CHALLENGES FOR THE EFFICIENCY AND EQUITY IMPACTS OF HEALTH CARE FINANCING REFORMS

1
CHALLENGES FOR THE EFFICIENCY AND EQUITY IMPACTS
OF HEALTH CARE FINANCING REFORMS

• Prof. Guillem López-CasasnovasProfessor in
  Public Finance D. Phil Univ. of York

2
The Health Care Box
FINANCIAL MECHANISM Taxes (direct/indirect),
pay-roll Savings, fees, premia
COLLECTING ORGANISATION Country/regional,
Social Security Mutual Funds, Private, HMOs
SOURCE Employer, employees Tax payers, users
Copayment
Cost utilisation extent
PUBLICLY PROVIDED HEALTH EXPENDITURE OVER GDP
Eligibility field
Services Scope (depth) Cure/Care
Population coverage (breadth) Restricted /
Universal
Modified from Busse R, et al (Feb 2007) HNP
Analyzing changes in Health Financing
Arrangements in High-Income Countries
3
The Health Care Box

How many boxes? Degree of pooling
4
HOW HEALTH CARE BOXES, MAINLY THOSE IN PUBLIC
SYSTEMS, GET ADJUSTED

• FOR GREATER MANAGEABILITY, PORTABILITY
  (INNOVATION AND ADJUSTMENT TO NEW SOCIAL NEEDS)
  AND ASSURING THEIR FINANCIAL SUSTAINABILITY
• HOW -BY CHANGING THE HEALTH CARE BOXES-, THE
  NATIONAL HEALTH SERVICES AND THE SOCIAL HEALTH
  INSURANCE SYSTEMS ANSWER TO THE NEW CHALLENGES
  DEMOGRAPHICS, TECHNOLOGY CHANGES AND CONCERNS FOR
  EQUITABLE ACCESS TO CARE

5
MAIN PURPOSE

• FROM A HEALTH ECONOMICS ANALYSIS, EXTRACT THE
  MAIN LEARNINGS FROM THE DEVELOPMENTS OF EUROPEAN
  HEALTH CARE SYSTEMS
• BY OBSERVING REFORM TRENDS IN NATIONAL HEALTH
  CARE SERVICES AND SOCIAL HEALTH INSURANCE TYPE OF
  MODELS
• IN FACING ECONOMIC DEVELOPMENT AND THE SOCIETY
  DEMOGRAPHIC CHANGE

6
THE ANALYSIS ...the departing point the nature
of the systems

• The NHS NATIONAL (aiming to
  geographical-universal uniform access conditions)
  HEALTH (through an intersectional coordinated
  action) SERVICE (by state administered care).
• However diversity at the point of access is
  unavoidable (not much contribution to reduce
  health inequalities in the English NHSLe Grand)
  corporative interests of health care providers,
  rather than health targets, usually prevail and
  some care services prove unmanageable in
  political hands (difficulty to say no, lack of
  commitment)

7

• To minorate these problems NHS have moved to the
  provision/ production split, with
• DECENTRALISATION in order to improve efficiency
  (by transferring responsibilities to providers)
  and assure that, if inequalities, they are
  acceptable (by choice or being local
  communities financially accountable after the
  central levelling of resources)

8
NHS SYSTEM INCENTIVES for improvementFor
coordination in delivering care (fund-holding on
a capitation risk- adjusted basis), mostly
centred in primary care management of illnesses
(LTCs, Chronic care conditions) and paying for
health outcomes performed.New roles for the
private sector Public-private partnerships,
internal markets in providing public services,
opening complementary private finance for less
cost effective care, once excluded from the
public packages
9
...the departing point the nature of the
systems. THE SOCIAL HEALTH CARE INSURANCE
SYSTEMS

• Social (community solidarity- premia) Health
  Care (life cycle utilization of affiliates)
  Insurance (risk pooling, entitlements of
  coverage) System (networks of multiple
  independent providers).
• However Sustainability implies to restrain open
  access, favoring primary care gate keeping for
  the delivery of care and a more accurate
  screening of the basic package granted for
  collective compulsory finance.

