Transcript Financing of Health Systems: restrictions and opportunities
Financing of Health Systems: restrictions and opportunities
International Conference on Innovations in Health Financing
Mexico City, April 2004 Carlos Noriega
Financing of Health Systems: restrictions and opportunities 1. Introduction
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Objectives Health expenditures: need and demand Health financing: a.
Collection b. Risk - Pooling c.
Contracting 5.
Policy Options and Opportunities
Mexico faces critical public health challenges in the near term:
Improving health status
Reducing health inequalities Demographic transition
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Some of the challenges emerged as a consequence of deficiencies in the national health system.
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Despite recent reforms, some issues remain to be defined.
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How should the national health system be financed?
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Conceptual analysis and international experience should bear on the policy response.
In designing a national health system the following issues need to be addressed:
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How much financing is required?
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From what sources?
What is the role of government?
Which services are to be included?
In strengthening an existing national health system the questions are inverted:
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What can be done with available financing?
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Is the structure of financing adequate?
Can the government do any better?
Should the basket of services be modified?
Financing of Health Systems: restrictions and opportunities
1.
Introduction
2. Objectives
3.
4.
Health expenditures: need and demand Health financing: a.
Collection b. Risk - Pooling c.
Contracting 5.
Policy Options and Opportunities
Set guiding principles for financing a national health system
Hypothesis It is as important the amount of financing as the structure of collection and the mechanism for allocating the resources Two major premises 1.
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The financing scheme is, simultaneously, a major instrument of economic and social policies. Principles cannot ignore the current economic, social and political environment
Financing of Health Systems: restrictions and opportunities
1.
2.
Introduction Objectives 3. Health expenditures: need and demand 4.
Health financing: a.
Collection b. Risk - Pooling c.
Contracting 5.
Policy Options and Opportunities
How much to spend?
The gap between need and demand for health services may be explained by:
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Legal and regulatory framework
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Budget restrictions Market failure
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Information costs and asymmetries
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Financial market costs
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Externalities
Health expenditures
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Form of investment in human capital
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Impact welfare and economic growth Health expenditures should respond to health considerations as well as to overall economic growth and development goals
DALY ´s
EVISA VS. HEALTH EXPENDITURE AS % OF GDP 78 68 58 48 38 México 28 0 3 6 9 Health expenditure as % of GDP 12 15 EVISA VS. HEALTH EXPENDITURE PER CAPITA (US$) 78 68 58 48 38 28 México 0 1 2 3 Health expenditure per capita (US$) 4 5 (X 1000)
Life Expectancy
LIFE EXPECTANCY VS. HEALTH EXPENDITURE AS % OF GDP 84 74 64 54 44 México 34 0 3 6 9 Health expenditure as % of GDP 12 15 LIFE EXPECTANCY VS. HEALTH EXPENDITURE PER CAPITA (US$) 84 74 64 54 44 34 México 0 1 2 3 Health expenditure per capita (US$) 4 5 (X 1000)
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México spends relatively little in health as compared to other countries with similar income per capita in the region Daly ´s in Mexico are relatively higher as compared to other countries with similar levels of health expenditures (% of GDP and $/pc) At low levels of expenditure more spending contributes to a higher health level At higher levels of expenditure more spending contributes marginally or even negatively to the health level México still can improve health levels by spending more Developing countries need to confer a higher priority to health expenditures to promote welfare and growth.
Financing of Health Systems: restrictions and opportunities
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Introduction Objectives Health expenditures: need and demand 4. Health financing: a. Collection b. Risk - Pooling c.
Contracting 5.
Policy Options and Opportunities
I. Sources of financing
From the point of view of efficiency Moral Hazard Once insured, there are incentives to engage in a more risky behaviour and to use in excess health services Adverse Selection Asymmetric information may lead riskier households/persons to seek affiliation Rule of thumb: control population in order to charge according to risk
From the point of view of equity Financing Risk burden Individual Out of pocket Pay per event Society-Pooling General Revenue Social Insurance Inequitable Equitable Rule of thumb: favor pooling of risks and of financing Dilemma: is there a conflict between efficiency and equity ?
