Health care financing
- 1. HealthCare Financing Dr. Devendra Kumar
- 2. Health care financing • WHO – “function of a health system concerned with the mobilization, accumulation and allocation of money to cover the health needs of the people, individually and collectively, in the health system” • To ensure that all individuals have access to effective public health and personal health care.
- 3. Principles of a health financing system
- 4. • Ideally a Financing system should be able to Generate revenue Pool the funds • So that there is cross-subsidy between the rich and the poor and also between the healthy and the sick. Purchase appropriate and efficient health care services.
- 5. Health expenditure, Total ( % of GDP) 4.296 4.401 4.247 4.28 4.685 8.875 9.767 9.681 10.018 9.921 0 2 4 6 8 10 12 1998 2002 2006 2010 2014 INDIA WORLD World Bank. Health Expenditure, 2014
- 6. International Comparison Spending on Health (% of GDP) 15.2 8.4 8.7 4.3 4.2 8.3 0 2 4 6 8 10 12 14 16 USA Brazil UK China India Global %ofGDP Source: UNDP, Human Development Report 2008
- 7. Health expenditure, Public ( % of GDP) 1.104 1.026 1.111 1.161 1.407 5.229 5.634 5.701 6.069 5.986 0 1 2 3 4 5 6 7 1998 2002 2006 2010 2014 INDIA WORLD World Bank. Health Expenditure, 2014
- 8. Public Expenditure on Health as % of GDP 8.2 7 6.9 4.8 3.5 2 1.8 0.9 0.9 0.4 1.9 0 1 2 3 4 5 6 7 8 9 Source: UNDP, Human Development Report 2008
- 9. Public expenditure on Health as % of GDP among BRICS nation 4.3 3.8 1.3 3 4.2 0 1 2 3 4 5 Brazil Russian Fed India China South Africa India spends least on healthcare among BRICS nation World bank. Health expenditure, public (% of GDP)2012
- 10. Public and Private Expenditure on Health 26.2 33.6 47.5 70 73.2 81.7 73.8 66.4 52.5 30 26.8 18.3 0 20 40 60 80 100 120 India Bangladesh Sri Lanka Canada Thailand Uk Public spending Private spending
- 11. Out of pocket health expenditure (% of total expenditure on health) 68.234 70.496 65.747 63.371 62.417 18.652 17.706 17.967 17.901 18.174 0 10 20 30 40 50 60 70 80 1998 2002 2006 2010 2014 INDIA WORLD World Bank. Health Expenditure, 2014
- 12. Total health exp. (4.9 % of GDP) Private Exp. (4% of GDP) OOP Exp. (3.6% ) Employee & Comm. Financing (0.4%) Govt. Exp. (0.93% of GDP) Centre State Local govt. GDP spending on health in India Source:World Health Statistics, (2007 &2008),WHO
- 13. Contribution to Health Expenditure by Central and State Government (as % of GDP) Of India 72.92 72.11 69.32 68.04 65.54 27.08 27.89 30.68 31.96 34.36 0 20 40 60 80 100 120 2001-02 2003-04 2005-06 2007-08 2009-10 Central Govt State Govt Source: RBI Bulletin 2012, Expenditure Budget, GOI
- 14. Sources of Financing Healthcare in India Source of Funds % Distribution (a) Public Funds Central Government 6.4 State Government 12.6 Urban Local Bodies and PRIs 1.3 Total (a) 20.3 (b) Private Funds Households 72.0 Firms 5.3 NGOs 0.1 Total (b) 77.4 (c) External Support Grants to Central Government 1.5 Material Aid to Central Government o.1 Grants to State Government 0.2 Total (c) 2.3 Total funds 100.0
- 15. Trends in health services utilization in IndiaPercentage distribution of cases of hospitalized treatment in urban areas by type of hospital during 42nd, 52nd and 60th NSSO rounds 0 10 20 30 40 50 60 70 42nd 52nd 60th NSSO rounds Percentage Government Non-Government The NSSO 60th round mentions an increase in both utilization of private sector utilization and hospitalization expenses
- 16. Mechanisms for financing the health care services • Out of Pocket Payment • General Tax Revenue • Insurance : Social Health Insurance Private Health Insurance Community Based Health Insurance • External Finance: Loans, Grants
- 17. Out of Pocket Payments (OOP) • Simplest form of health care financing • In India, this is the most common form of financing health care. • The main financer of health services in India is the individual household. • They meet 72% of the total health care costs by paying out of pocket at the time of service.
- 18. Contd.... • Adverse consequences of OOP:- • They lower access to health care by creating financing barriers. • They impoverish the households because of high medical costs.
