Health-Fi Nancing Reforms in Southeast Asia

7/28/2019 Health-Fi Nancing Reforms in Southeast Asia

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Lancet 2011; 377: 86373

Published Online

January 25, 2011

DOI:10.1016/S0140-

6736(10)61890-9

See Comment page 792

See CommentLancet 2011;

377: 355, 534, 619, and 700

See Online/Comment

DOI:10.1016/S0140-

6736(10)62140-X

This is the sixth in a Series of

six papers about health in

southeast Asia

International Health Policy

Program, Ministry of Public

Health, Nonthaburi, Thailan

(V Tangcharoensathien PhD,

W Patcharanarumol PhD);

Siem Reap Provincial Health

Department, Ministry of

Health, Siem Reap, Cambodi(P Ir MPH); United Nations

University, Kuala Lumpur,

Malaysia (Prof S M Aljunid Ph

Gadjah Mada University,

Health in Southeast Asia 6

Health-financing reforms in southeast Asia: challenges in

achieving universal coverage

Viroj Tangcharoensathien, Walaiporn Patcharanarumol, Por Ir, Syed Mohamed Aljunid, Ali Ghufron Mukti, Kongsap Akkhavong, Eduardo Banzon,

Dang Boi Huong, Hasbullah Thabrany, Anne Mills

In this sixth paper of the Series, we review health-financing reforms in seven countries in southeast Asia that havesought to reduce dependence on out-of-pocket payments, increase pooled health finance, and expand service use assteps towards universal coverage. Laos and Cambodia, both resource-poor countries, have mostly relied on donor-supported health equity funds to reach the poor, and reliable funding and appropriate identification of the eligiblepoor are two major challenges for nationwide expansion. For Thailand, the Philippines, Indonesia, and Vietnam,

social health insurance financed by payroll tax is commonly used for formal sector employees (excluding Malaysia),with varying outcomes in terms of financial protection. Alternative payment methods have different implications forprovider behaviour and financial protection. Two alternative approaches for financial protection of the non-pooroutside the formal sector have emergedcontributory arrangements and tax-financed schemeswith differentabilities to achieve high population coverage rapidly. Fiscal space and mobilisation of payroll contributions are bothimportant in accelerating financial protection. Expanding coverage of good-quality services and ensuring adequatehuman resources are also important to achieve universal coverage. As health-financing reform is complex, institutionalcapacity to generate evidence and inform policy is essential and should be strengthened.

IntroductionThe large amount of household out-of-pocket paymentsfor medical bills, resulting in household financialdisruption and impoverishment, was a key motive for

the adoption of a World Health Assembly Resolutionin 2005 on financial protection.1 Countries in southeastAsia, home to 87% of the worlds population and thathave a fast economic growth and a moderate povertylevel of 146%,2 have a high potential to accelerateprotection from financial risks and achieve universalcoverage of health care.

Universal coverage is defined as securing access by allcitizens to appropriate promotive, preventive, curative,and rehabilitative services at an affordable cost.3Prospects of progress towards this aspiration seem poor,4

particularly for countries whose government fiscalcapacity is low and whose social health insurance for theemployed sector is absent or very small, thus restrictingthe mobilisation of additional resources from payroll

contributions. Financing health care in most developingcountries greatly relies on out-of-pocket payments,5 withmost donors and global health initiatives such as theGlobal Fund focusing on specific diseases or interventionsrather than the broader health system.

Key messages

The development of a universal health coverage policy is guided by explicit consideration

of how best to cover and finance specific population groups: those in formal employment

the poor and vulnerable, and the informal sector and the rest of the population.

Those in formal employment can be given financial protection through

payroll-financed social health insurance or tax-funded arrangements.

The poor and vulnerable are accepted to need highly subsidised arrangements by general

budget, and there is good evidence from Laos and Cambodia that demand-side targeted

approaches such as health equity funds work better than a simple fee exemptions policy.

The informal sector and the rest of the population remain a challenge, with countries

such as the Philippines and Vietnam seeking to expand coverage through contributory

arrangements, and others such as Thailand using tax funding.

In addition to extension of population coverage, efforts should be given to provide

adequate financial risk protection and to design an appropriate mix of provider

payment methods that can affect physicians clinical practices towards rational use of

medical technologies, effi ciency, and long-term affordability.

Expanding coverage of good-quality services and ensuring adequate human resources

are equally important elements of achieving universal health coverage.

Comparative analysis such as that presented in this paper is helpful in bringing diverse

experiences from the southeast Asia region together to learn lessons and develop a

culture of evidence in decision making.

Search strategy and selection criteria

A common protocol was developed by VT and WP and agreed

upon by country authors. The protocol included country

health financing background, analysis of the government

efforts in coverage extension to the poor, those in formal

employment, and the informal sector. The analysis covered

source of revenue, pooling, service coverage, level of financial

risk protection, and the government policy towards universal

coverage. In producing each country report, authors

reviewed and synthesised the published literatures and other

government unpublished documents, such as the Philippine

health insurance corporation annual reports, the government

statistics year book in Vietnam, International Labour Offi ce

statistics, and Laos Health Financing Strategies 201115.

VT and WP then compiled and synthesised the final

references on the reports from the country authors.


