Post on 28-Dec-2015
Health Reform Experiences - Future Challenges in the
European Region
Open Health Institute Presentation and Discussion at the Summer School,
Moscow, July 2004
Armin FidlerThe World Bank
Objective of Presentation and Discussion: Outline what happened to health systems in the OECD
over the last decade Illustrate the choices and tensions which arise from the
organization of health systems Highlight fiscal affordability and questions of long-term
sustainability Provide an outlook on some of the future challenges for
health systems, such as ageing (example of Austria). Discuss the relevance of these OECD experiences for
Russia in the long term.
Gross National Income Per Capita (PPP)
0
2,000
4,000
6,000
8,000
10,000
12,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Central Europe
Baltic States
Western CISBulgaria and Romania
Other South-Eastern Europe
Central Asia
Caucasus
Total health expenditure as % of GDP
<= 12<= 10<= 8<= 6<= 4<= 2No data
EU-15: 8.9 (2001)
Central, South East Europe & Baltics: 5.8 (2001)
Impact of Early Reforms in the Last Decade Slowly improving health status but low user satisfaction Separation of funding from supply, Social Insurance High growth rates of (mostly private) providers and
increase in providers revenue Devolution of ownership structure of hospitals From budget to fee-for-Service to budget caps Funding fragmentation creates considerable
administrative costs (>3%) Comparatively low health care wages curtail even higher
growth of expenditures Public Health collapse
Which Values? Evidence versus Ideology
Social solidarity Focus on fairness and
equity Explicit cross-subsidy Social protection Universal Access, not
related to income Role of state usually
important State capture? Most prevalent in OECD
Individual responsibility Focus on efficiency Little cross-subsidy Limited Access Stratification by income Individual risk rating Limited risk pooling Consumer protection? US Model and attempts in
FSU
Sources and Management of Health System Revenues
Pri
vate
Pu
blic
Taxes
Public ChargesSales of Natural
Resources
Government Agency
Social Insurance /Sickness Funds/Obras
Mandates
Revenue Source
Public
PrivateGrantsPrivate Organizations /
Insurers
Employers
Individuals
Borrowing
Charity
Out-of Pocket
Private Insurance
Management Providers
Expenditure Reduction Versus Fiscal Sustainability Expenditure = short-term, emergency measure
Reduced services Improved operational efficiency
Fiscal sustainability = measures, known to persist, compatible with political + economic incentives Institutional measures (restructuring) that don’t rely on political
discretion (e.g., on amount of state subsidy to loss-makers) Have built-in incentives – for instance, to modulate future
excessive demand for, or supply of, services (e.g., co-payments) Values/consensusValues/consensus matter for political sustainability (and
incentives) Medium-term consensus framework to match
medium-term fiscal framework
Growth Rates of Public Expenditure on Health Care and Total Public Expenditure
-5
0
5
10
15
20
25
BE DK DE EL ES FR IE IT LU NL AT PT FI SE UK EU-15
average annual increase in public expenditure on health care, 1999-2002*
average annual increase in total government expenditure, 1999-2002*
Dynamic Issues How low can public health expenditures go?
Values matter here – how much should individuals pool their resources and risk (through budget), or assume individual responsibility?
How can contingent liabilities be contained? For example, government guarantees of commercial debt, if not
properly provisioned for, can de-rail expenditures in future. How can the revenue base be maintained?
High payroll tax rates, in an integrated labor market, can lower employment growth
Through shifting economic activity from one country to another Through driving employment to untaxed informal
economy
Evaluating Fiscal Effect of Reforms: A Simple Framework-
Low Predictability
High Predictability
High Cost-Efficiency
Low Cost-Efficiency
0.20
0.25
0.30
0.35
0.40
0.45
0.50
0.55
1994 1995 1996 1997 1998 1999 2000 2001
Georgia
Moldova
Russia
Estonia
Serbia and Montenegro
Kyrgyzstan
Azerbaijan
Romania
Poland
Hungary
Income inequality, 1994 - 2001 (Gini coefficients)
Accounting of Health Production
• Physical environment
• Life style
• Other socio-economic factors
•mortality• morbidity and QoL
•Perceived health status•Impairment, disability, handicap•Multi-dimensional health status•Disease-specific morbidity
Modification of health status
Health needs
Utilization of health services
(personal & collective)
Cost = Price x Volume
• Earnings• Fees• Capital
Input to healthservices
Population Health Status
•Manpower• Health facilities• Intermediate products•Medical knowledge & technology
Resources
•Training/education• Investment into medical facilities• Medical R & D
Investment
Expenditure on health by
establishments of providersExpenditure on health by Functions•Public health services• personal services and goods by,
• age group• disease (ICD• ATC (pharmaceuticals)• DRGs (inpatient care), etc.
