Role of private health insurance in transition of health care systems to universal coverage

1. Role of private health insurance in transition of health care systems to universal coverage Zoltán Kaló Professor of Health Economics 8 March2016 Cairo, Egypt zoltan.kalo@syreon.eu

2. Agenda • International trends of health care financing • Role of Social Health Insurance and Private Health Insurance in fulfilling health system objectives • Relationship between SHI and PHI • Purchasing health care services by PHI: pros and cons of different models

3. Before going into details - two key points • Determine your values and objectives for your health care system • establish your system based on these values and your own culture • monitor system performance them accordingly • Do not copy directly otherhealth care systems • some international consultants recommend that you should do what they or their countries did in the past • their past recommendations were not based on your culture and values • and you do not know whether their past recommendations were successful or not

4. Resource generation Health gain Quality Health financing system Equity in utilization and resource distribution Equity in health Revenue collection Financial protection Pooling Efficiency Equity in finance Purchasing Responsiveness Transparency and accountability Service delivery Health system and health system goals Source: Kutzin J. Health financing policy: a guide for decision-makersHealth Financing Policy Paper, WHO 2008 Intermediate objectives of health finance policy Health system goals Health system functions Stewardship

5. Health system objectives • Health gain • Equity in health • Equity in finance • Responsiveness • Sustainability of health care financing • Efficiency of health care delivery • Financial protection of households Responseto publicneeds Response to limited resources

6. International trends of health care financing

7. In the long-term health care expenditure grows faster than GDP in the majority of countries

8. Driving forces ofgrowinghealth care expenditure GDP growth – increased wealth Aging Increased health insurance coverage  increased access New diseases (e.g. AIDS, HCV) and disease structure (diabetes) Improved health technologies Increased health care personnel and infrastructure Health care specific inflation above average

9. Problems with dominantly privately funded health care systems • Inequity • High proportion of population has no insurance coverage • Limited responsiveness to needs of lower socioeconomic classes • Limited financial protection for households (i.e. out-of-pocket payments) • Fragmented health care delivery (i.e. patient routes are managed only for small proportion of patients)

10. Potential solution: Universal Coverage Source: WHO

11. Relevance for private health insurers in Egypt • Main political objective (government and international organizations): universal coverage implementation roadmap • Finding role for private health insurance is only a secondary question • Recommendation to private health insurers: involvement in designing roadmap for universal coverage

12. "All inclusive" health insurance package

13. Problems with dominantly publiclyfunded health care systems • Moral hazard of patients: overconsumption and reduced individual responsibility • Moral hazard of providers: supplier induced demand + paymentmaximisation • Monopolies: reduced efficiency

14. How to reduce moral hazard? D80% D100% price (P) D0% Preimb Pcopay Popt S Qcopay Qopt Qreimb quantity (Q) Increase price sensitivity of patients

15. Relevance for private health insurers in Egypt • Private financing has an increasing role in dominantly publicly funded health care system • When universal coverage is implemented, private health insurance may remain important element of health care funding • Recommendation to private health insurers: find your role

16. Convergence of different systems 100% Dominantly publicly funded 50% Dominantly privately funded 2015 1970

17. Public health insurance: support of health system objectives • Health gain • Equity in health • Equity in finance • Responsiveness • Sustainability of health care financing • Efficiency of health care delivery • Financial protection of households Responseto publicneeds Response to limited resources

18. Private health insurance: support of health system objectives • Health gain • Equity in health • Equity in finance • Responsiveness • Sustainability of health care financing • Efficiency of health care delivery • Financial protection of households Responseto publicneeds Response to limited resources

19. Major Challenges of Universal Health Coverage Implementation (1): Fund Raising

20. 8-17% 5-9% 1-5% GDP and Health Care Expenditure (GDP%) Source: WHO HFA 2010

21. System of healthcare financing Regulation Riskspooling Purchasing Fund raising Taxes and contributions Compulsory insurance/ National health service Insurance premium Voluntary insurance Out-of-pocket payment Health care Households Health care providers • Health system goals • Health-gain and reducing inequalities • Equity in and sustainability of finance • Responsiveness • Instrumental goals • Efficiency • Quality • Equity in access to care

22. Relationshipbetween resources, expenditure and income resources =  expenditure = income of providers T + C + R = S x PxQ = W x Z

23. Fundinguniversal coverage • tax • personal income tax • corporate tax • value added tax • tax on unhealthy product • insurance premium based on community rating • capped premium • opt-out (separated) – requires stability of the political system and economy • role of private insurance • supplementary • complementary

24. Current health spending in Egypt • 5.1% of GDP (2013) • reasonable • moderate increase can be expected after economy recovers • 41% public expenditure / total health expenditure • has to be increased • requires tax/premium increase • High rate of direct (out-of-pocket)expenditure • financialprotection of families is limited • patientcompliance & persistencewithchronictherapies is poor • potentialsolution: extension of private insurance to directpayments

25. Fund raising: policy options • Immediate significant increase of health care spending from public sources (e.g. considering external sources, IMF, etc.) • Reduction of private health insurance and redistribution to public health insurance • Gradual increase of health care spending (i.e. taxation on harmful products, economic growth) • Mandatingprivatehealthinsuranceplansforemployers of largecompanies • Reduction the scope of public health insurance services to increase the number of insured population • No reimbursement of expensive technologies for a period

