Health System Reforms in OECD Countries Lessons for China WHO China http://www.wpro.who.int/china

Overview of Presentation: OECD Health Systems Reforms - Lessons for China Characteristics of health care systems Financial resources for health care Cost containment initiatives Improving efficiency at the micro level Ensuring equitable access to health care Improving quality of care including patient satisfaction Government role in regulating quality, safety and cost control Reflections and implications for China http://www.wpro.who.int/china

1. Characteristics of Health Systems in OECD UNIVERSAL coverage of health care with Governments taking major responsibilities Adequate public health financing Via publicly organized social health insurance schemes Or via tax-based national health services Private insurance: main mode (Swiss, US) - increasing choice & timeliness of care (UK, Ireland, Australia, etc) The way health systems financed are affecting equity Relying on taxes and social insurance, rather than OOP more equitable and supports access to care Individual premium and cost sharing (co-payments) May have negative implications on equity in health care

Characteristics: OECD Public-integrated model (Australia, Nordic countries, UK pre-1990s) Merging finance with provision: run like Govt department Staff salary paid and complete population coverage Cost control can easily be done Weak incentives to improve efficiency, outputs, quality and responsiveness to patient needs Contract (purchasing) model (UK in 1990s, Japan, New Zeeland) Contract with public or private health providers More responsive to patient needs More difficult to contain costs Private insurance / provider model (Switzerland + US) Affordable insurance High degree choice Cost control weak

2. Financial resources for health: OECD Rapid rise of health expenditure in 1960s and 1970s After reductions in 1980s, several OECD countries have raised their public spending on health in the 1990s Total health expenditure (THE) averaged: 8.4% GDP with a range from 2.0% for Turkey to 13.2% for the US Public expenditure on health averaged: 6.2% GDP Most EU countries over 6% and the lowest is 4.2%, in Poland Turkey 1.5%; Korea 2.6%; US 5.9% of GDP Public share of THE averages: nearly 75% Surpasses 70% in most EU countries Lowest is 56% in Greece and Switzerland; Dutch 63% US and Korea both 44% Devoting more of GDP to health care as society gets richer not necessarily inappropriate

3. Cost containment initiatives - OECD Two major factors driving up health care spending in Europe: Technology: likely explained half of the total spending growth Population ageing 1980s European countries used 3 policy sets to control cost often in the following order: Regulation of prices and volumes of health care and inputs Caps on healthcare spending, either overall or by sector Shifts of the cost onto the private sector through increased but limited cost-sharing http://www.wpro.who.int/china

I. Regulation of prices and volumes of healthcare and inputs Price controls Wage controls esp. in systems with public-integrated systems (Denmark, Finland, Ireland, Spain, Sweden, UK) Price and fee controls between purchasers and providers (Belgium, France, Luxemburg, Germany, Austria, Hungary) Administrative price setting for pharmaceutical drugs (all EU countries except Germany and Switzerland) Disease Related Grouping (DRG) Price and volume controls Prices adjusted as a function of volume to stay within budget (Germany – ambulatory care; Austria – hospital care) Reduce marginal costing for additional supply and volumes http://www.wpro.who.int/china

Cont. I. Regulation of prices and volumes of healthcare and inputs Volume controls Limits on entry to medical schools (most EU countries) requires human resource planning taking into account age related needs increases Technology advances can reduce average length of stay in hospitals leading to reduced number of beds per capita - controlling the purchasing of high tech equipment The effects of cost control measures undermined by providers’ response: Increasing volumes Providing higher cost services Up-rating patient into higher cost classifications Shifting services into areas where there are no price controls Price and wage controls can have negative & longer-term effects on supply side Shortage of personnel, affecting flexibility and ability to increase supply http://www.wpro.who.int/china

More effective for hospital sector II. Budgetary caps Most effective in integrated models (Denmark, NZ, UK) or single payer countries (Canada) Budget process holds key to cost controls More effective for hospital sector Indicative budgets/targets – in countries with social-insurance systems (Belgium, France, Luxemburg, Netherlands) Prospective budgets instead of retrospective payments (paying provider on FFS) Limit the incentives to improve efficiency III. Shifting cost to private sector Cost sharing esp. in pharmaceuticals through non-reimbursable and co-payments Burden those who use services (sick & poor) and potentially restricting access to services

