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Health Insurance for the Poor

in Developing Countries

byJohannes P. Jütting

Development Centre, OECD, Paris

Presentation at the UN Department for Economic and Social Affairs (DESA)

March 11, 2005, New York

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Why is health a crucial issue for development and poverty

reduction?

High and often “hidden costs” of illness for the poor

From estimating “needs” to analyzing channels/conditions

Interesting institutional innovations world wide in coping with health risks

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Economic Costs

Non-economic Costs

Direct CostsIndirect Costs

Financial Costs

Cons & Lab

Bed

Drugs

Transport

Food

Accomodation

Time Costs

Waiting time

Days lost due to illness

Sale of Livestock

Sale of Asset

Weak /Reduction in Labour supply

Low level of Productivity / income

Pain/ Disutility

Exclusion from Social

Activities

Risk of Death

Risk of being handicapped

Travel time

- Reduce productive capacities- Reduce credit worthiness -Less chance to hire out or hire in labour

Low Leisure Time

Costs of Illness

Source:Asfaw 2003

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0 5 10 15 20 25 30 35 40

KERALA

TAMIL NADU

KARNATAKA

ANDHRA PRADESH

HARYANA

ORISSA

MAHARASHTRA

ALL INDIA

NORTH EAST

WEST BENGAL

MADHYA PRADESH

GUJARAT

RAJASTHAN

PUNJAB

UTTAR PRADESH

BIHAR

Percent Falling Into Poverty

Hospitalization and Impoverishment

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Outline

1)Health care financing as a key challenge

2) Institutional innovations: Community-based health insurance

3) Impact of community-based health insurance schemes: What do we know?

4) Lessons learned from successes and failures

5) Policy challenges

6) Conclusions

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Health care financing as a key challenge

• Problems in developing countries

− Social insurance in its current form inadequat to reach the poor

− Limited total expenditure for health

− Health system regressive

− Out of Pocket Expenditure (OOP) remain the main source

• Recent innovations in health care financing

Can these innovations contribute to poverty reduction?

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Different Forms of Health Care Financing

Tax Collector

Risk-Pooling Entity

Social Insurance Revenue Collector

Employers and Consumers

Taxes/Contributions

Health Care Providers

General Taxation Social Insurance OOPPHI

Source: Sekhri/Savedoff (2005)

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Private Health Insurance

Health Insurance

Pre-paymentRisk-pooling

(inter-temporal and/or inter-personal)

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Overview of community financing schemes

• Worldwide development

• From micro-finance to micro-insurance

• Great variety of institutional arrangements

• Small risk pools

• Subsidies

Institutional Innovations:Communtiy-based Health Insurance

(CBHI)

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Figure 2: Urban and Rural Health Insurance Schemes in Sub-Saharan Africa – Year of Inception and Size

Source: own presentation, Data Sources: Bennett et al. 1998, Atim 1998, Musau 1999, Debaig 1999

CBHI in Sub-Saharan Africa

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An example: mutual health organizations in Thies (Senegal)

• Development out of local self help groups

• Operate in rural areas

• Coverage: Hospitalization

• Important provider support

• Co-payments

Institutional Innovations:Communtiy-based Health Insurance

(CBHI)

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Characteristics of community financing schemes

• Community involvement

• Voluntary membership

• Non-commercial

• Risk-sharing

• Solidarity

Institutional Innovations:Community-based Health Insurance

(CHI)

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Hospitalization

Ticket for consultation

Daily cost Surgery

Members

Payment by:

3,000 F CFA*

Member

3,750 F CFA

Mutual

750 F CFA/unit

Member

Non-members

Payment by:

6,000 F CFA

Non-member

7,500 F CFA

Non-member

1,500 F CFA/unit

Non-member

Source: ZEF-ISED survey, 2000

* 3,000 F CFA = 4.6 US-$

How does it work?Example from Senegal

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Data sources

− Concertation (2004): Inventory in 11 francophone African countries

− ILO/WHO/GTZ/OECD project using WHO national health survey data (2002)

− Jütting (2005): field study in Senegal

3) Impact of CHI

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quality of care

utilisation ofsupply of care health care

(better quality) Health Care Provider confidence health status

to get „valuefor money“

resource mobilisation immediate labouraccess to care produc- WELFARE for the sick tivity

membership demand forhealth insu-rance income

administrat. riskcosts per pooling insured

contract (number & Households/Communitycoverage rate)

premium levels

Health Insurance SchemeSource: own presentation

Supply and Demand of Health Insurance

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Who participates?

– The poor? The chronic poor as well?

– Social exclusion?

