Raising revenues for the health sector

WHO Advanced Course on Health Financing for Universal Health Coverage

Barcelona, Spain, 8-12 June 2015

Revenue raising

Matthew JowettSenior Health Financing Specialist

WHO Geneva

Health Financing for UHC, Barcelona, Spain 8-12 June 2015

Service delivery

Stew

ards

hip/

Gove

rnan

ce/O

vers

ight

Creating resources (investment, HRH, technologies, etc.)

Financial protection and equity in finance

Quality

Final coverage goals

UHC intermediate

objectives

Health financing within the overall health system

Equity in resource

distribution

Efficiency

Transparency & accountability

UtilizationNeed

Revenue raising

Pooling

Purchasing

Benefits


Overview

Revenue sources & guiding objectives

How much should a country spend on health?

Developing revenue raising policy in support of UHC

Concluding messages


References:

“More Money for Health” WHR 2010: Chapter 2

“Shared responsibilities for health: a coherent global framework for health financing.” Chatham House Report. London, May 2014


Revenue sources for healthPUBLIC• Domestic

– Direct tax (income tax, payroll taxes)– Indirect tax (value-added, sales, excise taxes)– Non-tax revenues

• External– Grants (bilateral/multilateral) flowing through government– Loans (bilateral/multilateral) flowing through government

PRIVATE• Out-of-pocket payment • Voluntary prepayment (e.g. private insurance) • Individual (medical) savings accounts

All countries rely on mixed sources of financing

Mandatory Pre-paidPooled


GUIDING OBJECTIVES FOR

REVENUE RAISING IN

SUPPORT OF UHC

ADEQUATE level of public

spending on health (absolute)

PREDOMINANT reliance on public sources (relative)

FAIRi.e. progressive in

terms of the burden of financing

STABLE & PREDICTABLE

OTHERe.g. transparent, administratively

efficient


ADEQUATEAND

PREDOMINANTLY PUBLIC


How much is enough?

$12-22 per capita

199315% GGE to

health

2001$34 per capita

2001

$60 per capita2009

$44-$80 per capita

2010 $86 per capita / 5% GDP

2014

How much should a country spend?


Total health spending (per capita)(International $)

Source: WHO National Health Accounts 2012

Ethiopia

Bangladesh

Georgia

Mozambique

Kenya

Uganda

Liberia

Burkina Faso

Malawi

GambiaGhana

IndiaSu

dan

Indonesia

Nigeria

Rwanda

Viet Nam

Bolivia

0

50

100

150

200

250

2637 44 44 49 50

61 62 69 72 77 82 84 91 94 100

134

239

Tota

l hea

lth sp

endi

ng p

er ca

pita

(Int

$)


Ethiopia

Bangla

desh

Georgi

a

Mozambique

Kenya

Uganda

Liberi

a

Burkina F

aso

Malawi

Gambia

Ghana

IndiaSu

dan

Indonesia

Nigeria

Rwanda

Viet Nam

Bolivia

0

50

100

150

200

250

21 23 21 29 32 26 3049

63 64 61 5237

59 50

8399

219

Private

Public

Tota

l hea

lth sp

endi

ng p

er ca

pita

(Int

$)

Public & private health spending (per capita)(International $)


$86 per capita public

Indonesia is richer than Gambia, and has higher total per capita public

spending on health. But public health spending per capita is higher in

Gambia


How much does your gov. prioritise health?


GeorgiaKenya

Nigeria

IndonesiaBrazil

Bangladesh

Mozambique

India

Viet Nam

Bolivia

Ghana

UgandaSudan

Ethiopia

Gambia

Burkina Faso

South Africa

Liberia Ira

n

Malawi

Rwanda

Low inco

me

Lower middle in

come

Upper middle in

come

0

5

10

15

20

25

5.2 5.96.7 6.9

7.6 7.78.8

9.4 9.5 9.5 9.7 10.210.6 11.1 11.2 11.9

12.9 13.2

15.4

16.3

22.3

10.2 10.412.1

GGHE

as %

GGE

15% THE


Public spending on health within the economy


GeorgiaKenya

Nigeria

IndonesiaBrazil

Bangladesh

Mozambique

India

Viet Nam

Bolivia

Ghana

UgandaSudan

Ethiopia

Gambia

Burkina Faso

South Africa

Liberia Ira

n

Malawi

Rwanda

Low inco

me

Lower middle in

come

Upper middle in

come

0

1

2

3

4

5

6

7

8

1.2 1.21.3

1.7 1.71.8 1.9 1.9 1.9

2.7 2.8 2.8 3.0

3.3 3.4

4.1 4.2 4.34.6

6.1

7.0

2.7

3.64.3

GGHE

as %

GDP

5% GDP


How much is enough…..for what?Financial protection

Source: Compiled by WHO from latest dataWHR 2010: Background Paper No. 19

Under or non-utilisation of services is

also “catastrophic”

Public spending threshold level?