10
To minorate these problems SHIS have moved towards

• RISK TRANSFER from insurers to affiliates
  (copayments, deductibles..) and providers
  (risk-rating, prospective case-mix payments,
  global budgeting)
• INCENTIVES FOR COORDINATION by inserting into the
  system new brokers of the individuals care and
  lower co-payments to users if they access the
  system through primary care
• NEW STRATEGIES IN MANAGING ILLNESS EPISODES,
  being more selective in what services are in
  and out in the former comprehensive package of
  services

11
BASIC NHS- SHIS DIFFERENCES 1-Degree of
choice between cash transfers versus in-kind
delivery of care 2-Political involvement still
in the public provision/private production split
12
NHS- SHIS DIFFERENCES 3- Scope and actual
mix of health care coverage On basic (tax
financed), complementary (tax- favoured, under
regulated community premia) and additional
(private) package of services. With limited
opting-out 4-On the way they allocate the health
care management roles and its finance The flow
of Funds
13
NHS type Flow of funds
District Health Authorities
Public Funder
FundHolders or Integrated Providers (Trusts)
Inpatient care
(Capitation risk adjusted)
Primary Care
Hospital Care
Services
Services
Citizens / tax payers
Services
14
SHIS type Flow of funds
Health Insurer
Providers
Public Funder
Prices
Copayments
Complementary insurance
Basic package
Services
Citizens / premia
15
ARGUMENTS FOR ASSESSING THE SUPERIORITY OF EACH
MODEL INCENTIVES TO PROVIDERS FOR AN
EFFICIENT AND EQUITABLE DELIVERY COMPATIBLE WITH
CONSUMERS CHOICE   STRATEGIES FOR REDUCING MORAL
HAZARD IN HEALTH CARE CONSUMPTION, HOLDING
EQUITABLE OUTCOMES   THE EFFECTIVENESS OF IN-KIND
VERSUS CASH TRANSFERS  IN ACHIEVING POPULATION
HEALTH TARGETS   
16
COMMON GROUNDS FOR BOTH SYSTEMS

• Which part of the coverage should be under public
  regulation and collective finance less
  predictable, more financially catastrophic
• How to decentralise responsibilities minimum
  risk-pooling for a credible financial transfer
  and competition by improving providers autonomy
  the options

17
The options

• The frameworks of health care organisation and
  finance
• Planning/ Finance/ Insurance Risk
  management/Purchasing Production of
  care
• Health and Finance Depart. /Health Insurance
  Agencies / Purchasers of care services
  /Production and Managerial Units

18
EVIDENCE BASED

• Dual fiscal systems for public funding in a
  tax competitive context (almost regressive
  taxation) labour vs. capital income taxation,
  VAT vs. lower income taxes
• This calls for an expenditure reduction and in
  any case for a more selective (redistributive)
  social expenditure adopting the
  intergenerational perspective (elderly vs.
  youngsters), catalogue of cost effective care
  (implemented through commitments at the
  individual level), referring target groups (by
  screening demand and utilisation reviews..)

19
EVIDENCE BASED

• Excluded services, regulated referenced prices
  and co-payments, community premia for
  complementary servicesnot necessarily less
  equitable than some indirect taxes, and usually
  more efficient.
• Managing financial changes From paying inputs,
  to pay for performance (DRG, DM..) to risk
  adjusted capitation (to be, to do, to achieve)
• THE EQUITY/ EFFICIENCY DILEMMA EQUITY (NO
  RISK SELECTION RETROSPECTIVE PER SERVICE
  FINANCE) AND EFFICIENCY (PROSPECTIVE POPULATION
  BASED, RISK SELECTION) AT THE PROVIDERS LEVEL
  THE NEED OF BLENDING SYSTEMS

20
THE FINANCIAL RISK TRANSFER FROM PAYERS TO
PROVIDERS (AVERHILL, 2003)
21

• DO GLOBAL MANAGEMENT TRENDS EXIST? ARE THEY
  EVIDENCE-BASED? DOES A PERFECT SYSTEM EXIST
• YES, BUT EASIER TO DEFINE THAN TO IMPLEMENT
• 1-INTEGRATE (even virtually!) providers for a
  better coordinated services management
• 2-Be clear about main purpose in financing
  providers, by close monitoring health outcomes,
  health care services and medical faccilities
• ..AVOID THE INCENTIVE THAT WHENEVER IS WORST
  FOR THE SYSTEM IT IS BETTER FOR THE PROVIDERS
• 3- If you allow for public and private production
  under public provision, identify and finance in a
  separate way the fixed (stand by, structural)
  component of care and the variable (activity
  based, case-mix adjusted) component, since the
  specialisation and complexity index weight
  differently.

