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Role of Communities and thePrivate Sector
Alexander S. PrekerWorld Bank
October 28, 2003
Rich-Poor Differences inHealth Care Financing
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Revenue Pooling Resource AllocationCollection or Purchasing (RAP)
Flow of Funds Through the SystemPr
ivat
ePu
blic
Taxes
Public Charges
Mandates
Grants
Loans
PrivateInsurance
Communities
Out-of-Pocket
PublicProviders
PrivateProviders
Service Provision
GovernmentAgency
Social Insurance orSickness Funds
Private InsuranceOrganizations
Employers
IndividualsAnd Households
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• Collecting Pre-Paid Revenues
• Pooling of Funds and Sharing of Risks
• Allocating Resources and Purchasing
Origins of Rich-Poor DifferencesIn Financing Child Health
![Page 4: Rich-Poor Differences in Health Care Financing · rich to poor Poor Rich $ $ Cross subsidy from productive to non-productive part of the life cycle Produ ctive Non-produc tive $ $](https://reader033.vdocuments.mx/reader033/viewer/2022042812/5faa0a232d775b63e978f491/html5/thumbnails/4.jpg)
• Collecting Pre-Paid Revenues
• Pooling of Funds and Sharing of Risks
• Allocating Resources and Purchasing
Origins of Rich-Poor DifferencesIn Financing Child Health
![Page 5: Rich-Poor Differences in Health Care Financing · rich to poor Poor Rich $ $ Cross subsidy from productive to non-productive part of the life cycle Produ ctive Non-produc tive $ $](https://reader033.vdocuments.mx/reader033/viewer/2022042812/5faa0a232d775b63e978f491/html5/thumbnails/5.jpg)
Low-Income Countries HaveWeak Capacity to Raise Revenues
Tota
l Gov
ernm
ent R
even
ues
as %
GD
P� The tax structure in many
low-income countries isoften regressive.
0
20
40
60
80
100
Per capita GDP (Log scale)10,000 100,0001,000100
� Governments in manycountries often raise lessthan 5% of GDP in publicrevenues; and
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Low Income Pattern: Direct ChargesRevenue Pooling Resource AllocationCollection or Purchasing (RAP)
Priv
ate
Publ
ic
Taxes
Grants
Out-of-Pocket
Service Provision
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Total Expenditure on Health CarePercent of GDP
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Mozam
bique
Ethiopia
Uganda
Rw
anda
Kenya
Average
Zambia
Tanzania
Malaw
i
South Africa
HE % of GDP
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Public Expenditure on Health CarePercentage of Total Public Expenditure
0%
2%
4%
6%
8%
10%
12%
14%
Rw
anda
Mozam
bique
Uganda
Kenya
Ethiopia
Average
Tanzania
Malaw
i
Zambia
South Africa
PHE % Tot.Govt EXP.
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• Collecting Pre-Paid Revenues
• Pooling of Funds and Sharing of Risks
• Allocating Resources and Purchasing
Origins of Rich-Poor DifferencesIn Financing Child Health
![Page 10: Rich-Poor Differences in Health Care Financing · rich to poor Poor Rich $ $ Cross subsidy from productive to non-productive part of the life cycle Produ ctive Non-produc tive $ $](https://reader033.vdocuments.mx/reader033/viewer/2022042812/5faa0a232d775b63e978f491/html5/thumbnails/10.jpg)
What do We Mean by Pooling?
