Introduction to Health Financing, and the Concept of Universal Health Care

(HPAd 201)

1ST Semester, SY 2012 - 2013

Fernando M. Sison, MD, MPH Emer Faraon, MD, MBA
Department of Health Policy and Administration
College of Public Health University of the Philippines Manila

Developing Countries: Characteristics
Though there are variations across countries, basically the following are seen: (1) High population growth (2) Low GNP per capita (3) High maternal and infant mortality rates (4) High incidence of poverty (5) Education, housing and health outcomes need improvement (6) High % of the population live on less than USD 2.00 / day

Gross National Income
Classification: (2005 World Bank figures) Low ≤ $ 875.00 Low Middle $ 876.00 - $ 3,465.00 Upper Middle $ 3,466.00 - $ 10,725.00

Regional Health Financing Statistics
Ref: Lancet Series, Southeast Asia Health System, Jan. 2011
THE (% GDP) MALAYSIA 4.4 GGHE (% THE) 44.4 SHI (% THE) 0.4 OOP (% THE) 40.7

PHILIPPINES

3.9

34.7

7.7

54.7

INDONESIA

2.2

54.4

8.7

30.1

VIETNAM

7.1

39.3

12.7

54.8

Comparative Gross National Income
Ref: World Health Indicators / Statistics, 2007

Philippines  2005 GNI - $108 B  2005 GNI / capita – $ 1,300.00  Population below $ 1.00 / day – 15.5%  Population below $ 2.00 / day – 47.5%

Malaysia  2005 GNI - $ 125.8 B  2005 GNI / capita - $ 4,960.00  Population below $ 1.00 / day – NA  Population below $ 2.00 / day – 9.3%

General Features of Insurance System and Economic Indicators of Two Countries
PARAMETER
Main Social Insurer(s)

MALAYSIA
Gov‟t – 58.2% of of funding in public health sector  Private sector – 41.8% of funding in public health sector  Out-of-pocket – 73.8% of private health expenditure  Private insurance – 13.7% of private health expenditure  Employee Provident Fund (EPF) Social Security Organization (SOCSO)

PHILIPPINES
(1) PhilHealth > Formal Sector (GSIS, SSS) > Informal Sector (selfemployed; individual paying program) > Sponsored (unemployed, underemployed, indigent, retirees, pensioners) (2) Private health insurance (2) HMOs (3) Community Schemes

Dominant Form of Health Spending

Gov‟t – 58.2% of public health expenditure Out-of-pocket - 73.8% of private health expenditures

Out-of-pocket (54% of THE)

GNP / Capita in US $ (2005)

4,960.00

1,300.00

Gen. Gov‟t Expenditure on Health as a % of Total Expenditure (2011)
Private Expenditure on Health as a % of Total Expenditure (2011)

4.8%

3.8%

44.8%

35.3%

Evidence of Allocative Inefficiency
(Xingzhu Liu, Policy Tools for Allocative Efficiency of Health Services, World Health Organization, 2003)

► Experiences of OECD countries: health

care outcomes are not very sensitive to variations in health care expenditures ►Life expectancy and infant mortality measures are similar in OECD countries but the variations in total health care expenditures are very large

Evidence of Allocative Inefficiency

► 8 OECD countries: little difference in health status; large differences in health care expenditure, resource allocation, and use of services ► Ratio of MD to population – range of 1.4 to 3.1 / 1,000 ► Average number of MD visits / person / year – range of 2.8 – 11.5

Evidence of Allocative Inefficiency ► Number of hospital beds – range of 4.7 to 12.4 / 1,000 ► Annual number of hospital days / person – range of 1.2 to 3.7 ► Number of MRI scanners / 1,000,000 population ranges from 1 in Canada to 11.3 in USA ► Total health care expenditure as a % of Gross Domestic Product – range of 6.5% in Denmark to 14% in USA

