1. Under JPG Teaching
Fellowship
Permission from JPGSPH
CoE-UHC

2. HEALTH CARE FINANCING
Jahangir A. M. Khan, PhD
Head, Health Economist Unit
ICDDR,B
Associate Professor
JPGSPH, BRAC University
Email: jahangir.khan@icddrb.org

3. Defining Universal Health Coverage
WHO, 2005 says:
Universal health coverage means that everyone in the population has access
to appropriate promotive, preventive, curative and rehabilitative health care
when they need it and at an affordable price.

4. Three dimensions of UHC

5. Financial risk protection
No one should die and suffer because they cannot afford
health care, and no one should be made poorer because they
get sick.

6. What is healthcare financing?
The ways of payments for accessing healthcare
Includes:
 Collection of revenue and
 Purchasing of healthcare
6

7. ECONOMICS OF HEALTH CARE FINANCING
 Efficiency
Achieving efficiency is about comparing the costs (or
resources) and benefits (or well-being produced)
ensuring that resources are allocated in such a way so
that gain to the society can be maximized.
7

8.  Equity
Principle of being fair to all, with reference to a defined
and recognized set of values.
8

9. Population Pyramid, Bangladesh
80 above
75 to 79
70 to 74
65 to 69
60 to 64
55 to 59
50 to 54
45 to 49
Payer
40 to 44
35 to 39
30 to 34
25 to 29
20 to 24
15 to 19
10 to 14
5 to 9
Under 5
4000
3000
2000
1000
Males
HIES, 2010
1000
Females
2000
3000
4000

10. Issues →
Target ↓
Who to be funded? How to be funded?
POPULATION 151.6 MILLLION
(2012)
Funding healthcare – Who & How?
Poor
Below Poverty Line
47.8 MILLION
31.5%
Informal sector
83.4 MILLION
55%
Formal sector
20.5 MILLION
13.5%
Tax-funded publicly financed health care, Noncontributory health protection mechanisms
(e.g. SSK) part of the Social Health Protection
scheme
Tax-funded publicly financed health care with
user fee retention, community-based health
insurance initiatives, micro health insurance,
other innovative initiatives, gradual move to
Social Health Protection scheme coverage
Tax-funded publicly financed health care with
user fee retention, Social Health Protection
scheme, Complementary private coverage
10

11. ANALYTICAL APPROACHES
 Health care triangle
 Financing equation
 Functions of health care systems
11

12. Health care triangle
Delivery
Citizen
Provider
Third-party insurer
or purchaser
Source: Reinhardt, 1990
12

13. Financing equation
TF + SI + UC + PI = P X Q= W X Z
TF = Sum of taxation
SI = Social insurance contributions
UC = Out of pocket and user charges
PI = Insurance premium (voluntary or private)
P = Price of the service
Q = Quantity of the service
W = Quantity and mix of inputs
Z = Price of inputs
13

14. Functions of health care system
Financing
Revenue collection
Fund pooling
Purchasing
Provision
Personal
health services
Non-personal
health services
14

15. Revenue collection
Source
Mechanism
Collection agents
Firms,
Direct & indirect taxes
corporate entities
Compulsory insurance
& employers
contributions & payroll
Independent public
taxes
body or social security
households &
Voluntary insurance
agency
employees
premiums
Individuals,
Central, regional &
local government
Private not –for- profit or
for profit insurance
Medical savings
funds
accounts
Foreign & domestic
Out-of-pocket payments
Providers
NGOs & charities
Foreign govt
Loans, grants &
& companies
donations
Source: Kutniz, 2000
15

16. Fund pooling
o
Fund pooling is defined as the ’accumulation of prepaid health
care revenues on behalf of a population’.
o
Importance: It facilitates the pooling of financial risk across the
population.
o
Funding
Scope for pooling risk
Tax
Yes
Social security contribution
Yes
Private health insurance
Yes
Community rated premium
Yes
Medical savings account
No
User charges
No
16

