Key issues in health care financing

1. Key issues in health care financing Di McIntyre

2. Objectives • Introduce some key concepts • Introduce a useful analytic framework • Illustrate the analytic framework with some LMIC experience

3. Financial protection Ensuring that no household is impoverished because of a need to use health services

4. Universal coverage A health system that provides all citizens with adequate health care at an affordable cost

5. Equitable financing • Contribute according to ability-to-pay and benefit according to need (capacity to benefit) • Cross-subsidies: • Income cross-subsidies (rich to the poor) [proportional or progressive?] • Risk cross-subsidies (healthy to the ill) • Cross-subsidies in overall health system

6. Other key considerations • Efficiency: • Level of revenue generation • Costs of revenue collection & administration • Promotes technical & allocative efficiency • Sustainability: • Stability • Ability to expand over time • Feasibility

7. Framework (Kutzin) • Revenue collection • Pooling of funds • Purchasing

8. Revenue collection • Sources of funds: • Balance between external & domestic sources • Balance between companies & individuals • Contribution mechanisms: • Structure of contributions • Type of collecting organisation

9. Contribution mechanisms • General taxes: • Direct taxes usually progressive, particularly in LMICs • Indirect taxes usually regressive, but slightly progressive in some LMICs • Share of these taxes determines overall progressivity of tax revenue • Key issue: Fiscal space to increase spending on health care (debt burden)

10. Contribution mechanisms • Private voluntary health insurance: • If major component of funding, tends to be regressive • If ‘top-up’ and in many LMICs, ‘progressive’ (only the rich contribute, but also benefit) • Mandatory health insurance: • Depends on structure of contributions (flat amount or flat % contribution, maximum cap  tends to be regressive

11. Pooling of funds • Objective: Difficult to predict risk of an individual falling ill, but easier for a large group (pooling or spreading risk) • Key issues: • Coverage and composition of risk pool: Size of the population and the socio-economic status of groups covered • Mechanisms to allocate resources from pooling to purchasing organisations

12. Risk pool • Out-of-pocket payments and medical savings accounts allow no pooling (outside household) • Single, universal pre-payment funding mechanism maximises risk pool • Fragmented pools: • Sustainability and equity problems (reinsurance) • People ‘fall through the cracks’

13. Expanding risk pools • Voluntary or social health insurance  national health insurance: • Level of income & economic growth rate • Size of formal sector and urban population • Level of social solidarity • Resistance by those currently covered (changes in benefit package, contribution rates, etc.) • Opting out

14. Allocation mechanisms • Risk-equalisation between different insurance schemes: • Risk profile of each scheme (age, gender, chronic illness, etc.) • Risk-adjusted capitation to cover costs for standard benefit package • Needs- based allocation of tax (and donor) funds

15. Systemic view Global Fund ARV SHI reimbursements Matching govt. grant CBHI contributions OOP user fee revenue Tax & SWAP Rural district Urban district

16. Purchasing • Choice of benefit package: • Which services: low-frequency & high-cost; high-frequency & high cost; comprehensive • Type of service provider: Public, NGO and/or private-for-profit (accreditation and contracting issues) • Route for accessing services: referral routes, PHC gatekeepers (rather than co-payments) • Affordability and sustainability

17. Reimbursement mechanisms

18. Context and process • No single ‘right’ way of funding health care – depends on what exists in the country and what is feasible • Process of developing and implementing health care financing policies are critical – need to be aware of key stakeholders’ views and to reduce opposition & engender support