International Health Policy Program -Thailand NHA TEAM International Health Policy Program Draft report presentation for external peer review October 7, 2009 Determinants of National Health Expenditure

International Health Policy Program -Thailand 2 How Much Does the World Spend on Health? In 1998, the world spent nearly 7.9% of global income on health care. There are large variation in health spending across countries. These difference are not restricted to low- and high-income countries but exist within and across countries at the same level of economic development. Over the decades growth in health expenditure has tended to outstrip general inflation rates in most countries. We analyze and identify that determine health expenditure and how these determinants vary across countries at different levels of economic development.

International Health Policy Program -Thailand 3 Determinants of National Health Expenditures

International Health Policy Program -Thailand 4 Government and organization of the Health System Policies How a health-care system in a country is managed and organize influences how much that country spends on health care. At the most fundamental level the policies that government enact and the roll they play in managing the health system influences all inputs into health system. Financing Governments can use a mix of financing methods to mobilize health funds. National Health Accounts studies have shown that low-and- middle-income countries use a multiplicity of financing methods and have underdeveloped insurance markets and high out-of-pocket expenditures.

International Health Policy Program -Thailand 5 Total Health Expenditure by Financing-Thailand

International Health Policy Program -Thailand 6 Purchasing There exists significant variation across countries in how the purchasing function is organized effect overall health expenditure. Provider Payments The main aim of provider payment is to create incentives that influence the behavior of provider to achieve policy objectives of government such as equity, efficiency and increased access to care. There are three principle methods of provider payment - the purchaser pays salaries and makes available facilities and medical supplies - contracting for services - allocating an annual budget that could be set on the basis of expected services or enrolled population

International Health Policy Program -Thailand 7 Health Needs of the population Population structure The sheer increase in the number of individuals in a country increase health needs Change in population structure affects the need and demand of health-care-services. A lot of studies showed that change in demographic affect health expenditure. Epidemiology “Epidemiology transition” : preponderance of communicable disease noncommunicable conditions account for a large part of the disease burden

International Health Policy Program -Thailand 8 Lifestyles Lifestyles also affect health expenditures. Healthy lifestyles tend to improve health and reduce health expenditure, and unhealthy lifestyles result in poor health and increased health expenditure.

International Health Policy Program -Thailand 9 There exists a positive correlation between GDP per capita and share of total health expenditures as a percentage of GDP. The Effect of Income on health Expenditures

International Health Policy Program -Thailand 10 There exists a positive correlation between GDP per capita and per capita health expenditures. There exists a positive correlation between GDP per capita and the government share of total health expenditures.

International Health Policy Program -Thailand 11 Ratio of THE to GDP: Thailand

International Health Policy Program -Thailand 12 The report of the Commission on Macroeconomics (2001) shows that the health status is important in explaining the difference in economic growth even when one controls for macro-economic variables. Studies conducted in both developed and developing countries bear out the positive relationship between household income and the health status of children. Household income also is a strong predictor of the demand for health-care services and expenditures. In conclusion, income is an importance determinant of health expenditures at both the level of country and households.

International Health Policy Program -Thailand 13 Effect of Health Insurance on Health Expenditures Governments should undertake insurance where the market for whatever reason, has failed to emerge. Demand elasticities for medical care are non zero and indeed the response to cost sharing is nontrivial

International Health Policy Program -Thailand 14 Social security&WCF as percentage of THE: Thailand

International Health Policy Program -Thailand 15 The significant association observed in the United States and other developed countries between insurance and demand, as well as expenditures on health care, might not hold in the case of low-and middle income countries. Analysis of Household Health Care Expenditure and Utilization Surveys in middle- income countries do not always support the hypothesis that the presence of insurance increase demand and expenditures on health care.

International Health Policy Program -Thailand 16 The Effect of Physician Behavior on Health Expenditure The physician has the ability to induce demand and this will positively affect the physician’s income. Balance the gain from recommending and performing expensive treatments and the losses from possessing a bad reputation.

International Health Policy Program -Thailand 17 The Rule of Technology in determining Health Expenditure There is a relationship between health insurance and technology. The long run growth of health care expenditures is a by product of the interaction of the R&D process with the health insurance system. The relationship between technology availability and health-care spending: More availability is associated with higher use and expenditures. Not many studies exits on the development, diffusion, and adoption of technology and its impact on health expenditure and its impact on health ever, information contained in low-and middle-income countries.

International Health Policy Program -Thailand 18 Expenditures on Pharmaceuticals

International Health Policy Program -Thailand 19 Expenditures on pharmaceuticals accounted for a significant proportion of total health expenditures. In countries at all levels of economic development, expenditures on pharmaceuticals represent a fairly significant proportion of total health expenditures, and the current consensus is this will increase over time. R&D exits in rich countries but in poor countries, little or no R&D investment takes place.

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International Health Policy Program -Thailand 21 Conclusion Many countries consider health care to be a basic human right. Our analysis of the determinants of health expenditures shows that how health systems are organized and manages. The magnitude and share of these determinants in health expenditures varies across countries. There is a need to more systematically study this issue in the context of low-and middle- income countries.

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