major health financing model

Model Pembiayaan Pelayanan Kesehatan

Pola Belanja KesehatanPola Belanja Kesehatan

Belanaja Kesehatan 2004Belanaja Kesehatan 2004(population-weighted)(population-weighted)

Fakta KunciFakta Kunci

• Belanja Negara terhitung kurang dari 25% dari total belanja kesehatan di Low Income Countries (LICs), kira-kira 50% in MICs dan lebih dari 60% in HICs:

→ Policy-makers need to focus on private spending as well as public.

• Belanja Negara (Public spending) utk Kesehatan : kira-kira $10 per capita in LICs, lebih dari $100 in MICs, dan $2000 in HICs:

→ Policy-makers in LICs will be challenged to provide an essential package of basic services.

• Pembayaran langsung oleh masyarakat (Out-of-pocket payments) terhitung 70 percent di LICs, 40 percent di MICs dan 15 percent di HICs:

→ Policy-makers need to focus on improving formal risk pooling mechanisms in order to provide financial protection and protect the poor.

• Asuransi Social terhitung 2% dari total belanja kesehatan di LICs, 20% di MICs, dan 30% in HICs:

→ Policy-makers in LICs need to carefully evaluate whether they have the enabling conditions in place for SHI to succeed.

Fungsi dan Model Fungsi dan Model Pembiayaan KesehatanPembiayaan Kesehatan

Fungsi dan SasaranFungsi dan Sasaran

Fungsi Sasaran

Revenue Collection

Pooling

Purchasing

raise sufficient and sustainable revenues in an efficient and equitable manner to provide individuals with both a basic package of essential services and financial protection against unpredictable catastrophic financial losses caused by illness and injury

manage these revenues to equitably and efficiently pool health risks

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

Revenue Pooling Resource AllocationCollection or Purchasing (RAP)

Kebutuhan Pembiayaan Terkait dengan Pendapatan. Kebutuhan Pembiayaan Terkait dengan Pendapatan. Resiko dan Manajemen dan PembiayaanResiko dan Manajemen dan PembiayaanPrivate

Public

Taxes

Public Charges/Resource Sales

Mandates

Grants

Loans

PrivateInsurance

Communities

Out-of-Pocket

PublicProviders

PrivateProviders

Service Provision

GovernmentAgency

Social Insurance orSickness Funds

Private Insurance or Community-basedOrganizations

Employers

IndividualsAnd Households

Basic Packages: An Effort at Setting PrioritiesBasic Packages: An Effort at Setting Priorities

Modern and traditional medicine offer a very large and growing number of health interventions. But with the limited availability of public resources, not

all can be publicly afforded.

Maximum possible health status

Set o

f i nterven

tion

s

Select a limited set of health interventions, that you can finance

with available resources, and that maximizes health

status.

Include? Include? Include? Include? Include?

Source: Bitran

12

Why Consider Basic Packages?Why Consider Basic Packages?• Growing sense that main health problems

remain only partly tackled.• Current resources spent “otherwise” would

result in greater health gains.• In social or private health insurance, benefits

package must be made explicit: people pay a known premium in exchange for a known coverage, or set of benefits. Enrollees want to know their rights explicitly.

• Under social insurance, resource allocation is accomplished through basic benefit design

Source: Bitran

Decision Tree for Public Resource Decision Tree for Public Resource AllocationAllocation

Cost-Effective?

YesNo

Do NotSubsidize

FinancePublicly

Public? Private?

YesNo

ContributoryInsuranceAppropriate?

YesPublicGood? No

SignificantExternalities

NoYes

AdequatePrivate Demand?

No

Yes

CatastrophicCostYes

No

BeneficiariesPoor?

