Health Care Financing

Dr. Nilar Tin
Director (Planning)
Department of Health
What is a Health System?
What are the Goals?
What are the functions?
What is a Health System?

Health systems
consist of all
organizations, institutions and
resources that are devoted
to
prod...
Health system functions and goals
Goals
Good health outcomes
Responsiveness
Fairness in financing

Functions
Service deliv...
Health Systems, Programs and Determinants
Health Systems, Programs and
Interrelationship

Governance,
financing, Determina...
Concept: Health care financing is a process of
mobilizing, allocation and utilization of financial
resources in health sec...
The objectives of HF are
 to maintain and access to all basic health
services
 to improve quality of services generally...
Health

financing

and

its

sub-functions

Three functions:
Revenue collection



Risk pooling



Purchasing



In hea...
Questions that need answers for understanding HF
• Are resource mobilization mechanisms equitable?
Do the wealthier subsid...
I. Resource Generation
1.Amount of Resources
Health expenditure per capita:
% of government budget to health care
% of GDP...
Health expenditure per capita:
% of government budget to health care
-is being connected with Life Expectancy at birth
tre...
Health care expenditure depends upon
-

Income or economic development

-

Political will and commitment

-

System of res...
Us
by er ch
a
sec publi rges
t or c
CC
S

at e O O P
riv orP ct
se

Pu
b

Int
e
NG rnati
Os ona
l

lic
-T
ax
es

2.Sources...
1.Public Sources of Financing
• Governments raise funds through taxes, fees,
donor grants, and loans.
• MOF allocates gene...
a)Tax based financing
• Typical source of public fund-direct taxation of
individual and business incomes, and other kinds
...
b) User Fee system (CCS in Myanmar)
• Public facilities receive government subsidies
but lack funds to function appropriat...
c) User Fee system (Pre paid card)
• Pre-paid system is based on pooling of risks
• Small amount of contribution from comm...
Government Financing of Health Care
• Includes health expenditure of all levels of
government
• Unlike private markets Gov...
2. Private Sector-Direct payment to providers

•
•
•
•
•
•
•
•

For Profit only
Expensive
May have quality
Not directed to...
a).OOPs Out-of-Pocket payment
• “Out-of-pocket” expenditure on health by
households includes all types of health-related
e...
3. External funding for health-Donors/Lending
Agencies
• Multilateral donors –give a gift /grants: Public
donors WHO,UNICE...
External Sources-International NGOs
• Intermediaries between Donors/Lending
Agencies and the Recipient Countries
Donor

lo...
4. Health Insurance
• A system in which prospective consumers of care make
payment to a third party in the form of health
...
4. Health insurance is a mixed source of finance
It draws contributions/premiums from both
employers, employees and someti...
2. Private insurance: provides coverage for groups
or individuals through third party payer
institutions operating in the ...
Insurance markets suffer from market
failure
Due to
 Moral Hazard
 Adverse Selection
 Imperfect information
Big pool of...
5. Community based Health Insurance
• Community health insurance is
• “any not-for-profit insurance scheme aimed
primarily...
Community Based Health Insurance
Models of CBHI

C
B
O

Insurer

Reimbursement
Provider

N
G
O

Premium

Premium Community...
Community Based Health Insurance
Models of CBHI
NGO/CBO + Insurer
Fees

Community
Insurance model

Provider

Premium

are
...
Community Based Health Insurance
Models of CBHI

Premium

er a C

Provider + Insurer

Community
HMO model
CBHI Strengths
 Better access to health care for the poor
 More responsive to client needs since
organized along communi...
CBHI Weaknesses
 Limited resources, small size and insufficient
coverage: thus offer limited protection for
members
 Sus...
CBHI Weaknesses
• Often need outside financial and management
support
• Limited benefit to the poorest part of
population;...
Com posi t ion of t ot a l h ea l t h spen di n g
i n SEA R

