Prof.

Magdalene Rosenmller

SANIT 2004

Management in the Health Sector

System Comparison

Magdalene Rosenmller

University of Navarra

Basic Framework
Financing
Institution

Patients Health Care

Clients Providers
Users
Citizens

University of Navarra 2

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Prof. Magdalene Rosenmller

Basic Framework II
Collecting Authority Purchasing Agency
Financing
Institution

Employer

Patients Health Care

Clients Providers
Users
Citizens

University of Navarra 3

OECD system representation

(The German system)

OECD system representation (The German system)

Cotizaciones obligatorias Cajas de

ligadas a los ingresos seguro
enfermedad

Pago por
acto Asociaciones Presupuesto
Mdicos de mdicos global

Poblacin y
empresas
Orientacin

Pacientes
Presupuesto global
(funcin, en cierta
Hospitales
medida, del volumen
Flujo de servicios de actividad)
Flujo de informacin
Flujo de orientacin

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Prof. Magdalene Rosenmller

Different Type of Health Systems

Semashko Systems
Beveridge Systems
Semashko/Beveridge Systems
in low income countries
Bismarck Health Systems
Segmented Health Systems
Private Health Systems

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Challenges of Reform: Disintegration

from more integrated more disintegrated
from more complex more need for regulation
Socialized National Social Insurance Social and private
Health system Health Service Systems Insurance systems
State
State State
State MOH
MOH
MOH Private
MOF-MOH Social
Social insurance insurance
insurance
Public
Hospitals hospitals Public and HMOs
specialized Public and private
Polyclinics outpatient private hospitals
Outposts care hospitals

Outpatient
Outpatient
practices
GPs practices

Subscribed Subscribed patients

assigned Subscribed patients or or free choice
patients patients free choice

Schneider, M. (1998). European Integration and Health Care Reforms in the CEEC.
University of NavarraRecent Reforms in Organisation, Financing and Delivery of Health Care in Central and Eastern Europe6
in the Light of Accession to the European Union. Brussels: EC Consensus, May 1998: Proceedings.

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Prof. Magdalene Rosenmller

Semashko
Czech
Republic
(1989)

OECD, 2002

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Semashko Systems
In principle:
All health staff salaried
Services provided free of charge
Private sector very small or non-existent
In practice
Substantial under-the-table payments
Examples:
Former Soviet Union and Central and Eastern
Union countries (all in transition now)

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Prof. Magdalene Rosenmller

Beveridge
Health
Systems
United
Kingdom
(1989)

Beveridge
report (1943)
National
Health
Service Act
(1946)

OECD, 2002
University of Navarra 9

Beveridge Health Systems

(National Health Service - NHS)

Largely publicly provided and financed

May include some user charges
Small private sector

Examples:
UK, Denmark, Sweden, Spain, New Zealand

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Prof. Magdalene Rosenmller

Ministry of
Government
Health
Semashko /
Beveridge
Health Systems Public health
centers
in low income
countries Public
hospitals

Private for profit

clinics

Private for profit

hospitals
Zambia
Population
(pre-reform) /patients NGO hospitals
and clinics

Informal and
traditional sector

OECD, 2002
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Semashko / Beveridge Health Systems

in low income countries

Designed to be dominated by public provision / finance

Range of publicly owned health facilities
Direct employment of staff in public facilities
Default privatization with under-the-table payments
Large private sector (for-profit and not-for-profit)

Examples:
India, Pakistan, Kenya, Zambia

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Prof. Magdalene Rosenmller

Private
insurance

Bismarck Mutual Funds

Health Systems Statutory

(introduced in the Insurance Funds

Payment to
providers

19th century) Ministry of

health
Reimbursement
to patients

Public health

Pharmacists

Copayment GPs and

specialists
France
Municipal
(1988) Population
medical centers
/patients

Public
hospitals

Private
hospitals

OECD, 2002
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GERMANY

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Prof. Magdalene Rosenmller

Bismarck Health Systems

(Social Health Insurance)