Yes No

(Regulated)Private Market

Source: P. Musgrove

Insurance Can Be ComplexInsurance Can Be Complex• Adverse selection occurs

when sicker than average individuals enroll in competing public or private health insurance plans

• This can destabilize insurance markets through premium spirals if healthier individuals disenroll

• Insurers react by trying to screen out such high risk individuals by:

– requiring medical examsrequiring medical exams– examining claims historyexamining claims history– having waiting periodshaving waiting periods– excluding pre-existing excluding pre-existing

conditions from coverageconditions from coverage– refusing insurance coveragerefusing insurance coverage

• These instabilities can be offset by: – regulation of insurers – marketing insurance to

groups formed for other purposes (e.g. employment)

– having a mandatory public insurance program

Insurance Encourages Overuse of Insurance Encourages Overuse of ServicesServices

• This phenomenon known as This phenomenon known as moral hazardmoral hazard results results because of the tendency for insurance to increase because of the tendency for insurance to increase the probability of the occurrence of the event that is the probability of the occurrence of the event that is being insured againstbeing insured against

• It is present in both public and private insuranceIt is present in both public and private insurance

• Insurance design features to mitigate moral hazard Insurance design features to mitigate moral hazard include:include:

– cost sharingcost sharing– limits on benefitslimits on benefits– frequent renewabilityfrequent renewability

– utilization managementutilization management

Do Insurance Market Instabilities Do Insurance Market Instabilities Necessitate Public Financing?Necessitate Public Financing?

Public financing can: Public financing can:

– pool risks over the pool risks over the entire populationentire population

– eliminate adverse eliminate adverse selection and selection and medical underwriting medical underwriting problems problems

– still face cost still face cost problems due to problems due to moral hazard moral hazard

Private insurance can:Private insurance can:

– segment health risks segment health risks by underwriting groups by underwriting groups

– preclude economic preclude economic losses from coercive losses from coercive taxestaxes

– allow for greater allow for greater consumer choiceconsumer choice

Major Health Financing Major Health Financing ModelsModels


• National Health Service (NHS) -- systems financed through general revenues, covering whole population, care provided through public providers (General revenues dominate financing in some 106 of 191 countries)

• Social Health Insurance -- systems with publicly mandated coverage for designated groups, financed through payroll contributions, semi-autonomous administration, care provided through own, public, or private facilities (Over 60 countries have established SHI systems)

• Community-Based Health Insurance -- not-for-profit prepayment plans for health care, financed through private voluntary contributions, with community control and voluntary membership, care generally provided through NGO or private facilities

• Voluntary Health insurance -- financed through private voluntary contributions to for- and non-profit insurance organizations, care provided in private and public facilities

• User Fees – charges to individuals for publicly provided services

Evolution of Health Financing Evolution of Health Financing SystemsSystems

Patient Patient Out-of-Out-of-PocketPocket

Social InsurSocial Insur

Gov’t BudgetGov’t Budget Gov’t BudgetGov’t Budget

Social InsurSocial Insur

Patient Out-Patient Out-of-Pocketof-Pocket

Priv. insurPriv. insur

Low Income Low Income CountriesCountries

Middle Middle Income Income

CountriesCountries

High Income High Income CountriesCountries

National Health National Health Service ModelService Model

SocialSocialHealth InsuranceHealth Insurance

ModelModel

Private Private InsuranceInsurance

ModelModelSource: Modified from A. Maeda

CommunityCommunityFinancingFinancing

Patient Out-Patient Out-of-Pocketof-Pocket

Major Health Financing ModelsMajor Health Financing Models

Model

Revenue Source

Groups Covered

Pooling Organization

Care Provision

National Health Service

General revenues

Entire population

Central government

Public providers

Social Health Insurance

Payroll taxes Specific groups

Semi-autonomous organizations

Own, public, or private facilities

Community-based Health

Insurance

Private voluntary contributions

Contributingmembers

Non-profit plans NGOs or private facilities

Voluntary Health Insurance


Contributing members

For- and non-profit insurance organizations

Private and public facilities

Out-of-Pocket Payments

(including public user fees)

Individual payments to providers

None Public and private facilities (public facilities)


Model

Revenue Source

Groups Covered


Care Provision


General revenues

Entire population

Central government

Public providers


Payroll taxes Specific groups Semi-autonomous organizations



Insurance


Contributingmembers











What is a NHS?What is a NHS?

Three main features: 1. Funding comes primarily from general revenues.

• Taxes, other public revenues from sales of natural resources, sales of government assets, public tolls, borrowing and grant assistance, earmarked taxes or funds from local authorities.

1. Provide medical coverage to the whole population. • Health care coverage is considered an attribute of citizenship.

1. Usually deliver health care through a network of public providers.

• MoH heads a large network of public providers organized as a national health service.

• Facilities are owned by the government, and health personnel are public employees.

• However, some countries reimburse or contract with private providers.

