raising, pooling and allocating resources€¦ · (oecd 2013) -3.6% -3.2% -1.9% -1.1% -8.9% +2.2%...

Reinhard Busse, Prof. Dr. med. MPH FFPH FG Management im Gesundheitswesen, Technische Universität Berlin

(WHO Collaborating Centre for Health Systems Research and Management)

&

European Observatory on Health Systems and Policies

Raising, pooling and allocating

resources

Third-party Payer

Population Providers

EU

-15

n

ew

EU

A

me

rica

Ea

ste

rn M

ed

itera

ne

an

Afric

a

Western Pacific

So

uth

-Ea

st A

sia

Max. 8845

(USA)

Min. 25

(D.R. Congo)

Am

eric

a

EU

-15

n

ew

EU

Ea

ste

rn M

ed

itera

ne

an

So

uth

-East A

sia

W

es

tern

Pa

cific

A

frica

Max. 17.0%

(USA)

Min. 1.4%

(Timor Leste)

+7.0%

+1.8% +4.1%

+1.6%

+5.3%

+5.5%

+2.2%

+3.9%

+2.1%

+3.7%

+3.4%

+3.3%

+2.1%

+5.3%

Average annual growth

of total health expenditure

before crisis: 2000-2009 (OECD 2013)

//upload.wikimedia.org/wikipedia/commons/9/9e/EU28-2013_European_Union_map_enlargement.svg

-3.6%

-3.2% -1.9%

-1.1%

-8.9%

+2.2%

+1.3%

+0.9%

+0.8%

+1.0%

+1.4%

-1.2%

+1.9%

-1.3%


of total health expenditure

in crisis: 2009-2012 (OECD 2014)


-3.6%

-8.9%

+1.9%


of total health expenditure:

2009-2012 vs. 2000-2009

+7.0%

+5.3%

+2.1%


• A measure of the opportunity cost of health

spending.

• A means of international comparison.

But:

There is no unambiguous optimum level. It

is a matter of political preferences.

Why is the Health

Expenditure/GDP ratio of interest?

Despite the complications, there are just

four main ways of funding health care:

• Out-of-pocket payments by users

• Voluntary (private) insurance payments =

premiums

• Social insurance payments = contributions

or community-rated premiums

• Tax payments

regional local

Sub

stitu

tive

VH

I

Dupli

cate

VHI

Suppl

emen

tary

VHI1

Com

plem

entar

y

VHI

Cost

sharing

(covered

services)

Direct

payments

(uncovered

services)

For

mal

In-

formal

Dedu

ctible

Co-

paym

ent

Direct vs. indirect

General vs. earmarked

Tax compulsory SHI

contribution

Voluntary HI

premia

Out-of-pocket

payments

NGOs etc.

Public Private External sources

Total health expenditure

Prepaid resources

Co-

insur

ance

national

Third-party payer


Collector of

resources

Steward/

regulator Regulation

Raising

resources/

funding

Resource pooling & allocation

System typology

Purchasing/

contracting/

financing

providers

Coverage:

Who? What?

How much?

Income-dependent contributions

& sickness funds =

Social Health Insurance system

Taxes &

governments/ health authorities

= tax-funded system (NHS)

Delivery/

provision of services Risk-related premia

& private insurers =

Voluntary Health Insurance system

Third-party Payer


Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

prepaid

sickness funds

health

authorities

private insurers

Finding the “right“ funding mix …

public

Third-party Payer


Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

World-wide 2012 (large US market!)

23%

34%

15%

22%

58% public

1170 $PPP =

8.6% of GDP

“Public” money can be handled

by private-law institutions;

“publicly regulated” may

therefore be a better term.

