Tender purchasing of medicines as strategy for medical services cost containment: in Health Insurance Corporation - Khartoum State (HICKS).

Analysis of current situation and developing a copayment system in Health Insurance - Khartoum State (HIKS) Sudan.

1Analysis of current situation and developing a copayment system in Health Insurance - Khartoum State (HIKS) Sudan.

prepared by:

Omer Mukhtar Abdulkhalig Ahmed (M.Sc in Health Economics- University of Khartoum)2Introduction3Health insurance is defined as a contract between the insured and the insurer to the effect that in the event of specified events (determined in the insurance contract) occurring the insurer will pay compensation either to the insured person or to the health service provider. There are two major forms of health insurance. One is private health insurance, with premiums based on individual or group risks. The other is social security, whereby in principle societys risks are

Introduction4pooled, with contributions usually dependent on their capacity to pay(Guide to producing national health accounts: with special applications for low-income and middle-income countries, 2003).

New theory suggests that health insurance provides an economy wide redistribution of income from those who remain healthy to those who become ill which is efficient and it increases the welfare of society (Nyman, 2004).

Introduction5One of the problems that facing health insurance plans is a moral hazard which refers to the additional health care that is purchased when persons become insured. This is regarded, by health economists, as inefficient because health care is represented less than its cost of the production (Nyman, 2004).

Introduction6Copayment, which is defined as an amount under a health insurance scheme for which the insured person is liable. Copayments take the form of deductibles and/or coinsurance and Coinsurance, which is defined as a form of copayment in which the consumer pays a fixed amount or a percentage of the charges for each good or service rendered, are considered as mechanisms which done by the insurance companies to contain the cost (Guide to producing national health accounts: with special applications for low-income and middle-income countries, 2003).

Introduction7It is important for policy makers to understand the expenditure elasticity, i.e., the ways in which consumer demand for health services changes in response to differences in out-of-pocket costs (Duarte, 2012).

It is found that, in studies done in different countries, health expenditure income elasticity is higher at low-income levels and lower at higher income levels (Matteo, 2003). Introduction8Because copayment can reduce both necessary and unnecessary medical utilization, it may cause unintended outcomes in the treatments of some diseases, because there are certain groups of patients more sensitive to copayment changes, like non exempt patients on regular medications, the elderly and those on low incomes (Chen, Lee, Lin, Lee, Li, & Wu, 2012).

Introduction9Research Problem10 Research ProblemHIKS faces an increasing manner of the total cost of the health care services which are provided in two major groups, pharmaceutical services and medical services . This is may be due to many factors, like the universal coverage plan, the increase of prices of health care services, supply-induced demand etc. But, this increasing cost may influenced by other factors like moral hazard.11(Medicines 42.13%, laboratories 18.07%, and sophisticated investigations 10.54%, outpatient 15.07%, inpatient 5.11% and others 9.09%- cost of medical services in HIKS during Jan.2011 to Aug.2011). Khartoum State Health Insurance, Opportunities and Challenges- presented in a workshop by A.K.Nanda Kumar, PhD, WHO Health Finance consultant, Sep.2011.11Research Objectives12 Research ObjectivesBecause there is already copayment in the pharmaceutical services, the research aims to analyze the cost of medical services in 2012 to detect the medical services that cause 80% of the total cost of medical services to introduce copayment system in these detected medical services, so as to decrease the cost of medical services which me be influenced by moral hazard.

13Research Methodology14 Research MethodologyThe research methodology is mainly a retrospective cross sectional study.

It is a descriptive study rather than proving of hypothesis due to the limitation of the data. It is applied conclusion-oriented study.

15 Research Methodology The data is analyzed by using Microsoft Excels tables and charts by using Pareto 80/20 rule to determine the medical services that cause 80% of the total cost of medical services.

Pareto 80/20 rule is a causal relationship between the minor factors that cause the majority of the effect.

16Also, Pareto 80/20 rule is applied to analyze two medical services from these selected medical services, which contain many subservices, to detect sub-medical services that cause 80% of the total cost of each of these two medical services. This is because, these sub-medical services are technically and costly different.

Research Methodology (cont.)17Results & Findings18

Results & FindingsIt is found that 8 medical services, from 34 medical services, after exclusion operations because it was already involve copayment, caused 79.65% of the total cost of medical services, which were 23.5% of the total number of medical services. These 8 medical services were: laboratory investigations, consultant visits, GP visits, ophthalmic services, ultrasounds, MRI, X-Rays and CT.

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Results & Findings (cont.)

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Results & Findings (cont.)As a result of the analysis of laboratory investigations and ophthalmic services, which they contain many sub-services, it is found that:30 laboratory investigations, which were 10.6% of the total number of laboratory investigations, were responsible for 80.59% of the laboratory investigations cost.

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Results & Findings (cont.)

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Results & Findings (cont.)And 8 ophthalmic services, which were 9.76% of the total number of ophthalmic services, were responsible for 79.22% of the ophthalmic services cost.

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Results & Findings (cont.)

24Conclusions & Recommendations25

Conclusions & RecommendationsMore studies must be done to determine suitable copayment rate that would be introduced to the medical services.

If copayment system is introduced, it would be introduced to the detected 8 medical services and to the detected sub-medical services which include 30 laboratory investigations and 7 ophthalmic services (service no. 1 in the ophthalmic services table is already involved copayment).

26More studies must be done to determine if any groups - according to specific specifications - of enrollee demand more services than others.

More studies must be done to determine if any specific groups may be excluded from copayment; like: pregnant women, patients above 70 years old, children under 5 years old, etc. Conclusions & Recommendations (cont.) 27If any copayment rate is introduced, more studies must be done to determine the effect of this copayment rate on the demand of medical services, i.e. the elasticity of demand, and its effect on the overall cost of the medical services. Conclusions & Recommendations (cont.) 28 References29Chen, L.-C., Lee, Y.-Y., Lin, T.-H., Lee, C.-S., Li, C.-J., & Wu, D.-C. (2012). How Does Out-of-Pocket Payment Affect Choices When Accessing. Value in Health Regional Issues , 1 (1), 105-110.Duarte, F. (2012). Price elasticity of expenditure across health care services. Journal of Health Economics , 31 (6), 824841.Guide to producing national health accounts: with special applications for low-income and middle-income countries. (2003). Geneva: World Health Organization.Matteo, L. D. (2003). The income elasticity of health care spending. The European Journal of Health Economics , 4 (1), 20-29.Nyman, J. A. (2004). Is Moral Hazard Inefficient? The Policy Implications Of A New Theory. Health Affairs , 23 (5), 194-199.

References30Thank you

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