Health Financing for UHC: promising directions and pitfalls to avoid Joseph Kutzin, Coordinator Health Financing Policy, WHO UHC: everybody s rhetoric but whose responsibility Netherlands Platform for Global Health Policy and Health Systems Research 3 September 2014, Rotterdam
Overview l Who s (WHO s) responsible for what? l Clarifying core concepts l Things we know in health financing: lessons from theory and practice l Applying theory, evidence, and concepts to a core challenge for UHC in LMICs: the scale of the informal economy 2
WHO S (!) RESPONSIBLE FOR WHAT 3
WHO core responsibilities (for policy harm reduction and promising directions) l Conceptual clarity l Dissemination (and application) of what we do know about health financing policy We know more than we give ourselves credit for l Advocacy (for goals, not instruments!) Push for consensus on goals so we can have a meaningful fight about instruments l Aiming for intelligent policy dialog and debate at national and global levels 4
CORE CONCEPTS: UHC AND HEALTH FINANCING POLICY 5
Definition from our World Health Report l "Financing systems need to be specifically designed to: Provide all people with access to needed health services (including prevention, promotion, palliation, treatment and rehabilitation) of sufficient quality to be effective; Ensure that the use of these services does not expose the user to financial hardship" World Health Report 2010, p.6 6
Definition embodies specific aims (UHC goals) l Equity in service use; l Quality; and l Financial protection l for all l Utopian and unattainable?? 7
For relevance, think of UHC as a direction, not a destination l No country fully achieves all the coverage objectives And harder for poorer countries l But all countries want to Reduce the gap between need and utilization Improve quality Improve financial protection l Thus, moving towards Universal Coverage is something that every country can do Practical orientation for policy reforms Relevant to countries of all income levels 8
Don t forget rest of the system; financing can t do it alone l Health financing policy directly affects financial protection; policy on medicines does as well l Many parts of the system (service delivery, human resources, medicines, technologies, financing) combine to influence service utilization l Financing may only be complementary instrument for influencing quality (service delivery, human resources/ medical education, medicines, technologies, information) 9
What is the content of health financing policy/systems? Classifications or models l National Health System (Beveridge Model) l Social Health Insurance System (Bismarck) Doesn t help: sources are not systems (but may be politically valuable) Functions and policies l Collection l Pooling l Purchasing l Benefits and rationing Part of all health financing systems, regardless of label Understand systems (and reform options) in terms of functions, not labels or models 10
Beyond Beveridge and Bismarck l Labels like social health insurance or tax-funded system or community-based health insurance, (or even just insurance!!) are not helpful for understanding what a country is actually doing l Functional approach more useful Disaggregated view of collection, pooling, purchasing, benefits, and wider governance arrangements Relevant to countries at all income levels, but particularly important for countries with large informal sectors We observe a mix, with many countries coordinating different funding sources, channeling general budget revenues into a distinct purchasing agency, etc. 11
People Revenue collec1on Pooling Purchasing Service provision People What kinds of choices need to be and also this: made? Reforms to improve how the health financing system performs This Popula1on, service, and cost coverage; level and distribu1on of u1liza1on, extent of catastrophic and impoverishing payments
We are supporting countries to development health financing strategies for UHC l How to alter the system in a way that Reduces the gap between the need for and use of services, across the population, Improves quality of health services, Improves financial protection l given our starting point in terms of existing configuration of the health system, including coverage arrangements, overall current and expected fiscal constraints, and other key contextual factors, such as labor market (informality), public administration structure (e.g. decentralization), geography and population density, politics, etc.? l Over e.g. the next 5-10 years (time-bound)
Universal means universal, so think in terms of system, not schemes l Essential to get the unit of analysis right (for monitoring and policy) It is not about the % of the population that is in an (insurance) scheme (relevant in some countries but not in others) Effects of a scheme on its members is not of interest What matters is the effect at level of the entire system and population on UHC goals (impact of scheme on system goals) Because a scheme can makes its members better off by making others worse off l Getting this wrong can leads to useless (at best) or misleading (at worst) analysis and recommendations 14
Universal Coverage is not a new concept l Emerged in particular after 2 nd World War Push for social cohesion in Europe Concept of human security in Japan l WHO constitution highest attainable standard for all And later Alma Ata Health for All l Universal Declaration of Human Rights, includes right to medical care l Embedded in many national constitutions 15