Health Dimension of Globalization
Poverty as disability

► 1/5 live in absolute poverty; globalization skewed income distribution & accelerated destitution
► wealth & income are among the most important determinants of health

Poverty as Disability
► poor people’s coping mechanisms to rising cost of medical care ♠ reduce their consumption – ¾ of poor in Uganda decrease spending on meals ♠ distress sales – Kenya: ¼ of land sales; Vietnam: sale of buffalo ♠ household borrowing – Manila ♠ shifting spending – e.g., children stop schooling ♠ delaying / reducing care

Globalization & Health Care Reform
Broadly, changes were instituted worldwide in poor & rich countries to improve effectivity, efficiency, cost-recovery Common themes: 1. Identifying & responding to major health problems 2. Reducing role of the State 3. Organizational & management changes in the public sector 4. Increasing the number & yield of health financing sources

Globalization & Health Care Reform
Narrowly, instigated by international financial institutions & bilateral donor institutions – focus on social services by family & market, not by government

1. Prioritization 2. Privatization 3. Decentralization

Health Spending Inversely Related to Need / Disease Burden
Countries Disease Burden Health Spending

Developed

US$ 9 B

US$ 82 B

Developing

US$ 80 B

US$ 10 B

In rich countries, government pays for health; in poor countries, people pay out-of-pocket Industrial Countries: Private Spending as % of Total USA 55 Germany 15 Britain 5 Poor Countries: Latin America East Asia South Asia Sub-Saharan Africa
Private Spending as % of Total

58 52 75 60

Malaysian Health Care System (2005)
►122 MOH hospitals (with a total of

30,021 beds), ► 6 special medical institutions (with 4,740 beds), ► 809 health clinics, ► 1,919 rural clinics, ► 89 maternal and child health clinics, and ►146 mobile clinics

Malaysian Health Care System
► An

open-door policy in regard to general outpatient services and hospital admissions has been practiced by the public health sector. ► Access to specialist services is nonetheless controlled through a national system of referral.

Malaysian Health Care Financing System
► Public health services are heavily subsidized by the government. ► Primary care services at health clinics are delivered almost free of charge, whereby each patient is charged a nominal fee of RM 1 (equivalent to US$ 0.31 in 2007) for each outpatient visit based on Fees (Medical) Order 1976. ► Secondary and tertiary care services provided at hospital facilities are also highly subsidized by the government.

Malaysian Health Care Financing System
► Private health providers mainly focused on curative services and include general practitioner clinics, medical centres to private hospitals. ► Private hospitals exist in a variety of sizes (with the number of beds ranging from 17 to 2,358). There were 218 private hospitals (with a total of 10,542 beds), and an estimate of about 5,000 private general practitioner clinics (providing a range of primary health services) in 2004 .

Philippine Total Health Expenditure as a % of GNP, 1993 - 2007

Philippine Trends of Per Capita Health Spending at Current and Constant (1985) Prices, 1993 - 2007

Philippine Distribution of Health Expenditure by Source of Funds, 1997, 2003, 2007

Philippine Distribution of Health Expenditure by Use of Funds, 1997, 2003, 2007

Philippine Trends of Health Expenditure by Use of Funds, 1993 - 2007

CRITICAL ISSUES IN PHILIPPINE HEALTH FINANCING
1. Total health expenditures remain low
2. Health financing extremely fragmented 3. Health financing system highly inequitable 4. Institutional structures and incentives at the facility level are inappropriate and inadequate

Poverty & Subsistence Incidence - Poor Population
(Source: Official Poverty Incidence in the Philippines, 2009)

Poverty & Subsistence Incidence - Poor Families
(Source: Official Poverty Incidence in the Philippines, 2009)

Poverty and Food Threshold
(Source: Official Poverty Incidence in the Philippines, 2009)

