HEALTH FINANCING –

UNIVERSAL HEALTH COVERAGE

HEALTH FINANCING SYSTEM TO POLICY OBJECTIVES,
OTHER SYSTEM FUNCTIONS AND OVERALL SYSTEM GOALS
 II. Health Financing and UHC
TUJUAN ANTARA DAN AKHIR UHC
HEALTH FINANCING – FUNCTIONS AND LINKS
REVENUE COLLECTION
UH - THE THREE DIMENSIONS
What is included in financial protection?

What can we do to increase coverage?

3.
3.
2.

1.

1. 2.

Source: World Health Report, WHO, 2010 www.who.int/whr

IN A PERFECT WORLD…

100%
Height: what
proportion of the
costs are
covered?

Depth: Which
services are
covered?
Breath: who is covered?
IN THE REAL WORLD OFTEN…

Height: what
proportion of the
costs are covered?

Depth: Which
services are
covered?
Breath: who is covered?
SOURCES OF FUNDING AND COLLECTION

ATTENTION:
HEALTH (FINANCING) SYSTEMS ARE
OFTEN
DEFINED IN TERMS OF THE
PREDOMINANT SOURCE OF
FINANCING!
“GENERAL TAX” FUNDED SYSTEMS
NHS

• “Beveridge” system / National Health System

• All un-earmarked tax revenues e.g. income tax, VAT available for allocation by
national and local government.
• Funding agency is a Ministry of Health or District Health Department (part of core
government bureaucracy)
• Entitlement based on citizenship
• Purchasing and provision integrated in one organization
• Characterized by historical line-item budgeting direct to health facilities

Examples: The UK NHS pre-1990; former communist Soviet countries, Sri Lanka.
 “SOCIAL HEALTH INSURANCE” SYSTEMS
SHI

• “Bismarkian”. Predominant source of funding is payroll tax (compulsory contributions from employees and
employers earmarked for health insurance).
• Typically fixed % of salary i.e. proportional, not progressive; ceiling can add regressive dimension.
• Fund holding agency is one or multiple social health insurance fund(s)
• Enrollment is mandatory (at least de jure)
• Benefits and entitlements are linked to contributions
• Purchasing and provision functions separated
Examples: Germany; Japan, Estonia
THE PROBLEM WITH LABELS…
• These labels and descriptions no longer reflect the reality.
• Categorizing / analyzing the whole system based on the revenue source is
unhelpful; many health systems have introduced significant reforms without altering
the source of funds.
• Today so-called Social Health Insurance systems also rely on general taxes.
• Moreover, the source of funds does not determine:
• how those funds are pooled
• how those funds are used to pay providers
• how benefits and other characteristics of functions are specified!
POOLING
WHAT IS A POOL?
REVENUE POOLING
DEFENITION: Accumulation
of prepaid revenues on behalf of a
population for eventual transfer to providers

• The main challenge in pooling is fragmentation. Reforms aim

to reduce pool fragmentation.
• Various choices in policy making for effectiveness of risk
pooling (pooling as a policy objective)
• Compulsory and voluntary insurance/pooling
 EXAMPLES OF POOLING INSTITUTIONS

• Ministry of Health
• Decentralized departments of Health or local government health agency (e.g.
district, provincial)
• Social Health Insurance fund(s)
• Private health insurance funds (for profit and not-for-profit)
• Local member-owned and managed insurance schemes
 POOLING OF RISK AS A POLICY OBJECTIVE FOR…
• Financial protection and equity of access
EXPANDING RISK POOLING AS AN OBJECTIVE OF
HEALTH REFORM
• Classic argument: Maximize potential of available prepaid revenues for cross-
subsidy from the relatively healthy to the relatively sick
• Why do we care about this?
% Health expenditure by % of population
(France and Germany)
FINANCIAL PROTECTION IS CLEARLY NEEDED
• Protect those experiencing need for high cost care (e.g.
hospitalization, chronic need for medicines) against the costs of such
care
• Part of the anti-poverty agenda - addressing catastrophic costs
provides one of the clearest links between health system reform and
poverty alleviation
• As many factors influence the need for health care and the risk of
getting ill, cross-subsidy allows for solidarity between
• the sick and the healthy
• the rich and the poor
• the young and the old….
WHY A “VOLUNTARY” INSURANCE IS A PROBLEM?
The issue of “Adverse Selection” in private health insurance
• Individuals who are ill, know that they are at high risk and will try to buy insurance.
Good risks, i.e. healthy individuals will not.
• Private insurers (profit maximizers) know people will try to do this, so they use
methods to try to select only good risks – this is called “cream skimming”.
• Private insurers use tools such as: risk assessment (health checks), service exclusions,
raising premium, higher patient cost sharing.
➢ THIS IS WHY PUBLIC HEALTH INSURANCE COVERAGE IS NEEDED!
SO, WHAT IS A GOOD POOL….