27%

3%
4%

66%

OOPs

socia l in su r a n ce

pr iv a t e in...
Methods of Financing

• Universal Coverage: All residents are
covered
• Equal Access: All members have equal
access to hea...
• Universal Coverage:
Every one will be provided with a service when a
need arisen
Out of pocket payments at the point o...
Factors controlling the Impact & Efficiency
of the Health Care System
 1. Number of Health Workers
 2. Training of Healt...
Factors controlling the Impact & Efficiency
of the Health Care System
 6. Stock of Capital Equipment
 7. Technologies us...
Myanmar Health Expenditure (2002-05)
 Total Health Expenditure=26 billion kyats
 Total health expenditure as % of GDP= 2...
Health care providers and population in
Myanmar
• Access to medicine????? <2% of GDP use for
health
• Health care for all,...
National Health Policies on Financing

 To explore and develop alternative health
care financing system
 To augment the ...
Myanmar Health Care Financing
We’ve doneTax based health care-free
SSB- for employees
Public/private mix
CCS –with exempti...
Health carefinancing2010 common module phd 26 feb
Health carefinancing2010 common module phd 26 feb
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  • This includes efforts to influence determinants of health as well as more direct health-improving activities:
    A health system is therefore more than the pyramid of publicly owned facilities that deliver personal health services.
    It includes for example a mother caring a sick child at home, private providers, behavior change programs, vector-control campaigns, health insurance organizations, occupational health and safety legislation.
    It includes intersectoral action by health staff: eg encouraging the ministry of education to promote female education, a well-known determinant of better health, and the ministry of transport to promote the use of safety belts to prevent severe injury to the driver and passengers of motor vehicles
  • Service delivery: preventive and curative personal health services; primary, secondary services and tertiary services (public/private/voluntary NGOs)
    Public health service; services for specific population groups such as children and women, or for specific conditions such as tobacco or alcohol problems
    Resources: trained staff, commodities, facilities and knowledge
    Financing: sources of funds such as user fees, insurance, tax,
  • Private sector- for profit
    User charges-public/private
    Social Health Insurance- looks at equity, efficiency, universal accessibility
    Community contributions- donated hospitals, medicines, equipment etc
    Private households- out of pocket
    Government- previously fee for service. Thru’ taxes, Use as % of GDP for health 2% in Myanmar
  • Public goods-provision of safe water and sanitation, vector control activities, preventive measures for infectious and parasitic diseases.
    Private goods-non payers are not able to enjoy private goods
    Externalities: eg immunization got herd immunity
    AntiTB Treatment, STD reduce the risks of other people
  • Public goods-provision of safe water and sanitation, vector control activities, preventive measures for infectious and parasitic diseases.
    Private goods-non payers are not able to enjoy private goods
    Externalities: eg immunization got herd immunity
    AntiTB Treatment, STD reduce the risks of other people
  • Public goods-provision of safe water and sanitation, vector control activities, preventive measures for infectious and parasitic diseases.
    Private goods-non payers are not able to enjoy private goods
    Externalities: eg immunization got herd immunity
    AntiTB Treatment, STD reduce the risks of other people
  • Public goods-provision of safe water and sanitation, vector control activities, preventive measures for infectious and parasitic diseases.
    Private goods-non payers are not able to enjoy private goods
    Externalities: eg immunization got herd immunity
    AntiTB Treatment, STD reduce the risks of other people
  • Public goods-provision of safe water and sanitation, vector control activities, preventive measures for infectious and parasitic diseases.
    Private goods-non payers are not able to enjoy private goods
    Externalities: eg immunization got herd immunity
    AntiTB Treatment, STD reduce the risks of other people
  • Public goods-provision of safe water and sanitation, vector control activities, preventive measures for infectious and parasitic diseases.
    Private goods-non payers are not able to enjoy private goods
    Externalities: eg immunization got herd immunity
    AntiTB Treatment, STD reduce the risks of other people
  • Premiums are generally based on income regardless of actual risk.
  • Premiums are generally based on income regardless of actual risk.
  • Moral hazard- those insured tend to overuse insured services
    Adverse Selection- those who anticipate needing health care eg with diabetes, IHD will choose to buy than healthy ones—leads to higher costs, lower profits higher premiums and even fewer users in future.
    Capitation-fixed (usually annual payment) for each person on a physician’s list
    Deductibles- is a threshold amount incurred directly by the patient before the third party payer picks up coverage. Eg the first 75$ per year in covered outpatient’s programme
    Co-payment- refers to sharing of financial responsibility for the health service cost by patient and third party payer.
    DRG-Diagnosis related groups- started in 1983-is based on fixed hospital payment rate for 470 treatment classifications
  • Moral hazard- those insured tend to overuse insured services
    Adverse Selection- those who anticipate needing health care eg with diabetes, IHD will choose to buy than healthy ones—leads to higher costs, lower profits higher premiums and even fewer users in future.
    Capitation-fixed (usually annual payment) for each person on a physician’s list
    Deductibles- is a threshold amount incurred directly by the patient before the third party payer picks up coverage. Eg the first 75$ per year in covered outpatient’s programme
    Co-payment- refers to sharing of financial responsibility for the health service cost by patient and third party payer.
    DRG-Diagnosis related groups- started in 1983-is based on fixed hospital payment rate for 470 treatment classifications
  • Health carefinancing2010 common module phd 26 feb

