Designing Health Financing System to Achieve Universal Coverage

Health System Financing1 |

Designing Health Financing System to Achieve Universal Coverage

Designing Health Financing System to Achieve Universal Coverage

Ke Xu

Health Systems Financing

World Health Organization

November 2008, Shanghai


Universal Coverage as a Policy ObjectiveUniversal Coverage as a Policy Objective

defined as everyone having access to appropriate care when they need it and at affordable cost

implies financial risk protection andequity of access

associated with equity in financing ( contribution according to ability to pay)

Resolution "Sustainable Health Financing, Universal coverage and Social Health Insurance" May 2005. Geneva


Three Dimensions of Universal CoverageThree Dimensions of Universal Coverage


Universal Coverage Getting the Mix RightUniversal Coverage Getting the Mix Right

Revenue collection Pooling Purchasing

Collect funds (taxes or

contributions) efficiently and

equitably

Costs are shared by all and not borne by people

when they are ill

wealthy & healthy subsidize the poor & sick

Buy or provide effective health interventions

Incentives for efficiency


Revenue CollectionRevenue Collection

Sustainability

Is the money collected in an equitable way? Does the collected sufficient ?

EfficiencyEquity

How much I pay and how much others pay?

How to collect a sufficient amount of money with minimum administrative cost?


Health care services

Tax-based financing

Social health insurance

Other prepayment

schemes

Out-of-pocket payments

1. General tax or other revenue

2. Payroll tax

3. Contribution or premium

4. Direct payment

Household

External resource

Financing mechanisms

Financing sources

Natural resource revenue

Health Financing Mechanisms


Revenue CollectionRevenue Collection

Generally a mix of different types of revenue collection mechanisms co-exist:

– Tax based funding

• General taxation, earmark taxes

– Compulsory insurance

• Payroll tax and contribution

• Formal and informal sector employees

• Dependants

– Voluntary insurance


Social Health Insurance- Constrain FactorsSocial Health Insurance- Constrain Factors

•Income level and growth

•The structure of the economy

•The distribution of the population

•Administrative capacity

•Solidarity

•Stewardship


Funds PoolingFunds Pooling

How far can solidarity go ? How far can solidarity go ? – What level of cross-subsidies from rich to poor and from healthy to ill?

– Any role for supplementary or complementary health insurance ?

– Should opt-out be allowed (Latin America, Germany)?

How many pools-risk adjustment/ risk-equalisationrisk-equalisation?– One pool (Korea, Turkey)

– Multiple pools (Germany, Netherland, Switzerland…)

– Fragmentation and segmentation

How should tax-based funding be channeled? – To provider (Latin American countries)-low price services

– To insurance funds- low insurance premium

– To consumers (cash transfer)- to purchase services or insurance

.01

.03

.1.3

13

815

% o

f h

ou

seh

old

s w

ith c

ata

stro

ph

ic e

xpe

nd

iture

(lo

ga

rith

m)

3 5 8 14 22 37 61 100

out-of-pocket payment in total health expenditure % (logarithm)

OECD others

Proportion of households with catastrophic expenditures vs.share of out-of-pocket payment in total health expenditure


PurchasingPurchasing

Strategic purchasing

Provider payment mechanisms

Outpatient serviceInpatient service

DrugsHigh-tech medical equipments

Benefit package design

Differentiate cost sharing among different services and drugs

No over provisionNo over provision No over utilizationNo over utilization


By Pia Schneider: Provider Payment Reforms: Lessons from Europe and America for South Eastern Europe


The Design Features of Benefit Package The Design Features of Benefit Package

The size of benefit package

Budget constrainRisk protection

Width StructureDepth

The number of services

Cost-sharingWhat services and how much


OOP Components by Quintiles (Korea, 2007)OOP Components by Quintiles (Korea, 2007)

0%

20%

40%

60%

80%

100%

1 2 3 4 5 total

drug equipment service


Catastrophic Expenditure by Different Payments (Korea)

Catastrophic Expenditure by Different Payments (Korea)

0%

5%

10%

15%

20%

25%

30%

35%

2003 2004 2005 2006 2007

outpatient

inpatient

dental

drug


Percentage of Households Reporting Non-zero Inpatient Expenditure (Korea, 2007)

Percentage of Households Reporting Non-zero Inpatient Expenditure (Korea, 2007)

0

1

2

3

4

5

6

1 2 3 4 5 Total

quintiles

% o

f h

ou

seh

old

s


Out-of-pocket spending

Mixes of community cooperative and enterprise based health insurance, other private health insurance, SHI type coverage for specific groups and limited tax based financing

Absence of financial protection

Intermediate stages of coverage

Universal Coverage

•Tax-based financing

•Social health insurance

•Mix of tax-based and various types of health insurance

Incr

ease

prepaym

ent

Stages of Coverage and Organisational Mechanisms

Reduce

out-of-p

ocket p

ayments


How Long It Takes to Reach Universal Coverage?

How Long It Takes to Reach Universal Coverage?

Time (in years)

between first social protection

law and universal coverage

Costa Rica20

Republic of Korea

26

Japan36

UK36

Austria79

Belgium118

Germany127


SummarySummary

1. Achieving universal coverage takes time, a long-term vision is important

2. Revenue collects through equitable and efficient ways

3. Increase prepayment and reduce out-of-pocket payment

4. Improve financial risk protection through an appropriate benefit package

5. Improve service quality and control cost through a set of provider payment mechanisms.

Thank you for your attention!

Documents

Designing Health Financing System to Achieve Universal Coverage