What are the characteristics of a “good” risk pool, i.e.

one that would do a good job of meeting this re-
distributional objective?

• Size matters
• Diversity of risks to equalize each other
 WHY FRAGMENTATION IS AN OBSTACLE TO
EQUITABLE ACCESS AND PROGRESS TO UHC?
• A system is fragmented when there are barriers to the redistribution of prepaid funds
• Fragmentation of pooling limits the ability to cross-subsidize: Can only cross-subsidize within pools,
not between pools (unless there is central re-distribution mechanism)
• Fragmentation is a concern in virtually all health financing systems. Especially when you divide the
population into different schemes with different benefits and funding levels per capita
• Seems to be “inequity by design”
➢ HINT: INDONESIA’s MAJOR ACHIEVEMENT WITH JKN!!!
COUNTRY EXAMPLE: THAILAND. BENEFITS FROM
PUBLIC SUBSIDIES - FRAGMENTATION AND INEQUITY,
1992
Public insurance expenditure per capita

1.000

800

600

400

200

0 Civil Servants Social Security Low Income Elderly Health card

Baht per capita 916 541 214 72 63
COUNTRY EXAMPLE: THAILAND. MERGER OF 3
SCHEMES INTO 1 FUNDED BY GENERAL REVENUES, BUT
STILL HAS NOT FULLY OVERCOME THE EQUITY
PROBLEM.

Source: Sawasdivorn 2010, based on 2008 data.

FRAGMENTATION CAN HAVE VARIOUS FORMS
• Decentralized local government health agencies with
overlapping population coverage
• Overlapping but uncoordinated population or service mandates
between different funding agencies, e.g. local governments and
health insurance funds
• Competing health insurance funds
• Vertical program flows from general budget (e.g. MoH)
➢ Fragmentation is also a source of inefficiency: duplication and
service delivery responsibilities (or lack of clear responsibility
for financing service delivery)
EXAMPLES FOR REVENUE POOLING CHALLENGE
JKN reform changed the health insurance landscape in Indonesia. What remains to be
done?
Transformed

Local
Governments BPJS Health

Jamkesmas - SinglePayer
(Poor) - No cost-sharing
Jamsostek Military Jamkesda - Comprehensive
(Emploees Health (Local SHI benefits, incl.
ASKES SHI) Services schemes)
medicines
(Civil
Servants)

