Pakistan Social Protection Policy Notes
SOCAL PROTECTION IN HEALTH ‐ What are the Options for Pakistan?
Social Protection South Asia Human Development
The World Bank Group
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pakistan Social Protection Policy Notes
As part of technical assistance to the Government of Pakistan, the World Bank initiated the Pakistan
Programmatic Social Protection Policy Notes in 2009. The main objective of these notes was to facilitate
effective design and implementation of national safety net system being developed under the Benazir
Income Support Program (BISP). In addition, these notes were meant to inform overall social protection
policy in Pakistan.
This task was led by Xiaohui Hou (Economist), under the supervision of Mansoora Rashid (Sector
Manager) and with contributions from Andrea Vermehren (Senior Social Protection Specialist), Amjad
Zafar Khan (Social Protection Specialist), Cem Mete(Senior Social Protection Specialist), Jed Friedman
(Senior Economist), Kinnon Scott(Senior Economist), Iftikhar Malik (Senior Social Protection Specialist),
Inam ul Haq (Senior Health Specialist), Khalid Mahmud (Consultant), Ning Ma (Consultant), SeoYeon
Hong (Consultant), and Shumaila Rifaqat (Social Protection Specialist). The team appreciates and warmly
thanks the government counterparts, especially the Benazir Income Support Program, Federal Bureau of
Statistics, and the Ministry of Finance, for facilitating technical work and inputs into various policy notes.
We also extend our appreciation to UK Department of International Development (DfID), the Trust Fund
for Environmentally & Socially Sustainable Development (TFESSD) and the Gender Action Plan (GAP)
Trust Fund for contributing financial assistance in completing this task.
Opinions expressed in these policy notes are entirely those of authors. They do not represent official
views of the Executive Directors of the World Bank, the Trust Fund Donors, or the Government of
Pakistan.
Social Protection in Health ‐ What are the Options for Pakistan? 1
May, 2011
This is the first of the Policy Note Series on social protection in health by SASHD. The objective of the
policy note series is to guide the design of Health Insurance intervention under the Benazir Income
Support Program (BISP) by using the World Bank’s experience in facilitating governments around the
world, in the provision of health insurance coverage to the poor and vulnerable populations. Policy Note
1 dilates the essential principles and critical issues in the design of a social health insurance model and
also presents various options available to extend health insurance to the target population (poor and
vulnerable). Subsequent policy notes will expound the three health insurance models discussed under
Section IV using real life country cases from the region.
1 The note is prepared by Pablo Gottret and Xiaohui Hou and has incorporated inputs and comments from team members from both South Asia HNP and SP units. This note is finalized and delivered by Iftikhar Malik and Inaam Haq.
Social Protection in Health 1
ii
Table of Contents Table of Contents .......................................................................................................................................... ii
List of Tables ................................................................................................................................................. ii
I. Introduction .......................................................................................................................................... 1
II. Core Functions and Major Planning Issues ............................................................................................... 1
III. Pakistan BISP Health Insurance Programs –Where It Stands in Major Planning Issues .......................... 4
IV. Options to Extend Social Protection in Health........................................................................................ 4
V. Actions to be Taken .................................................................................................................................. 7
List of Tables Table 1 Potential Benefits and Risks of Developing a Health Insurance Scheme to Cover Costs of Health
Care for the Poor ........................................................................................................................................... 2
Table 2. Trade‐offs Associated with Different Options ................................................................................. 7
Social Protection in Health 1
1
I. Introduction
1. Many developing as well as developed countries have started to promote social protection in
health. There are two fundamental motivations or objectives for such a movement: a) to protect
households from impoverishment due to the catastrophic spending in the case of illness; and b) to
promote health among the poor in recognition that health, together with education and a working labor
market, is fundamental for an exit out of poverty.
2. Any country considering the introduction of some form of social protection for health through
an insurance mechanism must carefully analyze the key functions of health insurance and their relation
to the delivery of health services to the targeted population. The three key functions in a health
insurance program include revenue collection, pooling, and purchasing, besides ensuring that the
services being purchased are accessible and delivered with good quality to achieve objectives of
financial protection and promotion of health among the poor. Several planning issues arise from these
three core insurance functions and their link to service delivery.
3. With the rapid evolvement of the Benazir Income Support Program (BISP), the Government of
Pakistan (GOP) has committed that BISP beneficiaries are able to access critical health services without
being impoverished. The main objective of this note2 is to outline a) the issues that need to be
considered at the planning stage; and b) analyze what are the options for GOP to consider extending
social protection to health. Because the potential beneficiaries also access publicly‐financed services
from the public health sector, and because they are a large share of the supposed target beneficiaries of
parallel initiatives financed by the Government (and the Bank), the Bank recommends that a team,
including members from BISP, Ministry of Finance, Federal Ministry of Health and the Provincial
Governments (to which health service delivery is devolved in Pakistan) be formed to discuss pros and
cons of alternative design features. The Bank will be pleased to support this effort.
