Joseph Kutzin, Coordinator Health Financing Policy, WHO
UHC: everybody’s rhetoric but whose responsibility
Netherlands Platform for Global Health Policy and Health Systems Research
Health Financing for UHC:
promising directions and
Overview
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Who’s (WHO’s) responsible for what?
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Clarifying core concepts
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Things we know in health financing: lessons from theory
and practice
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Applying theory, evidence, and concepts to a core
challenge for UHC in LMICs: the scale of the informal
economy
WHO core responsibilities (for policy “harm
reduction” and promising directions)
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Conceptual clarity
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Dissemination (and application) of what we do know about
health financing policy
– We know more than we give ourselves credit for
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Advocacy (for goals, not instruments!)
– Push for consensus on goals so we can have a meaningful fight
about instruments
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Aiming for intelligent policy dialog and debate at national
CORE CONCEPTS: UHC AND
HEALTH FINANCING POLICY
Definition from our World Health Report
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"Financing systems need to be specifically designed to:
– Provide all people with access to needed health services
(including prevention, promotion, palliation, treatment and rehabilitation) of sufficient quality to be effective;
– Ensure that the use of these services does not expose the user
to financial hardship"
Definition embodies specific aims (UHC
goals)
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Equity in service use
;
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Quality
; and
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Financial protection
…
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…for all
For relevance, think of UHC as a direction,
not a destination
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No country fully achieves all the coverage objectives
– And harder for poorer countries
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But all countries want to
– Reduce the gap between need and utilization
– Improve quality
– Improve financial protection
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Thus, “
moving towards Universal Coverage
” is something
that every country can do
– Practical orientation for policy reforms
Don’t forget rest of the system; financing
can’t do it alone
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Health financing policy directly affects financial protection;
policy on medicines does as well
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Many parts of the system (service delivery, human
resources, medicines, technologies, financing) combine to
influence service utilization
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Financing may only be complementary instrument for
influencing quality (service delivery, human resources/
What is the content of health financing
policy/systems?
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“National Health
System” (Beveridge
Model)
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“Social Health Insurance
System” (Bismarck)
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Collection
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Pooling
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Purchasing
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Benefits and rationing
Classifications or models
Functions and policies
•
Understand
systems
(and reform options) in terms
of
functions
, not labels or models
Doesn’t help: sources are not systems (but may be politically valuable)
Part of all health financing systems, regardless of label
Beyond Beveridge and Bismarck
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Labels like “social health insurance” or “tax-funded system”
or “community-based health insurance”, (
or even just
“insurance”!!
) are not helpful for understanding what a
country is actually doing
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Functional approach more useful
– Disaggregated view of collection, pooling, purchasing, benefits,
and wider governance arrangements
– Relevant to countries at all income levels, but particularly
important for countries with large informal sectors
Pooling Purchasing Revenue collec1on Service provision People People
and also
this:
Reforms to
improve how
the health
financing
system
performs
What kinds of choices need to be
made?
This
Popula1on, service, and cost
We are supporting countries to development
health financing strategies
for UHC
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How to alter the system in a way that
– Reduces the gap between the need for and use of services,
across the population,
– Improves quality of health services,
– Improves financial protection…
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…given our starting point in terms of
– existing configuration of the health system, including coverage
arrangements,
– overall current and expected fiscal constraints, and
– other key contextual factors, such as labor market (informality),
Universal means universal, so think in
terms of system, not schemes
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Essential to
get the unit of analysis right
(for monitoring
and policy)
– It is not about the % of the population that is in an (insurance)
scheme (relevant in some countries but not in others)
– Effects of a “scheme” on its members is not of interest
– What matters is the effect at level of the entire system and
population on UHC goals (impact of scheme on system goals)
– Because a scheme can makes its members better off by making
others worse off
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Getting this wrong can leads to useless (at best) or
Universal Coverage is not a new concept
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Emerged in particular after 2
ndWorld War
– Push for “social cohesion” in Europe
– Concept of “human security” in Japan
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WHO constitution “highest attainable standard…” for all
– And later Alma Ata – “Health for All”
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Universal Declaration of Human Rights, includes “right to…
medical care”
Shift to UHC implied profound change in
rationale for public policy on “health coverage”
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Health insurance emerged in Europe as a condition of
labor (first formalized as public policy under Bismarck)
– Increasing labor productivity (industrialization)
– Reducing labor radicalism and unrest
– Thus, social (compulsory) health insurance for wage earners
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After 1945, “universal coverage”: affordable access to
health services as a condition of citizenship or human/
constitutional right
– Implies a shift away from a purely (direct) contributory approach
– Also implies compulsion or automatic entitlement
– Thus, health coverage for the entire population, with explicit
Well, it
should
have implied a new approach
to financing, but…
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Most advice coming to low and middle income countries
was largely based on following Europe’s historical path
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Approach based on a conceptual flaw with serious
An approach grounded in the first half of the 20
thcentury, applied in the 2
ndhalf (and beyond?)
