The reimbursement rates of the three programs are assumed to be constant at current levels. •6. Models cover a period that starts in 2013 and ends in 2060.

Actuarial Models• 1. The revenue-expenditure forecasting model• (1) That for BHIE

• (2) That for BHIR

• (3) That for NCMS

It is similar to that of BHIR

59 54

1 2, ,,

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m fx t x t ue t ur t ur tur t

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AC UR UR IP f u u

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AI UR UR P

100

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Actuarial Models• 2. Models for accumulated surpluses/deficits• (1) If the accumulated surpluses is positive

• (2) If there is no accumulated surpluses

1 (1 ) 1t t t tF F r AI AC r

2012 1

20122013

1 1t

t t m

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F r AI AC r

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Calculation of related parameters

• 1. Covered people in each insurance program• 2. Premium rate• 3. The growth rate of wage per captia• 4. The growth rate of inpatient medical

expenditure in each insurance program

Covered people• Method: cohort component method

Covered people-continued

Premium rate

• 1. BHIE: premium rate is 6.74% (real premium rate). 60% of the total premiums is going into the social pooling fund.

• 2. BHIR: premium is 322 RMB per captia in 2012. It will increase 45 RMB per year.

• 3. NCMS: premium is 308 RMB per captia in 2012. It will increase 50 RMB per year.

The growth rate of wage per captia

• 2013-2020: 8%• 2021-2030: 7%• 2031-2040: 6%• 2041-2050: 5%• 2051-2060: 4%

The growth rate of inpatient medical expenditure

• Method: “growth factor” method developed by Mayhew (2000)

Financial status of BHIE

Year Revenue ExpenditureCurrent-year

surplusAccumulated

surplus

2013 465 371 95 516

2020 1068 950 117 1416

2024 1428 1453 -25 1613

2030 2172 2722 -550 -125

2035 2973 4300 -1327 -5045

2040 4079 6619 -2540 -15138

2045 5121 9490 -4369 -32967

2050 6255 13261 -7005 -62363

2055 7478 17423 -9945 -105911

2060 9122 22495 -13374 -165622

Financial status of BHIR


surplusAccumulated

surplus

2013 71 53 17 94

2020 105 87 19 245

2027 160 160 -0.37 328

2030 181 204 -24 288

2036 220 314 -93 -76

2040 244 410 -165 -622

2045 276 543 -267 -1749

2050 308 703 -395 -3454

2055 334 868 -534 -5847

2060 354 1060 -706 -9018

Financial status of NCMS


surplusAccumulated

surplus

2013 231 217 14 99

2020 445 412 32 353

2024 553 567 -14 384

2029 672 839 -167 -91

2035 788 1268 -480 -2120

2040 860 1725 -866 -5631

2045 904 2183 -1279 -11160

2050 921 2679 -1757 -18966

2055 913 3090 -2177 -28996

2060 885 3472 -2587 -41114

Policy options• 1. Postponing retirement age• 2. The integration of MSAs and pooling fund• 3. Adjusting contribution policy (including

retirees as contributors to BHIE and increasing premium rate)

• 4. Abolishing the one-child policy• 5. Extending coverage of BHIE, BHIR and

NCMS• 6. Adjusting interest rate policy

Postponing the retirement age

Postponing the retirement age

Proposal

First year with

negative cash flow

First year with deficits and amounts (RMB billion)

Implications

Delay (years) of negative cash flow

Delay (years) of deficit

occurrence

Reduced deficits (RMB

billion) and percentage changes in

2060

Scenario 1 20262033

(151746)2 3

-13876(-8.38%)

Scenario 2 20282035

(137171)4 5

-28451(-17.18%)

Scenario 3 20302038

(123078)6 8

-42544(-25.69%)

The integration of MSAs and pooling fund

Proposal

First year with

negative cash flow

First year with

deficits and

amounts (RMB billion)

