1. By Hatim Jaber MD MPH JBCM PhD 5+7 -03- 2018
Faculty of Medicine Health Economics and Policies ( ) Financing health care. Economic in Health Policy -Cost and price. By
Hatim Jaber
MD MPH JBCM PhD

2. Course Content
Week 1 Introduction to Course introduction to Health: health value, health determinants.
Week 2 Introduction to: Health care management Health Policy and Healthcare Delivery.
Week 3 The scope of Economics and Health Economics .
Week 4 Demand and Supply Demand for Medical Care. Supply of public health . 
Week 5 The Market for Health Insurance.
Week 6 Financing health care. Economic in Health Policy-Cost and price.
Week 7 Health systems performance analysis. Measurement and evaluation in health care.
Week Midterm assessment (Exams.)
Week Public Goods, Market Failures, and Cost-Benefit Analysis.
Week Economic evaluation . Economics and efficiency cost analysis and cost effectiveness.
Week 11 Economic effects of Bad habits including smoking and alcohol consumption
Week 12 Quality Improvements in healthcare delivery Methods to improve health care delivery.
Week 13 Human resources in Healthcare delivery.
Week 14 Health Markets and Regulation and Economic regulation of health markets.
Week Final assessment (Exams.)

3. Week 6
Essential models for health care financing: Health status , Fairness in financing and Responsiveness
The Budget: Forms and Process..
Discuss how economists versus health professionals think about trade-offs in health.
Resource mobilization
Pooling of financial resources for health
Purchasing services
Language of Finance: Cost, Price, Revenue,
Definition of Cost, Types of costs . Expenditures, and running costs
Expenditures, and Reimbursement
What are the different approaches to costing?
What local, provincial and national databases containing costing data are available?
When does price affect utilization of medical care?

4. Presentation outline 5-3-2018
Time
Health policy and financing policy
Financial administration
08:00 to 08:20
Health care financing
08:20 to 08:30
Goals and methods of health care financing
08:30 to 08:40
Basic functions of a health financing system
08:40 to 08:50

6. Health policy and financing policy
Health policy and financing policy are inseparable because financing policy determines:
who has access to basic health care
how much is available,
who controls the funds and
how they are used;
- the technical,
- allocative and distributive efficiency of resource in use,
- social protection,
- what financial incentives are given to patients and providers and whether health care cost inflation can be controlled

7. Why should doctors be concerned with health care financing
Why should doctors be concerned with health care financing? Rising health care costs in all nations leading to: Government cost control measures e.g. regulation of prices Insurance company scrutiny of actions of doctors Loss of clinical autonomy for doctors e.g. doctors cannot prescribe expensive drugs or order expensive procedures without getting permission from other parties first.

8. Financial administration
Financial administration consists of a series activities were funds are made available for certain people in the organization under procedures that will ensure their efficient use.
The main activities are:
Budgeting
Accounting
Auditing
Purchasing

9. Budgeting: Accounting:
It is the allocation of financial resources in support for programs or projects for a special period of time. A budget is defined as “a balanced estimate of expenditures and receipts for a given period of time”.
Accounting:
“It is recording assembly and summarization of financial effects of executive action, harmonious relationship between budget and account is important to current comparisons, between goals set in and accomplishment.

10. Auditing:
“It is the investigation and report on the fidelity and legality of all financial transactions”.
Purchasing: “It is the acquisition of the property and materials needed in administration”.

11. Definition of health care financing
mobilization of funds for health care
allocation of funds to the regions and population groups and for specific types of health care mechanisms for paying health care
(Hsaio, W and Liu, Y, 2001)

12. The financing of health care systems consists of a range of instruments to achieve certain goals:
- improve the health of the majority
- allow health care production adapted to needs
- further equity in funding and access to health care
- improve quality
- control costs
- contribute to the allocative and technical efficiency of the system

13. Financing – the national health objectives:
National health policies focus on :
improving the population’s health and
Preventing diseases and health hazards
So that their entire population :
can aspire to a healthy and happy life and
thus productively, contributing to the development of the country and its economy.

