The Economics of National Health Reform – some perspectives

1. The Economics of National Health Reform – some perspectives Pan African Health Conference Alex van den Heever 16 September 2010

2. No system works if there is no accountability

3. Good governance is defined as the... “traditions and institutions by which authority in a country is exercised for the common good”. This includes: “the process of selecting those in authority, capacity of the government to manage, and respect for the state… . While desirable for the economic and social wellbeing of countries, these factors are not always necessary and are not sufficient to ensure the effective public provision of health services. Good governance in health requires enabling conditions: the existence of standards, information on performance, incentives for good performance, and, arguably most importantly, accountability … . How effectively these elements generate good governance hinges on the management of public resources at all levels of the health system.” Lewis et al, 2009, p.3

4. and... “In health care systems, poor governance accounts for much of the inefficiency in service provision, and in some cases results in no service at all. Lack of, standards, information, incentives, and accountability can not only lead to poor performance but also to corruption, “the use of public office for private gain”…. However, the line between poor governance and corruption is often blurred. Is poor service a function of corruption or simply of mismanagement? Improving governance and (thereby) discouraging corruption in health systems aims to increase the efficiency of health services so as to raise performance, and ultimately, improve the health status of the population.” Lewis et al, 2009, p.3.

5. Corruption and health and education outcomes... “The empirical analysis shows that a high level of corruption has adverse consequences for a country’s child and infant mortality rates, percent of low-birthweight babies in total births, and dropout rates in primary schools. In particular, child mortality rates in countries with high corruption are about one-third higher than in countries with low corruption; infant mortality rates and percent of low-birthweight babies are almost twice as high, and dropout rates are five times as high. The results are consistent with predictions stemming from theoretical models and service delivery surveys.” Gupta et al, 2000.

6. continued... “…improvements in indicators of health care and education services do not necessarily require higher public spending. It is equally, if not more, important to institute transparent procurement procedures and enhance financial accountability of public spending. … it is likely that a reduced level of corruption in the provision of services would help improve their quality.” Gupta et al, 2000.

7. Performance relative to benchmark countries? South Africa Compared to Peers (15 above and below per capita GNI in PPP US$): Government Expenditure on Health and Maternal Mortality Maternal mortality is an indicator of service quality rather than socioeconomic need

8. Health systems need to distinguish between... • Goals • Improving health status • Income protection • Rationing imperatives • Supply-driven • Demand-driven

9. Highest Income Groups Decreasing social returns for additional protection provided by Government Lowest Income Groups

10. STRATEGIC GOAL: MAXIMISE HEALTH STATUS STRATEGIC GOALS: INCOME PROTECTION AND MINIMISE AVOIDABLE SOCIAL REVERSALS Strategic Goals... Low priority High priority Low income High income

11. Social insurance Low Ancillary system Discretionary insurance and OOP Creates entitlements to reimburse conditions and services leaving supply to adjust Shifting toward self-funding – consequently demand is related to ability to pay on an OOP basis (i.e. no rationing) SUPPLY rationing Rationing approaches are very different Creates service access entitlements but limits the availability of services The more supply is increased, the more it approximates the access of demand-driven entitlements Base system NHS/NHI High High Low DEMAND rationing

12. Low Tier 3 Tier 4 Contributory Income cross-subsidies (vertical equity) Tier 2 Non-contributory Tiers 1 and 2 can converge over time with economic growth and reduced income inequalities Tier 1 High High Low Finance: Subsidy options Risk cross subsidies (horizontal equity)

13. Low Tier 4 Tier 3b Degree of Compulsion Central pooling and provision Tier 3a Central Pooling but decentralized provision Tier 2a Tier 2b High Tier 1 High Low Institutional options: delivery Degree of Centralization

14. UPWARD ACCOUNTABILITY TO CENTRALISED STRUCTURES Over-riding orientation Adherence to strategic norms and standards LOCALISED AUTHORITY/SERVICE DELIVERY AGENT Community participation Adherence to strategic norms and standards DOWNWARD ACCOUNTABILITY TO COMMUNITY/PATIENTS

