Health Care Financing

Dr. Nilar Tin

Director (Planning)

Department of Health

What is a Health System?

What are the Goals?

What are the functions?

What is a Health System?

Health systems consist of all

organizations, institutions and resources that are devoted

to producing health actions

Health system functions and goals

Functions

Service deliveryResource generation: HWF, supplies, informationFinancingGovernance and stewardship

Goals

Good health outcomesResponsivenessFairness in financing

Health Systems, Programs and Determinants Interrelationship

Health Outcomes

Health Systems

Health Programs Health

Determinants

Social, economic, cultural, environmental, geographical and political

Promotive, preventive, curative, rehabilitative

Governance, financing, resource creation, service provision

Health Systems, Programs and Determinants Interrelationship

Concept: Health care financing is a process of mobilizing, allocation and utilization of financial resources in health sector.

Resource ResourceResource

generation poolingpayment

1.Ensuring adequate and sustainable amount of resources to health care

2.Reducing OOP health expenditure, removing financial barriers to care, and reduce catastrophic effect and impoverishment due to illness

3. Improving efficiency and effectiveness of health care financing

The objectives of HF are to maintain and access to all basic

health services to improve quality of services generally

so that utilization of health services and facilities will increase-increasing efficiency of resource utilization

to create incentive for providers and consumers to use more services efficiently through various payment methods

Health financing and its sub-functions

Three functions:

Revenue collection

Risk pooling

Purchasing

In health financing, funds(revenues, contributions.)

are collected

accumulated in (a) pool (s)

allocated to health services/providers

Questions that need answers for understanding HF

• Are resource mobilization mechanisms

equitable? Do the wealthier subsidize the poor?

• Is the distribution of resources equitable? Efficient? Or are wealthier populations benefiting more from public financing than are poor populations?

• Do provider payments reward efficiency? Quality?

I. Resource Generation1.Amount of ResourcesHealth expenditure per capita:

% of government budget to health care

% of GDP (Gross Domestic Product) on health Pakistan -2.4%

Indonesia, Lao PDR, Philippines -3%

Thailand. Malaysia -4%

India -4.8%

Vietnam -5.4%

China -5.6%

Mongolia, Korea, Taiwan -6%

Japan -8%

Health expenditure per capita:

% of government budget to health care

-is being connected with Life Expectancy at birth trends

%HE LE0

Lao PDR 3 62

Singapore 3.6 80

India 4.8 64

Vietnam 5.4 72

ROK 6 78

Japan 8 84

Health care expenditure depends upon

- Income or economic development

- Political will and commitment

- System of resource allocation- Not only how much being used but - How effectively to spend/ to invest in health

care- Using for infrastructure? - Using for curative? - Using for preventive? Or promotive care?

International

NGOs U

ser c

harg

es

by p

ublic

se

ctor

CC

SCommunity based

HI schemePu

blic-

Taxes

Social HealthInsurance

Private

sector-O

OP

Private

Health

Insurance

2.Sources of Financing for Health

1.Public Sources of Financing

• Governments raise funds through taxes, fees, donor grants, and loans.

• MOF allocates general tax revenue to finance MOH budget.

• Govt health budgets• -based on previous year’s budget

-adjusted annually to account for inflation

-budgets usually have separate line items (for personnel, hospitals, pharmaceuticals, supplies, fuel, training, etc for recurrent costs

• Capital budget- paid through donor grants, loans)

a)Tax based financing• Typical source of public fund-direct taxation

of individual and business incomes, and other kinds of direct or indirect levies (import duties, license fees, property taxes, sales and market taxes, registration, etc)-higher tax for higher income groups

• Developing country-large portion of economically active population in informal sector- tax base might be small

• Ear marked taxes- increasing government revenues –eg tobacco

• Health services through tax revenues is most equitable –free for everyone-Thailand UC

b) User Fee system (CCS in Myanmar)

• Public facilities receive government subsidies but lack funds to function appropriately

• User fee collect modest fund-well below private market prices in public hospitals-eg; CCS

• User fee depress demand for services that are not really needed

• Poor can be protected by exemption mechanism

• Consumers ask for quality, competitive with private sector

c) User Fee system (Pre paid card)

• Pre-paid system is based on pooling of risks

• Small amount of contribution from community

• Can donate to poor

• Charges will deduct from the care per visit

• Preformed myths-hindering from buying cards-will bring illness to one of the families

Government Financing of Health Care

• Includes health expenditure of all levels of government

• Unlike private markets Gov health financing is able to satisfy social requirements of efficiency & equity

• Incentive to supply public goods• No neglect of externalities/spillover

effects• Explicit concern to tackle poverty

• Core responsibility of Gov to ensure supply of these services

2. Private Sector-Direct payment to providers

• For Profit only• Expensive• May have quality• Not directed to health but to illness-

curative only• Would like to have more turnover rate• No merit goods• Neglect externalities/spill over effect• No equity issue/pro poor health

approach

a).OOPs Out-of-Pocket payment

• “Out-of-pocket” expenditure on health by households includes all types of health-related expenses incurred at the point of receiving service - consultation fee,

-purchase of medicine, -laboratory services, -diagnostic services and -hospitalization

• Main determinant of catastrophic health expenditures for families-– Reduce expenditures on other basic needs – Push some households into poverty– May cause consumers to forgo health services and suffer

illness

3. External funding for health-Donors/Lending Agencies

• Multilateral donors –give a gift /grants: Public donors WHO,UNICEF, UNFPA, UNHCR

• Lending agencies-World Bank, ADB –lend large amount, hard loans-high interests, soft loans-less than market rate. Hard loans- interests for first five years and I+ Principle x 15 years ,later hard loan becomes soft then become a grant

• Bilateral donors- USAID, JiCa, DANIDA, CIDA between two countries-grants, ties are smaller,

• Private donors-Red Cross, Red Crescent, MSF, WVision

• INGO-for for profit, non for profit-missionary

External Sources-International NGOs

• Intermediaries between Donors/Lending Agencies and the Recipient Countries

Donor

loan grant

Intermediaries Recipients technical assistance

Problem: duplication and overlap in function and coverage

4. Health Insurance

• A system in which prospective consumers of care make payment to a third party in the form of health insurance scheme (premiums), which in the event of future illness will pay the provider of care for some or all of the expenses incurred.

