Professional Documents
Culture Documents
Healthcare Financing
Healthcare Financing
Learning outcomes
• Describe the functions of health care financing
• Discuss the different sources of revenue in health care
financing
• Compare and contrast health care systems from various
countries
• Assess how alternative models of health care financing
perform in Ethiopia
• Analyze the role of government in financing health
care in Ethiopia
• Evaluate the alternative revenue collection
mechanisms in Ethiopia
• Evaluate the role of donors in financing the Ethiopian
health care system
1. Introduction
• Sub-Saharan African countries set the SDG agenda
for sustainability of the national health targets.
Non
Hig Pro
-
h Ric duct
Low Poo pro
risk h ive
risk r duct
ive
Three
Dimensions: Quality of health
Total health
expenditure care;
Population
coverage Foregone care
(“breadth”); due to distance
and/or high OOP;
Target 3.8:
Achieve
universal health
coverage
Risk pooling
Resource allocation
Provider payment
Health Financing Modalities
General • Each modality is associated
Government
Revenue with different instruments
for revenue generation,
Out-of- Social Health pooling, and purchasing of
Pocket Insurance health services.
(OOP) (SHI)
Broad revenue base Potentially unstable source due to Tuvalu, Cuba, Solomon
comprising tax and non-tax annual budget process, sensitivity to Islands, Micronesia,
sources; political priorities, weaknesses in Seychelles, Brunei, Timor-
public financial management, and Leste: >90% total health
exposure to macroeconomic
Pool risks for entire volatility. expenditures is general
population. Easy to extend government revenue financed.
coverage to all, including Poverty, large informal share of
those in informal sector. economy, and capacity constraints Other prominent examples:
limit revenue-generating capacity in UK, Australia, Canada,
Financial burden of financing many developing countries. Norway, Denmark, Sweden,
health (and other sectors) can Italy, Malaysia, New Zealand,
be spread across entire May be regressive in some countries; Spain, Portugal.
population. “excessive” taxation may have
adverse macroeconomic
implications.
Can be a progressive source of
financing in some countries.
Social Health Insurance
Resources from mandatory earmarked payroll/income contributions by employers and
employees that are typically pooled by independent/quasi-independent insurance
agencies/“social health insurance funds” but can also be implemented as compulsory private
insurance; in modern social health insurance programs, governments pay contributions on
behalf of poor.
Activity:
In pairs list all health services exempted by
the Ethiopian government and how the
reimbursing mechanism is covered?
4. Outsourcing of Nonclinical Services in
Public Hospitals
Hospital management was spending
considerable time and resources on
routine administration and management of
human and material resources for provision
of supportive services for these health
facilities.
Assignment:
Prepare a detailed description of the
current HI schemes in Ethiopia
Implementation
Challenges
7. Establishment of A Private Wing in
Public Hospitals
In most regions and at the federal level, public
hospitals are allowed to open and operationalize a
private wing with the primary objective of
Reading assignment
Insurance
Reducing risk by combining a group of risks so that
the accidental losses to which the group is subjected
become predictable within narrow limits.
The fund then purchase health services from providers for the
benefit of those for whom contributions are made or who are
otherwise covered by the system/design
Benefit of Insurance
Example:
Premium Loadings
As loading increases, quantity of insurance purchased
generally falls
Information
Individual’s perception of loading
Underestimate the true risk ==> buy less insurance
Overestimate the true risk ==> buy more insurance
Quantity demanded = f( … )
out-of-pocket price
real income
time costs
prices of substitutes and complements
tastes and preferences
profile
state of health
quality of care
Determinants of Health Insurance Demand
1 Price of insurance
The consumer will forego/ give up/ health insurance if the
premium is greater than expected.
3 Income
Larger income losses due to illness will increase the
demand for health insurance
Determinants of Health Insurance Demand
4 Probability of ILLNESS
Consumers demand more insurance for events most likely
to occur
Consumers demand less insurance for events least likely to
occur
Consumers more likely to insure against random events
Types of Health Insurances
Health insurance Advantages Challenges
model
1.National / state-funded • Comprehensive coverage • Funding subject to political
of population pressures and available tax
(Beveridge) •Progressive revenue revenues
collection • Potential inefficiency in
Funding source: General • Large scope for raising healthcare delivery because
tax revenues resources of lack of competition and
• Simple mode of provider choice
governance
• Potential for administrative
efficiency
2.Public sector -Social • Mobilizes resources from • Coverage limited to
Health insurance employers for health workers employed in formal
• Funding typically sector
(Bismark) earmarked for health • Less progressive if tax is
• Can be progressive capped
Funding source: Payroll • Strong support from • Burden of payroll
taxes covered population contributions may increase
unemployment
• More complex to manage
Types of Health Insurances…
Health insurance Advantages Challenges
model
3.Community-based • Available to low-income • Limited financial protection for
(micro-insurance or groups& informal sector members
mutuelles) workers • Small risk pools risks
• Useful complement to sustainability (bankruptcy
Funding source: other financing common)
Premiums paid by mechanisms, such as user • Exclusion of poorest without
households fees or SHI subsidies
• Facilitate government or • Limited effect on delivery of care
donor funding to subsidize • Require national-level political
premiums to target and financial support to achieve
populations breadth & depth
4.Voluntary (private) • Financial protection for • Typically limited to higher
higher income population income populations
Funding source: • Can supplement state or • Plans compete for healthy /
Premiums paid social insurance coverage wealthy members
by households or • Can build local capacity (cream-skimming)
employers / in professional insurance • Increases differentials in
employees management access based on income
• Has high administrative costs
How does insurance affect the demand for Health
care?
1. Coinsurance - A form of medical cost sharing
in a health insurance plan that requires an
insured person to pay a stated percentage of
medical expenses after the deductible
amount, if any, was paid.
Patient pays only a fixed % of the cost of each visit
(often C = .20)
e.g. If the visit costs $ 100: patient pays $ 20,
insurance pays $ 80
2. Maximum/ limit- Insurer covers all costs until
some upper limit is reached
3. Indemnity Insurance( Co-pays)
– Insurer pays a fixed amount for each purchased
service (e.g. Physician office visit) and patient pays
any additional costs.
• Insurer pays $150 for each overnight hospital
stay, and patient pays the rest
Price
$150
D1
D0
Visits
4. Deductible
A fixed money amount during the benefit period -
usually a year - that an insured person pays
before the insurer starts to make payments for
covered medical services.
Plans may have both per individual and family
deductibles.
Some plans may have separate deductibles for
specific services.
e.g:- a plan may have a hospitalization deductible
per admission.
Patient pays a fixed amount out of pocket, then
insurance company pays all additional costs
Payment Methods
Payment:
The allocation of resources (usually money) to health sector
organizations and individuals in return for some activity (e.g.
delivering services managing organization)
Methods:
Third party payment-fee for services
Capitation
Out of pocket payment (self insurance)
1. Third party payment (fee-for-service)
Market failure
Imperfect information
Externalities
Imperfect Information and Uncertainty
– Universal access,