Health financing and

Universal Health Care.

Ramon Pedro P. Paterno
Institute of Health Policy & Development Studies University of the Philippines Manila National Institutes of Health

UP CPH June 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

1 The Context

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 worlds 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

a right or an investment?

Health

Health as a right

fundamental human right constitutional right primarily governments responsibility access to health services by virtue of citizenship

Health as an investment investment

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

So far growth has not been inclusive

Health is a right
because we are Filipinos
It is guaranteed by our Constitution.

Health is a right
because we are human
It is enshrined in the WHO Constitution and in various UN instrumentalities.

2 Universal Health Care

Richest Health provinces

Life expectancy at birth Infant mortality rate

inequity

Poorest slide provinces

Life expectancy at birth

> 80 < 10

< 60 > 90

Infant mortality rate Maternal mortality ratio

Maternal mortality ratio

< 15

>150

health inequities

Health systems Building Blocks

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
18

Any effort short of Universal Health Care in reforming the

Health Sector is unlikely to

solve the issue of inequities in

health.
19

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
20

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
21

3 Health Financing Situation

Total health expenditure has always been below the WHO recommendation of 5% GDP.
350 300 Billions of Pesos 250 200 150 100

THE 5% GDP

50
0

Why 5% of GDP?
% of HH with catastrophic expenditure
10 11 0.9 2 3 4 5 6 8

5
Middle

10

Country income:

Low

High

GGHE as %GDP

Adapted from Xu, K et al. (2003) . Household catastrophic health expenditure: a multicountry analysis The Lancet. 362: 111-117.

Share of Total Health Expenditure

70.0%
60.0%

57.9%
Out-of-pocket

50.0%

% share in THE

40.0% 30.0% 20.0% 10.0%

Government

23.7% 7.2%

Philhealth
1996 1998 2000 2002

0.0%
1994 2004 2006 2008 National Health Accounts, NSCB

Why must OOP be 20% of THE?

% of HH with catastrophic expenditure
10 11 0.9 0 2 3 4 5 6 8

10

20
Low

30

40

50

60

Country income:

Middle

High

OOP as %THE

70

80

90

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

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

100
90 80 % Share in THE 70 60 50 40 30 20 10 0 1995 1997 1999 2001 2003 2005
National Health Accounts, NSCB

Personal

Public Health

The commitment to Universal Health Care

DOH DO No. 2011-0188

Kalusugan Pangkalahatan
Execution Plan and Implementation Arrangements

The goal of universal health care is to

decrease

health inequities Depending on how we implement

UHC, it may not decrease health inequities.

Emphasize PHC and public Health health?

Pathway matters!
UHC

Status

Current performance

Emphasize hospitalization/ catastrophic spending?

Financial protection
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 financing
Advantages
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 financing
Disadvantages Compete/negotiate for budget every year with other government agencies

Social health insurance

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

Disadvantages
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

10%

50%

88%

47 YEARS

58 YEARS

GERMANY
7% 60% 96%

40 YEARS

37 YEARS
Source: WHO Discussion Paper No. 2 (2004)

AUSTRIA

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

2010 Aquino Health Agenda

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

Hypothetical scenario in the year 2000 Actual scenario

70.0% 60.0%

Out of pocket 57.9%

Out-of-pocket
% share in THE
50.0%

If government maintained its share at 41%...

40.0%
30.0% 20.0% 10.0% 0.0% 1994

and Philhealth 23.7% Govt Governmentincreased its share to 30%

Philhealth

Philhealth 7.2% Out-of-pocket share would have gone below 20%

2000 2002 2004 2006 2008

1996

1998

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

4 How much will UHC cost?

Based on 5% GDP recommendation

Php 617B by 2015
Year GDP* in current price (billions of pesos) THE as percent of GDP THE in billions of pesos 2007 2011 2013 2015

6,647
3.5% 235

9,018 10,549 12,341

4% 361 4.5% 475 5% 617

*Projected GDP from IMF World Economic Outlook Database April 2010

Based on National Health Accounts

Php 653B by 2015

Year

2004

2005

2006

2007

2008

2012

2015

THE
(billions of pesos)

188.0 218.2 242.6 256.7 295.5 464.9 653.2

Annual growth rate of THE at 12%

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?

If we succeed
Unique model SHI with informal sector contributing SHI premiums Plan: mandatory membership Proof of PhilHealth membership required for all government transaction: drivers license, business permit for sarisari store etc

Decreasing industry sector share in GDP

The informal sector in the Philippines will continue to increase, making universal population coverage more difficult
From 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

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.
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Regional Context
THE
(%GDP)

GGHE
(%THE)

(%THE)

SHI
0.4 7.7 8.7

(%THE)

OOP
40.7 54.7 30.1 54.8 19.2

Malaysia Philippines Indonesia Vietnam Thailand

4.4 3.9 2.2 7.1 3.7

44.4 34.7 54.5 39.3 73.2

12.7 7.1

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.
Professor of Economics Harvard School of Public Health

William Hsiao

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

5 Issues

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

Historical Revenue and Tax Effort

25

20

as % of GDP

15

Total revenues

10

Taxes

17% peak tax collection in 1997

1989 1993 1997 2001 2005

0 1981

1985

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, PAL
Philippine Daily Inquirer June 22, 2012

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

Philhealth Targets
2012 Benefits 2013 2014 2015 Total

58

77

92

103

330

Financing Sources
Premium Collections Investment Income Charge from Reserve Fund Reserve fund

50 6 6 101

67 5 10 91

76 5 18 73

79 3 28

272 19 62

45

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

PhilHealths THE share only 20% PhilHealth will pay P103B in reimbursements by 2015 Even if we use THE at 4% of GDP, which equals P493B, PhilHealths 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