Official Poverty Statistics, 2009 (NSCB)
PhP 974.00 – monthly per capita food threshold; how much a Filipino needed to meet his/her monthly food needs PhP 1,403.00 – monthly per capita poverty threshold in 2009; how much a Filipino needed to stay out of poverty PhP 16,841.00 – annual per capital poverty threshold PhP 231.00 – daily income for a family of five to stay out of poverty (PhP 8,251.00 monthly income)

Utilization of Health Facilities
(Source: National Demographic & Health Survey, 2008)
Public
Regional Hospital / Medical Center Provincial Hospital District Hospital Municipal Hospital RHU/ Barangay Health Center Other Public Private Hospital

Private
Private Clinic Other Private

Other
Alternative Medical Nonmedical

Lowest

2.3
Second

4.1 4.7 5.9 3.9 2.6

4.8 4.2 5.9 4.1 2.2

2.4 3.6 1.3 2.0 0.2

52.1 47.3 34.7 22.5 10.6

0.5 0.6 1.3 0.2 0.4

5.0 8.2 13.3 30.1 45.6

6.9 12.6 21.8 23.8 31.4

2.0 3.3 2.1 2.5 1.9

8.0 4.5 3.3 1.1 0.4

9.2 3.3 1.7 0.8 0.2

6.0
Middle

7.1
Fourth

8.3
Highest

4.0

Philippine Development Plan and Millennium Development Goals Selected Indicators
Indicators Prevalence of underweight children under five years of age (%) Proportion of households with per capita intake below 100% dietary energy requirement (%) Under 5 mortality rate (per 1,000 live births) Infant mortality rate (per 1,000 live births) Baseline 20.6
(2008)

Target (2016) 12.7

66.9
(2008)

30.1

34
(2008)

25.5

25
(2008)

17

Philippine Development Plan and Millennium Development Goals Selected Indicators
Indicators
Maternal mortality ratio (per 100,000 live births) Contraceptive Prevalence Rate (modern methods) Contraceptive Prevalence Rate (all methods)
Proportion of births attended by a health professional (%)

Baseline
162
(2006)

Target (2016)
50

34
(2008)

51
(2008)

63
(2015)

62
(2008)

90

Proportion of births delivered in health facilities (%)

44
(2008)

90

Philippine Development Plan and Millennium Development Goals Selected Indicators
Indicators
HIV Prevalence Malaria morbidity rate per 100,000 Malaria mortality rate TB prevalence rate per 100,000 TB mortality rate per 100,000 TB case detection rate TB cure rate

Baseline
Less than 1% (2009) 22 (2009) 0.03 (2009) 486 (2008) 41 (2007) 73 (2008) 79 (2008)

Target (2016)
Less than 1% 4 Less than 0.03 387 33 (2015) 85 85

Philippine Development Plan and Millennium Development Goals Selected Indicators
Indicators Baseline Target (2016)

Proportion of population with access to safe water, Households (%) Proportion of population with access to sanitary toilet facilities, Households (%) Population with access to affordable essential drugs (%)

82.3
(FHSIS 2008)

88

76.8
(FHSIS 2008)

88

73
(2009)

95

Philippine Development Plan and Millennium Development Goals Selected Indicators
Indicators
Population Growth Rate

Baseline
2.04 (2000-2007) 3.3 (2008) 54.3 (2007)

Target (2016)
1.48-1.82 (2015) 2.4-2.96 (2015) 35

Total Fertility Rate

Percentage of out of pocket payment from total health care expenditure Benefit Delivery Rate (National Health Insurance Program)

7.7 (2008)

30

National Health Insurance Program (NHIP) Coverage
NHIP Enrollment rate

53 (2008)
74 (2010)

100

100

Philippine Development Plan and Millennium Development Goals Selected Indicators
Indicators
Ratio of accredited health facilities to total number of licensed health facilities Mortality rate from lifestyle related and non communicable diseases (%) Prevalence (%) of stunted under-five children Prevalence (%) of wasted under-five children Prevalence (%) of thin children 6-10 years old 32.2 (2008) 7.5 (2008) 8.1 (2008)

