ME33ES MEDICINE AND ECONOMICSHEALTH SYSTEMS I

Summary

• Health care systems

• India

• US – current health system

• US – the Obama reforms

• France

• Social insurance systems versus tax financed systems

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Health care systems

• What impact does a country’s health care system have upon its health?

• Possibly very little!

• Most comprehensive attempt to assess strengths and weaknesses of different countries’ health care systems was World Health Report (WHR) 2000 produced by World Health Organisation: http://www.who.int/whr/2000/en/

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Countries investigated

• Japan (tops several WHR tables) and Sierra Leone (bottom of most WHR tables)

• Countries which illustrate different types of health care system (India, UK, France, US)

• Canada and Cuba (US, Canada, France, UK and Cuba all feature in Michael Moore’s film Sicko, www.youtube.com/watch?v=a7pCaK0aASEyoutube)

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• Disability adjusted life expectancy is measure of how long people live on average but adjusted for the time lived in a state of ill health

Rank Country Disability Adjusted Life Expectancy (at birth)

1 Japan 74.5

3 France 73.1

12 Canada 72.0

14 UK 71.7

24 US 70.0

33 Cuba 68.4

134 India 53.2

191 (last) Sierra Leone 25.9

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• Most of the countries at the top of the table are high income countries but Cuba is a notable exception

• Rankings reflect much more than the health care system including such factors as diet (Japan) and the effects of war/civil war (Sierra Leone)

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• Impact of the health care system upon a country’s health: How much is spent How health care is financed How well the health care system is organised: both how

efficiently and how well it addresses health priorities

• How much is spent is the least important of these three

Rank Country Disability Adjusted Life Expectancy (at birth)

Health spending, % GDP

Health spending, Int $ per capita

1 Japan 74.5 7.1 1759

3 France 73.1 9.8 2125

12 Canada 72.0 8.6 1836

14 UK 71.7 5.8 1193

24 US 70.0 13.7 3724

33 Cuba 68.4 6.3 109

134 India 53.2 5.2 84

191 (last)

Sierra Leone 25.9 4.9 31

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• US spends 34 times as much per person on health care as Cuba but on average Americans only have 19 months more of healthy life than Cubans

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World Health Report judges performance of a health system against five goals (combined in a single index):

• Health of the population

• Inequality in health

• Responsiveness (non health aspects of care)

• Inequality in responsiveness

• Fair financing

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Responsiveness

Respect for persons• Respect for people’s dignity• Confidentiality• Autonomy

Client orientation• Prompt attention• Amenities• Access to social support networks• Choice of provider

Rank Country Index (maximum = 100)

Health spending, % GDP

Health spending, Int $ per capita

1 Japan 93.4 7.1 1759

6 France 91.9 9.8 2125

7 Canada 91.7 8.6 1836

9 UK 91.6 5.8 1193

15 US 91.1 13.7 3724

40 Cuba 84.2 6.3 109

121 India 70.1 5.2 84

191 (last)

Sierra Leone 35.7 4.9 31

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• Again, only very rough correspondence between how well a health care system performs and a country’s wealth or how much it spends on health care

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Financing health care

• Out of pocket payments (paying for health care at the point of use); India

• Private insurance (voluntary health insurance by employers or individuals); US

• Social insurance (government makes health insurance payments compulsory); France

• Tax financing (government pays for health care from tax revenues); UK

• (In many poor countries, health care is financed by international donors, aid provided by rich countries; Sierra Leone)

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Wealth can ensure good health care systems if:

• There is universal coverage• People are not denied health care because of

inability to pay• Health care bills do not lead to people being

impoverished

• Key measure is how much of total health care spending is public spending

Rank Country Index (maximum = 100)

Health spending, Int $ per capita

Public spending, Int $ per capita

Public spending/total spending

1 Japan 93.4 1759 1410 80%

6 France 91.9 2125 1634 77%

7 Canada 91.7 1836 1322 72%

9 UK 91.6 1193 1156 97%

15 US 91.1 3724 1643 44%

40 Cuba 84.2 109 96 88%

121 India 70.1 84 11 13%

191 (last)