14. Health financing policies should have the ability to:
improve health outcomes,
provide financial protection, and
ensure consumer satisfaction – in a equitable, efficient, and financially sustainable manner.
provide policy-makers at global and country levels with the tools by providing an overview of health financing policy in developing countries.

15. The scope of objectives of the national health system is eventually limited by the extent to which they are affordable
Scarce national resources need to be optimized and rationalized.
Depending on the choice of financing mechanisms and sources, the achievement of national health objectives will be more or less independent of national budget constraints.

16. Affordability   
The extent to which something is affordable, as measured by its cost relative to the amount that the purchaser is able to pay.
Affordability needs to be assessed also in relation to the :
contributory capacity of individuals, employers and other public programs, such as social insurance schemes.
In the end, politicians must determine priority areas of the national health system at the expense of others.

17. The achievement of national health objectives is eventually achieved through :
the selection of an adequate method of financing
the choice of an effective and efficient organizational delivery structure for health services and
payment approach for health providers.
the regulatory framework and programs of public education.

18. 1. Access to health care when people need it. Need driven use of care.
Promotion of universal coverage through rational use of financing mechanisms
Most national health systems state their priority to the achievement of universal health coverage through a better use of available health financing mechanisms.
Universal coverage
Universal coverage is the core objective of a social solidarity health care system. It means:
 1. Access to health care when people need it. Need driven use of care.
2. Availability at affordable cost: equity in access.
3. Financial household's contributions are on the basis of ability to pay or equity  in financing
4. Such system will lead to equity in health

19. Health Care Financing Health financing involves collecting revenue
pooling resources
purchasing goods and services

20. Three basic functions of a health financing system :
Revenue collection : Financial contributions to the health system have to be collected equitably and efficiently.
Pooling : Contributions are pooled so that the costs of health care are shared by all and not borne by individuals at the time they fall ill. This requires a certain level of solidarity in the society.
Purchasing : The contributions are used to buy or provide appropriate and effective health interventions.

21. Health financing functions
Revenues collection : is the way health systems raise money from households, businesses and external sources.
Pooling deals with the accumulation and management of revenues and its defined patients population and geographic location to which revenues and expenses are determined.
Purchasing refers to the mechanisms used to secure services from public and private providers and it refers to the many arrangements for buyers health care services to pay health care providers.

22. Financing Systems Different financing methods available
and organization of the financing systems
Financing Systems
External financing
“Aid”
Internal financing
Public systems of health services
Social insurance systems (illness)
Unified System
Fragmented System
User
payments
For-profit or
Non-profit private insurance
Medical savings voluntary
or compulsory
Social contributions employers employees
Methods of public financing
Methods of private financing

23. The method of financing consists of the way in which financial resources are mobilized and how they are utilized.
It relates to different factors including:
· the approach to mobilize financial resources;
· the institutional and organization delivery structure;
· the allocation of resources;
· the remuneration (Mechanisms for paying) and incentive method for health providers;

24. The main methods of financing for health care include :
The national health insurance system,
General revenue,
Private insurance,
Community-based insurance and
Out-of-pocket payments.

25. Health Financing System Models:
National health service (compulsory universal coverage)
Social insurance
Private insurance (employer-based or individual purchase of private health insurance and private ownership of health sector inputs )

26. National Health Service
Main revenue type:
General taxes
Pooling: National pool
Purchasing:
United Kingdom Canada
New Zealand Australia
Italy
National or regional direct
purchase of services

27. Social Health Insurance
Main revenue type: Payroll tax
Pooling:
Pools by job or income
Purchasing:
France
Germany
Japan
Collective and selective contracts

28. Private Health Insurance
Main revenue type:
Individual & employer payments
Pooling:
Privately managed pools
Purchasing:
Selective contracts
United States Greece Singapore

29. Health service financing source
Health services financed broadly through
private expenditure or
public expenditure or external aid
Public expenditure includes all expenditure on health services :
central and local government funds.
where services are paid for by taxes.
Voluntary payments by individuals or employers are private expenditure.
External sources refer to the external aid which comes through:
aid program i.e. USAID
international non governmental organizations

30. Depending on the choice of method used to finance health services, the type of organization for health services through :
public,
private or
Both

31. The choice of method will impact on :
who bears the financial burden,
the amount of resources available and
who manages the allocation of resources.
Experience has shown that, without strategic policies and focused spending mechanisms , the poor and other ordinary people are likely to left without care.
The mobilization of resources through general revenue requires that the target group to which resources are allocated and health expenditure incurred be the entire population, in principle.

