UHC Forward: Towards Universal Health Coverage

Estonian health care is funded through a Social Health Insurance regime where contributions are paid by salaried and self-employed workers, who contribute 13% of their wages to the system. The earmarked payroll tax is collected by the Estonian Tax and Customs Board. The tax board then transfers the health contribution to the EHIF. This system has a strong element of solidarity, as 46% of enrollees are non-contributing members and are subsidized by those who contribute. All enrollees are entitled to the same benefits package.

The Estonian Health Insurance Fund is the primary financing entity. It is responsible for pooling funds, contracting with service providers, reimbursing health services and pharmaceuticals, and reimbursing sick leave and maternity benefits. In 2006, approximately 20% of EHIF expenditures went toward cash benefits such as health related work incapacity compensation, as well as dental care and prescription reimbursements. In the same year, approximately 70% of expenditures went toward payment of services such as preventative and curative health and pharmaceuticals and medical devices. EHIF also funds disease prevention and health promotion programs.

Funds are disbursed to the four regional EHIF offices on a per capita basis based on the number of insured in the region. The per capita payments for primary care are adjusted based on the age structure of the region, but payments for all other health services are not adjusted. Once the regional EHIF offices receive their funds, they have some flexibility in their allocation. This is especially useful, as the planning of health service provider contracts is conducted by the regional offices.

The EHIF is liable for all of its obligations, so it cannot declare bankruptcy. However, if social health insurance revenues are lower than budgeted, the state becomes responsible for the shortfall. Also, if the government establishes prices such that the EHIF cannot meet its contractual obligations, then the state becomes responsible. In order to ensure solvency, the EHIF has a cash reserve to manage daily cash flows, a legal reserve to decrease the risk of macroeconomic changes, equivalent to 6% of the budget, and a risk reserve to ensure that health insurance obligations are met, equivalent to 2% of the budget. EHIF revenues have exceeded expenditures every year since the reforms except 1999, when an economic crisis significantly reduced revenues.

Out-of-Pocket payments have been the most rapidly increasing sources of financing, increasing from 7.5% of total health financing in 1995 to 24% in 2006. OOP payments flow mainly toward cost sharing for EHIF benefits, payments for services outside of the EHIF benefits package, payments to non-EHIF providers, and to informal payments. However, the primary reason for the increase in OOP has been the dual increase in pharmaceutical use and dental care expenditures that are not a part of the benefits package.

Table 1: Share of Primary Sources of Health Care Financing (1995-2006)

Source: Ministry of Social Affairs, 1999-2006

There are no copayments for family doctor visits, but other services have small copayments. Prescription drugs normally have a deductible as well as a coinsurance of percentage. Flat small copayments are charged on family doctor home visits, outpatient care visits, and hospital bed days. There has been a gradual move toward an elimination of patient cost sharing for primary care. Outpatient specialist care has a maximum consultation fee, but providers can choose to charge any amount up to the maximum. Inpatient care providers can charge a per diem rate (maximum is set by EHIF) for up to ten days. However, inpatient child care, pregnancies, and emergency care are exempt from this per diem rate.

Rwanda has developed a comprehensive financing framework for health care that includes risk pooling, cross-subsidies, and substantial support from donors, NGOs, and tax-generated funding from the formal sector. In the Mutuelle system, funding is comprised of annual member premiums organized on a per household basis, with an annual payment of 1000 Rwandan francs (equivalent of approximately US$1.80) per family member, and a 10% service fee paid up-front for each visit to a health center or hospital. When a citizen cannot pay the premium up-front, microfinance institutions from community banks (Banques Populaires) provide individual loans to be repaid within a year of disbursement with 15% interest. Due to the high degree of poverty in Rwanda, the poorest individuals, as determined by community leaders, along with those infected with HIV/AIDs, are not required to pay the membership or service fees, rather their fees are subsidized by district and nationally organized solidarity funds financed primarily by the central government and external aid partners. A total of 1.5 million individuals enrolled in Mutuelles are subsidized by these funds.

Funding for the insurance scheme is coordinated at the central, district, and local levels. At the central level, two bodies exist to coordinate funding: the National Health Insurance Fund and the National Guarantee Fund of the Mutuelles. Financing for both these Funds comes primarily from external aid partners and the Central Government, though MMI, RAMA, and Mutuelle branches provide a small percentage of the financing as well. A substantial amount of funding for the National Funds comes from 16 bilateral and multi-lateral donors and external aid partners: approximately $700 million per year or a third of the central government’s total health spending. Though donor funds are generally funneled through the national Funds, some donors channel funds through NGOs. These funds are largely earmarked for specific purposed such as Tuberculosis, Malaria, and HIV/AIDS, rather than the national care system. The ear-marking of funds and diversion through third parties creates administrative challenges to the central government and often skews the focus of the health system, by placing an emphasis on disease-specific care.

The National Funds allocate and disburse funds to the sector and district level Mutuelle solidarity funds through block transfers to the district and sector level Mutuelle bodies as well as separately providing other subsidies to sector level solidarity funds for coverage of indigent Mutuelle members. The National Funds also reimburse two national referral teaching hospitals and one psychiatric hospital for care of Mutuelle members who are referred by district hospitals.

