Tor Iversen Health systems Literature (to be found in the compendium): Cutler, D.,2002. Equality, efficiency and market fundamentals: The dynamics of international medical-care reform. Journal of Economic Literature 40, Kornai, J. and Eggleston, K., Welfare, choice and solidarity in transition (Cambridge University Press, Cambridge) Classification of health systems 2.The Norwegian system 3.Examples: Do systems matter for the provision of health care?

1.Classification of health systems Characteristics of Health Care (according to Kornai and Eggleston): The value attached to health The norm of equal access Uncertainty and the demand for insurance Asymmetric information Selection –Adverse selection –Risk selection (cream skimming) Moral hazard Supply-side power and monopoly The defenselessness of the patient Mounting costs Many sectors have some of these characteristics – no other sector has them all

Tor Iversen Many classification schemes For instance: OECD (1994): The reform of health care system: A review of seventeen OECD countries (Also in NOU 1996:5: Hvem skal eie sykehusene. Appendix) This classification inspired by: Kornai, J. and Eggleston, K., pp Four dimensions: I Providers of health services II Financing health services III The sponsor of health services provision IV Payment system / revenue system for providers

Tor Iversen The health care triangle Consumer/Patient Health Care InsurerHealth care provider The Sponsor: Regulation and redistribution

Tor Iversen I Providers of health services 1.Organizations 1.1 Publicly owned 1.2 Non profit private Charitable foundation 1.3 Private for profit 2. Self-employed professionals

Tor Iversen II Financing A.State financing (from general taxation) B.Compulsory insurance C.Voluntary insurance D.Direct payment by individual (out of pocket payment) An actual country may have several of the components above.

Tor Iversen III The sponsor of health services provision Requires authority to set the rules of the game Regulation – for instance to prevent cream-skimming by insurers Contribute the financing of health care (insurance) Redistribution

Tor Iversen IV Payment system / revenue system for providers Retrospective systems Revenues equal actual costs Fee for service Fee per treatment Capitation Global/fixed budgets No cure no pay

Tor Iversen From Kornai & Eggleston p 72

Tor Iversen Degree of integration I IntegrationII Separation (i)(ii)(iii) I NHS – England II i Health Maintenance Organization (HMO) II ii Canada II iii Health plan/managed care (USA) Again, one country may have several subsystems Sponsor Insurer Provider Sponsor Insurer Provider Sponsor Insurer Provider Sponsor Insurer Provider

Tor Iversen The Norwegian system Three levels of government –State –County –Municipality Primary care Responsibility of the municipalities Consists of preventive services (child and school clinics, immunization etc), nursing homes, and general practice. Capitation/list patient system introduced from 1 June per cent of general practitioners are privately practicing with a contract with a municipality Payment system: 1/3 patient co-payment, 1/3 capitation fee and 1/3 fee for service. Specialist care Run by 5 state owned regional health enterprises from 1 January 2002 Somatic Hospitals financed 2005 by 40% fixed budgets and 60% activity dependent revenue on average Private specialists contract with a regional health enterprise and paid by practice allowance, fee for service and patient co-payments

Tor Iversen The development of health systems Cutler: 1.The First Wave of reform: Universal coverage and equal access 2.The second wave: Controls, Rationing and expenditure gaps 3.The third wave: Incentives and competition

Tor Iversen

Does the system matter? Example 1: Level of co-payment (from Kornai and Eggleston Figure 3.2) The optimal level of co-payment balances two types of inefficiencies Inefficiency 01 Moral hazard - overuse Too little use- Access barriers Loss of risk spreading Increase in uninsured Rate of co-payment (co-insurance rate, demand-side costsharing)

Example 2: Provider cost-sharing (from Kornai and Eggleston Figure 3.3) The optimal level of provider cost-sharing balances two types of inefficiencies Inefficiency 01 Production inefficiency Risk selection inefficiency Rate of supply-side cost-sharing) Cost reimbursement Pure Capitation

Example 3: The effect of payment system on General Practitioners referral decisions (From: Iversen, T. and Lurås, H., 2000, The effect of capitation on GPs’ referral decisions, Health Economics 9, ). The referral rate among general practitioners (GPs) varies Is the payment system for GPs likely to have an influence on the proportion of patients who is referred to second-level providers. Question asked: Does a switch from a practice allowance/fee for service system in general practice to a capitation/fee for service system have an impact on GP's referral rates? Two alternative payment systems for GPs are considered: 1.A fee-per-item of health services according to a fixed fee schedule combined with a practice allowance 2.A fee-per-item of health services according to a fixed fee schedule combined with a capitation payment depending on the number of patients on the physician’s list We expect the referral rate to be higher in system 2 than in system 1. Why? Empirical analysis supports the hypothesis

Example 4: The impact of accessibility on the use of specialist health care in Norway To what extent is the policy goal of allocating health care according to medical need fulfilled in Norway? Studying the impact of a person’s health relative to the impact of geographical access to specialist care. Distinguish between public hospitals and private specialist financed by the public insurance Data from Statistics Norway: Survey of level of living Distribution of contracts with private specialists 2002 and distribution of population according to regional health enterprise. Health East Health South Health West Health Middle Health North Sum Distribution of private specialists48 %18 %17 %10 %6 %100 % Distribution of population36 %20 % 14 %10 %100 %

Tor Iversen Empirical analysis shows that: The use of private specialists depend on patients education income geographical access (distance and capacity) No similar effect regarding the use of public hopsitals found