National Treasury

Sustainable financing of health and social services –

good health at low cost

Mark Blecher, National Treasury, South Africa

OECD Asian SBO Network Thailand

December 19 2014 1

National Treasury

Part 1: Health and social protection spending

• Social services spending in South and SE Asia generally significantly lower than in OECD countries, although variability and some prominent exceptions

• Often lower spending buys lower inputs, outputs, outcomes and quality but some exceptions (Japan highest Asian spender has longest life expectancy in world)

• Some countries rapidly stepping up spending and changing systems e.g. China health system development

• Some countries getting very good value at low cost (Thailand health)

• Some countries performing “miracles” with almost no funding (child survival Bangladesh)

• While increasing social sector spending in Asia seems almost inevitable, how does maximise value and limit unproductive cost increases? 2

National Treasury

Health and social protection services as share of budget

3

National Treasury

Health and social protection expenditure as share of GDP

4

National Treasury

Total health expenditure per capita (US$ ppp, Asia-Pacific)

5

National Treasury

Real per capita heath spending is growing

6

National Treasury

Total health expenditure as % of GDP

• Asia -19 mean lower than OECD, some <2-3% of GDP especially public health expenditure

7

National Treasury

Public health expenditure as % of total

• Higher public spending % in OECD • Many of low health spenders rely >50% on private, mainly out

of pocket expenditure which has poor risk protection

8

National Treasury

Medicine expenditure as % of total

• High medicine spending in Asia, significant potential to control o9

National Treasury

Doctors and nurses

10

National Treasury

Part 2 – Thailand good health at low cost

• SA planning a UHC reform under banner of NHI and is considering implementing a NHI Fund

• Thailand has a widely acclaimed UHC system, with a strong UC Fund • Thailand has achieved both health improvement outcome gains

(IMR<10) and social security objectives of reducing OOP and health related catastrophic expenditure

• Achieved at low cost ; Despite UHC and purchaser-provider split both public and total expenditure levels are below SA and administration costs are <1.5%.

• SA with higher expenditure has worse outcomes and in some ways less progress (great inequity, no purchaser –provider split, less developed reimbursement systems)

11

National Treasury

Cost containment in Thai health system • Remarkably cost-efficient system - "good health at low cost"; universal

coverage, IMR<10 but government health spending <3% of GDP • Controls mainly on supply side • Strong primary care focus with saturation with health centres (1:5000) • Prevention and promotion emphasis • Capitation for primary care and OPD reimbursement (Civil servant scheme

using FFS is far more expensive) • Capped DRG system for hospital inpatient reimbursement, v little use of FFS • Low administration costs – UC Fund only 1.2% • Some fund-holding for referrals • Low wage costs (may not be sustainable) • Entry at PHC level – potential bypass fees • Single UC Fund • Central tendering/purchasing for various medicines and other items • Health technology assessment used to assess new interventions • Relatively low use of private provision • Nevertheless have managed to largely retain trust of citizens, with declining

catastrophic and out-of-pocket expenditure 12

National Treasury

Key lessons

• After looking at UC Fund in Thailand, am of view that establishing NHI Fund in SA is achievable

• (Main issue SA will need to overcome, is legislative position pertaining to powers of provinces)

• SA potentially has a lot to learn practically from Thai experience of setting up capitation and DRG systems

• Health intervention and technology assessment agency (HITAP) would be useful associated institution in SA

13

National Treasury

Site visits Thailand

14

National Treasury

Revenue raising

15

Thailand South Africa Comment

Mechanism

Mainly general taxation for UC and civil servant scheme; Social security scheme contributory tripartite (4.5%,1.5%,1.5%)

Currently general taxation; considering small surcharge on PIT or mandatory contribution or VAT increase

Rapid spending growth in UC backed by econ growth. Low growth in 2014 has led to budget cap. Reliance on one main source?

Economic growth

Thailand has had high economic growth averaging 7% pa;

SA sluggish growth over decade (2%)

Thailand introduced UC at time of low growth after Asian econ crisis

User fees

30 Baht scheme reintroduced, but not fully implemented; catastrophic spending v low. Does have bipass fee.

Free PHC. Some user charges for hospitals.

Catastrophic expenditure

Declined from 2.71% to 0.49%

Partly due to minimal user charges, but ?more importantly trust in the UC system, gradual widening of benefits

National Treasury

Pooling

16

Thailand South Africa Comment

Public social security funds

UHC (75%), Social Security (formally employed, 15%, excludes dependants, part of wider SS contributory system eg pensions); civil servant (9%) Considering NHI Fund

Gradual process of fund alignment: benefits, administration

Private/mutual funds Small -7% THE

Medical aids cover 18%, spend 42.2% of THE; cover often partial so linked additional OOP spending

CoverageVirtually 100%. >99% eligible for UC are registered with cards etc.

