Health System Reforms in OECD Countries Lessons for China WHO China

1. Health System Reforms in OECD Countries Lessons for ChinaWHO China http://www.wpro.who.int/china

2. Overview of Presentation: OECD Health Systems Reforms - Lessons for China • Characteristics of health care systems • Financial resources for health care • Cost containment initiatives • Improving efficiency at the micro level • Ensuring equitable access to health care • Improving quality of care including patient satisfaction • Government role in regulating quality, safety and cost control • Reflections and implications for China http://www.wpro.who.int/china

3. 1. Characteristics of Health Systems in OECD UNIVERSAL coverage of health care with Governments taking major responsibilities Adequate public health financing • Via publicly organized social health insurance schemes • Or via tax-based national health services • Private insurance: • main mode (Swiss, US) - increasing choice & timeliness of care (UK, Ireland, Australia, etc) The way health systems financed are affecting equity • Relying on taxes and social insurance, rather than OOP • more equitable and supports access to care • Individual premium and cost sharing (co-payments) • May have negative implications on equity in health care

4. Characteristics: OECD Public-integrated model (Australia, Nordic countries, UK pre-1990s) Merging finance with provision: run like Govt department • Staff salary paid and complete population coverage • Cost control can easily be done • Weak incentives to improve efficiency, outputs, quality and responsiveness to patient needs Contract (purchasing) model (UK in 1990s, Japan, New Zeeland) • Contract with public or private health providers • More responsive to patient needs • More difficult to contain costs Private insurance / provider model (Switzerland + US) • Affordable insurance • High degree choice • Cost control weak

5. 2. Financial resources for health: OECD • Rapid rise of health expenditure in 1960s and 1970s • After reductions in 1980s, several OECD countries have raised their public spending on health in the 1990s • Totalhealth expenditure (THE) averaged: 8.4% GDP • with a range from 2.0% for Turkey to 13.2% for the US • Public expenditure on health averaged: 6.2% GDP • Most EU countries over 6% and the lowest is 4.2%, in Poland • Turkey 1.5%; Korea 2.6%; US 5.9% of GDP • Public share of THE averages: nearly 75% • Surpasses 70% in most EU countries • Lowest is 56% in Greece and Switzerland; Dutch 63% • US and Korea both 44% • Devoting more of GDP to health care as society gets richer not necessarily inappropriate

6. 3. Cost containment initiatives - OECD Two major factors driving up health care spending in Europe: • Technology: likely explained half of the total spending growth • Population ageing 1980s European countries used 3 policy sets to control cost often in the following order: • Regulation of prices and volumes of health care and inputs • Caps on healthcare spending, either overall or by sector • Shifts of the cost onto the private sector through increased but limited cost-sharing http://www.wpro.who.int/china

7. I. Regulation of prices and volumes of healthcare and inputs Price controls • Wage controls esp. in systems with public-integrated systems (Denmark, Finland, Ireland, Spain, Sweden, UK) • Price and fee controls between purchasers and providers (Belgium, France, Luxemburg, Germany, Austria, Hungary) • Administrative price setting for pharmaceutical drugs (all EU countries except Germany and Switzerland) • Disease Related Grouping (DRG) Price and volume controls • Prices adjusted as a function of volume to stay within budget (Germany – ambulatory care; Austria – hospital care) • Reduce marginal costing for additional supply and volumes http://www.wpro.who.int/china

8. Cont. I. Regulation of prices and volumes of healthcare and inputs Volume controls • Limits on entry to medical schools (most EU countries) • requires human resource planning taking into account age related needs increases • Technology advances can reduce average length of stay in hospitals • leading to reduced number of beds per capita - controlling the purchasing of high tech equipment The effects of cost control measures undermined by providers’ response: • Increasing volumes • Providing higher cost services • Up-rating patient into higher cost classifications • Shifting services into areas where there are no price controls Price and wage controls can have negative & longer-term effects on supply side • Shortage of personnel, affecting flexibility and ability to increase supply http://www.wpro.who.int/china

9. II. Budgetary caps • Most effective in integrated models (Denmark, NZ, UK) or single payer countries (Canada) • Budget process holds key to cost controls • More effective for hospital sector • Indicative budgets/targets – in countries with social-insurance systems (Belgium, France, Luxemburg, Netherlands) • Prospective budgets instead of retrospective payments (paying provider on FFS) Limit the incentives to improve efficiency III. Shifting cost to private sector • Cost sharing esp. in pharmaceuticals through non-reimbursable and co-payments Burden those who use services (sick & poor) and potentially restricting access to services

