Health System Reforms in OECD Countries Lessons for China WHO China

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Health System Reforms in OECD Countries Lessons
for ChinaWHO China
http//www.wpro.who.int/china
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Overview of Presentation

• OECD Health Systems Reforms - Lessons for China
• Characteristics of health care systems
• Financial resources for health care
• Cost containment initiatives
• Improving efficiency at the micro level
• Ensuring equitable access to health care
• Improving quality of care including patient
  satisfaction
• Government role in regulating quality, safety and
  cost control
• Reflections and implications for China

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1. Characteristics of Health Systems in OECD

• UNIVERSAL coverage of health care
• with Governments taking major responsibilities
  
• Adequate public health financing
• Via publicly organized social health insurance
  schemes
• Or via tax-based national health services
• Private insurance
• main mode (Swiss, US)
• - increasing choice timeliness of care (UK,
  Ireland, Australia, etc)
• The way health systems financed are affecting
  equity
• Relying on taxes and social insurance, rather
  than OOP
• more equitable and supports access to care
• Individual premium and cost sharing (co-payments)
• May have negative implications on equity in
  health care

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Characteristics OECD

• Public-integrated model (Australia, Nordic
  countries, UK pre-1990s)
• Merging finance with provision run like Govt
  department
• Staff salary paid and complete population
  coverage
• Cost control can easily be done
• Weak incentives to improve efficiency, outputs,
  quality and responsiveness to patient needs
• Contract (purchasing) model (UK in 1990s, Japan,
  New Zeeland)
• Contract with public or private health providers
• More responsive to patient needs
• More difficult to contain costs
• Private insurance / provider model (Switzerland
  US)
• Affordable insurance
• High degree choice
• Cost control weak

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2. Financial resources for health OECD

• Rapid rise of health expenditure in 1960s and
  1970s
• After reductions in 1980s, several OECD countries
  have raised their public spending on health in
  the 1990s
• Total health expenditure (THE) averaged 8.4
  GDP
• with a range from 2.0 for Turkey to 13.2 for
  the US
• Public expenditure on health averaged 6.2
  GDP
• Most EU countries over 6 and the lowest is 4.2,
  in Poland
• Turkey 1.5 Korea 2.6 US 5.9 of GDP
• Public share of THE averages nearly 75
• Surpasses 70 in most EU countries
• Lowest is 56 in Greece and Switzerland Dutch
  63
• US and Korea both 44
• Devoting more of GDP to health care as society
  gets richer not necessarily inappropriate

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3. Cost containment initiatives - OECD

• Two major factors driving up health care spending
  in Europe
• Technology likely explained half of the total
  spending growth
• Population ageing
• 1980s European countries used 3 policy sets to
  control cost often in the following order
• Regulation of prices and volumes of health care
  and inputs
• Caps on healthcare spending, either overall or by
  sector
• Shifts of the cost onto the private sector
  through increased but limited cost-sharing

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• I. Regulation of prices and volumes of
  healthcare and inputs
• Price controls
• Wage controls esp. in systems with
  public-integrated systems (Denmark, Finland,
  Ireland, Spain, Sweden, UK)
• Price and fee controls between purchasers and
  providers (Belgium, France, Luxemburg, Germany,
  Austria, Hungary)
• Administrative price setting for pharmaceutical
  drugs (all EU countries except Germany and
  Switzerland)
• Disease Related Grouping (DRG)
• Price and volume controls
• Prices adjusted as a function of volume to stay
  within budget (Germany ambulatory care Austria
  hospital care)
• Reduce marginal costing for additional supply and
  volumes

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• Cont. I. Regulation of prices and volumes of
  healthcare and inputs
• Volume controls
• Limits on entry to medical schools (most EU
  countries)
• requires human resource planning taking into
  account age related needs increases
• Technology advances can reduce average length of
  stay in hospitals
• leading to reduced number of beds per capita
• - controlling the purchasing of high tech
  equipment
• The effects of cost control measures undermined
  by providers response
• Increasing volumes
• Providing higher cost services
• Up-rating patient into higher cost
  classifications
• Shifting services into areas where there are no
  price controls
• Price and wage controls can have negative
  longer-term effects on supply side
• Shortage of personnel, affecting flexibility and
  ability to increase supply

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• II. Budgetary caps
• Most effective in integrated models (Denmark, NZ,
  UK) or single payer countries (Canada)
• Budget process holds key to cost controls
• More effective for hospital sector
• Indicative budgets/targets in countries with
  social-insurance systems (Belgium, France,
  Luxemburg, Netherlands)
• Prospective budgets instead of retrospective
  payments (paying provider on FFS)
• Limit the incentives to improve efficiency
• III. Shifting cost to private sector
• Cost sharing esp. in pharmaceuticals through
  non-reimbursable and co-payments
• Burden those who use services (sick poor) and
  potentially restricting access to services

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4. Improving efficiency at micro level OECD