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Yogyakarta, Indonesia

(Prof A G Mukti PhD); National

Institute of Public Health,

Ministry of Health, Vientiane,

Laos (K Akkhavong MPH); World

Bank, Manila, Philippines

(E Banzon MD); Vietnam Health

Economic Association, Hanoi,

Vietnam (D B Huong MSc);

University of Indonesia,

West Java, Indonesia

(Prof H Thabrany PhD); and

London School of Hygiene and

Tropical Medicine, London, UK

(Prof A Mills PhD)

Correspondence to:

Dr Viroj Tangcharoensathien,

International Health Policy

Program, Ministry of PublicHealth, Tiwanon Road,

Nonthaburi 11000, Thailand

[email protected]

Countries with a high share of out-of-pocket payments

are more likely to have a high proportion of householdsfacing catastrophic health expendituredefined asspending more than 40% of household consumptionexpenditure, excluding food, on health, more than25% of non-food consumption expenditure ofhouseholds on health, or more than 10% of totalhousehold consumption expenditure on health.6 A1% increase in the proportion of out-of-pocket paymentsin total health expenditure is associated with a22% increase in the proportion of households facingcatastrophic health payments. The larger the share ofprepayment in health-care financing, the smaller theproportion of households that face catastrophic healthspending.7 However, there is no strong evidence that

countries with social health insurance offer better orworse protection than do countries that rely on generaltaxation.8 Nevertheless, the existence of prepaymentdoes not guarantee financial protectioninadequatefinancial protection has been reported from someprepayment schemes. For example, 15% of individualsenrolled in the insurance scheme of the Self-EmployedWomens Association in India faced a financiallycatastrophic level of payment even after reimburse-ment for hospital admission,9 and the Chinese RuralCooperative Medical System covers only 30% of in-patient expenditure.10

For universal coverage, progress on three general areasis needed: extension of population coverage of healthinsurance schemes or other forms of prepayment,specification of which types of services should beprovided and ensuring their availability and quality, andimproving financial risk protection (webappendix p 1).The breadth is population coverage by insuranceschemes, the depth means service coverage such asoutpatient, inpatient, and other high-cost services, andthe height is the level of financial protection such asco-payment. The smaller the co-payment by users and

the more comprehensive the service coverage, the higher

the protection against financial risk.We focus discussion on these three areas. The keydilemma in resource-poor settings is the choice betweenproviding a high level of service and financial protectionfor a small group of the population versus extending ahigh level of population coverage but with restrictedservices and financial protection.

In this paper, we assess approaches to financing health-care reform and progress towards universal coverage inseven low-income and middle-income countries in thesoutheast Asia region. Brunei and Singapore, two high-income countries, were excluded from this analysis, aswas Myanmar, for which there is little information onhealth financing. On the basis of documentary analysis,

we review achievements of the health-financing reformsof these countries and identify challenges with regardsto population coverage, service coverage, and financialprotection to share lessons and to inform the financing-reform efforts of countries outside this region.

Country backgroundSeven countries in southeast Asia with different levels ofeconomic development and pace of expansion of health-service coverage and financial protection were selected ascase studies: two low-income countries with low coverage(Laos and Cambodia), and five middle-income countries,three of which have more than 50% coverage and clearpolicies towards universal coverage (Indonesia, thePhilippines, and Vietnam), and two of which haveachieved universal coverage (Malaysia and Thailand).

Table 1 shows the wide variation in economic andpoverty indicators among these countries. Fiscal space,the governments ability to collect tax and to spend fundsfor desired purposes, measured as a share of the grossdomestic product, ranges from 82% in Cambodia to168% in Thailand (by contrast with an average of225% in high-income countries in 2007).11

Gross national income per

capita in 2008 (PPP$)*

GDP yearly growth (%)* Fiscal space: government

tax (% of GDP)*

Poverty incidence (% below

national poverty line)

Poverty headcount (%)

2000 2005 2008

Malaysia 13 740 89 53 46 166 (2003) 87 (2004) NA

Thailand 5990 48 46 26 168 (2007) 210 (2000)

85 (2007)

NA

Philippines 3900 60 50 38 143 (2006) 329 (2006) 226 (2006)

Indonesia 3830 49 57 61 123 (2004) 202 (2009) 294 (2007)

Vietnam 2700 68 84 61 130 (2007) 182 (2006)

135 (2008)

215 (2006)

Laos 2040 58 71 75 101 (2007) 320 (2002)

270 (2008)

NA

Cambodia 1820 88 133 52 82 (2006) 347 (2004) 258 (2007)

As data on poverty from national estimates in some countries are scarce and irregularly reported, some countries only have reports of poverty indicators from one year. GDP=gross domestic product.

PPP=purchasing power parity. NA=not available. *World Development Indicators database, April 2009.11 Fiscal space of Vietnam was analysed by the country author (DBH) on the basis of data from the General

Statistical Offi ce, Vietnam. Offi cial country sources. Worl d Development Indicat ors database (Aug 31, 2010). 11 Percentage of population living at or below PPP US$125 per day.12

Table 1: Economic and poverty backgrounds of seven countries in southeast Asia

See Online for webappendix


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The poverty incidence is not only suggestive of the

number of people who cannot afford to pay medicalcosts when they are sick, but also indicates the magnitudeof the health budget needed if governments decide tosubsidise the poor. This subsidy puts pressure on thefiscal space, and, in resource-poor countries such as Laosand Cambodia, funding from donors is inevitable tosupport access for the poor to health services, especiallyservices linked to the Millennium Development Goals.