32. Various options and mechanisms for financing the health care services How do we pay for health care? 1. Out-of-pocket i.e. patient and family pays 2. Employer pays e.g. employer reimburses the employee who sees the doctor 3. Private insurance scheme 4. Charity or PVOs (private voluntary organizations) 5. Government i.e. through money raised from taxes (Britain’s National Health Service) or through a National Health Insurance scheme (South Korea and Taiwan) 6. Medical Savings Accounts (Singapore’s Medisave) the most traditional way of financing health care finance a major portion of the health care (especially in low income countries) 7. Foreign aid (important in poor countries)

33. General revenue or earmarked taxes
the most traditional way of financing health care
finance a major portion of the health care (especially in low income countries)
Social insurance
It is compulsory. Everyone in the eligible group must enroll and pay a specific premium contribution in exchange for a set of benefits.
Social insurance premiums and benefits are described in social compacts established through legislation. Premiums or benefits can be altered only through a formal political process

34. Community based financing
Refers to schemes are based on three principles:
-community cooperation,
-local self reliance and
-pre payment
Factors for success of community financing
Technical strength and institutional capacity of the local group
Financial control as part of the broader strategy in local management and control of health care services
Support received from outside organizations and individuals
Links with other local organizations
Diversity of funding
Responding to other (non health) development needs of the community
Ability to adapt to a changing environment

35. Changing government role in health care
Health is considered a public good
Government needs to actively participate to avoid market failures

36. equity in financing, Equity takes place at different levels:
equity in access to health care,
equal level of health status and
equity in terms of risk protection offered.

37. Conclusion Role of health economists must be recognized
Health financing cannot be dealt separately as it has got to do with good governance, economic growth, education
Social inclusion and financial protection seems to be provided through community based financing

38. Presentation outline 7-3-2018
Time
Cost and price
Outcomes
08:00 to 08:20
How to control costs?
08:20 to 08:30
Health Financing System Models
08:30 to 08:40
Health Financing in Jordan?????
08:40 to 08:50

39. What is Health Economics (HE)?
Compares the costs and consequences (outcomes) of medical interventions or health programs.
linking investments in health to economic
development.
Healthy People: healthy economy

40. What is Health Economics (HE)?
Inputs
Costs
Outcomes
Health
Care

41. Costs can be described in many ways
Cost / unit (cost/tab, cost/vial)
Cost / treatment
Cost / person
Cost / person / year
Cost / case prevented
Cost / life saved
Cost / DALY (disability-adjusted life year)

42. Costs
Direct costs: costs to deliver services to patient; both medical and non- medical
Indirect costs: cost of treatment to patient or society
Intangible costs: quality of life

43. Outcomes Both positive and negative outcomes should be addressed
Positive outcomes: drug’s efficacy measure, cure of disease, disease prevention,QALY,…….
Negative outcomes: treatment failure, nosocomial infection, malpractice….

44. Health care costs and Health outcomes
Initially, as health care resources increase, these outcomes improve,
but above a certain level, the slope of the curve diminishes, signifying that increasing investments in health care yield more marginal benefits.

45. Health care costs and Health outcomes
A small investment of resources to create more sanitary water supplies and to administer inexpensive hydration therapy yielded dramatic improvements in health.
On the other hand, Large investments of resources in new technologies may produce more marginal and difficult - to - measure improvements in the overall health of a population.
5/2/2014 Dr. Musa Ajluni 17

46. The Importance of Price
To the seller... Price is revenue
and profit source
What is Price?
To the consumer... Price is the cost of something
In the broadest sense, price allocates resources in a free-market economy

47. The Importance of Price to Marketing Managers
Revenue
The price charged to customers multiplied by the number of units sold.
Profit
Revenue minus expenses