DALY ´s vs Out-of-pocket expenditures as % of total health expenditures
EVISA VS. OUT OF POCKET HEALTH EXPENDITURE AS % OF TOTAL HEALTH EXPENDITURE 78 68 58 48 38 México 28 0 20 40 60 80 100 Out of pocket health expenditure as % of total health expenditure
21 11 1 -9 -19 -29 0 1 2 3 GDP per capita 4 5 (X 10000) 15 5 -5 -15 -25 0 20 40 60 80 100 Out of pocket health expenditure as % of total health expenditure
Source: WHO, Sample of 191 countries, 2002 GDPpc has a positive impact on DALY ´s Out-of-pocket expenditures have a negative impact on DALY ´s
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International evidence does not support the dilemma More equitable financing reinforce efficiency of health systems Equity goals may be pursued as part of the financing scheme Equity goals should be made transparent to ensure they are effectively achieved
II. Federal-Local
Federal financing
Equity: Inter-regional transfers Efficiency: More effective risk-pooling
Local financing
Alignment of incentives Transparency and accountability Closer links expenditure / collection
Challenges for local operation
• • • • Increase coverage Autonomy for managing programs Flexibility to adapt content of basic package of services Responsibility in a decentralized financing scheme
Local governments differ greatly in their contribution to health financing of open population
1600.00
BCS 1200.00
800.00
400.00
Cam p Col Dgo Ags Nay Q.Roo
Coah Chih Qr o Zac Yuc Son Tam ps Hgo Tlax NL SLP Tabs Mor Gr o Chis Gto Jal Mich Pue DF 0.00
4.00
8.00
Ver POBLACION ABIERTA Mex 12.00
Local financing for open population (% of total public spending, 2002)
60 50 40 30 20 10 0 Ta D ba is tri sc to o Fe de ra V l er ac ru C z hi hu ah ua S in al Ta oa m au lip N as ue vo L eó n M or el os N ay ar it C hi ap as Tl ax ca M la ic ho ac án Q ue ré ta ro C ol im a D ur B aj an a go C al ifo rn ia
Health programs for open population:
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Federal in nature, Operated by local governments Financed mostly by federal government
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To improve efficiency incentives need to be realigned: Increase local financing Provide operational autonomy to local governments
Financing of Health Systems: restrictions and opportunities
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Introduction Objectives Health expenditures: need and demand Health financing: a.
Collection b. Risk - pooling c.
Contracting 5.
Policy Options and Opportunities
I. National health system
In terms of risk pooling, health systems may, in principle, be classified as follows: Single pool Multiple pools Universal Coverage United Kingdom Partial Coverage Costa Rica Switzerland Mexico In most countries legislation ensures universal coverage, yet in practice health systems fall into one of these categories.
Advantages of a single pool of risks:
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Better compensation of risks More transparency for pooling financial resources Reduce administrative costs Centralized contracting of inputs and services Advantages of multiple pools of risk :
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Decentralization stimulates standardization Efficiency gains of adecentralized scheme Marginal compensation gains for very large populations
International experience seems to indicate that single systems perform better.
