Financing Health & Health Care:
Call for More Creativity & Hard Choices
Cambridge IHLP 2006
Jim Rice
[email protected]
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What we look at
• Money into sector
• Money within sector
• Money within
institution
• Not this:
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Accounting
Actuarial
Cash flow
Operational budgeting
Capital budgeting
Service line cost
accounting
– Contracting
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Flow of Discussions in Finance Track
• Overview of issues and options: Jim Rice
– Sources of Capital
– Sources of Finance, Types of Insurance
– Provider payments
• Multi-donor Challenges & Trends: Ken Grant
• Lunch
• Trends in balancing Private Health Insurance
– Satellite video link to World Bank in Washington DC
– Alex Preker and Nicole Tapay
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Often Confusion Among Policy Makers and Implementers
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Sector Performance Goals:
Macro Targets toward which we invest funds:
• Efficiency...
• Macro-efficiency, health as percent of GDP
• Micro-efficiency, maximizes units of service per
expenditures
• Equity...
• Adequacy and equity in use of care
• Income protection/transfer
• Effectiveness...
• Optimal outcomes...status/well being/functionality
• Optimal consumer/taxpayer satisfaction
• Choice-Freedom...
• Freedom of choice by consumer/citizen
• Degree of provider autonomy
(Refer to papers on CD for New Compact)
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Effective Health sector leaders must
master money flows...
Not just epidemiology, medicine, public heath, communications
• Sources and Uses of Funds
• Key Policy Questions Shaping Funds Flow
• Strategies to Harness Power & to Shape
Policy Development
• Strategies to Develop Leadership KSAs
– Knowledge
– Skills
– Attitudes
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Sources and Uses of Funds:
Show me the money...
Fees
Sickness Tax
Bonds &
Mortgages
Insurance
Premiums
Dedicated V.A.T. or
Excise Taxes
General Treasury
Donations
Philanthropy
Professional
Education & Training
5%
Capital Investments:
-- facilities
-- technology
Public Health
Protection &
Promotion
5%
Research &
Development
2%
Health
Restoration:
-- hospitals
85%
-- doctors
-- pharmacies
-- alternate modes
3%
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Capital Sources for Technology and Facilities
• Government line item
• Private Financing Initiative (PFI)
• New “Bond” Mechanisms (enabling legislation or
tax code refinement required)
• Mortgage Mechanism (ala a home or business)
What are they?
How Developed?
Pros and Cons of each, in certain settings?
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Themes of Reforms:
Cross-National Lessons?
• Move toward Universal Coverage
• Strengthen government control over percent health
consumes of GDP
• Decentralize the public system
• More cost sharing by users
• New risk-coverage/pooling programs
• More reliance on market forces to induce responsiveness
and accountability by all
• Government role evolving to goal setter/payer and
performance monitor/assurer
• Move to rely on “contracts” to clarify accountabilities
• Renewed Focus on behavioral determinants of health
status...Healthy Communities/Lifestyles
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Complex Policy Choices:
The Purchaser Side
Forms of Insurance
National Health Insurance
• Mandated Private
• Voluntary Private:
• Top-up Supplemental
• Opt-out Full
• Medical Savings Accounts:
• Alone
• With NHS
• With re-insurance
• Catastrophic Re-Insurance
Covered Groups
Civil Servants
Employed Local
Employed Expats
Children
Pensioners
All groups
Covered Benefits
Basic Public Health
Primary care
Hospital Care
Dental
Vision Care
Transplants
Pharmaceuticals
Catastrophic Cases
Level of Coverage
First dollar
Cost above limit
Shared Risk Corridors
Deductible Amount
Co-payments
Percent of fee schedule
Combinations are possible
Degree of Private
Insurance companies
Brokers sell public
Outsource full admin
Outsource functions:
•Enrollment
•Contribution collection
•Subscriber relations
•M.I.S.
•Quality assurance
•Provider contracting
•Claims adjudication
•Accounting
•Investment portfolio
Form of “Premium”
• Per capita from treasury
• Per capita by Employer or Association
• Premium risk based
• Premium community based
• Percent of wage
Who Pays for Whom? 10
Overlooked, underdeveloped lever for
change in health sector?
Health
sector
resource
needs
Tax Code More Than
Public Health Policy?
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Contracting choices …
• Salary:
– No incentive comp
– Creative incentive comp
Pluses?
Minuses?
• Fee-for service
• Per day
• Per stay/case no
adjustments
• Per stay adjusted
• Per capita
• Global budget
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Provider Payments Must Respond to Local
Realities and Desired Outcomes
Issue 1. People are increasingly becoming aware
(because of the spread of democratization) that quality
health services need to be provided more efficiently and
equitably to larger constituencies of people.
Issue 2. Health services are being threatened by
economic recession, which is leading to cutbacks in
recurrent budgets and a decline in capital development.