26. Major Challenges of Universal Health Coverage Implementation (2): Definition of Insurance Package

27. Service package for patients with insurance: 1) list of services and 2) conditions of access Source: WHO

28. How to define the scope of technologies for universal coverage? Vertical approach is used for budgeting • Emergency care • Primary care • Specialty care (outpatient + inpatient) • Pharmaceuticals • Special medical devices / diagnostics

29. How to define the scope of technologies for universal coverage? Horizontal reimbursementlist in different areas: • Minimum package for vital areas: emergency care, maternal health, pediatrics, infectious diseases • Essential package for most common diseases: diabetes, cardiovascular, (hepatitis C in Egypt) • Specialty disease areas: oncology • Services and technologies to improve equity: rare diseases

30. Insurance packages in universal coverage Packages Public health insurance • Population coverage: all citizens • Restriction: no copayment and waiting list Minimum package Emergency care, basic public health services Essential package I. Common diseases • Population coverage: all patients with insurance • Restrictions: copayment, waiting list, second-line, low quality Essential package II. Specialty diseases with public health priority • Population coverage: all patients with insurance • Restrictions: coverage only for subgroup, copayment, waiting list, second-line, lowquality Equity package Rare diseases, positive discrimination • Population: selected patients with insurance • Restrictions: strict diagnostic criteria, monitoring Non-reimbursed services

31. Role of private insurance Packages Public health insurance Private health insurance • Population: all citizens • Restriction: no copayment and waiting list Minimum package Essential package I. • Supplementary: copayment, choice • Complementary: immediate access, betterquality • Population: all patients with insurance • Restrictions: copayment, waiting list, second-line, lowquality, no choice Essential package II. • Population: all patients with insurance • Restrictions: coverage only for subgroup, copayment, waiting list, second-line • Supplementary: copayment, choice for patients • Complementary: immediate access • Complementary: coverage for patients with no access Equity package • Population: selected patients with insurance • Restrictions: strict diagnostic criteria, monitoring Non-reimbursed services • Complementary: coverage for non-covered services

32. Supplementary vs. complementary • Mixed payment (public for basic service + private for extras): supplementary • Full private payment for a service also covered by public health insurance: ??? • Full private payment for a service not covered by public health insurance: complementary

33. Role of private health insurance If public health insurance • covers only basic services with low quality, no choice for patients and/or implemented with significant copayment  supplementary role for extra services and coverage for out-of-pocket payments • covers only low quality infrastructure, limits the scope of services, or the volume is limited (i.e. waiting list)  complimentary role for immediate access, high-quality infrastructure, coverage of non-reimbursed health services • allows opt-out for high-income citizens  private health insurance coverage • mandating private health insurance plans for employers of large companies

34. Another major question • Universal health coverage requires investment into information technology systems • How to standardize and link IT systems of public and private health insurance to inform policymakers about health outcomes, resource utilization, costs, etc? • Private insurance needs data for risk-adjustment, pricing, etc.

35. Purchasing health care services by private health insurance: pros and cons of different models

36. Starting point • When universal health coverage is implemented, the operational model for current private health insurance has to be adjusted • Major questions: • Control of overspending • Relationship of purchasers and providers • Pricing of health services and technologies

37. Control of overspending Option 1 (mainly in developing countries): • Experience rating based on age, gender • Capped annual payment: no access to high cost therapies and services  pooling risks is notsoimportant Option 2 (mainly in developed countries): • Experience rating based on thorough medial check-up • No annual cap  pooling risks is essential • Risk-adjustment based on expected costs  database on resource utilization and costs • Increased cost-sharing: deductible, copayment, coinsurance

38. payment (direct) patient (consumer) health care provider(s) health care service or technology insurance / reimbursement coverage claim money transfer (tax, health insurance premium) money transfer (fee for service or budget) third party payer • Relationship of payer - provider: • indirect • contracted • integrated

39. Indirect model for private health insurance reimbursement Private health Insurance funds experience rating Primary health care provider Patient (consumer) Specialty health care provider service financial flow referral

40. Contractual model for private health insurance Private health insurance funds experience rating Primary health care provider Patient (consumer) contract payment Specialty health care provider service financial flow referral

41. How to reduce moral hazard? Risk-sharing in purchasing health care services Fee for service Prospective payment (e.g. DRG) Hospital day Adjusted capitation Capitation Global budget Risks borne by purchasers Risks borne by providers

42. Integrated model for private health insurance Private health insurance funds experience rating Primary health care provider Patient (consumer) owned by insurancefunds salary or budget Specialty health care provider service financial flow referral

43. Global trend: increasingrole of managedcare • integrated care • health care purchasing by physicians (e.g. GP fundholders) • health care provision by payers (e.g. Health Maintenance Organisations) • management of patient routes • treatment guidelines and financing protocols • develop evidence based guidelines and protocols • monitor the compliance of providers / patients with protocols

44. Pricingof technologies and services • Service prices are higher for private health insurance compared to public health insurance due to higher quality, faster access, etc. • What about prices of pharmaceuticals?

45. Differential pricing system of pharmaceuticals • Higher registered list price • referenced by other more affluent countries (external price referencing) • applicable for patients with private health insurance • Special access program may provide the medications at lower prices for poorer people with no private health insurance • confidential price reduction of rebate • payback system • Condition: no leakage of patients from private to public health insurance

46. Summary • Implementation of universal health coverage is the primary objective • Need for private health insurance will remain, so PHI should participate to explore its role • Operational model for private health insurance has to adjusted / improved