Health-financing challengesLevel and profile of health expenditurePrivate health expenditure has a dominant role in financinghealth care in five of the seven countries, contributingmore than 70% of total spending on health in Laos and

Cambodia (table 2),13,14 although the level of catastrophichealth expenditure differs between these countries,consisting of 5% of households in Cambodia and 105% inVietnam.15 Less than 9% of the government budget isallocated to health in five of these seven countriesexceptions being Cambodia (because government fundingincludes donor support channelled through government)and Thailand (because loans from development banks andbilateral sources were combined with the governmentbudget, which need to be repaid). The high amount ofexternal resources from donors in Cambodia (164% oftotal health expenditure) and Laos (145%) not only raisesquestions about long-term sustainability but also about theextent to which donor-funded programmes are inaccordance with national priorities.16

Social health insurance financed by payroll tax rangesfrom none in Cambodia to 127% of total health expenditurein Vietnam (table 2). Malaysia, an upper middle-incomecountry with a high level of formal sector employment, hasyet to establish a social health insurance schemesuchspending is only 04% of total health expenditure. Despite

the well established schemes in Thailand, the Philippines,

and Vietnam, their spending was still below the lowermiddle-income country group average of 158% of totalhealth expenditure, indicative of a smaller population sizein the employed sector and a lower benefit package thanfor other lower middle-income countries. Total healthexpenditure per capita in three of the countries, Indonesia,Laos, and Cambodia, is below the minimum US$4954per capita17 estimated to be necessary to provide theinterventions and health-system platform necessary tomeet the Millennium Development Goals.

Population coverage by financial protection schemesThe best estimates of insurance coverage for the countrypopulations are categorised in webappendix p 2 into four

relevant groups for 2009, on the basis of survey or admin-istrative data. Because of the different pace of populationcoverage expansion, the total number of the insuredpopulation varies greatly, with low coverage in Laos andCambodia, medium coverage in Indonesia and Vietnam,and high coverage in Thailand and the Philippines.Malaysia is reported to have 100% coverage because of itstax-funded system (although high out-of-pocket paymentssuggest effective coverage is less than this level).

The high percentage of the uninsured population(webappendix p 2), combined with the high level of out-of-pocket payments, put the uninsured people at risk offinancial impoverishment or forfeiting necessary healthcare, resulting in disability or deaths at home. Socialhealth insurance coverage is low because of the smallsize of the formal sector.

Coverage and extension of financialrisk protectionThe two most commonly used formal financingapproaches are social health insurance for formal sector

THE

(% GDP)

GGHE

(% THE)*

Private health expenditure

(% of THE)*

GGHE (% government

expenditure)

External

(% of THE)

SHI (% THE) Out-of-pocket

(% THE)

THE (per

capita US$)

THE (per capita

PPP int$)

Malaysia 44 444 556 69 00 04 407 3072 6044

Thailand 37 732 268 131 03 71 192 1365 2857

Philippines 39 347 653 67 13 77 547 626 1302Indonesia 22 545 455 62 17 87 301 418 810

Vietnam 71 393 607 87 16 127 548 583 1827

Laos 40 189 811 37 145 23 617 269 839

Cambodia 59 290 710 112 164 00 601 368 1081

Low income 53 419 581 87 175 46 483 268 670

Lower middle income 43 424 576 79 10 158 521 802 1810

Upper middle income 64 552 448 94 02 210 309 4879 7570

High income 112 613 387 172 00 256 140 44052 41450

Global 97 596 404 154 02 246 177 8023 8625

Data from the World Health Statistics, 2010.13 In accordance with National Health Accounts conventions, external finance is included within government and private shares (which sum to 100%). Private health

expenditure includes out-of-pocket payments, private social insurance, and other private insurance. International dollars are used when comparing across countries. US dollars are used when looking specifically

in one country. THE=total health expenditure. GGHE=general government health expenditure. SHI=social health insurance. PPP=purchasing power parity. int$=international dollar. NA=not available.

Table 2: Key indicators of health financing in seven countries in southeast Asia in 2007


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employees and general tax finance for the poor and

vulnerable because these groups are generally acceptedto be the responsibility of the government. Given theseapproaches, the coverage of the informal sector is a majorchallenge, described as squeezing the middle at aconference in 2006,18 the middle layer referring to thenon-poor or to the not-so-poor informal sector, whereasthe top layer consists of formal sector employees and thebottom layer comprises the poor.

By social health insurance, we mean a payroll tax-financed scheme for employees in the public or privatesectors, in which a specific portion of an employees salaryis mandatorily deducted, with the employer alsocontributing an equal or higher portion. In some countries,the government also contributes. By contrast, tax-financed

schemes draw on general tax revenues and do not needpre-paid individual or household contributions.

The population groups are re-categorised inwebappendix p 3 to distinguish the economically act ive(formal and informal sectors) from the poor and therest of the population, and indicates their size. The restof the population consists of non-poor children andelderly dependants and other economically inactivegroups. The poor include children, elderly dependants,and the poor in the informal sector. Despite thecomplexity of potential overlapping populations acrossthese four broad groups, these categories are useful toinform policy on how health-financial protection foreach group should be financed and progress in coverageextension monitored.

