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Zoltán Kaló Professor of Health Economics
Role of private health insurance in transition of health care systems to universal coverage Zoltán Kaló Professor of Health Economics 8 March 2016 Cairo, Egypt
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Agenda International trends of health care financing
Role of Social Health Insurance and Private Health Insurance in fulfilling health system objectives Relationship between SHI and PHI Purchasing health care services by PHI: pros and cons of different models
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Before going into details - two key points
Determine your values and objectives for your health care system establish your system based on these values and your own culture monitor system performance them accordingly Do not copy directly other health care systems some international consultants recommend that you should do what they or their countries did in the past their past recommendations were not based on your culture and values and you do not know whether their past recommendations were successful or not
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Health system and health system goals Source: Kutzin J
Health system and health system goals Source: Kutzin J. Health financing policy: a guide for decision-makers Health Financing Policy Paper, WHO 2008 Intermediate objectives of health finance policy Health system goals Health system functions Stewardship Health financing system Revenue collection Pooling Purchasing Resource generation Service delivery Quality Equity in utilization and resource distribution Efficiency Transparency and accountability Health gain Equity in health Financial protection finance Responsiveness
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Health system objectives
Health gain Equity in health Equity in finance Responsiveness Sustainability of health care financing Efficiency of health care delivery Financial protection of households Response to public needs Response to limited resources
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International trends of health care financing
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In the long-term health care expenditure grows faster than GDP in the majority of countries
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Driving forces of growing health care expenditure
GDP growth – increased wealth Aging Increased health insurance coverage increased access New diseases (e.g. AIDS, HCV) and disease structure (diabetes) Improved health technologies Increased health care personnel and infrastructure Health care specific inflation above average
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Problems with dominantly privately funded health care systems
Inequity High proportion of population has no insurance coverage Limited responsiveness to needs of lower socioeconomic classes Limited financial protection for households (i.e. out-of- pocket payments) Fragmented health care delivery (i.e. patient routes are managed only for small proportion of patients)
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Potential solution: Universal Coverage
Source: WHO
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Relevance for private health insurers in Egypt
Main political objective (government and international organizations): universal coverage implementation roadmap Finding role for private health insurance is only a secondary question Recommendation to private health insurers: involvement in designing roadmap for universal coverage
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"All inclusive" health insurance package
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Problems with dominantly publicly funded health care systems
Moral hazard of patients: overconsumption and reduced individual responsibility Moral hazard of providers: supplier induced demand + payment maximisation Monopolies: reduced efficiency
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How to reduce moral hazard?
price (P) D0% Preimb Pcopay Popt S Qopt Qcopay Qreimb quantity (Q) Increase price sensitivity of patients
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Relevance for private health insurers in Egypt
Private financing has an increasing role in dominantly publicly funded health care system When universal coverage is implemented, private health insurance may remain important element of health care funding Recommendation to private health insurers: find your role
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Convergence of different systems
100% Dominantly publicly funded 50% Dominantly privately funded 1970 2015
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Public health insurance: support of health system objectives
Health gain Equity in health Equity in finance Responsiveness Sustainability of health care financing Efficiency of health care delivery Financial protection of households Response to public needs Response to limited resources
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Private health insurance: support of health system objectives
Health gain Equity in health Equity in finance Responsiveness Sustainability of health care financing Efficiency of health care delivery Financial protection of households Response to public needs Response to limited resources
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Major Challenges of Universal Health Coverage Implementation (1): Fund Raising
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GDP and Health Care Expenditure (GDP%)
1-5% 5-9% 8-17% Source: WHO HFA 2010
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System of health care financing
Regulation Compulsory insurance/ National health service Households Health care providers Out-of-pocket payment Health care Taxes and contributions Voluntary insurance Fund raising Risks pooling Purchasing Insurance premium Health system goals Health-gain and reducing inequalities Equity in and sustainability of finance Responsiveness Instrumental goals Efficiency Quality Equity in access to care
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Relationship between resources, expenditure and income
resources = expenditure = income of providers T + C + R = S x P x Q = W x Z T = taxes R = insurance fees C = out-of-pocket payments S = scope of health services Q = volume of health services P = prices of services Z = volume of inputs (human and physical resources) W = prices of inputs
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Funding universal coverage
tax personal income tax corporate tax value added tax tax on unhealthy product insurance premium based on community rating capped premium opt-out (separated) – requires stability of the political system and economy role of private insurance supplementary complementary
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Current health spending in Egypt
5.1% of GDP (2013) reasonable moderate increase can be expected after economy recovers 41% public expenditure / total health expenditure has to be increased requires tax/premium increase High rate of direct (out-of-pocket) expenditure financial protection of families is limited patient compliance & persistence with chronic therapies is poor potential solution: extension of private insurance to direct payments
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Fund raising: policy options
Immediate significant increase of health care spending from public sources (e.g. considering external sources, IMF, etc.) Reduction of private health insurance and redistribution to public health insurance Gradual increase of health care spending (i.e. taxation on harmful products, economic growth) Mandating private health insurance plans for employers of large companies Reduction the scope of public health insurance services to increase the number of insured population No reimbursement of expensive technologies for a period
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Major Challenges of Universal Health Coverage Implementation (2): Definition of Insurance Package
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Service package for patients with insurance: 1) list of services and 2) conditions of access
Source: WHO
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How to define the scope of technologies for universal coverage?
