Vietnam s Health Care System: A Macroeconomic Perspective*

Transcription

1 Vietnam s Health Care System: A Macroeconomic Perspective* Paper Prepared for the International Symposium on Health Care Systems in Asia Hitotsubashi University, Tokyo January 21-22, 2005 Susan J. Adams, Ph.D. Senior Resident Representative International Monetary Fund Hanoi, Vietnam *The views expressed in this paper are those of the author and do not necessarily reflect official views of either the International Monetary Fund or the Government of Vietnam. The author expresses appreciation to colleagues in the Consultative Group of Vietnam for generously sharing their views and information about the health sector of Vietnam.

2 - 2 - ABSTRACT Vietnam s health indicators are better than would be expected for a country at its development level, and they continue to improve at rates that equal or surpass those in most neighboring countries. However, in the midst of a major program of poverty reduction and economic growth, Vietnam s health care system is in the midst of a dramatic transformation. Twenty years ago, it was firmly controlled by the central government. But the ability of the Ministry of Health (MOH) to shape activities has diminished significantly, due to the rapid growth of the private sector, the much larger role of out-of-pocket expenditures, and the ongoing process of fiscal decentralization. Over time, new policy tools have been developed, including user fees, health insurance and health-care funds for the poor. These tools all focus on the financing of health, but still fail to merge into a coherent health financing system. This paper outlines the current structure and effectiveness of Vietnam s health sector from the perspectives of public finance administration and macroeconomic tradeoffs. The paper will first compare Vietnam s health sector to those of other countries in Asia. A discussion of health spending in the context of overall public expenditure priorities in Vietnam will follow, with special attention to how the health sector is evolving within the context of Vietnam s Comprehensive Poverty Reduction and Growth Strategy (CPRGS) and longerterm planning framework.

3 - 3 - I. Introduction Vietnam has been characterized by remarkably pro-poor economic growth since the start of its doi moi, or economic reform program in the late 1980s. The percentage of the population living on less than 2100 calories per day fell from 58 to 29 percent between 1993 and This spectacular success results from the combination of sound macroeconomic management, increased reliance on market mechanisms, a strong emphasis on the delivery of social services, and sustained improvements in infrastructure. Along with all sectors in the economy, Vietnam s health care system is in the midst of a dramatic transformation. Twenty years ago, it was firmly controlled by the central government. But over time the ability of the Ministry of Health (MOH) to shape activities has diminished significantly, due to the rapid growth of the private sector, the much larger role of out-of-pocket expenditures, and the ongoing process of fiscal decentralization. New policy tools have been developed, including user fees, health insurance and health-care funds for the poor. These tools all focus on the financing of health, but still fail to merge into a coherent health financing system. And they coexist with tools organized by disease category, which operate under the form of National Health Programs (NHPs). There is little coordination between those programs, despite the fact that they often have the same target population (as in the case of tuberculosis and HIV/AIDS) and no mechanism in place to ensure that they are discontinued once their objectives are achieved. 1 The purpose of this paper is to outline the current structure and effectiveness of Vietnam s health sector from the perspectives of public finance administration and macroeconomic tradeoffs. The paper will first compare Vietnam s health sector to those of other countries in Asia. A discussion of health spending in the context of overall public expenditure priorities in Vietnam will follow, with special attention to how the health sector is evolving within the context of Vietnam s Comprehensive Poverty Reduction and Growth Strategy (CPRGS) and longer-term planning framework. Targeted health programs will also be reviewed, including the recent focus on targeted spending for HIV/AIDS by both the Government and donor community. Financing options and challenges for the future will conclude the paper. II. Vietnam s Health Sector in the Asian Context Vietnam s health indicators are better than might be expected for a country at its stage of overall development, and they continue to improve at rates that equal or surpass those in most neighboring countries. In terms of life expectancy adjusted for years lost to disabilities, Vietnam ranks 116 among 191 members of the World Health Organization (WHO), not very different from much wealthier countries such as Greece and Brazil. 2 Vietnam to the extent the data are comparable--has also continued to make impressive progress in reducing infant 1 See World Bank, Vietnam Development Report 2005 (VDR 2005): Governance. Prepared for the Vietnam Consultative Group Meeting, Hanoi, December See WHO website for Vietnam: (

