Health Financing in Low-Income Countries: The Liberia Case

1. Health Financing in Low-Income Countries: The Liberia Case Catherine Connor Abt Associates Inc. April 28, 2010

2. Why do we care about financing? 2

3. Out-of-pocket expenditures dominate health financing in Africa and Asia

4. Most developing countries are in the intermediate stage of health financing Universal coverage Liberia is here Mix of tax-based and social health insurance Intermediate stage of coverage Absence of financial protection Mixes of community, cooperative, and enterprise-based health insurance, social health insurance, and limited tax-based financing Dominance of out-of-pocket spending Carrin, Mathauer, Xu, Evans. 2008

5. Our agenda today Summarize current health financing in Liberia based on existing evidence Review 3 alternatives for health financing Each group has 20 minutes to discuss the health financing alternatives: What should Liberia do in the short term (2015)? What should Liberia do in the long term? 5

6. “ improve the health status of an increasing number of citizens, on an equal basis, through expanded access to effective basic package health services (BPHS), backed by adequate referral services and resources” Starting Point for Health Financing: Liberia’s National Health Policy 6

7. Level of financial resources available? Total expenditure on health as a percentage of GDP is 6.46%, which is higher than WHO suggested 5% Per capital expenditure is about $29-$33 in 2008, which is in the range of WHO Macro-economic Commission spending target of $34 However… 7

8. Similar to other post-conflict country, Liberia relies heavily on the external support(55% in 2008) 8

9. Despite free care policy, out-of-pocket spending twice as much as GoL spending The second largest source is private out-of-pocket expenditure, which accounts for about 29-35% of total expenditure Excluding donor funds, out-of-pocket expenditure accounts for over 65-67% of domestic health expenditure, $9-10 per person per year Government contribution accounted for 15% of total health expenditure in 2008 Although about 35% of families have a family member(s) employed in the formal sector, only 2% of total health expenditure comes from employer-based funds. 9

10. Similar to other post-conflict countries, service delivery infrastructure is still recovering About half of the BPHS is not available in current delivery system 10

11. Fixed budget and provider salaries: Incentive for productivity or quality? Public health facilities Annual budget from GoL Public employees are paid a fixed salary Public health facilities supported by NGO or FBO Annual budget from GoL Public employees are paid a fixed salary Non-government employees are paid a fixed salary by NGO and FBO NGO/FBO also pays “top-ups” to both types of employees Performance-based contracting is beginning 11

12. Who benefits? Inequity in access. Financing does not adequately target the poor. 12

13. Distribution of benefits from public subsidies by type of health facility – more for the rich Public subsidy of health clinics benefits the poor Public subsidy of hospitals and health centers benefits the rich % of public subsidy Line of perfectly equal benefit % of population by income decile

14. Summary of current health financing Sustainability Heavy reliance on donors - a short term necessity Liberia needs to increase domestic investment for economic growth for long-term sustainable health financing Efficiency Poor outcomes for $30 per capita spending Equity and financial risk protection 50% of services in BPHS not available High out-of-pocket spending, despite free care policy Government spending benefits the richer more than the poor Free care policy depends on government/donor funds 14

15. Health Financing Alternatives for Liberia

16. Potential health financing alternatives in Liberia Free Care Model (FC): This is Liberia’s current policy for the BPHS Health insurance model (HI): Proposed to be explored in near future in Liberia Mixed (free care-health insurance) model (FC-HI): Free care to cover BPHS and health insurance to cover an expanded BPHS and beyond

17. Current financial risk protection coverage: Population-service matrix Tax-based "free care" model Employers and Individuals Where does the money come from? Government And donors

18. Pro’s of Free Care Model Financing channel already exist: general tax and donors Single payer system is potentially able to control the cost (if there is no user fee or other payers)  More efficient enrollment  More equitable if the tax is progressive and poor have physical access to free services  Do not need the contribution from employers or individual, political feasibility is relatively high  Free care policy is already part of Liberia national health plan, political feasibility is relatively high

19. Cons of Free Care Model Requires large tax base (formal sector) and strong tax collection mechanism (normally not available in developing countries) OR Requires significant donor support May not improve equity if tax is not progressive and the poor have physical access difficulty  Can lead to providers charging informal fees, either directly as “under-the-table” fees or requiring patients to buy drugs and supplies in the open market May not able to cover all services, which could lead to high out-of-pocket payment for services outside the basic package

20. Current financial risk protection coverage: population-service matrix Insurance-based model Employers and Individuals Employers and Employees Government and Individuals Where does the money come from?

21. Pro’s of Health Insurance Model Public-private partnership to build multi-channel financing  Health insurance business model makes the funds and service availability more accountable  Government can allocate more funds to target priority services and the poor.   Financial risk can be shared among insurance agencies, providers, and consumers to use resources effectively and efficiently Government is in better position for monitoring and regulation enforcement.

22. Cons of Health Insurance Model Requires strong legislation and regulation.  Need employers’ contribution, increase the production costs? Need capable, creditable insurance agencies - infant stage in Liberia Relatively high enrollment costs  May require more than one insurance scheme to cover different populations with different service packages, may not be equitable in short-run

23. Current financial risk protection coverage: population-service matrix Hybrid model Employers and Individuals Employers and Employees Government and Individuals Where does the money come from? Government and Donors

24. Pro’s of Hybrid Model Public-private partnership to build multi-channel financing Government can focus on its scarce resource to ensure the equitable access to basic health services  Government can subsidize insurance for the poor for non-basic health services  Health insurance business model makes the funds and service availability more accountable  Financial risk can be shared among insurance agencies, providers, and consumers to use resources effectively and efficiently  Free care policy is already part of Liberia national health plan, feasibility is high

25. Cons of Hybrid Model Requires strong legislation and regulation  Need employers’ contributions Need capable, creditable insurance agencies - still in infant stage in Liberia May require more than one insurance scheme to cover non-basic health services, but inequity can be reduced with government subsidy to the poor   Relatively high enrollment costs 

26. Each group has 20 minutes to discuss the health financing alternatives • What should Liberia do in the short term (2015)? • What should Liberia do in the long term?

27. Evidence to inform health financing in Liberia

28. Thank you Reports related to this presentation are available at www.healthsystems2020.org