Baseline
90 (2010)

Target (2016)
95

2% annual reduction 20.9 Less than 5 Less than 5

Percent of pregnant women who are nutritionally-at-risk

26.3 (2008)

22.4

Philippine Development Plan and Millennium Development Goals Selected Indicators
BASELINE

MDG
Prevalence of underweight children under 5 years of age Percent of household with per capita energy less than 100% adequacy Under-5 mortality rate (per 1,000 live births) Infant mortality rate (per 1,000 live births) Proportion of yearold children immunized against measles

(1990 or closest to 1990) 34.5

TARGET By 2015

CURRENT LEVEL

PROBABILITY OF ATTAINING THE TARGET

17.3

26.2 (2008) 56.9 (2003)

Medium
Medium

69.4

34.7

80

26.7

33.5 (2008)

High

57

19

24.9 (2008) 79.2 (2008)

High Low

77.9

100

Philippine Development Plan and Millennium Development Goals Selected Indicators
BASELINE

MDG
Maternal mortality ratio (based on 7-12 PMDF* range) Proportion of births attended by skilled health personnel

(1990 or closest to 1990)

TARGET By 2015

CURRENT LEVEL

PROBABILITY OF ATTAINING THE TARGET

121-207

30.3-51.8

95-163 (2006)

Low

58.8

100

74.0 (2008)

Medium

Contraceptive prevalence rate
Prevalence associated with malaria Death rate associated with malaria

40.3
118.7

100
0

50.7 (2008)
13.3 (2008) 0.2 (2005)

Low
High High

1.4

0

Philippine Development Plan and Millennium Development Goals Selected Indicators
BASELINE

MDG
Prevalence associated with tuberculosis Death rate associated with tuberculosis AIDS

(1990 or closest to 1990)

TARGET By 2015

CURRENT LEVEL

PROBABILITY OF ATTAINING THE TARGET

246.0

0

273.1 (2008) 31.2 (2005) <1% (2010) 84.1 (2008)

Medium
Low Low High High

39.1

0

<1% 73.0

<1% 86.5

Proportion of population with access to safe water supply Proportion of households with sanitary toilet facility

67.6

83.8

89.0 (2008)

Reference of Subsequent Slides: Prof. Orville Solon, PhD, UP School of Economics, Series of Health Sector Reform Agenda Reports Focusing on Health Care Financing

The Context of Health Care Financing Reforms in the Philippines

1. Epidemiological context: rising chronic and degenerative diseases will mean increasing pressure in the market place as well as in public health budget to reallocate resources away from the delivery of services for infectious and communicable diseases

The Context of Health Care Financing Reforms in the Philippines

2. Demographic context: the size, structure and rate of growth of the population determines over the long term the capacity of the health sector, the mix of services produced, and the rate at which such capacity will have to increase.

The Context of Health Care Financing Reforms in the Philippines

3. Macroeconomic context: the prospects for GNP growth, the creation of new jobs, and price stability determine how much households, from which all finances are generated, can spend on health care.

Philippine Households Face Barriers to Health Care Other than Financing
1. Many households lack the information needed to make appropriate and effective decisions regarding spending and health care demand patterns. 2. Many households lack the knowledge required to make home-based health care services more efficient and effective.

Philippine Households Face Barriers to Health Care Other than Financing

3. Many households lack accessible and affordable transport facilities that would allow them better access to health care facilities 4. Many households find their work and social time schedules incompatible with the service hours especially of public health care providers

Philippine Households Face Barriers to Health Care Other than Financing 5. Many households hold on to socio-cultural values and belief systems that prevent them from receiving appropriate and effective health care services.

The Impact of Financial Barriers is Reflected in the Way Income, Prices, and Insurance Coverage Influence Household HealthSeeking Behavior in the Philippines
1. With higher incomes, utilization of facility-based services increase, and the services of more expensive (perhaps better quality) providers are sought. 2. With price increases, poorer households reduce health care utilization; others switch to less expensive (perhaps lower quality) providers. 3. Regardless of income and prices, insured households tend to have higher utilization rates for facility-based care and prefer more expensive health care providers.