Although all people have access, only 18% have insurance cover; large inequities between public and private

National Treasury

UC Fund • UC Fund potentially has many practical lessons for SA, which wants to

establish a NHI Fund. • Very good working example of purchaser-provider split in middle

income country • Both cover all persons not covered by other funds • Structure of fund potentially useful for SA to understand the functional

tasks • Information systems for registration, diagnostic and procedural coding

are practical and not overly complex – make establishment in SA seem feasible

• Functioning of capitation system provides good practical lesson • Functioning of DRG system excellent practical example • Low administration costs (1.2%) impressive • Internal clinical audit processes impressive

17

National Treasury

UC Fund (2) • Dedicated funding stream for prevention and promotion activities

seems to play very important role at PHC level and is far sighted • Note progressive strengthening of fund administration, so that other 2

main schemes are starting to adopt UC Fund systems e.g. DRG, claims clearing house

• Although mainly contracting with public sector also doing some private sector contracting using standard reimbursement tools (e.g. cataracts) and willingness to contract more widely if adherence to cost (tariff) and quality prescripts

18

National Treasury

Reimbursement

Text

19

Thailand South Africa Comment

Primary care

Capitation: well established; CUP as contracting unit; Population registration system, use of ID card, UC info system well established; Use of CUP appears to facilitate integration within district level. In some cases budget holding for referrals.

Global budgets; no particular standardised system; often input based; Considering capitation for NHI but practically at early stage progress, no clear proposals yet on operational details and risk of overly complex and expensive system; current proposal of capitation payment for each clinic may be too decentralised

Very interesting to see functioning system and electronic individual based information; SA can learn practically from this

Hospital

DRG system well established and through several version Thai 5.1; Subject to global cap helpful in cost containment

No standardised system and significant inequities; DRG development has been slow; limited and non-standardised diagnostic and procedural recording and coding and info systems. No formal case mix assessment and adjustment.

Seeing this practically working in Thailand impressive and SA can learn practically from this, including IT aspects

National Treasury

Benefit package

20

Thailand South Africa Comment

Summary

Mix of general (largely undefined eg inpatient) and specific defined high cost benefits; some exclusions

No package defition in public sector, but has many clinical guidines; Private has mandatory PMBs

Institutional framework

Strong Health intervention and technology agency evaluating c-e (HITAP); UC fund pulling out specific benefits for greater attention

EDL and clinical guidelines within DOH, but little formal econ eval capacity

SA could benefit from HTA agency

Benefit management

Specific benefit mangement programmes and financial incentives under Fund, quality audits

Health programmes in DOH, guidelines

National Treasury

Provision: Primary health care

• Thai PHC system is very deep – 1 health centre per 5000 (saturated decentralised coverage) ; up to 30 community workers per clinic.

• Close relationship with local government staff and employment of public health officers enables multi-sectoral approach

• Strong community focus and outreach – one of best examples of community based PHC have seen; Community workers, home visits, profile of community

• CUP as contracting unit seems to facilitate integration at district level, with health centres and district hospitals working to common purpose and sharing funds.

• Clear focus on prevention and promotion at health centres and district hospitals and dedicated funding stream

• District hospital we visited more like large community health centre – large OPD with 30 short stay beds, doctors, small lab

• Health centres hold own bank accounts and funds; simple admin systems and are audited. Gives greater power and flexibility.

21

National Treasury

Supporting institutions (1)

22

Thailand South Africa Comment

Health technology assessment

HITAP firmly established as semi-autonomous entity; Rigorous detailed technical evaluations of new interventions and technologies;

No formal institution. Limited economic evaluation capacity; Approach to benefit package vague, Priceless project useful but small and not institutionalised.

SA could benefit from formal institution linked to HITAPand NICE; Such an agency could help inform approach to benefit package in logical way

Health promotion

Thai Health formally established as independent agency; V interesting funding model with 2% dedicated excise tax on tobacco and alcohol; Very interesting programmes in range of media. Very well funded.