15. UPWARD ACCOUNTABILITY TO CENTRALISED STRUCTURES Over-riding orientation All decisions made centrally LOCALISED AUTHORITY/SERVICE DELIVERY AGENT No downward accountability or localised capacity to respond to needs DOWNWARD ACCOUNTABILITY TO COMMUNITY/PATIENTS

16. The logic of health insurance... Risk pooling needed only where large unpredictable (at the individual level) variations in claims occur Government induced risk-pooling needed where large predictable variations in claims occur – Community rating, PMBs No risk pooling possible where claims are small and at the discretion of the beneficiary True insurance possible Self-insurance even if funded through a medical scheme

17. NHI? Institutional Framework System for achieving universal access Competing models ? NHS Ancillary system Voluntary System Decentralized operations Responsiveness Accountability

18. Financing Base System Redistributive funding (universal access) Macroeconomic Constraints Prioritisedon basis of relative social return Ancillary System Social Pooling Minimum package + Non-discriminatory contributions + Income cross-subsidies + Integration of multiple pools + Default state fund Resource allocation Rationing Budget and Reimbursement

19. The base system

20. Tier 1 Direct relationship Indirect relationship Strategic Policy National legislation Conditions of employment Pricing of medicines and consumables Strategic financial allocations National Department of Health Tier 2 • Rendering of all health services • Hospital • Clinics • Emergency medical services • Mortuaries and forensic services • Support services • Procurement of goods and services, including clinical services • Private hospital licensing Provincial Departments of Health Structures between the government tiers are independent and co-operate rather than report hierarchically Health districts Tier 3 Clinic-based services, historically on a devolved basis, in terms of the NHA on an agency basis for provincial departments of health Emergency medical services on an agency basis for provincial departments of health Local government

21. Anc health plan of 1994

22. Source: ANC Health Plan, 1994

23. District Health System Proposals Source: ANC Health Plan 1994

24. Nhi committee of 1995

25. GENERAL FISCAL REVENUES National National PHC Programme General Tax allocations for Health Adjusted capitation formula Provincial Conditional PHC transfers from National PHC Programme Provincial PHC expenditure Adjusted capitation formula District District Health Authority Budget

27. Hospital strategy project of 1996

29. White paper of 1997

30. “The establishment of the DHS is at the core of the entire health strategy, and its rapid implementation, therefore, is of the highest priority.” Department of Health White Paper of 1997

31. Taylor committee of 2002

32. Mandate contributions, REF, contribution subsidy, price stabilisation General tax funded PROVINCIAL HEALTH DEPARTMENT MEDICAL SCHEMES Private hospitals Autonomous public hospital Contracted services Contracted services Introduce a purchaser provider split and shift to prospective reimbursement Shift away from fee-for-service to prospective reimbursement Some convergence on contracting approaches and incentives to maximise the achievement of quality outcomes efficiently

33. National health act of 2003 and the district system

34. MEC appointments Metropolitan or District Municipal Councils Local Municipal Councils • A person to represent the MEC (chairperson) • Up to five persons after consultation with relevant municipal councils A member of the Council nominated by the Council A member of the Council nominated by the Council 6 3 to 5

35. Model comprises of • Deconcentrated districts with no • Clearly defined distribution of authority • Financing framework • Meaningful decision-space • Governance and accountability

36. Summary of public hospital proposals

37. MODERATE performance HIGH performance Taylor Committee 2002 (Hosp) Strong DOH 1996 & WP 1997 (DHS) Governance and accountability LOW performance VERY LOW performance Weak HSP 1996 & WP 1997 (Hosp) RSA 1997 (DHS & Hosp) 2010 Weak Strong Degree of Decentralisation

38. MODERATE performance HIGH performance TARGET Strong Option 1 Governance and accountability Option 2 LOW performance VERY LOW performance Option 3 Weak NOW Weak Strong Degree of Decentralisation

39. conclusions

40. What needs to be done... • Base system • Population and patient focus through governance and accountability reform (downward accountability) • District and hospital system must be implemented • Restructured financial model • Providers able to access multiple revenue sources • Ancillary system - • Stabilise risk pooling • Stabilise costs • Stronger governance and accountability • Universal access to common standard of accident-related emergency care

41. Thank you