Global expenditure on health 2012: around $ 8.4 trillion (8,400,000,000,000)

80 $PPP/ capita

235 $PPP/ capita

770 $PPP/ capita

3050 $PPP/ capita

8845 $PPP/ capita

x3

x3

x4

x3

Third-party Payer


Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

Low-income countries 2012

37%

1%

1%

47%

39% public

83 $PPP =

5.1% of GDP

Third-party Payer


Central African Republic 2012

51%

0%

<1%

44%

51% public Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

3.8 % of GDP

Third-party Payer


Myanmar 2012

23%

<1%

0%

71%

24% public Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

1.8 % of GDP

Third-party Payer


Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

Lower middle income 2012

31%

5%

2%

55%

36% public

235 $PPP =

4.1% of GDP

Third-party Payer


India 2012

28%

2%

2%

61%

31% public Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

3.8% of GDP

Third-party Payer


Egypt 2012

31%

8%

1%

60%

39% public Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

4.9% of GDP

Third-party Payer


Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

Upper middle income 2012

29%

27%

7%

32%

56% public

766 $PPP =

6.0% of GDP

Third-party Payer


China 2012

18%

38%

3%

34%

56% public Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

5.4% of GDP

Third-party Payer


Colombia 2012

12%

63%

9%

15%

76% public Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

6.8% of GDP

Third-party Payer


Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

High income 2012

21%

40%

19%

15%

61% public

4516 $PPP =

11.6% of GDP

Third-party Payer


Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

High income excl. US 2012

36%

40%

6%

16%

76% public

3050 $PPP =

8.8% of GDP

Third-party Payer


Taxes

Voluntary insurance

Out-of-pocket

Czech Republic 2012

6%

77%

2%

15%

84% public

7.5% of GDP

Social Health

Insurance

contributions

Third-party Payer


Taxes

Voluntary insurance

Out-of-pocket

Germany 2012

8.5%

68%

9%

13%

77% public

11.3% of GDP

Social Health

Insurance

contributions

Third-party Payer


Taxes

Voluntary insurance

Out-of-pocket

Greece 2012

28%

39%

3%

28%

67% public

9.3% of GDP

Social Health

Insurance

contributions

Third-party Payer


Taxes

Voluntary insurance

Out-of-pocket

UK 2012

84%

0%

3%

9%

84% public

9.3% of GDP

Social Health

Insurance

contributions

Third-party Payer


Taxes

Social Health

Insurance

contributions

Voluntary insurance

Out-of-pocket

USA 2012

6%

41%

34%

11%

47% public

8845 $PPP =

17% of GDP

The richer countries are, the more they spend

publicly (with the exception of the US) …

… but is more public better?

x 4!

as much

Source: World Health Statistics 2015, baseline 2012

Correlation between private expenditure (as % of total health care expenditure)

and the level of fairness in financing

0.82

0.84

0.86

0.88

0.9

0.92

0.94

0.96

0.98

1

10 20 30 40 50 60

Private expenditure on health as % of total expenditure on health (2002)

Fair

ness in

fin

an

cia

l co

ntr

ibu

tio

n (

max. 1,0

0)

SHI

TAX

MIXED

USA

GR

ROK

CH

CDN

P

E

BFIN

IS

F

D

UK

DK

N

S

inequitable

Correlation between private expenditure (as % of

total health care expenditure) and the percentage of

households with catastrophic health expenditure

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

10 20 30 40 50 60

Private expenditure on health as % of total expenditure on health (2002)

% o

f h

ou

seh

old

s w

ith

cata

str

op

hic

(>40%

of

inco

me)

tota

l h

ealt

h e

xp

en

dit

ure

SHI

TAX

MIXED

USAGR

ROK

CH

CDN

P

ED

B

FIN

FDK

UK

N

IS

S

inequitable

progressive

proportional

regressive

Direct tax

Wage-related contribution

Private insurance

premium; user fee

income

health

funding

= equitable = „good“

= not

equitable

= „bad“

= „not so

good“

CAVE: Many tax-funded

systems have high indirect

taxes = regressive!

BUT: Low-income households

may get (tax-financed) tax-subsidies to pay

for insurance premiums.

possibly

Fig. 4.2 Per capita expenditure on health in US$PPP as compared to satisfaction with health system, 1998

Source: OECD Data base 2000.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 500 1000 1500 2000 2500 3000

Per capita expenditure US$ PPP

Sa

tisfa

cti

on

Dk

A

BF

D

L

NL

U KIrl S

E

PGr

I

Fin

NHS AVG

SHI AVG

The more, the better?

Levels of satisfaction and per capita

expenditure in EU-15 countries (2000)

0% 20% 40% 60% 80% 100%

Austria

Germany

France

Denmark

Italy

UK

Greece

More Less Other Sources: * Eurobarometer 44.3, 1996

Should more be spent on health?

