Current challenges in delivering social security health insurance

International Social Security Association Afric ISSA Meeting of Directors of Social Security Organizations in Asia and the Pacific Seoul, Republic of Korea, 9-11 November 2005 Current challenges in delivering social security health insurance Current needs and challenges in delivering social health insurance in Asia and the Pacific Mr. Regional Adviser in Health Care Financing WHO Regional Office for Western Pacific Philippines ISSA/ASIAPACIFIC/DM/SEOUL/1-WHO

Current challenges in delivering social security health insurance Current needs and challenges in delivering social health insurance in Asia and the Pacific Regional Adviser in Health Care Financing WHO Regional Office for Western Pacific Philippines Introduction Today, many countries in Asia and the Pacific are struggling to ensure large population access to appropriate health services. The policy objectives to reach broad and universal access require equitable and effective health financing arrangements affordable by all population segments. The Fifty-Seventh World Health Assembly held in May 2005 adopted the resolution that supports universal coverage through general taxation and social health insurance. The Fifty-Sixth Session of the WHO Regional Committee for Western Pacific held in September 2005 endorsed the Strategy on Health Care Financing for Countries of South East Asia and Western Pacific. The strategy provides the framework for increased health investment and effective health spending with greater access, coverage and equity that contribute to the attainment of national and international health goals and objectives such as the Millennium Development Goals (MDG). Through these policy and strategic documents, WHO advocates prepayment health care financing arrangements in the form of general taxation and social health insurance that share risks and pool funds among the population. The Asia and Pacific region has good experience in practicing social health insurance based upon the principles of social solidarity. Some countries such as Japan and the Republic of Korea have achieved universal coverage under compulsory social health insurance. Other countries such as China, India, Indonesia, Mongolia, Philippines, Thailand and Vietnam have introduced social health insurance for the formal sectors and the coverage is now gradually expanding to the informal sector. Interest in social health insurance is on the rise for many other countries such as Cambodia, Federated States of Micronesia, Fiji, Lao PDR, Papua New Guinea, Samoa, Tonga and Vanuatu.

2 Regional experience and evidence show that social health insurance is an attractive and feasible option for low and middle-income countries, if it is appropriately designed. Strong political commitment and government support are necessary conditions for the successful operation of social health insurance. But there are some challenges that countries face in the process of developing and delivering an effective social health insurance mechanism. This paper addresses the main challenges in the extension of coverage under social health insurance in Asia and the Pacific. Description of the situation Developing health systems that assure equitable access to health care for all citizens is one of the most important policy objectives in Asia and the Pacific. The attainment of this policy objective largely depends upon the adequacy, affordability and sustainability of health system financing. The best available evidence shows that health systems, which are mainly funded by private sources, do not ensure equitable access to health services, particularly for the poor and vulnerable. On the other hand, when health systems are funded through general taxation or social health insurance arrangements, there is a greater chance of equity in financing and service delivery. Today, most developing countries in the region need additional financial resources to ensure necessary access and coverage for their population. Social health insurance is one of the options to increase financial resources for health through equitable and affordable contributions. Many experts also agree that social health insurance has a big potential to translate out-of-pocket payments to prepayment. In recent years, social health insurance, because of its potentials in contributing to universal coverage, financial protection, access and equity in financing and delivering health services, has gained more attention in this region. There is an increasing awareness that, as part of a broader social security framework, social health insurance can provide greater financial protection, adequate coverage and equitable access to health services. Addressing equity, access, and coverage is a critically important issue to protect and improve the health status of the people, especially for the poor and vulnerable living in Asia and the Pacific. Today more than one-third of the world s 1.3 billion absolute poor people live in Asia. Health care cost is one of the major contributing factors to the increase in poverty in Asia. Evidence shows that when available health services are expensive at the point of delivery and there is inadequate financial protection, the cost of illness pushes many low-income and vulnerable people into deep poverty. Even modestly charged health services may lead to catastrophic expenses 1 if the frequency of their use is sufficiently high. 1 Catastrophic spending is defined as being 40 per cent or more of a household s effective income, net of subsistence (food) expenditure.