Systems financed through general revenues, covering whole population, care provided through public providers

NHS SystemsNHS Systems

Strengths

– Pools risks for whole population

– Relies on many different revenue sources

– Single centralized governance system has the potential for administrative efficiency and cost control

Weaknesses

– Unstable funding due to nuances of annual budget process

– Often disproportionately benefits the rich

– Potentially inefficient due to lack of incentives and effective public sector management

Systems financed through general revenues, covering whole population, care provided through public providers


Model

Revenue Source

Groups Covered


Care Provision


General revenues

Entire population Central government

Public providers


Payroll taxes Specific groups

Semi-autonomous organizations



Insurance


Contributingmembers











What is Social Health Insurance?What is Social Health Insurance?

Most common features and principles: 1. Membership is publicly mandated for a designated

population.– Occurs through an incremental process.– From existing employer-based insurance schemes to

compulsory schemes for specific employment groups to SHI.

1. Direct link between the payment of contributions to finance the system and the receipt of medical care benefits.– Only contributors have the right to access specific items of

care. – “There is a public commitment to take and give under

prescribed conditions stipulated by laws and regulations.” (Ron, Abel-Smith, and Tamburi 1990).

Systems with publicly mandated coverage for designated groups, financed through payroll contributions, semi-autonomous

administration, care provided through own, public, or private facilities

What is Social Health Insurance? (2)What is Social Health Insurance? (2)

3. Social solidarity is essential.– Implies a high level of cross-subsidization across

the system, between rich and poor, low-risk and high-risk people, and individuals and families

4. Management of social health insurance involves some degree of autonomy from the government, often through quasi-independent organizations in charge of the system and in principle the organization has to maintain its own financial solvency.

Social Health InsuranceSocial Health Insurance

Strengths

• Additional health revenue source• As a ‘benefit’ tax, there may be

more ‘willingness to pay’• Removes financing from annual

general government appropriations process

• Generally provides covered population with access to a broad package of services

• Often has strong support from population

• Can effectively redistribute between high and low risk and high and low income groups in the covered population

• Often serves as the basis for the expansion to universal coverage

Weaknesses

• Poor are often excluded unless subsidized by government

• Payroll contributions can reduce competitiveness and lead to higher unemployment

• Can be complex and expensive to manage, which is particularly problematic for LICs and some MICs

• Governance and accountability can be problematic

• Can lead to cost escalation unless effective contracting mechanisms are in place

• Often provides poor coverage for preventive services and chronic conditions

• Often needs to be subsidized from general revenues

Systems with publicly mandated coverage for designated groups, financed through payroll contributions, semi-autonomous

administration, care provided through own, public, or private facilities

Major Planning Issues (1)Major Planning Issues (1)

• Covered population/eligibility• Enrollment/premium collection• Benefit package• Costing/financing• Macro organization

Public, Semi-public, Private non-profit, for-profit

Monopoly or competition• Payment/contracting systems

Source: Hsiao, 2005

Source: Hsaio

AdministrationAdministration

• Costs of premium collection and targeting

• Transparency of its operations and performance

• Accountability to regulators and enrollees

• Compliance with law when operated by private insurers

Source: Hsiao, 2005

The Governance of Social Health The Governance of Social Health Insurance Arrangements Insurance Arrangements

– Stewardship or policy/regulatory

– Oversight

– Institutional

Source: World Bank

Enabling Conditions for Enabling Conditions for Social Health InsuranceSocial Health Insurance

• A growing economy and level of income able to absorb new contributions

• A large payroll contribution base and, thus a small informal sector

• Concentrated beneficiary population and increasing urbanization

• A competitive economy able to absorb increased effective wages arising from increased contributions

• Administrative capacity to manage rather complex insurance funds and issues such as management of reserves, cost containment, contracting and others

• Supervisory capacity to overcome some of the market failures such as moral hazard and risk selection as well as other important matters such as governance and sustainability

• Political consensus and will


Model

Revenue Source

Groups Covered


Care Provision


General revenues


Public providers





Insurance

Private voluntary

contributions

Contributingmembers

Non-profit plans

NGOs or private

facilities










What is CBHI?What is CBHI?

Three common features:1. Affiliation is based on community membership, and

the community is strongly involved in managing the system.

– Linked by geographic proximity, same profession, religion, ethnicity, or any “other kind of affiliation that facilitates their cooperation for financial protection” (Jakab and Krishnan 2004).

