Health financing andUniversal Health Care.

Ramon Pedro P. Paterno Institute of Health Policy & Development Studies

University of the Philippines Manila – National Institutes of Health

UP CPHJune 27, 2012

Objectives

1 The context

2 Define Universal Health care, its significance

3Overview of the Philippine Health Financing situation

4 How different is it from other models

5 Future challenges in attaining UHC

The Context1

Global Population – 6.7 Billion July 2009 US Census Bureau

The global health situation

Global Health Human Resource crisis

Development of Health Systems

Global trend: health systems:

“… left to their own devices, health systems do not gravitate naturally towards the goals of health for all through primary health care as articulated in the Declaration of Alma Ata”. …

Three … worrisome trends:– disproportionate focus on specialist, tertiary care

often referred to as “hospital-centrism”– fragmentation , as a result of vertical health

programs– the pervasive commercialization

• OECD – 20% of population• 90% of world’s health expenditure

Global health governance

• Is WHO defaulting to international finance institutions?

• From comprehensive Primary Health care to various forms of selective Primary Health Care

• Why is the WB formulating global health policies?

• Investing in Health…

Healtha right or an investment?

Healthas aright {

fundamental human right

constitutional right primarily

government’s responsibility

access to health services by virtue of citizenship

Healthas an

investment

• spending on health justified by increased productivity leading to growth• global competitiveness in global trade which leads to inclusive growth

{investment

So far growth has not been inclusive

Health is a rightbecause we are Filipinos

It is guaranteed by our Constitution.

Health is a rightbecause we are human

It is enshrined in the WHO Constitution and in various UN instrumentalities.

Universal Health Care2

Health inequity slideRichest

provincesLife expectancy at

birth > 80Infant mortality rate

< 10Maternal mortality

ratio

< 15

Poorest provincesLife expectancy at birth

< 60Infant mortality rate

> 90Maternal mortality ratio

>150

health inequities

Health systems Building Blocks

18

Weakness of the Health System

• Inappropriate governance within the health system

• Antiquated and inadequate health information system

• Ineffective regulation of health goods and services

• Fragmentation of health service delivery

• Dysfunctional health workforce

• Unfair, unjust and inadequate health care financing

19

Any effort short of

Universal Health Care in

reforming the Health

Sector is unlikely to solve

the issue of inequities in

health.

20

Universal Health Care

The provision to every Filipino of the highest possible quality of health care that is:– accessible, – efficient, – equitably distributed, – adequately funded, – fairly financed, – appropriately used by an

informed and empowered public

21

Universal Health Care

• Will ensure access to health care as a right regardless of ability to pay

• No significant out of pocket payment at point of service

• It is NOT charity • because it is prepaid either by our

taxes or PhilHealth premiums• All Filipinos pay taxes – income tax or

VAT

Health Financing Situation3

Total health expenditure has always been below the WHO recommendation of 5%

GDP.

19951996

19971998

19992000

20012002

20032004

20052006

20070

50

100

150

200

250

300

350

THE5% GDP

Billi

ons o

f Pes

os

Why 5% of GDP?

GGHE as %GDP1 2 3 4 5 6 7 8 9 10

20.9

34

56

810

11

% o

f H

H w

ith

ca

tast

rop

hic

exp

en

dit

ure

Adapted from Xu, K et al. (2003) . Household catastrophic health expenditure: a multicountry analysis

The Lancet. 362: 111-117.

Low Middle HighCountry income:

Share of Total Health Expenditure

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

% s

ha

re i

n T

HE

Government

Out-of-pocket

Philhealth

National Health Accounts, NSCB

23.7%

7.2%

57.9%

Why must OOP be 20% of THE?

Low Middle HighOOP as %THE

10 20 30 40 50 60 70 80 900

20.9

34

56

810

11

% o

f H

H w

ith

ca

tast

rop

hic

exp

en

dit

ure

Adapted from Xu, K et al. (2007) . Protecting Households from Catastrophic Health Spending.Health Affairs 26 No. 4: 972-983.

Country income:

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 20060

10

20

30

40

50

60

70

80

90

100 Personal Public Health

% S

hare

in T

HE

We spend 6.5 times more on personal care than public health.

National Health Accounts, NSCB

The commitment to Universal Health Care

DOH DO No. 2011-0188Kalusugan Pangkalahatan Execution Planand Implementation Arrangements

The goal of universal health care is to

health inequities

decrease

Depending on how we implement UHC, it may not decrease health

inequities.

Pathway matters!

Financial protection

HealthStatus

Current performance

UHC

Emphasizehospitalization/

catastrophicspending?

EmphasizePHC andpublichealth?

Adapted from Berman, P. (2012, Jan 26) . Pathways to UHC: Two Examples of Policy Trade-offs.Prince Mahidol Award Conference 2012. Bangkok, Thailand.