4. The note is organized as follows: Section 2 details the objectives of the three functions and
describe some of the major planning issues when implementing health insurance; Section3 analyzes the
issues requiring further discussion and decision in the case of BISP health insurance; Section 4 discusses
alternative mechanisms and uses of the BISP resources for the financing of different interventions; and
section 5 specifies some actions to be taken.
II. Core Functions and Major Planning Issues
5. The three key functions in a health insurance program include a) revenue collection, b) pooling
of both resources and risks, and c) purchasing, which are interlinked with each other. The objective of
the revenue collection is to raise sufficient and sustainable revenues in an efficient and equitable
2 The note does not pretend to be an exhaustive review of the design features required for appropriate use of the funds under BISP to accomplish the objectives of providing protection from catastrophic health expenditures to the poor.
Social Protection in Health 1
2
manner to provide individuals with a basic package of essential services which improves health
outcomes and provides financial protection. Catastrophic coverage alone will have little impact on
population health outcomes. Risk pooling is to manage these revenues to equitably and efficiently
create the insurance pools. Purchasing must ensure that health services are allocatively and technically
efficient. Of course the health services must also be delivered and utilized by the targeted population
and must be of good quality. Based on these three core functions, key issues which need to be
addressed in the planning stage in order to have an implementable and successful health insurance
program include:
Population coverage o Establish the population to be covered by the scheme o Understand pros and cons to targeting specific groups of people for health insurance o Learn how to identify the beneficiaries that are eligible for the scheme
Benefit package design o Identify priority health areas for benefit package (see next section) o Understand the cost and other implications of benefit package design
Engagement with health care providers: providers selection, payment, and service improvement o Identify health care provider providers and provider organizations (public or private)
that can offer the package of interventions for the scheme o Select and contract health care providers o Design payment systems o Develop processes to assure good quality and efficient health care.
Define regulatory and organizational structure: o Legislative framework, preparation of organizational structures to have the institutional
capacity for health insurance
Operational issues o Organize information systems, accountability/reporting arrangements, contract
management, financial management, claims administration, collection, enrollment, patient information and other mechanisms to facilitate appropriate use of services
Step six: Monitoring and evaluation o Develop a monitoring and evaluation framework to study the effectiveness of the
insurance scheme 6. In general, the development of various types of health insurance will present both key potential benefits as well as risks (listed in the table below). It is critical that the steps outlined above are analyzed and decided carefully, to ensure that design and implementation are sound and all benefits are reaped while the risks of wasteful and ineffective use of scarce resources are avoided. Table 1 Potential Benefits and Risks of Developing a Health Insurance Scheme to Cover Costs of Health Care for
the Poor
Social Protection in Health 1
3
Potential Benefits Potential Risks
1. Generate additional and more‐stable
resources for health if premiums are
additive
1. Resources flowing through health insurance systems
could make governments feel free to reallocate general
budget resources away from other publicly‐financed
health inputs, leaving the health sector with unchanged or
smaller resources
2. Enhance resources for and access to
priority health services for disadvantaged
populations
2. Benefits could favor the already better off who are
easier to reach with insurance, and/or cover mainly
secondary and higher level curative care, to the neglect of
primary and preventive services3
3. Protect households from
impoverishment due to high out‐of‐
pocket (OOP) health spending
3. The constitution of pools of money in insurance funds
without adequate oversight and accountability can make
for easy targets for corruption
4. Increase access and use of services
where payment at the time of need is
required. Benefits package/coverage can
incentivize households to seek preventive
services that they are less likely to pay
for, for example maternal and delivery
care, well child care and immunization.
4. Institutions and systems do not exist or are not ready to
handle the necessary tasks involved in insurance
implementation, making the system unworkable or highly
inefficient and costly. This is a significant risk in settings
were providers are not accustomed to seeking
reimbursement from a 3rd party
5. Increase the involvement of private
providers in addressing national health
goals and objectives
5. Leaving out public participation in the system
6. Influence provider and consumer
behavior in terms of quality, efficiency,
and effectiveness of care and prevention
6. Choosing provider payment methods that do not have
positive effects on quality, efficiency, and effectiveness. All
insurance schemes globally struggle with this balance.
7. Build on existing health insurance
initiatives, such as community‐based
schemes
7. Try to replace existing initiatives, such as community
based schemes, prematurely, losing thee schemes’
benefits and not replacing them with effective alternatives
8. Assist in redistribution of resources for
health to address socio‐economic and
geographic inequities
8. Launch a broad, but expensive, benefits package that is
financially unsustainable, raising then dashing
expectations
3 Governments often leave primary and preventive services out of benefits packages, because they are not as politically popular and visible as hospital and curative care.