4 - 4 - mortality and under-five mortality rates. Progress in controlling vaccine-preventable diseases, such as measles, diphtheria and tetanus, has been rapid as well; polio was completely eradicated in Improvements are considerable in reproductive health too. The total fertility rate fell from 3.8 in to 2.7 in Estimates for put it at 1.9, below replacement level. 3 While there are several impressive achievements, Vietnam also faces several serious challenges in the health sector, including several problems that previous policies have not yet resolved. In particular HIV/AIDS incidence is now just at the threshold of moving from the most vulnerable groups into the general population. 4 Moreover, according to data from the Vietnam National Health Survey (VNHS) and the 2002 Vietnam Demographic and Health Survey (VDHS), large disparities exist in many key health indicators by region, income and ethnicity. These disparities are further compounded by the advent of new health challenges, including SARS, avian flu and resistant strains of other diseases. In terms of health spending, Vietnam again has achieved remarkable results for a country that has limited public resources and per capita GDP. Referring to Table 1, amongst countries in Asia, Vietnam spends about 5-6 percent GDP on health care (both public and private expenditure), twice as much as its neighbor Lao PDR, but half as much as Cambodia. In standardized dollar terms (Table 2), Vietnam spends relatively little in purchasing power terms compared to other countries in Asia. But the more interesting story lies in the split between public and private expenditure: in Vietnam, only about one-fourth of health spending emanates from the public sector (Table 3), with the preponderance paid by private sector sources---only Cambodia has a lower share of public/private spending in the region. And across categories of general government spending (Table 4), Vietnam allocates only about 6 percent to health care, with less than one percent of GDP spent on current health services. Over recent years the thrust of Vietnam s health sector strategy has emphasized active prevention, public service delivery at the grass roots level, the need to mobilize the entire society in support of improved health care, the expansion of health insurance cover, the value of traditional medicine, and the active participation of the private sector under the government s leadership. 5 The high annual GDP real growth rate of 7 percent has enabled people to pay increasingly out of pocket, to the neglect of Government s increasing its share of expenditures allocated to health. 3 VDR See The Macroeconomics of HIV/AIDS, edited by Markus Haacker (Washington, DC, International Monetary Fund, 2004) for a general discussion of the economic impacts of HIV/AIDS on poverty and development. 5 Vietnam Public Expenditure Review and Integrated Fiduciary Assessment 2004, draft version, October 5, 2004, World Bank.

5 - 5 - TABLE 1. Vietnam (Compared with other countries in WHO Western Pacific Region) Indicator: Total expenditure on health as % of GDP, 2001 Country Ordered by Total expenditure on health as % of GDP, 2001 Cambodia 11.8 Marshall Islands 9.8 Australia 9.2 Palau 9.2 Kiribati 8.6 New Zealand 8.3 Japan 8.0 Micronesia (Federated States of) 7.8 Niue 7.7 Nauru 7.5 Mongolia 6.4 Republic of Korea 6.0 Samoa 5.8 China 5.5 Tonga 5.5 Tuvalu 5.4 Vietnam 5.1 Solomon Islands 5.0 Cook Islands 4.7 Papua New Guinea 4.4 Fiji 4.0 Singapore 3.9 Vanuatu 3.8 Malaysia 3.8 Philippines 3.3 Brunei Darussalam 3.1 Lao People's Democratic Republic 3.1 Source: World Health Organization, Country website for Vietnam (

6 - 6 - Table 2. Vietnam (Compared with other countries in WHO Western Pacific Region) Per capita total expenditure on health in international dollars, 2001 Definition: Total health expenditure per capita is the per capita amount of the sum of Public Health Expenditure (PHE) and Private Expenditure on Health (PvtHE). The international dollar is a common currency unit that takes into account differences in the relative purchasing power of various currencies. Figures expressed in international dollars are calculated using purchasing power parities (PPP), which are rates of currency conversion constructed to account for differences in price level between countries. Country Ordered by Per capita total expenditure on health in international dollars, 2001 Australia 2,532 Japan 2,131 New Zealand 1,724 Niue 1,041 Nauru 1,015 Singapore 993 Republic of Korea 948 Palau 886 Tuvalu 673 Brunei Darussalam 638 Cook Islands 598 Malaysia 345 Marshall Islands 343 Micronesia (Federated States of) 319 China 224 Fiji 224 Tonga 223 Samoa 199 Cambodia 184 Philippines 169 Papua New Guinea 144 Kiribati 143 Vietnam 134 Solomon Islands 133 Mongolia 122 Vanuatu 107 Lao People's Democratic Republic 51 Source: World Health Organization, country website for Vietnam (