+ve relationship between public

spending and financial protection


Your countries: public spending & financial protection

4 6 8 10 12 14 16 18 20 22 240

10

20

30

40

50

60

70

80

Nigeria

Indonesia

India

Bolivia Rwanda

General government health expenditure as a % of total government expenditure

Out

-of-p

ocke

t pay

men

ts a

s a %

of T

HE



Summary

Numerous attempts to define how much a country should spend, in

both absolute and relative terms, in order to progress towards UHC.

Spending targets send a clear message that in in many countries it will be difficult to make progress

without a significant increase in levels of public spending on health

However, wide variations in UHC performance in countries with

similar levels of public spending, are observed. UHC progress is not

only about raising more public money – efficient spending is

central.

Clear evidence that moving towards a predominant reliance on public sources is critical. Spending levels

should be guided by UHC performance.


FAIRAND

EQUITABLE


Equity in financing: health spending as% of household income

Poorest 2nd 3rd 4th Richest0%

2%

4%

6%

8%

10%

12% Proportionate Progressive Regressive

Household income quintile

Hea

lth s

pend

ing

as s

hare

of

hou

seho

ld in

com

e


Progressivity of revenue mix in US

Mean

USA

1 2 3 4 5 6 7 8 9 1005

1015202530354045

General tax Payroll tax Premiums OOP

Deciles of household income

Perc

enta

ge o

f Pre

-Tax

Inco

me

Source: T. Selden. 2009. “Using Adjusted MEPS Data to Study Incidence of Health Care Finance. Slide Presentation from the AHRQ 2009 Annual Conference (Text Version). December 2009. Agency for Healthcare Research and Quality, Rockville, MD


Revenue sourcesKey differences in relation to objectives

Fair? Mandatory Pre-paid Risk pooling

Redistribute

Direct taxes Indirect taxes ?

OOPs x x X x x

Voluntary prepayment x x x

Payroll taxes x


Direct patient payments – the retreat

Negative effect on financial

coverage

Negative effect on demand /

utilization / need

Often damages fairness,

transparency

Credit: WHO/Pierre Albouy

“….universal coverage cannot be achieved through private market-based systems of user fees and private insurance, or through voluntary community-based schemes.”

Credit: WHO/Pierre Albouy

“…even tiny out-of-pocket charges can drastically reduce their (the poor’s) use of needed services. This is both unjust and unnecessary.”


Payroll tax impact on fairness• Malaysia:

• Contribution ceilings are also commonly used, and add a regressive dimension

• In Europe, Bulgaria, Czech Republic, Netherlands and Slovakia all removed or revised ceilings as a result of the recent financial crisis in order to raise more funds, and improve progressivity in the process


STABLEAND

PREDICTABLE


External funding as % THEPredictability and stability an issue in some countries

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0

10

20

30

40

50

60

70

80

90

100

Malawi

Mozambique

Afghanistan

Bangladesh

Burundi

Cameroon

Egypt

Ethiopia

Ghana

India

Kenya

Liberia

Malawi

Mozambique

Nepal

Nigeria

Philippines

Rwanda

Sudan

Tunisia

Uganda

United Republic of Tanzania

Zambia



IFFIm (funds GAVI)ESTABLISHED IN 2006 TO ACCELERATE THE AVAILABILITY AND PREDICTABILLITY

OF FUNDS FOR IMMUNISATION PROGRAMMES


External funding – policy issues• May be offset by reductions in domestic

health spending:– Lu et al. suggested that for every $1 of development assistance

to governments, there was a decrease in GHE by $0.43-1.14.– van der Gaag & Stimac found a positive elasticity of 0.138

against public spending on health

• Often earmarked for a single disease programme – trend shows tailing off for HIV-AIDS; with increasing allocations to RMNCAH.

• Impact on pooling and fragmentation at the country level (e.g. Ghana)? Aligned with national priorities?