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“Starting insurance” with the formal sector
– Improves access and financial protection for the better off
– Historically in Europe and Japan, coverage grew w/ economic
development, growing formalization of the economy and high employment
– Today, however, LMIC governments face decisions on the
rationing of scarce medical technology that European and Japanese governments did not face a century ago
– Initially covered groups defend their interests, benefits and
subsidies, and concentrate scarce skills on their behalf
– Exacerbates inequalities, fragments the system, and is very
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Coverage as a “right” (of citizenship, residence) rather than
as a condition of employment
– Critically important implications for choices on revenue sources
and the basis for entitlement
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Shift thinking from scheme to system
– UHC goals should be considered at the level of the entire
population and system (what’s good for scheme members may/ may not be good for the entire population)
What UHC brings to public policy on health
coverage
UHC and health financing: summary of key
concepts
“Towards UHC” to
transform from
aspiration to relevant,
applicable concept
UHC goals matter at
level of system, not
schemes
Health financing:
think functions, not
labels (Bismarck and
Beveridge really are
dead)
UHC changes the
underlying rationale
for public policy on
health coverage
THINGS WE KNOW (AND SHOULD
WHO diplomacy: “The path to UHC should
be home-grown”
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Even if broad UHC objectives are shared by all countries…
– Specific manifestations of problems vary, so how the goals
should be operationalized will vary as well
– Every country already has a health financing system, so starting
point for each country is unique
– Mix of fiscal and other contextual factors also unique
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But this should not be interpreted to mean that “anything
goes” – we have learned a few things over past 30 years
– Some “do’s” and “don’ts” in health financing policy
– Both economic theory and international experience can help to
No amount of wishing or hoping will make
this go away
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“No nation achieves universal coverage without
subsidization and compulsion
.”
– Victor Fuchs (1996). “What every philosopher should know about health
economics.” Proceedings of the American Philosophical Soc 140(2), p.188.
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So no country gets to UHC relying principally on VHI
– Never has, never will: adverse selection is part of the “physics” of
health financing policy
– Compulsion or automatic entitlement is essential
– Issue is compulsory vs voluntary, not public vs private (inserting
the word “community” is not enough to combat adverse selection)
For example, VHI under the label of CBHI in West
Africa: low enrollment, small pools, insignificant
funding impact
Burkina Faso
Benin Mali Togo
Number of CBHIs 188 200 168 25
Number of
beneficiaries 256,000 140,000 510,000 16,000
% population
covered with CBHI 1.5% 1.5% 3.1% 0.3%
Ave. beneficiaries
per CBHI 1,362 700 3,036 640
Ave. contribution
per capita (XOF) 3,000 3,000 2,500 1,875
Similar findings in HEFPA
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Subsidies, information and administrative easing did not
yield great gains in voluntary prepayment/enrollment in
national health insurance programs in the Philippines and
Vietnam
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And similar to nearly every other country’s experience –
rich or poor – with voluntary prepayment (will come to
China and Rwanda soon). It is the nature of voluntary
health insurance markets…
Another important message: you can’t just
spend your way to UHC
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To sustain progress, need to ensure efficiency and
accountability
– “Strategic purchasing” as a critical strategy for this (and also for
capacity strengthening, given link between information and resource allocation)
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HEFPA and other studies reveal contrast between China
and Thailand
– Both greatly increased public spending and enrollment in health
insurance programs
– Thailand managed overall expenditure growth through coherent
policies on benefit design and purchasing
– China continued to rely on fee-for-service payment with high cost
The “promising directions” we seek
Health financing element
Desirable attributes/directions for reform
Revenue sources and contribution mechanisms
Towards predominant reliance on compulsory
sources of funds (i.e. various forms of direct and indirect taxation) – to meet the “Fuchs conditions” Pooling Reducing barriers to redistribution (increasing diversity of health risks within poolsfragmentation ), Purchasing Establishing and strengthening incentives for
efficiency and quality in purchasing mechanisms Benefit design
and rationing policies
