1. The Strategy of the Financial Structure of the New Egyptian Social Health Insurance System Dr. Mohamed Maait Deputy Minister of Finance Feb 2, 2012 1

2. Agenda 1- Problems of the Current SHI Financial Structure. 2- No Reform Financial Projections. 3- The New Social Health Insurance (NSHI). 4- Objectives of the NSHI. 5- Challenges Associated with the NSHI. 6- Conclusion. 2

3. 1-1: Problems of the Current Health Structure Health sector expenditure as a percentage of expenditures across State’s general budget has been fluctuating around 4.77% over the past five years which is a low percentage compared to other countries. 3

4. 1-2: Problems of the Current Health Structure 4

5. 1-3: Problems of the Current Health Structure The current system doesn’t provide coverage for many segments of the population such as: Informal workers who are not covered by any social insurance scheme. Informal workers who are covered by the social insurance Law No. 112 for year 1980 for casual and seasonal workers. Egyptians working abroad who are covered by the social insurance Law No.50 for year 1976. Self employed and employers who are covered by the social insurance Law No. 108 for year 1976. 5

6. 1-4: Problems of the Current Health Structure Excessive opting out of enrolled people particularly those with the highest wages and lowest medical risk (those represent around 45% of the system’s revenues and 23% of its costs). Different contribution rates and different wage definitions for different covered working population segments. 6

7. 1-5: Problems of the Current Health Structure 7

8. 1-6: Problems of the Current Health Structure 8

9. 1-7: Problems of the Current Health Structure Dissatisfaction with the provided quality of health care services and this may be reflected in the low utilization rate (25% of the overall country rate) because of the followings: The underfunding problems. The current structure in which the HIO acts as the financing agent, the service provider, as well as the management entity. The adverse-selection problem that the HIO faces. 9

10. 2-1: No Reform Financial Projections If there will be no reform to the current system and no new system: HIO will continue to cover approximately half of the population, and many segments of the population will remain uncovered. Utilization rate of the current system is expected to decrease further more from its current level which is only 25% of the country. HIO will finance only 6% of the total health costs of the country. Most of the health care in the country will continue to be financed out of pocket, representing more than two-third of the total health expenditures. 10

11. 2-2: No Reform Financial Projections Cont. The main health expenditure item of the MoF will be financial support of public providers, including treatment at the expense of the state (PTES), and the MoF financing will remain approximately stable at 1.4% of GDP. Under the current system the quality of the service provided is expected to deteriorate, pushing more people outside the system and the opting-out level will increase over time. 11

12. 3-1: The New Social Health Insurance The MoH, in cooperation with The MoF, has prepared a draft law of the NSHI that is currently under review. The MoF has conducted an actuarial study to evaluate the expenditures and revenues associated with the proposed NSHI system. The purpose of the actuarial study is to assess whether the new system would be financially sustainable according to the agreed upon financing structure and benefit package. 12

13. 3-2: The Proposed Coverage Strategy The new system is to be Mandatory. The new system regards the family rather than the individual as the insured unit. The new system will have a positive benefit package. The separation of financing and providing health services. The new organization will purchase the health care services of the public and private providers. A Quality Control Authority would be established to license and to supervise service providers. Public providers are to be allowed to increase their pricelist relative to the private pricelist. 13

14. 3-3: The Proposed Financing Strategy The New System is financed by the following: Contributions: paid by both employees and employers as a percentage of the total salary instead of the insurable salary. Copayments: paid on receiving the service to avoid any possible misuse of the system and to control the system’s costs. Copayments could be restricted to drugs and visits to the doctors. Earmarked tax. Other sources of income such as investment returns and collected fines. 14

15. 3-4: The Proposed Financing Strategy Cont. Transfers from the State’s budget (The State’s subsidy) to finance around one third of the costs of the new system: the Treasury pays contributions for people who are eligible for either full or partial subsidy, while it pays copayments only for people who are eligible for full subsidy. Any actuarial deficit can be amortized by modifying the financing structure and reviewing the elements of the system’s cost. 15

16. 3-5: The Proposed Implementation Strategy and Its Effect on the Financial Sustainability Short-term strategy:  Geographic gradual implementation of the new system.  Injecting more money into the current system to improve quality and regain people’s trust through enhancing the health services provided.  Subsidizing 1.5 million family defined by the Ministry of Insurance and Social Affairs (MISA) to be covered by the current health insurance system within a period of 3 to 5 years. 16

17. 3-6: The Proposed Implementation Strategy and Its Effect on the Financial Sustainability Cont. Long term strategy:  Evaluating the implementation of the new system in three governorates over the period years from various perspectives such as the financing structure, management, and infrastructure.  Then gradual implementation to cover all other governorates during the following period. 17

18. 4-1: Objectives of the NSHI Decreasing out-of-pocket spending from more than two-third of the total health expenditures to 33% through the transformation of the financial risk from the individual to a pooled risk fund. Extending coverage to around 90% of the population at the end of the 20 year period. Financing 50% of the total health expenditure in the country by the new system while the share of MoF as an implicit payor will be 16%. Regaining public’s trust in the current HIO by providing improved quality health services. 18

19. 4-2: Objectives of the NSHI Cont. Increasing the total spending on health as a percentage of the GDP from 5.9% to 7.7%. Decreasing the financial burden of the public providers for other health care services. Public providers pricelist convergence to a percentage of the private providers pricelist, taking this as an indicator of quality improvement, to reach: 40% over 5 years. 65% over the following 15 years. 75% over the following 10 years. 19

20. 5-1: Challenges Associated with the NSHI Infrastructure: It is important to inject more investment in the current system and not only the new system. Separation of financing and providing health services through the establishment of a new public organization (the payor). Gradual Implementation. Applying a mandatory system nationwide and the cancelation of the opting out of current employers. Definition of eligible for subsidies. 20

21. 5-2: Challenges Associated with the NSHI Cont. The new definition of insured salary and the new structure of unified contribution rates. Finally, all of these would require high level of collaboration between the MoH, MoF and MISA on the road map of implementing the system. 21

22. 6: Conclusion Thus, The MoF is aiming to increase spending on health and contribute to solving the problems of the current health system through the following: Introducing The New Social Health Insurance System (NSHI). Increasing the budget of public health providers. Increasing the budget of Patient Treatment at the Expense of the State. Taking steps to improve the quality and efficiency of the current SHI. Providing health insurance coverage for segments of the population such as unemployed population and women breadwinners that have no sufficient income or cannot afford basic family needs. 22

23. 23 Thank You