    1. 1. Health Care Financing Dr. Nilar Tin Director (Planning) Department of Health
    2. 2. What is a Health System? What are the Goals? What are the functions?
    3. 3. What is a Health System? Health systems consist of all organizations, institutions and resources that are devoted to producing health actions
    4. 4. Health system functions and goals Goals Good health outcomes Responsiveness Fairness in financing Functions Service delivery Resource generation: HWF, supplies, information Financing Governance and stewardship
    5. 5. Health Systems, Programs and Determinants Health Systems, Programs and Interrelationship Governance, financing, Determinants Interrelationship resource Health Social, creation, service Systems economic, provision cultural, environmental, geographical Health and political Outcomes Health Programs Health Determinants Promotive, preventive, curative, rehabilitative
    6. 6. Concept: Health care financing is a process of mobilizing, allocation and utilization of financial resources in health sector. Resource Resource Resource generation pooling payment 1. Ensuring adequate and sustainable amount of resources to health care 2. Reducing OOP health expenditure, removing financial barriers to care, and reduce catastrophic effect and impoverishment due to illness 3. Improving efficiency and effectiveness of health care financing
    7. 7. The objectives of HF are  to maintain and access to all basic health services  to improve quality of services generally so that utilization of health services and facilities will increase-increasing efficiency of resource utilization  to create incentive for providers and consumers to use more services efficiently through various payment methods
    8. 8. Health financing and its sub-functions Three functions: Revenue collection  Risk pooling  Purchasing  In health financing, funds(revenues, contributions.) are collected  accumulated in (a) pool (s)  allocated to health services/providers 
    9. 9. Questions that need answers for understanding HF • Are resource mobilization mechanisms equitable? Do the wealthier subsidize the poor? • Is the distribution of resources equitable? Efficient? Or are wealthier populations benefiting more from public financing than are poor populations? • Do provider Quality? payments reward efficiency?
    10. 10. I. Resource Generation 1.Amount of Resources Health expenditure per capita: % of government budget to health care % of GDP (Gross Domestic Product) on health Pakistan Indonesia, Lao PDR, Philippines Thailand. Malaysia India Vietnam China Mongolia, Korea, Taiwan Japan -2.4% -3% -4% -4.8% -5.4% -5.6% -6% -8%
    11. 11. Health expenditure per capita: % of government budget to health care -is being connected with Life Expectancy at birth trends %HE Lao PDR Singapore India Vietnam ROK Japan LE0 3 3.6 4.8 5.4 6 8 62 80 64 72 78 84
    12. 12. Health care expenditure depends upon - Income or economic development - Political will and commitment - System of resource allocation - Not only how much being used but - How effectively to spend/ to invest in health care - Using for infrastructure? - Using for curative? - Using for preventive? Or promotive care?
    13. 13. Us by er ch a sec publi rges t or c CC S at e O O P riv orP ct se Pu b Int e NG rnati Os ona l lic -T ax es 2.Sources of Financing for Health ivate Pr ealth ce H n sura In Co mm HI sch unity bas em e ed Soc ial He Ins alth ura n ce
    14. 14. 1.Public Sources of Financing • Governments raise funds through taxes, fees, donor grants, and loans. • MOF allocates general tax revenue to finance MOH budget. • Govt health budgets -based on previous year’s budget • -adjusted annually to account for inflation -budgets usually have separate line items (for personnel, hospitals, pharmaceuticals, supplies, fuel, training, etc for recurrent costs • Capital budget- paid through donor grants,
    15. 15. a)Tax based financing • Typical source of public fund-direct taxation of individual and business incomes, and other kinds of direct or indirect levies (import duties, license fees, property taxes, sales and market taxes, registration, etc)-higher tax for higher income groups • Developing country-large portion of economically active population in informal sector- tax base might be small • Ear marked taxes- increasing government revenues –eg tobacco • Health services through tax revenues is most
