Health Care Financing Health Economic Course Series

What is a financing mechanism? Aimed at: Raising funds –User fees, insurance premiums, donor aid, direct payments to private providers… Allocating funds (equity) –Governments, agencies, insurance organizations, private sector, non-profit sector, beneficiaries… Providing services in an efficient way (incentives) –Hospitals, clinics, other health facilities…

Key financing mechanisms Direct out-of-pocket payments Private /voluntary insurance General taxation Public/social insurance External financing Country/region specific mixture, changing overtime and with income. Individuals / households Government Donors

Analysis finances for health: NHA National Health Accounts = Standard set of tables that track the flow of funds –How much does the nation pay? –Who pays? –How are the funds spent? –How are they distributed across different health services?

Simple Model PURCHASING/FUNDING Insurance Public funding agency FINANCING Population and Enterprises CONSUMPTION Patients PROVISION Hospitals/Clinics Private practitioners Capitation fee for service budget direct payments Premiums, taxes, direct payments

Example FundersPublic Hospitals Public clinics Private clinic Total Households Ministry of Health Ministry of Education Community Insurance Private insurance Total

Policy Purpose of NHA Consistency / international comparisons / public good If implemented regularly could be used to monitor and evaluate financing reforms/sector plans Country specific questions: –How much is spent on HIV/AIDS? –How equitably is health expenditure distributed? –What is the size of the private sector? Current push to expand widely in Africa/Asia, already established in Middle East/Latin America (WHO/WB)

NHA Methods / Processes Extensive data collection Government / HIS / Provider records / Surveys Expenditures to be determined and categorized Needs to be institutionalized: –Meet demands of national policy makers –Capacity development –Fit in with routine accounting systems/expenditure reviews? Guide available WB website

Discussion 1: Financing mechanisms… 1.What are the principle ways of financing health care in the country? 2.How do these mechanisms performs with regards to the key aims of financing mechanisms? a.Succeeded in raising sufficient revenue b.Improved the fairness of financing c.Improved efficiency and contained costs 3.What are the key challenges?

First Challenge: Raising Revenues 1.Increase public and private resources for health (domestic and external sources) 2.Ensure stable financing, with sustainable and predictable revenues. 3.Determine resource needed: 1.Essential package? 2.Reasonable % of GDP given other development needs

What is available? How much do you think it costs to provide a package of basic primary level services? How many dollars per capita are available for health in Ethiopia? How many dollars per capita are available for health care in an average high income country?

Some examples

Second challenge: Allocation of resources Financing systems should provide incentives for and encourage: –Use and provision interventions that have a high health and economic impact (allocative efficiency) Cost effectiveness of PHC and prevention, while still underprovided –Equity in the allocation of resources for health (system-wide) Rural/urban, age, gender, population groups –Responsive and high quality services, produced efficiently (technical efficiency)

Third challenge: Prevent Catastrophic Expenditure High levels of direct out-of-pocket expenditure –Large private sector, informal payments to public sector, user fees Low level of access to risk pooling or prepayment plans (e.g. insurance) in lower income countries Low income levels mean high levels of health expenditure places vulnerable families into desperate situations –Economic burden of death or illness –Cost of health care

High level of pocket expenditure

The aims of financing reforms 1.Improve the amount of resources available (including stability/sustainability) 2.Improve the efficiency and equity of the allocation of resources (and thus eventually health outcomes) 3.Reduce catastrophic expenditure (risk-sharing / pooling, prepayment) 4.Support broader health sector aims such as responsiveness/quality improvement

Different types of reforms Key Reforms to Financing (raising fund): –Macro-level reforms –Increases / changes to external assistance to health sector –Introduction or reform of user fees –Introduction or expansion of community health insurance –Introduction or expansion of social insurance –Reforming private sector –Reforming public sector (PP mix) –Reforms to funding / purchasing (efficiency)

Macro-level reforms (the context) Most of domestic health expenditure funded by (non-health sector) revenues: –Tax-based revenues (income, VAT, contributions) –Other govt revenues: customs, public enterprises,… Increased through: –Macro-economic growth (GDP) –Expansion of the tax-based –Reduction debt repayments –Allocation to health expenditure Constrained by low incomes and by other development needs

External financing Increased external assistance for health in last decade (around 7%) Disease specific: e.g. TB –$16 million in 1990 –$190 million in 2000 (includes % of loans) –Needs estimated at $400 million New ways of working: –SWAps, Budget support, Program Support, Global Fund for AIDS, TB, Malaria, Project Support

External resources

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