1. Catastrophic health expenditure Webinar PBF and Equity – 21 June 2012 Catherine Korachais, Public Health Dept, Institute of Tropical Medicine, Antwerp, Belgium

2. Outline 1. Health financing system functions 2. Health financing equity 3. Catastrophic out-of-pocket health payments 4. Out-of-pocket health payments and Poverty 5. Empirical studies on catastrophic health expenditure: main results

3. Health financing system functions

4. Health financing functions Revenue collection  Who pays?  What mechanisms?  Who collects? Equity Efficiency Sustainability Fund pooling  Cross subsidies  Risk sharing Purchasing  What to buy and for whom?  From whom to buy?  How to pay for providers?

5. Health financing mechanisms Health care services Tax-based financing Social health insurance Other prepayment schemes Out-of-pocket payments 2. Payroll tax 4.Direct payments Households NGOs, international donors Financing mechanisms Financing sources Government 3. Contribution or premium 1. General tax or other revenue

6. Health financing equity

7. Health equity  According to WHO: « health equity is the absence of avoidable or remediable differences among groups of people, whether those groups are defined socially, economically, demographically, or geographically »  Two groups of definition:  Focus on health care and health outcomes  horizontal equity  Focus on health financing  vertical equity

8. Important rich-poor inequalities in health outcomes and health care utilization Source: “Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and Magnus Lindelow, The World Bank, Washington DC, 2008 Example from Bolivia

9. And Bolivia is not an isolated case in Latin America and Carribbean Source: “Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and Magnus Lindelow, The World Bank, Washington DC, 2008

10. Health inequalities and equity  Rich-poor inequalities in health largely derive from differences in constraints (e.g. income, time costs, health insurance…) rather than preferences  Hence they are often considered to be unfair and represent inequities  Focus on equity of payments for health care (both direct and indirect)

11. Health financing equity  Definition:  A health system is fairly financed if the ratio of households health payments to their budget is identical for all households, independent of the household’s health status or use of the health system  This implies:  High income households pay more than the low income  Households with same income pay the same amount  No household faces financial hardship because of health payments  No household is impoverished because of health payments

12. Fair health payments

13. Rich pay more than poor

14. Catastrophic health expenditure

15. Definition  We talk about « catastrophic health expenditure » when the health payments of one or more household members are high in relation to household budget  The idea is that spending a large fraction of the household budget on health care must be at the expense of the consumption of other goods and services (households may reduce their expenditure on other necessities for a period of time)

16. Methodology  Two variables to be defined  Health payments  Household budget  Health payments  Generally: out-of-pocket health payments

17. Methodology  Household budget  Revenues?  Difficult to measure in LICs  The measure « health payments on revenues » is not sensitive to the mean of financing  Total household expenditure?  Poor households in LICs spend little for their health; the severity of their budget constraint means that most resources are absorbed by items essential to sustenance, such as food, leaving little to spend on health care  Total household expenditure net of spending on basic necessities  « capacity to pay » (Xu et al. 2003; WHO) or « non discretionary expenditure » (Wagstaff and van Doorslaer 2003)  WHO: total household expenditure – food expenditure median

18. Methodology  Threshold  WHO applies a 40% threshold  WHO definition:  Catastrophic health expenditure occurs in households when their out-of-pocket payments equal to or exceed 40% of their non-subsistence expenditure or «capacity to pay», i.e. if:

19. Limits  Non users of health services (notably for financial reasons) are not considered in the analysis (since they don’t report any health payment)  Household coping behaviour is not considered  The analysis only reflects short-term impact of health payment on household financial burden  The concept does not consider the loss of revenues occuring because of illness

20. Poverty impact of health payments

21. Motivation  OOP health payments can drive individuals into poverty  Standard poverty measures do not adequatly account for health needs  How many more individuals are identified as poor when poverty is assessed on basis of household resources net of OOP health payments?

22. Definition Impoverishment due to OOP health payments  OOP health payments impoverish households when:  Households are non-poor before health payments (i.e. above the poverty line) and become poor thereafter (i.e. below the poverty line)  Households become more poor because of their health payments, i.e. were already poor before health payments and move away from the poverty line thereafter

23. Methodology Impoverishment due to OOP health payments  Defining the poverty line  Relative  Fraction of mean/median expenditure/income  Absolute  A given level of household expenditure/income (e.g. international poverty line at $1 or $2 PPP per capita and per day)  Poverty line based on subsistance expenditure (WHO method):  Median food expenditure  Two types of impoverishment are examined  Headcount difference before and after OOP health payments  Poverty gap difference before and after OOP health payments

24. Limits of this poverty measure  Not all OOP health payment are non discretionary, so substracting them from household budget will overestimate poverty  However leaving OOP health payments in budget will underestimate poverty +  Same limits as catastrophic health expenditure method

25. Main results from empirical studies

26. Health payments global impact  Each year, millions people do not have access to effective and affordable health care  150 million people face financial catastrophe  100 million of people are pushed below the poverty line  Among them, more than 90% come from LICs

27. Key points from empirical studies  High catastrophic expenditure incidence country characteristics  Low income countries

28.  The incidence of catastrophic health expenditure is higher in low income countries Xu, K. et al.(2007). Protecting Households From Catastrophic Health Spending. Health Affairs, 26, no.4 (2007): 972-983.