Protecting the poor and vulnerableCambodia introduced a user-fee policy in 1996with theaim of improving the capacity of the health-care deliverysystem, as revenues were used to pay incentives to healthworkers, supplement the inadequate government budget,and resolve irregularities of budget disbursement.19However, user fees created a barrier for the poor in theabsence of an effective exemption system.19,20 Since thefirst pilot trial in 2000,the health equity fund, which ismostly financed by donors to compensate health facilitiesfor medical expenditures of the poor and to pay some

travelling costs, has been gradually expanded, coveringabout 68% of the poor population, or 23% of Cambodiastotal population, by 2008.21 Evidence suggests that thisfund has improved access of medical services for thepoor and potentially provided financial protection.Although there has not been a methodologically rigorousstudy assessing the effect of the health equity fund onhealth-care access and financial protection, several casestudies have indicated a substantial increase in hospitaluse by poor members of the fund, without a decrease inuse by self-paying patients. In most cases, the number ofbeneficiaries of the fund accounted for more than a thirdof total hospital inpatients.2224 However, the financialsustainability and government capacity to expand usingits own resources have been questioned.25

The 1995 user charge policy in Laos 26 made provision

for exempting the poor from payments, but this approachdid not work well as village leaders verified the poor onan ad-hoc basis. Free care for the poor was a mandatewith inadequate fundingapart from routine allocationsfor medicines and staff salary, there was no additionalbudget line for this purpose.27 Health centres andhospitals were reluctant to subsidise the poor using theirown revenue from user fees. A donor-funded healthequity fund piloted in 2003 has been expanded after anassessment reported an increased use of services by thepoor, and recent government policy dialogues havefavoured increasing funding for the poor.28

In response to the 1997 Asian economic crisis, whichheavily affected the poor,29 Indonesia introduced a tax-

financed targeted scheme for the poor and the near poor,including homeless people and orphans. Finance is fromcentral and district governments, and providers are paidon a case mix-adjusted basis for both outpatient andinpatient services. Nationwide expansion of the schemereached 334% of the total population by 2008, so almostall the poor and the near poor are covered. From hospitaladministrative records, use has increased for ambulatoryand inpatient care,30 and the gap in the use of services hasreduced between the rich and the poor. Because of fiscalconstraints, the per capita government subsidy is onlyUS$6 per year for a package of outpatient and inpatientservices (relative to a total health expenditure of $418 percapita), and so might result in a low level of serviceprovision and financial protection. Out-of-pocket paymentalso remains high.

Since October, 1997, the Philippine Health InsuranceCorporation (PhilHealth) has introduced a sponsoredprogramme for poor households that are identified andregistered by the local government. The premium forthis programme is subsidised by central (meancontribution 80%, range 5090%) and local (meancontribution 20%, range 1050%) governments. Yearlyenrolment has depended on local government politicalwill and fiscal capacity; for example, peaking duringelection years.

Between 1975 and 2002, Thailand operated a scheme

designed to reach the poor when universal coverage wasintroduced. Initially, partial to full exemption was left tothe discretion of health workers and, subsequently, ameans test (to verify whether an individual or family waseligible for government help) was used to identify the poor;this step was initially applied by health workers and laterby a local committee. Despite the community involvement,nepotism resulted in under-coverage of the poor, and thenon-poor linked to local politicians commonly benefited.31

A common trend has emerged across the countriesthat health services for the poor are subsidised by taxthrough budget allocations to public providers, withadditional support in Laos and Cambodia from donors tohealth equity funds. Historically, means testing to iden-tify the poor has not been very accurate,32,33 and this


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imprecision remains a challenge in the countries that

rely on it. Panel 1 compares the targeting experiences inthe Philippines, Laos, and Cambodia where lessons canbe drawn from the different approaches in identifyingthe poor in these three countries.

Protecting the formal employment sectorThailand, the Philippines, Indonesia, Vietnam, andLaos use mandatory social health insurance for theformal sector. This insurance is commonly managed bya non-profit independent body with a clear governingstructure, and services are purchased on behalf ofmembers. A percentage of the payroll is deducted fromemployees and an equal or higher contribution madeby employers, and some governments also contribute

as in Thailand.A social health insurance scheme can have a major

strategic purchasing role in regulating public andprivate provider behaviour and in achieving goals ofeffi ciency, quality, and financial protection. Differentprovider payment arrangements can have differenteffects on doctors clinical decisions and behaviour onresource use.34 International experience indicates that afee for service payment stimulates unnecessarydiagnosis, prescription, and treatment, resulting in costescalation; closed-end payment such as capitation andcase-based payment have lower costs. The effects ofcapitation and case-based payment are an increased useof generic medicines and an increased use ofproper diagnosis and treatment, resulting in costcontainment.

The design of PhilHealth does not provide adequatefinancial protection for its members. Outpatient servicesare not covered; inpatient care is reimbursed up to amaximum amount, leading to balance billing, whenpatients pay additional bills beyond the level ofreimbursement. The share of social health insurance intotal health expenditure was 11% in 200535 and hasdeclined to 85% in 2007,3638 indicative of increasinglyrestricted financial protection to members. PhilHealthfound that reimbursement was only slightly more than athird of the total medical bill paid by patients in 2008,39

and aims to improve financial protection of members.An increased incidence of catastrophic health spending(defined as >25% of non-food consumption expenditureof households) has been observed, from 211% of thetotal population in 2000 to 221% in 2003 and297 in 2006.40

Whereas the PhilHealth fee-for-service model ensuresfree choice of the patient for their provider, the Thaisocial health insurance scheme introduced in 1991 limitssuch choice through a capitation contract model.Members register yearly with preferred public or privatecontractors and, in return, contractors are paid acapitation fee, currently 1900 Baht (US$57) per member,to provide all outpatient and inpatient services. Balancebilling is illegal. The scheme covers private employees

onlytheir dependants fall under the universal coverage

scheme, and public employees and dependants fall undera separate, non-contributory scheme financed by generaltax. Panel 2 describes the experiences of resistance toreform in Malaysia.

