Overview of Health Financing

1. Overview of Health Financing EAP Regional Seminar on Health Financing Bangkok, Thailand, February 2008 Fadia Saadah, World Bank

2. Outline of Presentation • Demographic and epidemiological trends • Health spending patterns • Health financing functions • Challenges/lessons

3. Demographic and Epidemiological Trends

4. Ages Ages MALES MALES FEMALES FEMALES 2020 2000 Source: World Bank Demographic Transition Underway: Working Age and Elderly Populations Will Grow Rapidly

5. Future GDP Growth in EAP Looks Robust Source: World Bank 2007.

6. NCDs and Injuries Represent a Major Share of BOD(Disease Burden Distributionby Select World Bank Region, 2001) Percent Note: Numbers are rounded. Source: Disease Control Priorities in Developing Countries, second edition, 2006, Table 4.1

7. Most EAP Countries Do Well on Child Mortality Given Their Income and Health Spending Levels

8. But Maternal Mortality Results are More Mixed

9. Health Spending Patterns

10. Health Expenditures Across Regions, by Source of Financing, 2005

11. Public Health Expenditures by Source of Financing

12. Total Health Expenditures by Source of Financing Source: Database of the Asia-Pacific National Health Accounts Network; data for recent years

13. Public Share of Total Health Spending is Generally Low

14. Out of Pocket Spending as a Share of Total Health Spending is High Relative to Other Comparable Income Countries

15. Catastrophic impact of health spending Source: EQUITAP study

16. Large OOP Share is Related to High Incidence of Catastrophic Health Spending Source: Equitap study

17. Health Financing Functions

18. Functions Objectives Health Financing Functions and Objectives Revenue collection raise sufficientand sustainable revenues in an efficient and equitablemanner to provide individuals with a basic package of essential services which improves health outcomes and provides financial protection and consumer satisfaction Pooling manage these revenues to equitablyand efficiently create insurance pools Purchasing assure the purchase of health services in an allocatively and technically efficient manner Source: Gottret and Schieber, Health Financing Revisited, World Bank 2006

19. Equity – Remains an Challenge in EAP (1) Source: Equitap study

20. Equity – Remains an Challenge in EAP

21. Indonesia - Wide Variation in Per Capita Health Spending Across Provinces Source: World Bank 2006

22. Cross subsidy from productive to non-productive part of the life cycle Cross-subsidy fromrich to poor (equity subsidy) Cross-subsidy from low-risk to high-risk (risk subsidy) $ $ $ $ $ $ High risk Non-productive Productive Rich Low risk Poor What do We Mean by Risk Pooling? Resource endowment Resource endowment Resource endowment Health risk Income Age

23. Fragmentation in Health Financing • In many countries in the region, health financing is fragmented • Different financing mechanisms for different groups or sectors of the economy • Thailand: Civil Service Medical Scheme and Social Security Scheme for formal sector; UC scheme for informal sector • China: Basic Medical Insurance (BMI) for urban formal sector; New Cooperative Medical Scheme (NCMS) for rural sector • Laos: Civil Service and Social Security Schemes for formal sector; CBHI and other schemes for informal sector • Fragmentation can also be geographic • China: Both BMI and NCMS are based on city- or county-wide risk pools • Several countries considering health financing reforms introducing new sources of financing and management mechanisms • fragmentation issue needs to be considered early in design phase

24. Universal HI : Thailand TAX 2001 >50 yrs. 1990 UC CSMBS SSS Contribution 48 mil. 7 mil. 7 mil. NHSO MOF Comptroller SSO Capitation DRG Capitation DRG FFS Insurees, Right holders Services Public Private Providers

25. Why is Fragmentation a Problem? • Administrative inefficiency • Duplication of tasks and dispersion of scarce capacity • Lack of portability  reduced labor market mobility • Difficult to implement cross-subsidization and achieve equity goals • Reduced ‘purchasing power’ and difficult to create coherent incentives for providers • E.g. different payment systems / rates for different schemes

26. What can be done about fragmentation • Joint / coordinated management systems and provider payment arrangements • On the agenda in many countries, but institutional and political barriers • Unification of schemes • E.g. integration of health insurance funds in South Korea in 2000 • Politically challenging • Risk-pooling at higher geographic level • Trend towards risk pooling at provincial level for pensions in China; not yet for health

27. Financing Challenges/Lessons • There is no one ‘right’ financing model. • System financing must be sustainable • LICs face difficult tradeoffs between financing essential services and providing financial risk protection -- prioritization is critical. • Important to address absorptive capacity and ability to finance from domestic resources future recurrent and capital costs.

28. Financing Challenges/Lessons • Many countries trying to achieve universal coverage, reduce fragmentation, and improve efficiency. However, key is the impact; specific model is of secondary importance. • Health Financing models need to take into account the level of income, rate of growth and institutional and administrative capacity. • Health Financing reforms need to pay great attention to political economy dimension also key. • Again, models need to be tailored to individual countries

29. Financing Decisions Involve Difficult Trade-offs Political Criteria Efficiency Health Outcomes Financial Protection Consumer Satisfaction Affordability Equity Sustainability

30. Key Messages • Macroeconomic situation provides good opportunity to increase financial protection and think about health financing reforms • Increasing role of private sector; models need to take that into account; ensure coordination and governance • Need to increase efficiency in spending in the region/Address fragmentation