Health Financing for UHC, Barcelona, Spain 8-12 June 2015 26

Earmarking as a strategy to increase level and stability of revenues

Tobacco Alcohol Area

Cambodia ✓ Public lighting / electrification

Indonesia ✓ Tobacco industry, social environment, Illegal goods control, public health, medical services

Lao PDR ✓ Tobacco control

Philippines ✓ ✓ Universal health care, medical assistance, health facilities, tobacco farmers

Thailand ✓ ✓ Local funding, Thai Health Promotion Foundation, Thai Public Broadcasting Service

Vietnam ✓ Tobacco control

South Korea ✓ ✓ Education, public health, environment

Mongolia ✓ ✓ Mongolian Health Promotion Foundation

FSM (Yap) ✓ ✓ Sports development

Tuvalu ✓ Tobacco control

East Asia and Pacific Regional WorkshopTobacco and Alcohol Tax Reforms, World Bank

27 February 2014


Philippines: a devolved systemRaising new finances to fund enrolment for the poor

PHIC sits alongside traditional budget funding. Cost of enrolling the poor was shared between national and

local government. But huge problems in committing funds.

New “sin tax” legislation passed in 2012. Increased taxes on alcohol and

tobacco.

Funds transferred directly to PHIC in support of the President’s UHC

reform agenda 2010-2016. Recentralisation of funding. Briefly

considered multiple insurers. Currently pushing for universal PHC

package.

Of the additional revenue raised, 85% earmarked for health, of which

80% used specifically to enrol the poorest 40% of the population

nationally.


Pros and cons of earmarking

PROS CONS

Can facilitate a shift in allocations e.g. to increase funding for previously neglected activities (e.g. between hospital and PHC services)

Limits flexibility from a broader fiscal perspective by introducing budget rigidity and possible allocative “inefficiency”

Potential to increase predictability of revenue stream for programming purposes

May simply be offset by reductions in other budget allocations with no increase in overall public envelope

Relatively popular with general public, as experienced with environmental taxes in many countries

Limits decision making of politicians – democracy not in action

• There are examples of earmarking working, and not working, in European countries• Some countries without earmarking have stable and predictable funding• More important than earmarking is political commitment to health


Summary

Different revenue sources have a different impact on equity in

finance.Voluntary sources are

generally regressive, especially out-of-pocket payments.

Public sources are generally progressive / proportionate,

although each country situation needs analysing. VAT often regressive, but depends

e.g. on exemptions.

Recent years have seen efforts to stabilize external funding for

specific interventions. Alignment with domestic priorities and systems is

critical.

Earmarking is increasingly used to protect revenues for health;

beware offsetting. Political commmitment matters more

than earmarking per se.


DOMESTIC EFFORTSTO MOVE TOWARDS

PREDOMINANTLYPUBLIC REVENUE

SOURCES


Health-specific payroll taxes

A large number of countries now have a payroll tax for health, or are considering introducing one, under a national health insurance scheme.

Several countries, including Kenya, the Philippines, Sudan, Ghana have

long-established schemes with payroll taxes.

What is the role of these agencies under the push for UHC?

Bangladesh, Mozambique, Liberia, Ethiopia, Malawi (?) are considering introducing payroll taxes for health

as part of new public health insurance schemes

FACT: Richer countries are reducing reliance on payroll taxes for a

number of reasons (tax burden on labour, in particular on employer

contributions, ageing population / dependency ratios)


Payroll taxes alone are never enoughGhana 2011

Japan 2011

Philippines 2012


Payroll tax: constraints and concerns• In low/middle income countries, a large % population not in

formal employment, and hence payroll taxes offer a very limited levy base

• How to enrol/cover those not in salaried employment?• Are government subsidies transferred to the “insurer /

purchaser” on behalf of those outside formal sector?• If enrolment is subsidised, what is the basis for transfers?

Stable? Predictable? Decided annually, or through a formula?• Pooling: are revenues from payroll taxes kept in a separate

pool to, for example, a fund for the poor with separate entitlements for the beneficiaries?

• Payroll taxes are effectively “earmarked taxes” and hence face potential offsetting e.g. of budget allocations.


Kazakhstan: new earmarked payroll taxes led to lower public funding for health

3.0%2.9%

2.7%

2.0%2.4%

0.4%0.6% 0.5%

2.5%

2.1%

1.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

1995 1996 1997 1998 1999

Hea

lth s

pend

ing

as %

GD

P

All public MHIF State budget

Earmarked payroll tax introduced 1996 and abolished1998

Revenue from new tax offset by reduction in unearmarked tax


TogoProposed new tax revenue sources

• Increase in existing tax rate on alcohol• Introduction of new taxes on mobile phone use, and airline tickets• Analysis suggested no negative impact on economic activity, but a positive

effect on public health (alcohol)• Earmarking still under discussion• If earmarked, it is estimated new revenues would be equivalent to

minimum 8.5% of current health budget• (Tobacco tax level already at maximum under regional customs union)


Liberia – options under consideration(pre-Ebola)