Social Protection in Health 1
4
III. Pakistan BISP Health Insurance Programs –Where It Stands in Major Planning Issues
7. Providing health insurance for the poor was announced in the Budget 2009‐10 and the budget
speech (which now stands approved by the Parliament as Finance Bill 2009), states that "the BISP will
also serve as a platform for complementary social assistance program, the main being health insurance
for the poor and vulnerable. This will cover full hospitalization, pregnancy, day‐care treatment,
diagnostic tests, and accident compensation for earning members of the family to a maximum limit of
Rupees 25,000/‐ per family per year." As transpired from the budget speech, the objective of providing
health insurance is to “support the ultra poor4 in managing the catastrophic health shocks besides
improving their general health condition".
8. The benefit package will cover “full hospitalization, pregnancy, diagnostic test and accident
compensation for earning members of the family”. The package needs to be clearly defined as the
package covers both insurable and non‐insurable events. It is not clear what accident compensation
refers to in this context and whether it is assumed to include a cash payment to the injured earning
members of the family in compensation of the earning loss (disability payments). The package also
implies that the some services will be delivered in the non‐hospital settings, such as pregnancy, day‐care
treatment (outpatient care) and some diagnostic test.
9. The financing is envisaged to be tax based and directly from federal budget. However, questions
which need to be considered by BISP whether there should be contributions from enrolled families and
possibly from provincial/local governments. The maximum benefit cap has clearly stated, which is
Rs.25,000 per family per year. However, it is not indicated whether this would be the value of the funds
provided by the government annually (anticipating an average use of Rs25,000/enrolled family/annum
as the premiums for the risk pool) or a specific credit account provided to each family for their own
household’s care. The details related to macro‐organization, provision, payment/contracting system;
necessary governance arrangements, regulatory and supervisory functions and monitoring and
evaluation mechanism are to be spelled out.
IV. Options to Extend Social Protection in Health
10. Among the several planning issues, the content of benefit package is a key decision variable,
which will largely influence the macro organization issues, the provision, payment and contracting issues
as well as the extent of regulatory and supervisory systems required. The benefit package as stated in
the budget speech envisages that the benefit package could include three major categories: i)
catastrophic illness, such as surgeries and illnesses that require hospitalization; ii) preventive services,
including prenatal care and post‐natal care and other outpatient services including delivery care and iii)
other diagnostic procedures. Different institutional arrangements may be needed for provision of
different benefit packages as outlined below.
4 coverage of the program limited to target population ‐ ultra poor being identified through poverty scorecard only
Social Protection in Health 1
5
12. Catastrophic Insurance for Inpatient Services: The benefit package only includes the
catastrophic illness, which requires inpatient services. For this purpose, BISP would (directly or through
some parastatal institution) contract with public hospitals, private hospitals or both to provide covered
services. Health services delivery has been largely devolved to the provincial governments in Pakistan,
thus coordination and contracting would be required between BISP, the Federal Government and the
Provincial Governments. In addition, different mechanisms may need to accommodate the large
variation in service delivery capacity across different provinces. One possibility is to establish what
would essentially be a parastatal institution that would purchase services for the targeted population
with a network of providers both public and private. Certainly in this case an appropriate governance
mechanism must be established for the parastatal within the rules for such entities in Pakistan (Board,
external audit, internal audits, monitoring and information mechanism, etc).
13. Alternatively, as in the case of BISP, private insurance company may be contracted for the
management of the inpatient package of services. The insurance company may be an appropriately
established company in compliance with Pakistan’s insurance regulation. The insurance company would
have to comply with the full requirements of such insurance legislation (for instance, minimum capital
requirements, solvency margins, other reserves, mechanisms for the investment and custody of these
reserves, etc). The competitive bidding for the management of this risk (in patient benefit package for
the ultra poor) to insurance companies would have to be based on some criteria (such as, for instance,
minimum premium per poor person or household) given compliance of certain criteria such as clear
definition of a network of providers. In case of a shallow insurance market in Pakistan, International
Competitive Bidding is possible but not very common (Bolivia bided out the management of workmen’s
compensation for the whole country through an international competitive bidding procedure). Also,
given the very unique nature of health insurance, versus life or hazard insurance, there are real risks
that private companies simply do not have the experience and expertise needed to effectively manage
health insurance, despite their assurances they can.
14. Finally, the benefit package may be managed through a Trust (administered by a 3rd party ‐ an
insurance company or otherwise). The management of the scheme would be separate from BISP.