Sierra Leone 35.7 31 3 10%

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• Uniquely among rich countries, the US fails to maintain a universal health care system and exposes its citizens to financial risk because of high health care bills

• Where Cuba succeeds and India and (more understandably) Sierra Leone fail is in maintaining a comprehensive public health care system

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• All countries have ‘mixed’ health care systems although often with one dominant method of financing

• Out of pocket payments (India)

• Private insurance (US)

• Social insurance (France)

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India

• 75% of spending on health care in India are out of pocket payments

• People buy health care from private health care providers just like buying mangos from a farmer in the market

• Result is that often the poor cannot afford health care

• Out of pocket payments provide no protection against potentially catastrophic health care bills

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• A quarter of Indians who have to go into hospital for care are driven into poverty by the costs of care

• In theory, all Indians have access to public health care but coverage and quality is variable due to:

low budgets poor management irregular supplies of drugs and equipment problems in retention of health professionals corruption

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• Private sector accounts for 75% of health workers, 68% of hospitals, 37% of beds

• 1.3 million businesses, employing 2.2 million people, from hospital doctors to traditional healers

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US – current health system

• Private insurance is basis of health system in just a few countries including US (and, before 1994, Switzerland)

• US system is dominated by private insurance but it is not compulsory

• Employer sponsored insurance is most common

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• Individual insurance, where people pay their own premium, covers the self employed and people who cannot obtain insurance through their employer

• Insurance plans are administered by private companies

• Health care benefits vary widely; some insurance plans cover drugs, others do not

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• To the surprise of some Americans, there is substantial public funding of health care already

• Medicare is a tax financed federal programme for people of 65 or over but many gaps in coverage (dental, hearing, eyesight care)

• Medicaid covers low income families but measure of eligible income is set very low

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• For Obama, main problems of US system include:

- Lack of security that insured people will receive good care: denial of cover for pre-existing conditions

- Lack of coverage of many Americans: US is only rich country without universal coverage

- High and increasing costs of care: over half of personal bankruptcies in US are due to health care bills

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US – the Obama reforms

• Obama reforms preserve the fundamentals of US system but seek to follow Switzerland in 1994 in moving towards:

o Making insurance compulsory

o Subsidising the premiums of low income groups

o Forbidding insurance companies to deny cover

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• Extremely bitter ‘debate’ culminated in passage of Affordable Health Care for America Act in March 2010 (although not a single Republican voted for it)

• Obama and Democratic Party was forced to drop idea of a public health insurance alternative to the private insurance companies

• Large number of further concessions such as insurance cover for abortion

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• Act prohibits insurers from refusing coverage or charging different rates according to patients' medical histories

• Establishes minimum standards for qualified health insurance plans

• Requires Americans to have health insurance coverage (or pay a fine)

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• Subsidy to low and middle income Americans to help buy insurance

• Expansion of Medicaid to include more low income Americans

• Requires most employers to provide coverage for their workers or pay a surtax on their worker's wages

• Tax credits to help small businesses provide insurance cover

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http://www.barackobama.com/issues/healthcare/index.php

• Still not clear what reforms will actually take place or what effect they will have

www.qmu.ac.uk/iihd

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France

• France has a social health insurance system

• Social insurance systems are ones in which there are compulsory income-based health insurance contributions

• First system established in Germany by Bismarck

• Some systems such as UK (‘national insurance contributions’), Sweden and Finland have remnants of social insurance

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• Since 1994 reforms, Switzerland is usually classified as a social health insurance system

• Social insurance systems are not true insurance systems in which the benefit package is defined by the insurance policy

• Benefits are not linked directly to contributions but are defined by need

• Social insurance systems are thus explicitly redistributive: from rich to poor and from well to ill

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• There are five health insurance funds in France covering: employees (much the largest fund), farmers, other self employed, civil servants and students

• Each of the funds covers the family of the insured person

• Insurance cover for those who are not members of any of the five funds is met by the government from general taxation

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• Employees have a health insurance contribution deducted from their pay at 7.5% of income; employers contribute 12.8%