Social Insurance arrangements dominate the system

Often some component of voluntary insurance
Both public and private providers
Minor co-payments

Examples:
Germany, Belgium, France, Netherlands, Austria,

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Segmented Ministry of
Health

Health Social
Insurance
Compulsory contributions

Systems Private
Voluntary contributions

Insurance
Taxes

Community
services

Private facilities
Population

Ecuador Social Insurance

facilities

Patients Public facilities

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Prof. Magdalene Rosenmller

Segmented Health Systems

Three important subsystems: public, social insurance, and
private (both private insurance and out-of-pocket)
Different segments of the population are covered under
each some are double-covered
Each subsystem has its own providers which are public,
quasi-public, and private, respectively

Examples:
Mexico, Peru, Ecuador, Uruguay, Colombia (changing)

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Private
Health
Systems

US
(1990)

OECD, 2002
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Prof. Magdalene Rosenmller

Private Health Systems

Private voluntary insurance is the most important financing
mechanism
Provider institutions mainly privately owned
Public involvement in finance and regulation still
substantial

Examples:
USA, Switzerland (changing)

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Main Characteristics
Federalism & Corporatism
Lnder and Federal Government
Corporate bodies (professionals, providers, insurers)
Funded by Social Insurance contributions
Hospital care (mix public, private, budget) ambulatory care
(private office based physicians, FFS)Federalism & Coporatism
(Lnder and Federal Government / Lnder / coporate bodies
(professionals, providers, insurers )
Hospital care (mix public, private, budget) ambulatory care
(private office based physicians, FFS)

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Prof. Magdalene Rosenmller

The German system at a glance ...

Financing Institution
Third-party payer

ca. 300 sickness funds

with self-government
not (health) risk-, organised in associations
but wage-related
contributions Strong Contracts,
mostly collective
delegation
Choice of fund
& limited
since 1996
governmental control

Free access
Providers
Population
Public-private mix,
SHI insures 88% organised in associations
(75% mandatorily,
13% voluntarily) adapted from
University of Navarra
Reinhard Busse, TU Berlin
21

Germany: challenges
Strict separation between ambulatory and hospital
(inpatient) care with different regulatory environment
and rules
Financial incentives vary between sectors and are
changed frequently solutions to old problems create
new ones
Moving between funds, young and health less
mixed risk adjustment fund
Quality and Cost Effectiveness (WHR 2000 #27 in
terms of performance (efficiency)

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Prof. Magdalene Rosenmller

Problem 1: Strict separation between ambulatory and hospital

(inpatient) care with different regulatory environment and rules

Proposals Repre-
Federal Ministry for health Federal Parliament sen-
of Health reform acts tation State Ministries
Federal Assembly Federal Council
responsible for health
(Bundestag) (Bundesrat)

Legislative frame Supervision

Enlistment in hospital plans

Obligation to secure hospital care

Insuree/ Patient Ob
Fre liga
eat ose edo tion
to tr cho m to to tr
tion m to cho eat
liga edo ose
Ob Fre
re

Obligation to contract
ecu

Freedom to choose
Physician to s re Hospital
tion ry ca
liga

negotiation
Financial
to
Ob bula
23 (Regional) Physicians am
16 Regional Hospital

negotiation
Financial
Associations Organizations
Federal Association of SHI
Supervision Federal Hospital
Physicians
Organization

Supervision of country-wide funds (via Federal Supervision of regional funds

Insurance Office) Sickness fund
Sickness funds in one region
Supervision
Supervision
Federal associations
of sickness funds
Supervision
Fed. Com. of Physicians and Fed. Com. for Hospital
Sickness Funds: Decisions on Care: Decisions on
ambulatory benefits Coordinating Committee
in-patient benefits
Valuation Committee: DRGs: Decision about
Setting of relative point values types and valuation