48. The Importance of Price
Revenue = Unit Price  Number of units sold
Revenue pays for every activity.
What’s left over is Profit.
Marketers must select a price
that is not too high
or not too low,
a price that equals
the perceived value to target consumers

49. Trends Influencing Price Setting
in the
Market
High rate of
new product introduction
Increased availability of
bargain-priced dealer and
generic brands
Price cutting as a strategy to maintain or regain
market share
More efficient and better
informed buyers

50. Decision Making Higher Cost Lower Cost Higher Effectiveness ? Yes
Lower Effectiveness No

51. Reasons for rising costs 1. New technology e. g
Reasons for rising costs 1. New technology e.g. MRI, organ transplants, renal dialysis, patented drugs to treat HIV/AIDS 2. Population ageing 3. Epidemiological transition 4. Medicalisation of social problems 5. Rising expectations of the public e.g. expect better “hotel services” in hospitals 6. Systems of health care financing without proper cost control mechanisms 7. Unwise spending by government e.g. building more and more hospitals 8. Inefficient privatisation e.g. privatisation of Government Medical Store
How to control costs?

52. How to control costs. New Technology 1
How to control costs? New Technology 1. Control import and introduction of new technology e.g. technology assessment law and “certificate of need” law 2. Get doctors to practise medicine more cost-effectively e.g. prescribe generic drugs, do not order expensive lab tests unnecessarily 3. Better planning and utilisation of facilities e.g. whole of Jordan has fewer MRI machines than the Amman region! Reduce the number of machines but utilize them more fully.

53. How to control costs?
Population Ageing 1. Promote healthy lifestyles among the young as well as the old 2. Alternative ways of caring for the aged e.g. care at home rather than in institutions if possible 3. Place aged in long term care facilities rather than hospitalize them 4. Avoid “heroic medicine” if patient is a terminal case

54. How to control costs. Epidemiological Transition 1
How to control costs? Epidemiological Transition 1. Prevention and health promotion at the individual level 2. Spend more on environmental health and occupational health programs 3. Better regulation of food industry (including the fast food industry and the processed food industry)

55. How to control costs? Medicalisation of Social Problems Non-medical programs to tackle social problems such as smoking and drug/alcohol abuse e.g. ban cigarette advertising, heavy taxes on tobacco and alcohol products

56. How to control costs. Rising expectations 1
How to control costs? Rising expectations 1. In government hospitals, do not provide unnecessary “hotel services” 2. Patients should be made to pay more if they want better “hotel services” 3. For chronic conditions, teach patients and their families better self-care so as to avoid expensive complications (teach patients that not all diseases can be cured) 4. Insurance companies should not pay for newer drugs and medical procedures i.e. those that have not been subjected to rigorous clinical trials

57. How to control costs? Financing schemes without proper cost control mechanisms 1. Pay doctors and other health care providers through capitation, salaries or negotiated fees. 2. Lessen “fee-for-service” payments to reduce “supplier-induced demand” 3. Utilization reviews to identify high cost doctors and hospitals 4. More cost-sharing by patients e.g. co-payments, deductibles and co-insurance (to reduce unnecessary care-seeking, to promote more appropriate care-seeking)

58. How to control costs. Unwise spending by the government 1
How to control costs? Unwise spending by the government 1. Spend more on prevention and health promotion e.g. spend more on prenatal care rather than on neonatal intensive care 2. Reduce hospitalization rates (i.e. wherever possible, treat on an outpatient basis) and have quicker discharges of hospitalized patients 3. Utilize lower cost health personnel to treat routine medical problems e.g. use nurse practitioners, medical assistants to do routine physical examinations & treat simple cases 4. Don’t build so many hospitals

59. How to control costs. Inefficient privatization 1
How to control costs? Inefficient privatization 1. Privatize only if this will increase competition and result in greater efficiency (lower prices, better service quality, better access) 2. Better laws and better enforcement of existing laws regulating the private sector e.g. one (controversial) proposal would be to allow doctors and hospitals to advertise and inform the public about their charges for various procedures 3. Where privatization is failing, the government should take over from the private sector

