7. HEALTH Albania spends a below average share of GDP and of total public expenditures on healthcare. As a result, out of pocket spending is high, and this has serious equity, poverty and health sector stewardship implications. Public funds are not utilized to protect the poorest segments of society from health expenditure induced poverty. Public funds are allocated on the basis of inputs rather than the population’s health needs and providers’ performance. Combined with the substantial regional variation in coverage, this result in an inequitable allocation of resources. There are substantial sectoral inefficiencies, at both the primary and the secondary care levels. The current system of funding providers and allocating the capital budget further exacerbates these problems. At the same time, there are signs that the Albanian healthcare system is beginning to face expenditure pressures similar to those experienced in other transition economies, namely, an increased demand for higher cost healthcare. Curbing these pressures, while also ensuring that the system adequately protects the population from health induced poverty, will require substantial changes in the way resources are allocated and utilized. This chapter recommends that Albania gradually shift to a single payer system which pays providers based on performance rather than inputs. It also recommends that investment decisions be based on strategic infrastructure master plans which are guided by the analysis of the current and expected utilization of care rather than by mere application of provider standards. Finally, it recommends that measures to improve the efficiency of resource utilization be accompanied by a gradual improvement in the balance of private and public spending. A. INTRODUCTION 7.1 This chapter will review the extent by which public sector financing of healthcare in Albania has worked towards achieving the objectives of protecting the population from impoverishing healthcare expenditures while ensuring the efficient delivery of such healthcare services. It will do this by reviewing the flow of funds in the sector, the level and mix of sectoral financing, and the efficiency and equity with which public sector resources are allocated. B. HEALTH OUTCOMES 7.2 Albania’s health outcomes compare favorably with those of other middle income countries outside the ECA region, but lag behind those of other countries in the Southeastern Europe (SEE) Region. All data sources show an improvement in Albania’s key health outcome indicators over the past decade, but different data sources paint a different picture of how well Albania is faring compared with other countries. By most accounts, Albania’s health outcomes compare favorably with those of other lower middle income countries outside the ECA Region, but not to other lower middle income countries in the SEE Region (Table 7.1). On the basis of official data, Albania enjoys the longest life expectancy in the Balkans. Other sources (Table 7.1) put Albania’s life expectancy below that of other countries in the SEE Region. Albania has the lowest healthy life expectancy in the Region. Similarly, estimated data which correcte for expected underreporting, put Albania behind other countries in SEE with respect to child and maternal mortality. Table 7.1: Comparative Health Indicators, Albania and Comparators GNI Maternal Child Life DTP Measles Per Mortality Mortality Expectancy Healthy Life TB Vaccination Vaccination Capita Rate Rate at Birth Expectancy incidence Rate Rate US$ Albania 55 21 72 61 10 93 97 1,740 Bosnia and Herzegovina 31 17 73 64 25 84 87 1,540 Bulgaria 32 15 72 65 20 96 96 2,130 Colombia 130 21 72 62 23 92 91 1,810 Croatia 10 7 75 67 19 95 94 5,350 Ecuador 130 27 71 62 62 99 89 1,790 Romania 58 20 71 63 67 97 97 2,310 Serbia and Montenegro 9 14 73 64 16 87 89 1,910 Thailand 44 26 70 60 63 94 96 2,190 FYR Macedonia 13 12 72 63 14 96 96 1,980 Turkey 70 39 70 62 12 75 68 2,790 Source: WHO world health data base, 2005. 7.3 As will be further discussed below, these outcomes are commensurate with Albania’s health expenditures. A mapping of total per capita health spending levels (adjusted for PPP) against life expectancy suggests that Albania achieves a relatively good health outcome for the total amount of money spent on healthcare (Figure 7.1). It also fares well in vaccination coverage when compared to other Figure 7.1: Life Expectancy and Healthcare countries with similar income levels (Table 7.1). This Expenditure in Central and Eastern Europe is a reflection of concerted efforts by the Government to reestablish a strong vaccination system following Life Expectancy and Health Care Expenditure In Central and Eastern the system’s breakdown during the upheavals of the Europe mid- and late 1990s. 2000 1800 7.4 Albania’s demographic and 1600 1400 epidemiological profile is changing, with the 1200 burden of non-communicable diseases becoming 1000 800 the