10. 4. Improving efficiency at micro level: OECD Ambulatory care – shifting care to an ambulatory environment helps control overall costs and enhance economic and technical efficiency The gate-keeping role of GPs has been encouraged in several EU countries (France, Norway, UK) GPs are employed on: • salaries (Greece, Finland, Iceland), salary-fee mix (Norway) • salary-capitation mix (Portugal, Spain, Sweden) • capitation-fee mix (Austria, Denmark, Ireland, Italy, Netherlands, UK) • fee for service (Germany) Reliance on fee-for-service may see supply-induced demand Growing interest in adopting a mix of different provider payment methods http://www.wpro.who.int/china

11. Improving efficiency at micro level HOSPITAL SECTOR • Purchaser (GP fund holders, primary doctors, insurers, patient) / provider split • Budgetary authorities: helps control overall costs and enhance efficiency • Patients: strengthen quality and accessibility care Critical issues: (1) Purchaser gets adequate information; (2) Increasing and competing providers and insurers; (3) Administrative cost Hospital contracting and payment system • Global grants/budgets • main payment method in public integrated systems and direct means to control spending can be combined with DRG (price and volume) • Bed-day payments (Switzerland): flat rate per occupied bed • Payments per case (prospectively) such as Diagnosis Related Group (DRGs) Fee for service: not used in EU as prone to supply induced demand Enhancing competition among insurers (Dutch: new reform)

12. Improving efficiency at micro level Pharmaceutical drugs • Strict drug approval process and pre-marketing requirements to assess whether products are safe & cost-effective for use (widespread in EU) • Price controls at the wholesale and retail level (widespread in EU, convergence in prices across EU countries) • Distribution of pharmaceuticals governed by national regulation with professional bodies, health providers and health users • Number of pharmaceutical wholesalers has decreased • Rational use supported by: • clinical practice guidelines (widespread in EU) • prescribing budgets and data to provide feedback to individual doctors • The degree for cost-sharing for drugs has been more widespread than for other components of healthcare – demand

13. Improving efficiency at micro level Technological change • Major impact on health outcome per disease and major driver of health spending • Pre-marketing controls to determine whether a new technology is safe and cost-effective for a particular use (widespread in EU) • Budget caps make hospitals more selective in acquiring new technologies (wide-spread; similarly, capital charges in UK) • Purchase of high technical equipment through central committee (Netherlands) http://www.wpro.who.int/china

14. Ensuring EquitableAccess to Health Care: OECD Universal coverage as policy objective means that everyone gets access to appropriate care when they need it and at affordable cost • Also adopted by poorer European countries (Moldova and Kyrgyztan) • (Belgium, Finland, Greece, Portugal, Spain The approach generally used to attain universal coverage in European countries has been: • make insurance coverage compulsory • include essential health services the service benefit package • minimize cost sharing with vulnerable groups often been exempted from cost-sharing • provider payment methods emphasisis on prepaid and pooled contributions and moveaway from user fees http://www.wpro.who.int/china

15. Cont … Ensuring EquitableAccess to Health Care: OECD Many countries have found that universal and comprehensive insurance coverage is not always sufficient to ensure equitable access to health services. The following problems need to be addressed separately: • Shortages or maldistribution of providers or services • Socio-cultural barriers Most OECD and European countries, including some of the poorer countries, provide nearly universal health coverage to their citizens • Out-of-pocket payments of total health spending below 23%in most EU countries (and max 33%, in Switzerland) • Out-of-pocket of total household consumptionbelow 3% in most EU countries (max is 6%, in Switzerland) http://www.wpro.who.int/china

16. Stages of coverage and organisational mechanisms Reduce out-of-pocket payments and increase prepayment Universal coverage • Options: • Tax-based financing • SHI • Mix of tax-based financing and various types of health insurance Intermediate stages of coverage Mixing community-, cooperative and enterprise-based health insurance, SHI-type coverage and limited tax-based financing Absence of financial protection Out-of-pocket spending http://www.wpro.who.int/china

17. Universal coverage OECD experience suggests that universal coverage has potentially many advantages • Improve the health and productivity of the population by making health services financially accessible to all • Providing coverage for preventive care can lower future expenditures for care • Reduce the need to provide for a large array of safety-net facilities for sick people who cannot afford care • Reduce administrative costs because processes such as verifying eligibility for the program will not be necessary • Reduce problems of adverse selection into health insurance plans • Enhance fairness in society http://www.wpro.who.int/china

18. 6. Improving quality of care and patient satisfaction: OECD Policy-makers in OECD increasingly address issues of • Inappropriate and poor technical quality of health-care services • Patient safety and medical errors Increased accountability for quality • Improving information systems and make reports public on health-care quality and performance of hospitals, individual providers, health insurance plans to enhance health system performance • DRG as a measure of quality (Czech) • Funding reward (UK) • Standardizing protocols and involvement professional associations • Mandatory accreditation • Setting targets and standards for improvement • Formalizing patients’ rights

