Domestic Financing for Health: Key Issues

1. ECOSOC Regional Ministerial Meeting Colombo, 16 March 2009 Domestic Financing for Health: Key Issues byDavid B Evans, DirectorDepartment of Health Systems FinancingHealth Systems and Services Cluster

2. Functions and Goals of Health System Goals / Outcomes of the system I N P U T S System Building Blocks or Functions SERVICE DELIVERY Quality Responsiveness (the way people are treated and the environment) Coverage HEALTH WORKFORCE INFORMATION Health MEDICAL PRODUCTS, VACCINES & TECHNOLOGIES LEADERSHIP/GOVERNANCE Fairness in financial contribution Efficiency FINANCING (COLLECTING, POOLING AND PURCHASING)

3. Three core health financing functions Equity and Transparency Revenue collection Pooling Purchasing Buy or provide effective health interventions Share costs - not borne only by people who are ill Collect sufficient funds efficiently

4. Revenue Collection • 13 Asian countries rely heavily on external funding for health. External funding the focus of the next Panel. These countries are more at risk of reductions in the funds for health. • Parts of Asia still growing relatively strongly. Govt. Expenditure on health should continue to rise, at least proportional to GDP and General Government Expenditure. • Exceptions: • Countries relying on import and export taxes/duties for govt. revenue • Where devaluation against currencies in which health imports denominated: e.g. medicines. Even same levels of expenditure buy less. • Parts of Asia in recession. Concern that there will be pressure to cut government health spending, particularly where emergency IMF emergency support. Good reasons for resisting this. Spending on health important in an economic downturn, protecting the poor and vulnerable. Can also be an important part of a stimulus package – increasing aggregate Demand

6. Revenue Collection - Households • Parts of Asia still growing relatively strongly: Household income on aggregate should continue to grow. Some Exceptions: • Possible reduction in remittances from abroad. • Effective income might fall if devaluation causes prices of imports to rise. • Pockets of unemployed or vulnerable: e.g. those in the export sector • Parts of Asia in recession: Effective household incomes fall. • Impact: less private health expenditures and shift to public sector. Important for public sector to be prepared.

7. Pooling: Lack of access, financial catastrophe and impoverishment due to user-charges

8. Pooling • Parts of Asia still growing relatively strongly: Important to continue the push towards prepayment and pooling of funds. Only then can universal coverage be achieved. • Parts of Asia in recession: Important to reinforce social protection mechanisms for the poor and vulnerable. • Crises sometimes offer opportunities for changes that might be politically difficult at other times: opportunity to set in place mechanisms that enable a more rapid movement to universal coverage when economic growth restarts. • Fundamental for the revitalization of Primary Health Care

9. Purchasing • Many sources of inefficiency in health e.g. • Inappropriate mix of interventions or inputs purchased; • Services available at inappropriate level of care; • Waste – e.g. long length of stay; over use of medicines • Ways providers are paid are particularly important. • Supply and demand side responses possible. Results-based financing (RBF) receiving considerable attention these days. Demand side incentives such as cash transfers can also improve equity. • Important to recognize it is only one part of the requirements for a well functioning health financing system. • Crises again offer additional opportunities for change: e.g. move to generic medicines. Focus on equity

10. Conclusions 1: Domestic Health FinancingNeeds • Raise additional funds where health needs are high and revenues insufficient • Reduce reliance on out of pocket payments where they are high, by moving towards pre-payment and pooling • Enhance social protection by ensuring the poor and other vulnerable groups have access to needed services, particularly during financial and economic downturns • Improve efficiency and equity: appropriate mix of activities to fund, appropriate inputs in production of health services, provider payment methods and other incentives for efficient service provision and use, and financial, contractual and other relationships with the non-government sector • Promote transparency and accountability in health financing systems

11. Conclusions 2: Grasping the Opportunity • Recessions and crises offer the opportunity for bold thinking • Health expenditure can be a valuable part of a stimulation package for countries in recession • Measures to protect the poor and vulnerable are critical. The crisis offers the chance to move more quickly.

12. Thank you

13. Stages of Coverage Reduce out-of-pocket payments and increase prepayment Universal Coverage * Tax - based financing * Social health insurance * Mix of tax - based financing and various types of health insurance Intermediate stages of coverage * Mixes of community Cooperative-and enterprise-based - - health insurance, other private health insurance, SHI-type Absenceof coverage for specific groups and tax-based financing financialprotection * Out-of-pocket spending for health care

14. Expected Economic Growth 2009 IMF revised all estimates, for all regions, downwards: • Global Gross Domestic Product growth: 0.25% • Advanced Economies: -2.0% (first year on year negative growth since 1945) • Central and Eastern Europe: -0.4% • Newly Industrialised Asia: -3.9% • Sub-Saharan Africa: +3.5% • Developing Asia: +5.5%

15. Global Growth