3 Recent national health accounts (NHA) data estimate that Asians pay for services more than anyone else compared to other regions. Health systems in most developing and low-income countries in the region heavily rely on out-of-pocket payments, which account for almost 60-70 per cent of their total health financing. As a result, the highest incidence of catastrophic health spending with large poverty impact is increasingly occurring in Asia and the Pacific. Some studies show that about 100 million people were pushed into poverty in Asia because of the poor health status and cost of illness. The WHO Commission Report on Health and Macroeconomics (CMH) urged all countries and international communities to consolidate their efforts to halve poverty by 2010 by enhancing health investments and public health spending towards scaling up essential health interventions with large impact on improving the health status of the poor and vulnerable. Despite the variety of financing resources, the level of available health resources in the region is relatively low. Many countries spend less than 5 per cent of their GDP on health. Economic constraints often limit the amount of health care available to a population because health care is becoming more expensive both in developed and developing countries. However, to achieve important health goals and objectives, low-income and developing countries need to mobilize additional resources. The CMH policy recommendations for low-income developing countries to increase government spending on health by 1 per cent of GDP by 2007 is an important target to ensure additional financial resources are made available for scaling up pro-poor health interventions. As mentioned earlier, social health insurance is included in policy level discussions in a number of countries as a potential alternative source of financing that provides equitable access to needed health services regardless of the degree of health risks and the amount of contribution. This allows the insured members to pay health insurance premiums to the common pool according to their income, but use the necessary health services according to their needs. However, there are several challenges in delivering and enhancing effective social health insurance coverage among all population segments. Country specific experiences, practices and evidence, the common challenges that limit adequate social health insurance coverage across different population groups are discussed below. Issues and challenges There are several issues and challenges in the extension of social health insurance coverage in Asia and the Pacific. Currently, few countries in Asia and the Pacific have reached universal coverage through social health insurance or prepayment mechanisms. Several low and middle-income developing countries have introduced social health insurance in recent years, but their coverage is still low. It means that the majority of the population in Asia and the Pacific are still not covered adequately by social safety nets for health. Most of the schemes are in the early stages of development. Their main challenge is the extension of coverage to various

4 population segments which are currently excluded from the coverage of existing schemes. The largest population segment excluded from social health insurance coverage and benefit is the rural population and other self-employed people running various smallscale family businesses. Almost all countries, which have introduced social health insurance in the past, initially started it for the salaried sector, including civil servants. It is clear that many important features of the registered and organized labour force such as stable and predictable salary income facilitated the process of designing and implementing social health insurance in the formal sector. Today, several countries have reached near universal coverage for the formal but coverage is still inadequate because the formal sector comprises only a small fraction of the total labour force. Another excluded population segment are family dependants. Currently, many social health insurance schemes in low-income developing countries exclude family dependants of the insured individual. In most cases, the dependants such as the non-working spouse, children and elderly, are recognized as vulnerable and inactive economically. In reality, many women reach old age without having worked at all and the only health insurance coverage for them is through their economically active spouses. Experience, therefore, shows that health insurance coverage and benefit provision of the contributing members do not adequately support the policy objective of universal coverage and population health improvement at large. Some governments policies provide for free or subsidized health care to children and the aged in public health facilities, but because of weak regulation and lack of government budget, such services do not always reach the target population. In this regard, some countries have begun to discuss the possible shift of health insurance unit from a paying member to the family. This policy shift will definitely contribute to broad coverage and benefit provision not only for the insured members, but also for their legal family dependants. The third important population segment excluded from any type of health insurance are the poor and low-income people. The poor people have greater need for health services, but they demand less because of many barriers and limitations. Currently, no country uses health insurance as the main mode of delivery of health service for the poor and vulnerable. But health insurance has a good potential to cover and provide at least the basic health services through effective cross subsidy between the rich and poor. There are some good experiences which show that premium subsidy for the poor and low-income population largely increases health insurance coverage among the poor and the low-income population group. Such insurance coverage allows the poor and low-income people to have access to health services when they get sick or seek consultations in public health facilities without significant financial barriers. It is a very important policy direction for low-income developing countries as long as they recognize the importance of population health improvement and financial protection in their poverty alleviation efforts, which contribute largely to their socio-economic development. The full inclusion of the high-income population group into the common pool will also broaden the potential to cover the poor and vulnerable. The inclusion of higher paid and more educated workers also can increase the pressure on health insurance

5 management to improve the quality of the benefits and transparency in fund management. But many countries still struggle with the situation where most private sector employees and even better-paying public sector workers largely remain outside the social health insurance schemes. Likewise, there are several other issues such as weak regulatory framework, fragmented administration, low premium contribution, poor compliance, and limited portability of coverage that countries need to address in order to achieve adequate and effective coverage among all population. Policy and decision makers are exerting efforts to identify and address these challenges through building up appropriate technical capacity, legislative, financial and administrative structures suited to country specific situations. In the end, it will lead to universal coverage where the whole population is granted with equitable access to necessary health services that would effectively respond to population health needs and improvements at large and contribute to many important national and international health development goals such as MDG. Recent and future reforms Recent and future reform measures towards enhancing the coverage of social health insurance in Asia and the Pacific need to answer several important policy questions. One of them is whether social health insurance is feasible for low-income developing countries. Mongolia s health care reform might be an interesting example to cite. Today, the Mongolian health care system continues to persist against the economic hardship caused by the fundamental socio-economic reforms. Low income, low population density, existence of a large informal sector including nomads, a high dependency ratio and newly emerging social problems such as unemployment and poverty led to multidimensional needs in reforming health care finance. Mongolia introduced social health insurance in 1993 and the whole development process has had successes, failures and challenges. However, appropriate policy measures played a critical role in the establishment of a social health insurance scheme as a new funding source. High government commitment and targeted subsidies ensured near universal coverage in a short period of time. Currently, almost 80 per cent of the population is covered by social health insurance. Under health insurance, individuals are relatively well-protected from high financial burdens related to medical care costs including catastrophic illnesses. Analysis of the achievements and challenges of social health insurance development in Mongolia may contribute to the discussion on many important aspects of social health insurance development including the issue of whether a developing and lowincome country can commit to universal coverage through a contributory prepayment mechanism under the given conditions. Mongolia s experience suggests that it is feasible if there is high political commitment and financial support for the low-income and vulnerable population groups. Another related policy question would be likely where universal coverage is achievable when the labour force has a large informal sector. It is expected that the informal sector will continue to play a major role in economic development in many developing countries in Asia and the Pacific. As regards to universal coverage, two main tendencies of social health insurance development are observed in the region.

