Under JPG Teaching Fellowship Permission from JPGSPH CoE-UHC
Under JPG Teaching Fellowship
Permission from JPGSPH
CoE-UHC
HEALTH CARE FINANCING
Jahangir A. M. Khan, PhD
Head, Health Economist Unit
ICDDR,B
Associate Professor
JPGSPH, BRAC University
Email: [email protected]
Defining Universal Health Coverage
WHO, 2005 says:
Universal health coverage means that everyone in the population has access to appropriate promotive, preventive, curative and rehabilitative health care when they need it and at an affordable price.
Three dimensions of UHC
Financial risk protection
No one should die and suffer because they cannot afford
health care, and no one should be made poorer because they
get sick.
6
What is healthcare financing?
The ways of payments for accessing healthcare
Includes:
Collection of revenue and
Purchasing of healthcare
7
ECONOMICS OF HEALTH CARE FINANCING
Efficiency Achieving efficiency is about comparing the costs (or resources) and benefits (or well-being produced) ensuring that resources are allocated in such a way so that gain to the society can be maximized.
Equity Principle of being fair to all, with reference to a defined and recognized set of values.
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Under 5
5 to 9
10 to 14
15 to 19
20 to 24
25 to 29
30 to 34
35 to 39
40 to 44
45 to 49
50 to 54
55 to 59
60 to 64
65 to 69
70 to 74
75 to 79
80 above
4000 3000 2000 1000 1000 2000 3000 4000
Males Females
Population Pyramid, Bangladesh
HIES, 2010
Payer
10
Issues → Who to be funded? How to be funded?
Target ↓
PO
PU
LA
TIO
N 1
51.6
MIL
LL
ION
(20
12
)
Poor
Below Poverty Line
47.8 MILLION
31.5%
Tax-funded publicly financed health care, Non-
contributory health protection mechanisms
(e.g. SSK) part of the Social Health Protection
scheme
Informal sector
83.4 MILLION
55%
Tax-funded publicly financed health care with
user fee retention, community-based health
insurance initiatives, micro health insurance,
other innovative initiatives, gradual move to
Social Health Protection scheme coverage
Formal sector
20.5 MILLION
13.5%
Tax-funded publicly financed health care with
user fee retention, Social Health Protection
scheme, Complementary private coverage
Funding healthcare – Who & How?
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ANALYTICAL APPROACHES
Health care triangle
Financing equation
Functions of health care systems
12
Health care triangle
Citizen Provider Delivery
Third-party insurer or purchaser
Source: Reinhardt, 1990
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Financing equation
TF + SI + UC + PI = P X Q= W X Z
TF = Sum of taxation
SI = Social insurance contributions
UC = Out of pocket and user charges
PI = Insurance premium (voluntary or private)
P = Price of the service
Q = Quantity of the service
W = Quantity and mix of inputs
Z = Price of inputs
14
Functions of health care system
Revenue collection
Fund pooling
Purchasing
Financing
Personal health services
Non-personal health services
Provision
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Firms,
corporate entities
& employers
Individuals,
households &
employees
Foreign & domestic
NGOs & charities
Foreign govt
& companies
Source Mechanism Collection agents
Direct & indirect taxes
Compulsory insurance
contributions & payroll
taxes
Voluntary insurance
premiums
Medical savings
accounts
Out-of-pocket payments
Loans, grants &
donations
Central, regional &
local government
Independent public
body or social security
agency
Private not –for- profit or
for profit insurance
funds
Providers
Revenue collection
Source: Kutniz, 2000
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Fund pooling
o Fund pooling is defined as the ’accumulation of prepaid health care revenues on behalf of a population’.
o Importance: It facilitates the pooling of financial risk across the
population.
o Funding Scope for pooling risk
Tax Yes
Social security contribution Yes
Private health insurance Yes
Community rated premium Yes
Medical savings account No
User charges No
Current funding situation in Bangladesh
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Health Financing in Bangladesh 2006-2007
18
Public SectorTk. 41,318
26%
Rest of the WorldTk. 12,391
08%
NGOsTk. 2,092
01%
Household OOPTk. 103,459
64%
Private FirmsTk. 1,325
0.8%
Private InsuraneTk. 314
0.2%
Million TakaTk. 69 = US $ 1
Allocation in public budget for health, 2009-2014
19
7,6
67
cr
9,4
70
cr
0
1
2
3
4
5
6
7
2009-10 2010-11 2011-12 2012-13 2013-14
6.18 5.68
5.03 4.82 4.26
Share (%) of total budget 6
,27
1 c
r
9,1
30
cr
9,4
70
cr
7,6
67
cr
7,2
87
cr
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
1 2 3 4 5
2.94 3.17
4.55
5.98
8.86
Out of pocket expenditure as a percentage of household
consumption expenditure across socioeconomic groups in
Bangladesh, 2005
Source: Van Doorslaer et al, 2007. 20
Distribution of out-of-pocket payments across income groups in Bangladesh, 2005
Estimated by: Jahangir A. M. Khan using secondary data from Van Doorsler et al, 2007 and Statistical Yearbook of Bangladesh, 2008.
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Poorest 2nd 3rd 4th Richest
6.2% 7.2%
12.2%
21.5%
52.8%
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FUNDING METHODS
o Taxation
o Out of pocket payments
o Loan, grants and donations
o Health insurance
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National or local taxes
Arguments in favour of local taxation
o More transparency
o Improved accountability
o Responsiveness to local preference
o Separation of health from competing national priorities
Arguments against local taxation o Generate inertia among politicians for risk change o Horizontal inequity o Same tax rate means less (more) revenue in poor (rich) regions o Less potential redistribution o National tax collection produces more economies of scale, compared with regional tax collection.