AgeR
esou
rce
endo
wm
ent
Health risk
Res
ourc
e en
dow
men
t
Cross-subsidy fromlow-risk to high-risk
Lowrisk
Highrisk
$
$
Income
Res
ourc
e en
dow
men
t
Cross-subsidy fromrich to poor
PoorRich
$
$
Cross subsidy fromproductive to non-productive
part of the life cycle
Productive
Non-produc
tive
$
$
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Low Income Patterns: FragmentationRevenue Pooling Resource AllocationCollection or Purchasing (RAP)
Priv
ate
Publ
ic
PublicProviders
PrivateProviders
Service Provision
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Less Pooling of Revenues inLow Income Countries
Share of world’s 1.3 billion living onless than US$1 day indicated by
size of blue bubbles
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0
1
2
3
4
5
6
7
8
9
10
1 500 999 1498 1997 2496 2995 3494 3993 4492 4991 5490 5989
HH
exp
endi
ture
as
mul
tiple
of
PL
Pov line = 1789870 dongs/day Pre OOP HH incomePost OOP HH income
Out-Of-Pocket (OOPs) ExpenditureAnd Poverty Without Risk Sharing
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0 5 10 15 20 25 30 35 40
KERALA
TAMIL NADU
KARNATAKA
ANDHRA PRADESH
HARYANA
ORISSA
MAHARASHTRA
ALL INDIA
NORTH EAST
WEST BENGAL
MADHYA PRADESH
GUJARAT
RAJASTHAN
PUNJAB
UTTAR PRADESH
BIHAR
Percent Falling Into Poverty
Hospitalization Causes ImpoverishmentSupply Side Subsides are not Enough
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• Collecting Pre-Paid Revenues
• Pooling of Funds and Sharing of Risks
• Allocating Resources and Purchasing
Origins of Rich-Poor DifferencesIn Financing Child Health
![Page 16: Rich-Poor Differences in Health Care Financing · rich to poor Poor Rich $ $ Cross subsidy from productive to non-productive part of the life cycle Produ ctive Non-produc tive $ $](https://reader033.vdocuments.mx/reader033/viewer/2022042812/5faa0a232d775b63e978f491/html5/thumbnails/16.jpg)
Benefit Incidence: The Rich Get More Public Benefits(All India, 1995-96)
10.1%13.4%
17.8%
25.6%
33.1%
0.0%
10.0%
20.0%
30.0%
40.0%
Poorest20%
2nd Middle 20% 4th Richest20%
Income Quintiles
Shar
e of
the
Publ
ic S
ubsi
dy
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• It provides financing
• It provides access to quality services
• It increases consumer satisfaction
The Private Sector is Important
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Who Pays for Health in India?
Private Insurance
0%
Private Investment
3%Public-States
14%
Public-Centre4%
Private Out-of-pocket79%
Source: NSSO; CSO; 1995-96Data
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Out-of-Pocket Health Payments and Household IncomeAll India (1995-96): The Poor Contribute Significantly
0.0
100.0
200.0
300.0
400.0
500.0
600.0
Poorest20%
20%-40% Middle20%
60%-80% Richest20%
Per C
apita
Priv
ate
Spen
ding
(Rs.
)
Out of Pocket to Public Facilities Out of Pocket to Private Facilities
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Service Delivery: People Use Public and Private Sectors(All India, 1995-96)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Outpatient Care
Hospitalization
InstitutionalDeliveries
Antenatal Care
Immunizations
Public-Private Sector Shares
Public Private
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Responsiveness:Little Satisfaction in Andhra Pradesh (2000)
But Private Sector Outperforms Public Sector
0 10 20 30 40 50
Waiting time
Doctor’s manner
Doctor’s skills
Nurse’s manner
Nurse’s skills
Explanation of care
Overall visit
Percent Satisfied or Very Satisfied
Public Private
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But Without Subsides the Poor Get Less:Proportion of Institutional Deliveries, All India (1995-96)
73%
68%
63%
53%
36%
0 10 20 30 40 50 60 70
Poorest 20%
20%-40%
Middle 20%
60%-80%
Richest 20%
Percent of Births Delivered at Health Facilities
Public Private
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• Increased Targeting of Public Resources
• Increased Private Sector Participation
• Increased Financial Protection
• Increased Subsides for the Poor
• Communities often Play an Important Role
Urgent Need for ChangeAt the Global Level
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The End