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OHE Lecturing for Professional Training at International Centre of Parliamentary Studies

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On 7th November 2018, Bernarda Zamora delivered a pro bono lecture to professionals from diverse countries enrolled at the Professional Certificate in Strategic Planning organised by the International Centre of Parliamentary Studies.

Author(s) and affiliation(s): Bernarda Zamora, Office of Health Economics

Conference/meeting: Professional Certificate in Strategic Planning organised by the International Centre of Parliamentary Studies

Location: Conference Centre, London

Date: Conference Centre, London

Published in: Healthcare

OHE Lecturing for Professional Training at International Centre of Parliamentary Studies

  1. 1. Health Financing: Towards Universal Coverage Dr Bernarda Zamora Professional Certificate in Strategic Health Planning International Centre for Parliamentary Studies 7 November 2018
  2. 2. 2 The Office of Health Economics Our Mission • Support better health care policies by providing insightful economic and statistical analyses of critical issues. What We Deliver • OHE provides authoritative resources, research and analyses in health economics, health policy and health statistics both through our independent research and in our consultancy. Our work informs decision making about health care and pharmaceutical issues at the UK, regional and international levels. How We Work • Our strategic perspective emphasises projects tackling policy and strategic issues that affect the present and will shape the future. We work closely with stakeholders, clients and external experts to develop important new policy insights, define strategies and identify optimal choices. Our People • OHE's strength is the talent and professional dedication that its staff brings to each project. Our team has diverse and extensive experience in the private, public and charitable sectors. Each individual maintains the highest professional standards in both working style and project results. Our History • OHE was founded in 1962 to commission and undertake research on the economics of health and health care collect and analyse health and health care data for the UK and other countries disseminate the results of its work and stimulate discussion of them and their policy implications Its independent Research and Policy Committee has helped maintain OHE's international reputation for the quality and independence of its research. Funding and Support • The OHE's current work programme is supported by research grants and consultancy revenues from a wide range of UK and international sources: the Association of the British Pharmaceutical Industry (ABPI) and other commercial clients, the Department of Health Policy Research Programme (PRP), the National Institute of Health Research (NIHR), the Medical Research Council (MRC), the EuroQol Foundation and a number of charitable and other organisations.
  3. 3. 3 Outline • Factors contributing to the escalation of health costs • Demand-side factors • Supply-side factors • Cost containment strategies • Sources of funding for the health system • International context • UHC within SDGs • Actions
  4. 4. 4 Factors contributing to the escalation of health costs Drivers of the explanation of the cross-country differences of public health expenditures • Large share of these differences (around 71%) can be explained by demographic and economic factors, notably real income. • The policy and institutional variables explain most of the remaining differences (23%). • In some cases, a substantial part of the difference remains unexplained. This is the case of Korea, Slovak Republic and New Zealand where this residual is above 40%. de la Maisonneuve, C. et al. (2016), “The drivers of public health spending: Integrating policies and institutions”, OECD Economics Department Working Papers, No. 1283, OECD Publishing, Paris.
  5. 5. 5 Demand-side factors: Ageing Age-related expenditure profiles 2018 Ageing Report EC • The Demographic Dividend: Success in East-Asia, Potential in Sub-Saharan Africa • The old age dependency ratio in EU is projected to increase from 29.6 % in 2016 to 51.2 % in 2070
  6. 6. 6 Demand-side factors: Health Status • To achieve savings from living longer - dying at an older age and being healthy for much of a lifetime - the per capita costs of health care at very old ages have to be lower than in childhood, youth or working ages. • HCE (hospital expenditure in the UK) is principally determined by proximity to death rather than age, and proximity to death is itself a proxy for morbidity (Howdon and Rice, JHE, 2018) • The economic burden of chronic conditions (cardiovascular diseases, cancer, chronic respiratory diseases, diabetes, and mental health conditions) over the period 2010-2030: $7.7 trillion for China (measured in real USD with the base year 2010), $3.5 trillion for Japan, and $1 trillion for South Korea. (Bloom et al., The Journal of the Economics of Ageing, 2018),
