Why social health insurance
(Business Mirror) - PhilHealth President and CEO Dr. Eduardo Banzon continues his series of editorials on the Philippines journey towards universal health coverage.
WHO pays for health, and how are resources spent? Debates always get colorful when discussions revolve around these questions. The fact that this has always been talked about highlights its importance. After all, there’s no point talking about reforms when resources are not available to get them done.
The 2007 Philippine National Health Accounts painted an alarming picture of how health care is financed in the country. It showed that the government did not spend enough on health, as taxes collected covered only 26.25 percent of health expenditures and out-of-pocket (OOP) payments remained high at 54.35 percent. This meant that the majority of the costs of health care was still shouldered by citizens. The potential of social health insurance in addressing financial barriers to health was not harnessed, as its contribution remained low at 8.52 percent—a power that we are now harnessing and leveraging.
Indeed, it has always been the government’s mandate to provide social services to its citizens. More and more, we’re seeing that the Aquino administration has been true to this mandate, as it assumes a more proactive role in building the country’s human capital. There is enough evidence to show that the government is now willing to invest more on health. Nearly P13 billion in the 2012 national budget to pay for the PhilHealth premium of 5.2 million poor families as determined by the National Household Targeting System is more than enough proof.
Given the three primary funding sources for health care—tax revenues financing the supply side, premium and tax revenues financing through insurance pooling, and OOP payments—it is clear that one of the objectives of universal health care is to lower or even eliminate OOP payments or expenses. As a post-payment scheme, where one settles the bill after service is utilized, OOP is expensive because it fails to leverage for a better price in exchange for volume. On the contrary, a pre-payment scheme gives the purchaser and/or user of care just that—price volume deals that not only ensure access to care, but also promote efficiency as levers are built around resource inflows. Clearly, there is a need to shift from post-payment to pre-payment. The question is, do we go for tax revenues financing the supply side or premium and tax revenues financing through health insurance?
Tax revenues financing the supply side primarily uses taxes to fund budgets for health facilities and salaries for health staff through a supply-side approach. This makes service quality variable; inefficiencies prevalent; and necessary services, supplies and medicines limited and constrained.
On the other hand, a social health insurance (SHI) system like PhilHealth pools premium payments into a fund to finance health-care services. PhilHealth is considered a global best practice, as it pools all premiums into a single fund, thus increasing its stability and leveraging power. And just like how other countries ensure insurance coverage of the poor, government uses tax revenues to subsidize and pay for premiums of the poor.
To put it simply, an SHI subscribes to a demand-side approach, where money follows the members. Contracted health facilities are reimbursed whenever members use their benefits within these facilities. Let us take note that PhilHealth members are at the heart of this system.
Considering that we are aiming for universal health care (UHC), PhilHealth promises to bring into the system volume—more than 95 million insured Filipinos—in exchange for lower health-care cost as a result of more efficient fund use. This volume gives us muscle to transform the system to ensure that our members are protected and delighted at the end of the day.
While both systems usually co-exist, the country needs to choose a predominant system because their co-existence weakens the leverage that one could have exerted. If hospitals continue to depend on budgets, there is no incentive to please customers because the money comes even if service provision is lacking and patients are dissatisfied. In the case of insurance, financing depends on the volume of patients seen and services rendered, thus challenging hospitals to serve their patients better.
My bias is pretty obvious at this point. A performance-based financing scheme that not only lowers OOP payments, but also empowers and delights Filipinos, is what we need to sustain universal health care.