{"id":35296,"date":"2019-06-24T13:52:18","date_gmt":"2019-06-24T11:52:18","guid":{"rendered":"https:\/\/www.getsmarter.com\/blog\/?p=35296"},"modified":"2023-08-10T15:03:54","modified_gmt":"2023-08-10T13:03:54","slug":"health-care-financing-and-the-sustainability-of-health-systems","status":"publish","type":"post","link":"https:\/\/www.getsmarter.com\/blog\/health-care-financing-and-the-sustainability-of-health-systems\/","title":{"rendered":"Healthcare Financing and the Sustainability of Health Systems"},"content":{"rendered":"\n

The average person\u2019s income is unable to keep up with the rising cost of healthcare. \u201cGood health is the foundation of a country\u2019s human capital, and no country can afford low-quality or unsafe healthcare<\/a>,\u201d says World Bank Group President Jim Yong Kim.1<\/sup> Access to reliable, affordable health services ensures healthier people who aren\u2019t being pushed into poverty. Universal health coverage, therefore, plays an important role in sustainable development and poverty reduction.<\/p>\n\n\n\n

A report by the Federal Reserve Board found that 44% of adult Americans could not come up with the $400 required in a medical emergency without turning to credit cards, family and friends, or selling off possessions, and 25% skipped medical treatments altogether due to unaffordability.2<\/sup> Sustainability through universal health coverage can ensure health services are made available to those who need them most, at the time they need it most.<\/strong> Reducing a country\u2019s dependency on direct, out-of-pocket payments for healthcare removes any financial barriers to access, and lowers the financial impact of health payments.3<\/sup><\/p>\n\n\n\n

What is universal health coverage, or National Health Insurance (NHI)?<\/h2>\n\n\n\n

The main premise of healthcare financing is a pooling of funds in order to ensure healthcare needs are met, irrespective of an individual\u2019s socioeconomic status.4<\/sup> Universal health coverage provides access to vital health services, such as prevention, promotion, treatment, rehabilitation and palliative care, without the often restrictive, financial burden of having the funds on hand to pay for these services.5<\/sup><\/p>\n\n\n\n

For this to be effectively implemented, an efficient health system is needed to provide an entire population with quality services, health workers, medicines and technologies, as well as a finance system that will protect people that can\u2019t afford to pay expensive medical fees.6<\/sup> With this in mind, it is clear that universal health coverage cannot be achieved overnight, but countries can take steps to move towards it, or to maintain the gains they\u2019ve already made.7<\/sup><\/p>\n\n\n\n

The financial sustainability of health systems<\/h2>\n\n\n\n

Phasing in universal healthcare to a country is an enormous undertaking financially. It is estimated that $274-371 billion will need to be spent on healthcare systems per year until 2030, in order for universal healthcare coverage (UHS) to be implemented. This accounts for only 67 countries, which represent 95% of the total population in low-income and middle-income countries.8<\/sup><\/p>\n\n\n\n

Around 75% of that spend will go towards health systems, with health workforce, infrastructure and medical equipment being the main cost drivers. Should this be successfully implemented, with gap funding from the World Health Organisation (WHO), up to 97 million lives could be saved, and life expectancy could increase by 3.1 to 8.4 years, depending on the country profile.<\/p>\n\n\n\n

Image: Conceptual framework for transforming health systems towards SDG Three targets. Overall contextual factors include climate change, poverty, migration, and changes in the level and distribution of wealth. Country-specific contextual factors include epidemiological and demographic transitions, urbanisation, and recovery from conflict and disasters.<\/p>\n\n\n\n

Universal healthcare financing that works<\/h2>\n\n\n\n

In 1948, WHO declared healthcare a basic human right, and as a result the demand for universal healthcare was born.9<\/sup> Since then, many countries have successfully implemented sustainable health systems, thus ensuring doctors and hospitals provide citizens with quality care at an affordable rate, and using their financial leverage to influence healthcare providers.<\/strong>10<\/sup><\/p>\n\n\n\n

Australia, Canada, France, Germany, Singapore, and Switzerland use the healthcare financing model where the government pays private companies to deliver healthcare services to its citizens.11<\/sup> In the United Kingdom, the government both provides and finances the healthcare system.12<\/sup><\/p>\n\n\n\n

Implementing a national health financial system<\/h2>\n\n\n\n

The United Nation\u2019s Sustainable Development Goals address global challenges faced by everyone, including poverty, inequality, climate, environmental degradation, prosperity, and peace and justice.13<\/sup> One of these goals is to achieve universal health coverage, making provision for financial risk protection, giving access to quality essential healthcare services and access to safe, effective, and affordable essential medicines and vaccines for all.<\/p>\n\n\n\n

According to McKinsey, a set of building blocks are needed before health system financing can transform emerging economies. These blocks create a cohesive system that will assist in delivering the best value for a country\u2019s population.14<\/sup><\/p>\n\n\n

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  1. Start at the top.<\/strong> A strong commitment from the country\u2019s leadership will ensure a successful health system transformation.<\/li>\n
  2. Additional funding.<\/strong> Regardless of the objective of healthcare financing, additional sources of funding will be required.<\/li>\n
  3. Who is purchasing?<\/strong> The \u2018payer\u2019 and \u2018provider\u2019 functions should be separated early on. Identifying a strategic purchaser organisation makes it easier to clarify responsibilities across typically rigid healthcare systems. It also opens the door for the introduction of market forces and performance-based competition across providers.15<\/sup><\/li>\n
  4. Develop coding for payments.<\/strong> Providers will need to invest in coding capabilities in order to develop payment systems, and purchasers will need to develop auditing capabilities in order to control data quality.<\/li>\n
  5. Reimburse providers.<\/strong> A well-developed reimbursement model will incentivise providers to provide quality healthcare services in an efficient, cost-effective manner.<\/li>\n
  6. Increase provider autonomy.<\/strong> Autonomy can be granted to providers in three broad areas: financial management, personnel management, and the delivery of social services.<\/li>\n<\/ol>\n\n\n\n

    A sustainable approach would be to start slowly by increasing the number of health services, while simultaneously lowering the out-of-pocket costs to patients over time.<\/p>\n\n\n\n

    Challenges of implementing national health financial systems in developing economies<\/h2>\n\n\n\n

    The biggest challenge for many emerging economies is that essential health services for diseases such as human immunodeficiency virus (HIV), tuberculosis, malaria, non-communicable diseases and mental health, sexual and reproductive health and child health, should be available to all who need them. However, given the proliferation of these diseases and the young population in low-income countries, these services cannot be offered to everyone at an affordable price.16<\/sup><\/p>\n\n\n\n

    This is illustrated in Ethiopia\u2019s Healthcare Financing Strategy (2015\u20132035). While the government is working toward universal health coverage, it acknowledges the challenges it faces to do so:17<\/sup><\/p>\n