Dr Phua Kai Hong, AB cum laude SM (Harvard), PhD (LSE) Lee Kuan Yew School of Public PolicyNational University of Singapore

Health Systems Financing in Asia

Current Trends and Issues in Health Care Financing in Asia

• Predominantly out-of-pocket expenditure in WHO SEARO and WPRO (Asia-Pacific)

• Growth in social insurance and less taxation in WPRO region (eg Korea, China, Vietnam)

• Increasing catastrophic expenditure and impoverishment due to healthcare spending (China and transitional economies)

• High expenditures for drugs and diagnostics (50-60 % of total health budget in China)

• Strong fundamentals and driving forces for increasing demand and consumption

Comparative Health and Expenditurein Selected Asian Countries (WHO Report 2000)

$/capita (Int $) Public/Total %GNP %Pop>60 DALE

Japan 2373 (1759) 80.2 7.1 22.6 74.5Korea 700 (862) 37.8 6.7 10.2 65.0China 20 (74) 24.9 2.7 10.0 62.3India 23 (84) 13.0 5.2 7.5 53.2

Singapore 843 (750) 35.8 3.1 10.3 69.3Brunei - (857) 40.6 5.4 5.0 64.4Malaysia 110 (202) 57.6 2.4 6.5 61.4Thailand 133 (327) 33.0 5.7 8.5 60.2Philippines 40 (100) 48.5 3.4 5.6

58.9Indonesia 18 (56) 36.8 1.7 7.3 59.7Vietnam 17 (65) 20.0 4.8 7.5 58.2Myanmar 100 (78) 12.6 2.6 7.4 51.6Cambodia 21 (73) 9.4 7.2 4.8 45.7Laos 13 (53) 62.7 3.6 5.2 46.1

Health Expenditure % GDP Per capita 1. France 9.8% $2,3692. Italy 9.3%

$1,8553. San Marino 7.5%

$2,2574. Andorra 7.5% $1,3685. Malta 6.3% $5516. Singapore 3.1% $8767. Spain 8.0%

$1,0718. Oman 3.9% $3709. Austria 9.0% $2,27710. Japan 7.1%

$2,373

Health Systems Performance WHO Rankings 2000

WHO Health Systems Performance Assessment

• Health Attainment (Effectiveness)

• Responsiveness (Efficiency)

- basic amenities, social support, respect,

confidentiality, autonomy, choice,

communications

• Fairness in Financing (Equity)

- distribution of risks, social protection

Effects of Health Care Financing and Payment Systems

• EQUITY Who pays? Who benefits? - Distribution - Access• EFFICIENCY Supply & Demand - Allocation - Production• EFFECTIVENESS Outcomes - Quality of Care - Health Status

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1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Per

cent

age

Comparative Health Expenditure in Selected Developed Countries

U.S.

Germany

Canada

JapanU.K.

Singapore

Year

Some Reasons for Singapore’s High Ranking and Low Expenditure

• Relatively high GNP growth in denominator

• Lower consumption due to age structure (age-adjusted projection up to 6-8% of GNP)

• Strong budgetary controls on public spending

• Absence of comprehensive health insurance

• Government subsidies for public health and differential pricing for personal consumption

• ? Cost-sharing and co-payment system

Health Expenditures as % of GDP in East Asian Economies (2000)

• National Health Insurance Systems

Japan 7.1

Korea 6.7

Taiwan 5.0• National Health Service Systems

Hong Kong 4.7

Malaysia 2.4

Singapore 3.1

Healthcare Expenditure in East Asia

Japan 7.1 80 : 20

Taiwan 5.0 66 : 34

Malaysia 2.4 58 : 43

Hong Kong 4.7 54 : 46

Korea 6.7 38 : 62

Singapore 3.1 36 : 64

% GNP Public:Private

26

% of population

$ per personX

H1

T1

X1

Private Public

Total (x) Private(x)

Health Expenditure Density Functions: Optimal Public-Private Mix?

2

Asian Health Care Financing Systems

With Universal Coverage• Social Health Insurance - Japan, Republic of Korea, Taiwan, Thailand

• National Health Service - Singapore, Hong Kong, Malaysia, Sri Lanka

Without Universal Coverage• Social Health Insurance

- China, Vietnam and transitional economies

• National Health Service - India, Indonesia and other developing countries

Selected Health Care Financing - Social Health Insurance Models

• JAPAN Universal health insurance (1922/1939) NHI Law amended (1984/1990) Trial DRG/PPS in 10 Hospitals (1/11/1998) Long term care insurance (1997/2000)• KOREA Universal health insurance (1976/1989) Health Care Reform Committee (1994/1997) K-RDRG Pilot Program (1997-1998)• TAIWAN Universal health insurance (1995) Partial DRG system (from 1998) Cost-containment measures (from 2000)

Selected Health Care Financing – National Health Service Models

• SINGAPORE National Health Plan (1983) Medisave/Medishield/Medifund (1984/1990/1993) Review Committee on National Health Policies (1992) White Paper on Affordable Health Care (1993) Casemix Funding (1999) Eldercare Fund/Eldershield (2000/2002) Enhanced Medishield/Private Insurance (2005)• HONG KONG Scott Report (1985) Consultation Paper - Towards Better Health (1993) Harvard Consultant’s Report (1999) Consultative Paper - Lifelong Investments in Health Care(2000) Proposal for Supplementary Private Insurance (2010)

