Dr Aviva Ron

-Senior Consultant

Public health and social health insurance-

The target is universal coverage

We are looking for the optimal health care financing strategy to reach that target

In the past:Government was responsible for health care - dual functions: Mandatory Regulation of health/health services Financing and provision of services

Health care was “free” in public facilities

In the present:Changing demography, health care costs (medical technology) can mean that Government needs more than it’s own

revenues. “Free” health care financed by government may then be

limited to what government can afford, and is willing to allocate for health care.

In most developing countries:Government spending on health is low

User fees are gradually introduced in public facilities –but do not cover all current expenditures

External funds are often the major source of funding Covers support to Ministry of Health to

specific facilities and programmesCovers some health care for the poor

Household out-of-pocket spending at the time of use becomes the major source of payment

And in periods of economic crises –less money is available for health care at government and household level

Low-Income Countries HaveWeak Capacity to Raise Revenues

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Per capita GDP (Log scale)

10,000 100,0001,000100

Governments in many countries often raise less than 5% of GDP in public revenues; and

Total health expenditure (THE) per capita: < 10$ per capita in 13 countries 10-20$ in 25 countries 20-50$ in 28 countries > 2000$ in 16 countries Norway and Switzerland >$4000 USA >5000$ Commission on Macroeconomics and

Health – recommended a minimum of $35 per capita.

Cambodia 86.2 Percent Congo DR 80.2 “ Guinea Bissau 80.2 “ “ Lao PDR 75.5 Malaysia 73.8 Mongolia 91.1 “ Philippines 78.2 Saudi Arabia 28.6 “ Tanzania 81.1 “ Trinidad & Tobago 72.6 “ Turkey 69.9 Viet Nam 74.2“

Governments introduce user charges in public facilities to generate revenue into their own health care facilities

Governments promote private health services:To relieve the public financial burdenTo reduce provision of public servicesTo respond to changes in patient

preferencesBut - often without adequate regulation!

Governments look for more external aid, without adequate concern for sustainability

Total health expenditure is less than 5% GDP

Out-of-pocket spending reaches 70% of totalhealth expenditure (THE)

Around 10% of the population is covered by prepayment and risk-sharing schemes

Vulnerable populations have no assured social assistance/safety nets to access health care

Analyse the current situation regarding revenues and expenditures on health care

Improve efficiency in health services – avoid duplication, rationalize where appropriate, through planning based on agreed policies and sound information

Look for more stable/sustainable funding sources for all population sectors, including the vulnerable populations

Define the goals in a reasonable time frame

Reach an appropriate level of health spending by government, through efficiencies and investment in health

Keep out-of-pocket spending below 30% of total

Cover at least 90% of the population by prepayment and risk pooling schemes

Cover almost 100% of the population through social assistance/social safety nets

Basically there are three options:1. Increase in government budget for “free” health care

from general taxation revenues – and/or more external funds

2. Household financing - out-of-pocket payments Direct payments of user fees to public providers as well as user fees to private (for-profit) providers

3. Prepayment - health insurance schemes with risk-poolingContributions paid by workers, employers, government, or by the household Mechanisms to cover the non-contributing/vulnerable populations through risk-pooling schemes - Moving from charity to equity

The strategy will usually be a mix of at least 2 of the 3

These options differ with respect to the:

• Stability, equity and efficiency

• Fairness of financing and cost-sharing by the population

• Risk sharing and fund pooling

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How much is now spent on health care?How much is spent by government?Can government spend more on health?

What are the sources of government revenue?Income tax of registered enterprises and workers – how many earners pay income tax? - how large is the unregistered /informal economy? Property and other taxesRevenue from service taxes – including state-owned authoritiesRevenue from natural resources/other sources

If the tax base/government revenue are growing: Are there competing social sector demands on tax revenues? Should priority be given to health services? Or other social services/public goods?Does increased public expenditure fit current economic reform measures?

Which health services should government give priority to– public or personal,

infrastructure and equipment, training?

To what extent can/should the government rely on external funds for health care?

If the user fees are high: - they may deter parts of the population (especially the poorest) from using health care; - they may lead to delays in seeking care; - direct payment through user fees may encourage unnecessary or inappropriate provision of services (lack of controls between provider and consumer/patient).- the fee (set amount) may be regressive - higher burden for lower income households- families may fall below the poverty level

If the fees are low – (even below the cost of services)- The yield is low and may not even justify

collection costs

If there are exemptions from fees in public facilities :- "unjustified" exemptions are encouraged- exemptions may not be respected by different providers, different levels of care - exempted patients may not be welcomed as there is no remuneration for these patients!

The protection which society provides for its members through a series of public measures, against the economic and social distress that otherwise would be caused by the stoppage or substantial reduction of earnings resulting from sickness, maternity, employment injury, unemployment, invalidity, old-age and death.

- To ensure greater stability in funding for health care - To be more equitable and reduce poverty, if the mechanisms truly spreads risks of illness and the subsequent health care costs throughout the community:

– To avoid high and unpredictable payment – To enable fairness of financing, and– To reach solidarity and optimal pooling in the

population– To provide revenue for under-funded public

health facilities

Social security systems who appreciate the value of adding health care as a short-term benefit – and potential for savings in disability allowances

Employers – faced with increasing burdens to cover occupational illness and accidents: Private commercial insurance is too

expensive Need to deal with non-work related illness

and accidents when these are not covered by other sources

Can be more efficient and cost-effective:Pooled funds enable more efficient purchasing of health services through negotiations with providers for populations – not for individuals

Negotiated and predictable payment to providers can encourage provider efficiency opportunities

Protection against the hazards of paying for services:

When the time of use is usually unpredictable

When the volume of service and costs are unpredictable

When the user has limited capacity to control costs

When income may be reduced due to ill-health Patient and family members

When the financial burden of the health care payment at the household level may require the sale of assets, and sources of household income

The burden may be too high for individuals or families

Family structure/composition is changing, priorities and responsibilities are changing

Some families have multiple needs, both acute and chronic

Savings cannot provide the solution and have other purposes in current socio-economic conditions

Social insurance – requiring contributions from households/insured persons

Social assistance – protected by the state for those who cannot contribute from their own incomes