evaluation of health care financing
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Evaluation of Health Care Financing
Dr. Kyaw Swa MyaLecturer/Head
Environmental Health DepartmentUniversity of Community Health
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Outline of Presentation
• Why health care financing?• Overview of health care financing• Evolution of health care financing at various
stages of economic development• Criteria for evaluation of health care financing
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Why is health care financing an important subject?
• Health care is a basic necessity• Many poor cannot afford illness cost• Medical cost for treating serious illness are
beyond the financial means of most households
• Many households face bankruptcy when serious illness strikes
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Philosophical Reason
• Egalitarian philosophies – emphasizes equity, particularly equal access to health care and views health care as fundamental necessity for human well being
• Utilitarian philosophies – views health in the context of how health contributes to a nation’s welfare
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Policy Reason
• The amount of financial resources mobilized for health care and how they are used depend on health care financing policy
• Financing is the principle instrument with which to determine resource flows, distribution of resources, and incentive structures for health providers
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Policy Reason
• Unless a nation has a rational and integrated financing policy, the health care costs of elderly, disabled, and less healthy persons are left for the government to finance and the cost become a heavy financial burden on the treasury
• Determine who will have access to basic health care, what services are offered, and their quality
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Market Failure Reason
• The distribution of health risks are highly skewed and it caused two serious market failures in private insurance market
• Adverse selection – high risk individual more likely to purchase insurance
• Risk selection – insurers exclude high risk individuals and only insure healthier persons for maximum profit
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Macro-environmental Reason
• Economic changes – reduction of government spending in public sector
• Demographic changes – significant increase in the population as a whole and of those over age 60
• Epidemiological changes – double burden? Triple burden?
• Political changes – increased demand and government supply
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Six Building Blocks of a Health System
Source: Strengthening Health Systems to Improve Health Outcomes, WHO’s Framework for Action – WHO 2007
Purposeful change aimed at improving health system performance for:
System Inputs
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Overview of HCF
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HCF policy goals (WHO report, 2000)
• Financial protection• Equity in finance• Equity of access• Transparency and accountability• Quality care and efficient service delivery• Administrative efficiency
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Three basic principles for HCF
• Principle 1 – Raise enough revenues to provide individuals with a basic package of essential services and financial protection against catastrophic medical expenses caused by illness and injury in an equitable, efficient, and sustainable manner
• Principle 2 – Manage these revenues to pool health risks equitably and efficiently
• Principle 3 – Ensure the purchase of health services in ways that are allocatively and technically efficient
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Functions of HCF
• Revenue collection• Polling resource• Purchasing services
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Methods of HCF
• Government revenue e.g. general tax, inflation, earmarked tax
• Social and private insurance• User fees (OOPs)• Community financing
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Exchange Model
• Bilateral exchange model for goods
Consumers Providers
Service
Money
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Exchange Model
• Trilateral Exchange Model for Goods
Consumers Providers
FinancingOrganization
Treasury
Premiums
Payments
Services
User’s fee
Taxes
Evolution of Health Care Financing at
Various Stages of Economic Development
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Stage I (three tired system) Stage II Stage III
Methods Poor Low Segmented finance (Universal coverage)
< $ 1,800 1,800 – 4,800 $ 5,000 – 12,000 $ > 12,000 $
General revenue +
donor
Public health, prevention
Public health services Public health services NHS (UK, N.Z.)
(clinics, hospitals) Medisave, Singapore
(50-60%) (40-50%) (20-40%)
Social insurance
For civil servant
NHI (Canada)
(10-20%) (30-60%) Bismarckian
Private insurance
Negligible (5-10%) (15-40%) Medicare (USA)
Private hospitals & clinics
Self pay (OOPs)
Pharmacists Self pay Self pay
Indigenous providers
(35-45%) (20-40%) (15-25%) (15-25%)
Bangladash Philippines Thailand USA, Singapore
India Indonesia Malaysia Canada
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Criteria for Evaluation of HCF
• Equity – in financing - in provision of health care
• Efficiency – in financing - in provision of health care• Other criteria – quality, sustainability, risk pooling
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Definition of Health Equity• The International Society for Equity in Health
(ISEqH) defined equity in health as “the absence of systematic and potentially
remediable differences in one or more aspects of health across populations or population subgroups defined socially, economically, demographically, or geographically”
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Difference of inequity and inequality
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Determinants of Health Inqualities1. Natural, biological variation2. Differential health-damaging behavior that is freely chosen3. Differential health-promoting behavior that is
freely chosen4. Differential health-damaging or health-promoting
behavior, where choices are restricted5. Differential exposure to unhealthy, stressful
conditions (home, work, etc…)6. Inadequate access to basic social and essential
health services7. Health-related social mobility
Generally perceived as unavoidable or fair
Generally perceived as avoidable or unfair
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Vertical and horizontal equity• Horizontal equity applies to people in the same
status or situation, and people who are alike should be treated in the same fashion, – in other words, equal treatment for equal need
• Vertical equity focuses on the difference between individuals or groups of people, and people who are unlike in relevant respects (e.g. income, health needs), and states that the differences should be treated differently in a just way
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How to measure equity?
• Lorenz curve• Gini coefficient• Kakwani index• Concentration index
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Lorenz Curve
• Lorenz curve is a graphical representation of the proportionality of a distribution (the cumulative percentage of the values). It was developed by Max O. Lorenz in 1905 for representing income distribution
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Lorenz Curve
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Gini Coefficient
Note: Gini Coefficient is a tool for measuring inequality of income. The value of Gini coefficient ranges from 0 to 1. A low Gini coefficient indicates more equal income or wealth distribution, while a high Gini coefficient demonstrates more unequal distribution.