Issue 3. Demographic patterns and diseases are
changing urbanization, the emergence of HIV/AIDS, the
resurgence of diseases like malaria and tuberculosis,
and the rising incidence of non-communicable diseases
and diseases attributable to lifestyle-thereby placing
different demands on health services than in the past.
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Constraint 1.The inefficient distribution of scarce resources. Hospital care still
consumes most expenditures, salaries absorb the bulk of recurrent costs, and
urban areas get more resources than rural areas.
Constraint 2.Poor systems for budgeting, for disbursing, for purchasing, and
for monitoring expenditures that have failed to achieve an equitable
distribution of health care resources.
Constraint 3.Lack of access to health care for populations that are
disadvantaged because of such factors as location, age, sex, poverty,
unavailability of services, unemployment, and bad planning or management of
services.
Constraint 4.Services that do not respond adequately to local needs. For
example, the poor quality of many services leads to under-utilization,
unmotivated and poorly trained staff, long waiting periods, inconvenient clinic
hours, inadequate drug supplies, lack of confidentiality, financial exploitation
by the private sector, and no safeguards against dangerous treatments.
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The goals of cost saving and cost predictability determine the
following primary requirements to the selection of payment methods:
In primary outpatient care:
•incentives should exist for providers to be interested in maintenance of enrollees’
health and decrease in frequency and severity of acute conditions in chronically ill
populations;
•incentives should exist for providers to render more services and reduce
inappropriate referrals to specialty physicians and hospitals;
•reasonable utilization of available resources (first of all, ancillary services) should be
encouraged.
In hospital:
•incentives should exist to optimize inpatient care utilization through reduction of
inappropriate admissions;
•incentives should exist to reduce length of stay (LOS);
•efficient utilization of available resources should be encouraged.
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Provider Payments: Four Basic Methods, Many Variations
•budgetary transfers,
•capitated payments (capitation),
•fee-for-service and
•case-based payments.
Vary in Outpatient Primary Care or Inpatient Acute Hospital
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Retrospective payment for the services provided.
Health care provider determines what types and volumes of care to
provide, and the financing party pays the claims when submitted;
Prospective payment for the planned volume of services.
The financing party and the health institution plan services by volume and
structure, and then negotiate the order for health services dependent on
the expected demand for services, available financial resources, and
economic interests of the parties.
This principle implies a more proactive role of the financing party as health
care purchaser, on the one hand, and a higher level of business
management demonstrated by the provider organization, on the other
hand. The volume of care and the structure of costs should be planned in
such a manner as to ensure that costs suffered by the provider were, at
least, recovered.
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Payment for Outpatient services:
1. For technological operations and procedures performed (per
detailed service).
2. Per visit.
3. Per finished outpatient case.
4. Per capita funding of primary care provided to enrollees.
5. Per capita funding of the entire scope of outpatient services
provided to enrollees (complex outpatient service).
6. Per capita funding of the entire scope of outpatient services
and part of inpatient services provided (partial fundholding).
7. Per capita funding of the entire scope of outpatient and
inpatient services provided (full fundholding).
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Payment for Inpatient services:
:
1. for reported number of bed-days;
2. for reported number of finished cases;
3. global budget in exchange for
negotiated and planned utilization and
structure of inpatient care.
4. Per capita payment for defined
population group
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New Provider Payment Systems: Mix and Match Methods
Depending on Goals at Given Point in Time: politics and Economy
•“Per Finished Case or Fee-for-Service for Outpatient Care and Per Finished
Case for Inpatient Care”
•“Per Finished Case or Fee-for-Service for Outpatient Care and Per Diem for
Inpatient Care”
•“Per Capita for Outpatient Care Per Finished Case for Inpatient Care”
•“Polyclinic Expenditure Budget Funding and Per Finished Case for Inpatient
Care”
•“Per Capita for Outpatient Care and Per Diem for Inpatient Care”
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Contracting choices …
• Salary:
– No incentive comp
– Creative incentive comp
Pluses?
Minuses?
• Fee-for service
• Per day
• Per stay/case no
adjustments
• Per stay adjusted
• Per capita
• Global budget
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Changing Patterns of Provide Payments
Implications for your country?
Will similar patterns occur?
When might such patterns occur?
How will the patterns vary in your setting?
How will the implications to providers behavior vary in your
country?
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Ultimate Strategy?
Pay attention to macro economics
• Countries must ...
• redeploy repair-shop
resources to revitalize
and rationalize regional
responsibilities for
reformed reliance on:
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• Strategy requires us all to
consider...
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Redefine hospital
Redefine risk
Redefine responsibilities
Redefine results
Redefine rewards
Risk-research
Risk-pooling
Risk-management
Results reporting
Rewarding results
Where does leadership come in?
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http://www.who.int/whr/2000/en/whr00_en.pdf
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If our health financing policy was rational …
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