Minister wants agency under President. Notes importance of promotion in chronic diseases etc. No detailed planning yet. Curently some by DOH, some by ngos eg Lovelife, Soul City

Formal agency may have advantages for South Africa, given high burden of preventible disease

National Treasury

Supporting institutions (2)

23

Thailand South Africa Comment

DRG development

Thai Equity Centre and case mix adjustment centre have developed robust country adapted DRG system. Provides sound base for UC Fund reimbursement of hospitals.

South Africa considering a price regulating authority, but private opposition. DOH little capacity to develop DRGs and slow progress

Creating institutional home for DRGs in SA might help get this compelx technical task done and implemented

Hospital accreditation

Formal independent institute in Thailand does hospital accreditation; Appears to be voluntary; From site visits does appear to be having +ve effects on quality; Informally getting mixed reports on quality

SA has recently established on Office of Standards Compliance; Current function is however not accreditation, but standards inspection. Is a private hospital accreditation body COHSASA.

SA has significant quality problems in public sector and formal quality accreditation might be useful

Policy analysis, international health

IHPP provides powerful policy, health economic and health systems analysis to support Ministry, region and beyond; CAP UHC training arm

1-2 university based policy institutes eg Centre for Health Policy (Wits)

Interesting institutional form, partly in Ministry, partly independent

National Treasury

24

National Treasury

Lessons from Thailand (UC at low cost)

• After looking at UC Fund in Thailand, am of view that establishing NHI Fund in SA is achievable

• UC Fund does appear to be a good practical middle income example for the NHI Fund MOH wants to establish in SA, with many system and structure lessons

• SA potentially has a lot to learn practically from Thai experience of setting up capitation and DRG systems

• Health intervention and technology assessment agency (HITAP) would be useful associated institution in SA

• Thai Health Foundation can provide lessons for health promotion institution SA MOH wants to set up under Presidency

25

National Treasury

Part 3: Social protection

26

National Treasury

Social protection programmes

27

National Treasury

Social protection distribution

28

National Treasury

ADB Social protection index

29

National Treasury

South Africa: social grant projection model (Rand 000)

30

Rand 000 2014/15 2015/16 2016/17 2017/18Old Age <75 35 780 39 447 43 242 46 629 Old Age >75 13 370 14 628 16 024 17 268 Old age 49 150 54 076 59 266 63 897 War veterans 6 5 4 3 Temporary disability 4 060 4 270 4 421 4 570 Permanent disability 14 813 15 698 16 630 17 487 Disability 18 873 19 969 21 051 22 057 Foster care 5 557 5 913 6 285 6 662 Care dependency 2 225 2 426 2 606 2 783 Child support 44 060 47 893 50 728 54 328 Grant in aid 315 274 303 320 Relief of distress 524 249 278 293 Total 120 710 130 804.6 140 519.1 150 342.6 Revised Budget 2015 120 702 130 093.3 139 556.4 148 934.2 (over)/underspend (8) (711) (963) (1 408)

Re-forecast with Sept data

National Treasury

Projecting social grant expenditure South Africa

• Medium term projection model • Cost = (p1*q1)+(p2*q2)+……… (p=price, =quantity) • Quantity= population*elegibility fraction*coverage eg: Elderly>60 years * 82% income eligible * 85% coverage • Adjustment factors • Audit, risk management, anti-fraud activities • Can vary cost by varying benefit design, value of grant (Minister announces

annually; elegibility criteria (population, age, income), targeted vs universal, scale-down rates

• SA social assistance system 3% of GDP, declining as coverage levels off, child population levelled off, elderly growing 3% pa

• Costing contributory social security similar but typically use actuarial assessment

31

National Treasury

Conclusion

• Health and social expenditure relatively low in Asia and likely to rise

• Design features can be critical to achieve value e.g. good health at low cost

• Controlling personnel costs • Demographic change important in social security expenditure • Planning requires detailed projection model • Consider possibility of convening Joint Finance-Health meeting;

noting OECD Health and fiscal sustainability network; WHO interested

32

National Treasury

Acknowledgements

• IHPP and Cap UHC: Drs Viroj, Walaiporn, Warisa, Angkana, Suwit, Phusit, Candyce, Saroja, Waraporn and all staff

• UC Fund: Drs Winai and Jedat, Piang and excellent team from different sections

• HITAP: Drs Yot, Inthira and other colleagues • Centre for health equity monitoring: Dr. Supasit • Staff at Amphawa district hospital, Pitsanolok regional hospital, health

centres and community workers • Thai Health Foundation • OECD: Jon Blondel, Camilla Vamalle, Francesca Colombo, Gregoire

Delagasnerie, Mark Pearson

33

National Treasury

Thank you

34