Focus on health financing
Late 1970s Voluntary community based health insurance attracted
considerable attention
1980’s financing of health care moved high on the agenda of the
discussions on health policy
Recurring theme in
Executive Board Meeting of the WHO in 1986,
World Health Assembly and the Commonwealth Health Ministers
Conference in 1986
User charges dominating the policy debates of 1970s and 1990s.
Attention back on community based health insurance
In developed countries the problem is containing the cost of health
care
In some developing countries the problem presents itself as how to
maintain health spending and how to achieve “health for all” initiative
Definition of health care
financing
Definition of health care financing
mobilization of funds for health care
allocation of funds to the regions and
population groups and for specific
types of health care
mechanisms for paying health care
(Hsaio, W and Liu, Y, 2001)
Health service financing source
Health services financed broadly through private expenditure or
public expenditure or external aid
Public expenditure includes all expenditure on health services by
central and local government funds spent by state owned and parastatal
enterprises as well as government and social insurance contributions
where services are paid for by taxes, or compulsory health insurance
contributions either by employers or insured persons or both this counts as
public expenditure.
Voluntary payments by individuals or employers are private
expenditure.
External sources refer to the external aid which comes through
bilateral aid programme or international non governmental
organizations
The ownership of the facilities used whether government by
government, social insurance agencies, non profit organizations
private companies or individuals is not relevant
Annual Health Care Expenditure
for Selected Asian Countries 1990 data
GDP per Public
Country capita Expenditure Expenditure
1990 as % of GDP as % of
(US$) total
Nepal 188 4.5 48.9
Bangladesh 204 3.2 43.8
China 311 3.5 60.0
India 353 6.0 21.7
Pakistan 354 12 52.9
Sri Lanka 473 18 48.6
Indonesia 596 2.0 35.0
Thailand 1558 5.0 22.0
Singapore 13,653 4.0 57.9
Mechanisms of Health Financing
general revenue or earmarked taxes
social insurance contributions
private insurance premiums
community financing
direct out of pocket payments
Each method
distributes the financial burdens and benefits
differently
each method affects who will have access to health
care
financial protection
General revenue or earmarked taxes
the most traditional way of financing health care
finance a major portion of the health care (especially in
low income countries)
Social insurance
It is compulsory. Everyone in the eligible group must
enroll and pay a specific premium contribution in
exchange for a set of benefits.
Social insurance premiums and benefits are described
in social compacts established through legislation.
Premiums or benefits can be altered only through a
formal political process
Private insurance
private contract offered by an insurer to exchange a set of
benefits for a payment of a specified premium.
marketed either by nonprofit or for profit insurance companies
consumers voluntarily choose to purchase an insurance
package that best matches their preference.
offered on individual and group basis. Under individual
insurance the premium is based on that individuals risk
characteristics.
major concern in private insurance is buyer’s adverse
selection
Under group insurance, the premium is calculated on a group
basis. risk is pooled across age, gender and health status.
Community based financing
Refers to schemes are based on three principles: community
cooperation, local self reliance and pre payment
Factors for success of community financing
Technical strength and institutional capacity of the local
group
Financial control as part of the broader strategy in local
management and control of health care services
Support received from outside organizations and individuals
Links with other local organizations
Diversity of funding
Responding to other (non health) development needs of the
community
Ability to adapt to a changing environment
Direct out of pocket
made by patients to private providers at the time a
service is rendered
user fees refer to fees the patients have to pay to
public hospitals, clinics, and health posts not to private
sector providers.
proponents of user fees believe that the fee can
increase revenue to improve the quality of public
health services and expand coverage
major objection raised against user fees had been on
equity grounds
Community financing
Technical strength and institutional capacity of the
local group
Financial control as part of the broader strategy in
local management and control of health care services
Support received from outside organizations and
individuals
Links with other local organizations
Diversity of funding
Responding to other (non health) development needs
of the community
Ability to adapt to a changing environment
Changing government role
in health care
Health is considered a public good
Government needs to actively
participate to avoid market failures
Health Financing in India
Characteristics
The government’s fiscal effort measured as the proportion of
total government expenditure spent on health again
identifies India as a low performer.
In a global ranking of the shares of total public expenditure
earmarked for health only 12 countries in the world had lower
proportions spent on health.
The out of pocket private spending dominates with 82 percen
spending of all health spending from private sources. This is
one of the highest in the world.
Globally only five countries have a higher dependence on
private financing in the health sector (WHR 2000).
About 10 percent of Indians have some form of health
insurance mostly formal sector and government employees.
National Health Account for India, 1991
(% of total Expenditure)
Use of
Source of Funds
Funds
(Expenditures) Public Out of All
Subsidies Insurance pocket sources
Primary 9.9 0.8 48.0 58.7
Care
Curative 3.3 0.8 45.6 49.7
6.6 NA 2.4 9.0
Preventi
ve,
Public
health
Inpatient 9.3 2.5 27.0 38.8
Care
Non 2.5 NA NA 2.5
service
Provision
All uses 21.7 3.3 75.0 100.0
Insurance schemes in India
categorized into : Mandatory, voluntary, employer
based, and NGO based
Mandatory insurance ESIS and CGHS
principally financed by the contributions of the
beneficiaries and their employers and from taxes.
ESIS receives contributions from state
governments whereas the latter is mainly financed
from central government revenues. ESIS covered
35.4 million beneficiaries in 1998 and CGHS
covered only 4.4 million beneficiaries in 1996.
Providers mainly work on salaries and hospitals
work under global budgets.
Voluntary health insurance schemes
Are for individuals and corporations
Available mainly through the General Insurance Corporation (GIC)
of India and its four subsidiaries- a government owned monopoly.
financed from household and corporate funds
GIC offers MEDICLAIM policy for groups and individuals and the
JAN Arogya Bima scheme to individuals and families, mainly to
cover poor people.
Policies have had only limited success in India covering only 1.7
million people in 1996.
With Insurance Regulatory and Development Act 1999 and the
liberalization of insurance more private voluntary health schemes
are expected to be introduced soon.
Employer based schemes
Offered both by public and private sector companies
through their own employer managed facilities
Mode lump sum payments, reimbursements of
employee’s health expenditure or covering them
under the group health insurance policy with one of
the subsidiaries of GIC.
Workers buy health insurance through their
employers taking insurance in lieu of wages
Ellis (1997) estimates roughly 30 million are
covered under the employer based scheme
Community based insurance schemes
Primarily for informal sector
Tends to cover all insured members of the community
for all available services but have emphasis on primary
health.
Most financed from patient collections, government
grant, donations, and such miscellaneous items as
interest earnings or employment schemes
Most NGOs have their own facilities or mobile clinics
to provide health care.
Total coverage is estimated to be about 30 million
people (Ellis 1997).
Challenges with insurance
India linking health insurance with employment is
difficult because most people are self employed,
have agricultural work, or do not have a formal
employer or steady employment.
Many of the poor are excluded from access to high
quality health care and health insurance because
of inability to pay, lack of knowledge, or other
factors, related to geography or discrimination
Too much of cream skimming too in India
i.e.selection of less risky groups by insurance
companies
Conclusion
Role of health economists be recognized
Health financing cannot be dealt
separately as it has got to do with good
governance, economic growth,
education
Social inclusion and financial protection
seems to be provided through
community based financing