However, Because Insurance Reduces the Cost-Consciousness of Households, Adverse Health-Seeking Patterns may Result.
1. The likelihood that facility-based care will be sought for mild conditions will increase. 2. Referral systems are likely to be by-passed as services of more expensive providers are sought. 3. The tendency to substitute equally effective home-based preventive and promotive care with facility-based care is induced.

The Institutions which Assist the Filipino Household in Financing Health Care Expenditures include:

1. Extended family networks (i.e., remittances, gifts, and transfers) 2. Informal community social networks (i.e., paluwagan)
3. Organized community schemes (i.e., health cooperatives)

The Institutions which Assist the Filipino Household in Financing Health Care Expenditures include:

4. Social networks (i.e., church, charitable institutions) 5. Sectoral networks (i.e., labor unions, employers) 6. Private voluntary insurance

The Institutions which Assist the Filipino Household in Financing Health Care Expenditures include:

7. Social insurance 8. Public health delivery system

Reference of most of the subsequent slides: Ramon P. Paterno, MD, MPH, “ Universal Health Care Financing”, Acta Medica Philippines, Vol. 44, No. 4, 2010, pages 58 – 70.

Four General Models of Health System Financing

1. Tax-based funded – U.K. National Health Service model or the Cuban model 2. Social Health Insurance funded – German Bismarckian model

Four General Models of Health System Financing

3. Government-subsidized National

Health Insurance paying for services provided by private providers 4. Out-of-pocket system – including private insurance paid out-of-pocket; US model is a combination of the different means of financing health care

Four General Models of Health System Financing

4. Out-of-pocket system (continued) government insurance subsidized with Medicare for the elderly & Medicaid for the poor, a tax-funded Veterans health service & private health insurance or out-of-pocket payments for the rest  US model has one of the highest national health expenditures (16% of GDP in 2007) but with a large number of the population uninsured (49 million) and with health outcomes ranked only as number 37th in the world

WHO Western Pacific Region Health Financing Strategy for the Asia-Pacific Region 2010 - 2015

1. Universal Coverage 2. Renewal of Primary Health Care 3. Health Systems Strengthening

Health Financing Trends in the Asia- Pacific Region

Most countries in the AsiaPacific Region:

1. Chronic underfunding 2. Inequitable sourcing of funding (low public spending leading to high out-of-pocket spending)

Health Financing Trends in the Asia-Pacific Region

Most countries in the Asia-Pacific Region:
3. Efficiency issues in terms of allocation of limited financial resources 4. Efficiency issues in terms of payment mechanisms leading to higher health care costs

Asia: Total Health Expenditures (THE)
► T.H.E. as a % GDP (2008) 3.1% Indonesia (2.2% in 2007) 3.2% Philippines (3.8% in 2009; 3.9% in 2007) 3.3% Thailand 4.4% Malaysia 4.5% Singapore 4.8% India (4.2% in2009) 5.4% Vietnam (7.1% in 2007) 5.6% China, Korea ► High private spending on health ► Majority of private expenditure is out-of-pocket

Underfunding Most developing countries in the Asia-Pacific Region spent (in terms of total health expenditure or T.H.E.) less than 5% of GDP based on National Health Accounts for 2007. Country T.H.E. as % of GDP Vietnam – 7% Korea ) Mongolia ) > 5% Cambodia ) Nepal ) Philippines 3.9% (3.8% in 2009)

June 22, 2011 Expenditures – Malaysia vs. Philippines
Malaysia
General Gov’t Expenditure on Health as % of Total Expenditure

Philippines

4.8

3.8

Priv. Expenditure on Health as & of Total Expenditure

44.8

35.3

General Gov’t Expenditure on Health as % of Total Gov’t Expenditure
Social Security Expenditure on Health as % of Gen. Gov’t Expenditure on Health Out-of-Pocket Expenditure as % of Priv. Expenditure