The Thai capitation model ensures containment of costand transfers financial risk to providers, whereas fee-for-service transfers financial risk to PhilHealth membersthrough balance billing. The risk under capitation isinadequate services, so unit costs and rates of use aremonitored and members can change contractor yearly ifthey are not satisfied. Results from studies have suggestedthat service use of this model in Thailand is adequate interms of rate of use (more than two visits per person peryear) and good quality of care provided to social healthinsurance members.4446

Panel 1: Challenges in targeting the poorlessons from Cambodia, Laos, and

the Philippines

In Cambodia, beneficiaries of the health equity fund are identified on the basis of

eligibility criteria either at the community level (pre-identification) or at health facilities

through questionnaire interviews using proxy means tests (such as durable assets,

housing, land ownership, and number of working members, dependants, and disabled

members) and estimates of household income, expenditure, and debt. Identification at

point of service picks up those missed at the community level.

In Laos, poor households eligible for the health equity fund are identified by a village

committee, using certain means-testing criteria. In areas not covered by the fund, the

village head issues a letter at the request of a patient, certifying the individual as poor on

a case-by-case basis. Unlike beneficiaries of the fund who get the cost of their free care

reimbursed to hospitals, poor individuals in non-fund areas have to negotiate for

exemption with providers as there is no budget line to subsidise free care for the poor.

In practice, some patients are allowed to delay payment.27

In the Philippines, those who are indigent for a certain period are assessed by local

government units, using a family income test, and are enrolled into a programme that

has budget subsidies to cover outpatient and inpatient care. The recently elected

government in 2010 has now mandated the central Department of Social Welfare and

Development to manage this assessment, because income tests are inconsistently applied

by local government units.

Potential leak of benefits to the non-poor is likely in all three countries, although further

study is needed, especially in Laos and Cambodia. In these two countries, supporting

transport costs for fund beneficiaries, in addition to medical costs, has been essential to

facilitate access to care by the poor.

Lessons

Ad-hoc certification in non-fund areas, and limited funding, are major factors in Laosfor under-coverage of the poor.

The health equity funds in Laos and Cambodia, with clear identification procedures

and reliable funding, have improved rates of use of services and tend to provide better

financial protection. Similarly, the sponsored programme of PhilHealth, with clear

targeted funding, has improved access and use.

In addition to the provision of basic quality health care, support of transport and food

for poor patients during their admission to hospital seems to be essential.

Although challenging, objective criteria and transparent and participatory

engagement by local communities in identifying the poor, as experienced in all three

countries, are essential to prevent favouritism and leakage to the non-poor.


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Vietnam, having experienced the drawbacks of fee-for-

service schemes such as excessive diagnosis and treatmentand levels of co-payment up to 30% of total bills,introduced a law in 2008 on health insurance that providesfor capitation for primary care services and case-basedpayment to be used for inpatient care. This programme isexpected to be fully implemented by 2014.

Strategic purchasing, in particular design of benefitpackage and provider payment method, establishessystem effi ciency, and level of out-of-pocket andcatastrophic spending. Once a payment system isentrenched, particularly in cases for which private-for-profit providers dominate the health-care market, radicalreform from fee-for-service to capitation or case-basedpayment will face united resistance from the medical

profession, as experienced in South Korea.47 Introducingthe right purchasing strategies at an early stage is a keyfoundation for the successful performance of socialhealth insurance. Panel 2 indicates some of thecomplexities of agreeing the introduction and design ofsocial health insurance in Malaysia.

Protecting the informal sector and the rest of

the populationThe informal sector and the rest of the population makeup a large proportion of these countries; for example,49% in Cambodia, 64% in Indonesia, and 73% in Vietnam.Because of the large numbers, their restricted capacity topay premiums, and the feasibility of enforcing payment,extension of coverage to this group is especially challenging.These seven countries have faced a key choicebetween acontributory scheme and a general tax-financed scheme.

Both PhilHealth and the Vietnam social insurancescheme use a contributory approach to extend coverage tothe informal sector, with premiums collected from groupssuch as taxi drivers and street vendors. PhilHealth seeksto collect a fixed yearly premium of 1200 Peso (US$258)

from individual members, but enforcement is noteffective despite huge effort and various innovations.Furthermore, the administrative cost of premiumcollection is high and collection complex because of highmobility and interruption and seasonality of cash income.There is adverse selection because members enrollingindividually are mostly chronically ill and have high ratesof use. This element of PhilHealth needs subsidies fromthe payroll tax-financed component.

In Vietnam, tax funding is used to subsidise the premiumfor the informal sector by 50%. There is a risk that coveragemight stall once the easy-to-reach population has beenenrolled, and the administrative cost of premium collectionwill be high in hard-to-reach remote areas. Moreover,information from impact assessment studies suggests thatthe fund has not reduced average out-of-pocket spendingand has had negligible effects on use among the poorestpopulation, although it has substantially increased overallservice use and reduced the risk of catastrophic spending.48

In Thailand, despite community-based49 and thenpublicly subsidised voluntary health insurance,50 30% ofthe total population remained uninsured in 2001, mostlyin the informal sector. In addition to problems of adverseselection and financial viability,51 enforcement of premiumpayment in the informal sector is not technically feasible.When an opportunity arose with a political demand toreach universal coverage in a year, as promised in the

January 2001 general election campaign, a contributoryscheme was ruled out on reasons of speed and because itwas politically inadvisable because of its implications forvoters supporting the new government. The politicalcontext at that time provided no option but to adopt generaltax funding for universal coverage, although financialassessment indicated its feasibility for both short term(ie, 1 year) and medium term (ie, 5 years) at the time. 52 Thecaveat is the question of financial feasibility in the longterm as the population of Thailand age and their demandsincrease. Thailand has extended tax financing from thepoor to the informal sector and the rest of the population(ie, squeezed bottomup), whereas the Philippines andVietnam have extended the contributory scheme from theformal to the informal sector (ie, squeezed topdown).

