Financing I: Raising Resources

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Financing I: Raising resources

Managing and Researching Health Care Systems

Wilm Quentin, Dr. med. MPH FFPH

FG Management im Gesundheitswesen, Technische Universität Berlin (WHO Collaborating Centre for Health Systems Research and Management)

&

European Observatory on Health Systems and Policies

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Financing I: Raising Resources 21 November 2017

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Outline of the course - Week 1

Topic Date Lecturer

Introduction and Outline of the course 20.11.2017 15-17 Uhr

Wilm Quentin and Daniel Opoku

Introduction and frameworks 21.11.2017

09-12 Uhr

Reinhard Busse

Financing I: Raising Resources 13.30-17 Uhr Wilm Quentin

Seminar on health system relevant

databases and information for term paper

22.11.2017 10-12 Uhr (H8173/74)

Anne Spranger

Financing II: Pooling and re-allocation 13.30-17 Uhr Reinhard Busse Financing III: Purchasing and payment

systems

23.11.2017 09-12 Uhr

Wilm Quentin Leadership and Governance + Care

Delivery

13.30-17 Uhr Reinhard Busse

Medical products 24.11.2017

9-10.30 Uhr

Reinhard Busse

Introduction to group exercise 10.30-12 Uhr Anne Spranger/Daniel Opoku

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Outline of the course - Week 2

Session 1: Introduction and Overview 3 20 November 2017

Topic Date Lecturer

Preliminary Summary of building blocks 27.11.2017 09-10.30 Uhr

Reinhard Busse Presentation by GIZ on health system

related German development cooperation

10.30-12 Uhr Ursula Bürger, Fachplanerin Kompetenz-Center Gesundheit und Soziale Sicherung, GIZ

Access and Coverage 13.30-17 Uhr Reinhard Busse

Quality and Safety 28.11.2017

09-12 Uhr

Reinhard Busse Financial and social risk protection 13.30-17 Uhr Wilm Quentin

Improved Health 29.11.2017

13.30-17 Uhr

Wilm Quentin

Efficiency and Responsiveness 30.11.2017

09-12 Uhr

Reinhard Busse Summary of Health System Performance

Assessment

13.30-17 Uhr Reinhard Busse Group Presentations and Wrap-up 01.12.2017

09-12 Uhr

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WHO 2007

WHO

building

blocks

21 Nov 21 to 23 Nov 24 Nov 24 Nov 23 Nov 23 Nov Week 8 27 Nov 28 Nov 22 Nov (seminar) 28 Nov 29 Nov 30 Nov 30 Nov 30 Nov/1 Dec

21 November 2017 Financing I: Raising Resources 4

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Outline for this afternoon

• 13:30-15:00: Presentation and discussion (90 min) • 15:00-15:15: break (15 min)

• 15:15-15:45: group work: analysing health system financing (30 min)

• 15:45-16:15: Presentation of group work • 16:15-17:00: Presentation (45 min)

Financing I: Raising Resources 5 21 November 2017

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Why is health care financing important?

World Bank (2013): World development indicators database Ghana Burkina Cote Ivoire FR _Lux USA 40 45 50 55 60 65 70 75 80 85 90 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 Lif e e xp ect an cy a t bi rt h, tot al ( yea rs)

Health expenditure per capita (PPP)

Caveat

- Strong association … but no causation - Strong influence of non health system

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Why is health care financing important?

World Bank (2013): World development indicators database Ghana Burkina Cote Ivoire FR _Lux USA 40 45 50 55 60 65 70 75 80 85 90 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 Lif e e xp ect an cy a t bi rt h, tot al ( yea rs)

Health expenditure per capita (PPP)

Caveat

- Strong association … but no causation - Strong influence of non health system

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Why is health care financing important? II

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WHO 2007

WHO

building

blocks

21 Nov 21 to 23 Nov 24 Nov 24 Nov 23 Nov 23 Nov 27 Nov 28 Nov 22 Nov (seminar) 28 Nov 29 Nov 30 Nov 30 Nov 30 Nov/1 Dec

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The health system triangle

Providers Population Third-party Payer Steward/ Regulator 10 21 November 2017 Financing I: Raising Resources

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The health system triangle II

Providers Population Third-party Payer Collector of resources Steward/ Regulator 11 21 November 2017 Financing I: Raising Resources

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Possible actors

Third-party Payer Collector of resources Steward/ Regulator National government, Regional/ local gov’t, Sickness funds,

Private health insurers, CBHI MSA ...