The path to universal coverage is financed by a combination of both

tax-based revenues and social health insurance (SHI) premiums

Tax-based financingAdvantages• Burden of contribution is

progressive if the tax design is progressive

• More consistent with health as a right paradigm

• Less administrative costs• Coverage by virtue of citizenship

Tax-based financingDisadvantagesCompete/negotiate for budget every year with other government agencies

Advantages• Additional revenues for the health

sector• Earmarked for health, no need to

compete with other government agencies in annual appropriation hearings

Social health insurance

Disadvantages• SHI premiums less progressive

contribution specially with PHIC salary cap on premium contribution

• Formal sector triple burden: income tax, SHI premiums as payroll tax, indirect tax (VAT)

Social health insurance

Social health insuranceDisadvantages• Large administrative costs – PhilHealth

12% of premium collection• Difficult to enroll the informal sector• May lull the Dept of Finance into

thinking not necessary to allot budget for health outside of SHI premiums (Wagstaff)

A historical context of social health insurance:The experiences of Germany and Austria

47 YEARS 58 YEARS

10% 50% 88%

GERMANY

AUSTRIA

7% 60% 96%

40 YEARS 37 YEARS

Source: WHO Discussion Paper No. 2 (2004)

It is easy to cover the formally employed sector.It is doubly hard to cover the informal sector!

PhilHealth as the key to health financing

“Expand coverage, increase benefit payments, include outpatient benefits,

use alternative forms of payment mechanisms, improve marketing to

increase beneficiary knowledge, improve information system…”

2001 Health Sector Reform Agenda2005 National Objectives for Health2005 Fourmula One2010 Health Care Financing Strategy

• enrolment of the of the poorest of the poor and mandatory enrolment of the informal sector

• increase awareness of PhilHealth benefits and entitlements

• access to inpatient and outpatient services through PhilHealth

• zero co-payment for sponsored members in government hospitals

2010 Aquino Health Agenda

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

% s

hare

in T

HE

Government

Out-of-pocket

Philhealth

Hypothetical scenario in the year 2000

If government maintainedits share at 41%...

…and Philhealthincreased its share to 30%

Out-of-pocket sharewould have gone below 20%

Actual scenario

Gov’t 23.7%

Philhealth 7.2%

Out of pocket 57.9%

Lessons from WHO-WPRO

From Bekedam, H. (2011). The World Health Report 2010 (Health Systems Financing: The Path to Universal Coverage)

Why PHIC should accelerate Out patient package development:

• 50% of OOP spending in the Philippines is for drugs

• The poor tend to rely more on purchase of drugs than medical care

• Availability of medicines in public facilities very low– Soonman Kwon – Pharmaceutical and

Health Care Financing, April 24, 2012

How much will UHC cost?4

Based on 5% GDP recommendation

Year 2007 2011 2013 2015

GDP* in current price (billions of pesos)

6,647 9,018 10,549 12,341

THE as percent of GDP 3.5% 4% 4.5% 5%THE in billions of pesos 235 361 475 617

Php 617B by 2015

*Projected GDP from IMF World Economic Outlook Database April 2010

Based on National Health Accounts

Annual growth rate of THE at 12%

Year 2004 2005 2006 2007 2008 2012 2015THE

(billions of pesos) 188.0 218.2 242.6 256.7 295.5 464.9 653.2

Php 653B by 2015

Based on Essential Health Package costing

• P1,382 per person 2010• Adjusted to annual inflation rate of

5.5% = P1,806 per capita by 2015 X population =

• P1806 X 103M population = P186B• Tertiary hospitalization costs: 34% of

THE• Total THE 2015 = P312B – P350 B

Why the 3 estimates

• 5% of GDP = P615B• NHA projection at 12% annual growth =

P653B• EHP + hospital expenditure = P312B

• P615 is based on WHO recommendation• NHA projection includes inefficiencies,

specially in drug purchases and fee for service payment mechanisms

• EHP projection P312B delivered by govt services

What is unique with our UHC?5

If we succeed

• Unique model• SHI with informal sector contributing

SHI premiums• Plan: mandatory membership• Proof of PhilHealth membership

required for all government transaction: driver’s license, business permit for sari-sari store etc

Decreasing industry sector share in GDP

The informal sector in the Philippines will continue to increase, making universal

population coverage more difficultFrom ADB. (2007). Country Diagnostics Studies: Philippines: Critical Development Constraints.

Global experience in SHI

From Langenbrunner, J. (2012). Bismarck vs. Beveridge: Is there still a debate?. Prince Mahidol Award Conference 2012. Bangkok, Thailand.