Promoting use of cost-effective services and limiting out-of-pocket burden, especially for the poor, and the
alignment of these declared policies with other aspects of the system (particularly purchasing)
Why stylized models and labels don’t help
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Promoting “health insurance” doesn’t help much unless
you address all the financing functions and policies
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“Taxation” is not a system, it’s a source of funds
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And for the context of most LMICs…
– Towards compulsory sources means more reliance on indirect
tax sources…
– Improving purchasing means making such revenues much more
flexible than in most public finance systems
– Means thinking outside our historical boxes, and intensive dialog
with public finance authorities on both the level and “quality” of the budget allocations, while we push for new forms of
Early 21st century pathways to UHC
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Thailand
merged several different schemes into one,
funded from
general revenues
, using quasi-public
purchasing agency
– Overcame most but not all fragmentation across schemes, and
progressively working to equalize benefits across them
– Increased service use while reducing catastrophic payments
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Mexico
addressing its legacy of a fragmented and unequal
system by
– creating a budget-funded insurance program for a defined list of
high-cost services for the entire population
More examples: slight differences in details
due to differences in starting points/context
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Ghana
and
Rwanda
have explicit coordination of bottom-up
and top-down financing mechanisms to create a virtual
national pool,
with budget revenues as main source
– Gains in utilization and financial protection
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Kyrgyzstan
and
Moldova
centralized pool of budget funds,
combined with new payroll tax, changed from input- to
output-based payment, and increased provider autonomy
– Impressive gains in geographic redistribution and efficiency
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Chile
(through the AUGE program) and
Burundi
(through its
PBF mechanism) link purchasing to explicit benefits
What they have in common: a “functional
approach” to health financing policy
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Recognized that the source of funds need not determine
how money was pooled, how services were purchased, nor
how benefits were specified
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They shifted their thinking from “schemes” to system
– Pooled together or coordinated use of different revenue sources
(in fact, so do Germany, Japan, Netherlands, Czech Rep, etc.)
– Introduced elements of performance-related payment from the
prepaid funds to address specified utilization or efficiency issues
– Progressively increased the size of the compulsory prepaid
funds while reducing the barriers to redistribution within it
Health financing for UHC: things we know
Predominant reliance
on compulsory
sources (let’s agree
to trust both theory
and evidence on VHI)
There’s no such thing
as “enough money” –
can’t just spend way
to UHC (look at my
country!)
Lots of documented
progress in past 15
years in LMICs that
have taken on these
lessons
Changing the role/use
of general budget
(including donor)
funds have been at
HEALTH FINANCING FOR UHC AND
THE CHALLENGE OF INFORMALITY
But context of high informality poses critical
challenges to realizing the “Fuchs conditions”
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Hard to mobilize much revenue from direct taxation
– Personal income tax
– Payroll tax (i.e. SHI contributions)
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Hard to collect voluntary prepayment as well
– Economics of voluntary health insurance (VHI)
– Gains (tax avoidance) from maintaining informality
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Hard for system to distinguish differences in capacity to
pay (poor from non-poor) within the informal sector
The “problem” of informality…
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…is mainly an issue of fiscal capacity
– Constrains ability of countries to generate enough public
revenues to ensure compulsory sources as main funding source
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Other problems and challenges arise due to
past policy
choices and implementation failures
– Attachment to contributory-based entitlement
– Fragmented/segmented pooling reinforces underlying social
differences and constrains redistribution (formal sector SHI)
– Weak purchasing from general budget revenues according to
bureaucratic line item practices
Then, reframe the “problem”
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In terms of progress towards UHC (goals), and not merely
participation in a scheme (instruments)
– Keep asking the “goal” questions: WHY is system
underperforming relative to UHC goals?