    16. 16. b) User Fee system (CCS in Myanmar) • Public facilities receive government subsidies but lack funds to function appropriately • User fee collect modest fund-well below private market prices in public hospitals-eg; CCS • User fee depress demand for services that are not really needed • Poor can be protected by exemption mechanism
    17. 17. c) User Fee system (Pre paid card) • Pre-paid system is based on pooling of risks • Small amount of contribution from community • Can donate to poor • Charges will deduct from the care per visit • Preformed myths-hindering from buying cardswill bring illness to one of the families
    18. 18. Government Financing of Health Care • Includes health expenditure of all levels of government • Unlike private markets Gov health financing is able to satisfy social requirements of efficiency & equity • Incentive to supply public goods • No neglect of externalities/spillover effects • Explicit concern to tackle poverty • Core responsibility of Gov to ensure supply of these services
    19. 19. 2. Private Sector-Direct payment to providers • • • • • • • • For Profit only Expensive May have quality Not directed to health but to illnesscurative only Would like to have more turnover rate No merit goods Neglect externalities/spill over effect No equity issue/pro poor health approach
    20. 20. a).OOPs Out-of-Pocket payment • “Out-of-pocket” expenditure on health by households includes all types of health-related expenses incurred at the point of receiving service - consultation fee, -purchase of medicine, -laboratory services, -diagnostic services and -hospitalization • Main determinant of catastrophic health expenditures for families– Reduce expenditures on other basic needs – Push some households into poverty – May cause consumers to forgo health services and suffer illness
    21. 21. 3. External funding for health-Donors/Lending Agencies • Multilateral donors –give a gift /grants: Public donors WHO,UNICEF, UNFPA, UNHCR • Lending agencies-World Bank, ADB –lend large amount, hard loans-high interests, soft loans-less than market rate. Hard loans- interests for first five years and I+ Principle x 15 years ,later hard loan becomes soft then become a grant • Bilateral donors- USAID, JiCa, DANIDA, CIDA between two countries-grants, ties are smaller, • Private donors-Red Cross, Red Crescent, MSF, WVision
    22. 22. External Sources-International NGOs • Intermediaries between Donors/Lending Agencies and the Recipient Countries Donor loan grant Intermediaries Recipients technical assistance Problem: duplication and overlap in function and coverage
    23. 23. 4. Health Insurance • A system in which prospective consumers of care make payment to a third party in the form of health insurance scheme (premiums), which in the event of future illness will pay the provider of care for some or all of the expenses incurred. Insurance Agency Payment Premium GOVT claims Provider insurance cover health care Consumers out-of-pocket payments
    24. 24. 4. Health insurance is a mixed source of finance It draws contributions/premiums from both employers, employees and sometimes from government Three types of insurance 1. Government of social insurance: provide compulsory or to a lesser extent voluntary coverage for people from formal sector (egSSB) Premiums are generally based on income.
    25. 25. 2. Private insurance: provides coverage for groups or individuals through third party payer institutions operating in the private sector. Premiums based on actual calculation of incidence of disease and use of services. Vary with age and sex. 3. Employer-based insurance: refers to coverage between the above two categories, in which employer plays a third party payer or collecting agent with eligibility based upon employment status.
    26. 26. Insurance markets suffer from market failure Due to  Moral Hazard  Adverse Selection  Imperfect information Big pool of risks between healthy and unhealthy, and between better off and poor. Cannot cover bypass surgery Good design – need gate keeping -capitation -deductibles -co-payment -DRG
