Unofficial payments and health financing policy: WHO s perspective Joseph Kutzin WHO Regional Advisor, Health Systems Financing Visiting Fellow, Imperial College Centre for Health Management 8 th annual public policy forum: the flow of money in health care 23 August 2007 Riga, Latvia
Outline of presentation WHO s approach: goals and functions of health financing and the concept of sustainability Unofficial payments and policy objectives Health spending patterns in Europe: Latvia in context Summary messages for consideration by policy makers and the public
WHO s approach to health financing http://www.euro.who.int/document/rc56/ebd01.pdf Health financing policy analysis and viable options for reform Descriptive framework Policy objectives Fiscal context Starting point, direction, and reality check
Normative policy question What should be the objectives of health financing policy? In other words, what should health financing systems (and related reforms) be trying to achieve?
Proposed generic policy objectives (and assessment criteria) Health financing reforms should improve Equity in funding the system (who pays) and the distribution of spending and services (who gets) Protection of the population against financial risk Transparency and accountability Quality and efficiency through better incentives Efficiency in the administration of the system to the extent that can be sustained within the limits of available resources
Measuring the objectives in Estonia: changes in financial protection over time Percent of households incurring high level of outof-pocket spending Percent of households impoverished by out-ofpocket health spending Percent of households 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 3.4% 6.4% 7.4% Percent of households 1.5% 1.2% 0.9% 0.6% 0.3% 1.0% 1.3% 1.4% 0.0% 1995 2001 2002 0.0% 1995 2001 2002 Source: Habicht et al. (2006). Detecting changes in financial protection: creating evidence for policy in Estonia. Health Policy and Planning 21(6): 421-31.
The health financing system: functions and policies (not labels and models) People Revenue collection Pooling Purchasing Service provision People What are the sources of funds, and how are they collected? How are funds accumulated on behalf of the population? How are providers paid? What are the entitlements and obligations of the people?
Implications All financing systems (to varying extents) share the proposed objectives assess performance by how well they do this job, not by what they are called Germans are not more insured than the British just because their system is called insurance Be committed to the objectives of health financing, but not to any particular institutional form or model Policy options should be justified by a plausible link to improving attainment of policy objectives
Informal (unofficial) payments and policy objectives
Informal payment is a form of out-ofpocket payment Formal/legal out-of-pocket payments Private purchase of services from private suppliers (e.g. buying medicines from private pharmacy) Official fees and co-payments in health facilities Informal/unofficial out-of-pocket payments Informal payments directly to health workers in health facilities ( under-the-table payments) Informal payments made for inputs in health facilities that are supposed to be provided by the health system (e.g. purchase of drugs and medical supplies needed for hospitalization)
Informal payment: definition Definition: a direct contribution, which is made in addition to any contribution determined by the terms of entitlement, in cash or in-kind, by patients or those acting on behalf of patients, to health care providers for services which the patients are entitled to (Gaál, 2004) An increasing number of countries have acknowledged this problem; few have successfully addressed it
Out-of-pocket payment and policy objectives Widespread reliance on patient payments is contrary to health finance policy objectives Access depends on ability to pay rather than medical need: contrary to equity in use Health care costs pose risk of impoverishment: contrary to financial protection Out-of-pocket payment a greater burden on the poor: contrary to equity in distribution of financial burden
Additional policy problems associated with informal payments Transparency: mismatch between official and real entitlements (have to pay more than officially required) Expected effects of provider payment incentives may not be realized if informal payments have a significant impact on provider behavior Equity effects unclear (relative to formal copayments)
The motivation of patients: informal payment in Hungary Coercion as the manifestation: of distrust in the health care system (e.g. feel safer if money is given) of unclear entitlements and extra services (e.g. am I entitled to choose my doctor? Or have to pay?) of direct pressures (sometimes subtle) from providers (e.g. delays in receiving documents) of misinterpretation of conventional situations (misreading what may be a normal part of doctorpatient interaction as a request for money) Gaal, P, M McKee (2005). Fee-for-service or donation? Hungarian perspectives on informal payment for health care. Social Science and Medicine 60(7): 1445-1457. Gaál P (2006): Gift, fee or bribe? Informal payment in Hungary. In Transparency International, Global Corruption Report 2006.
Are unofficial payments a policy concern in Latvia? To what extent is informal payment motivated by gratitude, coercion, or need to provide unfunded inputs? Is it a gift or fee-for-service? (freely given or required?) What is the magnitude of the problem? (big enough to effect the behavior of providers and patients?)