7 - 7 - Table 3. Vietnam (Compared with other countries in WHO Western Pacific Region) Indicator: General Government expenditure on health as % of total expenditure on health, 2001 Definition: Public Health Expenditure (PHE) is the sum of outlays on health paid for by taxes, social security contributions and external resources (without double-counting the government transfers to social security and extra-budgetary funds). Country Ordered by General Government expenditure on health as % of total expenditure on health, 2001 Kiribati 98.8 Niue 97.0 Solomon Islands 93.5 Palau 92.0 Papua New Guinea 89.0 Nauru 88.7 Samoa 82.2 Brunei Darussalam 79.4 Japan 77.9 New Zealand 76.8 Mongolia 72.3 Micronesia (Federated States of) 72.0 Australia 67.9 Cook Islands 67.6 Fiji 67.1 Marshall Islands 64.7 Tonga 61.6 Vanuatu 59.2 Lao People's Democratic Republic 55.5 Malaysia 53.7 Tuvalu 53.4 Philippines 45.2 Republic of Korea 44.4 China 37.2 Singapore 33.5 Vietnam 28.5 Cambodia 14.9 Source: World Health Organization, country website for Vietnam (

8 - 8 - Table 4. Vietnam (Compared with other countries in WHO Western Pacific Region) Indicator: General Government expenditure on health as % of total general government expenditure, 2001 Definition: Public Health Expenditure (PHE) is the sum of outlays on health paid for by taxes, social security contributions and external resources (without double-counting the government transfers to social security and extra-budgetary funds). General Government Expenditure corresponds to the consolidated outlays of all levels of government; territorial authorities (Central/Federal Government, Provincial/Regional/State/District authorities, Municipal/ Local governments), social security institutions, and extra-budgetary funds, including capital outlays. Country Ordered by General Government expenditure on health as % of total general government expenditure, 2001 Australia 16.8 Japan 16.4 Cambodia 16.0 Samoa 15.7 Niue 14.8 New Zealand 14.8 Papua New Guinea 13.0 Palau 11.6 Solomon Islands 11.5 Tonga 10.9 Mongolia 10.5 China 10.2 Vanuatu 9.7 Marshall Islands 9.6 Republic of Korea 9.5 Kiribati 9.3 Nauru 9.1 Cook Islands 8.9 Lao People's Democratic Republic 8.7 Micronesia (Federated States of) 8.5 Fiji 6.9 Malaysia 6.5 Philippines 6.2 Vietnam 6.1 Singapore 5.9 Brunei Darussalam 5.1 Tuvalu 2.9 Source: World Health Organization, country website for Vietnam (

9 - 9 - III. Expenditure Allocation within Vietnam s Health Sector Decentralization of health care delivery has been an ongoing process in Vietnam for several years, and has accelerated recently with the CPRGS rollout. This has led to an increasing share of government health spending at the local level (provincial level and below). The new State Budget Law, effective from January 2004, has given increased budget autonomy to provinces by providing recurrent funding on two block grants, one for wages and salaries and the other for all other operations and maintenance. The size of these block grants depends on the provinces population size, disease patterns and differential resource needs. Notwithstanding arguments about enhancing government ownership, however, there remains little understanding about the methods used by provinces to allocate funds internally across districts and communes. Because of this, inequities in the allocation of government health funding at the district and commune levels may effectively offset any apparent improvements in equity at the provincial level. Overall, public spending on health is regressive, in the sense that richer households get a larger share than poorer households (Table 5). But this pattern hides important differences across health-care facilities. For example, government hospitals are more easily accessible to richer households. Despite higher operating costs in remote areas, which tend to be poorer, most spending in these areas benefits richer households, with the top quintile getting almost one third of the total. The opposite is true for spending in commune facilities, which disproportionately benefits the poor. In fact, Vietnam s health success is attributable largely to its wide net of commune-level health centers (CHCs). There is one medical staff in every commune nationally, and only 1.4 percent of communes lack a medical station. About 96,604 medical staff are working in 116,359 villages nationally. Table 5: Spending on Public Health, from Poor to Rich Government hospitals Commune facilities All Percent Public Percent Public of spending Percent of spending Percent annual per visit of public annual per visit of public visits (VND) spending visits (VND) spending Percent of public spending Quintile Poorest Near poorest Middle Near richest , Richest Total Xxx Note: Figures include both inpatient and outpatient visits. Source: VDR Despite continuing disparities in government health spending among and within provinces, the main source of inequality in the distribution of health costs stems from out-ofpocket spending. With total public expenditures representing only about one percent of GDP, health care costs are mainly borne by households. Under Decree 10, an increasingly large number of health treatments are provided by public hospitals on a paying basis.

