1 Health System Reforms in OECD Countries Lessons for China WHO China .

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Health System Reforms in OECD Countries Lessons for China

WHO China

http://www.wpro.who.int/china

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Overview of Presentation:OECD Health Systems Reforms - Lessons for China

1. Characteristics of health care systems2. Financial resources for health care 3. Cost containment initiatives 4. Improving efficiency at the micro level5. Ensuring equitable access to health care6. Improving quality of care including patient satisfaction7. Government role in regulating quality, safety and cost control 8. Reflections and implications for China


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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

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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

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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

Total health 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

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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:

1. Regulation of prices and volumes of health care and inputs

2. Caps on healthcare spending, either overall or by sector3. Shifts of the cost onto the private sector through increased

but limited cost-sharing


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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


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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


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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-paymentsBurden those who use services (sick & poor) and potentially restricting access to services

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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


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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)

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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

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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)


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5. Ensuring Equitable Access 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 emphasis is on prepaid and pooled

contributions and move away from user fees


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Cont … Ensuring Equitable Access 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 consumption below

3% in most EU countries (max is 6%, in Switzerland)


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Stages of coverage and organisational mechanisms

Reduce out-of-pocket payments

and increase prepayment

Absence of financial protection

Intermediate stages of

coverage

Universal coverage

Out-of-pocket spending

Mixing community-, cooperative and enterprise-based health insurance, SHI-type coverage and limited tax-based financing

Options: • Tax-based financing• SHI• Mix of tax-based financing

and various types of health insurance


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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


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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 (1) 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)

(2) Standardizing protocols and involvement professional associations (3) Mandatory accreditation

– Setting targets and standards for improvement (4) Formalizing patients’ rights

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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


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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 limited or 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


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Reflections and implications for China ……

Resources to Health

Health expenditure in ChinaHealth expenditure (2000): $45 per capita per yearHealth 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 urban 29% 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%


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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


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Reflections and implications for China …… Ensuring equitable access 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


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Lessons for China from OECD

1. Step by step ….

2. 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

3. Consider universal coverage to essential services: Make health insurance compulsory

Improve, expand and integrate current urban, rural health insurance, and medical financial assistance with focus on ensuring access to 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

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4. 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

5. 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

6. Strengthen ambulatory care and introduce gate keeping village clinics and urban community health centers Improve quality of health services at lower level – gain trust


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5. 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

6. Introduce health system indicators that will focus on accessibility to quality of health services

Involve all stakeholders in the process

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1 Health System Reforms in OECD Countries Lessons for China WHO China .

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