Download Fiscal health: A view from the north

Fiscal aspects of health
systems
William Jack
Georgetown University
Motivated by
“The fiscal sustainability of health care in Canada”
Gregory Marchildon, Tom McIntosh, and Pierre-Gerlier Forest
AUST
CAN
FR
SWE
UK
US
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1985
1980
1970
1960
% of GDP
Total health spending in Canada
16
14
12
10
8
6
4
2
0
Is spending sustainable?
 1990-2002: ~constant, 9-10% of GDP
 But pressures lurk on the supply side:
 New technologies
 Prescription drugs
…..and the demand side:
 Ageing
 How should additional costs be financed?
Outline of comments
 Basic principles
 Mixed systems
 Some tax policy issues
Basic principles
Basic principles: I. Efficiency
 Raise money with minimal distortions
 Tax system design
 Maybe link taxes to benefits
 Spend money on the right things
 There is such a thing as too much health care
 Provide insurance
 …..without diluting incentives
Basic principles: II. Equity
 Redistribute from rich to poor
 Use the income tax system
 Generally, don’t use differential commodity
taxation, or the health system
 Redistribute from healthy to sick
 This is insurance
 Redistribute from low risks to high risks
 Risk adjustment mechanisms?
Generating funds with
mixed systems
Public-private mixes
 Canada: separate by service type
 Public insurance for physician and hospital
services
 Private (some public) insurance for drugs,
dental, vision, long-term care
 An alternative: separate by service quality
 Public insurance for basic care (of all kinds)
 Private insurance for higher quality care
Quality differentiated systems
 Chile: public-private
 Public health care: general tax finance
 ISAPREs: risk-based premiums
 Colombia: public-public
 Basic “subsidized regime”: general tax finance
 Higher quality “contributory regime”: payroll
tax finance
Dual public-private systems
 “Relieve the burden on the public system”
 Assumes taxes on those who opt out remain
in place
 Allowing people to opt out with their taxes will
not help budget position
 Paying them to opt out could reduce net
revenues
 Compare with public-private education
policies
 Should governments subsidize private
schools?
Insurance market competition
 Can competition help us “spend the money
well”?
 Need to define the package – uniform or
differentiated by risk?
 Adverse selection – the good risks drop out
 Affordability – package could be too expensive
for bad risks and/or the poor
 Administrative/marketing costs
Dual public-public systems
 Price discrimination
 Over-finance the higher quality public system
 Use extra funds to expand lower quality
system
 Is this better than general taxation?
 efficiency, equity, political feasibility?
 Should the government get into other
businesses to raise money for the poor?
Tax policy
User fees
 Raising money or spending it well?
 Is health care an efficient and/or equitable
tax base?
 or are user fees “taxes on the sick”?
 “Distortionary” effects of user fees should
in fact be positive
 The impact on risk exposure and equity might
not be
What is our model of demand?
 Do user fees deter only the use of
“unnecessary” care?
 If not, then
 (a) some people who need care are making
bad choices, and
 (b) some who don’t need care are being
conned
 Suggests the need for supply-side costsharing
Tax-subsidies to health insurance
 Effects of tax-subsidy – too much private
insurance
 moral hazard?
 or too little support for public insurance?
 Is a tax-subsidy regressive?
 (a) Effective MTRs can be high on the nearpoor
 (b) Optimally designed tax system might
include deductibility of health
Tax treatment of out-of-pocket
spending
 Medical savings accounts
 Use pre-tax income to pay OOP costs
 Can this reduce moral hazard problems?
 Nominal cost-sharing rate could increase
 Include insured expenses in taxable
income
 Effect is to increase cost sharing
 But nominal cost-sharing rate could fall
 Is it efficient for different people to face
different prices?