17. Current funding situation in
Bangladesh
17

18. Health Financing in Bangladesh 2006-2007
Private Firms
Tk. 1,325
0.8%
Million Taka
Tk. 69 = US $ 1
Private Insurane
Tk. 314
0.2%
Public Sector
Tk. 41,318
26%
Rest of the World
Tk. 12,391
08%
Household OOP
Tk. 103,459
64%
NGOs
Tk. 2,092
01%
18

19. Allocation in public budget for health,
2009-2014
Share (%) of total budget
7
6.18
5.68
5.03
6
4.82
4.26
9,470 cr
7,667 cr
9,130 cr
9,470 cr
2
7,667 cr
3
7,287 cr
4
6,271 cr
5
1
0
2009-10
2010-11
2011-12
2012-13
2013-14
19

20. Out of pocket expenditure as a percentage of household
consumption expenditure across socioeconomic groups in
Bangladesh, 2005
8.86
9.0
8.0
7.0
5.98
6.0
4.55
5.0
4.0
2.94
3.17
1
2
3.0
2.0
1.0
0.0
3
4
5
Source:Van Doorslaer et al, 2007.
20

21. Distribution of out-of-pocket payments
across income groups in Bangladesh, 2005
60.0%
52.8%
50.0%
40.0%
30.0%
21.5%
20.0%
10.0%
12.2%
6.2%
7.2%
0.0%
Poorest
2nd
3rd
4th
Richest
Estimated by: Jahangir A. M. Khan using secondary data from Van Doorsler et al,
2007 and Statistical Yearbook of Bangladesh, 2008.

22. FUNDING METHODS
o
o
o
o
Taxation
Out of pocket payments
Loan, grants and donations
Health insurance
22

23. National or local taxes
Arguments in favour of local taxation
o More transparency
o Improved accountability
o Responsiveness to local preference
o Separation of health from competing national priorities
Arguments against local taxation
o Generate inertia among politicians for risk change
o Horizontal inequity
o Same tax rate means less (more) revenue in poor (rich) regions
o Less potential redistribution
o National tax collection produces more economies of scale,
compared with regional tax collection.
23

24. General or hypothecated taxes
Arguments for general taxes
o It draws on a broad base of revenue.
o Trade-off between health care and other areas of public
expenditure (priorities of citizens).
Arguments for hypothecated taxes
o Reduce resistance to taxation as it is more visible
o Linkage between revenue (taxation) and expenditure makes the
funding of health care more transparent and responsive
o Makes people more connected to tax system and may increase
the pressure on providers to improve quality
24

25. Health insurance
 Health insurance is a means of financing healthcare.
 An insured person pays a small amount to an
organization (insurer) in a regular basis, against (per
month) which the insured person will have access to a
defined healthcare package.
25

26. Types of health insurance




Private insurance
Community health insurance
Social health insurance
National health insurance
26

27. Characteristics of insurance
Type of
insurance
Financing
source
Nature of
contribution
Funds
earmarked
for health
Membership
Private health
insurance
Out-ofpocket
payments of
premium
Voluntary
Yes
Contributing
members
and usially
their
dependents
Community
health insurance
Out-ofpocket
payments of
premium
Voluntary
Yes
Contributing
members
and usually
their
dependents
27

28. Characteristics of insurance
Type of
insurance
Financing Nature of
source
contribution
Funds
Memberearmarked ship
for health
Social health Employer Mandatory
insurance
and/or
employee
from salary
or wage
Yes
Contributing
members
and usually
their
dependents
National
health
insurance
No
All citizens
Govt.
general
revenue
and other
taxes
Funded mostly
from tax
revenues
28

29. Social Health Insurance
Social health insurance is an insurance programme which meets at
least one of the following three conditions:
1.
participation in the programme is compulsory either by law or
by the conditions of employment,
2.
the programme is operated on behalf of a group and restricted
to group members,
3.
an employer makes a contribution to the programme on behalf
of an employee.
29