Statutory health insurance 2003

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Problem 2:
Financial incentives vary between sectors/providers / frequent changes
Solutions to old problems create new ones

Voluntary private insurance Private health and Reimbursement of patients (pharmaceuticals, amb.
premiums 8.3% care) or payment to providers
long-term care insurers
Contributions 57.0% Payment to providers, sick pay to patients
Statutory sickness funds
Contributions 7.0% Statutory long-term care funds Payment to providers,
cash benefits to patients
General taxation 7.8% Federal and state governments

Investment & salaries

Public health services 0.8%

Ambulatory nursing care providers 2.7% Fee for service

Per diems
Nursing homes 7.0%
Co-payments and non-

Investment
expenditure 12.3%
reimbursed health

Investment
Public, private non-profit and private Per diems, case and procedure fees
for-profit hospitals
Per diems, case and procedure fees
27.4% plus fee for service

Prices
Population and Pharmacies 13.7%
employers Fee for service
Dentists 6.5% Fee for service (via Dentists associations)
Patients
(and private organisations) Fee Mainly capitation
for Physicians associations
Ambulatory care physicians
service
13.6%
Fee for service

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Prof. Magdalene Rosenmller

Problem 3 (actually No. 1):

Increase of contribution rate

Background: no tax subsidies; Sub-problem:

sickness funds are
not allowed to incur deficits
Expenditure
Contributory income
(wages up to threshold; pensions;
50% of wages for unemployed ...)
University of Navarra
sickness funds did go into debt
estimated to be up to 10 billion
(< 1 monthly expenditure)
= contribution rate
Sharp increases (1991-93; 2001-03)
have always triggered major reforms!
25

Responses: ongoing Reforms

Reform act Year

Health Care Reform Act 1989 ("First step") 1988

Unification Treaty (extension of SHI to eastern part) 1991

Health Care Structure Act 1993 ("Second step") 1992

Introduction of Long-term Care Insurance 1995

Health Insurance Contribution Rate Exoneration Act 1996

1st & 2nd Statutory Health Insurance 1997
Restructuring Act (third step")
Act to Strengthen Solidarity in Statutory 1998
Health Insurance
Reform Act of Statutory Health Insurance 2000 1999
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Prof. Magdalene Rosenmller

Solutions: latest developments

Restructuring financial incentives
Disease Management Programmes
The SHI Modernisation Act 2003
Funding basis to entire population?
from income based to per-capita?

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United
Kingdom

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Prof. Magdalene Rosenmller

Spain

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UK Health System: Main

Characteristics
Devolution responsibility to countries, then to
local bodies.
Tax based funding
Primary care by GPs, multiprofessional teams
in health centres (capitation)
Public hospitals, independent trust status
Little private care to private insured and direct
pay

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Prof. Magdalene Rosenmller

UK: Last Developments

Health policy = high profile
Recognised that health care has been under funded
9% of GPD (??),
increase NHS workforce numbers
Long waiting lists for hospital appointments, poor quality of
hospital buildings contracting services in France / Belgium
NICE - National Institute for Clinical Excellence
Development of DRG health related groups
Responsibility for purchasing to be passed from health
authorities to primary care trusts / local health groups, = main
purchaser of health services
Modernisation Board, Commission for Health Improvement

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Exercise
Decide in which system would you prefer to become
sick? Why?
Draw a scheme describing the Chinese system and its
characteristics and what is desirable?:
Who benefits and what are the benefits?
Who pays and how much?
Who collects the money and where does it go?
How much is it spent and on what?
How do patients access services?
Describe a typical patient journey through the system
What are the major challenges?
Definition of the Hospital
what are the basic elements?
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Prof. Magdalene Rosenmller

Bismarck vs. Beveridge

Contributions Citizenship/ resident
Wages All income
Defined (explicit Comprehensive
rationing) (implicit rationing)
Occupational insurer State Insurer
Independent State control
management Integrated providers
AWP contracts/
reimbursement

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Poor relief/charity Destitute Roman / Greek

