UNIVERSAL COVERAGE AND EQUITABLE ACCESS TO HEALTH CARE The European and German Experience

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UNIVERSAL COVERAGE AND EQUITABLE ACCESS TO HEALTH
CAREThe European and German Experience
Asia Pacific Summit on Health Insurance and
Managed Care Jakarta, 22-24 May 2002

• Friedeger Stierle, MD, MBA (HPN)
• Deutsche Gesellschaft für Technische
  Zusammenarbeit (GTZ)
• Eschborn, Germany

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Scope of Presentation

• Introduction developing a common language
• Health Insurance function health insurance
  organisation
• Definition of Social Health Insurance (SHI)
• Features of European health systems
• Social health insurance in Germany
• Historical development
• Conceptual pillars and underlying ethics
• Solidarity - Subsidiarity - Freedom of choice
• Principles of implementation
• Risk-equalisation
• Advantages of, and prerequisites for, social
  health insurance
• Conclusions

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Concept of Health Insurance

• Two basic functions
• Access to effective health care when needed
• Effective protection of family income and assets
  from financial costs of expensive medical care
• People are risk averse
• Preference to pay small regular payments in
  return for guarantee of coverage of large
  expenses, if they occur

cf J. Kutzin in Achieving universal coverage of
health care. 1998. Nontaburi office of health
care reform
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Health Insurance Function versusHealth Insurance
Organisation

• INSURANCE FUNCTION
• Effective protection from financial risk of
  illness
• Enhancing the insurance function of health
  systems is a policy objective
• It is of no public policy importance whether
  this health insurance function is mediated by
• Independent organisations, private business,
  civil society organisations ...
• Government systems, e. g. "national" health
  service
• if social costs and distributional effects are
  the same
• HEALTH INSURANCE SCHEME / ORGANISATION
• Insurance as a specific set of institutional
  arrangements

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Definition of Social Health Insurance
(International Labour Organization, ILO)

• Social Insurance is a system under which social
  risk, such as loss of income or need for
  medical treatment, are pooled on a mandatory
  basis among a group as broad as possible
• The costs are shared
• Contributions are imposed by statute on a uniform
  basis without regard to individual risk
• Members should not be permitted to seek exemption
  from coverage since this would results in
  dilution of the risk pool

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Health care in Europe "national" systems

• Predominantly or exclusively State-run e. g.
  Spain, UK, Scandinavian countries
• high degree of equality - often only on paper
• little - if any - autonomy from the state
• limited representations of the interests of the
  insured
• rigid system of pricing with cheap rates
• administration of want and waiting lists (UK)
• easy to organise and to run
• interesting model for very tight national budgets

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Health care in Europe - insurance models

• With, or without, competition among insurance
  carrierse. g. Germany, Austria, Belgium,
  France, Switzerland
• high degree of independence from State (yes G
  no F)
• contractual relationship with providers
• cost-reimbursement versus benefit in kind
  principle
• no waiting lists, but over-capacities (G)
• huge debts with State (F)
• customer orientation and complexity of structures
• generous, difficult because itrequires
  social consensus, but flexible !

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The German health care system...

• offers
• Universal access, comprehensive benefit package
• Freedom of choice of providers social insurance
  carriers
• is based on the concept of a social market
  economy
• private ownership, freedom to enter into
  contracts, competitive rights combined with
  societal responsibility
• however
• there is a shared view in society that 1) health
  is a sector of its own which needs strong
  regulation 2) health insurance to all can hardly
  be achieved through market mechanisms alone

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Features of German Social Health Insurance

• Employment-based health insurance
• contribution related to ability to pay (same
  of salaries)
• Compulsory for all earning less than fixed
  ceiling
• Administered by statutory sickness funds
• non-profit entities, but with legal mandate
• fiscally autonomous, financially self-sufficient
• decentralised, self-governed, controlled by
  members
• Ruled by public law (social code)
• but no take-over of the system by government

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Coverage of health insurance (1998)

• More than 99.5 of population coveredthrough
• 550 statutory sickness funds (SHI) 88
• other form of health insurance 12
• In contrast - the US
• gt 1/3 of population without adequate coverage
• 18 without any insurance coverage

OECD Health Data 1998
Source Gesundh.ökon.Qual.manag. 4 (1999), A75
DÄ.1999. 96 (41), C-1896
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The situation 120 years ago

