Tor Iversen 25.01.2005 2. Health systems Literature (to be found in the compendium): Cutler, D.,2002. Equality, efficiency and market fundamentals: The

Tor Iversen 25.01.2005

2. Health systems

Literature (to be found in the compendium):

Cutler, D.,2002. Equality, efficiency and market fundamentals: The dynamics of international medical-care reform. Journal of Economic Literature 40, 881-906.

Kornai, J. and Eggleston, K., 2001. Welfare, choice and solidarity in transition (Cambridge University Press, Cambridge) 47-99.

1. Classification of health systems

2. The Norwegian system

3. Examples: Do systems matter for the provision of health care?

1. Classification of health systems

Characteristics of Health Care (according to Kornai and Eggleston):• The value attached to health• The norm of equal access• Uncertainty and the demand for insurance• Asymmetric information• Selection

– Adverse selection– Risk selection (cream skimming)

• Moral hazard• Supply-side power and monopoly• The defenselessness of the patient• Mounting costs

Many sectors have some of these characteristics – no other sector has them all


Many classification schemesFor instance: OECD (1994): The reform of health care system: A

review of seventeen OECD countries (Also in NOU 1996:5: Hvem skal eie sykehusene. Appendix)

This classification inspired by:Kornai, J. and Eggleston, K., 2001. pp 47-99.

Four dimensions:I Providers of health servicesII Financing health servicesIII The sponsor of health services provisionIV Payment system / revenue system for providers


The health care triangle

Consumer/Patient

Health Care Insurer Health care provider

The Sponsor: Regulation and redistribution


I Providers of health services

1. Organizations1.1 Publicly owned

1.2 Non profit private

Charitable foundation

1.3 Private for profit

2. Self-employed professionals


II Financing

A. State financing (from general taxation)

B. Compulsory insurance

C. Voluntary insurance

D. Direct payment by individual (out of pocket payment)

An actual country may have several of the components above.


III The sponsor of health services provision

• Requires authority to set the rules of the game

• Regulation – for instance to prevent cream-skimming by insurers

• Contribute the financing of health care (insurance)Redistribution


IV Payment system / revenue system for providers

• Retrospective systems

• Revenues equal actual costs • Fee for service• Fee per treatment• Capitation • Global/fixed budgets• No cure no pay


From Kornai & Eggleston p 72


Degree of integration

I Integration II Separation(i) (ii) (iii)

I NHS – EnglandII i Health Maintenance Organization (HMO)II ii CanadaII iii Health plan/managed care (USA)

Again, one country may have several subsystems

Sponsor

Insurer

Provider

Sponsor

Insurer

Provider

Sponsor

Insurer

Provider

Sponsor

Insurer

Provider


The Norwegian system

• Three levels of government– State– County– Municipality

Primary care• Responsibility of the municipalities• Consists of preventive services (child and school clinics, immunization etc),

nursing homes, and general practice.• Capitation/list patient system introduced from 1 June 2001• 90 per cent of general practitioners are privately practicing with a contract

with a municipality • Payment system: 1/3 patient co-payment, 1/3 capitation fee and 1/3 fee for

service.

Specialist care• Run by 5 state owned regional health enterprises from 1 January 2002• Somatic Hospitals financed 2005 by 40% fixed budgets and 60% activity

dependent revenue on average• Private specialists contract with a regional health enterprise and paid by

practice allowance, fee for service and patient co-payments


The development of health systems

Cutler:

1. The First Wave of reform: Universal coverage and equal access

2. The second wave: Controls, Rationing and expenditure gaps

3. The third wave: Incentives and competition



Does the system matter?Example 1: Level of co-payment (from Kornai and Eggleston Figure 3.2)

The optimal level of co-payment balances two types of inefficiencies

Inefficiency

0 1

Moral hazard - overuse

Too little use-Access barriers

Loss of risk spreadingIncrease in uninsured

Rate of co-payment (co-insurance rate, demand-side costsharing)

Example 2: Provider cost-sharing (from Kornai and Eggleston Figure 3.3)

The optimal level of provider cost-sharing balances two types of inefficiencies

Inefficiency

0 1

Production inefficiency

Risk selection inefficiency

Rate of supply-side cost-sharing)Cost reimbursement

Pure Capitation

Example 3: The effect of payment system on General Practitioners referral decisions (From: Iversen, T. and Lurås, H., 2000, The effect of capitation on GPs’ referral decisions, Health Economics 9, 199-210).

• The referral rate among general practitioners (GPs) varies• Is the payment system for GPs likely to have an influence on the proportion of

patients who is referred to second-level providers. • Question asked: Does a switch from a practice allowance/fee for service system in

general practice to a capitation/fee for service system have an impact on GP's referral rates?

• Two alternative payment systems for GPs are considered: 1. A fee-per-item of health services according to a fixed fee schedule combined

with a practice allowance 2. A fee-per-item of health services according to a fixed fee schedule combined

with a capitation payment depending on the number of patients on the physician’s list

• We expect the referral rate to be higher in system 2 than in system 1. Why?

• Empirical analysis supports the hypothesis

Example 4: The impact of accessibility on the use of specialist health care in Norway

To what extent is the policy goal of allocating health care according to medical need fulfilled in Norway?

Studying the impact of a person’s health relative to the impact of geographical access to specialist care.

Distinguish between public hospitals and private specialist financed by the public insurance

Data from Statistics Norway: Survey of level of living

Distribution of contracts with private specialists 2002 and distribution of population according to regional health enterprise.

Health East

Health South

Health West

Health Middle

Health North

Sum

Distribution of private specialists 48 % 18 % 17 % 10 % 6 % 100 %

Distribution of population 36 % 20 % 20 % 14 % 10 % 100 %


Empirical analysis shows that:

The use of private specialists depend on patients

education

income

geographical access (distance and capacity)

No similar effect regarding the use of public hopsitals found

Documents

Tor Iversen 25.01.2005 2. Health systems Literature (to be found in the compendium): Cutler, D.,2002. Equality, efficiency and market fundamentals: The