) l153 Eco- vJoNv. 1'145 d'nl Economic Development Institute ';; of The World Bank Public Disclosure Authorized An International Assessment of Health Care Financing Lessons for Developing Countries Public Disclosure Authorized Edited by David W. Dunlop Jo. M. Martins Public Disclosure Authorized Public Disclosure Authorized EDI SEMINAR SERIES EDI SEMINAR SERIES An International Assessment of Health Care Financing Lessons for Developing Countries Edited by David W. Dunlop Jo. M. Martins The World Bank Washington, D. C. Copyright © 1995 The Intemational Bank for Reconstruction and Development l THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing November 1995 The Economic Development Institute (EDI) was established by the World Bank in 1955 to train officials concerned with development planning, policymaking, investment analysis, and project implementation in member developing countries. At present the substance of the EDI's work emphasizes macroeconomic and sectoral economic policy analysis. Through a variety of courses, seminars, and workshops, most of which are given overseas in cooperation with local institutions, the EDI seeks to sharpen analytical skills used in policy analysis and to broaden understanding of the experience of individual countries with economic development. Although the EDI' s publications are designed to support its training activities, many are of interest to a much broader audience. EDI materials, including any findings, interpretations, and conclusions, are entirely those of the authors and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. Because of the informality of this series and to make the publication available with the least possible delay, the manuscript has not been edited as fully as would be the case with a more formal document, and the World Bank accepts no responsibility for errors. Some sources cited in this paper may be informal documents that are not readily available. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to the Office of the Publisher at the address shown in the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to photocopy portions for classroom use is granted through the Copyright Clearance Center, Inc., Suite 910, 222 Rosewood Drive, Danvers, Massachusetts 01923, U.S.A. The complete backlist of publications from the World Bank is shown in the annual Index of Publications,which contains an alphabetical title list (with full ordering information) and indexes of subjects, authors, and countries and regions. The latest edition is available free of charge from the Distribution Unit, Office of the Publisher, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, Banque mondiale, 66, avenue d'lena, 75116 Paris, France. David W. Dunlop is an economist in the World Bank's Asia Technical Department and Jo. M. Martins is a senior public health specialist in the World Bank's East Asia and Pacific Region. Library of Congress Cataloging-in-Publication Data An Intemational assessment of health care financing: lessons for developing countries / edited by David W. Dunlop, Jo. M. Martins. p. cm.-(EDI seminar series) Includes bibliographical references. ISBN 0-8213-3253-8 1. Medical economics-Developing countries. 2. Medical care- Developing countries-Finance. 1. Dunlop, David W. II. Martins, Jo. M., 1936- . 111. Series. RA410.55.D48156 1995 338.4'33621'091724-dc2O 95-8983 CIP Contents Foreword v Contributors vii Part I The Conceptual Framework 1 1. Introduction 3 David W. Dunlop and Jo. M. Martins 2. A Framework for Assessing Health Financing Strategies and the Role of Health Insurance 15 William C. Hsiao Part II Country Case Studies 31 Asia 3. The Japanese Health Care System: A Stepwise Approach to Universal Coverage 33 Naoki Ikegami and Toshihiko Hasegawa 4. Issues in Health Care Delivery: The Case of Korea 65 Bong-min Yang North America 5. The Canadian Health Care System: Where Are We and How Did We Get Here? 79 Robert G. Evans and Maureen M. Law 6. The Health System of the United States: Lessons for Other Countries 115 Uwe E. Reinhardt Europe 7. Assessing the Experience of Health Financing in the United Kingdom 149 Brian Abel-Smith 8. Germany's Health Care and Health Insurance System 163 Uwe E. Reinhardt Part III Lessons of Experience 181 9. Lessons Learned 183 Jo. M. Martins and David W. Dunlop Foreword In the past decade, the countries of Southeast Asia and other regions have made significant progress on the health care front. Thanks to a substantial expansion in the provision of health care as a result of rapid economic development, infant and maternal mortality has fallen, life expectancy has increased, total fertility rates are down, and population growth has declined. That expansion is particularly evident in the greater numbers of physicians and nurses per thousand population and in the growing share of total health expenditures in gross domestic product. Although health status in the region could be improved even further-through the extension of primary health care to still disenfranchised groups and an effort to reduce the use of tobacco products-it is clear that much has been and will continue to be accomplished in both preventive and curative health care. Perhaps the greatest problem countries have experienced thus far lies in financing the costs of such care. The financial pressures are now greater than ever, since more and more older persons are seeking health care and their health problems (such as heart disease and diabetes) tend to be of a chronic and serious nature. This change in overall disease patterns implies that more people are seeking resource-intensive types of health care. Despite the relatively high growth in income per capita throughout Southeast Asia during the 1980s and early 1990s, many countries there have experienced enough periodic macro- economic problems to greatly reduce the resources available for all sectors, including health. Unfortunately, even if economic growth improves, competing claims for those resources- in the case of health care, from investment opportunities in other than universal or even voluntary health insurance programs-will continue to make them scarce. To address this problem, many countries have moved to implement various forms of cost recovery. Because of equity considerations, as well as the fact that the funding requirements in the health sector are so large, health insurance is one option that is receiving particularly close attention. In view of these developments, the Economic Development Institute (EDI) of the World Bank, together with the Asia Department of the World Bank, the Asian Development Bank, the Canadian Department of Health and Welfare, the U.K. Overseas Development Agency, the U.S. Agency for International Development, and the World Health Organization spon- sored a regional seminar on health financing and health insurance in Asia, which was held in Bali, Indonesia, from December 10 to 14, 1990. Ministers and other senior government officials from ministries of finance, planning, health, and social security in Fiji, Indonesia, the Republic of Korea, Malaysia, Papua New Guinea, the Philippines, and Thailand met with observers from China, Kenya, Morocco, and Nigeria to discuss their country's health financing problems and assess the experience of a number of countries that have im- plemented various types of health insurance in an effort to deal with their health financing problems. Seminar participants were particularly interested in learning how programs of v vi Foreword insurance were implemented, how they were working a number of years later, what problems might be expected, and how they might be addressed. At least two other international meetings have been held in the past several years to consider issues related to developing and implementing health insurance: one in Seoul, Korea, in March 1989; and the other in Taipei, Taiwan, in December 1989. The EDI meeting was the only one to consider the policy problems and difficulties of developing and implementing health insurance within a framework for assessing various health financing options. This framework provided a set of criteria for assessing the performance of any set of health financing options. These criteria were used to examine the various approaches to health insurance adopted in a number of the world's more affluent countries. These approaches were judged by their population coverage and financial access; the containment of health care costs/expenditures; efficiency of resource use; equity across income and other groups in financing health care; the degree of consumer choice available to those included in the insurance program; and the program's incentives for technological innovation in the delivery and financing of health care. This volume opens with a discussion of the important role of health insurance at this time in developing countries. Attention is also given to the macroeconomic context in which health financing takes place in developing countries, the growth of the health sector as development progresses, and the linkages between health financing, health status, and indicators of development. Other chapters are devoted to health financing and the use of health insurance in a set of six countries. Their experience can provide public policy officials in other countries with considerable insight into the fundamental ingredients of an effective health financing strategy. These studies will enable policymakers to better evaluate the various forms of health financing already in existence in their own country; the tradeoffs involved in incorporating a pluralistic set of providers of care, both public and private; and the potential for including a mix of financing options, including user charges, within a health financing strategy for each country.