At the district level, a district Mutuelle acts as a risk-pooling mechanism for all Mutuelles in the district and acts to reimburse the costs of district hospital care for the Mutuelle members referred by local health centers. Several sources contribute to the district Mutuelle funds: the National Guarantee Fund of Mutuelles, the sector level Mutuelle organizations, the district, and external partners. At the sector level, the Mutuelles perform a risk-pooling function for high-risk events at the sector level. Sector level Mutuelles are financed primarily by user fees, while the rest of the fees are from NGOs and development partners, interest generated from their bank accounts, and the Government of Rwanda to co-finance and subsidize membership fees.

The government sponsored program Rwanda Health Insurance Scheme (La Rwandaise d’Assurance Maladie or RAMA) is financed by monthly contributions of 15% of the member’s base salary with the employer paying 7.5% and the employee paying the difference. Members of the government sponsored Military Medical Insurance (MMI) contribute 5% of their base salary and the government adds 17.5% of the members’ base salary. Beneficiaries also contribute a 15% direct co-payment for services and pharmacies.

The table below summarizes the recipients of donor aid for health in Rwanda:

Aarogyasri is funded through general tax revenues generated by the state of Andhra Pradesh and the cost of premiums is fully subsidized for each beneficiary.

The state chose to fully cover the cost of insurance premiums as the administrative costs of collecting the premium would outweigh the total cost of the premium itself. In addition, the state wanted to ensure that the benefits of the scheme reached the poorest, who might otherwise be deterred from enrolling even if the premium to be paid out-of-pocket was nominal.

The SP is financed by the federal government, the state government, and enrollees. The federal and state governments fund a social solidarity contribution while enrolled families contribute a premium that is tied to income. Families in the two lowest income deciles and those in the third lowest decile with a child under five years of age are not required to contribute, conditional on their participation in health promotion activities. Annual family contributions range from $60 USD for families in the third lowest decile to $950 USD for families in the highest decile. Family premiums are collected at the state level, where they remain to be used to fund the essential benefits package.

Federal funding for the SP takes the form of two distinct contributions to the states—the social contribution and the solidarity contribution. The social contribution by the federal government is a fixed allocation per enrolled family and is periodically adjusted for inflation. The SP federal contribution comes from general taxes. The federal solidarity contribution is meant to redress the large differences in development between the states. It is 1.5 times the social contribution and is generally larger for poorer states. The solidarity contribution is based on a formula that considers a per family fixed component, a health-needs adjusted component, a component aimed at promoting additional state contributions, and a component based on health system performance. The goal of this resource transfer mechanism is to make up for historical imbalances and inequities, to respond to the needs of different population groups, and to provide incentives for performance and affiliation. The formula weights and the indicators used in the formula are updated annually.

The state contribution is similar in all the states, equaling approximately half of the federal social contribution. The family contribution is determined on a sliding-scale, with the goal that no family should contribute more than a fair share based on its ability to pay. Ability to pay has been defined as disposable income, which is total household spending minus spending on food. The family contribution equals a fixed proportion of disposable income, with a maximum of 5%. Income deciles three through nine have a nominal contribution, while the tenth decile has two levels of contribution due to the variable nature of the income distribution. As of 2008, 97% of families made no premium contributions. Likewise, states have also failed to pay their full share of the premium.

The framework of the reform creates certain paradoxes in its implementation. The percentage of families that are eligible to enroll in SP varies by state. The population of the northern industrialized states tends to have high levels of social security membership, whereas the population of poor southern states tends to have low levels of social security membership. This means that poor states with weak tax-based incomes must enroll a much higher percentage of their population out of state coffers compared to rich states with stronger tax bases. This appears to perpetuate inequality in health care delivery on a geographical basis. Because poorer states have the largest proportion of both the poor and the uninsured, and because the state contributions to the SP are established on a per-enrolled family basis, poorer states have to make a higher contribution than wealthier states, leading to increased geographical inequity. Therefore, federal resources are based on both a per-enrolled family fee plus a solidarity supplement for poorer states to help mitigate some of the adverse budgetary effects that stem from a large population of poor households.

The National Commission for Social Protection in Health (CNPSS) has established that states must target a maximum of 30% of their resources to purchase medications, 40% to contract personnel, and 20% for activities of health promotion, early detection, and prevention. Once the requirements for the transfer of resources have been met, funds are sent to the State Finances Secretariat. Before 2007, funds were transferred directly to the State Health Secretariats. The change was established due to the reporting requirements of the State Finance Secretariats, leading to increased transparency, as well as improving the registration and use of resources at the state level. Resources are transferred to the states every three months.

Since 2004, resources transferred to the Social Health Protection System have increased by an average of 11.5% annually in real terms, thereby reducing the gap between IMSS health expenditures and the expenditures of the Ministry of Health.

From 2001 to 2003, the growth rate in per capita expenditures on public health for the uninsured population averaged 5.2%. Conversely, during the first few years of the reform from 2004 to 2006, this growth rate nearly doubled to 12.3% per year. From 2001 to 2006, public expenditure for the uninsured increased by 61% overall. Since the implementation of SP, public health expenditure increased from 43.8% of total health expenditure in 2002 to 46.4% in 2006. This trend of growing public health expenditures is expected to continue.