Trends in Health Financing

in LMICs
Disclaimer: The views expressed in this paper/presentation are the views of the author and do
not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board
of Governors, or the governments they represent. ADB does not guarantee the accuracy of the
data included in this paper and accepts no responsibility for any consequence of their use. Ter
minology used may not necessarily be consistent with ADB official terms.

ADB

May 22, 2015

Soonman KWON, Ph.D.

Professor and Former Dean, School of Public Health
Seoul National University, Korea
President-elect, Korean Health Economic Association
President, Korean Gerontological Society
Kwon: Trends in HC FInancing

1. Resource Generation

Low economic growth and huge informal sector, along with

high OOP pay and low performance of public providers
- Economic development does not necessarily lead to

(formal sector) employment, either

- Contribution-based financing and implicit cross-subsidy

from the formal to informal sector may not work well

-> Need to use (income or consumption) tax, too

- Risk of top-down approach (covering the formal sector

first) of SHI

- Regressivity of consumption tax (e.g., Ghana) or

progressivity of income tax?

Kwon: Trends in HC FInancing

Health Expenditure as a % of GDP

and Financing Mix in Asia and the Pacific

Source: WHO, 2011

Kwon: Trends in HC FInancing

HC Fin in Low and Middle-income Countries

2. Challenges of the Informal Sector

Without government subsidy to the poor and informal
sector, universal coverage is very difficult through SHI
Full subsidy to the poor
Full or partial subsidy to the informal sector
E.g., China, Mongolia vs. Philippines, Vietnam
Premium contribution of the informal sector
Boundary between the informal sector and the poor is
blurred in many low-income countries
High cost of premium collection
Funds from the premium of the informal sector is
usually small
Kwon: Trends in HC FInancing

3. Role of Service Delivery

UHC requires a infrastructure of service delivery and
health workers to provide quality health care
Efficiency in service delivery makes it less costly to
achieve UHC and is a key to financial sustainability
- Crucial role of primary care for cost-effective health care
delivery
Health insurance reduces financial barrier to health and
increases demand, which can increase the supply of
private sector delivery (often big hospitals):
- Over-specialization of medical providers?
- Fiscal autonomy of public hospitals: pros and cons
- Passive privatization -> Good news and bad news
Kwon: Trends in HC FInancing

4. Pooling: Single Payer/Purchaser

Single insurer system is more efficient and equitable

Single Purchaser
-

Single purchasing through uniform benefits package

and provider payment across multiple schemes:
potential political costs, vested interests (those who
currently enjoy generous benefits)

Pooling of SHI and tax financing, in the case of public

hospitals
-> incentive for the Ministry of Health or the relationship
between MoH and insurance agency?
-

Kwon: Trends in HC FInancing

5. Purchasing and Payment System

Role of purchasing
- SHI or demand-side financing can contribute to the
efficiency of public providers
- Need financial autonomy of public hospitals to
maximize the purchasing power
- In many rural areas of low-income countries, there is
little competition among providers (i.e., little choice of
providers) -> challenges to effective purchasing
Provider Payment
- Prevalence of FFS: huge demand inducement
- Capacity issues in the implementation of prospective
payment system (e.g., DRG-based payment)
Kwon: Trends in HC FInancing

6. Benefits Package
The decision on which services to cover at which level of
patient cost sharing should be based on objective criteria
through a transparent process
- Economic evaluation (HTA: H Technology Assessment)
- Inherently priority setting process associated with value
judgment: cost-effectiveness alone is not enough
Pharmaceuticals
- Major source of OOP pay in many LICs
- Role of HC financing in production, distribution, benefits
decision (listing), pricing of medicines
Kwon: Trends in HC FInancing

7. Governance of HC Financing System

Strong role of a single ministry can avoid the potential
coordination problem across ministries, and help
health insurance serve the goal of health policy
Dilemma
- When the majority of hospitals are public, MoH as a
purchaser may not be effective: no separation of
purchasing and (service) provision
- Independent HI agency working closely with MoH:
Korea, Taiwan, Japan, Philippines
- Social security agency: Vietnam (PM), Mongolia (MoL)
- MoLW (formal sector) and MoH (informal sector):
China
Kwon: Trends in HC FInancing

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8. Challenges of Population Aging

Health systems in LICs are not well placed to respond to
population aging and an increase in NCDs
- Financial barrier for older people to access care
- Overreliance on hospital care from primary to long-term
care, exacerbated by weak gatekeeping and referral system
- Most countries have no long-term care system, beyond
hospitals and the family
- Expenditure on medicines is excessive, due to overprescription and inefficient procurement -> Impact on older
people who tend to rely more on medication
Kwon: Trends in HC FInancing

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Old-Age Dependency (65+/(20-64))

12

Proportion of Countries in which NCD-Related Services

and Treatments are covered by Health Insurance

Source: WHO, Global Status Report on Noncommunicable Diseases 2010,

Geneva: World Health Organization, 2011

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School of Public Health, Seoul National University

WHO Collaborating Center for Health System and Financing
Secretariat, (WHO-OECD) Asia Pacific Network for Pharmaceutical
Policy and Financing
KOICA: Health Insurance in Vietnam, Nepal, etc.
KOFIH
- Health Insurance in Ghana, Ethiopia
- Short-term Training for officers in NHIA of Ghana and Ethiopia
- Short-term Training for MOH officers in Indonesia, Ecuador, Peru,
Paraguay, Tanzania
NHIS and HIRA: One-year Training of Senior Officers
Ministry of Finance: Health system review of Myanmar, Algeria
Kwon: Trends in HC FInancing

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THANK YOU !!!

Prof. Soonman KWON

kwons@snu.ac.kr (Seoul National Univ.)

http://plaza.snu.ac.kr/~kwons (Homepage)
Kwon: Trends in HC FInancing

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