22

• DO EXIST GLOBAL MANAGEMENT TRENDS? ARE THEY
  EVIDENCE-BASED?
• EQUITY IN FINANCE AND DELIVERY
• Free acces/ opportunity costs.
• Consumption adjusted by need?
• Payroll taxes and general revenues as guarantees
  of equity in finance?
• Complementary insurance premia versus indirect
  taxes
• Users fees for less effective care vs. coercitive
  taxes
• Avoidable copayments equity and efficiency of
  reference pricing
• The issue of the public entitlements ins and
  outs of the public catalogue public financing
  less cost effective care?
• Quality of health care, avoiding diversity in
  hotel amenities and services exclusions.
• MACROECONOMIC CONTROL
• Cost escalation from insurance premia versus
  governmental budget overruns. WELFARE COSTS
  Moral hazard / excess burden from taxation.

23

• SUMMARY AND MAIN POLICY RECOMMENDATIONS FROM OUR
  HEALTH ECONOMICS ANALYSIS
• KEEP HEALTH SERVICES IN THE HEALTH AND HUMAN
  DEVELOPMENT POLICY PERSPECTIVE INTER AND INTRA
  GENERATIONAL BALANCE OF CARE, INTERSECTIONS OF
  HEALTH AND SOCIAL CARE, THE GLOBAL BURDEN OF
  DISEASE
• BE CLEAR IN FACING REFORMS ON WHAT IS
  SUBSTANTIALLY NORMATIVE ON PUBLIC INTERVENTION IN
  HEALTH CARE AND WHAT IS EMPIRICAL-IDELOGICALLY
  DRIVEN
• ON REDISTRIBUTIVE GROUNDS WE NEED TO BE MORE
  SELECTIVE.. BEING UNIVERSAL IS EASIER FOR
  POLITICIANS AND HEALTH CARE MANAGERS BUT IS LESS
  EQUITABLE (LESS TARGET ORIENTED) AND THE FINANCE
  OF THE SYSTEM MAY COLAPSE

24

• SUMMARY AND MAIN POLICY RECOMMENDATIONS FROM OUR
  HEALTH ECONOMICS ANALYSIS
• ON EFFICIENCY WE NEED TO IMPROVE AGENTS
  COORDINATION FOR BETTER HEALTH OUTCOMES
• (eg. THE HEALTH SYSTEM INTEGRATION STUDY
  - S. SHORTELL et.al.)
• PROVIDERS AUTONOMY AND SOME DEGREE OF RISK
  HOLDING ARE CRUCIAL FOR INCENTIVES TO SERVE THE
  SYSTEM GOALS
• BLENDING PROSPECTIVE AND RETROSPECTIVE SYSTEMS IS
  A KEY ISSUE IN PAYMENT METHODS
• RELOCATE THE PATIENT IN THE CENTRE OF THE SYSTEM

25

• THANKS FOR YOUR ATTENTION

26
ADDENDA TO COMPLEMENT THE ARGUMENT
27

• SOME BASICS IN ORDER TO BREAK THE PATH DEPENDENCE
  INERTIA
• FINANCING INSURANCE COVERAGE VERSUS PAYING FOR
  HEALTH CARE ACTIVITY
• CLOSING GLOBAL BUDGETS VS. FEE FOR SERVICE OPEN
  ENDED FINANCE
• PAYING PER PERFORMANCE VS. SALARIES
• CIVIL SERVICE STATUS VS. INDEPENDENT
  PROFESSIONALS.
• CENTRAL REGULATION OF TECHNOLOGY (MACRO
  ALLOCATIVE EFFICIENCY) VS. DECENTRALISATION
  (MICRO EFFICIENCY IN UTILIZATION)
• ON PATIENTS FLOWS OF UTILISATION MONEY GOES
  WHERE THE PATIENT GOES VS. PATIENTS GO WHERE THE
  MONEY GOES