10 Unofficial payments of various sorts imply that the burden on households is even heavier than suggested by Table 3; private out-of-pocket spending may represent as much as 80 percent of total spending on health care in Vietnam. 6 Disparate levels of health spending correlate with the persistence of substantial disparities in health status indicators, by region, income and ethnicity. In 2002, a four-fold range could be observed in the infant mortality rate between the Northern Mountains (40.9 per thousand) and the Southeast (11.3), as well as between those with no education (58.6) and those who had completed secondary school (13.2). Differentials also exist in morbidity rates. For example, the average annual number of days people are unable to work due to illness is more than twice as high in the poorest quintile of the population than in the richest quintile. To address these problems, the Government s strategy for the health sector is necessarily turning towards the introduction of health insurance and the public funding of health care expenses by the poor. In particular, Decision 139 has strengthened earlier targeted interventions by creating province-level Health Care Funds for the Poor (HCFP). These funds are allocated 70,000 VND (less than US$5) per beneficiary per year, with 76 percent covered by the central budget and the rest by other sources such as individual and community contributions. Provinces can allocate HCFP resources to the direct reimbursement of health care costs, or to the purchase of health insurance cards. As of 2003, there were 11 million HCFP beneficiaries, representing 84 percent of the target population. Out of this group, one third had been granted health insurance cards and two thirds had been entitled to direct reimbursements of health care costs. 7 While the level of HCFP funding per beneficiary is believed to be inadequate to cover the cost even of their user fees and basic drugs at government health facilities, Decision 139 paves the way to make public health spending much more progressive. The MOH is now calling for a doubling in the level of funding provided to HCFPs. Most of this additional spending would benefit people in the poorest two quintiles of the population. In addition to HCFPs, there have been a range of targeted programs in place, aimed at improving livelihoods through exemptions of user fees, access to credit or the development of local infrastructure. Overall, these targeted programs have performed quite well, especially in terms of identifying poor households and poor communes. But they are currently hampered by errors in poverty measurement, causing the geographical allocation of resources not to always match local needs. IV. Targeted Health Programs under HEPR and Program 135 The national targeted program for Hunger Eradication and Poverty Reduction (HEPR) was formally launched in July 1998 to target poor households to receive a range of benefits, 6 VDR Ibid.

11 including exemption of school fees, health care cards, access to subsidized credit, exemption from compulsory public work, exemption from agriculture tax and other contributions, food provision between harvest seasons, and New Year gifts. Because of limited resources, the benefits available tend to be distributed among a larger number of households so as to increase the coverage of the program. Program 135 was also approved in July 1998, but directed to poor communes rather than to households. These communes get a resource allocation that they most often use to invest in a local infrastructure project of their choice, out of a menu of options including roads, health centers, schools, irrigation systems, water supply systems, etc. The creation of HEPR and Program 135 represented an attempt to consolidate and rationalize a series of provincial social support initiatives. But the shortcomings of these targeted programs soon became apparent: there was little integration between programs; too few of the interventions focused on health; there was inconsistency in spending levels nationwide; and a lack of community mobilization behind poverty reduction. According to empirical estimates, about 10 percent of poor households as classified under the HEPR program benefit from health support---in the form of either health cards or health insurance at the cost of about one third of non-poor households accessing the same services via leakages in administration (a fairly normal leakage ratio for targeted programs). As for Program 135, about one in four communes are beneficiaries. Given that nearly 30 percent of poor households live in poor and remote communes, Program 135 goes some way towards attaining its objectives. When looking specifically at the beneficiary communes, nearly two thirds of their population lies in the bottom two quintiles, classified according to expenditures per capita. At the same time, however, 45 percent of the households in the beneficiary communes are not poor; high coverage is achieved at the cost of high leakage. 8 Figure 1: Spending on HEPR and Program 135 by Province Source: World Bank calculations based on data from MOF, GSO and the 2002 Vietnam Household Living Standards Survey. 8 VDR 2005.

