1

Overview of Health Overview of Health FinancingFinancing

EAP Regional Seminar on Health FinancingEAP Regional Seminar on Health FinancingBangkok, Thailand, February 2008Bangkok, Thailand, February 2008

Fadia Saadah, World BankFadia Saadah, World Bank

2

Outline of PresentationOutline of Presentation• Demographic and epidemiological trends

• Health spending patterns

• Health financing functions

• Challenges/lessons

3

Demographic and Demographic and Epidemiological TrendsEpidemiological Trends

4

2020

Demographic Transition Underway: Working Age Demographic Transition Underway: Working Age and Elderly Populations Will Grow Rapidlyand Elderly Populations Will Grow Rapidly

2000

FEMALESMALES

Ages

Source: World Bank

FEMALESMALES

Ages

100000 80000 60000 40000 20000 0 20000 40000 60000 80000 100000

5

Future GDP Growth in EAP Looks RobustFuture GDP Growth in EAP Looks Robust

Source: World Bank 2007.

6

NCDs and Injuries Represent a Major NCDs and Injuries Represent a Major Share of BODShare of BOD

((Disease Burden Distributionby Select World Bank Region, 2001Disease Burden Distributionby Select World Bank Region, 2001))

9

37

6

272222

596576

53

87

66

118141314120

50

100

E. Asia/Pacific

Europe/ Central Asia

Latin America/Caribbean

M. East/ N. Africa

High-incomecountries

World

Communicable, maternal, perinatal, and nutritional conditionsNoncommunicable diseasesInjuries

Percent

Note: Numbers are rounded.Source: Disease Control Priorities in Developing Countries, second edition, 2006, Table 4.1

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Most EAP Countries Do Well on Child Mortality Most EAP Countries Do Well on Child Mortality Given Their Income and Health Spending LevelsGiven Their Income and Health Spending Levels

China

CambodiaLao PDR

PhilippinesThailand

Vietnam

IndonesiaMalaysia

Samoa

Abo

ve a

vera

geB

elow

ave

rage

Above average Below average-3-2

-10

12

3P

erfo

rman

ce re

lativ

e to

hea

lth s

pend

ing

-3 -2 -1 0 1 2 3Performance relative to income

Source: WDI

Child mortality relative to income & health spending, 2005

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But Maternal Mortality Results are More MixedBut Maternal Mortality Results are More Mixed

Cambodia

Malaysia

Philippines

ThailandSamoa

China

Indonesia

Lao PDR

Vietnam

050

010

0015

0020

00M

ater

nal m

orta

lity

rate

250 1000 5000 25000GDP per capita, US$

Source: WDI

Maternal mortality rate vs income, 2000

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Health Spending PatternsHealth Spending Patterns

10

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

East Asia andPacific

Eastern Europeand Central Asia

Latin Americaand the

Caribbean

Middle East andNorth Africa

South Asia Sub-SaharanAfrica

% o

f tot

al h

ealth

spen

ding

General revenues Social insurance OOP Other

Health Expenditures Across Regions, Health Expenditures Across Regions, by Source of Financing, 2005by Source of Financing, 2005

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Public Health Expenditures by Source of Financing

12Source: Database of the Asia-Pacific National Health Accounts Network; data for recent years

Total Health Expenditures by Source of Financing

7.4

6.7

3.5

5.3

5.9

3.7

5.0

4.2

5.0

3.4

5.5

2.7

3.4

5.7

5.0

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Japan

Mongolia

Thailan

d

Hong K

ong SAR

Tonga

Malays

iaKorea

Sri Lank

a

Kyrgyz

stan

Philippines

China

Indones

ia

Banglad

esh

Nepal

Viet Nam

% o

f tot

al s

pend

ing

on h

ealth

0

1

2

3

4

5

6

7

8

(%) H

ealth

exp

endi

ture

as

a sh

are

of G

DP

)%( Public share )%( Private share Health as % of GDP

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Public Share of Total Health Spending is Public Share of Total Health Spending is Generally LowGenerally Low

ChinaIndonesia

Malaysia

Thailand

VietnamCambodia

Lao PDR

Philippines

Samoa

2040

6080

100

Gov

ernm

ent h

ealth

spe

ndin

g )%

of t

otal

(

250 1000 5000 25000GDP per capita, US$

Source: WDINote: log scale

Government health spending vs income, 2005

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Out of Pocket Spending as a Share of Total Health Spending Out of Pocket Spending as a Share of Total Health Spending is High Relative to Other Comparable Income Countriesis High Relative to Other Comparable Income Countries

China

Malaysia

Philippines

Thailand

Vietnam

Indonesia

CambodiaLao PDR

Samoa2040

6080

100

Out

-of-p

ocke

t hea

lth s

pend

ing

)% o

f tot

al(

250 1000 5000 25000GDP per capita, US$

Source: WDINote: log scale

Out-of-pocket health spending vs income, 2005

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Catastrophic impact of health spending

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%

MALAYSIA

SRI LANKA

THAILAND

INDONESIA

PHILIPPINES

TAIWAN

HONG KONG

NEPAL

INDIA

KOREA

CHINA

VIETNAM

BANGLADESH

% households with medical spending greater than 15% of household consumption

Source: EQUITAP studySource: EQUITAP study

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Viet

Thai

Taiw

SLK

PhilNep

Kor

Indo

Indi

HK

Chin

Ban

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

OOP share of financing

OO

P/To

tal e

xp >

15%

Large OOP Share is Related to High Large OOP Share is Related to High Incidence of Catastrophic Health SpendingIncidence of Catastrophic Health Spending

