Global Health Care Financing Trends:Lessons for Asian Countries

Ajay TandonSenior Economist

Global Practice for Health, Nutrition, and PopulationWorld Bank

Washington, DC, USAE-mail: atandon@worldbank.org

Jakarta April, 2015

Global Health Financing Landscape

Large variations in health expenditures: from ~US$15 in Eritrea, DRC to over ~US$9,000 in Norway, Switzerland, USA; Indonesia: US$108.

Range: ~2% of GDP (Myanmar) to ~18% of GDP (USA); Indonesia: ~3% of GDP.

Variations also in how health expenditures are financed:<20% public in Sierra Leone, Georgia to >90% public in Cuba, Timor-Leste; Indonesia:~40% public.

Lao PDRCambodia

Vietnam

South AfricaRussia

JapanAustralia

United States

India

ChinaMalaysia

Brazil

Korea

Myanmar

IndonesiaPhilippines

Thailand

525

100

500

2500

US$

Source: WDI

Total health expenditure per capita, 2012

Health is a Growing Share of the Economy

Health’s share of GDP hasgenerally increased by 1%point of GDP since 1995.

Changes in income, demography, epidemiology, technology, etc., are contributory factors.

Health industry prominent source of employment and revenues (including from medical tourism, remittances, pharmaceutical/medical equipment trade).

GlobalEAP

Indonesia

12

34

56

78

Shar

eof

GD

P(%

)

1995 1998 2001 2004Year

2007 2010 2012

Source: WDI

Total health expenditure share of GDP, 1995-2012

How is Health Expenditure Financed?

Five different health financing models:

Tax-financing (Beveridge) Social health insurance (Bismarck) Out-of-pocket (OOP) Private health insurance Community-based insurance

Each model is associated with different instrumentsfor revenue generation, pooling, and purchasing ofhealth services; Rarely do we see a “pure” form existin a country.

Sources of Health Expenditure Change asIncome Rises

2%14%

Tax40%

OOP44%

SHI Private/NGO SHI7%

6%

Tax45%

OOP41%

Private/NGO

SHI21%

9% Private/NGO

Tax39%

OOP31%

SHI26%

8% Private/NGOTax44%

OOP22%

Low income Lower middle income

Upper middle income High income

Source: WHO

Total health expenditure by source, 2012

Health Financing is a Means to an End

UHC is now a prominent policy objective across most developing countries.

UHC is about ensuring that everyone has access to quality health care services as needed without facing undue financial hardship.

Health financing is not only about how much money is expended by the health sector but also about how efficiently and equitably resources areraised, pooled, and allocated to achieve desired health system objectives such as UHC.

UHC is Not About Insurance Card Distribution…

Access to family planning At least 4 ANC visits Measles immunization Improved water source Adequate sanitation Non-use of tobacco Skilled birth attendance Anti-retroviral therapy

TB case detection and treatment rate

Hypertension treatment Diabetes treatment Incidence of catastrophic

health expenditure Incidence of impoverishment

resulting from high levels of health expenditure

WHO-WB Measurement FrameworkRecommended UHC Indicators

UHC ≠ Social Health Insurance

UHC is a health system objective not a health financing model, and social health insurance is not a necessary precondition for attaining UHC.

Some countries are attaining UHC usinggovernment general-revenue supply-side financing(Sri Lanka, Malaysia, Fiji).

Many other countries are attaining UHC using hybrid models: government general-revenue demand-side financing to augment supply-side financing with or without social health insurance.

Health Financing for UHC

Reducing dependence on OOP payments – andincreasing the share of pooled sources of financing -- is key for attaining UHC.

OOP payments are regressive and inequitable and increasethe extent and risk of impoverishment resulting from largehealth care expenditures.

OECD: <20% of total health expenditures is OOP (in line with WHO recommendation); Indonesia ~45% is OOP.

Pooling share can be increased either by increasing the share of health expenditure that is general-revenue and/or mandatory insurance financed.

Health Financing Economy

Health financing reforms(e.g., social health insurance) can increase labor costs and encourage informality.

Informality and poverty canresult in higher fiscal burden(e.g., for financing UHC).

Rising health care costs –due to ageing, NCDs, technology, pharmaceuticalprices – can threaten sustainability of health financing reforms and theeconomy.