12 V. Targeting HIV/AIDS: Recent Initiatives by Government and Donors 9 The MOH estimates that the number of people living with HIV in Vietnam increased during from 96,000 to 245,000 people, and the number of cases appears to be growing exponentially. Like other countries in the Asia region, the initial spread of the disease was among intravenous drug users (IDUs), then through sex workers, and is just starting to cross over into the general population. For example, the incidence rate among new military recruits is about 8 percent. In addition, the emerging HIV epidemic is closely linked to tuberculosis (TB), as HIV increases vulnerability to TB. Vietnam is at the threshold of pandemic infection of the pattern in several African countries; for this reason, active interventions by both the Government and the large donor community in Vietnam are timely. Until very recently, the Government had classified HIV as a social evil and stigma/discrimination was apparent in employment and health services. In March 2004, the Government responded to the problem with a National Strategy of Prevention and Control, with high-level endorsement by the Communist Party, the Government, and the National Assembly. The National Strategy has several ambitious targets, including: Reducing prevalence in the general population to below 0.3 percent by 2010 Providing care and treatment to all HIV-infected pregnant women Providing specific drugs to 70 percent of all AIDS patients Prevention and public awareness A harm reduction approach to provide clean needles/syringes and condoms. The State Budget allocation for HIV/AIDS in 2004 was about US$ 5 million, representing a 25 percent increase over the previous year; one-third of the amount was provided by the central government and the rest supported by local governments and non-health ministries. The international donor community has assisted with about US$ 70 million during the period For 2005, significant new funding is being provided by the World Bank and the U.S. Government, inter alia. While much work remains to be done, the National Strategy provides a framework for action and external donors are significantly increasing the capacity of the Government to respond to the HIV situation in Vietnam. VI. Options for Financial Management of the Health Sector 10 Generally, three main options exist for financing health care: one, government budget allocation; two, out-of-pocket payments; and three, prepayment schemes or health insurance. 9 This section draws on the United Nations Common Country Assessment for Viet Nam, Chapter 6: The Challenge of HIV/AIDS (Hanoi: UN, November 2004). 10 Several of the arguments in this section are derived from: United Nations Country Team Viet Nam, Discussion Paper No. 2, Health Care Financing for Viet Nam. (Hanoi: UNDP, June 2003).

13 Table 6. Chronology of Policies/Strategies for Vietnam s Health Sector, Year Policy/Strategy 1989 Fee for service Private practice Pharmaceutical sale 1992 Health insurance Legal document on private practice 1994 Upgrading CHC system Salary for CHC staff Health policy unit at MOH 1996 National drug policy Socialization of health care 1997 Provincial health system model 1999 Redefine goals of health sector reform Source: Tuan Tran, Community-based Evidence About the Health Care System in Rural Vietnam, PhD Dissertation, March 2004, p. 7. Until the mid-1980s, the health care system in Vietnam was fully subsidized by the Government. Starting in 1989 (Table 6), the Government sought additional means to finance and support health services. As we saw in Section II, budget support for health care has not been a key priority sector for the Government. Moreover, until recently the government budget and ODA concentrated on capital costs instead of recurrent costs, so health facilities were constructed but not supplied, staffed or maintained well. In Vietnam, out-of-pocket payments have been by far the most important source of financing, amounting to nearly US$ 23 per capita per year. The introduction of user fees has generated additional income for the public health sector. Provinces have discretion over the level of fees to be applied, and fees must be paid in advance. In addition, a large part of the revenues of hospitals and providers comes from informal payments by individual patients, with households reporting payments at public health facilities as much as 14 times higher than those reported by the Government. Formally, the Government has introduced a policy to waive fees for the poor, but in practice this system does not work, and clinicians naturally avoid treating patients holding insurance cards in favor of those willing to pay fees up front. In 1992, the Government introduced compulsory and voluntary health insurance schemes, administered by Vietnam Health Insurance (VHI) under the aegis of the MOH. Currently three forms of the insurance scheme operate: 1. Compulsory coverage: This covers all active and retired workers in the public sector and all salaried workers in private sector enterprises with 10 or more workers. The contribution rate is 3 percent of salary (2 percent paid by employer, 1 percent paid by employee).

