FINANCING OF HEALTH CARE Kai-Lit Phua, PhD FLMI Associate Professor School of Medicine & Health Sciences Monash University Malaysia

Biographical Details Kai-Lit Phua received his BA (cum laude) in Public Health & Population Studies from the University of Rochester and his PhD in Sociology (Medical Sociology) from Johns Hopkins University. He also holds professional qualifications from the insurance industry. Prior to joining academia, he worked as a research statistician for the Maryland Department of Health and Mental Hygiene and for the Managed Care Department of a leading insurance company in Singapore. He was awarded an Asian Public Intellectual Senior Fellowship by the Nippon Foundation in 2003.

Why should doctors be concerned with health care financing? Rising health care costs in all nations leading to: Government cost control measures e.g. regulation of prices Insurance company scrutiny of actions of doctors Loss of clinical autonomy for doctors e.g. doctors cannot prescribe expensive drugs or order expensive procedures without getting permission from other parties first

Reasons for rising costs 1. New technology e.g. MRI, organ transplants, renal dialysis, patented drugs to treat HIV/AIDS 2. Population ageing 3. Epidemiological transition 4. Medicalisation of social problems 5. Rising expectations of the public e.g. expect better “hotel services” in hospitals 6. Systems of health care financing without proper cost control mechanisms 7. Unwise spending by government e.g. building more and more hospitals 8. Inefficient privatisation e.g. privatisation of Government Medical Store in Malaysia

How do we pay for health care? 1. Out-of-pocket i.e. patient and family pays 2. Employer pays e.g. employer reimburses the employee who sees the doctor 3. Private insurance scheme 4. Charity or PVOs (private voluntary organisations) like National Kidney Foundation 5. Government i.e. through money raised from taxes (Britain’s National Health Service) or through a National Health Insurance scheme (South Korea and Taiwan) 6. Medical Savings Accounts (Singapore’s Medisave) 7. Foreign aid (important in poor countries)

How to control costs? New Technology 1. Control import and introduction of new technology e.g. technology assessment law and “certificate of need” law 2. Get doctors to practise medicine more cost- effectively e.g. prescribe generic drugs, do not order expensive lab tests unnecessarily 3. Better planning and utilisation of facilities e.g. whole of Australia has fewer MRI machines than the Kuala Lumpur region! Reduce the number of machines but utilise them more fully.

How to control costs? Population Ageing 1. Promote healthy lifestyles among the young as well as the old 2. Alternative ways of caring for the aged e.g. care at home rather than in institutions if possible 3. Place aged in long term care facilities rather than hospitalise them 4. Avoid “heroic medicine” if patient is a terminal case

How to control costs? Epidemiological Transition 1. Prevention and health promotion at the individual level 2. Spend more on environmental health and occupational health programmes 3. Better regulation of food industry (including the fast food industry and the processed food industry)

How to control costs? Medicalisation of Social Problems 1. Non-medical programmes to tackle social problems such as smoking and drug/alcohol abuse e.g. ban cigarette advertising, heavy taxes on tobacco and alcohol products

How to control costs? Rising expectations 1. In government hospitals, do not provide unnecessary “hotel services” 2. Patients should be made to pay more if they want better “hotel services” 3. For chronic conditions, teach patients and their families better self-care so as to avoid expensive complications (teach patients that not all diseases can be cured) 4. Insurance companies should not pay for newer drugs and medical procedures i.e. those that have not been subjected to rigorous clinical trials

How to control costs? Financing schemes without proper cost control mechanisms 1. Pay doctors and other health care providers through capitation, salaries or negotiated fees. 2. Lessen “fee-for-service” payments to reduce “supplier-induced demand” 3. Utilisation reviews to identify high cost doctors and hospitals 4. More cost-sharing by patients e.g. co- payments, deductibles and co-insurance (to reduce unnecessary care-seeking, to promote more appropriate care-seeking)

How to control costs? Unwise spending by the government 1. Spend more on prevention and health promotion e.g. spend more on prenatal care rather than on neonatal intensive care 2. Reduce hospitalisation rates (i.e. wherever possible, treat on an outpatient basis) and have quicker discharges of hospitalised patients 3. Utilise lower cost health personnel to treat routine medical problems e.g. use nurse practitioners, medical assistants to do routine physical examinations & treat simple cases 4. Don’t build so many hospitals

How to control costs? Inefficient privatisation 1. Privatise only if this will increase competition and result in greater efficiency (lower prices, better service quality, better access) 2. Better laws and better enforcement of existing laws regulating the private sector e.g. one (controversial) proposal would be to allow doctors and hospitals to advertise and inform the public about their charges for various procedures 3. Where privatisation is failing, the government should take over from the private sector