Evaluation of Health Care Financing Dr. Kyaw Swa Mya Lecturer/Head Environmental Health Department University of Community Health

KSM, UOCH2 Outline of Presentation Why health care financing? Overview of health care financing Evolution of health care financing at various stages of economic development Criteria for evaluation of health care financing

KSM, UOCH3 Why is health care financing an important subject? Health care is a basic necessity Many poor cannot afford illness cost Medical cost for treating serious illness are beyond the financial means of most households Many households face bankruptcy when serious illness strikes

KSM, UOCH4 Philosophical Reason Egalitarian philosophies – emphasizes equity, particularly equal access to health care and views health care as fundamental necessity for human well being Utilitarian philosophies – views health in the context of how health contributes to a nation’s welfare

KSM, UOCH5 Policy Reason The amount of financial resources mobilized for health care and how they are used depend on health care financing policy Financing is the principle instrument with which to determine resource flows, distribution of resources, and incentive structures for health providers

KSM, UOCH6 Policy Reason Unless a nation has a rational and integrated financing policy, the health care costs of elderly, disabled, and less healthy persons are left for the government to finance and the cost become a heavy financial burden on the treasury Determine who will have access to basic health care, what services are offered, and their quality

KSM, UOCH7 Market Failure Reason The distribution of health risks are highly skewed and it caused two serious market failures in private insurance market Adverse selection – high risk individual more likely to purchase insurance Risk selection – insurers exclude high risk individuals and only insure healthier persons for maximum profit

KSM, UOCH8 Macro-environmental Reason Economic changes – reduction of government spending in public sector Demographic changes – significant increase in the population as a whole and of those over age 60 Epidemiological changes – double burden? Triple burden? Political changes – increased demand and government supply

KSM, UOCH9 Six Building Blocks of a Health System Source: Strengthening Health Systems to Improve Health Outcomes, WHO’s Framework for Action – WHO 2007 Purposeful change aimed at improving health system performance for: System Inputs

KSM, UOCH10 Overview of HCF

KSM, UOCH11 HCF policy goals (WHO report, 2000) Financial protection Equity in finance Equity of access Transparency and accountability Quality care and efficient service delivery Administrative efficiency

KSM, UOCH12 Three basic principles for HCF Principle 1 – Raise enough revenues to provide individuals with a basic package of essential services and financial protection against catastrophic medical expenses caused by illness and injury in an equitable, efficient, and sustainable manner Principle 2 – Manage these revenues to pool health risks equitably and efficiently Principle 3 – Ensure the purchase of health services in ways that are allocatively and technically efficient

KSM, UOCH13 Functions of HCF Revenue collection Polling resource Purchasing services

KSM, UOCH14 Methods of HCF Government revenue e.g. general tax, inflation, earmarked tax Social and private insurance User fees (OOPs) Community financing

KSM, UOCH15 Exchange Model Bilateral exchange model for goods Consumers Providers Service Money

KSM, UOCH16 Exchange Model Trilateral Exchange Model for Goods ConsumersProviders Financing Organization Treasury Premiums Payments Services User’s fee Taxes

Evolution of Health Care Financing at Various Stages of Economic Development

KSM, UOCH18 Stage I (three tired system)Stage IIStage III MethodsPoorLow Segmented finance(Universal coverage) < $ 1,800 1,800 – 4,800 $5,000 – 12,000 $ > 12,000 $ General revenue + donor Public health, prevention Public health services NHS (UK, N.Z.) (clinics, hospitals) Medisave, Singapore (50-60%)(40-50%)(20-40%) Social insurance For civil servant NHI (Canada) (10-20%)(30-60%)Bismarckian Private insurance Negligible(5-10%)(15-40%)Medicare (USA) Private hospitals & clinics Self pay (OOPs) PharmacistsSelf pay Indigenous providers (35-45%)(20-40%)(15-25%) BangladashPhilippinesThailandUSA, Singapore IndiaIndonesiaMalaysiaCanada

KSM, UOCH19 Criteria for Evaluation of HCF Equity – in financing - in provision of health care Efficiency – in financing - in provision of health care Other criteria – quality, sustainability, risk pooling

KSM, UOCH20 Definition of Health Equity The International Society for Equity in Health (ISEqH) defined equity in health as “the absence of systematic and potentially remediable differences in one or more aspects of health across populations or population subgroups defined socially, economically, demographically, or geographically”

KSM, UOCH21 Difference of inequity and inequality Health inequalities are differences in health that are “avoidable,” “unjust, and unfair” Whitehead 1990

KSM, UOCH22 Determinants of Health Inqualities 1. Natural, biological variation 2. Differential health-damaging behavior that is freely chosen 3. Differential health-promoting behavior that is freely chosen 4. Differential health-damaging or health-promoting behavior, where choices are restricted 5. Differential exposure to unhealthy, stressful conditions (home, work, etc…) 6. Inadequate access to basic social and essential health services 7. Health-related social mobility Generally perceived as unavoidable or fair Generally perceived as avoidable or unfair

KSM, UOCH23 Vertical and horizontal equity Horizontal equity applies to people in the same status or situation, and people who are alike should be treated in the same fashion, – in other words, equal treatment for equal need Vertical equity focuses on the difference between individuals or groups of people, and people who are unlike in relevant respects (e.g. income, health needs), and states that the differences should be treated differently in a just way

KSM, UOCH24 How to measure equity? Lorenz curve Gini coefficient Kakwani index Concentration index

KSM, UOCH25 Lorenz Curve Lorenz curve is a graphical representation of the proportionality of a distribution (the cumulative percentage of the values). It was developed by Max O. Lorenz in 1905 for representing income distribution

KSM, UOCH26 Lorenz Curve

KSM, UOCH27 Gini Coefficient Note: Gini Coefficient is a tool for measuring inequality of income. The value of Gini coefficient ranges from 0 to 1. A low Gini coefficient indicates more equal income or wealth distribution, while a high Gini coefficient demonstrates more unequal distribution.