• French people pay for most services and drugs up front but can then reclaim a proportion of the payment

• The copayment (the residual which cannot be reclaimed) can be large: 20% for hospital care and 30% for consultations with a doctor

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• Reimbursements are meant to be prompt (within two weeks) but are often not

• System can be complex and expensive

• Concerns that some people may not seek care because of the copayments and the delays in reimbursement

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Social insurance systems versus tax financed systems

• Comparison of ‘ideal types’ or ‘pure systems’ although such systems do not exist in practice

• Differences between social insurance and tax financing: Earmarking Choice Providers Spending levels

• Similarities: Equity Rationing

SOURCE: European Observatory on Health Care Systems’ Health Care Systems in Transition, 2004.

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Earmarking

• Earmarking (hypothecation) refers to whether funds can only be used for a specific purpose

• Social insurance is usually based on an earmarked fund but in tax financed system, health care has to compete with other demands on how taxes be spent

• Earmarking contributes to certainty and stability but it also means it will be less likely that health care budgets are topped up when there is pressure on resources

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• There is evidence of greater willingness to contribute wherever there is earmarking and the use of funds is known

• Earmarking is one of the possible reasons why there tends to be greater satisfaction with health care provision in countries with social insurance

SOURCE: European Observatory on Health Care Systems’ Health Care Systems in Transition, 2004.

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Choice

• In social (and private) insurance systems there tends to be greater choice of providers than with tax financing

• People can choose the health facilities (and often individual doctors) where they will be treated, from a list of approved providers

• Choice is valued in itself by many

• Presence of choice also contributes to satisfaction with the health service and feeling it is responsive to public needs and preferences

Patients access to providers

SOURCE: European Observatory on Health Care Systems’ Health Care Systems in Transition, 2004.

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Providers

• Social insurance and tax financed systems differ in relationship between financing of health care and institutions (hospitals, clinics, doctors) which provide care

• Tax financed systems most often follow an ‘integrated’ model: the financer is the provider

• Hospitals and clinics are publicly owned and managed; doctors and other health care professionals are employed by government

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• In social insurance systems, there is generally separation of the functions of financing and providing care: ‘contract’ model

• The social insurance fund purchases services from independent providers – corresponds to ‘third party payer’ model in private insurance

• Social insurance payments are not usually collected directly by government but by quasi public bodies which are regulated rather than controlled by government

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Spending levels

• Spending levels tend to be higher under social insurance systems (% of GDP, 2002)

Germany 10.9Belgium 9.1France 9.7Netherlands 8.8

UK 7.1Denmark 6.5Sweden 7.9New Zealand 7.7

SOURCE: European Observatory on Health Care Systems’ Health Care Systems in Transition, 2004.

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• In some ways, surprising since contract models should be associated with lower costs

• Providers are paid on the basis of work done not by global budgets

• However, social insurance systems are less effective at combating demands upon health care resources (moral hazard)

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• Greater acceptability of health insurance contributions over taxes

• Role of social insurance funds, semi independent of government (‘third party payer’ problem)

• In addition, administrative costs tend to be higher under social insurance (France is exception)

SOURCE: European Observatory on Health Care Systems’ Health Care Systems in Transition, 2004.

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• Unresolved debate whether higher expenditure under social insurance reflects:

better quality care and more generous benefit packagesand/or (relatively) inefficient, high cost services

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Equity

• Social health insurance and tax financing systems tend to be similar in their strong emphasis on equity

• Access to health care is not determined by ability to pay

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Rationing

• Fairly explicit, mainly non price rationing is virtually inevitable under both social insurance and tax financing

• In Germany, planning mechanisms are used primarily to ration resources

• Benefit package which all providers are obliged to meet is planned according to available resources

• Copayments for drugs are small, 5% of costs

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• In France, price mechanisms are used to a greater extent to ration health care spending

• Traditionally, tax financed systems such as the NHS have relied upon waiting as the main rationing mechanism

• More recently, with the creation of NICE (National Institute for Health and Clinical Excellence), there has been a move towards the German model, defining what the NHS will pay for