Note: Under assumption all agriculture employment is informal

Country Informal employment

(2010)

Population living on$2-a-day

Philippines 86% 43%Indonesia 78% 53%Vietnam 74% 46%Thailand 65% 5%

Government Financing is Key Even UnderSocial Health Insurance Models

Non-contributory coverage for the poor.

Expansion of coverage to the non-poor informalsector is a key challenge: voluntary enrollment even with subsidized premiums have led to adverseselection problems.

Countries such as Thailand have expanded coverageto informal sector by government general- revenuefinancing.

Health’s Share of Government Budget

IndonesiaBrazil

Thailand China

India

Rwanda

Myanmar

Philippines

010

2030

Shar

e(%

)

Share of government expenditure on health, 2012

Costa Rica

Countries with a population of less than 250,000 have been excluded Source: WHO

Some Stylized Empirical Trends

LAC highest share; SAS lowest share; EAP and SSA sharesgrowing.

Across countries, health’s share of government expenditures isgenerally higher among richer countries, albeit economic growth and conducive macro-fiscalconditions don’t always result in re-prioritization towards health.

Large variations in prioritization to health across countries even after controlling for income.

LAC

SSAECA

SAS

EAP

MNA

68

1012

1416

1995 1998 2001 2004Year

2007 2010 2012

Source: WHONote: Countries with population less than 250,000 excluded

Health share of government expenditure across regions, 1995-2012

Empirical work on prioritization has been sparse; Econometric analyses suggests that factors such as democratization, lower levels of corruption, ethno-linguistic homogeneity, and more women in public office are correlated with higher shares of public spending on health; however, these findings are not robust and are sensitive to model specification.

Efficiency considerations are important: efficiency is in itselfa source of effective fiscal space; but can also be important forattracting additional public resources.

Evidence from case studies suggests that country-specific political economy considerations are key, and that results-focused reform efforts – in particular efforts to explicitly expand the breadth and depth of health coverage as opposed to efforts focused only on government budgetary targets – are more likely to result in sustained and politically-feasible prioritization of health.

How to Re-Prioritize Health?

Two Sets of Country Examples

Vietnam: government health spending to increase at a higher rate than increase in total government expenditure. Enshrined as legal decree, resulted in increase in prioritization. Brazil: matching earmarks for health spending at both federal and local government levels.Thailand: 2001 commitment to UHC, some indications that re-prioritization for health occurred concomitantly with a decline in military expenditure.

Thailand

PhhilippinesBrazil

India

Vietnam

Indonesia

05

1015

20

Sha

re(%

)

1995 1998 2001 2004 2007Year

20102012

05

1015

20

Sha

re(%

)1995 1998 2001 2004 2007

Year20102012

Source: WHO

Share of government expenditure on health, 1995-2012

Expansion in Social Health Insurance Not Always Associated with Declining OOP

2030

4050

60

OOP share of total health spending

Outpatient

Coverage

10

Per

cent

(%)

Coverage and OOP share

Inpatient

0.0

05.0

1.0

15.0

2.0

25.0

3

Inpa

tient

0

.02

.04

.06

.08

.1.1

2.1

4.1

6

Per

cent

(%)

Outpatient and inpatient utilization

Source: WHO; SUSENAS

Steady increase in proportion of population covered, especially since 2005; rise in outpatient/inpatient utilization rates but OOP share of total health spending has remained high.

1995-2011

1995 1998 2001 2004 2007 2010 1995 1998 2001 2004 2007 2010

Year Year

OOP Spending Remains High Despite RisingSocial Health Insurance Coverage in Many

Countries

OOP share

Coverage

1030

5070

90

1030

5070

90

Per

cent

(%)

1995 1998 2001 2004Year

Source: W HO

2007 2010

1030

5070

90

Per

cent

(%)

OOP share

OOP share

Coverage

1995 1998 2001 2004 2007 2010Year

Source: W HO

Philippines

OOP share

Vietnam

Coverage

1995 1998 2001 2004 2007 2010Year

Source: W HO; China Health Service Report

China

1030

5070

90

Per

cent

(%)

1995 1998 2001 2004 2007Year

Source: W HO

2010

Thailand

In Summary

Health financing is a means to an end; health financing is not only about the level of health expenditures, it is also about how resources areraised, pooled, and allocated to attain UHC.

Issues of government financing and re-prioritizationof health within the government budget are key forattaining UHC.

More focus is needed on health service coverage and financial protection, not just on how much is being spent and how many cards have been distributed.