Sources of financing
(intermediate & ultimate financing)
Structural Problems
Long-term fiscal sustainability threatened at already high levels of expenditure and debts
Consumer demand will continue to rise New technologies as cost drivers Excess capacity/distribution of resources Over- consumption
Drugs (highest in OECD at 25%), sick leave Ageing (disability and social cases in acute care) Inefficiencies at the continuity of care-interface
Cost-efficiency at Microeconomic Levels Demand Side
Cost sharing Austria: 70/30%
Public/Private (20%=OOPP) Gate keeping GPs
Issue = Payment systems Limits on coverage of
statutory package Create competitive
supplementary insurance market
Supply Side Purchaser-Provider Split
Selective Contracting Payment systems
DRG, Capitation, etc. HTA
Public agency (NICE in UK; ANDEM in France)
Provider Competition Good attempts in CZR
Management Decentralization HR policies
Challenges: Financial Sustainability of Health Systems
Major cost pressures new medical technologies, incl. drugs ageing society pressure to increase salaries of health care personnel (in particular in new EU countries) people’s expectations rise (EU) need to replace and maintain infrastructure
Focus: Eastern Europe public sector bears most of financial risk (92% of health care expenditure is public) excessive and expensive hospital capacity uncommonly high utilization of health services
Emerging Evidence on What May Work (1) Balance between public and private finance
co-payments for publicly paid services privately paid services – cross-subsidy some risks can be shifted to private risk pools equity should be over-riding concern
Provide financial incentives for efficiency and quality pooling funds active purchasing performance based funding of health care providers
Strengthen Primary Health Care gate keeping
Emerging Evidence on What May Work (2) Contain drug costs
no single solution, all available instruments used broad reference pricing, regulating wholesale-retail margins,
substitution for generics, prescription guidelines and monitoring, feedback to physicians, drug budget holding for group GPs
Proactive policies to optimize hospital capacity Management and governance reforms of health care providers
Decentralisation; autonomy; privatization Other policies to improve quality and access
evidence based medicine
$
Age
Capacity to contribute for a person on average
Average lifetime healthcare costs for a person
A
Need for subsidy
The Need for Cross - Subsidization
20
Pooling of Revenues... Equalizes Inequities
Cross subsidy from productive to non-productive part of
the life cycle
Cross-subsidy fromrich to poor
Cross-subsidy from
low-risk to high-risk
Pro-ductive
Non-produc
tive
AgeR
esou
rce
end
owm
e nt
Low risk
High risk
Health risk
Res
ourc
e en
dow
me n
t $
$
Poor Rich
Income
Res
ourc
e en
dow
me n
t
$
$
$
$
Determinants of Austrian Health Care Expenditure (IHS Study)
Demand Factors Increasing share of people 65+ increases health expenditure
noticeably. Higher number of deaths increases health expenditure slightly. Increasing life expectancy of the elderly is reducing health
expenditure (compression of morbidity). Supply and Policy Factors
Increase in the number of radiologists (proxy for technology) increases health expenditure somewhat (supplier induced demand).
Rise in acute-care beds leads to rising health care expenditure. High level of health expenditure leads to lower growth
rates of health expenditure.
In Austria, there is one youth for each person older than 65 now...
...but in 2030, there will be two elderly for each youth.
24% 17% 14%
62% 68%61%
14% 16%25%
0%
20%
40%
60%
80%
100%
1970 2000 2030
65+
15-65
<15
USA: 20-30% (Scitovsky, Capron 1986)
UK: 29% of hospital costs (Seshamani, Gray 2003)
A: 10-18% of public hospital costs (Riedel, Hofmarcher 2002)
Health Expenditures Last Year of Life
Austrian Model: „Resistant policy“ leads to higher health GDP share
Forecast of health care expenditure in percent of GDP, 2000 to 2020
0,0
2,0
4,0
6,0
8,0
10,0
12,0
14,0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
neutral
progressive policy
resistant policy
Austrian Model: Supply and Demand Factors and Expenditure Growth
-7,0%
-5,0%
-3,0%
-1,0%
1,0%
3,0%
5,0%
7,0%
Expenditure quotientLife expectancy at the age of 65Number of acute-care bedsNumber of radiologists Share of over 65-year-olds "net growth"
Scenario „neutral“, growth rates in percent
Long-Term Care Funding/Coverage
Country Service Funding Coverage
A Nursing Home
Personal Home careGeneral Taxation Universal
D Nursing Home
Personal Home careContributions Universal
IRL Nursing Home
Personal Home careGeneral Taxation Means-tested
L Nursing Home
Personal Home careGeneral Taxation
Contributions
Universal
NL Nursing Home
Personal Home careContributions Universal
E Nursing Home
Personal Home careGeneral Taxation Means-tested
S Nursing Home
Personal Home careGeneral Taxation Universal
UK Nursing Home
Personal Home careGeneral Taxation Means-tested
In Summary and for Discussion: In emerging market economies and in OECD health
expenditures grow faster than GDP, resulting in fiscal pressures Fiscal pressures stimulate a debate about how to finance
sustainably the health sector, including the role of the State versus the citizen.
Values, history and community expectations matter in this debate
Dual task of functioning health system: Focus on externalities for society: public health; Social protection for individuals against catastrophic events
Reform can never stop – as exogenous factors emerge and societal demands and values change