55.2
0.9

64.7
19.7

73.2

83.5

Key Sources of Health Funds

Direct, indirect taxes, other revenues
• Citizens • Collected by government

Contributions / payroll taxes
• Employers, employees • Collected by social security institutions or public bodies

Other
• Donations, grants, loans • Employers„ funds • Collected by various agencies

Premiums
• Households, individuals • Collected by private insurance funds

Out-of-pocket payments
• Households, individuals • Collected by providers

Asia-Pacific and SEA Regions: Sources of Funding
Government spending was less than 2% of GDP in almost half of the countries in the Asia-Pacific Region.
Government spending on health was too low to support universal coverage

Asia-Pacific and Southeast Asian Regions: Sources of Funding
Evidence within the Asia-Pacific Region, which covers 37 countries of the WHO Western Pacific Region & the 11 countries of the WHO Southeast Asia Region, suggests that countries whose governments spend less than 5% of GDP on health had a higher percentage of households with catastrophic health expenditure

Asia-Pacific and Southeast Asia Regions: Sources of Funding
Globally, the Asia-Pacific Region in 2005 had one of the higher levels of out-of-pocket health expenditure, with over 40% of total health expenditures in the Western Pacific Region and over 60% in the Southeast Asian Region.

In the Philippines, Out-of-Pocket share was 54% in 2007.

Allocative Efficiency
80% of essential care and 70% of desirable health interventions can be delivered at the primary level but an average of only 10% of health resources are used for primary care in Asia

Allocative Efficiency
Six (6) countries in the Asia-Pacific Region spent less than 20% on primary health care; Philippines spent 11% on public health care About half of total health spending in Cambodia, China, Lao PDR & Vietnam went to pharmaceuticals & diagnostic services

Payment Mechanisms
More common methods: (1) Fee-for-service (2) Salaries (3) Case payments (4) Capitation (5) Global budget

Payment Mechanisms
Main provider payment mechanism in AsiaPacific Region: (1) Budget allocations (2) Salaries (3) Fee-for-service – regulations regarding fees and balance billing tend to be weak; when the provider is paid for every service provided, usually at the time of service; usually strong in terms of quality but drives cost up & encourages over-provision of services

Path to Universal Coverage – Key Health Financing Options at Different Stages of the Evolution towards Universal Coverage Universal Coverage
Tax-based financing Social health insurance Mix of tax-based and social health insurance

Intermediate stages of coverage
Mixes of community-cooperativeand enterprise-based health insurance & other private insurance, social health insurance-type coverage for specific groups & limited tax-based financing
Health expenditure dominated by out-ofpocket spending

Absence of financial protection

Philippines – Underfunding of the Health System
1995 – 2007: Total Health Expenditure  3.4 – 3.7% of GDP 2007: Total Health Expenditure  3.5% of GDP (PhP 235 B) 2009: T.H.E.  3.8% of GDP Share of Total Health Expenditure: Government  26.6% (PhP 61 B) PhilHealth  8.5% (PhP 20 B) OOP  54.3% (PhP 127 B)

Philippines – Underfunding of the Health System
Almost half of total health expenditure in 2007 (PhP 110 B out of PhP 235 B) was spent on pharmaceuticals Pharmaceutical sales: 80% in drugstores; 10% in hospitals; 10% in government institutions Branded medicines made up 97% of sales’ generics – 3% Multinationals controlled 68.7% of the market; Philippine drug companies – 31.4%

Philippines – Allocative Efficiency

Personal care expenditures  73 - 78% of national health expenditures Public health expenditures  11-14% of national health expenditures

Philippines – Payment Mechanisms

Fee-for-service payment mechanism remains the dominant form of the reimbursement mechanism of PhilHealth  90% of reimbursement for hospital claims