Contributions (from taxes) would be paid to the Trust, claims would be paid from the trust resources,
and all reserves would also belong to the Trust. As a separate entity, the trust would keep any surplus,
absorb loses and could also go bankrupt. The trust would be sponsored by the GoP (or BISP in this case),
the beneficiaries of the Trust would be ultra poor as the specified target population and their
dependants, and the administrator of the Trust would be a separate entity from the Trust. The Trust
would have its own by‐laws which would establish its purpose, operating procedures and others. In this
case, the scheme would operate in a trust manner as many other similar trusts for the management of
defined contribution pensions operating in many countries, especially in Latin America (Chile, Peru, etc).
It would be however fundamental that the requirements for the administrator of the trust be clearly
established, including the needed guarantees and insurance to be required from the administrator to
back a clear, transparent and efficient management of the trust.
15. It must be noted that to ensure appropriate access to the services some clear beneficiary
(consumer) protection rules are required. For instance, an insurance company may have the incentive
Social Protection in Health 1
6
to keep utilization of services to minimum which in itself may defeat the whole social welfare rationale
of setting out the scheme. Although insurance companies which are unregulated have incentives to risk
select (adverse selection), problems of providing access to health services is not unique to insurance
companies.
16. Certainly the benefit package to be provided does not need to be circumscribed to inpatient
care. It could also include pregnancy and outpatient care, which are largely delivered through primary
care centers. Contracting monitoring contracts with these multiple centers in both urban and rural
areas is a major undertaking for the coordinating/implementing agency or the parastatal company or
the Trust. A definition of the mechanism of payment to the provider (for instance fee per service as
opposed to capitated payments introduces additional complications such as over‐provision of services
(moral hazard) or under‐ provision of services that also require regulation and monitoring and
evaluation. The interventions to be delivered at primary care can certainly also be part of the package
of services contracted through the insurance company, however insurance companies consider these as
non‐insurable events (they are only subject of pre‐payment) and will be willing to manage them at a
cost.
Policy Note Series‐ II delves into the details of the BISP health insurance model that has been designed
to reduce income loss from catastrophic health shocks and simultaneously improving access to health
services. The Policy Note II addresses most of the issues flagged in Note I, while those unresolved will
require higher level government intervention that is likely to materialize upon finalization of the design
and implementation strategies.
17. Demand Side Subsidies Services: In many places, the poor underutilize essential services for
reasons outside the cost at point of delivery (reason may be the opportunity cost of not going to work
one day, the cost of transportation to the point of service delivery, lack of education about the benefit
of preventive interventions, etc). Many countries have introduced incentives such as Vouchers or
Conditional Cash Transfers to motivate the utilization of services or the change of certain behaviors by
the targeted population (for instance to motivate utilization of services such as pre‐natal care, nutrition,
supplements and institutional deliveries) These services have been proven to be one of the most cost‐
effective ways to improve maternal/child health outcomes. The services are provided by eligible
providers (for instance as defined by provincial governments, and the cash transfer covers all out of
pocket costs plus an incentive. The institutional details remain important needing to identify the
mechanisms for the cash transfers, verification of the conditions, monitoring and evaluation and others.
18. Output Based Financing for an Essential Health Service Package: Some countries are
experimenting with Output Based or Results Based Financing where payment is based for the delivery
(output) of an essential package of services to a targeted population (for instance the ultra‐poor as
identified by BISP). These payments can go to public sector institutions (such as primary care centers) or
private institutions. This case is similar to the one mentioned earlier where the package of services is
broader than inpatient services. The institutional arrangements require the ability to contract, monitor
compliance, definition of payment mechanism and others.
Social Protection in Health 1
7
19. It is clear that the benefit package is a key issue in the planning stage, which has implications for
other major planning issues. Table 2 compares the financial protection, health outcomes and feasibility
by different benefit packages. The feasibility reflects the requirement of the institutional arrangement,
supply side constraints and the competitiveness of the insurance market.
Table 2. Trade‐offs Associated with Different Options
Benefits covered Financial Protection
Health Outcomes
Feasibility of Implementation of
Coverage
Surgeries and Inpatient Services High Low Medium Difficulty
Preventive Care (MCH, immunization) Low High Medium Difficulty
Other Outpatient Services Low Medium High Difficulty
V. Actions to be Taken
20. GoP needs to clearly define the benefit package, whether it should include some or all of the three
possible packages: inpatient services, preventive care and other outpatient services. Once this key
planning issues is fixed, the rest of the planning issues particularly those about the macro‐organization,
payment and contract issues must be discussed and resolved. There is a need to consider the possibility
of establishing a Technical Working Group including BISP, the Ministry of Finance, the Ministry of Health
and the Provincial Governments to review the design of the insurance mechanism and establish an
implementation plan. Although the pages above may seem daunting from a planning perspective, there
is substantial experience regarding these issues and the Bank will welcome the opportunity to support
the GoP in this endeavor.
