Under JPG Teaching Fellowship

Permission from JPGSPH

CoE-UHC

HEALTH CARE FINANCING

Jahangir A. M. Khan, PhD

Head, Health Economist Unit

ICDDR,B

Associate Professor

JPGSPH, BRAC University

Email: jahangir.khan@icddrb.org

Defining Universal Health Coverage

WHO, 2005 says:

Universal health coverage means that everyone in the population has access to appropriate promotive, preventive, curative and rehabilitative health care when they need it and at an affordable price.

Three dimensions of UHC

Financial risk protection

No one should die and suffer because they cannot afford

health care, and no one should be made poorer because they

get sick.

6

What is healthcare financing?

The ways of payments for accessing healthcare

Includes:

Collection of revenue and

Purchasing of healthcare

7

ECONOMICS OF HEALTH CARE FINANCING

Efficiency Achieving efficiency is about comparing the costs (or resources) and benefits (or well-being produced) ensuring that resources are allocated in such a way so that gain to the society can be maximized.

Equity Principle of being fair to all, with reference to a defined and recognized set of values.

8

Under 5

5 to 9

10 to 14

15 to 19

20 to 24

25 to 29

30 to 34

35 to 39

40 to 44

45 to 49

50 to 54

55 to 59

60 to 64

65 to 69

70 to 74

75 to 79

80 above

4000 3000 2000 1000 1000 2000 3000 4000

Males Females

Population Pyramid, Bangladesh

HIES, 2010

Payer

10

Issues → Who to be funded? How to be funded?

Target ↓

PO

PU

LA

TIO

N 1

51.6

MIL

LL

ION

(20

12

)

Poor

Below Poverty Line

47.8 MILLION

31.5%

Tax-funded publicly financed health care, Non-

contributory health protection mechanisms

(e.g. SSK) part of the Social Health Protection

scheme

Informal sector

83.4 MILLION

55%

Tax-funded publicly financed health care with

user fee retention, community-based health

insurance initiatives, micro health insurance,

other innovative initiatives, gradual move to

Social Health Protection scheme coverage

Formal sector

20.5 MILLION

13.5%

Tax-funded publicly financed health care with

user fee retention, Social Health Protection

scheme, Complementary private coverage

Funding healthcare – Who & How?

11

ANALYTICAL APPROACHES

Health care triangle

Financing equation

Functions of health care systems

12

Health care triangle

Citizen Provider Delivery

Third-party insurer or purchaser

Source: Reinhardt, 1990

13

Financing equation

TF + SI + UC + PI = P X Q= W X Z

TF = Sum of taxation

SI = Social insurance contributions

UC = Out of pocket and user charges

PI = Insurance premium (voluntary or private)

P = Price of the service

Q = Quantity of the service

W = Quantity and mix of inputs

Z = Price of inputs

14

Functions of health care system

Revenue collection

Fund pooling

Purchasing

Financing

Personal health services

Non-personal health services

Provision

15

Firms,

corporate entities

& employers

Individuals,

households &

employees

Foreign & domestic

NGOs & charities

Foreign govt

& companies

Source Mechanism Collection agents

Direct & indirect taxes

Compulsory insurance

contributions & payroll

taxes

Voluntary insurance

premiums

Medical savings

accounts

Out-of-pocket payments

Loans, grants &

donations

Central, regional &

local government

Independent public

body or social security

agency

Private not –for- profit or

for profit insurance

funds

Providers

Revenue collection

Source: Kutniz, 2000

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Fund pooling

o Fund pooling is defined as the ’accumulation of prepaid health care revenues on behalf of a population’.

o Importance: It facilitates the pooling of financial risk across the

population.

o Funding Scope for pooling risk

Tax Yes

Social security contribution Yes

Private health insurance Yes

Community rated premium Yes

Medical savings account No

User charges No

Current funding situation in Bangladesh

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Health Financing in Bangladesh 2006-2007

18

Public SectorTk. 41,318

26%

Rest of the WorldTk. 12,391

08%

NGOsTk. 2,092

01%

Household OOPTk. 103,459

64%

Private FirmsTk. 1,325

0.8%

Private InsuraneTk. 314

0.2%

Million TakaTk. 69 = US $ 1

Allocation in public budget for health, 2009-2014

19

7,6

67

cr

9,4

70

cr

0

1

2

3

4

5

6

7

2009-10 2010-11 2011-12 2012-13 2013-14

6.18 5.68

5.03 4.82 4.26

Share (%) of total budget 6

,27

1 c

r

9,1

30

cr

9,4

70

cr

7,6

67

cr

7,2

87

cr

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

1 2 3 4 5

2.94 3.17

4.55

5.98

8.86

Out of pocket expenditure as a percentage of household

consumption expenditure across socioeconomic groups in

Bangladesh, 2005

Source: Van Doorslaer et al, 2007. 20

Distribution of out-of-pocket payments across income groups in Bangladesh, 2005

Estimated by: Jahangir A. M. Khan using secondary data from Van Doorsler et al, 2007 and Statistical Yearbook of Bangladesh, 2008.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Poorest 2nd 3rd 4th Richest

6.2% 7.2%

12.2%

21.5%

52.8%

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FUNDING METHODS

o Taxation

o Out of pocket payments

o Loan, grants and donations

o Health insurance

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National or local taxes

Arguments in favour of local taxation

o More transparency

o Improved accountability

o Responsiveness to local preference

o Separation of health from competing national priorities

Arguments against local taxation o Generate inertia among politicians for risk change o Horizontal inequity o Same tax rate means less (more) revenue in poor (rich) regions o Less potential redistribution o National tax collection produces more economies of scale, compared with regional tax collection.

