Designing Health Financing System to Achieve Universal Coverage

1. Designing Health Financing System to Achieve Universal Coverage Ke Xu Health Systems Financing World Health Organization November 2008, Shanghai

2. Universal Coverage as a Policy Objective • defined as everyone having access to appropriate care when they need it and at affordable cost implies financial risk protection and equity of access associated with equity in financing ( contribution according to ability to pay) Resolution "Sustainable Health Financing, Universal coverage and Social Health Insurance" May 2005. Geneva

3. Three Dimensions of Universal Coverage

4. Universal Coverage Getting the Mix Right Revenue collection Pooling Purchasing Collect funds (taxes or contributions) efficiently and equitably Costs are shared by all and not borne by people when they are ill wealthy & healthy subsidize the poor & sick Buy or provide effective health interventions Incentives for efficiency

5. Revenue Collection Sustainability Is the money collected in an equitable way? Does the collected sufficient? Efficiency Equity How to collect a sufficient amount of money with minimum administrative cost? How much I pay and how much others pay?

6. Health Financing Mechanisms Financing mechanisms Financing sources Tax-based financing 1. General tax or other revenue External resource 2. Payroll tax Social health insurance Health care services Household Other prepayment schemes 3. Contribution or premium Natural resource revenue Out-of-pocket payments 4. Direct payment

7. Revenue Collection Generally a mix of different types of revenue collection mechanisms co-exist: • Tax based funding • General taxation, earmark taxes • Compulsory insurance • Payroll tax and contribution • Formal and informal sector employees • Dependants • Voluntary insurance

8. Social Health Insurance- Constrain Factors • Income level and growth • The structure of the economy • The distribution of the population • Administrative capacity • Solidarity • Stewardship

9. Funds Pooling • How far can solidarity go ? • What level of cross-subsidies from rich to poor and from healthy to ill? • Any role for supplementary or complementary health insurance ? • Should opt-out be allowed (Latin America, Germany)? • How many pools-risk adjustment/ risk-equalisation? • One pool (Korea, Turkey) • Multiple pools (Germany, Netherland, Switzerland…) • Fragmentation and segmentation • How should tax-based funding be channeled? • To provider (Latin American countries)-low price services • To insurance funds- low insurance premium • To consumers (cash transfer)- to purchase services or insurance

10. Proportion of households with catastrophic expenditures vs. share of out-of-pocket payment in total health expenditure 15 8 3 1 % of households with catastrophic expenditure (logarithm) .3 .1 .03 .01 3 5 8 14 22 37 61 100 out-of-pocket payment in total health expenditure % (logarithm) OECD others

11. Purchasing Strategic purchasing Provider payment mechanisms Outpatient service Inpatient service Drugs High-tech medical equipments Benefit package design Differentiate cost sharing among different services and drugs No over provision No over utilization

12. By Pia Schneider: Provider Payment Reforms: Lessons from Europe and America for South Eastern Europe

13. The Design Features of Benefit Package Risk protection Budget constrain The size of benefit package Structure Depth Width What services and how much The number of services Cost-sharing

14. OOP Components by Quintiles (Korea, 2007)

15. Catastrophic Expenditure by Different Payments (Korea)

16. Percentage of Households Reporting Non-zero Inpatient Expenditure (Korea, 2007)

17. Stages of Coverage and Organisational Mechanisms Universal Coverage Increase prepayment • Tax-based financing • Social health insurance • Mix of tax-based and various types of health insurance Intermediate stages of coverage Mixes of community cooperative and enterprise based health insurance, other private health insurance, SHI type coverage for specific groups and limited tax based financing Reduceout-of-pocket payments Absence of financial protection Out-of-pocket spending

18. How Long It Takes to Reach Universal Coverage? Time (in years) between first social protection law and universal coverage

19. Summary • Achieving universal coverage takes time, a long-term vision is important • Revenue collects through equitable and efficient ways • Increase prepayment and reduce out-of-pocket payment • Improve financial risk protection through an appropriate benefit package • Improve service quality and control cost through a set of provider payment mechanisms.

20. Thank you for your attention!