POTENTIAL REVENUE SOURCE PROBABILITY OF CAPTURING

Social security Medium to High

NGO tax Medium

County development fund Low to Medium

Sin taxes & airline levies Medium to High

Payroll taxes High

Other corporate social responsibility by expatriate corporations

Low to Medium

Individual premiums High

Vehicle-related fees Medium to High



Energy density (kJ 100 g-1)

Fat c

onte

nt (g

100

g-1

)

SUPERMARKET READYMEALS

Burgers

Fried chicken

Fries (chips)

S'market pies, pasties

FAST FOODSFAST FOODS

S'markethealthy options

Gambian main meals

GAMBIAN +GAMBIAN +HEALTHY CHOICEHEALTHY CHOICE

S'market readymeals (Indian)

S'market readymeals (Italian)

S'market pizzasSUPERMARKET READY

MEALS

Energy & fat in foods in GambiaPr

entic

e AM

, Jeb

b SA

. Fas

t foo

ds, e

nerg

y de

nsity

and

ob

esity

: a p

ossib

le m

echa

nist

ic lin

k. O

bes R

ev

[Inte

rnet

]. 20

03 N

ov [c

ited

2010

Apr

1];4

(4):1

87-1

94.

>>

http://www.ncbi.nlm.nih.gov/pubmed/14649369


Richer countries moving ahead….slowlyCountry Measures taken Expected revenues

Hungary

€0.016 per litre of soft drinks €0.33 per kg for pre-packaged sweetened products,€0.67 per kilogram for salty snacks €0.84 per litre of energy drinks

€74-170m per annumEarmarked for health system

France €0.036 per litre tax on sweetened drinks

€150m per annum

DenmarkLevy of €2.41 per kg of saturated fat, when reaches more than 2.3% of content of a particular food (October 2011)

Unavailable.POLICY NOW DISCONTINUED

• See table on page 29 of the WHR 2010 report. List of options together with fundraising potential, country examples and some implementation / policy issues.


Are new taxes the answer?

• Many such efforts in lower/middle income countries relatively new – ongoing analysis. Philippines case is positive.

• Efforts to improve fiscal capacity / tax compliance, in order to increase total government budget, together with efforts to increase priority for health, also likely to have a significant impact.

• Furthermore, moving towards a predominant reliance on public sources, in support of UHC, requires more than raising more public revenues for health.


1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

10

20

30

40

50

60

70

80

90

100

0

5

10

15

20

25

30

35

40

45

PHILIPPINES: GENERAL GOV. HEALTH EXPENDITURE PER CAPITA &PRIVATE SPENDING ON HEALTH AS % TOTAL

SOURCE: WHO NHA DATABASE 2015

Priv

ate

as %

tota

l he

alth

spen

ding

GGHE

per

capi

ta U

S$


1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

10

20

30

40

50

60

70

80

90

100

0

20

40

60

80

100

120

140

MOLDOVA: GENERAL GOV. HEALTH EXPENDITURE PER CAPITA &PRIVATE SPENDING ON HEALTH AS % TOTAL


Priv

ate

as %

tota

l he

alth

spen

ding

GGHE

per

capi

ta U

S$

Insurance reforms


1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

10

20

30

40

50

60

70

80

90

100

0

5

10

15

20

25

30

35

40

45

RWANDA: GENERAL GOV. HEALTH EXPENDITURE PER CAPITA &PRIVATE SPENDING ON HEALTH AS % TOTAL


Priv

ate

as %

tota

l he

alth

spen

ding

GGHE

per

capi

ta U

S$


Summary

Many countries have introduced/are introducing health-specific payroll

taxes. High levels of informality raise serious limitations on their impact in

terms of revenue-raising.

Introduction of such payroll taxes raise numerous issues & concerns

e.g. how to cover non-formal sector; nature of transfers if any; possible

fragmentation.

New taxes e.g. tobacco, alcohol, mobile phones, unhealthy foods are

of growing interest, and are often earmarked, raising offsetting issue.

Impact still unclear given early days.

Domestic sources dominate in most countries, even in countries with

payroll taxes, and in those with high external support. Moving towards

predominantly public spending requires more than revenue-raising

efforts.


CONCLUDING MESSAGES

Be guided by overall health system

objectives, and health system performance

when designing revenue raising policy.

The source affects fairness in financing.

Levels of public financing drive health

system performance in terms of UHC, for

example in terms of financial risk

protection. Threshold level around 20-30%?The health budget, allocated

from general government revenues, will remain in

most cases the single largest source of funding, even

where payroll taxes exist, new taxes are introduced, or

external financing high.

Think about the overall envelope of public funding for health;

external sources, and earmarked taxes are often offset during budget allocations

Moving towards predominant public financing requires

action beyond revenue raising policy

alone.

Raising revenues for the health sector

Health & Medicine