– Keep pushing to ensure the right unit of analysis: system, not
scheme (scheme as a means to an end, not itself an aim)
– Don’t allow an inappropriate specification the problem (inability to
get the nonpoor informal sector to contribute) be equated to the solution (targeting the poor and making the nonpoor pay), as there are many other options
Broad categorization of financing
reform options
Non-contributory-based
l Universal, budget funded,population-based system
– UK, Scandinavia, Sri Lanka
l Budget-funded for all not
covered by explicit social security mechanism
– Thai UCS, Mexico SP
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Entitlement for some groups to
range of services
– India GSHISs, Cambodia HEFs
Contributory-based
l De facto voluntary prepayment
for coverage, unsubsidized
– Indonesia’s plan, Nigeria’s plan,
Malawi’s plan, Bangladesh’s plan, …
l Fully (for poor) and “heavily”
subsidized prepayment for coverage (complementarity)
– Rwanda CBHI, China NCMS,
Switzerland, Germany,
CONTRIBUTORY-BASED
APPROACHES
Contributory (provocation) 1: unsubsidized
contributions by the non-poor informal sector
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Advantages
– Equitable relative to ability to contribute (if you can do it)
– Minimizes fiscal impact
– Would not impact on formalization of the workforce (in effect, it
would be a means of formalizing the informal sector)
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Disadvantages
– This has never worked anywhere (big disadvantage)
– Costly to implement, both targeting and revenue collection (so in
fact, there would be some fiscal impact)
– This approach ignores global experience and effectively
suggests a government that is not really interested in moving to UHC
Contributory 2. Subsidized participation with
strong public commitment to universality
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This approach recognizes that
no country gets to universal
population coverage without budget transfers
; not
everyone can or will contribute
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In countries with contributory-based entitlement that have
reached universal population affiliation, general budget
transfers play key role
– Japan: 25% of insurance revenues from general budget transfer
– Hungary: over half of insurance revenues from general budget
– Germany: small but increasing role for general revenues as
Challenges of de facto voluntary
participation, even subsidized, in LMICs
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HEFPA conclusion from analysis in Vietnam and
Philippines
– “…subsidization of premia by as much as 50%, along with the
provision of information on the operation and benefits of
insurance, is insufficient to bring enrollment rates anywhere close to the realisation of universal coverage.”
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Bitran, “UHC and the Challenge of Informal Employment”
– “…it is difficult to enroll informally employed individuals on a
voluntary basis, even if they are offered large enrollment subsidies.”, p.18
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But 2 “successes”:
China
and
Rwanda
. What can we learn
China and Rwanda have achieved 90% or
more coverage on a contributory basis
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Some features in common that distinguish their approach
(2 technical, 1 political)
– Level and mechanisms used for directing budget subsidies, with
cost of the “premium” being less than the perceived value of the benefit, stimulating demand
– Role of local gov’t officials to both inform people and enroll them
into the coverage program
– Strong central governments able to direct local government
actors and “encourage” population to enroll (quasi-compulsory)
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Other contextual elements
Subsidies, pooling structure, and local gov’t
roles may explain Rwanda’s “CBHI” (!) success
l Government led,
from central to
local, and not NGO response to system failure l Heavily subsidized on demand and supply sides; contributions
important but not main source
l Compulsory
l Pooling across
Structure of Rwanda Health Insurance
Regulation Finance Payment
Advisor Rwanda Health
Insurance Council
Private Health Insurance
Ministry of
Finance Ministry of Health
Rwanda Social Security Board + MMI District Sector District Hospital Health National Risk
Pool HospitalReferral
District CBHI Risk Pool
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Coverage ↑ 10% 2003 to 98% 2012
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Explicit “mutual leveraging” between gov’t levels and
households in contributions
– “voluntary” contribution by individual matched by subsidies from
local and central governments (subsidy per person more than tripled between 2008 and 2012, now 80% gov’t, 20% families)
– Aligned incentives: local governments get more funding with
higher levels of enrollment