  7. 7. 7 Demand-side factors: Ageing and Health Status
  8. 8. 8 Demand-side factors: Ageing and Health Status Change in healthy life expectancy at birth, 1990–2010 Above: Males Below: Females Salomon et al. Lancet, 2012
  9. 9. 9 Demand-side factors: Income • Income elasticity of health care demand • Is health an individual necessity and a national luxury? • Estimates elasticity total public health expenditure: a 1% increase in GDP per head associated to following increase in HE per head: • Zamora (2013) finds that country-specific effects explain all the income effect for hospital spending but not for total and public health spending. 2018 Ageing Report EC 1 to 1.1 OECD 2016 0.92 to 1.34 Acemoglu et al. 2013 0.72 with upper bound 1.13 Feng et al. 2017 1.1
  10. 10. 10 Supply-side factors: medical technology, institutions, human and physical capital
  11. 11. 11 Cost containment strategies Reforms in Advanced Countries: A Typology • Macro-level controls - Budget caps - Supply constraints - Price controls • Micro-level reforms - Public management and coordination - Contracting - Market mechanisms • Demand-side reforms - Patient cost sharing - Tax treatment of private health insurance
  12. 12. 12 Cost containment strategies Budget caps and central oversight have been effective in reducing spending growth Drawbacks: • limit access to health care, as evidenced by growing waiting times for elective surgery in Canada, Sweden, and the United Kingdom during the period of expenditure consolidation. • budget caps alone are unlikely to incentivise greater efficiency, as they are most often based on historical costs. • budget constraints that are applied partially (e.g., only to inpatient care spending) can lead to expenditure increases in areas that are not controlled.
  13. 13. 13 Cost containment strategies Supply and price controls appear to have only modest effects on the growth of public health spending • Restrictions on supply were used in • Canada (hospital closures, mergers, and reduction in the number of beds) • Finland (reduction in the number of hospital beds) • Germany (delisting ineffective treatments and positive drug lists) • Italy (positive list for pharmaceuticals) • Netherlands (delisting certain treatments) • Price controls were implemented mainly in those countries where the public sector contracts with the private sector to provide services • Canada (regulated fees for physicians) • Germany and the Netherlands (both reference pricing for pharmaceuticals). • Cost-effectiveness evaluations to control supply
  14. 14. 14 Cost containment strategies Greater involvement of sub-national governments in key health care decisions can reduce expenditure growth if central oversight is maintained • Decentralised health systems that score high on central government oversight (Canada, Sweden) have lower supply-side cost growth than those with relatively weak oversight (Spain). There is evidence in favor of some contracting reforms that improve incentives to provide cost-effective care • Managed care, requiring pre-authorization for services (a type of gatekeeping), and selective contracting with providers (the U.S.). • Payment methods have shifted from traditional fee-for-service methods to case-based payments such as DRGs in Finland, Germany, Italy, and the United Kingdom. • Finland and Sweden introduced forward-looking budgets which constrain spending by providing a hard budget constraint based on projected demand and average cost per patient or case.
  15. 15. 15 Cost containment strategies Market mechanisms can also slow the growth of health expenditures • Purchaser-provider split (Italy, Sweden, and the United Kingdom) • Competition among hospitals (the United Kingdom and Sweden) • Sweden also introduced charges for municipalities that were not ready to receive discharged hospital patients (e.g., if a nursing home was not available) and this has been effective in reducing the number of long- term care patients treated in hospitals, as opposed to nursing homes. Demand side reforms can also help curtail spending growth • Extending the use of supplementary and complementary private insurance has a dampening effect on supply-side cost growth • Increase in cost-sharing slowed the growth of health spending to GDP for about a year, but with subsequent increases
