How We Might Spend Our Way to Better Health

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How We Might Spend Our Way to Better Health

• National Conference on Health
• Mario Taguiwalo
• April 29, 2008

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Micro Views to Health Financing

• Patient how to pay for costs of care I need?
• Provider how to get paid for costs of care I
  provide?
• Public health manager how to get funding for
  interventions I know are required?
• How these health financing questions are answered
  determine health status of individuals and
  communities

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How financing improves health

• Individuals and communities can improve their
  health with right use of right goods and services
  at right time (quality care is desired real
  outcome of provider-beneficiary interaction)
• Health financing helps individuals and
  communities improve their health by paying right
  cost of capacity and providing right goods and
  services used right at right time (money outcome
  of interaction satisfies both provider and
  beneficiary evidence of health benefit generated)

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Two sides of financing

• Sources how financing for health is raised,
  where it comes from (government, employers,
  insurance, households)
• Uses how financing for health is used, where
  money goes (hospitals, drugs, professional fees,
  administration)
• Dedicated funds DOH and PHIC
• General funds GAA, LGU, employer, households

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Source and use often go together

• Capital equity, grant or loan for service
  capacity (e.g. government hospital, private
  hospital, private education and training of
  provider)
• Operating budget subsidy (e.g. government budget
  for administration/public providers)
• Out-of-pocket payments (e.g. household payment
  for drugs, hospital care, professional fees)
• Health benefit payments (e.g. reimbursement for
  hospital, PF, drugs capitation payment for OPB)

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Features of some source-use combinations

• Operating budget subsidies clear planning
  intent, provider certainty, assures availability
  vs inflexibility, less incentive for
  responsiveness, mismatches in supply and demand
• OOPP consumer exchange, no payment-no service,
  provider responsiveness, client preferences vs
  provider uncertainty, beneficiary uncertainty
• Health benefit payment mimics one or other
  wiser buyer than govt or individual

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How financing affects health care

• Creates, locates and distributes provider
  capacity (capital financing, service financing)
• Sustains, motivates and influences provider
  effort and practice (use and service financing)
• Determines range, quality and prices of
  accessible services (use and service financing)
• Affects patients and populations use of
  available services (use and service financing)

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Philippine financing for health

• 2005 cost to use service capacities and actual
  goods and services provided to individuals and
  communities is financed by following sources
• Out-of-pocket payment (incl prvt insurance, HMOs,
  employers) -59 of total cost
• Philhealth benefit payment-11 of total cost
• NG budget (DOH ODA) 16 of total cost
• LGU budgets 13 of total cost

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What is right about our health financing regime?

• Able to financially sustain an extensive service
  capacity meeting many health needs
• Many patients able to secure care satisfactory to
  them at financing burden that is not usually
  oppressive
• Overall health status continues to improve maybe
  not at highest levels for our income but also not
  at lowest for same category.

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What is wrong about our health financing regime?

• Service capacity not meeting growing needs
  technical range and quality, geographic spread,
  quantity slow technical diffusion from center to
  periphery (not spending enough to grow capacity)
• Persistent shortfalls in disease control and
  public health protection (not spending on right
  things)
• Dangerous variations in provider performance (not
  compensating providers based on results)
• Incidence of wasteful spending without evidence
  of health benefit (spending on wrong things)

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Findings by Herrin and Racelis

• Public subsidy to hospitals and health centers is
  pro-poor more of the poor use these facilities.
  Health centers more pro-poor than public
  hospitals.
• Observed effect on number of people who become
  poor or reduction of income below poverty line
  due to out-of-pocket payments for health is small
  (less than 1) Maybe because poor use free care
  or maybe poor do not use care at all

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Most important damages of current health financing

• Under-spending on disease control and public
  health protection crucial to all (rich or poor,
  city or rural, educated or not) only source is
  tax spending on public health (DOH and LGUs)
• Under-use of quality health care by poor and near
  poor due to financial burdens/barriers associated
  with reasonable provider costs only available
  mechanism is Philhealth benefit spending

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Momentum against reform

• Individuals and communities just try to get the
  best that they can get from present system no
  incentive for anyone to reform system for own
  transient and specific benefit
• Providers more receptive to health financing
  reform (health financing is health provider
  income) but moral hazard of self-interested
  reform
• LGUs also more receptive to health financing
  reform (health financing is a major cost to LGUs)

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Why financing reform is needed

• Sick individuals unable to get right care at
  right time (under-financing of essential personal
  care)
• Communities unable to secure benefits of
  cost-effective public health interventions
  (under-financing of essential public health)
• People getting worse from wrong or bad care
  (financing with adverse health outcomes)
• People becoming poor from non-use of care due to
  high costs (financing with poverty outcomes)

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Challenge of health financing reform

• Dominant OOPP by users to providers default
  financing unless system weaned from this source,
  difficult to move to socialized financing best
  for health
• Government spending in health DOH budget has to
  work better with LGU budgets, plus grow with
  population needs
• Philhealth and NHIP larger NHIP, more diverse
  enrollees, new benefits on stream, effects on
  supply, quality, prices or user burden

