CAPACITY DEVELOPMENT WORKSHOP ON HEALTH SYSTEM DEVELOPMENT FOR REGIONAL COUNTRY OFFICE STAFF Health Care Financing Funct

1. CAPACITY DEVELOPMENT WORKSHOP ON HEALTH SYSTEM DEVELOPMENT FOR REGIONAL COUNTRY OFFICE STAFFHealth Care Financing Functions and Options Eastern Mediterranean Regional Office, World Health Organization Dr. Hossein Salehi May 20-24, 2007 Alexandria, Egypt

2. Introduction; Health spending • Spending on health has been increasing world-wide including in EMR • Advances in medical technology, higher population and providers’ expectations, income growth, health system development are some determinants • Increased inequalities in health spending between and within countries • Health care financing is at the center of most health policy reforms

3. Why Health Care Financing? • Financial resource generation • Economic efficiency • Allocative efficiency…producing the right things • Technical efficiency…producing things right • Social protection • Equity • Horizontal equity • Vertical equity

4. HEALTH SYSTEM CONCEPTUAL FRAMEWORK Social Determinants of Health SYSTEM BUILDING BLOCKS GOALS OF HEALTH SYSTEM Responsiveness Information Support Service Delivery Coverage Leadership & governance Provider performance Health workforce Health Financing Quality & Safety Health technology Efficiency Financial protection Equity

5. HEALTH SYSTEM CONCEPTUAL FRAMEWORK • Healthcare Financing • Collection • Pooling • Purchasing Social Determinants of Health SYSTEM BUILDING BLOCKS GOALS OF HEALTH SYSTEM Responsiveness Information Support Service Delivery Coverage Leadership & governance Provider performance Health workforce Health Financing Quality & Safety Health technology Efficiency Financial protection Equity

6. Functions Objectives raise sufficient and sustainable revenues in an efficient and equitable manner to provide individuals with both a basic package of essential services and financial protection against unpredictable catastrophic financial losses caused by illness and injury Revenue Collection manage these revenues to equitably and efficiently pool health risks allowing for subsidies from healthy to unhealthy, rich to poor, and productive workers to dependents Pooling Purchasing assure the purchase of health services is strategic and both allocatively and technically efficient (for whom to buy, what services to buy, from who to buy, and how to pay)

7. Functions and Key Issues of the Health System

8. Modalities of Health Financing Systems

9. NATIONAL HEALTH SERVICE (e.g. UK,Scandinavian Countries, GCC countries) HEALTH SYSTEM MODELS Provincial / Regional Government Single Payer System (e.g., Canada, Spain) SOCIAL HEALTH INSURANCE – Bismarckian System (e.g., Germany, Japan) Voluntary Private Insurance Model (e.g., US) • Direct payment (out-of-pocket) at point of service • ( e.g., prevailing system in most low income countries) MIXEDSYSTEM Micro Insurance

10. Share of out-of-pocket expenditure (%)- 2004 Per capita total health expenditure (US$)- 2004 Source: WHO NHA Website

11. Proportion of households with catastrophic expenditures vs. share of out-of-pocket payment in total health expenditure 15 8 3 1 % of households with catastrophic expenditure (logarithm) .3 .1 .03 .01 3 5 8 14 22 37 61 100 out-of-pocket payment in total health expenditure % (logarithm) OECD others

12. Households with catastrophic expenditures and impoverishment 5 4 3 % of households impoverished 2 1 0 0 3 6 9 12 15 % of households with catastrophic expenditure

13. Catastrophic health expenditure and impoverishment 1995–2002; I.R. Iran • Reduce expenditures on other basic needs • Push some households into poverty • May cause consumers to forgo health services and suffer illness Catastrophic health expenditures

14. Strengths Pools risks for whole population Relies on many different revenue sources Single centralized governance system has the potential for administrative efficiency and cost control Weaknesses Unstable funding due to nuances of annual budget process Often disproportionately benefits the rich Potentially inefficient due to lack of incentives and effective public sector management NHS SystemsFinanced through general revenues, covering whole population, care provided through public providers or contracting

15. Strengths Additional health revenue source As a ‘benefit’ tax, there may be more ‘willingness to pay’ Removes financing from annual general government appropriations process Generally provides covered population with access to a broad package of services Can effectively redistribute between high and low risk and high and low income groups in covered population Often serves as the basis for the expansion to universal coverage Weaknesses Poor are often excluded unless subsidized by government Potential negative impact on employment Administrative cost can be high Can lead to cost escalation unless effective contracting mechanisms are in place Poor coverage for preventive services Often needs to be subsidized from general revenues Social Health InsurancePublicly mandated for specific groups, financed through payroll taxes, semi-autonomous administration, care provided through own, public, or private facilities

16. Strengths Community-run and not-for-profit Promotes pre-payment Mobilizing additional resources, providing access and financial protection in LICs CBHI can be a helpful complement but is not a substitute for NHS or SHI systems Weaknesses Difficult to scale up Financial protection are limited due to the small size of most schemes The financial sustainability of most schemes is questionable Should be encouraged when alternatives are not viable Community Based Health InsuranceNot-for-profit prepayment plans for health care, with community control and voluntary membership, care generally provided through NGO or private facilities

17. Strengths As a prepayment and risk pooling mechanism is generally preferable to out of pocket expenditure May increase financial protection and access to health services for those able to pay When an “strategic purchasing” function is present it may also encourage better quality and cost-efficiency of health care providers Weaknesses Associated with high administrative costs and profit (up to 40%) It is generally inequitable Applicability in LICs and MICs requires well developed financial markets and strong regulatory capacity Has the potential to divert resources and support from mandated health financing mechanisms Private Health InsuranceFinanced through private voluntary contributions to for- and non-profit insurance organizations, care reimbursed in private and public facilities

18. Financing & Provision of health care; Who pays? Who provides? Provision Public Private • Public Financing & Private Provision • Solidarity in financing • Competition and Choice in provision Public Financing Private

19. Fiscal space: Availability of budgetary room that allows a government to provide resources for a desired program Exists when a government can increase expenditures without impairing its fiscal solvency Fiscal space can be created by: tax measures and better administration reducing lower priority expenditures borrowing domestically or externally seignorage grants Fiscal Space is Needed to Scale Up Spending

20. Alternative health care financing;States’ responsibilities regardless of the choice of HCF model • Adherence to the principle of health for all and recognition of health as citizens’ rights • Governance (stewardship) of health system • Financing and provision of public health programmes including all preventive, environmental and promotional health interventions

21. Transition towards universal coverage Public spending Majority of population Covered through: Government revenue funded programme and/or Social health insurance Private spending 1. Limited social health insurance for civil servants 2. Public Programmes for vulnerable groups Limited Governmentfunded programmes Direct payment at the point of services 1. Direct payment at the point of service 2. Limited private health insurance Private health insurance Provides supplementary coverage

22. CAPACITY DEVELOPMENT WORKSHOP ON HEALTH SYSTEM DEVELOPMENT FOR REGIONAL COUNTRY OFFICE STAFFHealth Care Financing Functions and Options Eastern Mediterranean Regional Office, World Health Organization Dr. Hossein Salehi May 20-24, 2007 Alexandria, Egypt

23. Fund Collection Indicators

24. Pooling Indicators

25. Purchasing Indicators