Public and private health spending patterns: Latvia in the European context
Accounting for government spending on health Gov t health spending GDP Government health spending as share of the economy = Total gov t spending GDP Fiscal context X Gov t health spending Total gov t spending Public policy priorities
Fiscal context: Latvia has a small state relative to most of the EU (ave for Baltics) 60% 50% 40% 30% 20% 10% 0% TJK GEO TKM ARM KAZ KGZ ALB AZE UZB MDA IRL LTU CHE MKD LVA ROU RUS UKR EST TUR SVK ESP BGR BIH GBR LUX CYP SCG POL HRV BLR PRT ISL MLT SVN NOR DEU NLD ITA HUN GRC AUT FIN BEL ISR CZE FRA DNK SWE Total government spending as % GDP Source: WHO estimates for 2003, European Member-States w population > 600,000
Priorities vary widely across the region; Latvia appears to accord very low priority to the sector in public resource allocation 20% 15% 10% 5% 0% AZE GE TJK ARM CYP UZB KAZ KGZ ALB RUS LVA POL AUT BGR GRC UKR BLR ROU FIN EST ISR BIH MDA HUN BEL NLD CZE TKM ITA SVK DNK SW ESP LUX HRV SVN TUR PRT FRA LTU MLT GBR SCG MKD IRL DEU NOR ISL CHE Health as % total government spending Source: WHO estimates for 2003, European Member-States w population > 600,000
Result: low public spending on health compared to most of EU and neighbors 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% AZE TJK GEO ARM KAZ KGZ UZB TKM ALB CYP LVA RUS UKR ROU MDA BGR EST POL BIH BLR LTU GRC AUT SVK TUR ESP FIN IRL MKD HUN ISR NLD LUX BEL ITA HRV SVN PRT CHE CZE GBR SCG MLT DNK FRA SW NOR DEU ISL Public spending on health as % GDP Source: WHO estimates for 2003, European Member-States w population > 600,000
High burden of out-of-pocket spending a symptom of low public spending? (Yes, at least in part ) 80% TJK AZE GEO 70% OOPS as % total health spending 60% 50% 40% 30% 20% 10% ARM KGZ ALB UZB KAZ TKM CYP LVA RUS MDA BGR ROU UKR EST BIH GRC CHE ISR PRT POL LTU ESP HUN BEL BLRAUT TUR ITA FIN MKD HRV IRL SVK GBR SVN NLD CZE LUX SCG MLT DNK NOR ISL SWE FRA DEU R 2 = 0.80 0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% Public spending on health as %GDP Source: WHO estimates for 2003, European Member-States w population > 600,000
Back to policy objectives Health financing reforms should improve Equity in funding the system (who pays) and the distribution of spending and services (who gets) Protection of the population against financial risk Transparency and accountability Responsiveness to the choices made by citizens Quality and efficiency through better incentives What about sustainability? Efficiency in the administration of the system
Re-interpreting sustainable health financing Proposal is to treat fiscal sustainability as an obligation, but not as a health finance policy objective. Implications of this are: Aim of policy is not just to balance revenues and expenditures, but rather to improve performance to the extent possible subject to the constraint of maintaining financial balance Sustain performance, not just the system Absence of a deficit is not necessarily a success
All systems ration: there is no escape from tradeoffs Fiscal sustainability requirement Explicit rationing Implicit rationing Price (formal copays & service exclusions) Non-price (wait lists) Price (informal payments) Non-price (service dilution, delay, denial) access barriers, financial burden access barriers, dissatisfaction access barriers, financial burden, lack of transparency Less health gain, dissatisfaction
Fiscal sustainability efficiency All systems ration, but different approaches have different implications for policy objectives Increases the attention that must be paid to system efficiency: getting the most, in terms of progress on health finance policy objectives, within the constraints of available resources Implies need to take a comprehensive approach to reform rather than just cutting the budget
Selected summary messages for your consideration
Addressing out-of-pocket payment may be more important than just focusing on unofficial payments Need better understanding of composition of out-of-pocket payments Just informal, or also things like payments for outpatient medicines? Need to monitor and analyze the consequences of these payments Just individual choice, or real problems of financial protection and equity (WHO supporting work on this soon in Latvia, similar to the analyses we supported in Estonia)
Continue what you are doing today Foster informed and intelligent public discussion about your problems and priorities Why are unofficial payments an issue in Latvia? What is the nature of this problem and how to address it? Why are out-of-pocket payments so high in Latvia compared to the rest of Europe and our neighbors? Should we devote a larger share of our public budget to health care? Etc.
Be systematic Systemic analysis will help you to develop comprehensive and systematic approach to address unofficial payments (and other challenges you are facing) WHO can support and facilitate this process
Thank you! http://www.euro.who.int/document/rc56/ebd01.pdf http://www.euro.who.int/document/rc56/rbd01.pdf Regional Committee for Europe Fifty-sixth session Copenhagen, 11 14 September 2006 EUR/RC56/BD/1 26 June 2006 Approaching health financing policy in the European Region 61099 ORIGINAL: ENGLISH This paper has been developed as a follow-up to the launch of the European health systems initiative by the fifty-fifth session of the Regional Committee (resolution EUR/RC55/R8). The aim of this background paper is to elaborate an approach to health financing policy that countries can adapt to their own national context. This entails: (1) specification of a set of health finance policy objectives, grounded in WHO s core values; (2) a conceptual framework for analysing the organization and functions of the health financing system; and (3) recognition of the way in which key contextual factors, particularly fiscal constraints, affect a country s ability to attain policy objectives or implement certain types of reforms. Because of the great diversity of national contexts within the Region, there is no blueprint no particular model or system of financing that is appropriate for all countries. Hence, while the approach is fundamentally grounded in a common set of values and objectives, it permits analysis and recommendations that are countryspecific and realistic. Key messages for decision-makers are to identify and address the harmful consequences of fragmentation in financing arrangements, and to ensure that the instruments of health financing policy are consistently aligned with the objectives.