Ministry of Health Regional/ local gov’t Health Authority Sickness funds HMOs

GPs, specialists, dentists Ambulatory/ inpatient providers

Public/ private hospitals ... Government/

Parliament

12 21 November 2017 Financing I: Raising Resources

Providers Population

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Third-party Payer Providers Population Collector of resources Financing II:

Resource pooling & allocation

Financing I:

Raising resources/ funding

Financing III: Purchasing/ contracting/ paying providers Access to services

Functions

Steward/ Regulator Coverage: Who? What? How much? 13 21 November 2017 Financing I: Raising Resources

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Third-party Payer Providers Population Collector of resources

Functions

Steward/ Regulator Coverage: Who? What? How much? 14 Regulation

21 November 2017 Financing I: Raising Resources

Financing II:

Financing I:

Financing III: Purchasing/ contracting/

paying providers

Access to services

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Third-party Payer

Population

Providers

Taxes Social Health Insurance contributions Voluntary insurance Out-of-pocket prepaid

sickness funds

health

authorities

private insurers

public

Finding the “right“ funding mix …

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Total health expenditure

Government/Public Rest of the world

Government Compulsory cont.

Voluntary VHI Subs-titutory Supple-mentary Compli-mentary  Direct vs. indirect  General vs. earmarked Prepaid resources Central

System of Health Accounts (2011)

SHI Comp.

private

 Income related contributions

 Community-rated premiums NGOs Enterprise Regional, local Comp. MSA OOP payments Direct payments Cost sharing With public With private  Formal vs. informal  Deductible vs. co-payment vs. co-insurance  Community vs. risk-rated premiums

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To take home: despite the seemingly many options,

there are just four main ways of funding health care:

• Out-of-pocket payments by users

• Voluntary (private) insurance payments = premiums (usually risk-related)

• Social insurance payments

= contributions based on income or

community-rated premiums (everybody pays the same) • Tax payments

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Out-of-pocket payments

1. Direct payments = Payments for services that are not covered by insurance

2. User charges: Payments for services covered by insurance

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Economic theory: the market

• The market assures an efficient allocation of resources

• …under the condition of a perfect market: – No externalities – No monopolies – No asymmetry of information – Rational decisions by consumers

Q Q₀ P₀ P demand supply

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Are the conditions fulfilled?

• No externalities? • No monopolies?

• No asymmetry of information? • Rational decisions by consumers? + incidence of costs!

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Third-party Payer Providers Population Collector of resources Financing II:

Financing I:

Financing III: Purchasing/ contracting/ paying providers Access to services Steward/ Regulator Coverage: Who? What? How much? 21 21 November 2017 Financing I: Raising Resources

Provision of services Regulation

System typology

Income-dependent contributions & sickness funds =

Social Health Insurance system Taxes &

governments/ health authorities = tax-funded system (NHS) Risk-related premia

& private insurers =

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Third-party Payer Providers Financing I: Raising resources/ funding 22 21 November 2017 Financing I: Raising Resources

Provision of services

System typology:

based on main funding source and third-party payer

… but with other implications around the triangle

Income-dependent contributions & sickness funds =

Social Health Insurance system Taxes &

governments/ health authorities = tax-funded system (NHS) Risk-related premia

& private insurers =

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Private health insurer

Limited resource pooling (for companies, insured within one tariff etc.)

Typical private (indemnity) health insurance

Financing I: Raising Resources 23 21 November 2017 Steward/ Regulator (Health) risk-related premium (Voluntarily) insured part of population Public-private mix Free choice Very little government control Reimbursement of costs (no contracts)

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Why do we have health insurance?

