Limitations in financing health systems Conference “Innovations in Health Financing” Eduardo González Pier Mexico City, April 2004

Central message: How to align a financing scheme in order to achieve the objectives of health systems?

Contents 1. Responsibilities, objectives and components of health systems 2. Alternative financing 3. Risk allocation and payment mechanisms 4. Conclusions

Responsibilities Objectives Health Governance Financing Income generation Adequate care Production of goods and services Financial Protection Responsibilities and objectives of health systems

Prevention Diagnosis Treatment Rehabilitation Individual health care (medical attention) Governance Information and research Community health services Public goods Health Assets Classification of health assets Epidemiolo- gical surveillance Environmental Services Group services Community outreach Cooperation during disaster

Responsibilities and objectives of health systems Cancellation of risks Service Governance Health Ministries Financing Fund raising Vertical role alignment in accordance with each institution Responsibilities and components Head Affiliation Risk grouping Fund allocation Plural Community Services Individual health services 1 er N. 2 do N. 3 er N.

Level of investment in health Total health expenditure share of GDP (2000) Source: World Health Report % 2% 4% 6% 8% 10% 12% 14% Ecuador Nicaragua Guatemala Perú México Rep. Dom Costa Rica Bolivia Honduras Chile Reino Unido España Japón Austria Italia Brasil Dinamarca Australia Argentina Colombia Alemania Uruguay EU

Public investment in health Source: World Bank, 2000 and WHO, The GNP per capita variable was used as an approximation to the GDP per capita.

Sources of pressure on a financial reform: Change and complexity Pressures on expenditure and greater financial needs epidemiolo- gical transition economic transformation political change (democratization) technological / organiza- tional innovation greater role of women in formal economy increased level of education urbanization demogra- phic transition

Contents 1. Responsibilities, objectives and components of health systems 2. Alternative financing 3. Risk allocation and payment mechanisms 4. Conclusions

1. Taxes pocket-money payroll (social security) pre-payment Evaluation of alternatives: fund raising local federal 2.Private expenditure

Gasto públicoPre-pagoGasto de bolsillo Structure of health expenditure Source: WHO, 2001.

Note: Public expenditure includes government expenditure, international subventions and from non governmental organizations, as well as social security funds. Source: World Bank, 2000 Fiscal revenue/GDP Public expenditure in health/GDP VEN URU EU RU SUI SUE ESP POR PER NOR NZ NL MEX IT IRL GRE ALE FR FIN CZCH CR COL CHI BOL BEL AUS AUST ARG Level of investment in health

1.Equality in financing 5.Choosing capacity 3.Efficiency (allocation and system) 4.Accountability Evaluation of alternatives: criteria 2.Meeting needs 6.Macro-efficiency 7.Political acceptance 8.Sustainability / stability (political and economic)

Evaluation of alternatives: sources vs criteria

Contents 1. Responsibilities, objectives and components of health systems 2. Alternative financing 3. Risk allocation and payment mechanisms 4. Conclusions

ResponsibilitiesObjectives Health Governance Financing Income generation Adequate care Production of goods and services Financial protection Responsibilities and objectives of health systems

Payment mechanisms General budget Budget by line-item Capitation Payment according to diagnosis / result (intermediate) Payment for services

Sources of income vs payment mechanisms General budget Budget by line-item CapitationPayment according to diagnosis / result Payment for services General tax Local tax Payroll tax Private pre- payment Pocket- money expenditur e                   

Incentives Mechanisms PreventionActivityCare / qualityCost containment General budget ++- +/-+++ Budget by line- item +/-- +/-+++ Capitation Payment according to diagnosis +/-++ Payment for services +/ Payment mechanisms and incentives for suppliers Source: World Report on Health 2000, WHO

Prevention Diagnosis Treatment Rehabilitation Individual health care (medical attention) Governance roles Information and research Community health services Public goods Health assets Classification of health assets Epidemiolo- gical surveillance Environmental services Group services Community outreach Cooperation during disasters

Public goods Health care to the communityto the individual General budget Budget by line- item Capitation Payment by diagnosis Payment for service Payment mechanisms vs types of health assets              

Contents 1. Responsibilities, objectives and components of health systems 2. Alternative financing 3. Risk allocation and payment mechanisms 4. Conclusions

ResponsibilitiesObjectives Health Governance Financing Income generation Adequate care Production of goods and services Financial protection Conclusions Objectives of health systems

Alternative financing Conclusions: How to align a financing scheme in order to achieve the objectives of health systems? Payment mechanisms Incentives for service suppliers Incentives for service suppliers Immediate results Final objectives