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General or hypothecated taxes
Arguments for general taxes
o It draws on a broad base of revenue.
o Trade-off between health care and other areas of public expenditure (priorities of citizens).
Arguments for hypothecated taxes
o Reduce resistance to taxation as it is more visible
o Linkage between revenue (taxation) and expenditure makes the
funding of health care more transparent and responsive
o Makes people more connected to tax system and may increase
the pressure on providers to improve quality
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Health insurance
Health insurance is a means of financing healthcare.
An insured person pays a small amount to an organization (insurer) in a regular basis, against (per month) which the insured person will have access to a defined healthcare package.
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Types of health insurance
Private insurance
Community health insurance
Social health insurance
National health insurance
27
Characteristics of insurance
Type of
insurance
Financing
source
Nature of
contribution
Funds
earmarked
for health
Membership
Private health
insurance
Out-of-
payments of
premium
Voluntary Yes Contributing
members
and usially
their
dependents
Community
health insurance
Out-of-
payments of
premium
Voluntary Yes Contributing
members
and usually
their
dependents
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Characteristics of insurance
Type of
insurance
Financing
source
Nature of
contribution
Funds
earmarked
for health
Member-
ship
Social health
insurance
Employer
and/or
employee
from salary
or wage
Mandatory Yes Contributing
members
and usually
their
dependents
National
health
insurance
Govt.
general
revenue
and other
taxes
Funded mostly
from tax
revenues
No All citizens
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Social Health Insurance
Social health insurance is an insurance programme which meets at least one of the following three conditions: 1. participation in the programme is compulsory either by law or
by the conditions of employment, 2. the programme is operated on behalf of a group and restricted
to group members, 3. an employer makes a contribution to the programme on behalf
of an employee.
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Social Health Insurance
Social health insurance contributions are not related to risk, are levied on earned income and collected by a body at arm’s from government – otherwise it amounts to an earmarked payroll tax. Contributions are usually compulsory and shared between the employees and the employers.
Why SHI
Universal coverage
Broad base for financing healthcare
Preventing adverse selection
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History of SHI
SHI established in Germany by Bismarck in 1883
27 countries have established UHC via SHI
32
How long time it takes
Germany 127 years
Belgium 118 years
Austria 79 years
Luxembourg 72 years
Costa Rica 48 years
Japan 36 years
Korea 26 yeras
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Community-Based Health Insurance
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What is CBHI? Any not-for-profit insurance scheme aimed primarily at the informal sector and formed on the basis of a collective pooling of health risks and in which the members participate in its management.
Common features (NGO driven CBHI)
36
Small membership group Small and affordable premium with limited
benefits and coverage Simple procedures and considerable member
participation in management of the program
Why CBHI?
37
Informal sector – around 90% population Reliance on poorly functioning government
health facilities or expensive private facilities – barriers to sufficient and quality healthcare
CBHI – pre-payment at affordable premium
Target population of CBHI
38
Informal sector Unorganized groups Poorer section of the community (trial)
Prerequisites for CBHI
39
Essential Problems with healthcare and high out-of-pocket medical payments An organized group willing to pool risk through insurance mechanism NGO/CBO etc. willing to organize CBHI and have administrative capacity Healthcare providers who can provide adequate quality care
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Prerequisites for CBHI
Desirable Willingness to pay – principle of risk sharing, solidarity, healthcare needs to be managed Ability to pay – affordable premium Reliable data – demography, morbidity, costs Legal aspect – legally functional Technical and managerial capacity
Main steps in initiating CBHI
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1. Identify need for CBHI
2. Identify management and administrative organization
3. Identify target community
4. Designing CBHI: Provider -/mutual-/linked- model
5. Defining the benefit package
6. Fixing the premium
7. Identifying the providers
8. Who is the insurer
9. How does one administer the scheme?
10. Processing claims and reimbursements
11. Risk management
Identify target community
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Locality Organized Unorganized
Urban Driver's association, shopkeeper's association
Vendor, rag pickers, maid
Rural Co-operative societies, self-help groups
Landless laborers, subsistence farmers
Designing CBHI
43
Provider model Healthcare provider (hospital) initiates and organizes the health insurance program. Mutual model NGO/CBO initiates and organizes the health insurance Program. Linked model NGO/CBO collects premium from community and passes it on to health insurance company.
Advantages and disadvantages with different models
44
Characteristics Model
Provider Mutual Linked
Freedom to suit the local needs
Very free Very free Depends on insurance company's products
Premium Affordability Affordability Acturial
Benefit package Comprehensive and meets local need
Comprehensive and meets local need
Traditional mediclaim policy with its exclusions and limitations
Financial risk With provider With NGO/CBO With insurance company
Quality of care Possibly good Poossibly good No difference between insured and non-insured
Community involvement
Not good Good Good
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Population (in Million)
48 (BPL)
18.8 (Formal)
85.7
(Informal)
Social Health Protection Scheme (SHPS)
Heath Equity Fund/NHSO SSK (BPL)
Formal Sector SHP
2016
2032
Universal
Coverage
2021
Micro, Community
based insurance
Voluntary
subscriptions to SHPS
MoHFW, 2012
Sequencing in the implementation of the Social Health Protection Scheme
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Purchasing
The transfer of pooled resource to service
providers on behalf of the population for which
the funds are pooled.
SUMMARY
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Healthcare financing Efficiency
Equity
Health insurance
Social health insurance
Community-based health insurance
Purchasing healthcare (will be taken)
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Thank you