Sources of Health Care Financing

The Elements of Health System Management Resource Inputs (trained staff,drugs, knowledge, facilities,etc.) Organization (ministry, hospitals, etc.) Financial support Service Provision

Health Sector Reform: Civil service and public sector reform Development in financing the social sector Managed-market health care reforms Development in epidemiology and health economics

Health Sector Reform -2- HSR occurs as part of changes in public sector reforms. Changes in health financing: the need to assess the advantages and disadvantages of user fees, community financing, voucher systems and different forms of insurance Traditional bureaucratic structures do not necessarily sufficient incentives to guarantee cost-effective or user-friendly services, neither are unregulated private markets capable of achieving the mix of objectives that health systems seek to satisfy.

Need versus Demand

Aging and Economic Growth Year:Japan Korea Thailand / Sri Lanka population 65+ (%) Japan population 65+ (%) Korea population 65+ (%) Thailand population 65+ (%) Sri Lanka GNP per capita, Japan GNP per capita, Korea GNP per capita, Thailand GNP per capita, Sri Lanka

Low-income Countries Have Weak Capacity to Raise Revenues Governments often raise less than 20% of GDP in public revenues; The tax structure in many low-income countries is often regressive

Epidemiological Changes  Nature of health care (quantity + quality) Not necessarily all public goods Higher service costs Less and less passive acceptance of service (   Customers’ satisfaction, better quality of service) Accountability to be sought after

Major challenges for health financing n Epidemiological transition n Financial constraints n Allocative inefficiency of health sector resources n Lack of management capacity

Recurrent Costs Problems in Developing Countries

(1) Private foreign investment foreign direct investment foreign portfolio investment (stocks, bonds and notes) (2) Public and private development assistance bilateral and multilateral donor agencies (grants and loans) nongovernmental organizations (NGOs) The International Flow of Development Resources

Government Budget 1. Development (Capital) Budget （資本予算） – Domestic Financing –External Financing (development assistance, etc.) 2. Recurrent Budget （経常予算） –Domestic resources (tax, user fees) Absorptive capacity ( 援助 の吸収能力 ) Foreign currency portion Local currency portion

Development (Capital ) Budget Actual Recurrent Budget Shortage in recurrent budget User Fees Recurrent Resource Gap (by Y.Uchida)

Recurrent cost constraints threaten the productivity of past investment n A mismatch between capital investment* and recurrent financial capacity (*one-off investment) “ R ” co-efficient: the ratio of recurrent expenditure to total investment outlay District hospitals 0.33  every $1000 spent on the initial capital development of a district hospital results in $333 of expenditure per year

external assistance ・ Development (capital) budget + recurrent budget ・ Foreign currency portion + local currency portion A mismatch between capital investment* and recurrent financial capacity (*one-off investment)

Symptoms of the recurrent cost problems New facilities unable to function because of recurrent resources Faculties supplied with equipment but no qualified staff to operate Poorly maintained buildings, equipment, facilities, etc. Transportation difficulties and immobile vehicle fleets caused by lack of spares, fuel, etc. A large number of unfilled posts 

  The consequences of these problems Reduced efficiency Reduced service quality/quantity Reduced confidence in public sector facilities A shortened lifespan for capital investments Low morale among staff with high turnover

Causes for the recurrent cost problems n Poor project design n Weak planning, budgeting and resource mechanisms （ dual budgeting, PIP) n Resource availability factors (low per capita income, low growth rates, low savings rations, weak business sectors) n Weak management capacity

Balance Sheet: B/S Assets Current assets (Short-term assets) Fixed assets (Long-term assets ） Liabilities Current Liabilities Long-term Liabilities Stockholders’ Equity

Aid Coordination and Resource Management

Coordination of external resources is central to the development agenda in many countries. The following growing recognitions: Unmanageable proliferation of projects, policies and demands on sector ministries

Unmanageable proliferation of projects, policies and demands on sector ministries  Fragmented (overlapped) sector activities = projectisation Little resource fungiblility Several technical specifications Some disbursement rules and financial years among donors Enormous works with donors’ missions – heavy administrative burden Parallel management system

Parallel Management System  Excessive separate systems created great confusion. The disbursement and accounting arrangements made financial control very difficult and rendered it impossible to gain an overview of the resources employed or to analyse expenditures. The fragmentation of control over civil works initiatives hindered the development of rational capital planning policies and paid inadequate attention to the aggregate recurrent cost consequences.

Unmanageable proliferation of projects, policies and demands on sector ministries Fragmented sector activities Little resource fungiblility Several technical specifications A few different disbursement rules and financial years Enormous works with donors’ mission Asymmetric power relationships Informal networking between key policymakers /managers in both donor and recipient organizations

Ugandan national health plans since 1986 National Relief Plan 1986 Rehabilitation and Development Plan 1987 Ten Year National Health Plan 1990 Three Year National Health Plan 1992 National Plan of Action for Children 1992

SWAps (sector-wide approaches): The concept of coordination, best compressed in the SWAps. SWAps represents a next generation approach to aid, and set out to provide a broad framework within which all resources are coordinated in a coherent and well- managed way.

Definition of SWAps (sector-wide approaches): All significant public funding for the sector supports a single sector policy and expenditure program, under Government leadership, adopting common approaches across the sector, so as to disburse and account for all public expenditure.

SWAP Arrangements Coordination mechanism: A steering committee: 1) A Code of Conduct which establishes principles and mechanisms on which SWAp is to be based 2) Formulating and sharing a sector policy (a set of medium and long term performance indicators) 3) Allocation of development resources and technical assistance  Basket Fund (pooling arrangement)

KSM, UOCH 31 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, UOCH 32 Overview of HCF

KSM, UOCH 33 Exchange Model Bilateral exchange model for goods Consumers Providers Service Money

KSM, UOCH 34 Exchange Model Trilateral Exchange Model for Goods ConsumersProviders Financing Organization Treasury Premiums Payments Services User’s fee Taxes

KSM, UOCH 35 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, UOCH 36 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, UOCH 37 Efficiency Overview Society Providers Purchasers Health Plans Health Care Financing Individuals Revenue collection, Risk pooling Purchasing TechnicalProductive Social Perspective Output Type

KSM, UOCH 38 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