14 Voluntary schemes: These include health insurance for school children, with a per capita contribution collected by the educational institutions; and the Farmer Voluntary Insurance Scheme, where farmers contribute 30 per cent of their premia and the provincial government contributes 70 percent. 3. Schemes fully subsidized by the Government: These include reward schemes for merit, free health cards for the poor, etc. But these schemes disadvantage the most vulnerable in the face of informal user charges. The concept of health insurance is relatively recent in Vietnam. However, a recent study found that VHI members were overwhelmingly in favor of the scheme, because it allows them to pay much less per hospital visit. Due to the lack of attention by health care providers for card holders, for minor problems people prefer to pay fees and not use their cards. A relevant concern is whether the resources from targeted programs are being used efficiently. Considerable delays in the allocation of poor household certificates and health care cards are frequent as well. Time lags of several months curtail the use of a benefit which is in principle valid for one year only. Moreover, not all the households with health care cards benefit from the exemption of health care costs. According to the Quarterly Household Survey (QHS), northern provinces fare the worst, with only two thirds of the respondents claiming to have always received the exemption. Respondents in Southern provinces were more positive. Results are more encouraging in the case of health subsidies. The money saved as a result of this support was said to be either very important or important by QHS respondents. Again, the result was consistent across regions, ethnic groups and gender categories. Given that four out of five beneficiaries of health support are among the poorest 40 percent of the population, this result suggests a sizeable poverty alleviation impact. On the other hand, the statistical analysis reveals no significant impact on the use of medical facilities. In principle, more frequent use could be expected as a result of lower health care costs. But it could also be the case that the poor seek medical treatment only in the event of serious health problems, and would be unlikely to visit a physician more often just because it has become cheaper. Local taxes and fees, on the other hand, are rather regressive (Table 7). On the surface, the burden on households appears to be limited, at least compared to VAT. But these figures seriously underestimate the burden for several reasons. For instance these figures do not include a range of user fees collected at the local level, especially for health and education, whose main purpose is to compensate for the insufficiency of budget allocations to meet the cost of service delivery. Overall, replacing revenue from local taxes and contributions by revenue from CIT and VAT would probably make the distribution of the finance burden more equitable. Confronted with a gap between budget allocations and social needs, local governments are resorting to regressive sources of revenue, and raising the cost of social services beyond what is affordable to the poor. It might be necessary to look toward other, more equitable revenue sources to support health care services.

15 Per household (000 VND) Table 7: Taxes Paid, from Poor to Rich VAT Percent of Per Percent of household household all proceeds expenditure (000 VND) Local fees Percent of household expenditure Percent of Quintile all proceeds Poorest Near poorest Middle Near richest Richest Total Note: Local fees include agricultural taxes, irrigation fees, contributions to school construction and furniture, to parent-teachers associations, to construction of health centers, to health funds, to disaster-relief funds, and to funds to assist poor households. Source: World Bank calculations, based on data from the 2002 VHLSS. VII. Challenges Going Forward In March 2001 the Government of Vietnam prepared a Strategy for People s Health Care and Protection One of the objectives for health care reform during the decade was to improve equality in access to and use of health care services to improve quality of health care services in all levels (i.e., commune, district, provincial and national levels). This objective has been incorporated into the MOH master plan. In a recent Ph.D. dissertation by Tran Tuan at the University of Newcastle, 11 two key recommendations are made to achieve this objective: Renovating the health insurance system to regulate the financial relationships between the users and providers. Seeking new approaches to strengthen the quality and efficiency of the commune curative care services. The commune-level health center (CHC), as mentioned in Section III, is considered the foundation of the primary health care system in Vietnam for both preventive and curative care, and is the vital link to guarantee equity of health care. However, people are using the CHCs only for preventive care, and then relying principally on private providers for curative care. But the role of private providers in curative care at the commune level is not adequately addressed in the government s strategy of strengthening curative services. 11 Tuan Tran, Community-Based Evidence About the Health Care System in Rural Vietnam, PhD Dissertation, University of Newcastle, Australia, March 2004, pp