60. Health Financing in Jordan
5/2/2014

61. Health Care Global Spending on Healthcare(2010)
(US$ 6.5 trillion)
Developing Countries Share
15%
USA
45%
55%
85%
developed Countries
Developed Countries Share
%16 of Global Population Live in Developed Countries

63. 5/2/2014 Dr. Musa Ajluni 46
Source;WHO,NHA

64. Jordan Health Expenditures by Sector,2009
(1610 millions JD)
Donors 4%
Private 30%
(1610 millions JD)
Public
Private Donors
Public 66%
5/2/2014

65. Areas of Health Expenditure in Jordan
Management 2%
Human Resources Development 1%
Primary Health Care 19%
Secondary Health Care 78%
5/2/2014

66. 16.2
9.8 10
9.5
7.6
5.8
USA
OECD
JOR
TUR EGY
5/2/2014

67. Public Insurance Schemes in Jordan
Civil Insurance Program (CIP)
The monthly premium for civil service employees is 3% of their monthly salaries, up to a cap of 30 JD
Features of the CIP include:
Coverage of dependents, whether the beneficiary is a male or a female
No limits on coverage
Comprehensive coverage of all medical services, including dental
Patients with medical conditions not treatable within the MoH facilities (e.g., complicated heart surgery) are transferred to other facilities (e.g., private sector) free of charge
Insured individuals have to pay 5% of the price of their medications, with a price ceiling of JD 10
Beneficiaries of the MoH health insurance scheme can seek treatment at private sector hospitals, but need to contribute 10%-30% of treatment fee
(55%)
Royal Medical Services (RMS)
Military personnel pay a monthly flat fee ranging from 2-4 JD, depending on their rank
RMS facilities services are viewed as best-in-class in Jordan 51
Source: Jordan National Agenda

68. Health Finance Challenges, Jordan
A large portion Jordanians remain not
covered by any medical insurance
Health spending in Jordan is high when compared to other MENA and middle- income countries.
The public sector spends too much on secondary health care, potentially due to insufficient primary health care management and facilities 52

69. Health Finance Challenges, Jordan(cont.)
The increasing demands and expectations of the public for effective and accessible health care.
The rapid advances in technology and rising
health care costs.
Duplication in the delivery of service and
multiple insurance
High percentage of expenditures on drugs 53

70. The public budget funds most of the cost incurred by MoH facilities with little contribution from the insured
MoH Budget – By Source of Financing
Donors
13%
Contributions
and User Fees
18%
69%
Ministry of Finance 54

71. The increasingly aging Jordan population is expected
to further strain government budget over the next decade
Population Breakdown by Age (In Million)
(2005 / 2020)
100% 100%
Government Health Care Expenditure (In JD Million)
(2004 / 2020)
CAGR ( ) 4% 5%
65+ 5%
913
16%
26% %
x 2.6
36%
35%
20-39 2%
350
45% 0%
33%
0-19
2005
2020F
2005
2020F
Source: Jordan National Agenda 55

72. Proposed Intervention to Improve Healthcare Financing and Improve Efficiency
Fair distribution of funds allocated to primary, secondary and tertiary health care systems.
Adopt a unified procurement system.
Avoid duplication in the delivery of service and multiple insurance and exemption through establishing an independent health insurance commission.
Coordinate the purchase of medical equipment (strategic Purchasing). 56

73. Proposed Intervention to Improve Healthcare Financing and Improve Efficiency (cont.)
Promote partnership with the private sector in order to save on future capital expenditure while taking advantage of the private sector’s low occupancy rates.
Introduce “Certificate of Need” as a mechanism to contain costs.
Undertaking a comprehensive study to establish an effective referral system for the individual public programs as well as across programs. 57

74. Proposed Intervention to Improve Healthcare Financing and Improve Efficiency (cont.)
Proper Health Services Planning and Management
Institutionalizing Quality Assurance Programs
Introducing Cost Accounting and Cost Effectiveness
Analysis
Introduce prospective payment methods, to reimburse healthcare providers
Introducing Co-payment Mechanisms
Rational Use of Drugs 58