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Health System Reforms in OECD Countries
Lessons for China
WHO China
http://www.wpro.who.int/china
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Overview of Presentation:
OECD Health Systems Reforms - Lessons for China
1. Characteristics of health care systems
2. Financial resources for health care
3. Cost containment initiatives
4. Improving efficiency at the micro level
5. Ensuring equitable access to health care
6. Improving quality of care including patient satisfaction
7. Government role in regulating quality, safety and cost control
8. Reflections and implications for China
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1. Characteristics of Health Systems in OECD
UNIVERSAL coverage of health care
with Governments taking major responsibilities
Adequate public health financing
 Via publicly organized social health insurance schemes
 Or via tax-based national health services

Private insurance:
- main mode (Swiss, US)
- increasing choice & timeliness of care (UK, Ireland, Australia, etc)
The way health systems financed are affecting equity
 Relying on taxes and social insurance, rather than OOP
more equitable and supports access to care
 Individual premium and cost sharing (co-payments)
May have negative implications on equity in health care
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Characteristics: OECD
Public-integrated model (Australia, Nordic countries, UK pre-1990s)
Merging finance with provision: run like Govt department
– Staff salary paid and complete population coverage
– Cost control can easily be done
– Weak incentives to improve efficiency, outputs, quality and responsiveness to
patient needs
Contract (purchasing) model (UK in 1990s, Japan, New Zeeland)
– Contract with public or private health providers
– More responsive to patient needs
– More difficult to contain costs
Private insurance / provider model (Switzerland + US)
– Affordable insurance
– High degree choice
– Cost control weak
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2. Financial resources for health: OECD
-
Rapid rise of health expenditure in 1960s and 1970s
After reductions in 1980s, several OECD countries have raised their
public spending on health in the 1990s

Total health expenditure (THE) averaged:
-
8.4% GDP
 with a range from 2.0% for Turkey to 13.2% for the US

Public expenditure on health averaged:
6.2% GDP
 Most EU countries over 6% and the lowest is 4.2%, in Poland
 Turkey 1.5%; Korea 2.6%; US 5.9% of GDP

Public share of THE averages:
nearly 75%
 Surpasses 70% in most EU countries
 Lowest is 56% in Greece and Switzerland; Dutch 63%
 US and Korea both 44%
-
Devoting more of GDP to health care as society gets richer not
necessarily inappropriate
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3. Cost containment initiatives - OECD
Two major factors driving up health care spending in Europe:
–
–
Technology: likely explained half of the total spending growth
Population ageing
1980s European countries used 3 policy sets to control cost
often in the following order:
1. Regulation of prices and volumes of health care and inputs
2. Caps on healthcare spending, either overall or by sector
3. Shifts of the cost onto the private sector through increased
but limited cost-sharing
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I. Regulation of prices and volumes of healthcare and inputs
Price controls

Wage controls esp. in systems with public-integrated systems
(Denmark, Finland, Ireland, Spain, Sweden, UK)

Price and fee controls between purchasers and providers
(Belgium, France, Luxemburg, Germany, Austria, Hungary)

Administrative price setting for pharmaceutical drugs (all EU
countries except Germany and Switzerland)

Disease Related Grouping (DRG)
Price and volume controls

Prices adjusted as a function of volume to stay within budget
(Germany – ambulatory care; Austria – hospital care)

Reduce marginal costing for additional supply and volumes
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Cont. I. Regulation of prices and volumes of healthcare and inputs
Volume controls
 Limits on entry to medical schools (most EU countries)
– requires human resource planning taking into account age related needs increases

Technology advances can reduce average length of stay in hospitals
– leading to reduced number of beds per capita
- controlling the purchasing of high tech equipment
The effects of cost control measures undermined by providers’ response:
 Increasing volumes
 Providing higher cost services
 Up-rating patient into higher cost classifications
 Shifting services into areas where there are no price controls
Price and wage controls can have negative & longer-term effects on supply side
 Shortage of personnel, affecting flexibility and ability to increase supply
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II. Budgetary caps
 Most effective in integrated models (Denmark, NZ, UK) or single
payer countries (Canada)




