INITIATIVES THAT CREATE ADDITIONAL REVENUE FOR HEALTH CARE IN JAMAICA THE NATIONAL HEALTH FUND Eva Lewis-Fuller Public Health Consultant Jamaica W.I.
Achieved independence from Britain – 1962 Total population: 2,751,300 Life expectancy at birth (years): Total: 73 - Male: 71years; Female: 76 years An ageing population with 11% over 60 years Main causes of death: - Cardiovascular diseases - Malignant neoplasm (cancers) - Diabetes - Trauma/violence
The Health Care System Emerged as a centralized health care system out of the era of slavery. 1997 - Decentralized into 4 Regions: i)South East, ii)Southern, iii)Western, iv)North East. 24 hospitals operating at 3 levels: A, B, C 350 primary health care centres operating at 5 levels: Types 1, 2, 3, 4, 5 Government-funded health care from general taxes Health workers/providers are paid negotiated/ standardized salaries through temporary or permanent appointments or contracts
PRIVATE HEALTH CARE Provides 60% of primary health care services Provides about 15% of secondary/tertiary services in 6 private hospitals 18% of population covered with private health insurance Few government/private partnership in health care - e.g. diagnostic services
Population (2007): 2.78 million GDP per capita @ PPP (2006): US$ 4600 Smoking prevalence: 15%
CARICOM Caribbean Regional Integration Efforts Jamaic a Trinidad & TobagoBarbados Dominica Grenada Belize Antigua & Barbuda SurinameThe BahamasGuyanaHaitiMontserrat St Kitts & Nevis St Vincent & the Grenadines St Lucia
Overview of Functions of Health Care Systems Source: Murray c. and Frenk S. (1999) A WHO Framework for Health System Performance Assessment
Value Added Tax/General Consumption Tax Special Consumption Tax – Specific * Import Duty Standard Compliance Fee Customs User Fee Cost Insurance and Freight Environmental Levy * SCTS increased from $2.30 to $6.00 per stick of cigarette Excise Duty Additional Stamp Duty Special Consumption Tax ad valorem Changes in Taxation, 2008 Amendment to the GCT Act, resulted in changes in the tax structure
Taxes and Charges Collected from Cigarettes Tax Type200720082012/2013 Financial Year Tariff7,328,281.106,336,712.79 Additional Stamp duty 21,614,500.0214,241,230.51 General Consumption Tax 495,772,884.29699,341,204.16 Special Consumption Tax (AVD) 6,669.1522,724.62 Special Consumption Tax 1,967,274,560.003,609,399,500.00 Environmental Levy1.414,116.512,527,629.84 Excise561,753,177.06200,121,711.86 Standards Compliance Fee 1,493,707.061,516,577.71 Customs User Fee9,948,309.4610,081,004.60 TOTAL3,066,606,204.654,543,588,296.091,250,776,784.71
TOBACCO TAXATION – JAMAICA 2007 Share of tobacco-specific taxes in the prices of pack of cigarette: Excise specific tax.........15.8% Excise ad-valorem tax....14.5% Import duties on pack....23.9% TOTAL TOBACCO-SPECIFIC TAXES IN PRICE = 54.2% 2008 Increase in Special consumption tax to produce $2.88 billion Tobacco-specific taxation in retail price = 57% 2009 SCT on cigarettes increased from $6,000 per 1,000 sticks to $8,500 to produce a revenue of $1.84 Billion. Tobacco-specific taxation in retail price= approx. 60%
A clear negative relationship between the real price of cigarettes and consumption in Jamaica 14
Impact of a 10 per cent increase in cigarette tax, given different price elasticities of demand (and an initial tax burden of 52 per cent) Price elasticity % change in consumption % change in government revenue 0.00.0010.00 -0.1-0.529.43 -0.2-1.048.86 -0.3-1.568.28 -0.4-2.087.71 -0.5-2.607.14 -0.6-3.126.57 -0.7-3.646.00 -0.8-4.165.42 -0.9-4.684.85-5.204.28 -1.1-5.723.71 -1.2-6.243.14 -1.3-6.762.56 For all realistic (and even unrealistic) price elasticities of demand an increase in the excise tax (1)decreases consumption (2)increases government revenue 15
Brought about by The National Health Fund Act, April 1, 2003.
