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  1. 1. Under JPG Teaching Fellowship Permission from JPGSPH CoE-UHC
  2. 2. HEALTH CARE FINANCING Jahangir A. M. Khan, PhD Head, Health Economist Unit ICDDR,B Associate Professor JPGSPH, BRAC University Email:
  3. 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. 4. Three dimensions of UHC
  5. 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. 6. What is healthcare financing? The ways of payments for accessing healthcare Includes:  Collection of revenue and  Purchasing of healthcare 6
  7. 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. 8.  Equity Principle of being fair to all, with reference to a defined and recognized set of values. 8
  9. 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. 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. 11. ANALYTICAL APPROACHES  Health care triangle  Financing equation  Functions of health care systems 11
  12. 12. Health care triangle Delivery Citizen Provider Third-party insurer or purchaser Source: Reinhardt, 1990 12
  13. 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. 14. Functions of health care system Financing Revenue collection Fund pooling Purchasing Provision Personal health services Non-personal health services 14
  15. 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. 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. 17. Current funding situation in Bangladesh 17
  18. 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. 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. 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. 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. 22. FUNDING METHODS o o o o Taxation Out of pocket payments Loan, grants and donations Health insurance 22
  23. 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. 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. 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. 26. Types of health insurance     Private insurance Community health insurance Social health insurance National health insurance 26
  27. 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. 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. 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. 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. 31. Why SHI  Universal coverage  Broad base for financing healthcare  Preventing adverse selection 31
  32. 32. History of SHI  SHI established in Germany by Bismarck in 1883  27 countries have established UHC via SHI 32
  33. 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. 34
  35. 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. 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. 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. 38. Target population of CBHI  Informal sector  Unorganized groups  Poorer section of the community (trial) 38
  39. 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. 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. 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. 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. 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. 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. 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. 46
  47. 47. Purchasing The transfer of pooled resource to service providers on behalf of the population for which the funds are pooled. 47
  48. 48. SUMMARY  Healthcare financing Efficiency Equity  Health insurance Social health insurance Community-based health insurance  Purchasing healthcare (will be taken) 48
  49. 49. Thank you 49