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Gini Coefficient
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The Kakwani index• Is defined as twice the area between the
concentration curve of health payment and the Lorenz curve of household income
• The value of the Kakwani index ranges from -2 to 1
• A negative Kakwani index value indicates the regressive nature of health care payments
• In contrast, a positive value indicates the progressive nature of health care payments
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The Concentration Curve and Index
• The concentration curve graphs on the x-axis the cumulative percentage of the sample ranked by living standards, beginning with the poorest, and on the y-axis the cumulative percentage of the health service use corresponding to each cumulative percentage of the distribution of the living standard variable
• The concentration index is a means of quantifying the
degree of income-related inequality within a specific health variable, for example, health service use, and government health subsidies
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The concentration index• is defined as twice the area between the
concentration curve and the line of equality (the 45-degree line running from the bottom-left corner to the top-right)
• In the case where there is no income-related inequality, the concentration index is zero
• The index takes a negative value when the concentration curve lies above the 45-degree line of equality, indicating disproportionate concentration of health service use or other health variables among the poor, and a positive value when it lies below the 45-degree line of equality
Equity in Health Care Financing
Kakawani Index
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Concentration curve for health payment and lorenz curve for health expenditure, Egypt 1997
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Concentration curve for health payment and lorenz curve for health expenditure, Egypt 1997
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Progressive & Regressive result of previous figure
• Kakawani index (direct tax) = 0.2501• Kakawani index (indirect tax) = 0.1435• Kakawani index (social insurance) = - 0.0532• Kakawani index (OOPs) = 0.0644
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Trends of Kakawani indices of HCF Methods in Thailand (1986 – 1998)
0.2479 0.25450.2309
0.29110.2546 0.2372 0.2269
-0.2273-0.1911 -0.1787 -0.1635
-0.2406
-0.1322-0.1019
-0.064-0.0362
-0.0667-0.0972 -0.108
-0.3176
-0.2327 -0.2317 -0.238
-0.1507
-0.2515-0.2044
-0.254
-0.2227
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
0.4
1986-1988-1990-1992-1994-1996-1998
Direct indirect Both direct & indirect OOPs
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Progressivity of HCF
Equity in Provision of Health Care
Concentration Index
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Selected concentration curves of ambulatory service use among different types of health facilities in 2003
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Selected concentration curves of ambulatory service use among different types of health facilities in 2003
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Selected concentration curves of ambulatory service use among different types of health facilities in 2003
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Selected concentration curves of ambulatory service use among different types of health facilities in 2003
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Concentration curve for health sector subsidies and lorenz curve of household consumption,
Egypt 1997
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Regressive result of previous figure
• Kakawani index (inpatient) = - 0.1785• Kakawani index (outpatient) = - 0.1069• Kakawani index (health centre) = - 0.4797• Kakawani index (total subsidy) = - 0.2124
Efficiency in Health Care Financing and Provision of Health
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Efficiency Measures Overview
1. Perspective
2. Output
3. Type of Efficiency
Function of Health system esp in Health Care Financing
Revenue collection, risk pooling, purchasing
Allocative,Technical/ Productive and
Social Efficiency
It is organized in three tiers
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Efficiency OverviewSociety
Providers PurchasersHealth Plans
Health Care Financing
Individuals
Revenue collection, Risk pooling Purchasing
Technical Productive Social
Per
spec
tive
Out
put
Typ
e
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Allocative Efficiency
A firm achieves technical efficiency when it cannot produce the same output with any fewer inputs
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Technical/Productive Efficiency
A firm achieves productive efficiency when it cannot produce the same output at a lower
cost
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Social efficiency
• Social efficiency is more often the focus for society than for firms and mainly consider for social inclusion
• No person can be better off without making somebody worse off (Pareto optimality)
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Public Finance Challenge
Environmental sanitation
Family Planning
Vector control
Maternal and Child Health
OP hospital referrals
Health center OP curative
OP hospital self-referrals
2nd class IP care
VIP IP care
Kidney dialysis
Open heart surgery
Cosmetic surgery
Water supply
Pure Public Goods
Pure Private Goods
Curative
Preventive
Government policy dictates most resources flow here
Actual funding ends up here
RichPoor
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Public / private collaboration in curative service delivery
SHI -
public/private provision
Financing: Filling the gapsFinancing: Filling the gaps
Pure Public Goods
Pure Private Goods
Curative
Preventive
Self-financing Pre-pmt Schemes
The richThe poor
Pure private provision + service contracts
Public provision & finance
Subsidized pre-pmt Schemes
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References• Andres Vork et. al, 2010. Income related inequality in
health care financing and utilization in Estonia since 2000. WHO health financing paper 2010/3
• Innovative Medicine South Africa, 2009. National health insurance Background brief: Understanding Health Care Financing
• Mara Brain, 2008. Public Health Care: Reform and financing, A big picture
• Owen O’donnel et. al, 2008. Analyzing health equity by using household survey data: A guide to techniques and their implimentations
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References (Contd)• Pablo Gottret & George Schieber, 2006. Health
financing revisited: A practitioner’s guide• Supasit Pannarunothai and Direk Patmasiriwat, 2000.
Equity-directed health care reform in Thailand: The use of macroeconomic indices
• The alliance, 2006. Efficiency in Health Care: What does it mean? How is it measured? How can it be used for valued based purchasing?
• WHO, 2007. Strengthening Health System to improve Health Outcomes: WHO’s framework for action
• William Hsiao, 2000. Health care financing in developing nations
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