4. Improving efficiency at micro level: OECD Ambulatory care – shifting care to an ambulatory environment helps control overall costs and enhance economic and technical efficiency The gate-keeping role of GPs has been encouraged in several EU countries (France, Norway, UK) GPs are employed on: salaries (Greece, Finland, Iceland), salary-fee mix (Norway) salary-capitation mix (Portugal, Spain, Sweden) capitation-fee mix (Austria, Denmark, Ireland, Italy, Netherlands, UK) fee for service (Germany) Reliance on fee-for-service may see supply-induced demand Growing interest in adopting a mix of different provider payment methods http://www.wpro.who.int/china

Improving efficiency at micro level HOSPITAL SECTOR Purchaser (GP fund holders, primary doctors, insurers, patient) / provider split Budgetary authorities: helps control overall costs and enhance efficiency Patients: strengthen quality and accessibility care Critical issues: (1) Purchaser gets adequate information; (2) Increasing and competing providers and insurers; (3) Administrative cost Hospital contracting and payment system Global grants/budgets main payment method in public integrated systems and direct means to control spending can be combined with DRG (price and volume) Bed-day payments (Switzerland): flat rate per occupied bed Payments per case (prospectively) such as Diagnosis Related Group (DRGs) Fee for service: not used in EU as prone to supply induced demand Enhancing competition among insurers (Dutch: new reform)

Improving efficiency at micro level Pharmaceutical drugs Strict drug approval process and pre-marketing requirements to assess whether products are safe & cost-effective for use (widespread in EU) Price controls at the wholesale and retail level (widespread in EU, convergence in prices across EU countries) Distribution of pharmaceuticals governed by national regulation with professional bodies, health providers and health users Number of pharmaceutical wholesalers has decreased Rational use supported by: clinical practice guidelines (widespread in EU) prescribing budgets and data to provide feedback to individual doctors The degree for cost-sharing for drugs has been more widespread than for other components of healthcare – demand

Improving efficiency at micro level Technological change Major impact on health outcome per disease and major driver of health spending Pre-marketing controls to determine whether a new technology is safe and cost-effective for a particular use (widespread in EU) Budget caps make hospitals more selective in acquiring new technologies (wide-spread; similarly, capital charges in UK) Purchase of high technical equipment through central committee (Netherlands) http://www.wpro.who.int/china

Ensuring Equitable Access to Health Care: OECD Universal coverage as policy objective means that everyone gets access to appropriate care when they need it and at affordable cost Also adopted by poorer European countries (Moldova and Kyrgyztan) (Belgium, Finland, Greece, Portugal, Spain The approach generally used to attain universal coverage in European countries has been: make insurance coverage compulsory include essential health services the service benefit package minimize cost sharing with vulnerable groups often been exempted from cost-sharing provider payment methods emphasis is on prepaid and pooled contributions and move away from user fees http://www.wpro.who.int/china

Cont … Ensuring Equitable Access to Health Care: OECD Many countries have found that universal and comprehensive insurance coverage is not always sufficient to ensure equitable access to health services. The following problems need to be addressed separately: Shortages or maldistribution of providers or services Socio-cultural barriers Most OECD and European countries, including some of the poorer countries, provide nearly universal health coverage to their citizens Out-of-pocket payments of total health spending below 23% in most EU countries (and max 33%, in Switzerland) Out-of-pocket of total household consumption below 3% in most EU countries (max is 6%, in Switzerland) http://www.wpro.who.int/china

Stages of coverage and organisational mechanisms Reduce out-of-pocket payments and increase prepayment Universal coverage Options: Tax-based financing SHI Mix of tax-based financing and various types of health insurance Intermediate stages of coverage Mixing community-, cooperative and enterprise-based health insurance, SHI-type coverage and limited tax-based financing Absence of financial protection Out-of-pocket spending http://www.wpro.who.int/china

Universal coverage OECD experience suggests that universal coverage has potentially many advantages Improve the health and productivity of the population by making health services financially accessible to all Providing coverage for preventive care can lower future expenditures for care Reduce the need to provide for a large array of safety-net facilities for sick people who cannot afford care Reduce administrative costs because processes such as verifying eligibility for the program will not be necessary Reduce problems of adverse selection into health insurance plans Enhance fairness in society http://www.wpro.who.int/china

6. Improving quality of care and patient satisfaction: OECD Policy-makers in OECD increasingly address issues of Inappropriate and poor technical quality of health-care services Patient safety and medical errors Increased accountability for quality Improving information systems and make reports public on health-care quality and performance of hospitals, individual providers, health insurance plans to enhance health system performance DRG as a measure of quality (Czech) Funding reward (UK) Standardizing protocols and involvement professional associations Mandatory accreditation Setting targets and standards for improvement Formalizing patients’ rights