  16. 16. 16 Sources of funding for the health system • Key Questions to Assess Alternative Government Revenue Sources for Health (Cashin, C. Health Financing Policy, World Bank 2016) • Which new revenue sources could generate additional funds for the health sector in the most efficient and equitable manner and create the least macroeconomic and fiscal distortion? • Which new revenue sources would be acceptable within current macroeconomic and fiscal policy? • Which of these potential revenue sources are administratively and politically feasible? • Which new revenue sources could generate additional funds without simply offsetting existing government health spending? • What is the relationship between these sources of funds and the other health financing functions of pooling and purchasing?
  17. 17. 17 Sources of funding for the health system • Most countries rely on some combination of general tax revenues at the national and local government levels, earmarked revenues, and private contributions toward the cost of health care. • In general, there is a trend toward greater diversification of revenue sources and some evidence of a shift toward general tax revenue and away from payroll tax financing
  18. 18. 18 Sources of funding for the health system • An expansion of benefits financed by taxes, rather than social insurance, should be the first option for most countries seeking to expand coverage where labor market informality is high. • Social insurance systems can help contain spending by limiting benefits to contributors. However, if the goal is to expand coverage and labor market informality is high—as it is in many emerging economies—tax-financed provision of universal basic health care (such as in Thailand) may be the best starting point. • For countries where labor market informality is limited and revenue administration is of high quality, expansion of social insurance- based systems could be considered. • The experience of Chile suggests that sustainable financing flows can be achieved through a combination of mandatory contributions in the formal labor market, individual cost-sharing through copayments, and supplementary budget financing (especially where subsidization is necessary and in the public interest).
  19. 19. 19 Sources of funding for the health system: Earmarked tax and revenue • High-income countries such as France and Japan, for example, are seeking to reduce overreliance on earmarked payroll taxes, which not only have led to labor market distortions, but also no longer generate enough revenue given their aging. • Earmarking a portion of broad-based taxes, such as the VAT as is done in Ghana and Chile, avoids the labor market distortion but may still introduce allocative inefficiency by adding to rigidities in the budget. • Indonesian context—energy subsidy reduction and sustainable development. Using subsidy reduction to partially finance universal health coverage is a more efficient compensation mechanism than Conditional Cash Transfers. (Ahmad, E. Financing the SDGs, Incentives and Multilevel Governance: South- South examples and lessons for Indonesia. IMF-JICA High Level Forum, Tokyo, February 2017.)
  20. 20. 20 Sources of funding for the health system: Innovative Domestic Financing Source: Cashin, World Bank 2015
  21. 21. 21 Sources of funding for the health system: Administration costs
  22. 22. 22 International context: SDGs • In 2015, WHO estimated that the minimum investment required in the health sector for countries to attain the SDGs by 2030 is USD 55 billion per year. • Of this annual amount, according to the The Taskforce on Innovative International Financing for Health Systems, between two thirds and three quarters— USD 40 billion—must be spent on Health system strengthening (HSS) efforts.
  23. 23. 23 International context: actions • Framework on integrated people-centred health services http://www.who.int/servicedeliverysafety/areas/people-centred-care/en/ • High-Level Commission on Health Employment and Economic Growth http://www.who.int/hrh/com-heeg/en/ • EU-Luxembourg-WHO UHC partnership https://uhcpartnership.net/ • Health Data Collaborative https://www.healthdatacollaborative.org/
  24. 24. 24 To enquire about additional information and analyses, please contact Bernarda Zamora (bzamora@ohe.org) To keep up with the latest news and research, subscribe to our blog, OHE News Follow us on Twitter @OHENews, LinkedIn and SlideShare Office of Health Economics (OHE) Southside, 7th Floor 105 Victoria Street London SW1E 6QT United Kingdom +44 20 7747 8869 www.ohe.org OHE’s publications may be downloaded free of charge from our website. Thank you!

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