29. Key points from empirical studies  High catastrophic expenditure incidence country characteristics  Low income countries  Low prepayment level (whether social insurance or tax-based)

30.  A low level of prepayment is associated with a high incidence in catastrophic health spending Xu, K. et al.(2007). Protecting Households From Catastrophic Health Spending. Health Affairs, 26, no.4 (2007): 972-983.

31. Key points from empirical studies  High catastrophic expenditure incidence country characteristics  Low income countries  Low prepayment level (whether social insurance or tax-based)  Groups excluded from financial protection mechanisms  Important income inequalities  High poverty level  Non adequate public health service

32. Key points from empirical studies  Individuals and households characteristics associated with a high risk of catastrophic health expenditure:  Low income

33. Poor people are more at risk: example from Rwanda Saksena, P. et al.(2011). Mutual health insurance in Rwanda: Evidence on access to care and financial risk protection. Health Policy, 99:203-209.

34. Key points from empirical studies  Individuals and households characteristics associated with a high risk of catastrophic health expenditure:  Low income  Rural  Household size: very small or very big more exposed  Education  Age: more than 65 or less than 5 more exposed  Chronic diseases  No health insurance

35. The boundaries and names shown and the designations used on this map do not imply the expression of any opinion whatsoever on the part of the World Health Organization concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. Dotted lines on maps represent approximate border lines for which there may not yet be full agreement.  WHO 2006. All rights reserved Distribution of Households With Catastrophic Expenditure

36. Catastrophic health expenditure and PBF

37. Open questions  What is the impact of PBF systems on health payments  Direct effects  If cost is a barrier to utilisation, then PBF may attenuate the problem, through for instance:  Vouchers system for the poorest  Transport cost reimbursement by health facilities for some patients  Since health service quality is improved, patients may start to prefer using public health services, which are also cheaper  Indirect effects, according to the framework in which PBF is implemented  If PBF is the financing mean adopted by a prepayment system of health services, then it may reduce costs

38. Thank you for your attention Questions and Answers

39. References  Methodology and data treatment  Xu K, et al. (2005): Distribution of health payments and catastrophic expenditures-Methodology. Discussion paper No. 2. HSF, World Health Organization.  Xu, K et al.(2003): Summary measures of the distribution of household financial contributions to health. Chapter 40 in: CJL Murray, DB Evans, editors. Health Systems Performance Assessment: Debates, Methods and Empiricism. Geneva: World Health Organization; 2003.  Xu, K. et al. (2007): Assessing the reliability of household expenditure data: results of the World Health Survey. Discussion paper. No. 5. 2007. HSF, World Health Organization.  O’Donnell, et al. 2007. « “Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity www.worldbank.org/analyzinghealthequity

40. References  Concept and empirical studies  Berki, S. E. 1986 « A Look at Catastrophic Medical Expenses and the Poor » Health Affairs 138-145  Murray, CJL et al. (2003): Assessing the distribution of household financial contributions to the health system: concepts and empirical application. Chapter 38 in: CJL Murray, DB Evans, editors. Health Systems Performance Assessment: Debates, Methods and Empiricism. Geneva: World Health Organization; 2003.  Saksena, P. et al.(2011). Mutual health insurance in Rwanda: Evidence on access to care and financial risk protection. Health Policy, 99:203-209  Van Doorslaer et al. 2007 « Catastrophic Payments for Health Care in Asia » Health Economics, 16:1159-1184  Wagstaff and van Doorslaer 2003 « Catastrophe and Impoverishment in Paying for Health Care: with Applications to Vietnam 1993-98 » Health Economics 12:921-934  Xu, K. et al. (2006): Understanding the impact of eliminating user fees: Utilization and catastrophic health expenditures in Uganda. Social Science & Medicine. V62(4):866-876  Xu, K. et al.(2007). Protecting Households From Catastrophic Health Spending. Health Affairs, 26, no.4 (2007): 972-983.  Xu, K. et al. (2005): Designing health financing systems to reduce catastrophic health expenditure. Technical Briefs for Policy-Makers No.2. World Health Organization. Country case studies