Panel 2: Complexities of introducing social health insurance in Malaysia

In Malaysia, an upper middle-income country, health services are free for all citizens at

primary, secondary, and tertiary levels with minimum co-payment, ranging from 100 RM

(US$031) for outpatients to 300 RM ($094) per admission day. The country spent

$3072 per capita on health in 2007, using supply-side financing through yearly budget

allocations to public-sector providers. Despite this relatively high expenditure, variousproblems are apparent: high levels of out-of-pocket payment making up 407% of total

health expenditure (mostly spent on secondary and tertiary private services); long waiting

times for procedures in public hospitals (eg, 23 weeks for orthopaedic surgery41); rising

health care costs because of the epidemiological transition in the face of limited public

funds; and poorly regulated private fees.

Between 1985 and 1996, the Government commissioned five reviews on health

financing; recommendations were made that the Government should establish a National

Health Financing Scheme to pool resources from both public and private sources and to

provide universal financial risk protection based on social health insurance principles.

Discussions on health-financing reform were restarted in 2000. From 2000 to 2006,

multi-stakeholder meetings were convened to discuss the National Health Financing

Mechanism. However, no decision was made and various barriers can be identified in

addition to absence of political will: Loser versus gainer differences: the proposed introduction of social health insurance

necessitates mandatory contributions by the formal sector such as civil servants and

private sector employees who have reservations about having to pay on top of

personal income tax. The voices of the informal sector and the poor who are potential

gainers from the new scheme are not heard. Social solidarity mechanisms seem

insuffi cient to overcome opposition.

Private interests: there is strong lobbying by private health insurance operators who

fear the scheme will dilute their profits.

Institutional conflict of interest: the proposed National Health Financing Authority,

which will administer the national scheme, threatens the Ministry of Health, which

might lose all its financing power to the Authority.

Technical barriers: collection of premiums from the informal sector is diffi cult.

Information from Yon and colleagues.42,43

RM= Ringgit Malaysia.


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Figure 1 summarises the achievements in insurancecoverage extension by 2009 for three population groups(including the informal sector and rest of populationgroups together) in six countries. Laos faces challengesin coverage extension to all groups, whereas Vietnamhas fully covered the formal sector and the poor but hasa major challenge covering the informal sector and therest of the population through a contributory scheme.

Cambodia has made good progress in using healthequity funds to cover the poor, although this achievementneeds to be sustainedintroducing social healthinsurance for the formal sector and devisingarrangements to cover the large informal sector is ahuge challenge both for fiscal capacity and programmemanagement. The Philippines face two majorchallenges, to extend coverage to the poor by encouragingincreased local government financial commitments,and to enrol the hard-to-reach informal sector into theindividual contributory scheme. Huge challenges inIndonesia are also coverage extension to the informalsector and the rest of the population with a clear policyon sources of financing, while sustaining coverage ofthe poor and near-poor in a fully decentralised system.

By contrast, Thailand and Malaysia have reached acoverage for the whole population.

This region of southeast Asia still has a huge gap ofinsurance coverage, which is a daunting challenge in thenext wave of reform efforts.

Discussion and recommendationsTable 3 summarises achievements in the three areas of

population coverage, service coverage, and financialprotection. Population coverage has been established bywillingness and capacity to subsidise the poor, enforceformal sector enrolment into social health insurance,and protect the rest of the population throughprepayment, whether through tax or contributions.Service coverage is indicative of previous and currentinvestments in the health-service infrastructure, anddecisions on benefit packages for the various schemes.The level of financial protection is established bywillingness and fiscal capacity to purchase a large orsmall benefit package, and by co-payment policy.

The 76% estimate of insurance coverage for thePhilippines is from PhilHealth; however, a recent house-hold survey from the National Statistics Offi ce53 estimates

Figure 1: Insurance coverage for three population groups in 2009

Malaysia is not included because it has 100% coverage. In the Philippines, the formal sector covered by PhilHealth (35%) includes public and private employees and

their spouse and dependants, wherea s the target population (22%) from the International Labour Offi ce statistics covers only the public and private sector empl oyees.

Data from webappendix pp 23. ROP=rest of population.

0

20

40

60

80

100

14%

27%

59%

100%

4% 2% 2%8%

Laos

17%

0%

35%

48%

1%

100%

24%23%

Cambodia

PopulationInsurance coverage

16% 20% 20%

64%

100%

48%

13%15%

Indonesia

22%

35% 33%

18%

45%

23%

100%

76%

Philippines

Formal sector

0

20

40

60

80

100

0

20

40

60

80

100

27% 25%

9% 9%

64%64%

100%98%

Thailand

The poor Informal sectorand ROP

Total

1 3% 1 3% 14% 14%

28%

55%

100%

73%

Vietnam

Formal sector The poor Informal sectorand ROP

Total


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a national coverage of 38%, suggesting the need to improvePhilHealths electronic membership database. All threeinsurance schemes in Thailand (covering the formal

private sector, civil servants, and the rest of the population)provide a comprehensive benefit package with almost noco-payment. Out-of-pocket payments have decreased from33% of total health expenditure in 2001 before universalcoverage, to 177% in 2008,54 and the reduced incidenceand intensity of catastrophic payment has especiallybenefited the poor population.55,56 With universal coverage,Thailand implemented a purchaser-provider split andmandated that people choose a local primary care unit atwhich to register, with their costs covered throughcapitation and case-based payment. There is evidence thathealth-care providers are improving their responsivenessto patients.57 Malaysia has retained the traditional Ministryof Health power of financing and provision. The perceivedabsence of responsiveness of public providers has led to

the high level of out-of-pocket payments for private sectorcare, which is a major source of public concern. 5860