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General or hypothecated taxes

Arguments for general taxes

o It draws on a broad base of revenue.

o Trade-off between health care and other areas of public expenditure (priorities of citizens).

Arguments for hypothecated taxes

o Reduce resistance to taxation as it is more visible

o Linkage between revenue (taxation) and expenditure makes the

funding of health care more transparent and responsive

o Makes people more connected to tax system and may increase

the pressure on providers to improve quality

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Health insurance

Health insurance is a means of financing healthcare.

An insured person pays a small amount to an organization (insurer) in a regular basis, against (per month) which the insured person will have access to a defined healthcare package.

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Types of health insurance

Private insurance

Community health insurance

Social health insurance

National health insurance

27

Characteristics of insurance

Type of

insurance

Financing

source

Nature of

contribution

Funds

earmarked

for health

Membership

Private health

insurance

Out-of-

pocket

payments of

premium

Voluntary Yes Contributing

members

and usially

their

dependents

Community

health insurance

Out-of-

pocket

payments of

premium

Voluntary Yes Contributing

members

and usually

their

dependents

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Characteristics of insurance

Type of

insurance

Financing

source

Nature of

contribution

Funds

earmarked

for health

Member-

ship

Social health

insurance

Employer

and/or

employee

from salary

or wage

Mandatory Yes Contributing

members

and usually

their

dependents

National

health

insurance

Govt.

general

revenue

and other

taxes

Funded mostly

from tax

revenues

No All citizens

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Social Health Insurance

Social health insurance is an insurance programme which meets at least one of the following three conditions: 1. participation in the programme is compulsory either by law or

by the conditions of employment, 2. the programme is operated on behalf of a group and restricted

to group members, 3. an employer makes a contribution to the programme on behalf

of an employee.

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Social Health Insurance

Social health insurance contributions are not related to risk, are levied on earned income and collected by a body at arm’s from government – otherwise it amounts to an earmarked payroll tax. Contributions are usually compulsory and shared between the employees and the employers.

Why SHI

Universal coverage

Broad base for financing healthcare

Preventing adverse selection

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History of SHI

SHI established in Germany by Bismarck in 1883

27 countries have established UHC via SHI

32

How long time it takes

Germany 127 years

Belgium 118 years

Austria 79 years

Luxembourg 72 years

Costa Rica 48 years

Japan 36 years

Korea 26 yeras

33

34

Community-Based Health Insurance

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What is CBHI? Any not-for-profit insurance scheme aimed primarily at the informal sector and formed on the basis of a collective pooling of health risks and in which the members participate in its management.

Common features (NGO driven CBHI)

36

Small membership group Small and affordable premium with limited

benefits and coverage Simple procedures and considerable member

participation in management of the program

Why CBHI?

37

Informal sector – around 90% population Reliance on poorly functioning government

health facilities or expensive private facilities – barriers to sufficient and quality healthcare

CBHI – pre-payment at affordable premium

Target population of CBHI

38

Informal sector Unorganized groups Poorer section of the community (trial)

Prerequisites for CBHI

39

Essential Problems with healthcare and high out-of-pocket medical payments An organized group willing to pool risk through insurance mechanism NGO/CBO etc. willing to organize CBHI and have administrative capacity Healthcare providers who can provide adequate quality care

40

Prerequisites for CBHI

Desirable Willingness to pay – principle of risk sharing, solidarity, healthcare needs to be managed Ability to pay – affordable premium Reliable data – demography, morbidity, costs Legal aspect – legally functional Technical and managerial capacity

Main steps in initiating CBHI

41

1. Identify need for CBHI

2. Identify management and administrative organization

3. Identify target community

4. Designing CBHI: Provider -/mutual-/linked- model

5. Defining the benefit package

6. Fixing the premium

7. Identifying the providers

8. Who is the insurer

9. How does one administer the scheme?

10. Processing claims and reimbursements

11. Risk management

Identify target community

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Locality Organized Unorganized

Urban Driver's association, shopkeeper's association

Vendor, rag pickers, maid

Rural Co-operative societies, self-help groups

Landless laborers, subsistence farmers

Designing CBHI

43

Provider model Healthcare provider (hospital) initiates and organizes the health insurance program. Mutual model NGO/CBO initiates and organizes the health insurance Program. Linked model NGO/CBO collects premium from community and passes it on to health insurance company.

Advantages and disadvantages with different models

44

Characteristics Model

Provider Mutual Linked

Freedom to suit the local needs

Very free Very free Depends on insurance company's products

Premium Affordability Affordability Acturial

Benefit package Comprehensive and meets local need

Comprehensive and meets local need

Traditional mediclaim policy with its exclusions and limitations

Financial risk With provider With NGO/CBO With insurance company

Quality of care Possibly good Poossibly good No difference between insured and non-insured

Community involvement

Not good Good Good

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Population (in Million)

48 (BPL)

18.8 (Formal)

85.7

(Informal)

Social Health Protection Scheme (SHPS)

Heath Equity Fund/NHSO SSK (BPL)

Formal Sector SHP

2016

2032

Universal

Coverage

2021

Micro, Community

based insurance

Voluntary

subscriptions to SHPS

MoHFW, 2012

Sequencing in the implementation of the Social Health Protection Scheme

46

47

Purchasing

The transfer of pooled resource to service

providers on behalf of the population for which

the funds are pooled.

SUMMARY

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Healthcare financing Efficiency

Equity

Health insurance

Social health insurance

Community-based health insurance

Purchasing healthcare (will be taken)

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Thank you