- 19. General Tax Revenue • Second most important mechanism. • Governments collect revenue through taxes, both direct and indirect. • This revenue is allocated to various sectors including the health sector • Out of the total expenditure, 20.3 % was public/ government expenditure.
- 20. Insurance • The revenue is generated either by individuals paying a premium or by employers contributing towards their employees or even the government paying on behalf of the poor. • Health insurance could be an alternative health financing mechanisms • Limitations:- Demand side Supply side
- 21. Contd... • Demand side limitations:- Protection from the real cost of ill health may make individuals less risk averse, causing them to neglect precautionary/ preventative measures. Or, being covered, an individual may consume excessive amounts of health care. • Supply side limitations:- With insurance, excess demand can be supplier - induced as well -- the provider has fuller information on health status than the patient and could have used this asymmetry in information to over-prescribe services covered under the insurance plan.
- 22. • Broadly there are three major types of health insurance: • Social Health Insurance (SHI) • Private Health Insurance • Community Health Insurance
- 23. • In India, there two major SHI schemes:- • Employees State Insurance Scheme (ESIS) • Central Government Health Scheme (CGHS)
- 24. Employees State Insurance Scheme (ESIS) • All workers and their dependent relatives are eligible for the benefits. • Comprehensive cover:- Out Patient In Patient and Rehabilitation • Its own network of dispensaries and hospitals, supplemented by some outsourced Authorized Medical Attendants and private hospitals. • Covers over 50 million persons presently.
- 25. • Contribution :- • Employer - 4.75 % of the total wages • Employee - 1.75 % of his /her wage • Sate government - 1/8 th of the total expenditure of medical care. • Central government - 7/8 th of the total expenditure of medical care
- 26. Central Government Health Scheme (CGHS) • Moral hazard :- Demand side limitation, self referred patients. • It appears that most patients prefer to bypass the dispensaries and directly avail of specialist services. • Covers 3.2 million persons, has its own dispensaries while hospital services are outsourced. • Both provide comprehensive ambulatory and hospital care without any annual limits.
- 27. Private Health Insurance • Emerges from voluntary actions in a market where buyers are willing to pay premium to private insurance companies • Major strength are that as a prepayment and risk pooling mechanism it is generally preferable to out of pocket expenditure. • Main weaknesses are : it is associated with high administrative costs and profit, it is generally inequitable
- 28. Community Health Insurance • Mostly not-for-profit prepayment plans for health care, with community control and voluntary or compulsory membership • Care is generally provided through NGO or private facilities. • Managed by community members and accountable back to members. • CHI schemes have had some success in providing financial protection to the poor in the informal sector. • Helpful complement
- 29. The Public Health Care System in India • Three most important features:- i) Low levels of public spending: Between 1996-06, the public expenditure with respect to GDP was at 0.94%. • NRHM, the expenditure increased only marginally to 1.2 percent of GDP in 2009-2010.
- 30. ii) A resulting poor quality of preventative care and poor health status of the population iii) The inadequate level of public health provision has forced the population to seek private health providers resulting in high OOP spending.
- 31. Recent Reforms for Increasing Allocation to Health Care • National Rural Health Mission (NRHM) • Rashtriya Swasthya Bima Yojana (RSBY)
- 32. Healthcare financing across the world. • Broadly, there are three patterns: - • The United States relies on private insurance paid for mostly by employers • Almost half of the health spending (16 % of GDP) is financed by tax money for the care of the old and the very poor. • The United Kingdom uses tax finances to pay for 80 per cent of its healthcare spending. • In Europe, social insurance schemes bear most of the financial burden.
- 33. Challenges • Rapid population growth with limited resources and to balance the conflicting demands of increased coverage of health care • Raising resources for investing in health is one challenge and Spending these resources equitably and efficiently is another. • In the Indian situation where a majority of the people are self- employed, universal coverage will remain a mirage • The majority of the Indian population is unable to access high quality healthcare provided by private players as a result of high costs.
- 34. Challenges • Many villages in India do not have a hospital worth the name within accessible distance, so what use would insurance cover be for people living there • Insurance companies provide health cover to the young, the employed and the rich, and avoid those who are elderly, unemployed and poor. • NHA statistics show that close to 70 per cent of the out-of- pocket expenditure of the household is for outpatient care, which will not be covered by insurance. • Cost escalation:- Invariably expensive drugs and procedures are prescribed.
Editor's Notes
- #14: Increased marginally to 1.04% in 2011-12
- #35: In these countries , 85% of financing comes from public resources like taxes, social insurance or national insurance, which ensures healthcare reaches over 90% of the population. Single public autonomous agency or a few co-ordinated agencies pool resources to finance health care. Single payer mechanism