Figure 2 depicts the association between insurancecoverage and general government health expenditure as apercentage of total health expenditure, and the size ofeach sphere indicates the fiscal space for each country.Three country groups are apparent: a tax effort of morethan 15% of the gross domestic product (Malaysia andThailand), 10%15% (the Philippines, Indonesia,Vietnam, and Laos), and less than 10% (Cambodia). Long-term fiscal capacity to sustain the universal coverage inthe Thailand scheme is a major policy challenge, especiallygiven its large benefit package. For Malaysia, public sectorresponsiveness needs to improve and a much greaterproportion of funding needs to be channelled throughprepayment arrangements.61,62As an upper middle-incomecountry, Malaysia has a high potential either to increasethe general government health expenditure from 444%of total health spending (table 2) or to introduce payrolltax-financed social health insurance, given the largeproportion of the formal employed sector.

In reducing out-of-pocket spending by households, it isdiffi cult for the national government in a decentralisedsystem, such as that in the Philippines and Indonesia, tomobilise political will and improve financial commitmentto the poor and vulnerable. The US$6 per year for apackage of outpatient and inpatient services for poorindividuals in Indonesia can cover only a very limited setof services, resulting in high levels of out-of-pocketexpenditure, and the contributory premium of US$258 forthe informal sector in the Philippines also provides only asmall package and thus co-exists with high levels of out-of-pocket payment. General tax could be used to financeindividual members in PhilHealth, although this approachis a major political decision as it departs from the currentlaw. The government needs to broaden the tax base and

Population coverage

by financialprotection schemes

Health service coverage by financial protection schemes Financial protection for the total

population (measured by out-of-pocket costs as % of THE, 2007)

Malay sia 100 % Primary care services f ocus o n mat ernal and chi ld h ealth ; curat ive services are f ree f or a ll . Serv ices are rat io ned

by waiting time and number of family physicians in health centres; patients opt to pay for private services;

survey reports 62% of ambulatory care was provided by private clinics.

407%

Thailand 98% Comprehensive benefit package, free at point of service for all three public insurance schemes. 192%

Philipp ines 76% Bene fit package covers ad mission onl y e xce pt for the spons ore d progr amme, whi ch also cove rs outpatien t

services; high level of co-payment for all PhilHealth components: average reimbursement is 54% of the total

medical bill, the balance being paid out-of-pocket.

547%

Indone sia 48% Al thoug h the polic y in te nti on is to provide comp rehensive services, the low per ca pita gover nment sub sidy for

the poor of US$6 per year for a package of outpatient and inpatient services might result in inadequate service

provision, high levels of self-payment, and low levels of financial protection.

301%

Vietnam 548% Benefit package is comprehensive but has a substantial level of co-payment: 520% of medical bills. 548%

Laos 77% In principle, there is a comprehensive coverage for social health insurance and government employee

schemes, but low level of funding results in a small service package.

617%

Cambodia 24 % The poor covered by the he alth equity fund are en titl ed to a c omp rehensive pa ckage, incl udin g tran sport costand food allowance, but the scope and quality of care provided at government health facilities are restricted.

601%

Information is from synthesis of the authors research. THE=total health expenditure.

Table 3: Summary population, service coverage, and financial protection in seven countries in southeast Asia in 2009

Figure 2: Fiscal space in the context of insurance coverage and general government expenditure

The size of the spheres indicate the size of the fiscal space as measured by tax revenues as percentage of gross

domestic product. GGHE=general government health expenditure. THE=total health expenditure.

Malaysia(166%) Thailand

(168%)

Indonesia

(123%)

GGHE as % THE

%I

nsurancecoverage

00

20

40

60

80

100

20 40 60 80 100

Laos(101%)

Cambodia(82%)

Vietnam

(130%)

Philippines(143%)


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diversify the sources of government non-tax revenue.

However, improving the current low contribution topeople in the informal sector is consistent with the policydirection of PhilHealth.

A clear message emerges from the analysis of Vietnam;the government needs to increase fiscal space for healthsubsequent to consistent favourable economic perform-ance to fulfil its commitment towards universal coverageby 2014. With a contributory scheme for the informalsector, government subsidies might increase enrolmentbut those people hard to reach will not be covered, and atsome point there will need to be consideration of a tax-financed scheme that pays the premiums of the poorand enrols them in the Vietnam social security scheme.This scheme would demand strong political leadership

supported by fiscal capacity.Because fiscal space constraints limit coverage extension

to the poor in Laos and Cambodia, resources from donorsare inevitable. There are opportunities to harmonise andreorient funding from global health initiatives tostrengthen health systems, in compliance with the ParisDeclaration on aid effectiveness,63 in particular tostrengthen primary health care. The Declaration calls forsynergies of donor programmes in line with nationalpriority and furnishes an opportunity to improve primaryhealth care that is accessible to the rural poor population.Better access to quality care is one aspect of universalhealth coverage, and good-quality and accessible primarycare services can contribute to improved service use by thepoor.46 Improvement of the effectiveness of means testingis possible through active engagement by communitymembers in identifying the poor, using approaches suchas quantitative assessment of consumption levels andqualitative assessment to rank households by wealth.64The experience in Cambodia exemplifies the advantage ofdemand-side financing by a health equity fund inimproving the accountability of providers to the poor.Removing user charges without additional funding tosubsidise health care for the poor might be harmful. 65