Changing Features of the Singapore Health Care System

Mixed Public-Private Health Care Market

• Choice of private and public systems

• Competition and integration between public, private and voluntary sectors

• Appropriate mix of financing methods

• Co-payment at the point of consumption

• Selective insurance to avoid moral hazard

• Targeted public subsidies to address inequity

• Government benchmarks for prices & quality

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1965 1970 1975 1980 1985 1990 1995 2000

Year

$b

illio

n

Government Expenditure Private Expenditure Total Expenditure

Public-Private Health Expenditure in Singapore (1965-2000)

Singapore Health Statistics – Past and Present

1980 2005• Life expectancy 70 years 80 years• Infant mortality 12/’000 2.5/’000 • Aged/total population 5 % 9 %• Public hospital mix 85 % 80 %• Health expenditure/GDP 3 % 4 % • Health expenditure/ 6 % 7 %

government budget• User fees recovered / 3 % 60%

public expenditure

Singapore’s HybridHealth Care Financing

Seeks to avoid either extremes -

Welfare StateTax-funded/Social insurance- ‘Free’ services- Low quality- Inefficiency

Free Market Fee for service Private insurance - Moral hazard - Adverse selection - Inequity

Healthcare Financing Strategies

Instill personal and family responsibility(Cost-sharing)

+ Ensure future sustainability with ageingand avoid inter-generational problems

(Savings)+

Enhance risk-pooling and social protection (Insurance)

+Target subsidy and equitable distribution

(Taxation)

Medisave

Medishield

Medifund

PRIMARYCARE

ACUTECARE

CATASTROPHIC(LONG TERM CARE)

FinancingMethod

PrivatePayment

CompulsorySavings

Social/Private Insurance

PUBLIC SUBSIDIESSource: Dr. Phua Kai Hong

Taxes PUBLIC HEALTH SERVICES

(Eldershield)

(Eldercare fund)

Health Care Financing in Singapore

Public Hospitals: Bed Distribution

Types of Beds

% Distribution

% Subsidy

Class A (1 bedded)

7 0

Class B1 (3-5 bedded)

16 20

Class B2 (6-10 bedded)

28 65

Class C (open ward)

49 80

Day Surgery/ Specialist Outpatient Clinics

Private Subsidized

0 50

Health Care Financing Reforms -The Unfinished Agenda

1983 Blue Paper – National Health Plan1984 Medisave1990 Medishield1993 Medifund1993 White Paper - Affordable Health Care2000 Eldercare Fund2002 Eldershield2005 Enhanced Medishield/Private Insurance 2009 Means Test (Targeted Public Subsidies)2010 ?

The Singapore Health Care Model

• Singapore’s health system ranked extremely high• Reputation for high quality, choice and efficiency• Equity risks covered by subsidies and safety nets• Fully funded medical savings with social insurance

to finance increasing needs of ageing population • Balance between health care supply and demand

with pricing and subsidy, while containing costs • Goals of efficiency, equity, quality and sustainability

to be maintained by appropriate public-private mix in provision, financing, regulation and education

Similar Approaches to Old Age Security and Health Care Financing

World Bank’s 3 Pillars for Old Age Security• Redistribution (Taxation) • Savings • Insurance

Singapore’s 3M for Health Care Financing• Medisave (avoids inter-generational transfers)• Medishield (pools risks for catastrophic care)• Medifund (subsidizes the poor and indigent)

4 8 12 16 20 24 28

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France

SwitzerlandRussia

GermanyItaly

Finland

NorwaySweden

Belgium

United Kingdom

Denmark

SpainPortugal

Greece

Japan

Ireland

New Zealand

Australia

Canada

United States

Hong Kong

Taiwan

Korea

Malaysia SingaporeSingapore

Hea

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Aged Dependency Ratio (>65/Aged 15-64)

Health Expenditures and Ageing

Population Ageing: Impact on Health Expenditure

• Health expenditure will increase with growing proportion of the aged

• Health expenditure will increase with longer survival of the aged population

• Health expenditure will increase with widening periods of morbidity and disability before death

Population Ageing Trends by 2030

Health and Long Term Care Financing in Japan

• Universal health insurance 1922-1939 • National Health Insurance (1961)• Health Service Law for the Aged (1982/1986)• National Health Insurance amendments 1984-1990• The Golden Plan / New Golden Plan (1990) - 10 -Year Gold Plan for the Development of Health

and Welfare Services for the Elderly• Public Long Term Care Insurance Act (1997) -

implemented in 2000 - 50% insurance (40 years and above) - 50% general taxation

Health and Long Term Care Financing in Singapore

FINANCING METHOD• Personal savings• Compulsory savings• Catastrophic insurance• Disability insurance• Endowment• Taxation

3-M SYSTEM + 2E

• MEDISAVE (1984)• MEDISHIELD (1990)• + ELDERSHIELD(2002)• MEDIFUND (1992)• + ELDERCARE FUND

(2000)

Special Conditions in Asia

• Fastest pace of economic transition• Highest rates of population ageing and

population growth• Great propensity for savings• Strong traditional family support systems

Old age security and health care financing

must contend with such considerations