Implications

Delay (years)

of negative cash flow

Delay (years) of

deficit occurrence


billion) and percentage changes in

2060Combining MSAs and social pooling fund

20282035

(163187)4 5

-2436(-1.47%)

Including retirees as contributors to BHIE

Proposal

First year with

negative cash flow

First year with deficits and


Implications



Reduced deficits (RMB billion) and percentage

changes in 2060

Retirees: 1% 20252031

(155514)1 1

-10108(-6.10%)

Retirees: 2% 20262033

(145402)2 3

-20220(-12.21%)

Retirees: 3% 20272034

(135284)3 4

-30339(-18.32%)

Retirees: 4% 20282035

(125159)4 5

-40463(-24.43%)

Retirees: 5% 20292037

(115026)5 7

-50596(-30.55%)

Retirees: 6% 20302038

(104882)6 8

-60740(-36.67%)

Retirees: 6.74%

20312040

(97368)7 10

-68254(-41.21%)

Retirees and working

enrollees: 9.3%

20472061(-229)

23 31-165851

(-100.14%)

Increasing premium rate-BHIE

Proposal

First year with

negative cash flow



Implications



Reduced deficits (RMB billion) and

percentage changes in 2060

Increase: 1% 20282036

(138404)4 6

-27218(-16.43%)

Increase: 2% 20322041

(111035)8 11

-54587(-32.96%)

Increase: 3% 20352046

(83435)11 16

-82187(-49.62%)

Increase: 4% 20402051

(55522)16 21

-110100(-66.48%)

Increase: 5% 20432056

(27208)19 26

-138414(-83.57%)

Increase: 5.95% 20462061(-195)

22 31-165817

(-100.12%)

Increasing premium rate-BHIR

Proposal

First year with

negative cash flow

First year with deficits and amounts

(RMB billion)

Implications





Increase by RMB 10 per year

20312040

(7278)4 4

-1740(-19.29%)


20352045

(5523)8 9

-3495(-38.76%)


20382050

(3747)11 14

-5271(-58.45%)


20412055

(1942)14 19

-7076(-78.47%)


20442060(100)

17 24-8918

(-98.89%)


20442061(-87)

17 25-9104

(-100.96%)

Increasing premium rate-NCMS

Proposal

First year with

negative cash flow



Implications






20282035

(34570)4 6

-6522(-15.87%)


20312040

(27997)7 11

-13096(-31.87%)


20352045

(21352)11 16

-19740(-48.04%)


20382050

(14613)14 21

-26479(-64.44%)


20402055

(7759)16 26

-33334(-81.12%)


20432060(761)

19 31-40331）(-98.15%)


20442061(-657)

20 32-41750

(-101.60%)

Abolishing the one-child policy

Program

First year with

negative

cash flow

First year with deficits

and amounts

(RMB billion)

Implications



Reduced deficits (RMB billion)

and percentage changes in 2060

BHIE 20242030

(150800)0 0

-14822(-8.95%)

BHIR 20332042

(82066)6 6

-8110(-8.99%)

NCMS 20242030

(426275)0 1

15352(3.74%)

Extending coverage of BHIE, BHIR and NCMS

Program

First year with

negative cash flow

First year with

deficits and


Implications


Delay (years) of negative cash

flow


billion) and percentage

changes in 2060

BHIE 20242030

(166298)0 0

676(0.41%)

BHIR 20302039

(7853)3 3

-1164(-12.91%)

NCMS 20242029

(43317)0 0

2224(5.41%)

Adjusting interest rate policy

Program

First year with

negative cash flow

First year with

deficits and


Implications


Delay (years) of negative cash

flow


billion) and percentage

changes in 2060

BHIE 20242031

(165278)0 1

-344(-0.21%)

BHIR 20272037

(8922)0 1

-96(-1.06%)

NCMS 20242030

(41011)0 1

-82(-0.20%)

drivers of health spending growth and the sustainability of three major social health insurance...

Documents

qt pt

health statistics

health reform

health spending growth

insurance program2

social pooling funds

social pooling funds

actuarial projection