Newly established social health insurance schemesshould learn from the experiences of different providerpayments regarding strengths and weaknesses of various

payment models. PhilHealth not only provides limitedfinancial protection to its members, but also loses itspotential monopsonisticpurchasing power to steer health-care providers to improve effi ciency. As the largest or onlypurchaser of medical services in the country, PhilHealthhas an opportunity to exert its purchasing power to achieveeffi ciency, such as introducing capitation and case-basepayment system. The PhilHealth 2008 annual reportstated that: PhilHealth must move away from fee forservice towards provider payment schemes where it caneasily leverage its purchasing power of more than185 billion Pesos of health care purchases in 2008.66

Social health insurance in Laos, although mandatory,does not cover the full eligible population and effortsshould be made to expand coverage. Cambodia has yet to

establish social health insurance to encompass the

rapidly increasing formally employed sector. Althoughexpanding the community-based health insurance canlead to adverse selection, this approach can be a temporarymeans for coverage extension to the informal sector, asindicated in Thailand. In general, coverage extension tothe informal sector and the population outside formalschemes is divided, with contributory schemes leadingone way and tax financing another. The choice dependson political and health-system contexts. Well functioningcontributory arrangements need an effective governmentand administrative capacities. When fiscal space is morefavourable, the case in Thailand indicates that tax-financed arrangements are feasible.

Although decisions on extending coverage to the

various population groups can be made on pragmaticgrounds, governments need to move towardsharmonisation of benefit packages, levels, and methodsof provider payment across these schemes as membersmove from one scheme to another. Differences betweenschemes within a country is also a major source ofinequity. In a decentralised context, particularly inIndonesia and the Philippines, evidence is needed on theproper balance between national and local governmentfinancing and roles in coverage extension.

Financing reform is complex and necessitates context-specific evidence; national institutional capacity togenerate evidence and effective translation into policydecisions are vital.67,68 Regular assessment of cost drivers,long-term financial projections, and capacity to generateand act on evidence about cost-effective interventions areneeded. However, there is scope for countries to learnfrom each other. Partnership and collaborative workamong co-authors in southeast Asia are strong foundationsfor further regional collaboration in the efforts towardsbetter financial risk protection and universal coverage inthis region. As we have experienced and discussed, thereare great opportunities to share experiences amongcountries in this region in the movement towardsuniversal coverage for improved health care. Moreover,the challenges the governments face, including how toimprove the responsiveness of public services, expand

social health insurance, and identify and protect the poor,and whether coverage of the informal sector is betterimplemented through contributory arrangements or taxfinance, are ones faced across the developing world.

This paper is a timely contribution to the current globaldebates on how to provide financial risk protection to thepoor and vulnerable, how to extend coverage to the formaland informal sectors, and how to reach universal coverage,drawing on experiences and lessons from seven countriesin southeast Asia with different paces of development. Wehave discussed the strengths and weaknesses of differentdesigns of strategic purchasing and debated financingsources for the informal sector. The experiences of eachcountry indicate the diversity of country choices, related topolitical decisions, historical precedence, and social value.


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However, our focus on financing reforms should not be

interpreted to imply that additional supply factors, notablyquality of care and human resources, are not also importantelements of achieving universal coverage.

In conclusion, governments hold responsibility toprotect their citizens from catastrophic health expenditureand impoverishment, or welfare loss from inability to usehealth services when needed. Key messages emerge forresource-poor settingsfirst, the extension of functioningand affordable primary health-care services is an initialpriority for governments as geographical access to servicesis still a major problem. This extension needs to bematched with financial risk protection for the poor,including effective identification of the poor, user feeexemption, and adequate levels of subsidy. Second, even

though the formal sector might be small, social healthinsurance can make an important contribution toinsurance coveragealthough general tax funding mightbe preferable in the long run.69 Finally, when the poor areadequately protected by tax-funded schemes, and in casesin which fiscal capacity allows, introducing partial subsidyfor the informal sector can be an appropriate choice.These practical steps of reform should maintain a long-term objective of harmonising all prepayment or healthinsurance schemes with a universal and equal coverage.

Contributors

VT was the lead author and was responsible for setting the conceptualframework of the paper, undertaking the literature search, verifying data,data interpretation, writing the manuscript, and ensuring full

participation and contributions by country authors. WP helped to set theconceptual framework of the paper, and provided country data(Thailand), compiled data and data analysis for seven counties, producedtables and figures, and gave comments on the content of the draft.PI (Cambodia), SMA (Malaysia), AGM (Indonesia), KA (Laos),EB (Philippines), and DBH (Vietnam) provided and verified countrydata. HT (Indonesia) provided country data. PI, SMA, and AGM gavecomments on the framework and on the general content of the draft. PI,SMA, KA, and EB helped to rewrite the text relevant to the country theyprovided data on. DBH gave comments relevant to Vietnam. AM was thescientific guarantor, responsible for setting the conceptual framework ofthe paper with VT, giving comments on the draft, redrafting the wholepaper until reaching the final version.

Conflicts of interest

We declare that we have no conflicts of interest.

Acknowledgments

This paper is part of a Series funded by the China Medical Board,Rockefeller Foundation, and Atlantic Philanthropies. We thank the ChinaMedical Board and the Regional Steering Committee in conveningvarious workshops.

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