    27. 27. 5. Community based Health Insurance • Community health insurance is • “any not-for-profit insurance scheme aimed primarily at the informal sector and formed on the basis of a collective pooling of health risks, and in which the members participate in its management.” • Two essential features of CBHI: 1. Affiliation is based on community membership and the community is strongly involved in managing the system 2. Members share a set of social values
    28. 28. Community Based Health Insurance Models of CBHI C B O Insurer Reimbursement Provider N G O Premium Premium Community Intermediary model Care
    29. 29. Community Based Health Insurance Models of CBHI NGO/CBO + Insurer Fees Community Insurance model Provider Premium are C
    30. 30. Community Based Health Insurance Models of CBHI Premium er a C Provider + Insurer Community HMO model
    31. 31. CBHI Strengths  Better access to health care for the poor  More responsive to client needs since organized along community lines  Often start up is small, but then evolve into larger arrangements involving other financing instruments.  Often used by governments as a supplementary tool for extending health coverage, especially for informal and unorganized sector workers, and rural
    32. 32. CBHI Weaknesses  Limited resources, small size and insufficient coverage: thus offer limited protection for members  Sustainability: small size of the pool makes these schemes unviable and unsustainable.  The often voluntary nature of contribution can lead to adverse selection, driving up the cost and at the same time making the resources collected even less than the targeted amounts.
    33. 33. CBHI Weaknesses • Often need outside financial and management support • Limited benefit to the poorest part of population; cash-poor people may not be able to participate • Limited effect on delivery of care: evidence suggests that by and large such schemes are not able to negotiate better quality of care and thus do not improve the efficiency of health care
    34. 34. Com posi t ion of t ot a l h ea l t h spen di n g i n SEA R 27% 3% 4% 66% OOPs socia l in su r a n ce pr iv a t e in su r a n ce tax
    35. 35. Methods of Financing • Universal Coverage: All residents are covered • Equal Access: All members have equal access to health care • Equity in Financing: Financing method addresses ability to pay • Efficiency: Minimizes administration cost
    36. 36. • Universal Coverage: Every one will be provided with a service when a need arisen Out of pocket payments at the point of consumption should not exceed 30% of a person's income Service must be reached a certain minimum standard
    37. 37. Factors controlling the Impact & Efficiency of the Health Care System  1. Number of Health Workers  2. Training of Health Workers  3. Method and level of compensation  4. Method and level of consumer payment  Risk pooling  Provider incentive  5. Equity of Access
    38. 38. Factors controlling the Impact & Efficiency of the Health Care System  6. Stock of Capital Equipment  7. Technologies used  Financial incentives & Constraint     8. Preventive Care (Minimum essential package) Immunization Pre-natal Malaria, TB
    39. 39. Myanmar Health Expenditure (2002-05)  Total Health Expenditure=26 billion kyats  Total health expenditure as % of GDP= 2.11 (2005)  MOH Expenditure by line items during last 5 years plan      Salary Goods and services Training Maintenance TA = = = = = 45% 28% 15% 9% 3%
    40. 40. Health care providers and population in Myanmar • Access to medicine????? <2% of GDP use for health • Health care for all, with them and by them • 30%urban • 70%rural Doctors, specialists midwives
    41. 41. National Health Policies on Financing  To explore and develop alternative health care financing system  To augment the role of co-operatives, joint ventures, private sectors and NGOs in delivery of health care in view of the changing economic system  To strengthen collaboration with other countries for national health development
    42. 42. Myanmar Health Care Financing We’ve doneTax based health care-free SSB- for employees Public/private mix CCS –with exemption mechanism RDF –look into poor Trust fund –interests for poor Booming private sector Later---CBHI, others--Main aim should be “Protect people from financial catastrophe during illness”         
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