Where should the extra money come

from?

0% 20% 40% 60% 80% 100%

West Germany

East Germany

France

Italy

Netherlands

Sweden

Britain

% respondentsLower national spending on other thingsHigher taxes on tobacco and alcoholHigher general taxationHigher social insurance (national insurance in UK) contributionsHigher charges for patientsMore private health insuranceOther/ don't know/ no answer

Source: Eurobarometer 49 1998 in Mossialos and King 1999 Health Policy 49

Using the triangle to

visualise monetary flows

Co

- paym

ents

and n

on

-

reim

burs

ed h

ealth e

xpenditure

12.3

%

Private health and

long - term care insurers

Statutory sickness funds

Federal and state

governments

Physicians’

associations

Population and

employers

Voluntary private

insurance

premiums 8.4%

Contributions

56.9%

General taxation

7.9%

Reimbursement of patients

Payment to providers

Investment &

salaries

Prices

Investment

Per diems, case plus

procedure fees, DRGs



Mainly

capitation

Fee for service

Fee

for

service

Stat. long - term care funds Contributions

7.0%

Payment to providers,

Fee for service

Fee for service (via Dentists’ associations)

Pharmacies 13.8%

Public health services 0.8%

Ambulatory

care physicians

13.4%

Acute public, private -

non-profit and private -

for profit hospitals

27.2%

Dentists 6.3%

Ambulatory nursing care

providers 2.7%

Nursing homes 6.9% Investment

Fee for service

Per diems

Co

- paym

ents

and n

on

-

reim

burs

ed h

ealth e

xpenditure

12.3

%

Private health and

long - term care insurers

Statutory sickness funds

Federal and state

governments

Physicians’

associations

Population and

employers

Voluntary private

insurance

premiums 8.4%

Contributions

56.9%

General taxation

7.9%

Reimbursement of patients

Payment to providers

Investment &

salaries

Prices

Investment





Mainly

capitation

Fee for service

Fee

for

service

Stat. long - term care funds Contributions

7.0%

Payment to providers,

Fee for service

Fee for service (via Dentists’ associations)

Pharmacies 13.8%

Public health services 0.8%

Ambulatory

care physicians

13.4%

Acute public, private -

non-profit and private -

for profit hospitals

27.2%

Dentists 6.3%

Ambulatory nursing care

providers 2.7%

Nursing homes 6.9% Investment

Fee for service

Per diems

Ressource

mobilisation Purchasing/ payment

Out-of-pocket

Ressource

mobilisation

Out-of-pocket

Purchasing/

payment

Taxes

Social

insurance

VHI

Out of pocket payments – sometimes

referred to as user charges:

1. Full cost charging for, e.g., OTC medicines

(second dimension of coverage)

2. Insurance schemes often require part-

payments (known as cost sharing) in the

form of co-payments, co-insurance and

deductibles (third dimension of coverage)

3. Informal (under the counter) payments are

commonplace in Eastern Europe and LMIC

Should more reliance be placed

on user charges?

• A mechanism for demand management

(discouraging frivolous use)

• A mechanism for raising extra revenues.

• BUT research evidence suggests that user

charges are likely to be inefficient and

inequitable.

Form Definition

Co-

payment

User pays a fixed fee (flat rate) per item or service

Co-

insurance

User pays a fixed proportion of the total cost, with

the insurer paying the remaining proportion

Deductible User bears a fixed quantity of the costs, with any

excess borne by the insurer; deductibles can apply

to specific cases or a period of time

• Not all benefits are covered at 100% by public schemes

• Three different forms of cost-sharing are most commonly used

Forms of (formal) cost-sharing

• clinical condition – diabetics in Sweden, pregnant women in

the United Kingdom and people with specified chronic

illnesses in Ireland, Finland, Spain and UK

• level of income – all those with low incomes in Austria,

Belgium, Germany, Ireland and UK and older people with low

income in Greece

• age – older people in Belgium, Ireland, Korea, Japan, Spain

and UK and children and adolescents in many countries, e.g.

in Germany, Japan and UK

• type of drug – drugs for chronic illnesses in Portugal, drugs

for life-threatening illnesses in Belgium, both types of drug in

Greece and effective drugs in France

Reduced rates or exemptions commonly relate to one or

more of the following:

Admin. costs as % of expenditure

Private Public

Belgium 26.8 (FP, groups) 4.8%

France 10-15% (NP), 15-25% (FP) 4.0 - 8.0%

Germany 16.7% (2002)* 6.1% (2002)*

Ireland 11.8% (NP 2001)

5.4% (NP 1997)

2.8% (1995)

Italy 27.8% (2000) 0.4% (1995)

Netherlands 12.7% 4.4%

UK 14.2% (BUPA), 16.9% (PPP) 3.5% (1995)

Mossialos and Thomson 2002 NB: figs for 1999 unless otherwise stated; *Federal Statistical

Office 2004

NP = non-profit / FP = for-profit

Contribution

collector

Third-party

payer


Independent of risk,

need and utilisation,

i.e. income-related or

community-rated

Dependent on volume,

appropriateness (service

= need) and quality,

steered by priorities and

incentives

Dependent on risk,

but independent of actual

utilisation

Ability to pay Solidarity Need

Pooling allocation

50

3,4

10

2,5

10

4

10

6,9

5

5,6

5

8,8

5

15,6

5

53,2

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% of

population

% of

expenditure

Expenditure is highly skewed: 5% of

population account for >50% of expenditure (example Germany 2001)

20%

80%

Expenditure is highly skewed: 5% of

population account for >50% of expenditure (example France 2001)

Source : CNAMTS/EPAS

5%

51%

64%

10%

78%

20%

98%

70%

100%

90%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% of people % of expenses

20%

80%

0%

50%

100%

US population Total health expenditure

1%

5%

10%

55%

69%

27%

Sourc

e:

Monhe

it 2

003 a

nd B

erk

and M

onheit 2

001

… and the same picture in the USA

50%

97%

Issues for discussion:

Do allocate to regions with …

• more elderly

• more ill persons

• lower life expectancy

• more persons in urban areas

• more hospital beds and physicians

more money?

Risk adjusters in the capitation formulas for resource

allocation (social health insurance systems)

Country Year of

implementation

Risk-adjusters

Austria None

Belgium 1995

2006

-Age, sex, social insurance status, employment status, mortality,

urbanization, income

-Age, sex, social insurance status, employment status, mortality

urbanization, income, diagnostic and pharmaceutical cost groups

France None

Germany 1994/1995

2002

-Age, sex, disability pension status

-Age, sex, disability pension status, participation in

disease management program

Japan ? (-Age)

Korea None

Luxembourg None

Netherlands 1993

1996

1999

2002

-Age, sex

-Age, sex, region, disability status

-Age, sex, social security/ employment status,

region of residence

-Age, sex, social security/ employment status,

region of residence, diagnostic and pharmaceutical cost groups

Switzerland

(within canton)

1994 -Age, sex

Sources: adapted from Busse et al. (2004) and updated with data from Risk Adjustment Network (HAN)

Risk adjusters in the capitation formulas for resource

allocation (tax-financed systems)

Country Risk-adjusters

Australia Age, sex, ethnic group, homelessness, mortality, education level, rurality

Canada Age, sex, socioeconomic status, ethnicity, remoteness

Denmark Age, number of children in single parent families, percentage of rented flats,

unemployment, education, immigrants, social status, single elderly people

England Age, mortality, morbidity, unemployment, elderly people living alone, ethnic origin,

socioeconomic status

Finland Age, disability, morbidity, archipelago, remoteness

Iceland None

Ireland not applicable

Italy Age, sex, mortality, morbidity, utilization

New Zealand Age, sex, welfare status, ethnicity, rurality

Norway Age, sex, mortality, elderly living alone, marital status

Portugal Mainly based on historical precedent; Age, relative burden of illness (diabetes,

hypertension, tuberculosis, AIDS),

Spain None

Sweden Age, sex, marital status, employment status, occupation, housing tenure, high

utilizer

Sources: Rice and Smith (2002); Mapelli (1999); Järvelin et al. (2002); Vallgårda et al. (2001)

raising, pooling and allocating resources€¦ · (oecd 2013) -3.6% -3.2% -1.9% -1.1% -8.9% +2.2%...

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