• Ambulatory care shifting care to an ambulatory
  environment helps control overall costs and
  enhance economic and technical efficiency
• The gate-keeping role of GPs has been encouraged
  in several EU countries (France, Norway, UK)
• GPs are employed on
• salaries (Greece, Finland, Iceland), salary-fee
  mix (Norway)
• salary-capitation mix (Portugal, Spain, Sweden)
• capitation-fee mix (Austria, Denmark, Ireland,
  Italy, Netherlands, UK)
• fee for service (Germany)
• Reliance on fee-for-service may see
  supply-induced demand
• Growing interest in adopting a mix of different
  provider payment methods

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Improving efficiency at micro level

• HOSPITAL SECTOR
• Purchaser (GP fund holders, primary doctors,
  insurers, patient) / provider split
• Budgetary authorities helps control overall
  costs and enhance efficiency
• Patients strengthen quality and accessibility
  care
• Critical issues (1) Purchaser gets adequate
  information (2) Increasing and competing
  providers and insurers (3) Administrative cost
• Hospital contracting and payment system
• Global grants/budgets
• main payment method in public integrated systems
  and direct means to control spending can be
  combined with DRG (price and volume)
• Bed-day payments (Switzerland) flat rate per
  occupied bed
• Payments per case (prospectively) such as
  Diagnosis Related Group (DRGs)
• Fee for service not used in EU as prone to
  supply induced demand
• Enhancing competition among insurers (Dutch new
  reform)

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Improving efficiency at micro level

• Pharmaceutical drugs
• Strict drug approval process and pre-marketing
  requirements to assess whether products are safe
  cost-effective for use (widespread in EU)
• Price controls at the wholesale and retail level
  (widespread in EU, convergence in prices across
  EU countries)
• Distribution of pharmaceuticals governed by
  national regulation with professional bodies,
  health providers and health users
• Number of pharmaceutical wholesalers has
  decreased
• Rational use supported by
• clinical practice guidelines (widespread in EU)
• prescribing budgets and data to provide feedback
  to individual doctors
• The degree for cost-sharing for drugs has been
  more widespread than for other components of
  healthcare demand

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Improving efficiency at micro level

• Technological change
• Major impact on health outcome per disease and
  major driver of health spending
• Pre-marketing controls to determine whether a new
  technology is safe and cost-effective for a
  particular use (widespread in EU)
• Budget caps make hospitals more selective in
  acquiring new technologies (wide-spread
  similarly, capital charges in UK)
• Purchase of high technical equipment through
  central committee (Netherlands)

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Ensuring Equitable Access to Health Care OECD

• Universal coverage as policy objective means that
  everyone gets access to appropriate care when
  they need it and at affordable cost
• Also adopted by poorer European countries
  (Moldova and Kyrgyztan)
• (Belgium, Finland, Greece, Portugal, Spain
• The approach generally used to attain universal
  coverage in European countries has been
• make insurance coverage compulsory
• include essential health services the service
  benefit package
• minimize cost sharing with vulnerable groups
  often been exempted from cost-sharing
• provider payment methods emphasis is on prepaid
  and pooled contributions and move away from user
  fees

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Cont Ensuring Equitable Access to Health Care
OECD

• Many countries have found that universal and
  comprehensive insurance coverage is not always
  sufficient to ensure equitable access to health
  services. The following problems need to be
  addressed separately
• Shortages or maldistribution of providers or
  services
• Socio-cultural barriers
• Most OECD and European countries, including some
  of the poorer countries, provide nearly universal
  health coverage to their citizens
• Out-of-pocket payments of total health spending
  below 23 in most EU countries (and max 33, in
  Switzerland)
• Out-of-pocket of total household consumption
  below 3 in most EU countries (max is 6, in
  Switzerland)

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Stages of coverage and organisational mechanisms

Reduce out-of-pocket payments and increase
prepayment
Universal
coverage

• Options
• Tax-based financing
• SHI
• Mix of tax-based financing and various types of
  health insurance

Intermediate stages of
coverage
Mixing community-, cooperative and
enterprise-based health insurance, SHI-type
coverage and limited tax-based financing
Absence of

financial protection
Out-of-pocket spending
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Universal coverage

• OECD experience suggests that universal coverage
  has potentially many advantages
• Improve the health and productivity of the
  population by making health services financially
  accessible to all
• Providing coverage for preventive care can lower
  future expenditures for care
• Reduce the need to provide for a large array of
  safety-net facilities for sick people who cannot
  afford care
• Reduce administrative costs because processes
  such as verifying eligibility for the program
  will not be necessary
• Reduce problems of adverse selection into health
  insurance plans
• Enhance fairness in society

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6. Improving quality of care and patient
satisfaction OECD

