Role of government, social health insurers, and private health insurers

Transcription

1 Financing Universal Health Coverage: Role of government, social health insurers, and private health insurers Universal Healthcare Coverage Meeting Singapore, 10 February 2015 Peter Zweifel, Emeritus, University of Zurich (Switzerland)

2 Financing Universal Health Coverage (UHC): Challenges 1 Growing share of GDP is being devoted to healthcare expenditure 2 Fiscal sustainability of UHC financing in developed countries 3 Creation of sustainably systems in developing countries 4 Ensuring that healthcare is (i) responsive to consumer needs, (ii) efficiently produced (iii) fair and equitable, (iv) adaptable to future technology and supportive of innovation

3 Financing Universal Health Coverage (UHC): Issues Social health insurance (SHI) is feasible in developed countries with their dominant formal sectors In developing countries, Government (G) has played a critical role in the financing and provision of health care in developing countries However, as noted by a World Bank report (2007, p. xviii), The result is underfunded and low-quality publicly financed health services that leave the poor and other households without adequate care and exposed to severe financial risk in the event of illness

4 Objectives of this talk 1 Introduce five economic criteria for assessing the performance of a healthcare system 2 Show the contribution of two players (SHI and private health insurance PHI) to the attainment of this five criteria 3 Suggest a possible role of Government as the regulator

5 The five economic criteria of performance I Criterion No. 1: Provision with goods and services according to consumer preferences An economy that fails to produce those goods and services that are desired by consumers has poor performance The services provided by the healthcare sector need to match citizens preferences Evidently, these cannot be preferences expressed at last minute, e.g. right before a surgical intervention Rather, consumers should have access to their preferred set of medical services at a given contribution

6 The five economic criteria of performance II Criterion No. 2: Static efficiency This criterion states that the goods and services demanded according to criterion No. 1 should be available at the least possible cost However, the set of available healthcare services is expanding fast The criterion should read, For a given contribution paid (tax, SHI contribution, PHI premium), the set of goods and services delivered should be as comprehensive as possible

7 The five economic criteria of performance III Criterion No. 3: Adaptability of production Health care is continuously subject to changes in demand and supply Aging and new health conditions impinge on the demand side New medical technology, lower-cost alternatives of treatment, new forms of organization impinge on the supply side Healthcare providers should adjust in due time to these changes

8 The five economic criteria of performance IV Criterion No. 4: Dynamic efficiency This is the requirement that criteria No. 1 through No. 3 need to be attained continuously over time This is only possible with the right mix of types of innovation, viz. product and process innovations Product innovation creates new (combinations of) characteristics that meet with increased willingness to pay by consumers Process innovation means the same but at lower cost It often involves organizational restructuring, which is usually resisted by healthcare providers

9 The five economic criteria of performance V Criterion No. 5: Income distribution according to merit This criterion (also known as the no rents condition) is of crucial importance (Extreme) example: Consider a physician who (1) does not care about the preferences of patients (2) makes no attempt to provide services at least cost (3) adjusts neither to changed patient preferences nor to new therapeutic possibilities (4) pursues only product innovation while neglecting process innovation Why should he or she care to satisfy the other four criteria of performance if earning a decent income?

10 Relative strengths and weaknesses of SHI and PHI I Aspect Perf. Crit. Assessment Advantage SHI PHI A. Moral hazard, overconsumption 2 Static effic. SHI, PHI face this problem SHI cannot honor higher copay through lowered contribution (solidarity principle) SHI cannot introduce experience rating (bonus/malus) x

11 Relative strengths and weaknesses of SHI and PHI II Aspect Perf. Crit. Assessment Advantage SHI PHI B. Inability of high risks to obtain coverage 1 Pref. match 2 Static eff. Rationing induced by governmental premium regulation High risks would be welcome at (very) high premiums Problem for combination high risk, low income x

12 Relative strengths and weaknesses of SHI and PHI III Aspect Perf. Crit. Assessment Advantage SHI PHI C. Premiums out of reach for important parts of the population 5 Inc. dist. 2 Static eff. This can be true of SHI contribution, too Can reflect excessive expenditure due to moral hazard Government can pay premium subsidy targeted at meriting population (e.g. poor households)??

13 Relative strengths and weaknesses of SHI and PHI IV Aspect Perf. Crit. Assessment Advantage SHI PHI D. Failure to keep up with new medical technology 3 Adaptability SHI need not compete for customers PHI needs to compete if under pressure of competition Government needs to prohibit collusion between PHI x

14 Relative strengths and weaknesses of SHI and PHI IV Aspect Perf. Crit. Assessment Advantage SHI PHI E. Failure to implement organizational innovation (e.g. Managed Care) 4 Dyn. eff. SHI need not strive for efficiency PHI needs to continue offering a favorable benefit/premium ratio SHI hesitant to put pressure on healthcare providers Government to prohibit collusion between PHI x

15 Division of labor between SHI, PH, and Government I SHI PHI Government Remark Provides basic coverage to all Gives choice to consumers Can permit choice between competing SHI schemes Needs to manage competition Coverage for all difficult beyond formal sector Competition within SHI likely to be resisted by SHI

16 Division of labor between SHI, PH, and Government II SHI PHI Government Remark Redistribution Test bed for innovation & efficiency Needs to set aside money for subsidization of premiums Needs to emphasize competition policy Consumer empowerment rather than provider empowerment likely to be resisted by healthcare providers

17 Conclusion and outlook I Evidently, reaping the contribution PHI can make to the performance of the healthcare sector poses several challenges to public policy The first and foremost challenge is to competition policy: PHI firms are not to collude on premiums, lists of preferred healthcare providers, or pharmaceutical benefit The second challenge is to health policy: Deregulate premiums The third challenge is to fiscal policy: Reserve money for subsidizing premiums for those who merit health insurance 14/05/08 / 17

18 Conclusion and outlook II Note: The reforms sketched constitute a challenge to citizens as well Economists tend to forget that choice is not without cost, while returns are uncertain Studying an insurance policy entails time-consuming effort The gain in utility is uncertain because there is the risk of making the wrong choice Government may mandate PHI to always include a simple uniform option in their set of policies Patience also helps: It takes time to learn making choices (and navigating in a market economy more generally!) 14/05/08 / 18

19 Reference A.S. Preker et al. (eds.), Private Voluntay Health Insurance in Devlopment. Friend or Foe? Washington DC: The World Bank, /05/08 / 19