7. Government role in paying, providing and regulating: OECD Government as the provider & payer of services, using tax revenues: UK, Finland, Denmark, Ireland, Sweden, Norway, Spain Government as the payer of services, using tax revenues; private providers: Canada Government oversees the provision & payment of services by non-profit organizations (sickness / insurance funds) which rely on employer & employee contributions: Germany, France, Netherlands Government provides safety net for those outside private insurance schemes: Switzerland Government strongly regulates or oversees quality, safety and cost control http://www.wpro.who.int/china

8. Reflections and Implications for China China is weak in regulator function (cost, quality, safety) Insurance coverage low with incomplete package Urban: 55%, employment based + commercial and non-commercial health insurance Rural: 45%, voluntary, focus catastrophic illness, very low reimbursement level (30%) “Insurers” either way Govt (MoLSS, MCA) or scattered rural schemes (RCMS) have limited or no negotiation power with provider Provider merely public but salary paid 50 – 90% thr. user fees: Increasing amounts of clinical care and under-providing preventive and basic care Prescribing excessive and unnecessary amounts of drugs and diagnostics Cost control measurements difficult due to dependency on user fees http://www.wpro.who.int/china

Health expenditure in China Reflections and implications for China …… Resources to Health Health expenditure in China Health expenditure (2000): $45 per capita per year Health expenditure (2004): $71 per capita per year (5.6% of GDP) Total Health Expenditure (THE) Govt 17% in 2004 vs. 40% in 1980 Insurance mainly urban 29% in 2004 vs. 40% in 1980 (Rural) Individual (HH) 54% in 2004 vs. 20% in 1980 Fear that health care cost will reach 8 - 10% of GDP in 5 years time without necessarily improving quality due to inappropriate mechanisms and tools to control costs (price) and quantity (volume) Drugs consist 44% of THE. In OECD this around 15% http://www.wpro.who.int/china

China’s experience in public spending on Health Reflections and implications for China …… Improving efficiency at micro-level China’s experience in public spending on Health 68% of public health resources toward hospitals for mainly urban residents and insufficient public resources go to “public goods” Local governments in poor areas, which are responsible for financing health services, face sharp financial constraints and fail to fulfill their core public health functions – unfunded mandates Doctors outnumber nurses No gate keeper and excessively using tertiary services, bypassing available health services in the community – TRUST, increasing cost http://www.wpro.who.int/china

Reflections and implications for China …… Ensuring equitable access to healthcare: Health services in China are: (1) grossly under-funded by Govt; (2) insurance coverage low; (3) packages inadequate; (4) reimbursement low and (5) health workers relying on user fees. This has resulted in: Over two thirds of China’s population need to rely on their own pockets to cover the cost of medical bills Out-of-pocket spending is 56% of total health spending Health care cost main single reason for people falling into poverty (30% NHSS; 50% DRC report) ACCESSIBILITY TO HEALTH SERVICES VERY LOW Govt acknowledges accessibility to Health as key problem with around 40% of population lacking access to hospital – mainly financial http://www.wpro.who.int/china

Lessons for China from OECD Step by step …. Clarify vision and strengthen Government role in Health: Govt to increase public expenditure towards public health and to support safety net and access to Health for the West and the poor Regulator in safety, quality and cost Senior level endorsement required to guide the many actors in Health Consider universal coverage to essential services: Make health insurance compulsory Improve, expand and integrate current urban, rural health insurance, and medical financial assistance with focus on ensuring access to Health for the low resource areas and safety net for the poor. Include essential heath services in package with focus on West and the poor

Lessons for China from OECD Change the method of provider payment: towards prepaid and pooled contributions away from user fees Introduce forward looking budget instead of retrospective payments Strengthen the role of purchaser of health services Put in place cost containment tools and mechanisms Regulate price and volume of health care & inputs Caps on health care spending Develop National Medicine Policy, registration, pricing, distribution, rational use Strengthen ambulatory care and introduce gate keeping village clinics and urban community health centers Improve quality of health services at lower level – gain trust http://www.wpro.who.int/china

Lessons for China from OECD Improve quality of health services, especially at lower level Standardize treatment protocols Introduce mandatory accreditation Improve reporting system and ,make reports public on health care quality Improve quality of staff at lower level Introduce health system indicators that will focus on accessibility to quality of health services Involve all stakeholders in the process THANK YOU http://www.wpro.who.int/china