health finance reforms in southern europe: lessons from croatia european health forum september 27,...
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Health Finance Reforms in Southern Health Finance Reforms in Southern Europe: Lessons from CroatiaEurope: Lessons from Croatia
European Health ForumSeptember 27, 2002
Akiko Maeda, Lead Health SpecialistThe World Bank
amaeda@worldbank.org
Health Finance Reform in Southern Europe – Unfinished Agenda
Evolution of Croatian Health Financing System examined for effectiveness in:– Revenue mobilization– Risk pooling and redistribution– Expenditure management
Effectiveness of the new reform initiatives
Measuring Health System PerformanceMeasuring Health System Performance
Revenues Revenues /Inputs/Inputs
• Redistributive Redistributive (prog./reg.)(prog./reg.)
• Administrative Administrative EfficiencyEfficiency
• Risk-pooling/ Risk-pooling/ management management
Health Services Health Services ThroughputsThroughputs
• Allocative Allocative EfficiencyEfficiency
• Microecon. Microecon. efficiencyefficiency
• Efficacy/ Efficacy/ EffectivenessEffectiveness
Health Health OutcomesOutcomes
• Aggregate Aggregate
• Disease Disease specific specific
• Socio-Socio-economic economic factorsfactors
Croatian Health Financing System – Last decade
Croatia: 1993 Health Reforms established the foundations of the current health financing system:– Consolidation of fragmented public financing under
a single fund (Croatian Institute of Health Insurance - HZZO)
– Establishment of revenue source from high payroll tax rate
– Broad categories of exemptions, generous benefits including sick /maternity leave
Health Finance Reform in Croatia – Unfinished Agenda
Croatia: 1993 Health Reforms on provider system– Legislation establishes private providers
and private insurance market– New provider payment systems:
• capitation for primary care practices
• point system for specialists/ combined per diem / fee for service for hospital
Croatian Health Finance Reform – Unfinished Agenda
A decade after the first round of reforms,Croatia continues to face high cost of care – Health expenditures (accrual basis) estimated
at 9% of GDP, US$400 per capita– Persistent recurrent deficits and growing
arrears of the Croatian Institute of Health Insurance (19% of revenues in 2002)
– High payroll tax rate adds to labor costs
Health Expenditure Trends in Central Eastern Europe and Newly Independent States, 1998
Total Health Expenditure, 1998
GDP Per Capita (US$, Official Exchange Rate), log scale
Hea
lth
Exp
end
itu
re P
er C
apit
a (U
S$)
lo
g sc
ale
CEE
NIS
Linear (NIS)
Linear (CEE)
10
100
1000
100 1000 10,000
Croatia
Global Health Expenditure as % GDP, ca. 1998
0
2
4
6
8
10
12
14
GDP Per Capita (US$, Official Exchange Rate), log scale
To
tal H
ealth
Exp
end
iture
(% o
f G
DP
)
100 1,000 10,000 100,000
Croatia
Croatia Social Health Insurance Beneficiaries
0%
20%
40%
60%
80%
100%
1994 1995 1996 1997 1998 1999 2000 2001
Year
% T
otal
Ben
efic
iari
es
Others including dependents
Unemployed
Pensioners
Actively Employed and ActiveFarmers
Croatia Health Finance – Managing Risk Pooling and Redistribution
Managing risk pooling and redistribution:– Broad exemptions on copayments and premiums
results in untargeted subsidies
– Central budget transfers made retroactively to cover deficits
– Actuarial analysis needed to estimate impact of the projected changes in the beneficiary composition, contribution levels and expected health service utilization rates
Croatia Health Finance – Managing expenditure
Provider payment systems do not encourage efficiency or quality:– GP capitation system does not provide
incentives to rationalize referrals or drug prescriptions
– Point system for physician reimbursement encourages cost escalation among specialists
– Point-based hospital payment system does not encourage efficiency
Croatia Health Finance – Managing Expenditure
Cost Containment Measures 1999 – 2002– Global capping of hospital budget and reduction
in hospital bed capacity– Introduction of partial case-based payment
systems– Restriction on number of prescriptions per
beneficiary, introduction of drug reference price – Restriction on number of referrals per
beneficiary
Croatia Health Finance – Managing Expenditure
Initial Results of Cost Containment Measures – Hospital expenditures contained, but with
growing waiting lists – Restrictions on referrals and prescriptions
• not effective in controlling volume and cost of services
• raises quality and equity concerns
Croatia Health Insurance Expenditures (constant 1997 price), 1994-2001
0
2000
4000
6000
8000
10000
1994 1995 1996 1997 1998 1999 2000 2001
Year
HR
K,
in m
illi
ons,
con
stan
t 19
97 p
rice
Other health service-related expendituresHospitalizationPrescription drugsPolyclinics, specialist consultationsPrimary care
Croatia Health Finance Reform Initiatives 2002
Revenue base – Consolidation of budget under Treasury:
improve collection compliance and debt management
– Payroll tax rate reduced from 18 to 16%– Increase in copayment rates– Introduction of “Supplementary Health
Insurance”
Croatia Health Finance Reform Initiatives 2002
Improved targeting and risk pooling?– Central and local government contributions
are more clearly linked to benefits and target population
– But exemptions remain broad– Estimation of costs not based on actuarial
analysis
Health Insurance Act 2002
“Supplementary Health Insurance”– Provides complementary financing to cover
copayments for services covered under the statutory health insurance
– Primarily viewed as an instrument for raising revenues
– Tax exemptions and discounts on premiums given to pensioners as inducements
– Private health insurers are kept out of the SHI market until 2003
Health Insurance Act 2002
Issues with the new “Supplementary Health Insurance” – Moral hazard - undermines the demand
moderating effects of copayments– Selection bias – high risk groups likely
to purchase SHI, encouraged by discounts given to the high risk groups (pensioners)
Health Insurance Act 2002
Net effect of “Supplementary Health Insurance”:– Increased spending may not be compensated
by additional SHI subscriptions– Negative equity impact: only those who can
afford to pay SHI will receive extra coverage– Private insurers will likely cherry-pick
beneficiaries when the market is opened in 2003
Next Steps in Health Finance Reform
Focus on improving macro and microeconomic efficiency on the provider side by aligning incentives to improve productivity and quality of care
Target subsidies better and provide better protection for vulnerable groups
Revenues – reduce burden on payroll tax, improve allocation of general revenues from central and local governments
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