• Policy-makers in OECD increasingly address issues
  of
• Inappropriate and poor technical quality of
  health-care services
• Patient safety and medical errors
• Increased accountability for quality
• Improving information systems and make reports
  public on health-care quality and performance of
  hospitals, individual providers, health insurance
  plans to enhance health system performance
• DRG as a measure of quality (Czech)
• Funding reward (UK)
• Standardizing protocols and involvement
  professional associations
• Mandatory accreditation
• Setting targets and standards for improvement
• Formalizing patients rights

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7. Government role in paying, providing and
regulating OECD

• Government as the provider payer of services,
  using tax revenues UK, Finland, Denmark,
  Ireland, Sweden, Norway, Spain
• Government as the payer of services, using tax
  revenues private providers Canada
• Government oversees the provision payment of
  services by non-profit organizations (sickness /
  insurance funds) which rely on employer
  employee contributions Germany, France,
  Netherlands
• Government provides safety net for those outside
  private insurance schemes Switzerland
• Government strongly regulates or oversees
  quality, safety and cost control

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8. Reflections and Implications for China

• China is weak in regulator function (cost,
  quality, safety)
• Insurance coverage low with incomplete package
• Urban 55, employment based commercial and
  non-commercial health insurance
• Rural 45, voluntary, focus catastrophic
  illness, very low reimbursement level (30)
• Insurers either way Govt (MoLSS, MCA) or
  scattered rural schemes (RCMS) have limited or no
  negotiation power with provider
• Provider merely public but salary paid 50 90
  thr. user fees
• Increasing amounts of clinical care and
  under-providing preventive and basic care
• Prescribing excessive and unnecessary amounts of
  drugs and diagnostics
• Cost control measurements difficult due to
  dependency on user fees

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Reflections and implications for China
Resources to Health

• Health expenditure in China
• Health expenditure (2000) 45 per capita per
  year
• Health expenditure (2004) 71 per capita per
  year (5.6 of GDP)
• Total Health Expenditure (THE)
• Govt 17 in 2004 vs. 40 in 1980
• Insurance mainly urban 29 in 2004 vs. 40 in
  1980 (Rural)
• Individual (HH) 54 in 2004 vs. 20 in 1980
• Fear that health care cost will reach 8 - 10 of
  GDP in 5 years time without necessarily improving
  quality due to inappropriate mechanisms and tools
  to control costs (price) and quantity (volume)
• Drugs consist 44 of THE. In OECD this around 15
  

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Reflections and implications for China
Improving efficiency at micro-level

• Chinas experience in public spending on Health
• 68 of public health resources toward hospitals
  for mainly urban residents and insufficient
  public resources go to public goods
• Local governments in poor areas, which are
  responsible for financing health services, face
  sharp financial constraints and fail to fulfill
  their core public health functions unfunded
  mandates
• Doctors outnumber nurses
• No gate keeper and excessively using tertiary
  services, bypassing available health services in
  the community TRUST, increasing cost

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Reflections and implications for China
Ensuring equitable access to healthcare

• Health services in China are (1) grossly
  under-funded by Govt (2) insurance coverage low
  (3) packages inadequate (4) reimbursement low
  and (5) health workers relying on user fees.
• This has resulted in
• Over two thirds of Chinas population need to
  rely on their own pockets to cover the cost of
  medical bills
• Out-of-pocket spending is 56 of total health
  spending
• Health care cost main single reason for people
  falling into poverty (30 NHSS 50 DRC report)
• ACCESSIBILITY TO HEALTH SERVICES VERY LOW Govt
  acknowledges accessibility to Health as key
  problem with around 40 of population lacking
  access to hospital mainly financial

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Lessons for China from OECD

• Step by step .
• Clarify vision and strengthen Government role in
  Health
• Govt to increase public expenditure towards
  public health and to support safety net and
  access to Health for the West and the poor
• Regulator in safety, quality and cost
• Senior level endorsement required to guide the
  many actors in Health
• Consider universal coverage to essential
  services
• Make health insurance compulsory
• Improve, expand and integrate current urban,
  rural health insurance, and medical financial
  assistance with focus on ensuring access to
  Health for the low resource areas and safety net
  for the poor.
• Include essential heath services in package with
  focus on West and the poor

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Lessons for China from OECD

• Change the method of provider payment
• towards prepaid and pooled contributions away
  from user fees
• Introduce forward looking budget instead of
  retrospective payments
• Strengthen the role of purchaser of health
  services
• Put in place cost containment tools and
  mechanisms
• Regulate price and volume of health care inputs
• Caps on health care spending
• Develop National Medicine Policy, registration,
  pricing, distribution, rational use
• Strengthen ambulatory care and introduce gate
  keeping village clinics and urban community
  health centers
• Improve quality of health services at lower level
  gain trust

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Lessons for China from OECD

• Improve quality of health services, especially at
  lower level
• Standardize treatment protocols
• Introduce mandatory accreditation
• Improve reporting system and ,make reports public
  on health care quality
• Improve quality of staff at lower level
• Introduce health system indicators that will
  focus on accessibility to quality of health
  services
• Involve all stakeholders in the process
• THANK YOU

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