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Simple reform strategy

• Reduce dominance of OOPP by increased size and
  effectiveness of two separate but coordinated
  public spending streams
• Health budgets of DOH and LGUs
• Health benefit spending of Philhealth
• Strengthen authority and capacity of DOH to
  provide technical and policy direction to
  national health financing reform

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Part 1 DOH and LGU Spending for Health

• Consolidate DOH and ODA for health sector reform
  harmonize spending policies on commodities and
  supplies, on equipment and capital goods, on
  training and technical assistance
• Set budget priorities for LGU health spending
  what services for whom should be financed, choice
  using financing to buy or provide services
• Create legal framework for area-wide health
  provider organizations (DOH hospitals, LGU
  hospitals, LGU health centers operating together)

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DOH and LGU spending for public health capacity

• Use DOH and ODA block of funds more purposeful
  way focused, linked to performance for public
  health outcomes, leveraged for local reforms
• Influence LGU provision and spending for health
  to assure basic public health protection, enable
  poor to access essential care, keep local health
  systems functioning efficiently for all

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Part 2 NHIP as leverage fund for health sector
reform

• NHIP benefit payment as dedicated stream of
  future income to health providers options for
  backing capital investments in health care
  capacity in targeted areas
• NHIP benefit payment as co-payment of patient OOP
  burden options for containing total OOP burden
• NHIP benefit payment as privilege for providers
  to supplement their revenues options for
  inducing more efficient health sector
  arrangements

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Some facts about NHIP

• Current fund balance of P69.334 B (end 2007)
  more than enough to cover next two years
  expenditures (at P42.523 B based on RA 7875 at
  P56.7 B based on reserve limit)
• Universal coverage defined as 85 of population
  enrolled expected to be reached in 2009
• Total benefit spending in 2006 P17.2 B (more
  than 80 on inpatient benefits) total benefit
  spending less than actual collection since 1998

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Philhealth planning benefit reforms

• Need for collection targets as well as spending
  targets within an actuarial framework
• Within this framework, set of policy goals for
  priority benefits for development and roll out
• Priority benefits for development guided by
  national health care financing direction set by
  DOH
• Critical for Philhealth benefit to link with
  DOH-LGU spending directions to maximize total
  effect of public spending on other sources of
  funding

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Some possibilities to consider

• Stabilize universal coverage by tax-based payment
  of premium for all families not in formal sector
  mandate LGUs to pay for portion (via IRA
  intercept) and allow them to recover their
  subsidies via local revenues
• Set up special upgraded benefit programs for
  universal coverage localities, including
  sub-national (local) variations in NHIP benefits
  based on equivalent premium costs
• Develop health service performance contracts with
  LGUs area-wide provider enterprises

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Further possibilities

• Multi-year guaranteed service payment for certain
  categories of services from certain providers to
  back-up capital spending
• Bulk purchase of services for use by
  beneficiaries with set co-payments (zero or
  pre-set minimum)
• Organize and contract pre-designated providers
  for retirees and old age beneficiaries based on a
  stream of services required by these clients

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Yet other possibilities

• Beneficiary advisory boards to PHIC regional
  offices
• Performance-based hierarchy of provider
  accreditation linked to wider access to higher
  level benefit payments
• Benefit development investment fund to pay for
  costs of testing and developing new benefits
  according to policy purposes

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Still other possibilities

• Target total annual benefit pay-out linked to
  attainment of certain measurable policy goals
  reduction of OOPP burden, improvement of health
  sector efficiency, expansion of access to quality
  care
• Management performance tied to attainment of
  reform goals beyond achieving enrollment,
  collection and payment levels

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Ideas for legislation (1)

• Plan for reducing out-of-pocket costs in
  financing high levels of use of maternal, newborn
  and child care and nutrition services necessary
  to attain MDG 4 and 5 by 2015 that mandates DOH
  budget, LGU budgets and Philhealth benefits to
  combine and coordinate their spending

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Ideas for legislation (2)

• Plan for financing a basic set of health care
  services for the poor by targeting those
  beneficiaries enrolled as indigents with
  Philhealth and then mandating that DOH and LGU
  budgets provide for necessary co-financing (in
  addition to the Philhealth benefit) so that these
  beneficiaries do not have to pay for using a
  basic set of health services

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Ideas for legislation (3)

• New legal framework for establishing and
  operating area-wide health provider
  organizations non-profit public-private
  cooperation combines hospitals, clinics and
  community-based providers under one enterprise
  DOH facilities, LGU facilities and private
  entities can be part of one organization
  oversight by DOH and LGUs

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Ideas for legislation (4)

• New expanded authority of DOH to direct and
  influence health care financing reform, possibly
  with budgetary mechanisms that use its annual
  budget to affect changes in the health care
  financing system, such as a capital financing
  mechanism standards setting in budget levels and
  priorities of LGU spending for health policy
  setting for Philhealth benefit spending