28

• DO GLOBAL MANAGEMENT TRENDS EXIST? ARE THEY
  EVIDENCE-BASED? DOES A PERFECT SYSTEM EXIST
• YES, BUT EASIER TO DEFINE THAN TO IMPLEMENT
• 1-INTEGRATE (even virtually!) providers for a
  better coordinated services management
• 2-Be clear about main purpose in financing health
  outcomes, Health care services or health care
  providers paying structure, activity and
  outcomes
• By either focusing on
• patients health (global) or
• illness episodes or
• providers tasks (inputs) .
• ..AVOID THE INCENTIVE THAT WHENEVER IS WORST
  FOR THE SYSTEM IT IS BETTER FOR THE PROVIDERS

29

• 3- LOOK FOR A PROPER BALANCE BETWEEN USER CHARGES
  AND TAX PAYERS REVENUES. Welfare rationale
  (redistribution vs. excess burden) for financial
  sustainability
• WITHIN THE CONTEXT OF A PUBLIC HEALTH SYSTEM (NHS
  or SHIS)
• FINANCERS VERSUS INSURERS PURE PROSPECTIVE GOOD
  FOR EFFICIENCY (PROMOTING REVENTION) , BAD FOR
  EQUITY (INCENTIVES TO RISK SELECTION).
• THE OPPOSITE IS TRUE FOR RETROSPECTIVE
  FINANCING..
• ...PURCHASING HEALTH CARE COVERAGE RATHER THAN
  HEALTH SERVICES
• - risk-adjusted capitation
• - optimal risk-pooling and reinsurance

30

• INSURERS VS. PROVIDERS maintain an ACTIVITY
  BASED BUDGET CONTRACT
• case-mix adjusted
• blending prospective with actual costs
• global budgeting (re-scaling finance and activity
  in computing numeraires)
• USERS FINANCIAL FLOWS.
• Money follows he patients choice
• Choice on coinsurance for complementary services,
  and or co-payments at the providers level
• equity adjustments (fiscal expenditure and
  others)

31

• ACCOUNTABILITY AT ALL LEVELS
• POLITICIANS FACING TAX PAYERS EXPLICIT
  PRIORITIZATION
• INSURERS FACING POLITICIANS FOR COMPREHENSIVENESS
  AND RISK SELECTION
• PROVIDERS FACING INSURERS COST-EFFECTIVE HEALTH
  CARE
• USERS FACING PROVIDERS, INSURERS AND POLITICIANS
  GOOD VALUE FOR MONEY

32

• Specific suggestions In the Hospital setting
• search for differential production lines, closest
  as possible to the Health Services Plan
• specific rationale within each of them
• dont go for fees, based on costs, per activity
• try to offer interchangeability among lines at
  initial equal finance (favoring the dynamics of
  better profitability by reducing costs instead of
  by increasing gross revenues)

33

• THE VALUE OF HEALTH.
• Not just a cost problem but a leading welfare
  tfactor oo!!
• TO ENVISAGE THE FUTURE Health system reforms
  with greater consumerism and citizens
  empowerment. Independent professionals, brokers
  of the health problems of the citizens.
• GRADUAL REFORMS, BUT SELECTIVELY RADICAL You
  will never be able to take advantage of the winds
  if you dont know where you are going

34

• Does a perfect financing system exist for health
  care YES, but easier to define than to implement
• Be clear about financing Health care vs. Health
  care providers
• By either focusing on
• patients health (global) or
• illness episodes or
• providers tasks (inputs) .

35

• FINANCING SOURCES
• BALANCING USER CHARGES AND TAX PAYERS REVENUES.
  Welfare rationale
• WITHIN THE CONTEXT OF A PUBLIC HEALTH SYSTEM (NHS
  or HIS)
• INSURERS VS. PROVIDERS what not to
  do.....towards an ACTIVITY BASED BUDGET CONTRACT
• case-mix adjusted
• blending prospective with actual costs
• global budgeting (re-scaling finance and activity
  in computing numeraires)

36

• PUBLIC FINANCERS Vs. INSURERS What not to do
• ...PURCHASING HEALTH CARE COVERAGE RATHER THAN
  HEALTH SERVICES
• - risk-adjusted capitation
• - optimal risk-pooling and reinsurance
• USERS FINANCIAL FLOWS.
• coinsurance for complementary services, and or
• copayments at the providers level
• equity adjustments (fiscal expenditure and
  others)

37

• ACCOUNTABILITY AT ALL LEVELS
• politicians facing tax payers priorities
• insurers facing politicians for comprehensiveness
  and risk selection avoidance
• providers facing insurers cost-effective health
  care
• users facing providers, insurers and politicians
  good value for money