KSM, UOCH28 Gini Coefficient

KSM, UOCH29 The Kakwani index Is defined as twice the area between the concentration curve of health payment and the Lorenz curve of household income The value of the Kakwani index ranges from -2 to 1 A negative Kakwani index value indicates the regressive nature of health care payments In contrast, a positive value indicates the progressive nature of health care payments

KSM, UOCH30 The Concentration Curve and Index The concentration curve graphs on the x-axis the cumulative percentage of the sample ranked by living standards, beginning with the poorest, and on the y-axis the cumulative percentage of the health service use corresponding to each cumulative percentage of the distribution of the living standard variable The concentration index is a means of quantifying the degree of income-related inequality within a specific health variable, for example, health service use, and government health subsidies

KSM, UOCH31 The concentration index is defined as twice the area between the concentration curve and the line of equality (the 45-degree line running from the bottom-left corner to the top-right) In the case where there is no income-related inequality, the concentration index is zero The index takes a negative value when the concentration curve lies above the 45-degree line of equality, indicating disproportionate concentration of health service use or other health variables among the poor, and a positive value when it lies below the 45-degree line of equality

Equity in Health Care Financing Kakawani Index

KSM, UOCH33 Concentration curve for health payment and lorenz curve for health expenditure, Egypt 1997

KSM, UOCH34 Concentration curve for health payment and lorenz curve for health expenditure, Egypt 1997

KSM, UOCH35 Progressive & Regressive result of previous figure Kakawani index (direct tax) = Kakawani index (indirect tax) = Kakawani index (social insurance) = Kakawani index (OOPs) =

KSM, UOCH36 Trends of Kakawani indices of HCF Methods in Thailand (1986 – 1998)

KSM, UOCH37 Progressivity of HCF

Equity in Provision of Health Care Concentration Index

KSM, UOCH39 Selected concentration curves of ambulatory service use among different types of health facilities in 2003

KSM, UOCH40 Selected concentration curves of ambulatory service use among different types of health facilities in 2003

KSM, UOCH41 Selected concentration curves of ambulatory service use among different types of health facilities in 2003

KSM, UOCH42 Selected concentration curves of ambulatory service use among different types of health facilities in 2003

KSM, UOCH43 Concentration curve for health sector subsidies and lorenz curve of household consumption, Egypt 1997

KSM, UOCH44 Regressive result of previous figure Kakawani index (inpatient) = Kakawani index (outpatient) = Kakawani index (health centre) = Kakawani index (total subsidy) =

Efficiency in Health Care Financing and Provision of Health

KSM, UOCH46 Efficiency Measures Overview 1. Perspective 2. Output 3. Type of Efficiency Function of Health system esp in Health Care Financing Revenue collection, risk pooling, purchasing Allocative, Technical/ Productive and Social Efficiency It is organized in three tiers

KSM, UOCH47 Efficiency Overview Society Providers Purchasers Health Plans Health Care Financing Individuals Revenue collection, Risk pooling Purchasing TechnicalProductive Social Perspective Output Type

KSM, UOCH48 Allocative Efficiency A firm achieves technical efficiency when it cannot produce the same output with any fewer inputs

KSM, UOCH49 Technical/Productive Efficiency A firm achieves productive efficiency when it cannot produce the same output at a lower cost

KSM, UOCH50 Social efficiency Social efficiency is more often the focus for society than for firms and mainly consider for social inclusion No person can be better off without making somebody worse off (Pareto optimality)

KSM, UOCH51 Public Finance Challenge Environmental sanitation Family Planning Vector control Maternal and Child Health OP hospital referrals Health center OP curative OP hospital self-referrals 2nd class IP care VIP IP care Kidney dialysis Open heart surgery Cosmetic surgery Water supply Pure Public Goods Pure Private Goods Curative Preventive Government policy dictates most resources flow here Actual funding ends up here RichPoor

KSM, UOCH52 Public / private collaboration in curative service delivery SHI - public/private provision Financing: Filling the gaps Pure Public Goods Pure Private Goods Curative Preventive Self- financing Pre-pmt Schemes The rich The poor Pure private provision + service contracts Public provision & finance Subsidized pre-pmt Schemes

KSM, UOCH53 References Andres Vork et. al, Income related inequality in health care financing and utilization in Estonia since WHO health financing paper 2010/3 Innovative Medicine South Africa, National health insurance Background brief: Understanding Health Care Financing Mara Brain, Public Health Care: Reform and financing, A big picture Owen O’donnel et. al, Analyzing health equity by using household survey data: A guide to techniques and their implimentations

KSM, UOCH54 References (Contd) Pablo Gottret & George Schieber, Health financing revisited: A practitioner’s guide Supasit Pannarunothai and Direk Patmasiriwat, Equity-directed health care reform in Thailand: The use of macroeconomic indices The alliance, Efficiency in Health Care: What does it mean? How is it measured? How can it be used for valued based purchasing? WHO, Strengthening Health System to improve Health Outcomes: WHO’s framework for action William Hsiao, Health care financing in developing nations

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