Budget process holds key to cost controls
More effective for hospital sector
Indicative budgets/targets – in countries with social-insurance
systems (Belgium, France, Luxemburg, Netherlands)
Prospective budgets instead of retrospective payments (paying
provider on FFS)
Limit the incentives to improve efficiency
III. Shifting cost to private sector
 Cost sharing esp. in pharmaceuticals through non-reimbursable and
co-payments
Burden those who use services (sick & poor) and potentially
restricting access to services
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4. Improving efficiency at micro level: OECD
Ambulatory care – shifting care to an ambulatory environment helps
control overall costs and enhance economic and technical efficiency
The gate-keeping role of GPs has been encouraged in several EU
countries (France, Norway, UK)
GPs are employed on:
– salaries (Greece, Finland, Iceland), salary-fee mix (Norway)
– salary-capitation mix (Portugal, Spain, Sweden)
– capitation-fee mix (Austria, Denmark, Ireland, Italy, Netherlands, UK)
– fee for service (Germany)
Reliance on fee-for-service may see supply-induced demand
Growing interest in adopting a mix of different provider payment
methods
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Improving efficiency at micro level
HOSPITAL SECTOR
 Purchaser (GP fund holders, primary doctors, insurers, patient) / provider split
– Budgetary authorities: helps control overall costs and enhance efficiency
– Patients: strengthen quality and accessibility care
Critical issues: (1) Purchaser gets adequate information; (2) Increasing and
competing providers and insurers; (3) Administrative cost
Hospital contracting and payment system
 Global grants/budgets
– main payment method in public integrated systems and direct means to control
spending can be combined with DRG (price and volume)
 Bed-day payments (Switzerland): flat rate per occupied bed
 Payments per case (prospectively) such as Diagnosis Related Group (DRGs)
Fee for service: not used in EU as prone to supply induced demand
Enhancing competition among insurers (Dutch: new reform)
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Improving efficiency at micro level
Pharmaceutical drugs



Strict drug approval process and pre-marketing requirements to assess
whether products are safe & cost-effective for use (widespread in EU)
Price controls at the wholesale and retail level (widespread in EU,
convergence in prices across EU countries)
Distribution of pharmaceuticals governed by national regulation with
professional bodies, health providers and health users


Rational use supported by:



Number of pharmaceutical wholesalers has decreased
clinical practice guidelines (widespread in EU)
prescribing budgets and data to provide feedback to individual doctors
The degree for cost-sharing for drugs has been more widespread than
for other components of healthcare – demand
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Improving efficiency at micro level
Technological change



Major impact on health outcome per disease and major driver of
health spending
Pre-marketing controls to determine whether a new technology is
safe and cost-effective for a particular use (widespread in EU)
Budget caps make hospitals more selective in acquiring new
technologies (wide-spread; similarly, capital charges in UK)
– Purchase of high technical equipment through central committee
(Netherlands)
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5.
Ensuring Equitable Access
to Health Care: OECD
Universal coverage as policy objective means that everyone gets
access to appropriate care when they need it and at affordable cost
– Also adopted by poorer European countries (Moldova and
Kyrgyztan)
– (Belgium, Finland, Greece, Portugal, Spain
The approach generally used to attain universal coverage in
European countries has been:
– make insurance coverage compulsory
– include essential health services the service benefit package
– minimize cost sharing with vulnerable groups often been
exempted from cost-sharing
– provider payment methods emphasis is on prepaid and pooled
contributions and move away from user fees
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Cont … Ensuring Equitable Access to Health Care:
OECD
Many countries have found that universal and comprehensive insurance
coverage is not always sufficient to ensure equitable access to
health services. The following problems need to be addressed
separately:
– Shortages or maldistribution of providers or services
– Socio-cultural barriers
Most OECD and European countries, including some of the poorer
countries, provide nearly universal health coverage to their
citizens
– Out-of-pocket payments of total health spending
below 23%
in most EU countries (and max 33%, in Switzerland)
– Out-of-pocket of total household consumption
in most EU countries (max is 6%, in Switzerland)
below 3%
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Stages of coverage and
organisational mechanisms
Universal
coverage
Intermediate stages of
coverage
Absence of
financial protection
Out-of-pocket spending
Mixing community-, cooperative
and enterprise-based health
insurance, SHI-type coverage and
limited tax-based financing
Options:
• Tax-based financing
• SHI
• Mix of tax-based financing
and various types of health
insurance
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Universal coverage
OECD experience suggests that universal coverage
has potentially many advantages
– Improve the health and productivity of the population by
making health services financially accessible to all
– Providing coverage for preventive care can lower future
expenditures for care
– Reduce the need to provide for a large array of safety-net
facilities for sick people who cannot afford care
– Reduce administrative costs because processes such as
verifying eligibility for the program will not be necessary
– Reduce problems of adverse selection into health
insurance plans
– Enhance fairness in society
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6. Improving quality of care and patient
satisfaction: OECD
Policy-makers in OECD increasingly address issues of
– Inappropriate and poor technical quality of health-care services
– Patient safety and medical errors
Increased accountability for quality
(1) Improving information systems and make reports public on healthcare quality and performance of hospitals, individual providers, health
insurance plans to enhance health system performance
–
–
DRG as a measure of quality (Czech)
Funding reward (UK)
(2) Standardizing protocols and involvement professional associations
(3) Mandatory accreditation
– Setting targets and standards for improvement
(4) Formalizing patients’ rights
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7. Government role in paying, providing and
regulating: OECD
Government as the provider & payer of services, using tax revenues:
UK, Finland, Denmark, Ireland, Sweden, Norway, Spain
Government as the payer of services, using tax revenues; private
providers: Canada
Government oversees the provision & payment of services by nonprofit organizations (sickness / insurance funds) which rely on
employer & employee contributions: Germany, France, Netherlands
Government provides safety net for those outside private insurance
schemes: Switzerland
Government strongly regulates or oversees quality, safety and cost
control
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8. Reflections and Implications for China
China is weak in regulator function (cost, quality, safety)
Insurance coverage low with incomplete package
– Urban: 55%, employment based + commercial and non-commercial health insurance
– Rural: 45%, voluntary, focus catastrophic illness, very low reimbursement level (30%)
“Insurers” either way Govt (MoLSS, MCA) or scattered rural schemes
(RCMS) have limited or no negotiation power with provider
Provider merely public but salary paid 50 – 90% thr. user fees:
– Increasing amounts of clinical care and under-providing preventive and basic care
– Prescribing excessive and unnecessary amounts of drugs and diagnostics
– Cost control measurements difficult due to dependency on user fees
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Reflections and implications for China ……
Resources to Health
Health expenditure in China
Health expenditure (2000): $45 per capita per year
Health expenditure (2004): $71 per capita per year (5.6% of GDP)
Total Health Expenditure (THE)
Govt
17% in 2004 vs. 40% in 1980
Insurance mainly urban
29% in 2004 vs. 40% in 1980 (Rural)
Individual (HH)
54% in 2004 vs. 20% in 1980
Fear that health care cost will reach 8 - 10% of GDP in 5 years time
without necessarily improving quality due to inappropriate mechanisms
and tools to control costs (price) and quantity (volume)
Drugs consist 44% of THE. In OECD this around 15%
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Reflections and implications for China ……
Improving efficiency at micro-level
China’s experience in public spending on Health