38

• Some recommendations from the analysis
• INTEGRATE (virtually) providers
• CAPPING FINANCE
• DEVELOP NON TAX FINANCING BY NEW COMMUNITY PREMIA
• IMPLEMENT CLINICAL GOVERNANCE AND CLINICAL
  BUDGETS
• Strategy
• EMPOWER CITIZENS BY INFORMATION AND CULTURAL
  CHANGE
• TALK THE LANGUAGE OF HEALTH AT THE FINANCIAL
  LEVEL AND OF CARE AT THE PROFESSIONAL LEVEL

39

• Specific suggestions In the Hospital setting
• search for differential production lines, closest
  as possible to the Health Services Plan
• specific rationale within each of them
• dont go for fees, based on costs, per activity
• try to offer interchangeability among lines at
  initial equal finance (favouring the dynamics of
  better profitability instead of gross revenue)

40

• THE VALUE OF HEALTH.
• Not just a financial problem-maker but a welfare
  problem-solver too!!
• TO ENVISAGE THE FUTURE Health system reforms
  with greater consumerism and citizens
  empowerment. Independent professionals, brokers
  of the health problems of the citizens.
• GRADUAL REFORMS, BUT SELECTIVELY RADICAL You
  will never be able to take advantage of the winds
  if you don know where you are going

41

• GENERAL ISSUE RESOURCE FUNDING AND INTERNAL
  PUBLIC ALLOCATION OF REVENUES FOR HEALTH CARE.
• A new balance between market forces, consumerism
  and demand control in health care
• The appropriate mix of general revenues (direct/
  indirect taxation), community rates (insurance/
  coinsurance) and prices (or user costs).
• Empowering citizens informed choice
• patients do not demand care. Citizens may
  demand health insurance coverage.

42

• Effective health planning and efficient managed
  care
• a shift in the financial risk from payers to
  providers
• financial incentives to providers for efficient
  care delivery,
• the creation of competition among providers in
  cost, scope and quality of services.

43

• ENVISAGING THE FUTURE THE DANGERS OF SOCIAL
  ACCOUNTABILITY AND PERSONAL RESPONSIBILITY IN
  HEALTH CARE UTILISATION.
• Systemic inefficiency has to do not only with
  cost inflation, but also with inadequate
  utilisation, over-utilisation, and with lack of
  flexibility to adjust health care to the new
  technologies in the broadest sense.
• THESE ARE PRECISELY THE NEW AREAS FOR ADDED
  VALUE IN HEALTH

44

• RELEVANT ISSUES How resources are allocated to
  providers
• either directly from public authorities,
• with or without a regional step (in the former
  case on a constitutional or on a purely
  administrative basis)
• with or without additional local-federal finance
• through intermediate agents, that exercise the
  functions of insurance companies
• with or without community rating or risk adjusted
  capitation for the substitutive package,
• with or without complementary insurance or
  individual co-payments at the point of access

45

• (cont.)
• how should providers be paid (from a per item
  basis up to a population parameter), given the
  implicit level of risk assumption in this case,
  and given the well known fact that supply induces
  demand
• what is the economic status of the providers
  (purely public, non-profit organisation or purely
  private) (Figure 1 Notice the different
  equilibrium likely in each case.

46

• ENVISAGING THE FUTURE increase in accountability
  at all levels of health care provision.
• In public financing, accountability to tax payers
  on priorities political democracy and priority
  settings
• Insurers facing public financiers should be
  accountable for assuring comprehensiveness and
  the absence of risk selection a basic package at
  a regulated price must be available
• Providers should have to face insurers for cost
  effective health care and finally users should
  make providers, insurers and politicians
  accountable for achieving good value for money
  from their taxes and fees.

47

• Financing insurance coverage versus paying for
  health care activity.
• Fee for service for open ended activities vs.
  Global budgets
• Capitation (Unadjusted) versus salary.
• Civil service vs. Independent professionals.
• Central regulation of technology and on patients
  flow searching for health care vs. consumerism

48

• The production and provision split
• Changes in the way health providers are financed
• Positive and negative list of drugs, reference
  pricing and some proposals for new increases on
  co-payments for drug consumption.
• Gate-keeping in Primary Health Care (capitation
  vs. Salaries).

49

• THANKS FOR YOUR ATTENTION