Areas to be presented: 1.NHFs MANDATE 2.REVENUE SOURCES & PERFORMANCE 3.EXPENDITURE 2004 – 2011 4.FINANCIAL SUSTAINABILITY ISSUES 5.CONCLUSION THE NATIONAL HEALTH FUND 17
To provide prescribed health benefits to all residents of Jamaica To provide greater access to medical treatment and preventative care for specified diseases and specified conditions To secure improvement in the productivity of residents by reducing time lost on the job due to health care problems NHFs MANDATE
To reduce the Islands disease burden through health promotion and prevention programmes To provide support to health services and promote and encourage the utilization of primary health care services To improve the quality of life of the population To make pharmaceutical and medical supplies accessible and available to government owned health facilities NHFs MANDATE
NHFs mandate is achieved through: NHF Benefits Division Individual Benefits - provide direct assistance to patients with specific conditions, the elderly under the Jamaica Drug for the Elderly Programme (JADEP), for persons of all ages with chronic diseases. Institutional Benefits - provide assistance to the public and private healthcare system Public Information - provides direct assistance through education and information. NHF Pharmaceutical Division Wholesale pharmaceuticals mainly to Regional Health Authorities (RHA). Will be fully responsible for pharmaceutical services as of 2014. Drug Serv: Provides retail sale of pharmaceuticals at affordable prices through Drug Serv Pharmacies strategically located. THE BENEFITS OF THE NHF
REVENUE SOURCES NHFs revenue stream is comprised of: NHF Benefits Division Tobacco Tax SCT Payroll Tax (from National Insurance deductions) NHF Pharmaceutical Division Sale of Pharmaceuticals mainly to Regional Health Authorities (RHA) Drug Serv Provides retail sale of pharmaceuticals at affordable prices through Drug Serv. A broadened revenue base will go a far way in ensuring that the NHF is better able to achieve its objectives now and in the longer term as financial sustainability is strengthened.
FUNDING 2009/2010 to present The NHF is financed by three sources of funding: 1) 20% of SCT charged on the importation of tobacco related products. 2) A Payroll Deduction collected by the National Insurance Fund (1% of 5% (20%) of NIS Collected). 3)5% of the Special Consumption Tax collected. Note that in April 2009 the tax structure on Tobacco was changed; the changes were as follows for 2009/2010: NHFs entitlement from SCT on Tobacco was reduced from 23% to 20%; however, the specific tax rate was increased from $6,000.00 to $8,500.00 per thousand sticks of cigarettes. 22
TOBACCO TAX 2003 to 2008 – 23% Excise Revenue declined between 2005-2008 2008-2009 - Tax structure revised as follows: 23% Excise eliminated. SCT increased from $2,300 to $6,000 per thousand sticks with NHF entitled to 20% of this SCT. 2009-2010 – increase in specific tax from $6,000 to $8,500 per thousand sticks of cigarettes
5% SCT Since April 2003 – 5% of Special Consumption Tax Collected Increase in revenue from this source is due to increase in the price of the products on which SCT is charged; petrol and alcohol in particular. Effective April 27, 2009 SCT on petrol was increased by $8.75 per litre; based on Section 9(c) of the NHF Act, NHF is entitled to 5% of this additional SCT, however this is in dispute with the MOF.
PAYROLL TAX Since Oct. 2003 (1% of 5% of NIS collected). Presently accounts for 41% of NHFs revenue. Revenue from Payroll Tax declined in 2009/10 when compared to 2008/09; this is due to: Unemployment increasing Reduction in compliance by employer. There was an increase in 2010/11, this is due to an increase in the NIS threshold from $500k to $1m.
Health care expenditure will continue to consume a greater share of revenue as utilization pattern increases. In order to achieve a high level of efficiency and quality delivery of services, further expenditure in technological development will be warranted. Demographic factors such as ageing population will impact utilization patterns. EXPENDITURE
Financial sustainability from NHFs perspective refers to the ability of NHF to collect sufficient financial resources and to manage these resources effectively to realise our mandate over the long term and to allow us to promote quality and efficiency in service delivery and improvement in administrative and technical processes NHFs FINANCIAL SUSTAINABILITY
Declining revenues from established sources of funding Impediments to revenue outcomes e.g due to illegal activities such as counterfeit cigarettes and alcohol Harsh economic climate may force collection agencies to withhold fund due to NHF to meet their immediate financial needs Changes in Government Policy (eg. The pending policy that will require government owned entities to remit a minimum of 5 – 10 % of surplus to the Consolidated Fund.) THREATS TO NHFS SUSTAINABILITY
The NHF is an important source is revenues for the Ministry of Health. Based on our current level of funding, the NHF should continue to be sustainable in the medium term, assuming no additional demands. As effective health promotion measures achieves the goals of reducing prevalence of illnesses and deaths caused by lifestyle habits such as tobacco smoking and excessive alcohol, other sources of funding will have to be found for the NHF in the future If, however, benefits are to be added, it must be done incrementally and there must be at least a commensurate increase in revenue. The sustainability of the NHF must be strengthened so that we will continue to effectively reduce the burden of health care in Jamaica. CONCLUSION
THE HEALTH EQUATION Health = Constant (nutrient consumption x education x healthy lifestyle x child care x sanitation x appropriate health technology x.....etc etc..... Remember...whatever is done to one side of the equation should be done to the other.