68% of public health resources toward hospitals for mainly urban
residents and insufficient public resources go to “public goods”

Local governments in poor areas, which are responsible for financing
health services, face sharp financial constraints and fail to fulfill their core
public health functions – unfunded mandates
Doctors outnumber nurses
No gate keeper and excessively using tertiary services, bypassing available
health services in the community – TRUST, increasing cost
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Reflections and implications for China ……
Ensuring equitable access to healthcare:
Health services in China are: (1) grossly under-funded by Govt; (2)
insurance coverage low; (3) packages inadequate; (4)
reimbursement low and (5) health workers relying on user fees.
This has resulted in:

Over two thirds of China’s population need to rely on their own pockets
to cover the cost of medical bills

Out-of-pocket spending is 56% of total health spending

Health care cost main single reason for people falling into poverty
(30% NHSS; 50% DRC report)

ACCESSIBILITY TO HEALTH SERVICES VERY LOW
Govt acknowledges accessibility to Health as key problem with around
40% of population lacking access to hospital – mainly financial
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Lessons for China from OECD
1.
Step by step ….
2.
Clarify vision and strengthen Government role in Health:

Govt to increase public expenditure towards public health and to support
safety net and access to Health for the West and the poor

Regulator in safety, quality and cost
Senior level endorsement required to guide the many actors in Health
3.
Consider universal coverage to essential services:

Make health insurance compulsory

Improve, expand and integrate current urban, rural health insurance, and medical
financial assistance with focus on ensuring access to Health for the low resource
areas and safety net for the poor.

Include essential heath services in package with focus on West and the poor
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Lessons for China from OECD
4.
5.
6.
Change the method of provider payment:

towards prepaid and pooled contributions away from user fees

Introduce forward looking budget instead of retrospective payments

Strengthen the role of purchaser of health services
Put in place cost containment tools and mechanisms

Regulate price and volume of health care & inputs

Caps on health care spending

Develop National Medicine Policy, registration, pricing, distribution, rational
use
Strengthen ambulatory care and introduce gate keeping village
clinics and urban community health centers

Improve quality of health services at lower level – gain trust
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Lessons for China from OECD
5.
Improve quality of health services, especially at lower level




6.
Standardize treatment protocols
Introduce mandatory accreditation
Improve reporting system and ,make reports public on health care quality
Improve quality of staff at lower level
Introduce health system indicators that will focus on
accessibility to quality of health services
Involve all stakeholders in the process
THANK YOU
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