Overview of Health Financing

1
Overview of Health Financing

• EAP Regional Seminar on Health Financing
• Bangkok, Thailand, February 2008
• Fadia Saadah, World Bank

2
Outline of Presentation

• Demographic and epidemiological trends
• Health spending patterns
• Health financing functions
• Challenges/lessons

3
Demographic and Epidemiological Trends
4
Demographic Transition Underway Working Age and
Elderly Populations Will Grow Rapidly
5
Future GDP Growth in EAP Looks Robust
Source World Bank 2007.
6
NCDs and Injuries Represent a Major Share of
BOD(Disease Burden Distributionby Select World
Bank Region, 2001)
Percent
Note Numbers are rounded. Source Disease
Control Priorities in Developing Countries,
second edition, 2006, Table 4.1
7
Most EAP Countries Do Well on Child Mortality
Given Their Income and Health Spending Levels
8
But Maternal Mortality Results are More Mixed
9
Health Spending Patterns
10
Health Expenditures Across Regions, by Source of
Financing, 2005
11
Public Health Expenditures by Source of Financing
12
Total Health Expenditures by Source of Financing
Source Database of the Asia-Pacific National
Health Accounts Network data for recent years
13
Public Share of Total Health Spending is
Generally Low
14
Out of Pocket Spending as a Share of Total Health
Spending is High Relative to Other Comparable
Income Countries
15
Catastrophic impact of health spending
Source EQUITAP study
16
Large OOP Share is Related to High Incidence of
Catastrophic Health Spending
Source Equitap study
17
Health Financing Functions
18
Health Financing Functions and Objectives

• Functions

• Objectives

Revenue collection
raise sufficient and sustainable revenues in an
efficient and equitable manner to provide
individuals with a basic package of essential
services which improves health outcomes and
provides financial protection and consumer
satisfaction
Pooling
manage these revenues to equitably and
efficiently create insurance pools
Purchasing
assure the purchase of health services in an
allocatively and technically efficient manner
Source Gottret and Schieber, Health Financing
Revisited, World Bank 2006
19
Equity Remains an Challenge in EAP (1)
Source Equitap study
20
Equity Remains an Challenge in EAP
21
Indonesia - Wide Variation in Per Capita Health
Spending Across Provinces
Source World Bank 2006
22
(No Transcript)
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What do We Mean by Risk Pooling?
Resource endowment
Resource endowment
Resource endowment
Health risk
Income
Age
24
Fragmentation in Health Financing

• In many countries in the region, health financing
  is fragmented
• Different financing mechanisms for different
  groups or sectors of the economy
• Thailand Civil Service Medical Scheme and Social
  Security Scheme for formal sector UC scheme for
  informal sector
• China Basic Medical Insurance (BMI) for urban
  formal sector New Cooperative Medical Scheme
  (NCMS) for rural sector
• Laos Civil Service and Social Security Schemes
  for formal sector CBHI and other schemes for
  informal sector
• Fragmentation can also be geographic
• China Both BMI and NCMS are based on city- or
  county-wide risk pools
• Several countries considering health financing
  reforms introducing new sources of financing and
  management mechanisms
• fragmentation issue needs to be considered early
  in design phase

25
Universal HI Thailand
TAX
2001
1990
gt50 yrs.
UC
CSMBS
SSS
Contribution
48 mil.
7 mil.
7 mil.
NHSO
MOF Comptroller
SSO
Capitation DRG
Capitation DRG
FFS
Insurees, Right holders
Services
Public Private Providers
26
Why is Fragmentation a Problem?

• Administrative inefficiency
• Duplication of tasks and dispersion of scarce
  capacity
• Lack of portability ? reduced labor market
  mobility
• Difficult to implement cross-subsidization and
  achieve equity goals
• Reduced purchasing power and difficult to
  create coherent incentives for providers
• E.g. different payment systems / rates for
  different schemes

27
What can be done about fragmentation

• Joint / coordinated management systems and
  provider payment arrangements
• On the agenda in many countries, but
  institutional and political barriers
• Unification of schemes
• E.g. integration of health insurance funds in
  South Korea in 2000
• Politically challenging
• Risk-pooling at higher geographic level
• Trend towards risk pooling at provincial level
  for pensions in China not yet for health

28
Efficient Purchasing is Essential

• Will payments be based on results?
• What care will be produced?
• How will care be produced? What about quality?
• To whom will care be offered?
• What kinds of care and how much will consumers
  demand/access?
• How will will providers be paid and/or consumers
  reimbursed?

Source Modified from Rena Eichler, WB, 2003
29
Higher Public Spending on Health Does Not
Necessarily Mean Better Health Outcomes
Public spending and child mortality rate are
shown as the percent deviation from rate
predicted by GDP per capita Source Spending and
GDP from World Development Indicators database.
Under-5 mortality from Unicef 2002, WDR 2004
30
Financing Challenges/Lessons

• There is no one right financing model.
• System financing must be sustainable
• LICs face difficult tradeoffs between financing
  essential services and providing financial risk
  protection -- prioritization is critical.
• Important to address absorptive capacity and
  ability to finance from domestic resources future
  recurrent and capital costs.

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Financing Challenges/Lessons

• Many countries trying to achieve universal
  coverage, reduce fragmentation, and improve
  efficiency. However, key is the impact specific
  model is of secondary importance.
• Health Financing models need to take into account
  the level of income, rate of growth and
  institutional and administrative capacity.
• Health Financing reforms need to pay great
  attention to political economy dimension also
  key.
• Again, models need to be tailored to individual
  countries

32
Fiscal Space is Needed
Budgetary room that allows a government to
provide resources for a desired purpose without
any prejudice to the sustainability of its
financial position

• Estimates of revenue effort may suggest that an
  additional several percent of GDP could be raised
  through domestic revenue measures.
• Additional grants from donors are unlikely.
• Spending efficiency can be improved.
• Macroeconomic and debt management may suggest
  that new borrowing over the period should be
  limited.
• Seignorage (govt prints money which it loans to
  itself) is yet another, but generally limited,
  mechanism for creating fiscal space.

Source World Bank, PREM, 2007.
33
Financing Decisions Involve Difficult Trade-offs
Political Criteria
Efficiency
Health Outcomes Financial Protection Consumer
Satisfaction
Affordability
Equity
Sustainability
34
Key Messages

• Macroeconomic situation provides good opportunity
  to increase financial protection and think about
  health financing reforms
• Increasing role of private sector models need to
  take that into account ensure coordination and
  governance
• Need to increase efficiency in spending in the
  region/Address fragmentation