Health economics: Health care systems financing and organisation: international comparisons with the NHS Flashcards
Classifying healthcare systems
• By dominant financing source
• By political philosophy (capitalist, socialist; Social Democratic, Conservative, Liberal)
• By the nature of state intervention (universal protection, or specific groups only – e.g. the poor)
• By level of national income
• 3 dimensions (Bohm, 2013)
• Regulation, financing, service provision
Health Care…
(Cost)
• Funding is a concern in all countries
• Is not costless
• Someone has to pay for it
• All health care is ultimately paid for by households
• User charges / out of pocket expenses
• Private insurance
• Taxation / social insurance
• Voluntary sector
• But… the method of revenue collection, pooling and purchasing services has important implications
Objectives of health financing
• Healthy population
• Quality of health services
• Equity (redistribution, vertical equity)
• Sustainability (economic / fiscal)
• Efficiency
• Universal coverage
Limitations to Universal Coverage
Example UK:
• Not everybody covered: e.g. in UK NHS – foreign students and visitors from outside, overseas…
• Not covered in full: people still pay prescription charges, which can be substantial
• Not all treatments covered: based on recommendations by National Institute for Health and Care Excellence (NICE) = typically £20,000-30,000 per QALY (up to £300,000 for rare conditions, HST Programme)
• Rationing through waiting times
• Accessibility (incl. ambulance waiting)
Three health financing functions
Revenue collection - population
Pooling - NHS, social insurance schemes, private health insurance…
Individual accounts
Purchasing - providers
Revenue collection
• Direct - payments at the point of service use
• user fees in public sector
• fees paid to private provider (full or co-payment)
• Prepayment
• Compulsory
• Taxes (General revenue or earmarked or combination)
• Mandatedcontributions(e.g.socialhealthinsurance)
• Voluntary –Private health insurance
Equity and health finance
• A financing source is progressive if you contribute proportionally more with increasing income
• Systems based on social insurance or general taxation tend to be more progressive
• Systems based on private insurance or relying on direct payments tend to be more regressive
Risk pooling
• Accumulating prepaid health care revenues on behalf of a population
• Nation-wide
• By profession
• By employer
• By location / community
• To address unpredictability of need for health care expenses
• Opportunity for cross-subsidy –redistribution from healthy to sick, from better off to the poor
• BUT Complex – Market Failure • Adverse Selection
• Moral Hazard
Purchasing
• The process by which funds are allocated to healthcare providers to obtain services on behalf of identified groups (e.g. insurance scheme members) or the entire population (Kutzin 2001)
• 3 key decisions:
• What services will be purchased?
• From which service providers, and how will people access them?
• How will services will be purchased?
HS typology based on financing sources
• Traditional sickness insurance (‘Bismark’ model) – private insurance with state subsidy
• National Health Insurance – national level single-payer health insurance system
• National Health Service (‘Beveridge’ model) – state finances and provides health care
• Mixed – combining traditional sickness insurance and national health coverage
Out of pocket expenses / user Fees
• At the point of service use: access to health care completely limited by ability to pay, income and wealth levels
• Very few would suggest this is a sensible method of funding health care alone
• Concern about financial catastrophe (typically defined as 25% of total expenditure
or 40% of capacity to pay)
• However, some degree of OOP exists in most countries
Social healthi
• In theory avoids the problem of adverse selection as premium are unrelated to individuals risk and participation is compulsory
• Typically collected as a percentage of people’s incomes
• Employer contributions common
• Typically operated by a public agency
• Benefits limited to members of the scheme and in some cases dependents
• Advantages: redistributive, mobilise additional resources
• Disadvantages: complex and expensive to administer, often limited choice
• Examples: Belgium, France, Ghana, Mexico, Germany (public/private)
Private health insurance
• Limited government intervention
• Risk pooling, small pool
• Premiums risk rated
• Often tied to employment
Private health insurance
• Advantages: Provide complementary cover for high cost services, or non covered providers for those able to pay
• Disadvantages: purchasing based on fee-for-service (high costs), market segmentation & cream-skimming (equity impact)
• Examples: Switzerland, US, South Africa
General taxation
• Tax revenue includes
• Direct taxes: deductions at source (PAYE)
• Indirect taxes (VAT, export, import duty)
• Funds combined in a single pool
• Tax funding used to finance health services and exemption schemes • Medicare and Medicaid
• Sure start
• Generally considered to be more scope for ‘cross subsidisation’ of those who do not contribute or contribute little
• Consumption of health care not linked to contribution
• Advantages: very progressive, broadest pooling, economies of scale, efficiency
• Disadvantages: subject to economic fluctuation and political interference (particularly with hypothecated taxes)
• Examples: UK, Denmark, Cuba, Sri Lanka
WHO indicators for health system performance
WHO 2000 report
WHO indicators for health system performance
• Assesses performance against three overall goals: • good health
• responsiveness to the expectations of the population • fairness of financial contribution
• Progress towards them depends crucially on how well systems carry out four vital functions
• service provision
• resource generation • financing
• stewardship