Vertical approach is used for budgeting Emergency care Primary care Specialty care (outpatient + inpatient) Pharmaceuticals Special medical devices / diagnostics
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How to define the scope of technologies for universal coverage?
Horizontal reimbursement list in different areas: Minimum package for vital areas: emergency care, maternal health, pediatrics, infectious diseases Essential package for most common diseases: diabetes, cardiovascular, (hepatitis C in Egypt) Specialty disease areas: oncology Services and technologies to improve equity: rare diseases
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Insurance packages in universal coverage
Public health insurance Minimum package Emergency care, basic public health services Population coverage: all citizens Restriction: no copayment and waiting list Essential package I. Common diseases Population coverage: all patients with insurance Restrictions: copayment, waiting list, second-line, low quality Essential package II. Specialty diseases with public health priority Population coverage: all patients with insurance Restrictions: coverage only for subgroup, copayment, waiting list, second-line, low quality Equity package Rare diseases, positive discrimination Population: selected patients with insurance Restrictions: strict diagnostic criteria, monitoring Non-reimbursed services
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Role of private insurance
Packages Public health insurance Private health insurance Minimum package Population: all citizens Restriction: no copayment and waiting list Essential package I. Population: all patients with insurance Restrictions: copayment, waiting list, second-line, low quality, no choice Supplementary: copayment, choice Complementary: immediate access, better quality Essential package II. Population: all patients with insurance Restrictions: coverage only for subgroup, copayment, waiting list, second-line Supplementary: copayment, choice for patients Complementary: immediate access Equity package Population: selected patients with insurance Restrictions: strict diagnostic criteria, monitoring Complementary: coverage for patients with no access Non-reimbursed services Complementary: coverage for non-covered services
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Supplementary vs. complementary
Mixed payment (public for basic service + private for extras): supplementary Full private payment for a service also covered by public health insurance: ??? Full private payment for a service not covered by public health insurance: complementary
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Role of private health insurance
If public health insurance covers only basic services with low quality, no choice for patients and/or implemented with significant copayment supplementary role for extra services and coverage for out-of-pocket payments covers only low quality infrastructure, limits the scope of services, or the volume is limited (i.e. waiting list) complimentary role for immediate access, high-quality infrastructure, coverage of non-reimbursed health services allows opt-out for high-income citizens private health insurance coverage mandating private health insurance plans for employers of large companies
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Another major question
Universal health coverage requires investment into information technology systems How to standardize and link IT systems of public and private health insurance to inform policymakers about health outcomes, resource utilization, costs, etc? Private insurance needs data for risk-adjustment, pricing, etc.
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Purchasing health care services by private health insurance: pros and cons of different models
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Starting point When universal health coverage is implemented, the operational model for current private health insurance has to be adjusted Major questions: Control of overspending Relationship of purchasers and providers Pricing of health services and technologies
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Control of overspending
Option 1 (mainly in developing countries): Experience rating based on age, gender Capped annual payment: no access to high cost therapies and services pooling risks is not so important Option 2 (mainly in developed countries): Experience rating based on thorough medial check-up No annual cap pooling risks is essential Risk-adjustment based on expected costs database on resource utilization and costs Increased cost-sharing: deductible, copayment, coinsurance
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Relationship of payer - provider: indirect contracted integrated
payment (direct) patient (consumer) health care provider(s) health care service or technology reimbursement coverage insurance / claim health insurance premium) money transfer (tax, (fee for service or budget) money transfer third party payer Relationship of payer - provider: indirect contracted integrated
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Indirect model for private health insurance
reimbursement Private health Insurance funds experience rating Primary health care provider Patient (consumer) Specialty health care provider service financial flow referral
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Contractual model for private health insurance
insurance funds experience rating Primary health care provider Patient (consumer) contract payment Specialty health care provider service financial flow referral
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How to reduce moral hazard
How to reduce moral hazard? Risk-sharing in purchasing health care services Risks borne by purchasers Fee for service Prospective payment (e.g. DRG) Hospital day Adjusted capitation Global budget Risks borne by providers Capitation
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Integrated model for private health insurance
insurance funds experience rating Primary health care provider Patient (consumer) salary or budget owned by insurance funds Specialty health care provider service financial flow referral
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Global trend: increasing role of managed care
integrated care health care purchasing by physicians (e.g. GP fundholders) health care provision by payers (e.g. Health Maintenance Organisations) management of patient routes treatment guidelines and financing protocols develop evidence based guidelines and protocols monitor the compliance of providers / patients with protocols
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Pricing of technologies and services
Service prices are higher for private health insurance compared to public health insurance due to higher quality, faster access, etc. What about prices of pharmaceuticals?
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Differential pricing system of pharmaceuticals
Higher registered list price referenced by other more affluent countries (external price referencing) applicable for patients with private health insurance Special access program may provide the medications at lower prices for poorer people with no private health insurance confidential price reduction of rebate payback system Condition: no leakage of patients from private to public health insurance
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Summary Implementation of universal health coverage is the primary objective Need for private health insurance will remain, so PHI should participate to explore its role Operational model for private health insurance has to adjusted / improved
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