Shift to UHC implied profound change in rationale for public policy on health coverage l Health insurance emerged in Europe as a condition of labor (first formalized as public policy under Bismarck) Increasing labor productivity (industrialization) Reducing labor radicalism and unrest Thus, social (compulsory) health insurance for wage earners l After 1945, universal coverage : affordable access to health services as a condition of citizenship or human/ constitutional right Implies a shift away from a purely (direct) contributory approach Also implies compulsion or automatic entitlement Thus, health coverage for the entire population, with explicit policies to fund coverage for the non-salaried population 16
Well, it should have implied a new approach to financing, but l Most advice coming to low and middle income countries was largely based on following Europe s historical path l Approach based on a conceptual flaw with serious consequences in developing countries 17
An approach grounded in the first half of the 20 th century, applied in the 2 nd half (and beyond?) l Starting insurance with the formal sector Improves access and financial protection for the better off Historically in Europe and Japan, coverage grew w/ economic development, growing formalization of the economy and high employment Today, however, LMIC governments face decisions on the rationing of scarce medical technology that European and Japanese governments did not face a century ago Initially covered groups defend their interests, benefits and subsidies, and concentrate scarce skills on their behalf Exacerbates inequalities, fragments the system, and is very difficult to undo 18
What UHC brings to public policy on health coverage l Coverage as a right (of citizenship, residence) rather than as a condition of employment Critically important implications for choices on revenue sources and the basis for entitlement l Shift thinking from scheme to system UHC goals should be considered at the level of the entire population and system (what s good for scheme members may/ may not be good for the entire population) 19
UHC and health financing: summary of key concepts Towards UHC to transform from aspiration to relevant, applicable concept UHC goals matter at level of system, not schemes Health financing: think functions, not labels (Bismarck and Beveridge really are dead) UHC changes the underlying rationale for public policy on health coverage (think/act accordingly) 20
THINGS WE KNOW (AND SHOULD TRUST) ABOUT HEALTH FINANCING 21
WHO diplomacy: The path to UHC should be home-grown l Even if broad UHC objectives are shared by all countries Specific manifestations of problems vary, so how the goals should be operationalized will vary as well Every country already has a health financing system, so starting point for each country is unique Mix of fiscal and other contextual factors also unique l But this should not be interpreted to mean that anything goes we have learned a few things over past 30 years Some do s and don ts in health financing policy Both economic theory and international experience can help to avoid repeating mistakes made by others 22
No amount of wishing or hoping will make this go away l No nation achieves universal coverage without subsidization and compulsion. Victor Fuchs (1996). What every philosopher should know about health economics. Proceedings of the American Philosophical Soc 140(2), p.188. l So no country gets to UHC relying principally on VHI Never has, never will: adverse selection is part of the physics of health financing policy Compulsion or automatic entitlement is essential Issue is compulsory vs voluntary, not public vs private (inserting the word community is not enough to combat adverse selection) l Compulsion refers to revenue source (i.e. some form of taxation) and basis for entitlement (mandatory/automatic)
For example, VHI under the label of CBHI in West Africa: low enrollment, small pools, insignificant funding impact Burkina Faso Benin Mali Togo Number of CBHIs 188 200 168 25 Number of beneficiaries % population covered with CBHI Ave. beneficiaries per CBHI Ave. contribution per capita (XOF) % Total Health Expenditure 256,000 140,000 510,000 16,000 1.5% 1.5% 3.1% 0.3% 1,362 700 3,036 640 3,000 3,000 2,500 1,875 0.3% 0.25% 0.4% 0.04% Source of slide: Alexis Bigeard, WHO West Africa Intercountry Support Team
Similar findings in HEFPA l Subsidies, information and administrative easing did not yield great gains in voluntary prepayment/enrollment in national health insurance programs in the Philippines and Vietnam l And similar to nearly every other country s experience rich or poor with voluntary prepayment (will come to China and Rwanda soon). It is the nature of voluntary health insurance markets 25
Another important message: you can t just spend your way to UHC l To sustain progress, need to ensure efficiency and accountability Strategic purchasing as a critical strategy for this (and also for capacity strengthening, given link between information and resource allocation) l HEFPA and other studies reveal contrast between China and Thailand Both greatly increased public spending and enrollment in health insurance programs Thailand managed overall expenditure growth through coherent policies on benefit design and purchasing China continued to rely on fee-for-service payment with high cost sharing, with no gains in financial protection 26
