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Evaluation of Health Care Financing

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  1. Evaluation of Health Care Financing Dr. Kyaw Swa Mya Lecturer/Head Environmental Health Department University of Community Health

  2. Outline of Presentation • Why health care financing? • Overview of health care financing • Evolution of health care financing at various stages of economic development • Criteria for evaluation of health care financing KSM, UOCH

  3. Why is health care financing an important subject? • Health care is a basic necessity • Many poor cannot afford illness cost • Medical cost for treating serious illness are beyond the financial means of most households • Many households face bankruptcy when serious illness strikes KSM, UOCH

  4. Philosophical Reason • Egalitarian philosophies – emphasizes equity, particularly equal access to health care and views health care as fundamental necessity for human well being • Utilitarian philosophies – views health in the context of how health contributes to a nation’s welfare KSM, UOCH

  5. Policy Reason • The amount of financial resources mobilized for health care and how they are used depend on health care financing policy • Financing is the principle instrument with which to determine resource flows, distribution of resources, and incentive structures for health providers KSM, UOCH

  6. Policy Reason • Unless a nation has a rational and integrated financing policy, the health care costs of elderly, disabled, and less healthy persons are left for the government to finance and the cost become a heavy financial burden on the treasury • Determine who will have access to basic health care, what services are offered, and their quality KSM, UOCH

  7. Market Failure Reason • The distribution of health risks are highly skewed and it caused two serious market failures in private insurance market • Adverse selection – high risk individual more likely to purchase insurance • Risk selection – insurers exclude high risk individuals and only insure healthier persons for maximum profit KSM, UOCH

  8. Macro-environmental Reason • Economic changes – reduction of government spending in public sector • Demographic changes – significant increase in the population as a whole and of those over age 60 • Epidemiological changes – double burden? Triple burden? • Political changes – increased demand and government supply KSM, UOCH

  9. Six Building Blocks of a Health System Purposeful change aimed at improving health system performance for: System Inputs Source: Strengthening Health Systems to Improve Health Outcomes, WHO’s Framework for Action – WHO 2007 KSM, UOCH

  10. Overview of HCF KSM, UOCH

  11. HCF policy goals (WHO report, 2000) • Financial protection • Equity in finance • Equity of access • Transparency and accountability • Quality care and efficient service delivery • Administrative efficiency KSM, UOCH

  12. Three basic principles for HCF • Principle 1 – Raise enough revenues to provide individuals with a basic package of essential services and financial protection against catastrophic medical expenses caused by illness and injury in an equitable, efficient, and sustainable manner • Principle 2 – Manage these revenues to pool health risks equitably and efficiently • Principle 3 – Ensure the purchase of health services in ways that are allocatively and technically efficient KSM, UOCH

  13. Functions of HCF • Revenue collection • Polling resource • Purchasing services KSM, UOCH

  14. Methods of HCF • Government revenue e.g. general tax, inflation, earmarked tax • Social and private insurance • User fees (OOPs) • Community financing KSM, UOCH

  15. Exchange Model • Bilateral exchange model for goods Money Consumers Providers Service KSM, UOCH

  16. Exchange Model • Trilateral Exchange Model for Goods Taxes Treasury Financing Organization Payments Premiums Services Consumers Providers User’s fee KSM, UOCH

  17. Evolution of Health Care Financing at Various Stages of Economic Development

  18. KSM, UOCH

  19. Criteria for Evaluation of HCF • Equity – in financing - in provision of health care • Efficiency – in financing - in provision of health care • Other criteria – quality, sustainability, risk pooling KSM, UOCH

  20. Definition of Health Equity The International Society for Equity in Health (ISEqH) defined equity in health as “the absence of systematic and potentially remediable differences in one or more aspects of health across populations or population subgroups defined socially, economically, demographically, or geographically” KSM, UOCH

  21. Difference of inequity and inequality • Health inequalities are differences in health that are “avoidable,” “unjust, and unfair” Whitehead 1990 KSM, UOCH

  22. Determinants of Health Inqualities Generally perceived as unavoidable or fair Generally perceived as avoidable or unfair 1. Natural, biological variation 2. Differential health-damaging behavior that is freely chosen 3. Differential health-promoting behavior that is freely chosen 4. Differential health-damaging or health-promoting behavior, where choices are restricted 5. Differential exposure to unhealthy, stressful conditions (home, work, etc…) 6. Inadequate access to basic social and essential health services 7. Health-related social mobility KSM, UOCH

