SESSION 2: BUILDING A

PICTURE OF HEALTH CARE

FINANCING

OECD Technical Workshop on the Implementation of the Health Financing Framework under SHA 2011 Paris, 9 October 2012 David Morgan, Health Division, OECD and Eva Orosz, Head of Health Policy and Health Economics Department, ELTE University, Budapest, Hungary

An example of a health financing system

• Describing health financing systems

– Identifying health financing schemes

– Linking agents to schemes

– (Financial flows)

• Selected issues

• Exercise: Country(A)

• Mapping SHA 1.0 to SHA 2011

Overview

• Task 1: Identifying the national health care financing arrangements

– preparing an inventory of financing arrangements

– Classifying according to ICHA-HF in SHA 2011

• Task 2: Describing the structure of the health financing system

– identification of related financing agents for each financing scheme

• Task 3: Identifying the basic flows in health financing

– (i) revenue-raising by the financing schemes; and

– (ii) allocation of resources by the financing schemes (according to functions, providers and beneficiaries)

(Sessions 3 and 4)

Describing health financing systems

Classification of Financing Schemes

HF.1 Government schemes and compulsory contributory health financing schemes

HF.1.1 Government schemes

HF.1.1.1 Central government schemes

HF.1.1.2 State/regional/local government schemes

HF.1.2 Compulsory contributory health insurance schemes

HF.1.2.1 Social health insurance schemes

HF.1.2.2

Compulsory private insurance schemes

HF.1.3 Compulsory Medical Saving Accounts (CMSA) HF.2 Voluntary health care payment schemes

HF.2.1 Voluntary health insurance schemes

HF.2.2

Financing schemes of non-profit institutions serving households (NPISH)

HF.2.3 Enterprise financing schemes HF.3 Household out-of-pocket payment

HF.3.1 Out-of-pocket excluding cost-sharing

HF.3.2 Cost sharing with third-party payers HF.4 Rest of the world financing schemes (non-resident)

HF.4.1 Compulsory schemes (non-resident)

HF.4.2 Voluntary schemes (non-resident)

• Roles of financing schemes

– Raising revenue

– Pooling resources

– Purchasing goods and services (towards strategic purchasing)

– Benefit / rationing entitlement

• Financing schemes are defined as

– a set of rules that govern raising and pooling revenues, modes of participation and basis for entitlement, strategies for purchasing

– can be implemented by one or more institutional units

• Important to track all Financing Schemes

The basis of financing schemes

They apply to any existing fund for health, with a specific financing mechanism

• Resident or non-resident (foreign) scheme

• Participation mandatory or voluntary

• Entitlement – contributory or non-contributory

• Contributions compulsory or voluntary

• Prepaid or purchases at the time of service use

• Pooling interpersonal or solely for the individual or family, temporal

• Purchase of insurance policy needed or not / of services

Main criteria to classify a financing scheme

Resources for classifying HF : Table 7.2.

Resources for classifying : Figure 7.2

HF.1 Government

schemes and

compulsory

prepaid schemes

Resident

system?

Mandatory

Coverage?

Mandatory

Coverage?

Entitlement

based on

contribution?

Entitlement

based on

contribution?

Prepaid

contribution?

Cost

sharing?

Programs with

charity purpose?

Entitlement

based on

contribution?

Entitlement

based on

contribution?

Purchase of

insurance policy?

Interpersonal

pooling?

HF.4.1

Compulsory

scheme

HF.4.2

Voluntary

scheme

HF.4.2.1

Insurance

HF.4.2.2

Other

HF.4.1.2

Other

HF.4.1.1

Insurance

HF.2

Prepaid

HF.3

OOP

HF.1.1

Government

schemes

HF.1.2.1

Social health

insurance

schemes

HF.1.2.2

Compulsory private

insurance schemes

HF.2.2

NPISH schemes

HF.2.3

Enterprise

schemes

HF.1.3

CMSA

HF.2.1 Voluntary

health insurance

HF.1.2

Compulsory

contributory

schemes

HF.3.1

OOP, excl.

cost sharing

HF.3.2

Cost sharing

compulsory; cost

voluntary insurance

Yes

Yes Yes

Yes Yes

Yes

Yes

Yes

Yes

Yes

Yes

HF.4

RoW financing schemes

Yes

A compulsory insurance administered by private insurance companies

(Note that under SHA 1.0 this was categorised under HF.2 Private sector as HF.2.1. Private social insurance.)

A contribution payment is requested by law. Therefore, considered as a compulsory contributory health financing scheme (HF.1 under SHA 2011)

But, ambiguity on the appropriate sub-category:

• Social health insurance scheme (HF.1.2.1)

• Compulsory private insurance scheme (HF.1.2.2)

Using the table of definitions together with the criteria tree, it can be seen that the relevant criterion relates to the purchase of a contract between the individual and the insurance company.