The promising directions we seek Health financing element Revenue sources and contribution mechanisms Pooling Purchasing Benefit design and rationing policies Stewardship of financing Desirable attributes/directions for reform Towards predominant reliance on compulsory sources of funds (i.e. various forms of direct and indirect taxation) to meet the Fuchs conditions Reducing barriers to redistribution (fragmentation), increasing diversity of health risks within pools Establishing and strengthening incentives for efficiency and quality in purchasing mechanisms Promoting use of cost-effective services and limiting out-of-pocket burden, especially for the poor, and the alignment of these declared policies with other aspects of the system (particularly purchasing) Unified, coherent, goal-driven, and evidence-informed governance arrangements in the financing system 27
Why stylized models and labels don t help l Promoting health insurance doesn t help much unless you address all the financing functions and policies l Taxation is not a system, it s a source of funds l And for the context of most LMICs Towards compulsory sources means more reliance on indirect tax sources Improving purchasing means making such revenues much more flexible than in most public finance systems Means thinking outside our historical boxes, and intensive dialog with public finance authorities on both the level and quality of the budget allocations, while we push for new forms of accountability for the use of these funds (outputs, not inputs) 28
Early 21st century pathways to UHC l Thailand merged several different schemes into one, funded from general revenues, using quasi-public purchasing agency Overcame most but not all fragmentation across schemes, and progressively working to equalize benefits across them Increased service use while reducing catastrophic payments l Mexico addressing its legacy of a fragmented and unequal system by creating a budget-funded insurance program for a defined list of high-cost services for the entire population creating a program of "popular insurance" for informal sector funded largely by central budget transfers to the States, which in turn are responsible for enrolling the population Also reducing gap in per capita funding and benefits across schemes
More examples: slight differences in details due to differences in starting points/context l Ghana and Rwanda have explicit coordination of bottom-up and top-down financing mechanisms to create a virtual national pool, with budget revenues as main source Gains in utilization and financial protection l Kyrgyzstan and Moldova centralized pool of budget funds, combined with new payroll tax, changed from input- to output-based payment, and increased provider autonomy Impressive gains in geographic redistribution and efficiency l Chile (through the AUGE program) and Burundi (through its PBF mechanism) link purchasing to explicit benefits Demonstrable gains in use of defined priority services l India (GSHISs) and Cambodia (HEFs) link existing targeting mechanisms to budget/donor funded schemes for the poor
What they have in common: a functional approach to health financing policy l Recognized that the source of funds need not determine how money was pooled, how services were purchased, nor how benefits were specified l They shifted their thinking from schemes to system Pooled together or coordinated use of different revenue sources (in fact, so do Germany, Japan, Netherlands, Czech Rep, etc.) Introduced elements of performance-related payment from the prepaid funds to address specified utilization or efficiency issues Progressively increased the size of the compulsory prepaid funds while reducing the barriers to redistribution within it New organizations and institutional arrangements were key enablers/agents of change 31
Health financing for UHC: things we know Predominant reliance on compulsory sources (let s agree to trust both theory and evidence on VHI) There s no such thing as enough money can t just spend way to UHC (look at my country!) Lots of documented progress in past 15 years in LMICs that have taken on these lessons Changing the role/use of general budget (including donor) funds have been at the core 32
HEALTH FINANCING FOR UHC AND THE CHALLENGE OF INFORMALITY 33
First, context: public spending on health matters Source: WHO estimates for 2012, countries with population > 600,000
But context of high informality poses critical challenges to realizing the Fuchs conditions l Hard to mobilize much revenue from direct taxation Personal income tax Payroll tax (i.e. SHI contributions) l Hard to collect voluntary prepayment as well Economics of voluntary health insurance (VHI) Gains (tax avoidance) from maintaining informality l Hard for system to distinguish differences in capacity to pay (poor from non-poor) within the informal sector l Not a problem IF system can ensure service guarantees and financial protection on a non-contributory basis E.g. UK, Scandinavia, arguably in Sri Lanka,
The problem of informality l is mainly an issue of fiscal capacity Constrains ability of countries to generate enough public revenues to ensure compulsory sources as main funding source l Other problems and challenges arise due to past policy choices and implementation failures Attachment to contributory-based entitlement Fragmented/segmented pooling reinforces underlying social differences and constrains redistribution (formal sector SHI) Weak purchasing from general budget revenues according to bureaucratic line item practices Unclear and poorly communicated entitlements 36