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Approach reflects strong political will to increase coverage,
Expanding coverage in China’s New
Cooperative Medical Scheme (NCMS)
NON CONTRIBUTORY-BASED
APPROACHES
Non-contributory (1) – universal
population-based, tax-funded coverage for all
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Advantages
– Equitable and potentially efficient (easy to implement, if you can
do it)
– It can work (UK, Scandinavia, arguably Sri Lanka, Malaysia)
– No direct labor market impact (complete de-linkage)
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Disadvantages
– Fiscal impact (many LMICs can’t provide the funds needed)
– In practice, high risk of over-promising and under-delivering
– Often linked to passive purchasing and weak accountability (a
practical problem, not a conceptual one – budget funds can be used strategically)
Non-contributory (2): fully fund coverage for
uncovered from general budget revenues
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Well-known examples include
Thai
Universal Coverage
Scheme,
Mexico
’s Seguro Popular
– Both began with intent to have co-contribution from covered
population, but gave up – not worth collection cost
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Advantages
– Administratively simple, no targeting, no additional revenue
collection costs or bureaucracy for this purpose
– Evidence shows clearly that this can work
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Challenges/potential disadvantages
– Fiscal constraints limit scope unless strong political commitment
Is it fiscally feasible? Key question, and
answer is definitely “it depends”
Government health spending with Indonesia’s fiscal constraint but other countries’ priorities
Country GDP per capita Public spending as % GDP Health as % of total public spending Government health spending as % GDP Indonesia 4,668 17.5% 5.3% 0.9% Malaysia 15,589 17.5% 6.1% 1.1% Viet Nam 3,398 17.5% 9.4% 1.6% China 8,373 17.5% 12.5% 2.2% Thailand 8,703 17.5% 14.5% 2.5% Australia 40,859 17.5% 16.8% 2.9%
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Equitable if it can be implemented, and targeting costs can
be mitigated if health uses an existing mechanism rather
than creating our own
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As with any targeted approach, challenge is managing the
boundaries
– Errors of inclusion and exclusion
– Even if targeting administered by others, connecting the “list” to
the health financing system is not easy
Non-contributory (3). Prioritizing specific
groups for tax-funded coverage
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With purchaser-provider split
– Cambodia’s Health Equity Funds: donor and gov’t money pays
user fees on behalf of poor
– RSBY and several State schemes in India
• RSBY: “BPL” list determines eligibility, but eligible persons must still
enroll w/very small fee
• Andhra Pradesh: all on the list automatically covered
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Without purchaser-provider split
– Simple fee exemptions, often relying on health facilities to
determine who can pay and who can’t, and with few incentives for effective implementation
Non-contributory (4): selective universalization
of services (purchasing and benefits)
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Make certain services universal/guaranteed for all (in
defined target group), irrespective of whether or not they
are “insured”
– Expands coverage via purchasing and benefits rather than via
contribution and population affiliation
– In line with priorities and capacity, can build on this to increase
scope of service coverage guaranteed to all, funded from general revenues
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To avoid this being an empty declaration, link benefit to an
explicit purchasing mechanism
– Nigeria: Jigawa State free MCH program, with explicit line in the
Thinking through Burundi’s “selective free
care w/PBF” as a path towards UHC
Current Pooled Funds Services:
which services
Direct costs: propor8on of the direct costs
covered
Extend to non-‐covered
Reduce cost sharing and fees
Include other services Free MCH services What next?
Reflections on selective universalization of
services, especially for poorest countries
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Advantages
– Reflect public commitment to at least something for everyone
– Brings more explicit budget financing commitment
– Universalizing certain services from budget revenues can reduce
amount needed for premiums to get insured for the rest
– Avoids the adverse selection and capacity to prepay problems
– Foundation for UHC built on purchasing rather than contribution
and pooling - needs to be an explicit option for consideration instead of sole focus on getting people into insurance schemes
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Disadvantages
– Leaves out potentially important services that people want, with