Insurance Agency

Payment Premium GOVT

claims insurance cover

Provider health care Consumers out-of-pocket payments

It draws contributions/premiums from both employers, employees and sometimes from government

Three types of insurance1. Government of social insurance: provide

compulsory or to a lesser extent voluntary coverage for people from formal sector (egSSB) Premiums are generally based on income.

4. Health insurance is a mixed source of 4. Health insurance is a mixed source of financefinance

2. Private insurance: provides coverage for

groups or individuals through third party payer institutions operating in the private sector.

Premiums based on actual calculation of incidence of disease and use of services.Vary with age and sex.

3. Employer-based insurance: refers to coverage between the above two categories, in which employer plays a third party payer or collecting agent with eligibility based upon employment status.

Due to Moral Hazard Adverse Selection Imperfect information

Big pool of risks between healthy and unhealthy, and between better off and poor. Cannot cover bypass surgery

Good design – need gate keeping -capitation

-deductibles-co-payment-DRG

Insurance markets suffer from market Insurance markets suffer from market failurefailure

• Community health insurance is • “any not-for-profit insurance scheme aimed

primarily at the informal sector and formed on the basis of a collective pooling of health risks, and in which the members participate in its management.”

• Two essential features of CBHI:1. Affiliation is based on community membership and the community is strongly involved in managing the system2. Members share a set of social values

5. Community based Health Insurance5. Community based Health Insurance

Community Based Health InsuranceModels of CBHI

Community

NGO

CBO

Premium

Premium Insurer Reimbursement

Provid

er

Care

Intermediary model

Community Based Health InsuranceModels of CBHI

NGO/CBO + Insurer

Community

Prem

ium

Insurance model

Provid

erFees

Care

Community Based Health InsuranceModels of CBHI

Provider + Insurer

Community

Prem

ium

Car

eHMO model

CBHI StrengthsBetter access to health care for the poor

More responsive to client needs since organized along community lines

Often start up is small, but then evolve into larger arrangements involving other financing instruments.

Often used by governments as a supplementary tool for extending health coverage, especially for informal and unorganized sector workers, and rural populations.

CBHI WeaknessesLimited resources, small size and

insufficient coverage: thus offer limited protection for members

Sustainability: small size of the pool makes these schemes unviable and unsustainable.

The often voluntary nature of contribution can lead to adverse selection, driving up the cost and at the same time making the resources collected even less than the targeted amounts.

Limited management skills

CBHI Weaknesses

• Often need outside financial and management support

• Limited benefit to the poorest part of population; cash-poor people may not be able to participate

• Limited effect on delivery of care: evidence suggests that by and large such schemes are not able to negotiate better quality of care and thus do not improve the efficiency of health care

Composition of total health spending in SEAR

66%4%3%

27%

OOPs social insurance priv ate insurance tax

Methods of Financing

• Universal Coverage: All residents are covered

• Equal Access: All members have equal access to health care

• Equity in Financing: Financing method addresses ability to pay

• Efficiency: Minimizes administration cost

• Universal Coverage:

Every one will be provided with a service when a need arisen

Out of pocket payments at the point of consumption should not exceed 30% of a person's income

Service must be reached a certain minimum standard

1. Number of Health Workers

2. Training of Health Workers

3. Method and level of compensation

4. Method and level of consumer payment Risk pooling Provider incentive

5. Equity of Access

Factors controlling the Impact & Factors controlling the Impact & Efficiency of the Health Care SystemEfficiency of the Health Care System

6. Stock of Capital Equipment

7. Technologies used Financial incentives & Constraint

8. Preventive Care (Minimum essential package)

Immunization Pre-natal Malaria, TB

Factors controlling the Impact & Factors controlling the Impact & Efficiency of the Health Care SystemEfficiency of the Health Care System

Total Health Expenditure=26 billion kyats

Total health expenditure as % of GDP= 2.11 (2005)

MOH Expenditure by line items during last 5 years plan Salary = 45% Goods and services = 28% Training = 15% Maintenance = 9% TA = 3%

Myanmar Health Expenditure (2002-Myanmar Health Expenditure (2002-05)05)

Health care providers and population in Myanmar

• Access to medicine????? <2% of GDP use for health

• Health care for all, with them and by them

• 30%urban Doctors,

specialists

• 70%rural midwives

To explore and develop alternative health care financing system

To augment the role of co-operatives, joint ventures, private sectors and NGOs in delivery of health care in view of the changing economic system

To strengthen collaboration with other countries for national health development

National Health Policies on FinancingNational Health Policies on Financing

We’ve done- Tax based health care-free SSB- for employees Public/private mix CCS –with exemption mechanism RDF –look into poor Trust fund –interests for poor Booming private sector Later---CBHI, others---Main aim should be “Protect people from

financial catastrophe during illness”

Myanmar Health Care FinancingMyanmar Health Care Financing