Then, reframe the problem l In terms of progress towards UHC (goals), and not merely participation in a scheme (instruments) Keep asking the goal questions: WHY is system underperforming relative to UHC goals? Keep pushing to ensure the right unit of analysis: system, not scheme (scheme as a means to an end, not itself an aim) Don t allow an inappropriate specification the problem (inability to get the nonpoor informal sector to contribute) be equated to the solution (targeting the poor and making the nonpoor pay), as there are many other options 37
Broad categorization of financing reform options Non-contributory-based l Universal, budget funded, population-based system UK, Scandinavia, Sri Lanka l Budget-funded for all not covered by explicit social security mechanism Thai UCS, Mexico SP l Entitlement for some groups to range of services India GSHISs, Cambodia HEFs l Universal population guarantee for specific services Burundi free MCH, Chile AUGE Contributory-based l De facto voluntary prepayment for coverage, unsubsidized Indonesia s plan, Nigeria s plan, Malawi s plan, Bangladesh s plan, l Fully (for poor) and heavily subsidized prepayment for coverage (complementarity) Rwanda CBHI, China NCMS, Switzerland, Germany, Netherlands, Czech Rep,
CONTRIBUTORY-BASED APPROACHES 39
Contributory (provocation) 1: unsubsidized contributions by the non-poor informal sector l Advantages Equitable relative to ability to contribute (if you can do it) Minimizes fiscal impact Would not impact on formalization of the workforce (in effect, it would be a means of formalizing the informal sector) l Disadvantages This has never worked anywhere (big disadvantage) Costly to implement, both targeting and revenue collection (so in fact, there would be some fiscal impact) This approach ignores global experience and effectively suggests a government that is not really interested in moving to UHC 40
Contributory 2. Subsidized participation with strong public commitment to universality l This approach recognizes that no country gets to universal population coverage without budget transfers; not everyone can or will contribute l In countries with contributory-based entitlement that have reached universal population affiliation, general budget transfers play key role Japan: 25% of insurance revenues from general budget transfer Hungary: over half of insurance revenues from general budget Germany: small but increasing role for general revenues as government seeks to minimize impact on labor market l Clearly not just an approach for LMICs 41
Challenges of de facto voluntary participation, even subsidized, in LMICs l HEFPA conclusion from analysis in Vietnam and Philippines subsidization of premia by as much as 50%, along with the provision of information on the operation and benefits of insurance, is insufficient to bring enrollment rates anywhere close to the realisation of universal coverage. l Bitran, UHC and the Challenge of Informal Employment it is difficult to enroll informally employed individuals on a voluntary basis, even if they are offered large enrollment subsidies., p.18 l But 2 successes : China and Rwanda. What can we learn from them? 42
China and Rwanda have achieved 90% or more coverage on a contributory basis l Some features in common that distinguish their approach (2 technical, 1 political) Level and mechanisms used for directing budget subsidies, with cost of the premium being less than the perceived value of the benefit, stimulating demand Role of local gov t officials to both inform people and enroll them into the coverage program Strong central governments able to direct local government actors and encourage population to enroll (quasi-compulsory) l Other contextual elements History: population aware that not being covered means risk of high out-of-pocket spending Services must be both physically available and deemed to be worth it by the population
Subsidies, pooling structure, and local gov t roles may explain Rwanda s CBHI (!) success Regulation Finance Payment Advisor Private Health Insurance District Rwanda Social Security Board + MMI Structure of Rwanda Health Insurance Ministry of Finance Rwanda Health Insurance Council National Risk Pool District CBHI Risk Pool Ministry of Health Referral Hospital District Hospital l Government led, from central to local, and not NGO response to system failure l Heavily subsidized on demand and supply sides; contributions important but not main source l Compulsory Sector Adapted from Makaka 2012. CBHI Section Population Health Centre l Pooling across schemes and whole country
Expanding coverage in China s New Cooperative Medical Scheme (NCMS) l Coverage 10% 2003 to 98% 2012 l Explicit mutual leveraging between gov t levels and households in contributions voluntary contribution by individual matched by subsidies from local and central governments (subsidy per person more than tripled between 2008 and 2012, now 80% gov t, 20% families) Aligned incentives: local governments get more funding with higher levels of enrollment l Approach reflects strong political will to increase coverage, and attention to inter-governmental financial relations 45
NON CONTRIBUTORY-BASED APPROACHES 46