6 First, some countries pursue health care financing reform to support broad population coverage through the existing social insurance schemes. In such situations, the overall intention is to increase the contribution base through enforcement of registration of small businesses, including self-employed entrepreneurial activities of vendors or service providers. At a policy level, it is intended to achieve universal coverage through a single national scheme that covers both the formal and informal sectors. The second tendency is that some countries with large informal sectors are initiating innovative approaches to develop community-based health insurance pilot schemes or other social safety net approaches exclusively for the informal sector. This is mainly due to the challenges in extending coverage to the informal sector, slow progress in expansion, poor quality of services, inadequate budgetary financing, unmet health demand and needs of the people engaged in the informal economies. There are also some other reasons linked to the management capacity of the social health insurance schemes to diversify its operation to remote provinces and rural settlements. Concerns with the links between poverty and health have also demonstrated the necessity to provide access to health care for the poor and vulnerable living in rural provinces and communities. In many cases, effective and equitable health care financing options such as community or micro health insurance schemes are seen as a feasible way to make services available while at the same time, to provide financial protection for the poor and vulnerable. Ongoing health care financing reforms also demonstrate their potentials to be both pro-poor and effective to combat poverty caused by sickness. But evidence shows that the key factor in the coverage of the low-income, self-employed and informal sector is the subsidization of their contributions by government. Experiences show that it is reasonable to develop social health insurance schemes for the formal and informal sector populations, through a national approach, or through a parallel approach, promoting compulsory social security schemes for the salaried population and community health insurance schemes for the rest of the population. In both cases, the major issues influencing enrolment and sustained membership by the informal sector is the affordability of contributions, with the family as the unit of coverage, flexibility in collection and a balanced range of health care benefits. But the formal commitment by government to support the poor and other vulnerable populations is critically important to ensure that all population segments are covered under such schemes. Another essential factor to reach universal coverage is good governance. Revenues from contributions are dependent on honest reporting of salaries by employers and income or assets in the case of the self-employed, and these are dependent on governance. The next important question can be whether specific provider payment methods have any impact on increasing the potential for the extension of coverage. Despite the tight controls that are imposed on the levels of income of providers, fee-for-service has remained the preferred method for providers in most countries in the region.

7 The social health insurance schemes, however, are keen to shift to other mechanisms, such as more case payment and capitation. The capitation method, which facilitates cost control and requires a less complex and less costly billing system, has therefore been adopted by several new social health insurance schemes. Finally, many countries well recognize that the efforts to reach the critical mass of coverage through social health insurance require good coordination and regulation that would ensure the optimal spread of risks and pooling of funds through the principles of solidarity by the sharing of interest between all population segments. Universal coverage cannot be reached without a sound legislative base and regulation and without reaching a broad consensus on social health insurance development and operational principles or without effective translation of long-term policy commitments into concrete actions. Available knowledge, expertise, best practices and experiences across countries and regions will help to identify the issues and challenges, to achieve universal coverage in a given socioeconomic situation. Conclusion Health care is becoming more expensive both in developed and developing countries in Asia and the Pacific. Lack of public financing, extensive use of various cost recovery and cost sharing initiatives, and out-of-pocket payments are beginning to play a dominant role in total health care financing in most low-income developing countries in the region. Even modestly charged service fees in public health facilities lead to catastrophic health expenses because of poor regulation and monitoring user fees. Such private payments create equity concerns in accessing health services if there are inadequate financial protection or social safety mechanisms. Health services are available only to those who can afford to pay or those who are covered by health insurance. The last, and the most preferred option, contributes to equity and access among large population because of the risk sharing and fund pooling potentials. Broad population coverage under social health insurance is a critical issue in delivering social health insurance. But several challenges exist. Even though social health insurance have been introduced in a number of countries in the region, large population segments such as informal sector employees, self-employed workers, family dependants, the poor and vulnerable are still excluded from the existing social health insurance schemes. Ensuring universal coverage under social health insurance is necessary for many low-income countries to achieve many important national and international health goals such as the MDG. But the existing challenges require more innovative approaches and action that would lead to gradual extension of health insurance coverage and benefit through effective regulatory and management mechanisms.

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