30. Social Health Insurance
Social health insurance contributions are not related to risk, are levied
on earned income and collected by a body at arm’s from government –
otherwise it amounts to an earmarked payroll tax.
Contributions are usually compulsory and shared between the employees
and the employers.
30

31. Why SHI
 Universal coverage
 Broad base for financing healthcare
 Preventing adverse selection
31

32. History of SHI
 SHI established in Germany by
Bismarck in 1883
 27 countries have established UHC
via SHI
32

33. How long time it takes







Germany
Belgium
Austria
Luxembourg
Costa Rica
Japan
Korea
127 years
118 years
79 years
72 years
48 years
36 years
26 yeras
33

34. 34

35. Community-Based Health Insurance
What is CBHI?
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.
35

36. Common features (NGO driven CBHI)
 Small membership group
 Small and affordable premium with limited
benefits and coverage
 Simple procedures and considerable member
participation in management of the program
36

37. Why CBHI?
 Informal sector – around 90% population
 Reliance on poorly functioning government
health facilities or expensive private facilities –
barriers to sufficient and quality healthcare
 CBHI – pre-payment at affordable premium
37

38. Target population of CBHI
 Informal sector
 Unorganized groups
 Poorer section of the community (trial)
38

39. Prerequisites for CBHI
Essential
 Problems with healthcare and high out-of-pocket medical payments
 An organized group willing to pool risk through insurance mechanism
 NGO/CBO etc. willing to organize CBHI and have administrative
capacity
 Healthcare providers who can provide adequate quality care
39

40. Prerequisites for CBHI
Desirable
 Willingness to pay – principle of risk sharing, solidarity, healthcare
needs to be managed
 Ability to pay – affordable premium
 Reliable data – demography, morbidity, costs
 Legal aspect – legally functional
 Technical and managerial capacity
40

41. Main steps in initiating CBHI
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Identify need for CBHI
Identify management and administrative organization
Identify target community
Designing CBHI: Provider -/mutual-/linked- model
Defining the benefit package
Fixing the premium
Identifying the providers
Who is the insurer
How does one administer the scheme?
Processing claims and reimbursements
Risk management
41

42. Identify target community
Locality
Organized
Unorganized
Urban
Driver's
association,
shopkeeper's
association
Vendor, rag pickers,
maid
Rural
Co-operative
societies, selfhelp groups
Landless laborers,
subsistence farmers
42

43. Designing CBHI
Provider model
Healthcare provider (hospital) initiates and organizes the
health insurance program.
Mutual model
NGO/CBO initiates and organizes the health insurance
Program.
Linked model
NGO/CBO collects premium from community and passes
it on to health insurance company.
43

44. Advantages and disadvantages with
different models
Characteristics
Provider
Very free
Model
Mutual
Very free
Premium
Benefit package
Affordability
Comprehensive
and meets local
need
Affordability
Comprehensive
and meets local
need
Financial risk
With provider
With NGO/CBO
Quality of care
Possibly good
Poossibly good
Community
involvement
Not good
Good
Freedom to suit the
local needs
Linked
Depends on
insurance
company's
products
Acturial
Traditional
mediclaim policy
with its
exclusions and
limitations
With insurance
company
No difference
between insured
and non-insured
Good
44

45. Sequencing in the implementation of the Social Health
Protection Scheme
Population
(in Million)
48
(BPL)
18.8
(Formal)
85.7
(Informal)
Social Health Protection Scheme
(SHPS)
Heath Equity Fund/NHSO
SSK (BPL)
Formal Sector SHP
Micro,
Community
based insurance
Voluntary
subscriptions to
SHPS
Universal
Coverage
2016
2021
2032
MoHFW, 2012
45

46. 46

47. Purchasing
The transfer of pooled resource to service
providers on behalf of the population for which
the funds are pooled.
47

48. SUMMARY
 Healthcare financing
Efficiency
Equity
 Health insurance
Social health insurance
Community-based health insurance
 Purchasing healthcare (will be taken)
48

49. Thank you
49