BEFORE 2014 SINCE 2014

 INTEGRATION OF JAMKESDA – DISCUSSION
POINTS
• Parallel local budget allocation to the health care system
• In some cases “double” coverage of members
• Political interests of local government
• Difficulty of members data validation and transfer to JKN
• Parallel contracting and payments of providers
• Different benefit packages in different schemes, ranging from limited,
comprehensive (same as JKN) and greater benefits than those provided by JKN
• Incentive to enroll the high risks (e.g. chronic ill) from Jamkesda into JKN
SUMMARY: REVENUE POOLING
• Pooling is central to health financing policy, both as an objective (risk pooling
for coverage) and an instrument (how funds are pooled and flow through the
system)
• Pooling alone is not sufficient for redistribution: requires explicit linkage with
purchasing (we will see later)
• To promote equity of access and financial protection…
• compulsory pooling is better than voluntary
• prepayment is better than out-of-pocket
• Again, fund sources are not systems. The source of funds does not have to
determine how the funds are pooled. We can pool different sources in one pool
(e.g. payroll contributions and budget revenues)
ASURANSI KESEHATAN
Suatu manajemen risiko dimana seseorang atau sekelompok orang (yang disebut
pemegang polis/peserta) melakukan transfer risiko yang dihadapinya dengan
membayar premi (iuran/kontribusi) kepada pihak asuransi.
Risiko yang ditanggung oleh asuradur disebut benefit/manfaat
BENEFIT
Benefit dalam asuransi kesehatan dapat berupa:
Pelayanan kesehatan
Uang
 Uang pengganti pelayanan kesehatan (reimbursement)
 Uang pengganti karena tidak kerja
 Asuransi Sosial vs Asuransi Komersial
KRITERIA ASKES SOSIAL ASKES KOMERSIAL

Kepesertaan Wajib Sukarela

Premi % Upah, Not risk related
Risk related
Tua-Muda,
Sifat Gotong Royong Kaya-Miskin, Sehat-Sakit
Sehat-Sakit
Sama
Paket Sesuai pilihan
peserta
Egaliter, you get what you
Keadilan/equity need Liberter, individu
you get what you pay
Pemerintah/kuasi Pemerintah/swasta
Badan Penyelenggara bersifat nirlaba
bersifat not for
profit/for profit
Tinggi
Pengendalian biaya
Rendah
KEUNGGULAN ASKESSOS VS ASKESKOM
Askes Sosial Askes Komersial
 Tidak terjadi seleksi bias (Adverse selection)
➢Pemenuhan kebutuhan seseorang
 Subsidi silang luas
atau kelompok orang
 Pool besar
 Menyumbang pertumbuhan ekonomi ➢Pertumbuhan ekonomi
 Administrasi sederhana dan murah ➢Kepuasan peserta tinggi
 Memungkinkan tarif pel kes yang seragam ➢Produk sangat beragam,
 Kendali biaya dengan buying power
memberikan pilihan kepada konsumen
 Peningkatan dan pemerataan pendapatan
dokter/fasilitas pel kes ➢No universal coverage
 Cakupan semua penduduk (universal coverage)
 KELEMAHAN ASKESSOS VS ASKESKOM
Askes Sosial Askes Komersial

➢Pilihan bapel terbatas

➢Pool dana relatif kecil
➢Manajemen kurang kreatif
➢Manajemen kompleks
➢Pelayanan seragam
➢Equity liberter
➢Banyak fasilitas kesehatan yang tidak suka
➢Biaya administrasi tinggi
➢Tidak mungkin cakupan universal
➢Secara makro tidak efisien
FAILURE OF VOLUNTARY HI

Cost
Avg, premi
Failure of voluntary HI, 2

Cost
Avg, premi
Failure of voluntary HI, 3

Continue, until bancrupt

Cost
Avg, premi
Failure of voluntary HI, 4

Continue, until bancrupt

Avg, premiCost
 Am % pddk dg ASK

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Social Health Insurance Coverage

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 Population coverage

100

80
% pddk insured

60

40

20

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n A N D k
Se
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 Per capita health care costs and
per diem hospital costs
5000
$/day
4000
HCE/Cap Dominance of commercial HI

3000
US $

2000

1000

0
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ris

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dia
ko

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HEALTH EXPENDITURE AS % OF GDP
18
USA Germany
Canada France
14
Japan UK
% GDP

10

2
1970 1975 1980 1985 1990 1997
Year
HEALTH CARE COSTS, IMR, AND TYPE OF HEALTH INSURANCE

50

40

30 Social HI Commercial HI
IMR

20

10

0
0 1.000 2.000 3.000 4.000 5.000
HE Expenditure US $ /cap/yr
LIFE EXPECTANCY, INPATIENT COSTS PER DAY, AND TYPE OF HEALTH
INSURANCE
90
80
70
Life expectance

60
50 Social HI Commercial HI
40
30
20
10
0 200 400 600 800 1.000 1.200
Hospital costs /day (US$)