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Finding a model to suit South Africa Dr Japie du Toit Healthcare Advisor PricewaterhouseCoopers.

1Finding a model to suit South Africa Dr Japie du Toit Healthcare Advisor PricewaterhouseCoopers

2Content 4 Models of healthcare system financing – Beveridge – Spain and the United Kingdom – Bismarck – Netherlands and Colombia – NHI – Taiwan and Turkey – Out of pocket Lessons for: – Policy development – Policy implementation – Providers – Funders – Government Questions

34 models of healthcare systems (T R Reid) The Beveridge model: Named after William Beveridge, social reformer who designed Britain's NHS. Health care is provided and financed by the government through tax payments, just like the police force or the public library. (UK, Italy, Spain, New Zealand, most of Scandinavia, Cuba) Bismarck model: Named for the Prussian Chancellor Otto von Bismarck, who invented the welfare state -uses an insurance system - the insurers are called "sickness funds" -usually financed jointly by employers and employees through payroll deduction. Universal cover. Providers mostly private. Payers non-for-profit under tight government control. (Germany, Japan, France, Netherlands, Colombia, Switzerland) National Health Insurance: It uses public or private-sector providers, but payment comes from a single government-run insurance program that every citizen pays into. Since there's no need for marketing, no financial motive to deny claims and no profit, these universal insurance programs tend to be cheaper and much simpler The single payer tends to have considerable market power to negotiate for lower prices, control costs by limiting the medical services they will pay for, or by making patients wait to be treated. (Canada, Taiwan, Korea, Turkey) Out of Pocket : Developing world Parts of Africa, South-East Asia and Latin America.

4Some examples of each

5Beveridge - Spain Highly decentralized to 17 regions; Universal cover (98.7%); 12% of population have private insurance as top-up; Funding by block grants from federal government to regional authorities supplemented by own regional tax funds; Large variation in health resources e.g. Catalonia has more than 4.5 hospital beds per 1,000 population, while Valencia has just 2.8; Purchasing agent - regional health authority; Patients cannot choose their GPs or specialists - assigned a primary care doctor from a local list – referral within network; Co-payment for pharmaceuticals outside hospital, dental & optometry; Regions contracts with NHS hospitals, financed through global budgets - case-based payment for hospitals outside the NHS; Doctors can be salaried employees, capitation or FFS;

6Funding in Spain

7Beveridge - UK Highly centralised -The government pays directly for health care and finances the system through general tax revenues; Universal cover; About 12 percent of Britons have private health insurance – through employer or individually; National Institute for Health and Clinical Excellence (NICE) issues binding guidelines whether the NHS should provide specific services; Co-payment for pharmaceuticals outside hospital, dental & optometry; General tax revenues are pooled by the Treasury which negotiates a budget with the Department of Health every three years; DOH allocates funding to Primary Care Trusts (PCT) who purchase services from GPs, hospitals (public and private) on pay by results mechanism;

8Funding in the UK

9Experiences with Beveridge system Pros Good cost control over the longer term Simplicity of use for the public Low administration cost Universal cover Cons Government funding deficits develop over time Service rationing according to available funding Major waiting lists – specialist visits, hospital admission, procedures Quality issues my develop due to underfunding Significant co-payments may develop Limited provider choice a common problem Private insurance often used to bypass queues by the rich – leading to inequity to access, especially to specialist and hospital care

10Bismarck - Netherlands One of most market-oriented national health care systems in Europe; Major reform in 2006 – now 98.5% cover; All citizens purchase a basic health insurance plan from one of 41 private insurance companies set at an average rate of 1050 p.a.; Government provides health care allowances for low income citizens if the average flat-rate premium exceeds 5% of their household income on a sliding scale; Employers generally pay half of insurance premiums, the individuals the other half. Individual premiums are tax deductible; Insurance must cover a comprehensive package including GPs, specialists, hospitals, dentistry for <18y,>18y must pay the first 150 in a given year; Insurers negotiate quality, quantity, and price with providers; Insurers may provide care directly, with own staff and facilities, e.g. primary care centres and pharmacies or contract a network with DRG type payments for hospitals, capped FFS or salaries for specialists and capitation for GPs.