Direct impact: access to health care and better financial protection

Indirect impact: labour productivity, health outcomes, income and well-being

Impact of CHI on Poverty

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100.0%366Total

100.0%9.8%36Unknown

90.2%8.5%31>100,000

81.7%5.5%2050,000-100,000

76.2%4.6%1730,000-50,000

71.6%20.2%7410,000-30,000

51.4%16.7%615,000-10,000

34.7%8.7%323,000-5,000

26.0%11.7%431,000-3,000

14.2%14.2%52< 1,000

CumulativePercent# of MHITarget Group of HMI

* according to micro-survey of African insurance providersSource: La Concertation (2004: 23).

Target Groups of CBHI in Western

and Central Africa

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Dependent variable: Membership in a mutual

Variable Marginal effects

Constant -0.100* Individual characteristics Sex (1= male) -0.042** Age group 1 (age <26) Age group 3 (age >50)

0.000 0.077**

Literacy (can read/ read and write, 1= yes) 0.109*** Other organization (membership in other group, 1= yes) 0.070** Relationship ( self, spouse, parents, children, 1 = yes) 0.115*** Frequency of illness (No. of cases ill in last 6 months) -0.011 Household characteristics Wolof (household belonging to ethnic group of Wolof, 1= yes)

0.182***

Religion (1= Christian) 0.386*** Income terzile: Lower Income terzile: Upper

-0.047** 0.219***

* Significant at 0,1 level ** Significant at 0,05 level *** Significant at 0,01 level

Who participates? Senegal Field Study

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Variable Model 1b (hospitalisation)

Model 2b (expenses)

Constant -0.137*** 9.445*** Individual characteristics Sex (1= male) -0.014** 0.401 Age group 1 (age < 26) Age group 3 (age > 50)

-0.016** 0.022**

-0.520*** -0.141

Literacy (can read/ read and write, 1= yes) -0.010 -0.035 Membership (in health insurance without Ngaye Ngaye, 1=yes)

0.020** -0.514**

Frequency of illness (number of cases ill in last 6 months)

0.008 -0.03

Type of illness (complications during pregnancy/ childbirth, 1=yes)

1.125**

Severity of illness (number of days hospitalized) 0.015*** Household characteristics Wolof (household belonging to ethnic group of Wolof, 1 = yes)

-0.005 -0.033

Religion (1 = Christian) -0.004 0.142 Income terzile: Lower Income terzile: Upper

-0.008 0.016**

-0.120 0.67***

* Significant at 0,1 level ** Significant at 0,05 level *** Significant at 0,01 level

Results: Access to Health Care and Financial

Protection

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0 20 40 60 80 100

%

Styed overnightin a hopsital

(last 5 y)

Hospitalizedthe same day

needed

Received out-patient care

(last 12 m)

He

alt

h C

are

In

dic

ato

rs

Fig. 3.10. In and out -patient Care Utilization by Insurance Status

Insured

Non-insured

Utilization of Health Services

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Fig 6.1. Welfare Threatening Ways of Health Care Financing by Exp. Quintile and Insurnce Status

0.000

0.200

0.400

0.600

So

ld i

tem

s

Bor

row

dfr

om

fam

ilyB

orr

owe

dfr

omou

tsid

e

Sol

d it

em

s

Bo

rro

wd

from

fam

ilyB

orro

wed

fro

mo

uts

ide

1st quinti le 5th quintile

Per

cen

tag

e o

f H

Hs

Insured

Non-insured

Health Care Financing Strategy

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• Participation

− The poor participate, but the chronic poor are generally excluded

− Risk of social exclusion (kinship, ethnic groups, religion)

− Overall coverage very low

• Access to health care and financial protection

− Some positive evidence > more studies needed (randomized experience ideally)

− Strengthening of demand side

− Promotion of preventive health care; education

Summary of Findings

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• Broader poverty impact

– So far only anecdotal evidence

– More research needed

• Overall assessment

– Very limited evidence so far

– Most CBHI schemes seem to have pro poor impact for their members, but only on limited scale

– Although CHI promise improvement of status quo (OOPs; user fees), donor expectations too high

Summary of Findings II

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Scheme design and management

• Flexibility in payment procedure and benefit package

• Controlling for adverse selection and moral hazard

• Degree of community participation

Existence of a viable health care provider

• Quality

Household and community characteristics

• Level of welfare in the village

• Perception of illness/insurance

• Traditional risk sharing arrangements

Lessons Learned

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Increasing poverty of CBHI impact requires:

• Scaling up of schemes and institutional strengthening

• Improvement of scheme design; e.g. link to MFI, broader coverage, modalities of paying fees

• Training and education

• Improving link to the public health sector (PPP)

• Linking up with PRSPs and decentralization

• Donor support

5) Policy Challenges

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• Improved access to health care key determinant for poverty reduction

• Community financing interesting option to be further explored, but ...

• ...scaling up crucial for further development

• Improving social insurance

• Experimenting and evaluation of private health insurance beyond community financing

6) Conclusions and Outlook