Problems of health care financing

• Uncertainty about the time of need

• Uncertainty about the quantity of need

• The magintude of need can lead to catastrophic expenditures • Lack of access because of financial reasons

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Economic theory: Conditions

• The market will offer health insurance under the following conditions:

– Risks have to be independent (everybody has his individual probability of falling ill)

– The risk has to be a risk and not certainty (p <1)

– The risk has to be a risk and not uncertainty (it has to be possible to estimate the risk)

– There is no hidden information – There are no hidden actions

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Are the conditions fullfilled? I

• Independent probabilities?

– Epidemics?  Excluded from coverage • Probability <1 ?

– Chronically ill (probability=1) – The elderly (probability ~1)

Incomplete coverage

• Known probability?

- Possible for groups but difficult for individuals  Often employer-based health insurance and more

expensive/difficult for individuals

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Are the conditions fulfilled? II

• No hidden information?

– Individuals know if they are sick or not  exclusion of pre-existing conditions  adverse selection

• No hidden actions?

– The risk of need and the quantity of need depends on actions

• Maternity  excluded from coverage

• Moral hasard, supplier induced demand  cost explosion

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Private health insurer

Limited resource pooling (for companies, insured within one tariff etc.)

Private health insurance 2

Financing I: Raising Resources 28 21 November 2017 Steward/ Regulator (Health) risk-related premium (Voluntarily) insured part of population Public-private mix No/Limietd choice Very little government control HMO

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Community-based health insurance

Limited resource pooling within the community

Community-based health insurance (type 1 and 2)

Financing I: Raising Resources 29 21 November 2017 Steward/ Regulator Per capita premium Small part of (voluntarily insured) population

Public (and sometimes also private) providers

Coverage of basic services

Little

government control

Type 1: Reimbursement

of costs

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Third-party Payer

Collector of resources:

sickness funds, government agencies …

Resource pooling within and/or across funds; risk-based allocation

Social health insurance type

Steward/ Regulator

Not (health) risk-, but usually wage-related contribution

Mandatory insurance

(traditionally limited to employees, later extended to other groups)

= sickness funds Public-private mix Contracts, collective or “selective” Choice among contracted providers Due to “delegation” and “self-regulation” limited government control

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Other SHI system characteristics

• Solidarity: set of four cross-subsidies on the

funding side (healthy to sick, well-off to

less-well-off, young to old, and individuals to families) that

provide equal benefits on the entitlements side.

• Pluralism: a complex mix of different public,

quasi-public, not-profit, and sometimes

for-profit actors.

• Participation:

shared governance among these

actors, sometimes described as “self-regulation”.

• Choice: insurees’ ability to select among

contracted providers and, in some countries,

among different sickness funds.

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Sickness funds Providers Population Collector of resources Choice of provider

New social health insurance systems

Financing I: Raising Resources 32 21 November 2017 Wage-related contributions Indirect government control Contracts

Public and private providers

Mandatory insurance

(traditionally limited to employees, later extended to other groups)

Guided

(group 1:  selective)

&

Capitation/

FFS/DRGs

+ taxes

(group 1: in competition/ group 2: on regional basis)

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Some LMIC examples: addition’l revenue

• Ghana: 2% addition to VAT as “National Health

Insurance Levy”, transferred to National Health

Insurance Scheme

• Gabon: 10% levy on mobile phone turnover and 1.5%

levy on foreign money transfers, to fund coverage for

the poor in the national health insurance scheme

• Philippines: 85% of the additional revenues raised

from increased taxes on alcohol and tobacco

earmarked for health, of which 80% used specifically

to enrol the poorest 40% of the population nationally

in PHILHEALTH.