11Funding in the Netherlands – pre 2006

12Funding in the Netherlands – post

13Bismarck - Colombia Compulsory insurance system that is supposed to provide universal coverage through two types of affiliation (2003 reforms); – The contributory system covers those can pay. The employed contributes 12% of their salary (2/3 is paid by employer) while self- employed pays 12% of their declared income (70% of members); – The subsidized system cares for the indigents. They are entitled to a minimal package initially providing 50% of contributory system benefits - gradually to be increased to 100% by %; Subsidized system is partly funded by contributory system – 8.33% of collections of the contributory regime goes to subsidized regime; Insurers (EPS) are now competing for contributors and private providers compete for patients; State assumes the role of regulator, provides subsidies for the poor and, through a highly decentralized system, takes care of the collective health needs – public and preventative health – delivered by local government; Universal health care coverage not achieved - permanent economic crisis, armed conflict, official unemployment rate of 20%, and a continuous deficit on government budget – deficit on subsidised system By % coverage achieved.

14Experiences with Bismarck system Pros Increased competition drives down cost; Universal cover possible; Uniform and comprehensive package of benefits possible; Good quality measures in place for private providers and driven by competition; Separation of finance and provision. Cons The community rating requirement may result in steep increases in premiums for younger workers; Potential oversupply of services by private providers; Difficult to police compulsory contributions and self –employed may stay out or under-report income; Strong regulatory control needed; High administration cost.

15National Health Insurance - Taiwan Introduced in 1995 when only 57 % was covered by 3 SHI programs called Labour, Government Employees, Farmers insurance. (96% cover achieved by end 1996) NHI had 2 objectives: equal access to all and controlling spending; NHI provides universal access to a comprehensive benefit package covering preventive and medical services, prescription drugs, dental services, Chinese medicine, and home nurse visits; Patients have the right to freely choose their providers and for hospitals and physicians to freely choose their practice. Preventative services free. Co-payment of US$8 for hospital OPD and US$5 for clinic visits and 10% co-insurance for inpatient hospital cost capped at 10% of average national income. Poor exempted. OOP fell from 48% of total spent on health in 1993 to 30% in Hospitals

are publicly (35%) and privately (65%) owned (5.7/1000) paid on DRGs; 63% percent of doctors employed by hospitals are salaried plus bonus based on productivity - remainder are fee-for-service private practitioners; Most workers are employed in formal sector, so a compulsory NHI can effectively collect premiums through employers. (4% unemployed)

16National Health insurance Taiwan

177 years after the NHIs implementation, the program began to run a deficit, and the government raised contribution rate from 4.25 % to 4.55 % of annual income in 2002; Government has the revenue to subsidize the coverage of the poor, veterans, and farmers. Taiwan has the skills and human resources to manage the NHI.

18National Health Insurance - Turkey Before 2003there were 3 health insurance funds covering formally employed, self-employed and active and retired civil servants. A government-financed programme covered the low-income uninsured (the Green Card programme). Informal-sector workers account for about 25% of the population and only some of these were covered as dependents.(85% coverage) Ministry of Health (MoH) operated a very large network of preventive and primary health-care centres and hospitals, while one of the social security agencies managed its own network of facilities. Private facilities were not effectively regulated. (60% of spending was public) 10 year health transformation plan of established the MoH as a planning and supervising authority; implementing Universal Health Insurance (UHI) uniting all citizens of Turkey under a single Social Security Institute (SSI); – expanding delivery, increasing access, improving the motivation, knowledge and skills of personnel. – Set up educational and scientific institutions to support the system; – securing quality and accreditation systems to encourage effective and quality health-care services; – providing access to effective information for decision making, through the establishment of an effective Health Information System.

19National Health Insurance - Turkey Public hospitals in Turkey, including those previously managed by a social security institute, were consolidated under the DOH; Hospital reimbursement moving to DRGs for all hospitals – private hospitals may charge 30% more than SSI rates funded through co- payment; in October 2008, a single-payer system has been established for public patients as a Social Security Institute with a single claims and utilisation management system; Contributory scheme -12.5% of income of all employees in the public and private sectors, and the self-employed will be collected-employer contributes 7.5%. Means testing for reduced premium; Non-contributory – for the poor – government contributes reduced rate; 10% unemployment rate; Average 2.3 beds per 1000 population with large regional variation.