Country System Overall Health System Position WHO 3 6 7 8 9 15 19 33 41 45 51 65 Norway France Canada Netherlands United Kingdom United States Spain Chile Colombia Costa Rica Mexico Venezuela Single Single Single Single Single Multiple Multiple Single Single SIngle Multiple Multiple
Challenges to implement effective risk-pooling in the presence of various national health institutions:
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Portability of rights Standardization of public contributions Management of financial reserves Standardization of services Standardization of quality of services Recommendation:
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Migrate to a single health system with effective financing and risk pooling,
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In the short run implement a gradual process of separation of financing/provision in existing public health institutions
II. Public-Private
Two major issues need to be answered: 1. Nature of the service The false debate
PUBLIC (?) PRIVATE (?) Compulsory affiliation Non-profitable Centralized Comprehensive coverage Regulated Risk-pooling Voluntary affiliation Profitable De-centralized Partial coverage Non-regulated Health-services provision
GOAL INSTRUMENT ACTION
Long term perspective Universal coverage Efficiency and Quality of health services Cost containment Compulsory affiliation Public contribution (subsidies for the poorest and worst risks) Competition in the provision of services Competition Creation of operative and actuarial reserves Regulation for “bad risks” (pre-existencias) Hard budget restriction • •
International experience shows a variety of solutions Services not necessarily have to be provided by the public sector. Ultimate criterion : allow private participation on efficiency grounds making use of available instruments
2. Co-existence of providers: substitute vs. complement Role Condition Mechanism
Substitute Large group Capitated reversal of contributions Complement None Nature of risk not prioritary for public health Basic Package Complementary Package Basic care
Public
Secondary care Tertiary care
Private This outcome enhances efficiency in the system and allows for public resources to be focused where they cannot be substituted by the private sector.
Financing of Health Systems: restrictions and opportunities
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Introduction Objectives Health expenditures: need and demand Health financing: a.
Collection b. Risk - Pooling c. Contracting 5.
Policy Options and Opportunities
Basic services provided Classical Universalism: Provide and finance everything for everybody New Universalism: If services are to be provided for all, then not all services can be provided.
Defined basket of basic services
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Gains in efficiency : Costs: standardization allows for economies of scale Simplification of processes: planning, training, monitoring,
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supervision Certainty on rights of affiliates Sharpening the scope of public responsibilities
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Gains in equity : Affiliates receive similar benefits (avoids undue transfers) Increase coverage
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Constraints: Budget Restriction Extend coverage Recommendations:
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Reach a consensus on public health priorities Establish cost-effectiveness criteria to define a basket of basic services
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Coordinate among existing public health institutions to transit to that basket of basic services
Financing of Health Systems: restrictions and opportunities
1.
2.
3.
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Introduction Objectives Health expenditures: need and demand Health financing: a.
Collection b. Risk - Pooling c.
Contracting 5. Policy Options and Opportunities
Policy Options and Opportunities
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Funding: Increase total funding to health
(2-3% of GDP in 5-10 years)
Increase public financing (budget and tax reform) Increase and uniform contributions by local governments Channel out-of-pocket resources to pre-paid schemes
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Pooling: Conform a national pool (contract with capitated payments) Voluntary affiliation to complementary private services Separation of financing/provision of health services Allow private participation in complementary services
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Contracting: Move towards a basket of basic services
Consensus on public health priorities and health financing
Collection Riks-Pooling Contracting
Efficiency Equity Universal Coverage
Goal Instrument Actions Funding Increase total resources by 2 3% of GDP in 5-10 years Channel out-of-pocket resources into a pre-paid scheme Federal Government raises contributions and explicit subsidies Local governments increase contributions and uniform them across regions Transform current assistance programs into insurance programs Tax and budget reform Tax and budget reform Seguro popular de salud, Seguro de salud de familia, voluntary affiliation (IMSS, ISSSTE) Pooling Contracting Establishment of a single national pool Pool contributions and subsidies Split funding and provisioning Contract through capitated payments Allow private participation for complementary services Legal and regulatory reforms Coordinate (merge) existing national and local social security institutions (IMSS, ISSSTE, ISSSTESON, ISSSTELEON, etc.) Internal reforms of existing national and local social security institutions Define a basic package of services Legal and regulatory reforms Define services based on cost effectiveness criteria
Financing of Health Systems: restrictions and opportunities
International Conference on Innovations in Health Financing
Mexico City, April 2004 Carlos Noriega