  23. Vertical and horizontal equity • Horizontal equity applies to people in the same status or situation, and people who are alike should be treated in the same fashion, • in other words, equal treatment for equal need • Vertical equity focuses on the difference between individuals or groups of people, and people who are unlike in relevant respects (e.g. income, health needs), and states that the differences should be treated differently in a just way KSM, UOCH

  24. How to measure equity? • Lorenz curve • Gini coefficient • Kakwani index • Concentration index KSM, UOCH

  25. Lorenz Curve • Lorenz curve is a graphical representation of the proportionality of a distribution (the cumulative percentage of the values). It was developed by Max O. Lorenz in 1905 for representing income distribution KSM, UOCH

  26. Lorenz Curve KSM, UOCH

  27. Gini Coefficient Note: Gini Coefficient is a tool for measuring inequality of income. The value of Gini coefficient ranges from 0 to 1. A low Gini coefficient indicates more equal income or wealth distribution, while a high Gini coefficient demonstrates more unequal distribution. KSM, UOCH

  28. Gini Coefficient KSM, UOCH

  29. The Kakwani index Is defined as twice the area between the concentration curve of health payment and the Lorenz curve of household income The value of the Kakwani index ranges from -2 to 1 A negative Kakwani index value indicates the regressive nature of health care payments In contrast, a positive value indicates the progressive nature of health care payments KSM, UOCH

  30. The Concentration Curve and Index The concentration curve graphs on the x-axis the cumulative percentage of the sample ranked by living standards, beginning with the poorest, and on the y-axis the cumulative percentage of the health service use corresponding to each cumulative percentage of the distribution of the living standard variable The concentration index is a means of quantifying the degree of income-related inequality within a specific health variable, for example, health service use, and government health subsidies KSM, UOCH

  31. The concentration index • is defined as twice the area between the concentration curve and the line of equality (the 45-degree line running from the bottom-left corner to the top-right) • In the case where there is no income-related inequality, the concentration index is zero • The index takes a negative value when the concentration curve lies above the 45-degree line of equality, indicating disproportionate concentration of health service use or other health variables among the poor, and a positive value when it lies below the 45-degree line of equality KSM, UOCH

  32. Equity in Health Care Financing Kakawani Index

  33. Concentration curve for health payment and lorenz curve for health expenditure, Egypt 1997 KSM, UOCH

  34. Concentration curve for health payment and lorenz curve for health expenditure, Egypt 1997 KSM, UOCH

  35. Progressive & Regressive result of previous figure • Kakawani index (direct tax) = 0.2501 • Kakawani index (indirect tax) = 0.1435 • Kakawani index (social insurance) = - 0.0532 • Kakawani index (OOPs) = 0.0644 KSM, UOCH

  36. Trends of Kakawani indices of HCF Methods in Thailand (1986 – 1998) KSM, UOCH

  37. Progressivity of HCF KSM, UOCH

  38. Equity in Provision of Health Care Concentration Index

  39. Selected concentration curves of ambulatory service use among different types of health facilities in 2003 KSM, UOCH

  40. Selected concentration curves of ambulatory service use among different types of health facilities in 2003 KSM, UOCH

  41. Selected concentration curves of ambulatory service use among different types of health facilities in 2003 KSM, UOCH

  42. Selected concentration curves of ambulatory service use among different types of health facilities in 2003 KSM, UOCH

  43. Concentration curve for health sector subsidies and lorenz curve of household consumption, Egypt 1997 KSM, UOCH

  44. Regressive result of previous figure • Kakawani index (inpatient) = - 0.1785 • Kakawani index (outpatient) = - 0.1069 • Kakawani index (health centre) = - 0.4797 • Kakawani index (total subsidy) = - 0.2124 KSM, UOCH

  45. Efficiency in Health Care Financing and Provision of Health

  46. Efficiency Measures Overview It is organized in three tiers Function of Health system esp in Health Care Financing 1. Perspective 2. Output Revenue collection, risk pooling, purchasing Allocative, Technical/ Productive and Social Efficiency 3. Type of Efficiency KSM, UOCH

  47. Efficiency Overview Society Health Care Financing Perspective Health Plans Providers Purchasers Individuals Output Revenue collection, Risk pooling Purchasing Technical Productive Type Social KSM, UOCH

  48. Allocative Efficiency A firm achieves technical efficiency when it cannot produce the same output with any fewer inputs KSM, UOCH

  49. Technical/Productive Efficiency A firm achieves productive efficiency when it cannot produce the same output at a lower cost KSM, UOCH

  50. Social efficiency • Social efficiency is more often the focus for society than for firms and mainly consider for social inclusion • No person can be better off without making somebody worse off (Pareto optimality) KSM, UOCH