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Central government (Ministry of Health) Public Providers Population Central government (Ministry of Finance) Limited choice Universal coverage

Traditional integrated NHS-type system

Financing I: Raising Resources 34 21 November 2017 General taxation Direct government control (“command-and-control”)

NHS =

Payer &

Provider

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Central Regional government Providers Population Central government (MoF) More choice Limited Universal coverage

New NHS-type systems

General taxation

Regulator

Public and private

providers Purchaser –

Provider split

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Central Regional government Providers Population Central government (MoF) More choice Limited Universal coverage

New NHS-type systems

General taxation

Regulator

Public and private

providers Purchaser –

Provider split

Questions arising:

• Funding from national or regional taxation?

• Benefit catalogue uniform?

• Supply density and quality regulated uniformly?

• Access to services across regional borders?

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NATIONAL BUDGET Budget of National Health System Regional Health Service REGIONAL BUDGET • National taxes • Regional taxes L AW O F REG IO NA L P A R L IA M E N T L AW O F NA T IO NA L P A R L IA M E N T National taxes Regional taxes

Different options for regionalisation

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Providers: often separate for different segments Population

Government

Fragmented system

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Sickness funds

Private insurance

+CBHI

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Group work

(30 min)

5 groups

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Group task

Imagine: A new Minister of Health wants to undertake a major reform. However, (s)he first wants to understand how the system is functioning and how well it performs.

• Select one of your countries

• The student from the country represents the MoH • Other students form a group of consultants

• Summarize the major actors and financial flows in the system • Make suggestions about how to improve the financing system • After break: One of the consultants presents the results

(5min)

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Example 1: The German health system at a glance

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The German system at a glance

Financing I: Raising Resources 42

21 November 2017 118 sickness funds Provider Population strong delegation & limited governmental control Health Fund “Risk-structure compensation” Uniform wage-related contribution

+ extra contribution set by sickness funds

Choice

contracts, mostly collective

Public-private mix, organized in associations ambulatory care/hospitals Universal coverage: Choice of fund/insurer Collector of resources Third-party payer 44 private insurers Risk-related premium SHI: 88% PHI: 11% PHI: no contracts

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Example 2: The Chinese health system at a glance

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The Chinese system at a glance

44 Provider

Population

NHFP

Voluntary enrolment of families in rural areas: premiums + government

subsidies

contracts with hospitals and pharmacies

Public-private mix, contracted and

non-contracted

(near) Universal coverage:

Collector of resources Third-party payer

Compulsory enrolment of urban employees: income-related contribution NRCSM: 62% UEBMI: 19% URBMI: 16% Voluntary enrolment in urban areas: premiums +

subsidies

Inpatient and catastrophic outpatient

Choice of contracted providers

MOHRSS

New Rural Cooperative Medical Scheme (NRCMS)

Urban Employee Basic Medical Insurance (UEBMI)

Urban Resident Basic Medical Insurance (URBMI)

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Ressource mobilisation Out-of-pocket Purchasing/ payment Taxes Social insurance VHI

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Two ways to look at health expenditures in Africa

US$130

US$543 US$453

US$95

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Source: Atlas of African Health Statistics 2016

 We will return to this when

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Total Health Expenditure as % of GDP

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Health Expenditure/GDP

Why is this ratio of interest?

• A measure of the opportunity cost of health spending. • A means of international comparison.

But:

There is no unambiguous optimum level. It is a matter of political preferences.

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… but is more public “better”?  lecture on Nov 28

x 4!

as much

Source: World Health Statistics 2015, baseline 2012

Richer countries spend more publicly

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Sources of health care financing by income group

21 November 2017

Source: Mills A (2014), NEJM

TAX

TAX TAX

SHI SHI

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Global expenditure on health 2012: around $ 8.4 trillion (8,400,000,000,000) 80 $PPP/ capita 235 $PPP/ capita 770 $PPP/ capita 3050 $PPP/ capita 8845 $PPP/ capita x3 x3 x4 x3

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Distribution of public expenditures on health

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Conclusion

• The health system triangle is a useful tool to analyse actors, functions and financial flows of health systems.

• There are four ways to fund health systems: out-of-pocket, private insurance premiums, social insurance contributions, and taxes.

• A simple system typology distinguishes between SHI, NHS, PHI and fragmented systems … but the real world is more

complex.