Lessons from Thailand

55

WHY is UCS Non-Contributory

“It is technically not feasible to achieve Universal Coverage rapidly with the application of the contributory scheme. The UC members do not have regular cash income… premium collection is difficult …

Direct tax is the most progressive source of financing health care …”

Achieving Universal Coverage in Thailand, What lessons did we learn? Viroj Tangcharoensathien,et al. WHO Commission on Social Determinants, March 2007.

Regional Context

THE(%GDP)

GGHE (%THE)

SHI (%THE)

OOP (%THE)

Malaysia 4.4 44.4 0.4 40.7

Philippines 3.9 34.7 7.7 54.7

Indonesia 2.2 54.5 8.7 30.1

Vietnam 7.1 39.3 12.7 54.8

Thailand 3.7 73.2 7.1 19.2

From Tangcharoensathien, V. et al. (2011). Health-financing Reforms in Southeast Asia: Challenges in Achieving Universal Coverage. The Lancet, 377(9768), 863 - 873

“I would argue the new model of social insurance is that … you ask these

formally employed people to pay, but you use general revenue taxes (to) subsidize the premium for the poor people and near poor. That's also

social health insurance.”

William HsiaoProfessor of Economics

Harvard School of Public Health

2012 Jan 9 . Roundtable Discussion by the Council on Foreign Relations, Washington DC.

Issues5

Can we raise the needed revenues?

• Fiscal space = revenues vs expenses; Revenues mainly Tax Effort or tax collection rate as % of GDP

• “tax revenues in the region – 13.2% of GDP are the lowest of any region in the world. This suggests there is room to raise revenues to finance (Health)– WPRO Health Financing Strategy 2010 - 2015

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

0

5

10

15

20

25

as

% o

f G

DP

Historical Revenue and Tax Effort

Total revenues

Taxes17%

peak taxcollectionin 1997

Adapted from Diokno, B. (2008 June 11). The Philippines: Fiscal Behavior in Recent History. Presented at 2nd AC-UPSE Economic Forum. UP Diliman, Quezon City.

Health financing

• Fiscal space: we can generate the money

• Tax effort or tax collection rate presently at 14% of GDP

• Historically peaked at 17% of GDP 1997

Health financing

• With political will and Tax Reforms, we can achieve tax collection rate of 17% of GDP again

• 3% GDP differential = P300B, enough for UHC through public health system

Disparities in wealth

• Wealth of 40 richest Filipinos increased by $13B to $47.4B this year,

• Our GDP increased by P732B or $17B. • $13B = 76.5% of $17B• Henry Sy worth $9.1B or P395B, greater

than Total Health Expenditure for 2008• Lucio Tan $4.5B Tobacco King, PALPhilippine Daily Inquirer June 22, 2012

How much should come from taxes and how much from PHIC premiums?

Philhealth Targets

2012 2013 2014 2015 Total

Benefits 58 77 92 103 330

Financing Sources

Premium Collections 50 67 76 79 272

Investment Income 6 5 5 3 19

Charge from Reserve Fund 6 10 18 28 62

Reserve fund 101 91 73 45

Adapted from So, R. (2012, Feb 21). Presentation at the National Academy of Science and Technology Roundtable,Manila.

PhilHealth’s THE share only 20%

• PhilHealth will pay P103B in reimbursements by 2015

• Even if we use THE at 4% of GDP, which equals P493B, PhilHealth’s share of P103B would only be 20.9% of THE

• Govt share must be at least 45%

Recommendations:

• With cost efficiency reforms, we can provide rational universal health care at P 312 B – P350B

• With political will, we can generate the needed revenues to finance universal Health care

• Even with PhilHealth, government, both national and local, must still spend for health through taxes (45-55% of Total Health Expenditure)

Recommendations:

• To achieve Rapid Universal Population coverage, we can retain contributory coverage of the formal sector: government and private

• Consider the rest of the population covered by virtue of citizenship

• Subsidize through taxes the premiums of the poor and the non-professional informal sector

Recommendations:

• New payment mechanisms: Contractual capitation of the Essential health package to the District Health System (InterLocal Health Zones) may provide the payment mechanism to quickly transfer money through PhilHealth to the providers

Health System reforms

• Increased Health Financing necessary but NOT sufficient• Need Reforms in the other building

blocks:

Health System reforms

• Health governance:– unite on paradigm of Health as a right and

Health equity through UHC–Develop participatory mechanisms

• Health information –Need for a National Health Information

System to provide evidence based health governance

Health System Reforms

• Health Regulation:–Medicines and devices–Health human resource production &

deployment–Provider fees

• Organization of Health Services–Gatekeeper system–Primary care based UHC– Recentralize?

• Health Human Resource Production:– Implement the Health Human resource

Master Plan–Produce committed, motivated Health

professionals able to work within the health system and transform it, to address local health problems to achieve UHC and decrease health inequities.–Deploy and retain the health professionals

where they are needed.

Social Determinants of Health… as long as we have a divided society, UHC will not achieve

equity in health …

Thank you