19. 7. Government role in paying, providing and regulating: OECD Government as the provider & payer of services, using tax revenues: UK, Finland, Denmark, Ireland, Sweden, Norway, Spain Government as the payer of services, using tax revenues; private providers: Canada Government oversees the provision & payment of services by non-profit organizations (sickness / insurance funds) which rely on employer & employee contributions: Germany, France, Netherlands Government provides safety net for those outside private insurance schemes: Switzerland Government strongly regulates or oversees quality, safety and cost control http://www.wpro.who.int/china

20. 8. Reflections and Implications for China China is weak in regulator function (cost, quality, safety) Insurance coverage low with incomplete package • Urban: 55%, employment based + commercial and non-commercial health insurance • Rural: 45%, voluntary, focus catastrophic illness, very low reimbursement level (30%) “Insurers” either way Govt (MoLSS, MCA) or scattered rural schemes (RCMS) have limitedor no negotiation power with provider Provider merely public but salary paid 50 – 90% thr. user fees: • Increasing amounts of clinical care and under-providing preventive and basic care • Prescribing excessive and unnecessary amounts of drugs and diagnostics • Cost control measurements difficult due to dependency on user fees http://www.wpro.who.int/china

21. Reflections and implications for China ……Resources to Health Health expenditure in China Health expenditure (2000): $45 per capita per year Health expenditure (2004): $71 per capita per year (5.6% of GDP) Total Health Expenditure (THE) Govt 17% in 2004 vs. 40% in 1980 Insurance mainly urban29% in 2004 vs. 40% in 1980 (Rural) Individual (HH)54% in 2004 vs. 20% in 1980 Fear that health care cost will reach 8 - 10% of GDP in 5 years time without necessarily improving quality due to inappropriate mechanisms and tools to control costs (price) and quantity (volume) Drugs consist 44% of THE. In OECD this around 15% http://www.wpro.who.int/china

22. Reflections and implications for China …… Improving efficiency at micro-level China’s experience in public spending on Health • 68% of public health resources toward hospitals for mainly urban residents and insufficient public resources go to “public goods” • Local governments in poor areas, which are responsible for financing health services, face sharp financial constraints and fail to fulfill their core public health functions – unfunded mandates Doctors outnumber nurses No gate keeper and excessively using tertiary services, bypassing available health services in the community – TRUST, increasing cost http://www.wpro.who.int/china

23. Reflections and implications for China ……Ensuring equitableaccess to healthcare: Health services in China are: (1) grossly under-funded by Govt; (2) insurance coverage low; (3) packages inadequate; (4) reimbursement low and (5) health workers relying on user fees. This has resulted in: • Over two thirds of China’s population need to rely on their own pockets to cover the cost of medical bills • Out-of-pocket spending is 56% of total health spending • Health care cost main single reason for people falling into poverty (30% NHSS; 50% DRC report) • ACCESSIBILITY TO HEALTH SERVICES VERY LOW Govt acknowledges accessibility to Health as key problem with around 40% of population lacking access to hospital – mainly financial http://www.wpro.who.int/china

24. Lessons for China from OECD • Step by step …. • Clarify vision and strengthen Government role in Health: • Govt to increase public expenditure towards public health and to support safety net and access to Health for the West and the poor • Regulator in safety, quality and cost Senior level endorsement required to guide the many actors in Health • Consider universal coverage to essential services: • Make health insurancecompulsory • Improve, expand and integrate current urban, rural health insurance, and medical financial assistance with focus on ensuring accessto Health for the low resource areas and safety net for the poor. • Include essential heath services in package with focus on West and the poor

25. Lessons for China from OECD • Change the method of provider payment: • towards prepaid and pooled contributions away from user fees • Introduce forward looking budget instead of retrospective payments • Strengthen the role of purchaser of health services • Put in place cost containment tools and mechanisms • Regulate price and volume of health care & inputs • Caps on health care spending • Develop National Medicine Policy, registration, pricing, distribution, rational use • Strengthen ambulatory care and introduce gate keeping village clinics and urban community health centers • Improve quality of health services at lower level – gain trust http://www.wpro.who.int/china

26. Lessons for China from OECD • Improve quality of health services, especially at lower level • Standardize treatment protocols • Introduce mandatory accreditation • Improve reporting system and ,make reports public on health care quality • Improve quality of staff at lower level • Introduce health system indicators that will focus on accessibility to quality of health services Involve all stakeholders in the process THANK YOU http://www.wpro.who.int/china