Non-contributory (1) universal populationbased, tax-funded coverage for all l Advantages Equitable and potentially efficient (easy to implement, if you can do it) It can work (UK, Scandinavia, arguably Sri Lanka, Malaysia) No direct labor market impact (complete de-linkage) l Disadvantages Fiscal impact (many LMICs can t provide the funds needed) In practice, high risk of over-promising and under-delivering Often linked to passive purchasing and weak accountability (a practical problem, not a conceptual one budget funds can be used strategically) Many countries already have schemes, so not relevant for them 47
Non-contributory (2): fully fund coverage for uncovered from general budget revenues l Well-known examples include Thai Universal Coverage Scheme, Mexico s Seguro Popular Both began with intent to have co-contribution from covered population, but gave up not worth collection cost l Advantages Administratively simple, no targeting, no additional revenue collection costs or bureaucracy for this purpose Evidence shows clearly that this can work l Challenges/potential disadvantages Fiscal constraints limit scope unless strong political commitment May contribute to reducing rate of formalization of labor force Risk of fragmentation if separate scheme for non-contributors 48
Is it fiscally feasible? Key question, and answer is definitely it depends Government health spending with Indonesia s fiscal constraint but other countries priorities GDP per capita Public spending as % GDP Health as % of total public spending Government health spending as % GDP Country Indonesia 4,668 17.5% 5.3% 0.9% Malaysia 15,589 17.5% 6.1% 1.1% Viet Nam 3,398 17.5% 9.4% 1.6% China 8,373 17.5% 12.5% 2.2% Thailand 8,703 17.5% 14.5% 2.5% Australia 40,859 17.5% 16.8% 2.9% Source: WHO health expenditure estimates for 2011, applying different country resource allocation priorities to Indonesia s fiscal level 49
Non-contributory (3). Prioritizing specific groups for tax-funded coverage l Equitable if it can be implemented, and targeting costs can be mitigated if health uses an existing mechanism rather than creating our own l As with any targeted approach, challenge is managing the boundaries Errors of inclusion and exclusion Even if targeting administered by others, connecting the list to the health financing system is not easy 50
Examples l With purchaser-provider split Cambodia s Health Equity Funds: donor and gov t money pays user fees on behalf of poor RSBY and several State schemes in India RSBY: BPL list determines eligibility, but eligible persons must still enroll w/very small fee Andhra Pradesh: all on the list automatically covered l Without purchaser-provider split Simple fee exemptions, often relying on health facilities to determine who can pay and who can t, and with few incentives for effective implementation Puts all burden on facilities and doesn t work very well 51
Non-contributory (4): selective universalization of services (purchasing and benefits) l Make certain services universal/guaranteed for all (in defined target group), irrespective of whether or not they are insured Expands coverage via purchasing and benefits rather than via contribution and population affiliation In line with priorities and capacity, can build on this to increase scope of service coverage guaranteed to all, funded from general revenues l To avoid this being an empty declaration, link benefit to an explicit purchasing mechanism Nigeria: Jigawa State free MCH program, with explicit line in the budget Burundi: transforming President s decree into reality by linking PBF to the declared benefits
Thinking through Burundi s selective free care w/pbf as a path towards UHC Free MCH services Reduce cost sharing and fees What next? Include other services Direct costs: propor8on of the direct costs covered Extend to non- covered Current Pooled Funds Services: which services are covered? Popula'on: who is covered? 53
Reflections on selective universalization of services, especially for poorest countries l Advantages Reflect public commitment to at least something for everyone Brings more explicit budget financing commitment Universalizing certain services from budget revenues can reduce amount needed for premiums to get insured for the rest Avoids the adverse selection and capacity to prepay problems Foundation for UHC built on purchasing rather than contribution and pooling - needs to be an explicit option for consideration instead of sole focus on getting people into insurance schemes l Disadvantages Leaves out potentially important services that people want, with access to these dependent on insurance status or ability to pay 54
Towards UHC in contexts of high Get the question right, or all you will focus on is how to get people to contribute (and you will fail) informality Recognize that at least some degree of de-linkage of entitlement from contribution will be needed Changing role (and often level) of general budget revenues key to all viable options Focus on purchasing and not just (or even mainly) revenue collection 55
SUMMING UP: CORE MESSAGES FROM THIS APPROACH TO HEALTH FINANCING POLICY 56
Things to remember about health financing policy for UHC Conceptual clarity on both goals and systems is essential Size of informal economy is major fiscal challenge for moving towards UHC in LMICs UHC is fundamental shift in foundation for public policy on health coverage Changing role of general revenues at heart of successes ; new dialog w MOFs Trust what both theory and evidence tell us, and don t believe in magic Towards UHC: what problem to solve, not what model to choose 57
www.who.int/whr/2010 Thank you 58