• Rapid industrialisation, internal labour
  migration
• Impoverishment of large parts of the population
• Traditional systems could not cope any more
• Tradition of self-help guilds, friendly
  workers societies, unions, etc.
• Existence of private insurance for the rich,
  but no confidence in the free market to solve
  social problems
• Political parties opposed to a tax- financed
  system

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The beginning of sickness funds

• Germany was still an agrarian country
• Less than 10 of population covered (industrial
  workers)
• Contribution rate 3 of gross wages
• Compensation payment for loss of income during
  sickness ? name sickness fund!
• Workers and employers sitting togetherin the
  assemblies of representatives (50 50)
• Continuous expansion of coverage
• white collar workers, unemployed, pensioners, ...
• farmers only in the late 1960s

13
Number of sickness funds and contributing members
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Basic Principles of the German Health Care System

• Overarching Goal of all domestic policy SOCIAL
  HARMONY (reduction of social friction)
• amongst various socio-economic classes
• amongst various interest groups
• Principle of solidarityPrinciple of
  subsidiarity (supplementarity)Principle of
  free choice of providers

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1. Principle Solidarity

• Ethical platform
• Everyone should have access to the same benefit
  package and same quality of care on equal terms
• No family should be financially burdened by
  illness
• Implies ? the wealthier pay for the poor
• ? the young pay for the old
• ? the healthy pay for the sick
• ? small families/singles pay for larger
  families
• Contributions fixed of salary - not related
  to health status

16
Solidarity the generation contract(transfer
payments to pensioners) 1997
Contri-butions
Bene-fits
Bene-fits
Contri-butions
Source DÄ. 1999. 96 (7), p. C-289
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2. Principle Subsidiarity (Supplementarity)

• Solve problems at the lowest possible level-
  higher levels only intervene in case of failure,
  or inability
• Central (Federal) Government
• has the role of a regulator and supervisor
• direct spending on health care is very little
• is only marginally involved in service provision
• delegates state functions to actors of the
  system? the health care sector is left to govern
  itself, within the set federal legal framework

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The legal framework

• Constitution The Federal Republic of Germany
  is a democratic and social federal state
• Based on the constitution, the Social
  Codecovers the field of statutory health
  insurance
• In accordance to this public law, the statute of
  the sickness fund specifies further regulations
• Implementation - a co-operative work of
• sickness funds
• medical professions (association of panel
  doctors)
• hospitals and
• other suppliers of services

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Self - government of social insurance carriers
providers

• Autonomous administration
• Legal status public autonomous bodies (ruled by
  public law)
• Controlled by elected representatives of the
  members and employers (5050)(not run by the
  state)

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3. Principle of free choice

• Patients have freedom of choice!
• - of doctors (1st level of care) and hospitals
• - of social health insurance carriers
• Uniform compensation system of providers
• (mix of private and public providers)
• identical, negotiated price schedules
• makes provider competition possible based on
  quality

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Remuneration of providers Benefit in kind
principle

• Members receive the health care considered as
  necessary, effective, sufficient and economic in
  kind
• Sickness funds directly reimburse providers of
  care
• Ambulatory care
• global budget based on capitation
• Hospital care
• prospectively negotiated expenditure caps
  ("budgets") based on a mix of per diems and
  flat-rates
• in future diagnostic related groups
• The average German citizen never sees or pays a
  bill of hospitals or doctors !

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Third Party Payment Sickness Funds
Objective solidarity Contribution relatedto
ability to pay
23
Third Party Payment Private Insurance(indemnity
insurance)
Objective profitPremium relatedto health
status
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Rules of financing sickness funds

• Expenditures have to be covered by contributions
• No raising of credits allowed!!
• Self - governing body fixes the contribution rate
• Individual charge depends on the members income
  status
• Employer and employee share the contribution
  (5050)
• Contribution is levied at the source (the
  employer)
• Low income groups are exempted from co-payments

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The German barometer for cost-controlthe
combined average contribution rate
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The contribution rate

• Determined by three major factors
• morbidity, age structure and sex distribution
• average size of family covered
• average gross payroll of insured
• Implies substantial cross-subsidies amongst
  membershowever
• varied between 8 to over 16 of gross salary,
  because of different risk structures of funds
  horizontal inequity between rich and poor funds
• ? Introduction of risk equalisation fund (1994)

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Risk-equalisation how does it work?

