Owen Smith – World Bank Washington DC – February 1 st, 2011 Health care financing in Georgia

Ultimately two main objectives for a health financing system To improve health outcomes: Reduce mortality and morbidity – especially for the poor To protect against high out-of-pocket payments (OOP): People should be not forced into poverty by ill health How can Georgia use the health financing system to improve its performance vis-à-vis these two goals?

Objective #1: Improving health outcomes Life expectancy gap with US has widened since 1970

How have US & Europe accomplished these life expectancy gains since 1960s? Major factors: Decline in smoking rates Pharmaceuticals for cardiovascular diseases: ACE-inhibitors, beta-blockers, statins, etc. Cardiac surgery: bypass, angioplasty Early detection and treatment of certain types of cancer (e.g., breast, colon) Neo-natal intensive care units

Very low coverage of these interventions in Georgia

Health financing to improve health outcomes: Key messages Need for additional funding for health Very low budget allocation to health by international standards Making progress against non-communicable diseases is typically more expensive than maternal & child health, infectious diseases Aim to extend a larger benefit package to more people Since it cannot be afforded all at once, need to prioritize: Target expansions to the poorer segment of the population first (e.g., by expanding Medical Insurance Program (MIP) for poor) Offer coverage of most cost-effective services first Measure health outcomes – both nationally and within health facilities – and hold insurers/hospitals/doctors accountable for their performance

Objective #2: Prevent poverty due to ill health Poverty headcount in Georgia rises by about 3 percentage points – from about 24% to 27% – due to out-of-pocket spending on health This is one of the largest impacts on poverty due to OOP in the world (e.g., compare Georgia with Montenegro…)

Largest share of OOP is for drugs: Compare Georgia’s retail drug prices to EU Brand drugs generally cost more in Georgia… …and most generics cost less EU price source: OBIG/PPRI

Strong relationship between size of government health budget and level of OOP

Two major ways to lower OOP in Georgia Lower OOP without more spending: -- reforms to promote affordability of drugs Lower OOP with more spending -- expand publicly-subsidized insurance programs

Health financing to lower out-of-pocket payments: Key messages Additional government spending will be required Almost all countries spend ~4-8% of GDP on health (public + private), and Georgia is no different (~6%) The share that is not covered by budget will be left to OOP No low or middle-income country has found a way to finance a significant share of OOP through private, voluntary insurance Expand Medical Insurance Program (MIP) to more people Promote lower drug prices Recent steps to relax rules for importing New measures to oblige doctors to prescribe generic medications Use government purchasing power to buy and promote lower- price generics

Thank you