Philippines – Fragmented Health Financing System

Stakeholders of government health spending: 1. DOH – finances retained hospitals & national health programs 2. LGUs (provincial governors, municipal & city mayors) – 81 provinces, 136 cities, 1,495 municipalities; use IRA to finance health facilities & services; provinces finance provincial and district hospitals; municipalities are in charge mainly of public health & primary health care 3. PhilHealth – pays for services of DOH, LGUs, & private health facilities

Social Solidarity in Reverse
Breadth of PhilHealth Coverage
PhilHealth – claims 86% universal coverage as of 2010 2008 National Demographic Health Survey – only 38% of respondents aware of at least 1 household member being a PhilHealth member 2010 SWS Survey of Filipinos on Health Care Services & Financing – only 36% of respondents had PhilHealth coverage

Social Solidarity in Reverse
Breadth of PhilHealth Coverage
Disaggregation of PhilHealth coverage: ABC income group – 62% D income group – 36% E income group - 29% PhilHealth’s Quality Improvement Demonstration Study  only 25.5% of children under 6 years of age hospitalized in 11 provinces in the Visayas had PhilHealth coverage in 2003

Social Solidarity in Reverse
Depth of PhilHealth Coverage: ► Covers only inpatient benefits ► Outpatient benefits are limited – TB DOTS, maternal care, malaria, outpatient benefits for sponsored members in accredited health centers ► Don’t include outpatient drugs

Social Solidarity in Reverse
Height of PhilHealth Coverage  financial protection provided ► PhilHealth’s benefits cover from 40 - 60% of hospitalization expenses ► Internal survey on support value (% of hospitalization costs covered by PhilHealth benefits): ♣ in government wards, (2004 - 2006) support value of 56% for ordinary cases, 50% for intensive cases, 44% for catastrophic cases

Social Solidarity in Reverse
Height of PhilHealth Coverage Support value may even be eroded by as much as 30% by out of hospital purchases

PhilHealth’s Quality Improvement Study  patients in secondary hospitals in the Visayas had outside of hospital purchases amounting to 30% of their hospitalization needs

Social Solidarity in Reverse
Public hospitals are not benefiting enough from PhilHealth reimbursements 2006: among the top ten hospitals reimbursed by PhilHealth, only one was a government hospital, Davao General Hospital; the rest were tertiary private hospitals

Social Solidarity in Reverse
Utilization of PhilHealth ► Principle of social solidarity ► Sponsored (indigent) sector has low utilization rates

Major Issues in Health Financing
1. Divergent health financing philosophy among the major health stockholders & government administrations

2. Chronic underfunding of the health system
3. Inequitable sourcing of funding for health: low government share leading to high outof-pocket share

Major Issues in Health Financing
4. Efficiency Issues 4.1 Allocative: spending the limited health resources on expensive tertiary health care vs. the more cost effective primary and preventive health care 4.2 Payment mechanisms: dominance of the inefficient fee-for-service payment mechanism 4.3 Fragmentation & overlap of the different financing institutions with PhilHealth seemingly acting independently of DOH

What is Universal Health Care?
Provision to every Filipino of the highest possible quality of health care that is accessible, efficient, equitably distributed, adequately funded (without significant outof-pocket payments at the time of need), fairly financed (prepaid either by taxes or PhilHealth premiums), & appropriately used by an informed and empowered public

How Much Will Universal Health Care Cost?
Table 1. Target Scenarios for Increasing Total Health Expenditure (THE) to 5% Gross Domestic Product (GDP) by 2015 Year
GDP* in current price (Billions pesos) T.H.E. at 3.5% T.H.E. at 4% T.H.E. at 4.5% T.H.E. at 5% *Projected GDP taken from IMF World Economic Outlook Database, April 2010

2007
6,647

2011
9,018

2013
10,549

2015
12,341

235 361 475 617

Alternate Proposal for Implementing Universal Health Care

Setting up a National Health Development Fund with at least an additional PhP 50B to the present Department of Health budget; will provide the following:

1. PhP 14 B for the Philippine Health Insurance Corporation premium of the poorest 60% of the population
2. PhP 10 B for health infrastructure

Alternate Proposal for Implementing Universal Health Care

3. PhP 10 B for improving personnel salaries of the government’s health human resources
4. PhP 15 B to ensure adequate supply of 100 essential medicines 5. PhP 1 B for disaster preparedness

Alternate Proposal for Implementing Universal Health Care

Implementation can begin with the poor families in the regions with the worst health status: ARMM, MIMAROPA, Samar-Leyte, Bicol, Zamboanga Peninsula, West Visayas, Davao Peninsula, urban poor areas of Metro Manila, metro Cebu, Davao.

Possible Sources of Revenue for Universal Health Care
Table 3. Potential Sources of Funds for Universal Health Care (UHC)

Source
PhilHealth Reserve Fund Removal of PHIC Salary Cap Anti-Corruption Drive Road Users‟ Tax PAGCOR

Revenue (PhP)
110 B

Potential for UHC
(PhP)
Initial input of 50 B 11 B

280 B 10 B 30 B

100 B 5B 7B

PCSO (30% to Charity)
Documentary Stamp Tax (25% of Incremental Revenue)

22.6 B

6.8 B

Possible Sources of Revenue for Universal Health Care Table 3. Potential Sources of Funds for Universal Health Care (UHC) Source Revenue (PhP) Potential for UHC (PhP)
Sin taxes Amendment: 1st Year 2nd Year 3rd Year

20 B 30 – 40 B 40 – 50 B

10 B

4th Year
Debt for Equity Swap TOTAL

70 B
40% of National Budget

100 B

PhP 240 B + PhP 50 B from PHIC Fund

Allocative Efficiency
Essential Health Package: ► Defined by a Filipino Technical Working Group under the sponsorship of WHO Philippines Country office Costing was modeled on a working rural Inter-Local Health Zone consisting of 5 municipalities (and RHUs) ► Centered around a functional district hospital with the necessary health facilities, equipment, essential medicines, & staffed by the health human resource needed to provide the defined services

Allocative Efficiency
Essential Health Package: ► Consists of eight (8) services with supporting diagnostic lab services and an adequate supply of prioritized essential medicines ► Eight (8) services build on existing RHU health services & were expanded to include community mental health & oral health & rehabilitative services connected with noncommunicable diseases

Allocative Efficiency
Cost of the Essential Health Package =

PhP 1,400.00 per Filipino 2007: With Total Health Expenditure = PhP 235 Billion, the per capita health expenditure = PhP 2,640.00

Allocative Efficiency
Costing of Essential Health Package gives us a scientific basis for health budget formulation To provide all Filipinos basic health services, need at least a health budget of:

PhP 1,400.00 x 94 million Filipinos in 2010 = PhP 135 Billion vs. the 2011 Department of Health budget of PhP 33 B.

Global Budgeting
Provision of Essential Health Package can be sub-contracted to interested inter-local health zones (ILHZs) using a global budget based on the capitation amount of PhP 1,400.00

► Might be a financial incentive for district hospitals & surrounding municipalities to work together ► This would incentivize promotive & preventive health services to lessen the need for the more expensive curative services & medicine

Social Determinants of Health & Universal Health Care

Improvements in the health sector only account for about 20% of the improvement in health status Improvements in the social (i.e., socio-economic-politicalenvironmental) conditions account for the larger 80%

Social Determinants of Health & Universal Health Care

Government’s anti-poverty strategy  focus on agriculture & rural development thru asset reforms (e.g., agrarian reform, urban land reform, ancestral domain reform); reforms in the agricultural sector  investments in productivity improvements & supporting infrastructure

Challenge for Developing Countries

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High % of rural population Self employed, high illiteracy

Relevant Sources of Health Care Financing

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