Social health insurance schemes (HF.1.2.1) and Compulsory private insurance schemes (HF.1.2.2)

1. Government schemes whose mode of participation is automatic

• SHA 2011 Compulsory/mandatory definition:

• Coverage of the population is automatic, universal for all citizens/residents (e.g. national health services);

• Participation (contribution payment) is mandatory by law for all the population or for defined groups within the population (social health insurance or compulsory private insurance).

Citizens are enrolled whether they use the services or not

“Automatic” mode of participation - i

2. What about private corporations that enroll their employees automatically in a private scheme?

– If this is discretionary, not compulsory by law or regulated by government => voluntary scheme

3. What about public corporations that enroll their employees at a voluntary health insurance

– this is a discretionary use of public resources, not compulsory by law or regulated by government

=> voluntary scheme

“Automatic” mode of participation - ii

• What about government reimbursing health expenses of its employees?

– Government scheme or Employer scheme?

• When regulated by law it is a government scheme

SHA 2011 uses the terms “compulsory” or “mandatory” related to an existing law or government regulation

Government as an employer

• institutions performing health system governance and financing administration

• provider of revenues of financing schemes

• financing agent involved in collecting and pooling of revenues

• financing agent purchasing services

• intermediary organisation

• owners of health care provider institutions

• owners of institutions performing health care-related functions

– See example (Table 4.2) in Financing Guidelines, page

38

Possible roles of government units

• Transactions related to health functions (HC)

• Transactions related to health-related functions (HCR.1, HCR.2)

• Transactions related to resource-generation (investment in human and physical capital and R&D)

• Providing revenues by the government to other health financing schemes

• Transactions made as an intermediary institution (e.g., between foreign NGOs and local NGOs)

• Non-health transactions by government units acting as health financing agents

Main transactions of government in the health care system

• External funds transferred to governmental agencies => public schemes (e.g. budget support) FS.2 or FS.7?

• External funds managed by development agencies resident in the country => NGO schemes

• Non-resident insurance => RoW schemes (e.g. foreign health insurance coverage of a resident)

• Enclave (notably embassies) that pays for the health care of their employees – RoW (except local employees) schemes

Rest of the World schemes

• Resident aid and development schemes operated in the country on a permanent basis (longer than one year and linked to the domestic economy and health system: report, coordination, etc.) are NGOs schemes (domestic schemes)

• Transfers in-kind are included and valued

• RoW schemes are not exclusive for grants, they include insurance payments following migration and travel of population

ROW schemes (ctd)

• As in SHA 1.0, financing agents are the institutional entities that manage / administer financing schemes

• Less emphasis on financing agents in SHA 2011 but they are still included (e.g. to show relationship between agents and schemes)

• Shorthand label is now FA (formerly HF)

Financing Agents (FA)

Classification of health financing agents (SHA 2011)

FA.1 General government FA.1.1 Central government FA.1.2 State/regional/local government FA.1.3 Social Security Agency

FA.1.9 All other general government units

FA.2 Insurance Corporations

FA.2.1 Commercial insurance companies

FA.2.2 Mutual and other non-profit insurance organizations

FA.3 Corporations (other than insurance corporations) FA.3.1 Health management and provider corporations

FA.3.2 Corporations (other than providers of health services) FA.4 Non-profit institutions serving households (NPISHs) FA.5 Households

FA.6 Rest-of-world FA.6.1 International organizations

FA.6.2 Foreign governments

FA.6.3 Other foreign entities

Relationship between Financing schemes (HF) and Financing agents (FA)

20

Financing schemes

Financing Agents (institutional units)

Government

units

FA.1.1, FA.1.2

Social insurance

funds

FA.1.3

Insurance

corporations

FA.2

Households

FA.5

Rest of the World

FA.6

Government schemes

HF.1.1

Compulsory social

health insurance

HF.1.2.1

Voluntary health

insurance

HF.2.1

Out-of-pocket

payments

HF.3

Foreign aid

programmes

HF.4

Exercise: Country A (or your own country)

Using either the description of COUNTRY (A) or knowledge of your own system:

1) Prepare an inventory of the different financing arrangements in the first column of Table 1 2) Classify the financing arrangements according to HF (SHA 2011) using Table 7.1 and Figure 7.2 if necessary - indicating the degree of difficulty E(asy) D(ifficult). 3) List the financing agents responsible for each scheme according to FA (SHA 2011)

Key task:

• To make a clear distinction between financing schemes and the financing agents (institutions) administering the financing schemes – For special issues see Table 2.2 and 2.3 in the

Guidelines

• Requires special consideration: – The same financing scheme can be managed by more

than one financing agent (e.g., statutory health insurance in COUNTRY(A))

– The same financing agent can manage more than one financing scheme (e.g., private insurance companies in COUNTRY(A))