20Turkey: 22.6 Turkey: 71.6

21Experiences with National Health Insurance Pros Previously uninsured increased their use of health services – access; The single-payer system provides tools to manage spending more effectively (unified fees, lower administration - 2% of total cost), patient & provider data used in management; Increased equity and universal cover; NHI can be introduced without using more resources if there is a functioning existing system and unemployment is low - increases can be offset by savings. Cons Duplication of provider facilities possible; NHI may struggle to keep up with patient demands for more benefits; Resources can go to services that deliver minimal health returns; Heavy commitment of resources to short-term care and comprehensive coverage for acute care undermines funding for public health; Significant organizational ability and human resources are required to manage a NHI.

22SA: US$8900/869, Colombia: US$6130/626, Taiwan:US$16111/686 Turkey: US$10771/609 SA COL TAIW

23Lessons in finding a model for South Africa Policy development Enabling factors for heath reform: – Strong and sustained economic growth; – Long-term political stability and sustained political commitment; – Strong institutional and policy environment; – Increased levels of population education; – Commitment to equity, social cohesion and solidarity; – Health coverage and financing mandates; – Financial resources committed to health, including private financing – Consolidation of risk pools; – Limits to decentralisation; – Primary care focus, especially millennium development goals; Reform should be initiated though development of rational, evidence based policies leading to sustainable transformation; Universal coverage and a comprehensive benefit package to all of its residents should the objective of all health reform initiatives;

24Lessons in finding a model for South Africa Policy development Attention to national history, values, and culture to help each country define the appropriate approach to reforms; Have sufficient information and strong analytical tools and skills to define the most pressing problems and to develop and monitor solutions that are appropriate for the country; Significant body of evidence in healthcare reform is available globally and useful reform tools were developed internationally. Separate purchasing and delivery of healthcare; Public health issues across ministries e.g. sanitation, human settlement and education; Incorporate market mechanisms such as competition, cost- consciousness, market prices, and consumer choice;

25Lessons in finding a model for South Africa Policy implementation Good information systems and evidence-based decision-making; Strong stakeholder support; Efficiency gains and co-payments used as financing mechanisms; Flexibility and mid-course corrections; The devil is in the detail; Involvement of higher education and vocational training institutions; Improving transparency and accountability of the system.

26Lessons in finding a model for South Africa Provider Taiwan set a reasonable volume standard for outpatient visit coupled with a sliding fee schedule for visits above the volume standard. This discouraged induced demand and reduced the number of visits per person. Performance-related pay to raise providers productivity; Payment should be performance based for both public and private facilities; Public providers should have a fair amount of autonomy and be kept accountable; Hospital based doctors (including specialists) should be salaried by hospital; Reimbursement should be based on capitation and DRG systems that share risk with providers; Rewarding good quality care and providing incentives for efficiency in service organization and delivery; Family practice as primary care portal.

27Lessons in finding a model for South Africa Funder Universal health care led to cost containment, not cost explosion; Single payer or very few payers are better positioned to control cost and reduce overheads globally mergers occurred on a large scale; Single payment technology interface saves costs for providers and funding pool; Promoting administrative efficiency by minimizing duplication and minimizing costs that do not contribute to achieving system goals; Supplementary rather that substitutive private insurance had better results in NHI; Centralizing collection lead to less fragmentation of national pool and contribute to sustainability because a fewer pools means less need for risk adjustment less resistance to it.

28Lessons in finding a model for South Africa Government Strong stewardship role; Ultimately less involvement in provider functions with some level of autonomy of health delivery facilities; Strengthening health surveillance/disease control; Health regulation including financing and provision over all sectors; Create planning and management capacity; Monitoring and evaluation; Health promotion, social participation in health, promotion of equitable access; Quality assurance, human resources training, research in public health and control and disaster prevention; Develop capacity to undertake health technology assessment HTA (including economic evaluation).

29Contact details: Thank you. Questions?

Category: Advisor

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