health financing challenges in the baltic states toomas palu sr. health specialist, world bank...
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Health Financing Challenges in the Baltic States
Toomas PaluSr. Health Specialist, World BankMember of Management BoardEstonian Health Insurance Fund
Health financing reforms include to a various degree social insurance
elementsEstonia
• Health Insurance Act – 1991, 2002• Earmarked 13% payroll tax• Estonian Health Insurance Fund (EHIF Act 2000)
Latvia• Government decrees 1993, 1997, 1999• Earmarked 28.4% of income tax• Latvian State Compulsory Health Insurance Agency (Gov agency)
Lithuania• Health Insurance Act 1995• Earmarked 30% of income tax, 3% payroll tax• Administered by State Patient Fund (Government Agency)
The main objective of introducing health insurance in the Baltics was
…
… to ensure increased and sustainable level of health
financing
powered by physician lobby.
Health expenditures: appropriate level? how sustainable? *
* OECD and EU candidate countries, data from 1998-1999, OECD, WHO
0
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14
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000
GDP per capita, USD in PPP
Hea
lth
exp
end
itu
res
% G
DP
Estonia
Latvia
Lithuania
UK
US
Explanation of different health financing reform outcomes
Estonia has higher level of health financing because health insurance is the main source of public health funding
• Formalisation of economy, gradual decline of “grey” economy• Productivity improvements• Average salary growths higher than economy in general
In Latvia and Lithuania large part of health financing is determined through political budget negotiations, but …
• Health sector neither EU nor NATO priority• Health issues only now becoming part of political (election) debates
Health financing information is not comparable and comprehensive• Standard (OECD, WHO) health accounts are assembled only in Estonia• Latvia accounts only for public sources, Lithuania assembles its own
national health accounts
HI share of overall health financing. Pooling of funds.
0%
20%
40%
60%
80%
100%
Estonia Latvia Lithuania
Sources of funds
Other
Households
Social Insurance
Government0%
20%
40%
60%
80%
100%
Estonia Latvia Lithuania
Financing agents
Is Estonian narrow tax base sustainable in long term?
Solidarity in Estonian health insurance
state3%
13 % tax45% of insured
no contri-butions
52% of insured
Cost pressures
Aging population• average life expectancy is increasing• birth rates below population replacement rate
Ever-emerging new high-cost effective medical technologies• high cost of pharmaceuticals• situation worse for economies of transition because they
lag behind in introduction as well as penetration rates of already existing medical technologies
Pressure from health care provides to increase reimbursement rates• low salaries of medical personnel• unfunded capital costs
Increased expectations of citizens
Costs of various benefits to EHIF
0
100
200
300
400
500
600
700
800
900
1996 1997 1998 1999 2000 2001 2002
Mill
ion
EE
K
0
500
1000
1500
2000
2500
3000
3500
Mill
ion
EE
K
Pharmaceuticals Sickness benefits Health services
11%22%
13%0.2%
2%
20%
24%
-8%
19%
5.3%
74%63%
13%21%
42%
17%
5%
5.8%
Examples of cost pressures in Estonia
Cost million EEK
% of EHIFsecondary care budget
Queues Joint replacement surgery - 3821 persons 134 6.4%Cataract surgery - 4670 persons 30 1.4%
New high tech, not included in the benefit list yetinner ear prosthesis 5 0.2%Inplanted cardiac defibrillator 30 1.4%PCR test for donor blood safety 5 0.2%
Reimbursement rate rise demanded by health providers 250 11.9%% of pharmaceuticals
budgetNew drugs not include in the reimbursement list
Fabry disease – Fabrazyme® - 4 persons 12 1.6%Leucemia – Gleevec ® 30 persons 15 1.9%
Regular intake of ordinary high blood pressure drugs 200 25.9%
Solutions to cost pressures
More money for health care!?• Limited by overall strength of economy • Attract private financing - investments, cost sharing, private insurance; PPP -
public-private-partnerships
Effective and efficient use of scarce resources• Keywords: cost-effectiveness, appropriateness, needs, incentives, evidence base,
transparency
Make choices• What benefits are covered by social health insurance
Cost-sharing: regulating user charges
Estonia• Co-payment of Euro 3.2 for outpatient specialist consultation• Co-payment of Euro 1.6 per hospital day up to 10 days (Euro 16) per
admission, adjusted annually according to inflation• Few exemptions• Reasonable user charges for above standard accommodation• Patients are charged full cost if the want to by-pass queues
Latvia• Euro 0.8 for outpatient specialist consultation• Euro 8.4 at hospital admission, Euro 2.5 per hospital day up to Euro 25 per
admission • Extensive exemptions
Lithuania• Government approves a list of services that are paid out of pocket
Making choices about HI benefits
None of the countries has been successful• obvious choices have been done – cosmetic surgery,
etc. have been excluded from the public benefits packages
• politically very difficult decisions, not popular among electorate
• clear criteria are not defined
Technical solutions for better use of scarce resources
International evidence base
Implementation in Baltics
Reference pricing for reimbursable pharmaceuticals Pharmaceutical reimbursement budgets for physicians +/- Rational prescribing Global budgets and case-based reimbursement (DRGs) for hospital care
Competitive contracting +/- +/- Use of health economics in decision making +/- Optimisation of hospital infrastructure Analysis of needs and needs based planning +/-
Needs assessment and contract planning in Estonian health insurance fund• Untying contract planning from historical hospital services
production, planning according to patients’ needs• Analyze service utilisation variation among 7 population
pools as a proxy for need•utilisation of data warehouse concept
• Separate supply induced demand from medical need as much as possible
•consult with GPs • Analyze queues – integrate results• Budget planning and scost-and-volume contracts
according to needs assessment results
Small area variation in the utilisation of dermatology services, Estonia 2001
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250
Ida-
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latio
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ases
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Outpatient Inpatient
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Op
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Psych
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Re
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Th
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Ort
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Outpatient
Inpatient
HK (All) Arv (All) Nimi (All)
Sum of Ülearv 100 000 kindl kohta
Põhieriala
Rtüüp2
Monitoring waiting times
Prioritizing queues in Estonia
Application of prioritization protocols• joint replacement and cataract surgery queues• evaluate need, e.g.
- physical impairment (visual aquity, functional mobility)
- pain- ability to work, give care to dependents, live
independently• protocols based on New Zealand experience
People with higher needs needs wait less
Optimisation of hospital capacity in Estonia
Implemented through• Rational “Hospital Masterplan 2015”• Legal hospital reform: incorpororation under private law as foundations
(trusts) or joint stock companies under public ownership• Hospital mergers – internalise efficiency problem to hospital
managementIn 2001 EHIF had 17 hospital contracts in Tallinn In 2002 EHIF has 4 hospital contracts in Tallinn
• Supported by EHIF contracting• Development of conceptual solution for long term care• Solving health sector investment financing problem
1993 1999 2001 2015
Number of hospitals 115 78 67 13
Number of hospital beds 14 377 10 358 9160 3500
ALOS 15.4 9.9 8.7 4
Hospital capital investment financing reform
Key reform features• capital cost will be included in the EHIF price in 2003• hospitals will pay capital charge on assets they have
received free of charge from the State• hospitals will make their own investment decisions• for expensive investments “certificate of need” is
required, issued by the State Health Board
This policy will be additional incentive for divesting excess hospital buildings and equipment