Best Practices in Healthcare Financing: Sri Lanka Case

Ravi P. Rannan-Eliya

ECOSOC Annual Ministerial Review – Regional Ministerial Meeting on Financing Strategies for Health Care

16-18 March, 2009

Colombo, Sri Lanka

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WB Good Practices in Health Financing

Low healthcare spender

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. . . yet good health at low cost

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Good financial protection

. . . despite significant out-of-pocket spending

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Formative origins in 1930s• Democracy in 1931

– Made government accountable to people

– Income tax introduced

– Free education

• Autonomy from foreign influence– Self-rule with freedom to find our own way

• Adequate resources– Relatively good tax base

• Economic crisis and epidemics– Impact of 1930s Global recession and 1934 Great

Malaria Epidemic

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Consequences

• High priority given to risk protection– High allocation of budget to inpatient care

and hospitals (>75%)

• Emphasis on physical access over consumer quality– Extensive network of rural facilities– Pro-poor government spending

• Removal of financial barriers– Abolition of user fees (1951)

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Increase in public provision

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. . . despite falling health budgets

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Made possible by 2-3% annual increases in efficiency

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Yet Sri Lanka is not a NHS system

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but a third model

• Developing countries cannot afford UK NHS (“Beveridge”) model– Cost of government financing free care for all: 5-8% of GDP– Actual government budgets: 2-3% of GDP

• So only able to pay for 40-60% of overall needs through public financing– Typical outcome is that limited public services are captured

mostly by rich, leaving poor without services– Rationing through spatial barriers, or informal costs

• Sri Lanka has solved this by successful mix of public and private financing and provision– Public services universal but used more by poor– With public spending focusing on insurance function

Sri Lanka’s public-private mix

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With self-selection of rich into private sector

Bangladesh

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Q1 Q2 Q3 Q4 Q5

Public Private

India

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50

60

Q1 Q2 Q3 Q4 Q5

Sri Lanka

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40

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Q1 Q2 Q3 Q4 Q5

Malaysia

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40

50

60

Q1 Q2 Q3 Q4 Q5

Indonesia

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40

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60

Q1 Q2 Q3 Q4 Q5

Hong Kong

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40

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Q1 Q2 Q3 Q4 Q5

Use of public and private inpatient services by income quintiles

Key Messages

• Accountability to people is critical

• Government must provide insurance through hospital care

• Improving efficiency is critical for expanding coverage

• Never give up on public sector

• Manage the financing gap by prudent use of voluntary private care

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