Mapping SHA 1.0 to SHA 2011 (1)

Suggested method:

• For the latest data: Describing health financing systems (as discussed earlier) – i.e. defining financing schemes independently from

the previously used categories of SHA1.0

• For previous years‟ data: Mapping SHA 1.0 to SHA 2011 – Connecting SHA 1.0 and SHA 2011 similarly as done

in the exercise of COUNTRY(A)

Mapping SHA 1.0 to SHA 2011 (2)

Main options to decide:

• mapping to the “default” scheme. For example, HF.1.1.1 is mapped by “default” to HF.1.1.1 Central governmental schemes

• mapping to a different (non-default) scheme. For example, (part of) HF.2.2 may be mapped to HF.1.2.2. Compulsory private insurance. (See Table 3.1)

• the value accounted as spending by HF (under SHA1.0) should be accounted as revenue. (HF.1.1.1 Central governmental scheme versus FS.1.4 Other transfers from government)

A possible approach - SHA 1.0 to SHA 2011

SHA 1.0 SHA 2011

“Default” financing scheme Other “possible” financing scheme

HF.1.1.1 Central government HF.1.1.1 Central governmental schemes HF.2.2 (1) NPISHs financing schemes

HF.1.1.2 State/provincial government

HF.1.1.2 State/regional/local governmental schemes

HF.1.1.3 Local/municipal government

HF.1.2 Social security funds HF.1.2.1 Social health insurance

HF.1.2.2 Compulsory private insurance

HF.2.1 Voluntary health insurance schemes

HF.1.3 Compulsory medical saving accounts

HF.2.1 Private social insurance

HF.2.1 Voluntary health insurance schemes

HF.1.2.1 Social health insurance scheme

HF.2.2 Private insurance enterprises

HF.1.2.2 Compulsory private insurance

Mapping to default schemes (1)

SHA 1.0 SHA 2011

“Default” financing scheme Other “possible” financing

scheme

HF.2.4 NPISHs (other than social insurance)

HF.2.2 NPISHs financing schemes HF.1.1.1 Central governmental schemes

HF.2.5 Corporations (other than health insurance)

HF.2.3 Enterprises financing schemes

HF.2.3 Private household out-of-pocket expenditure

HF.3 Household out-of-pocket payment

HF.3 Rest of the world HF.4 Rest of the world financing schemes

HF.2.2 NPISHs financing schemes

Mapping to default schemes (2)

Programmes managed by Private insurance enterprises: all classified as HF.2.2 under SHA 1.0

Mode of participation

Benefit entitlement

NCU Financing scheme (SHA 2011)

(1) (2) (3) (5) (6) (7)

Compulsory health insurance for persons with income above a certain level

Compulsory for a given group of population

Based on individual contracts

HF.1.2.2 Compulsory private insurance scheme

Compulsory LTC insurance

Compulsory for the whole population

Based on the relevant law

HF.1.2.1 Social health insurance scheme

Voluntary health insurance

Voluntary Based on individual contracts

HF.2.1 Voluntary health insurance scheme

Mapping HF.2.2 Private insurance enterprises (SHA 1.0) to financing schemes

When there is a substantial involvement by the government, a basic issue is to decide how to classify the transaction concerned:

• as spending by HF.2.2 NPISHs financing schemes (receiving revenues from the government); or

• as spending by HF.1.1.1 Central governmental schemes, administered by NPISH (as a financing agent

Mapping NPISHs (SHA 1.0) to financing schemes (SHA 2011)

Accounting issues:

• SHI may provide other benefits (sick leave or disability allowances in addition to health care benefits

• SHI may be a secondary activity (e.g., pension funds);

• An institution (e.g., PHI company) may manage two different schemes: compulsory insurance and voluntary insurance;

• Health-related insurance may be a secondary product of private insurance companies;

• An NGO may have activities in several areas, including health;

• An enterprise‟s health financing schemes may not record its administrative costs.

Assumptions required to calculate costs; (e.g. ratio of employment costs; ratio of health spending, etc)

Costs of administration and intermediation

All costs related to collecting, pooling and purchasing – regardless of how many agencies attributed to HF

BUT at what point?

• E.g. a proportion of the costs of the Tax? If contributions collected on behalf of Social Insurance Fund? Or when funds become „earmarked”

• When providing revenues to other financing schemes should related admin costs be accounted in the non-governmental financing scheme? E.g., HC.7.2 x HF.2.2.

• When government serves as an intermediary organisation (only conveying revenues between providers of revenues and financing schemes concerned) should any costs be attributed? e.g. HC.7.2 x HF.2 or HF.4

• A foreign donor may give funds to an international NGO, who then passes money to a local or country NGOs. At each stage NGOs deduct funds for administration. In such cases the costs should only be taken into account at the point where revenues are received within the domestic economy, e.g. by the local NGO.

Admin costs - Intermediation