16 In an environment where salaries remain low, CHC staff will not seriously consider improving curative services toward health equity as their key objective. Under the current set of incentives, it is more lucrative for staff to earn fees privately for curative services and not share them with other staff. It then requires first an increase in CHC salaries to disincent private practice; and secondly a change in management systems at CHCs to involve NGOs or contract private providers to run the CHC curative services. VIII. Conclusions As noted in the WHO report, Macroeconomics and Health, 12 about the Millennium Development Goals (MDGs): The importance of the MDGs in health is, in one sense, self-evident. Improving the health and longevity of the poor is an end it itself, a fundamental goal of economic development. But it is also a means to achieving the other development goals relating to poverty reduction. The linkages of health to poverty reduction and to long-term economic growth are powerful, much stronger than is generally understood. In line with Vietnam s high aspirations to reduce poverty and increase living standards, improvements in health care and its financing should be central in light of the quotation above. Among the various financing options, the best alternatives at present seem to be to increase the government budget share to the health sector (particularly in the recurrent budget) and to expand health insurance coverage. While there are clear directions to improve the system of public health insurance and the use of insurance cards, there is also increasing scope for private health insurance provision, given the large number of new insurance companies coming into Vietnam under the US Bilateral Trade Agreement and the WTO. Vietnam is a large country of over 80 million people, so health insurance coverage can target large groups and spread risk easily. The generally robust nature of the Vietnamese people, combined with a culture of healthy food and daily exercise, are an actuarial dream. Just as the Vietnamese people are willing to invest in their education and human capital development, they will be willing to subscribe to group health insurance programs to support their health care as living standards continue to rise. At the same time, poor people need protection from Government in the provision of health insurance, buttressed by correctlyincentivized CHC clinicians. Nevertheless, the goal of universal health insurance coverage is a challenge requiring several additional steps. 12 Macroeconomics and Health: Investing in Health for Economic Development. (Report of the Commission on Macroeconomics and Health, World Health Organization, 2001), excerpted from the Executive Summary.

17 Some of these steps toward universal health insurance cover fall into three main areas: Legislative framework for social health insurance: The path of legislation depends on execution of the Master Plan for the health sector, and would probably require the passage of a full law (rather than simply a decree) on social health insurance, including for the sensitive issues of compliance and enforcement. The growth of the private sector in recent years will lead to increased demand for private for-profit health insurance, which might bypass the state insurance scheme and divert the highest paid workers, leaving the VHI as a fund for low-paid workers and vulnerable groups. 2. Institutional development for extension of coverage: Providing universal health insurance cover in Vietnam will be better achieved by extending existing programs rather than by layering on new programs for new groups. The easiest plan would be to use the existing collection channels for other social security payments from workers to also collect contributions for social health insurance. 3. The role of Government: Payments mechanisms, revised and appropriate user fees, and disincentives against under-table payments need to be established, and part of this change will come about by improved Treasury management systems and networking of local administrative and spending units. At the same time, the role of the Ministry of Health vis-àvis the VHI system needs revisiting, to ensure quality control in the shift of resources toward the insured population. While the health care system has made significant strides, as conveyed by surprisingly good outcome indicators for Vietnam s stage of development, there remain several areas-- particularly in financing options and insurance schemes--that require further attention. Certain areas of immediate concern, such as controlling the HIV/AIDS epidemic, are being addressed head-on by Government and donors. To the extent this same urgency of purpose can be applied to the general health care needs of the population, Vietnam will reap the endogenous rewards of good health in its long-term growth path. 13 See UNDP, Health Care Financing for Viet Nam (June 2003), pp

18 REFERENCES Government of Vietnam, General Statistics Office. Vietnam Household Living Standards Survey (VHLSS) and Quarterly Household Survey (QHS). (Hanoi: Statistical Publishing House, 2003). Government of Vietnam, Ministry of Health. Vietnam National Health Survey, (VNHS). (Hanoi: MOH, 2003). Government of Vietnam, National Committee for Population and Family Planning. Vietnam: Demographic and Health Survey 2002 (VDHS). (Hanoi: NCPFP, 2003). Haacker, Marcus, ed. The Macroeconomics of HIV/AIDS. (Washington D.C.: International Monetary Fund, 2004). Tuan, Tran. Community-Based Evidence About the Health Care System in Rural Vietnam, PhD Dissertation. (University of Newcastle, Australia: March 2004). United Nations, United Nations Common Country Assessment for Viet Nam. (Hanoi: UN, November 2004). United Nations Development Program, Health Care Financing for Viet Nam, Discussion Paper No. 2, (Hanoi: UNDP, June 2003). World Bank, Vietnam Development Report 2005 (VDR 2005): Governance. Prepared for the Vietnam Consultative Group Meeting. (Hanoi: WB, December ). World Bank, Vietnam Public Expenditure Review and Integrated Fiduciary Assessment 2004, Chapter 12: Health Sector Expenditure, preliminary draft. (Hanoi: WB, October 5, 2004). World Health Organization. Macroeconomics and Health: Investing in Health for Economic Development. Report of the Commission on Macroeconomics and Health. (Geneva: WHO, 2001). World Health Organization, Website for Vietnam: (