1. Beneficiaries are excluded from other kinds of health coverage.

2. Members share a set of social values.

Not-for-profit prepayment plans for health care, with community control and voluntary membership, care generally provided through NGO or private facilities

Community-Based Health InsuranceCommunity-Based Health Insurance

Strengths• Community-run and not-for-profit• Membership is voluntary• Promotes pre-payment • Plays a role in mobilizing additional

resources, providing access and financial protection in LICs

• Risk sharing is usually from the well to the sick

• If premiums are based on income, there can also be risk sharing from the better off to the poor

• CBHI can be a helpful complement but is not a substitute for NHS or SHI systems

Weaknesses• Heterogeneous in terms of populations

covered, regulation, and benefits provided

• Providing access and financial protection are limited due to the small size of most schemes

• The financial sustainability of most schemes is questionable

• CBHI schemes generally do not reach the very poor

• Their impacts on care delivery are quite limited

• Should be encouraged only where more comprehensive health financing arrangements cannot be implemented on a large scale

Not-for-profit prepayment plans for health care, with community control and voluntary membership, care generally provided through NGO or private facilities


Model

Revenue Source

Groups Covered


Care Provision


General revenues


Public providers





Insurance


Contributingmembers



Private voluntary

contributions


For- and non-profit

insurance organizations

Private and public

facilities





What is Voluntary Health Insurance?What is Voluntary Health Insurance?

• Voluntary health insurance is defined as any health insurance that is paid for by voluntary contributions.

• In reality, most private health insurance markets are voluntary. – Important to identify whether the voluntary scheme is a primary

or additional source of health care funding.

• Primary functions (OECD 2004): – the main source of health coverage for a population or

subpopulation (primary)– coverage of the same services or benefits as the public system

(duplicate) (although the providers and timely access to, quality, and amenities of the services may vary)

– coverage of cost sharing under the public system (complementary)

– coverage of services uncovered by the public system (supplementary)

Financed through private voluntary contributions to for- and non-profit insurance organizations, care provided in private and public

facilities

Voluntary Health InsuranceVoluntary Health Insurance

Strengths

• As a prepayment and risk pooling mechanism is generally preferable to out of pocket expenditure

• May increase financial protection and access to health services for those able to pay

• When an “active purchasing” function is present it may also encourage better quality and cost-efficiency of health care providers

Weaknesses

• Associated with high administrative costs

• Not effective in reducing cost pressures on public health financing systems

• May be inequitable without public intervention either to subsidize premiums or regulate insurance content and price

• Has the potential to divert resources and support from mandated health financing mechanisms

• Applicability in LICs and MICs requires well developed financial markets and strong regulatory capacity

Financed through private voluntary contributions to for- and non-profit insurance organizations, care provided in private

and public facilities


Model

Revenue Source

Groups Covered


Care Provision


General revenues


Public providers





Insurance


Contributingmembers









Individual payments to

providers

N/A None Public and private

facilities (public

facilities)

User Fees are Only a Small Share of User Fees are Only a Small Share of Total Consumer PaymentsTotal Consumer Payments

Fees for publicly provided services

Evidence on User Fees is MixedEvidence on User Fees is Mixed

Strengths

– Generate additional revenue with which to improve health care quality

– Increase demand for services owing to the improvement in quality

– May reduce out-of-pocket and other costs, even for the poor, by substituting public services sold at relatively modest fees for higher-priced and less accessible private services

– Promote more efficient consumption patterns by reducing spurious demand and encouraging the use of cost-effective health services

– Encourage patients to exert their right to obtain good quality services and make health workers more accountable to patients

– When combined with a system of waivers and exemptions, serve as an instrument to target public subsidies to the poor and to reduce the leakage of subsidies to the non-poor

Weaknesses

– Are rarely used to achieve significant improvements in quality of care, either because their revenue generating potential is marginal or because fee revenue is not used to finance quality gains

– Do not curtail spurious demand because in poor countries there is a lack, not an excess, of demand

– Fail to promote cost-effective demand patterns because the government health system fails to make cost-effective services available to users

– Hurt access by the poor, and thus harm equity, because appropriate waivers and exemption systems are seldom implemented; where they are, the poor get discriminated against with lower quality treatment

Fees for publicly provided services

major health financing model

Healthcare