• All sickness funds pay the same percentage of
  their revenues to the risk-equalisation fund
• The total collected by the risk-equalisation fund
  is re-allocated to all sickness funds,
  according to the risk-equivalence of their
  members
• ? Paying to the equalisation fund related
  to ability to pay of the sickness fund
• ? Receiving from the equalisation fund
  related to risk-structure the insured

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Effects of risk-equalisation

• It compensates (or penalises) each sickness
  fund for its risk-structure that is different
  from the average national risk
• Prevents risk-selection (cream skimming)
• Makes competition possible between sickness funds
  
• based on management efficiency (quality), and
• not on the level of the contribution rate
  (price)!
• Range of contribution rate
• before 8 to 16 now 11 to 14
• Without risk equalisation fund
• some sickness funds would have contribution rates
  of 20
• others would have rates below 10 !!

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Advantages of social health insurance

• Remoteness from the state - flexibility -
  accountability!
• Independence from the state budget public debt
• Independence from arbitrary displacement of funds
  
• Creates transparency regarding allocation of
  funds
• Makes decision-making easier and more predictable
• Gives room for financial sovereignty
• Makes introduction of self-governing bodies
  possible
• Makes competition and choice possible - without
  compromising equity

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Prerequisites for social health insurance

• Existence of formal labour sector
• Functioning fiscal system determination of
  contributions
• Capacity of the state as regulator, supervisor
  financier
• creating and updating the legal framework
• assuring that private health services pursue
  shared social goals
• subsidising contributions of the poor and
  indigent
• Decentralisation and democratic control
• Equalisation mechanisms between SHI carriers /
  funds
• A simple system import will never succeed!
• Consider historical development, economical
  situation, cultural values, learn from success
  failures of others, ...

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Conclusion

• Health insurance to all
• can hardly be offered with the laws of the
  market, since those market laws automatically
  marginalize those parts of society which are too
  weak, or simply not attractive in economic terms,
  thereby intensifying social cleavages
• SHI facilitates introduction of solidarity
• No adverse risk selection services based on
  need contribution related to ability to pay

32
friedeger.stierle_at_gtz.de

• Thank you for your attention!

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The Swiss Model

• All citizens have to be insured - free choice of
  carrier
• Premium
• varies per Canton (95 to 320 SF/month, inequity!)
• capitation, same for all (elderly, infants,...)
  in one Canton
• no contribution from employer
• 25 of citizens cannot afford premium (state
  subsidises)
• Deductibles 230 SF/person/year
• Co-insurance of 10 of all costs (up to 850
  SF/year)
• Choice between cost re-imbursement and
  benefit-in-kind
• Risk equalisation between carriers (sex, age)
• Tariffs of providers regulated per Canton
• Huge yearly increase of expenditures ( 10)

Source DÄ. 2001. 98 (40). C-2051
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The ongoing health care reform - about 50 laws
since 1977....

• Keep average contribution rate stable
• Increase efficiency - contain costs
• Maintain the solidarity principle while
  increasing the choice of members of sickness
  funds
• global budgets prospective payments of
  providers (prices)
• limiting number of panel doctors, gate-keeper
  provider networks
• positive list for pharmaceuticals
• quality management elements of managed care
• develop health promotion and prevention
• improvement of transparency and information
• strengthen rights of patients, support self-help
  groups
• Reform of hospital financing
• DRG-like price system, expenditure caps,
  monistic financing

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Satisfaction with Health Systems in the Fifteen
EC Member States in 1996
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Breakdown of sickness funds health expenditure
(, 1st half year 2000)

Source Süddeutsche Zeitung Nr. 205. Sept, 6,
2000. P 25
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Statutory versus private insurance Does the
market contain expenditures?

• 1983 - 1994
• Consultation of doctors per year
• private insurance 2.8 ? 4.5
• statutory sickness fund 2.8 ? 3.7
• Hospital stays per year
• private insurance 1.66 ? 1.79
• statutory sickness fund 1.36 ? 1.34
• Administrative costs
• private insurance 14
• statutory sickness fund 5

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Increase of Expenditure, 1988 1998 Statutory
versus private insurance
Old Länder only
Source AOK. 2000. Gesundheit und Gesellschaft. 1
(3), p. 7
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Revenues expenditures of sickness funds in
Billion DM, 1992 - 1997
DM