leading cause of death among the adult 600 400 population. Infectious diseases are still a leading 200 Albania 0 Health Care Expenditure Per Capita PPP Capita Per Expenditure Care Health cause of infant and child deaths. But recently, non- 66 68 70 72 74 76 78 80 communicable diseases, mainly cardiovascular Estimated life expectancy diseases and cancer, have become the leading causes of death among adults, and their incidence is expected Source: WHO, Health for All Data Base, 2005. to increase substantially as the population over 65 years of age doubles in the next 20 years. Some studies suggest that the diabetes incidence rate is higher than in many Western European countries and is likely to grow substantially over the coming two decades.143 Among the top new health risk factors are the high tobacco consumption, the rapidly increasing rate of fatal road accidents, and changing diets. Although HIV/AIDS prevalence is reportedly still low, the risk of HIV transmission is high owing to the mobility of the population and too human and drug trafficking. 143 See Ministry of Health and Public Health Institute, “Albania Public Health and Health Promotion Strategy,” 2003. 136 7.5 The healthcare system is ill prepared to face this increase in non-communicable diseases and the lengthy and costly treatment associated with these diseases. The system continues to be heavily centered around secondary and hospital care, with insufficient emphasis on primary care, including primary and secondary preventive care and health promotion. Preventive care and health promotion will need to be substantially strengthened and will require higher resource allocations if Albania is to effectively address the growing incidence of non-communicable diseases in a cost-effective manner. 7.6 Furthermore, the existing health financing system offers limited protection against catastrophic illness or injury and Figure 7.2: Out of Pocket Spending on Health by Expenditure allows for little redistribution of Quintile, 2002 and 2005 resources to protect the most vulnerable groups from 2002 2005 impoverishing healthcare 14 900 expenditures. LSMS household 12 survey data show that lower income 800 groups spend a significantly higher 10 700 share of their household budget on 8 600 healthcare than upper income 6 groups, although in absolute terms 500 4 400 the lowest income quintile spends Health exp per capita only about half as much on health 2 as the top quintile (Figure 7.2) 0 1 2 3 4 5 1 2 3 4 5 7.7 The Albania Poverty Expenditure quintile Assessment has shown that health Monthly health exp., per capita As % of household expenditure* Source: LSMS 2002 and 2005 expenditures have a strong 2005 v alues are price and inf lation adjusted to 2002 prices. impact on poverty, with the *Health exp. was added to hh expenditure to compute these percentages. Quintiles were not af f ected. poverty incidence increasing from 25 to 34 percent if out-of-pocket health expenditure is subtracted from household income.144 Outpatient care expenditures have a greater impact on poverty than hospital expenditures, owing to their more frequent occurrence (Figure 7.3). 7.8 However, when low income households are faced with hospitalization, the income shock is catastrophic, with the average hospital payment amounting to over four times the monthly per capita income of the lowest expenditure quintile. Lower income households also have a significantly higher likelihood of incurring catastrophic healthcare expenditures than better off households, as even relatively modest outpatient care expenditures can amount to an excessively high share of a household’s budget. The average out-of-pocket expenditures for one episode of outpatient care amount to 50 percent of the average monthly per capita expenditure of the lowest consumption quintile, suggesting that even the need for a simple outpatient care visit can result in catastrophic expenditures for the lowest income groups.145 144 Pre-healthcare payment poverty is measured as the percentage of people whose household expenditure falls below the poverty line. Post-healthcare payment poverty is measured as the percentage of people whose household expenditure net of healthcare expenditure falls below the poverty line. The rationale is that expenditures on healthcare could have been used for other essential household consumption. See World Bank, “Albania Poverty Assessment“ 2003. 145 See World Bank, Albania Health Sector Note, 2005. 137 Figure 7.3: Poverty Impact of Health Expenditures 35% 30% 35% % of population 30% poverty 25% spending more 25% q1 headcount index 20% than given share 20% before and after 15% Pre-payment H1 q2 on health care 15% health spending Post payment H1 q3 10% by consumption 10% 5% quintiles 5% q4 0% 0% q5 All health hospital > 10% of total > 25% of total > 50% of total expenditures expenditures expenditures expenditures expenditures Source: World Bank Poverty Assessemnt 2003.