Source: Equitap studySource: Equitap study

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Health Financing Health Financing FunctionsFunctions

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Health Financing Functions and ObjectivesHealth Financing Functions and Objectives

Functions Objectives

Revenue collection

Pooling

Purchasing

raise sufficient and sustainable revenues in an efficient and equitable manner to provide individuals with a basic package of essential services which improves health outcomes and provides financial protection and consumer satisfaction

manage these revenues to equitably and efficiently create insurance pools

assure the purchase of health services in an allocatively and technically efficient manner

Source: Gottret and Schieber, Health Financing Revisited, World Bank 2006

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Equity – Remains an Challenge in EAP (1)Equity – Remains an Challenge in EAP (1)Poorest quintiles' shares public health subsidy

0%

10%

20%

30%

40%

50%household expenditure

public health subsidy

Source: Equitap studySource: Equitap study

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Equity – Remains an Challenge in EAP Equity – Remains an Challenge in EAP

Richest quintiles' shares public health subsidy

0%

10%

20%

30%

40%

50%

household expenditure

public health subsidy

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Indonesia - Wide Variation in Per Capita Health Spending Across Provinces

0

50

100

150

200

250

300

350

Maluku UtaraBantenLampungSulawesi TenggarJawa BaratSulawesi UtaraNusa Tenggara BaJawa TimurSumatra SelatanJawa TengahKalimantan BaratBengkuluYogyakartaBangka BelitungSulawesi SelatanNanggroe Aceh DaSumatra UtaraJambiKalimantan SelatRiauMalukuNusa Tenggara TiBaliSulawesi TengahSumatra BaratKalimantan TengaPapuaGorontaloKalimantan Timur

Thou

sand

Rp.

Maximum Minimum Mean

Source: World Bank 2006Source: World Bank 2006

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What do We Mean by Risk Pooling?What do We Mean by Risk Pooling?

Age

Res

ourc

e e n

dow

men

t

Health risk

Res

ourc

e e n

dow

men

t

Cross-subsidy from low-risk to high-risk

(risk subsidy)

Low risk

High risk

$

$

Income

Res

ourc

e e n

dow

men

t

Cross-subsidy fromrich to poor

(equity subsidy)

PoorRich

$

$

Cross subsidy from productive to non-productive

part of the life cycle

Productive

Non-produc

tive

$

$

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Fragmentation in Health Financing• In many countries in the region, health financing is fragmented• Different financing mechanisms for different groups or sectors of the

economy– Thailand: Civil Service Medical Scheme and Social Security Scheme for

formal sector; UC scheme for informal sector– China: Basic Medical Insurance )BMI( for urban formal sector; New

Cooperative Medical Scheme )NCMS( for rural sector– Laos: Civil Service and Social Security Schemes for formal sector; CBHI

and other schemes for informal sector• Fragmentation can also be geographic

– China: Both BMI and NCMS are based on city- or county-wide risk pools• Several countries considering health financing reforms introducing

new sources of financing and management mechanisms– fragmentation issue needs to be considered early in design phase

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Universal HI : Thailand

UC CSMBS SSSSSSContribution

2001

NHSO MOF Comptroller SSOSSO

CapitationDRG FFS

CapitationDRG

Public Private Providers

48 mil. 7 mil. 7 mil.

Insurees, Insurees,

Right holderRight holderss

TAX1990

Services

>50 yrs.

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Why is Fragmentation a Problem?

• Administrative inefficiency– Duplication of tasks and dispersion of scarce capacity

• Lack of portability reduced labor market mobility

• Difficult to implement cross-subsidization and achieve equity goals

• Reduced ‘purchasing power’ and difficult to create coherent incentives for providers – E.g. different payment systems / rates for different

schemes

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What can be done about fragmentation

• Joint / coordinated management systems and provider payment arrangements– On the agenda in many countries, but institutional and

political barriers• Unification of schemes

– E.g. integration of health insurance funds in South Korea in 2000

– Politically challenging• Risk-pooling at higher geographic level

– Trend towards risk pooling at provincial level for pensions in China; not yet for health

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Financing Challenges/LessonsFinancing Challenges/Lessons

• There is no one ‘right’ financing model.

• System financing must be sustainable

• LICs face difficult tradeoffs between financing essential services and providing financial risk protection -- prioritization is critical.

• Important to address absorptive capacity and ability to finance from domestic resources future recurrent and capital costs.

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Financing Challenges/LessonsFinancing Challenges/Lessons

• Many countries trying to achieve universal coverage, reduce fragmentation, and improve efficiency. However, key is the impact; specific model is of secondary importance.

• Health Financing models need to take into account the level of income, rate of growth and institutional and administrative capacity.

• Health Financing reforms need to pay great attention to political economy dimension also key.

• Again, models need to be tailored to individual countries

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Financing Decisions Involve Difficult Trade-Financing Decisions Involve Difficult Trade-offsoffs

Efficiency

EquitySustainability

Affordability

Political Criteria

Health Outcomes

Financial Protection

Consumer Satisfaction

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Key Messages• Macroeconomic situation provides good

opportunity to increase financial protection and think about health financing reforms

• Increasing role of private sector; models need to take that into account; ensure coordination and governance

• Need to increase efficiency in spending in the region/Address fragmentation