Mutuality
Guilds Middle ages

Voluntarism Blue collar workers Early industrialization

Corporatism Employees Late industrialization

Universalism Citizens Post WW-II

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Prof. Magdalene Rosenmller

Comparison: Collection of Funds

Source: WHO HITs Health Care in Transition Profiles

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Comparison: Reimbursement Systems

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Prof. Magdalene Rosenmller
Coverage (percentage of population
with public/social insurance/ type)
Private insurance (percentage of
population with private insurance/
type)
Benefits defined? By whom?
Main taxes/ contributions
Other contributions/ taxes
Ceiling on contributory income
Determines contributions/ taxes
Collection of contributions/ taxes
Global budget (frequency)
Mechanism for national pooling or
financial risk sharing among funds
University of Navarra
Payment - Incentives
Payment method
Budget
Capitation
Fee-for-service
Case Based
University of Navarra
SANIT - System Comparison
Germany
88%
9% (substitutive); approx.10% of
SHI members (supplementary
and/or complementary)
Yes. Generic terms in Social Code
Book V. More detailed benefits in
ambulatory care are defined by
Federal Committee of Physicians
and Sickness Funds. Hospital
benefits to be defined by Federal
Committee of Hospitals and
Sickness Funds in future.
Varying by fund: Employer 6.75%
mean, Employee 6.75% mean 10%
rate for people earning below EUR
322. employer only.
No
Yes. DEM 6525 monthlyincome in
2001
Individual funds subject to approval
by Lnder (regional) government or
Federal Insurance Office
Individual funds
No. Sectoral budgets
Risk-structure compensation
mechanism at the federal level (for
>90% of income)
Advantages
Allows strong control
Predictable expenses
Predictable expenses
Provider has incentive to operate
efficiently
Eliminates supplier-induced
demand
Low administrative costs
Increase health productivity
Strong incentive to operate
efficiently
United Kingdom
100%
11.5% (complementary and
supplementary)
No for medical services. Except
where the decisions of NICE make
explicit the inclusion/ exclusion of
certain drugs or services. Negative
list of drugs (Section 8a Drug Tariff)
Income tax bands (10%, 22%, 40%)
VAT (17.5%)
National Insurance contributions
Employer 11.9% Employee 10%
Yes for national insurance
contributions Employee Lower GBP
87, upper GBP 575 Employer Lower
GBP 87, no upper
Treasury
Inland Revenue
Yes. 3-year cycle
Risk adjusted allocations to health
authorities/ health boards and in
future direct to loca l purchasers
(e.g. PCTs)
37
Disadvantages
No direct financial incentive for
efficiency
Provider may under-provide
services
Financial risk may bankrupt
provider
Provider may under-provide
services
Cost-escalating: strong
incentives for induced demand
High administrative costs
Provider has incentives to select
low-risk within case categories
Less suitable for outpatient care
38
19
Prof. Magdalene Rosenmller

Responsiveness Internal Incentives

WHO 2000

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Pooling to redistribute risk, cross-subsidy for greater equity

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Prof. Magdalene Rosenmller

Health System Financing and Provision

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Health System Financing and Provision

University of Navarra 42

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Prof. Magdalene Rosenmller

Functions of a health system

Financing

RESOURCE GENERATION
Revenue Collection
STEWARDSHIP

Fund Pooling

Purchasing

Provision
Personal Non-Personal
Health Services Health Services

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Provider Payment mechanism and

provider behavior

Source: WHO Health Report 2000

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Prof. Magdalene Rosenmller

Exposure of different organisational

forms to internal incentives

Source: WHO Health Report 2000

University of Navarra 45

Exposure of different organisational

forms to external incentives

Source: WHO Health Report 2000

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Prof. Magdalene Rosenmller

Objectives
Efficiency
Allocative efficiency
Technical efficiency
Equity
Progressivity
Equity of access
Responsiveness
Accessibility
Choice
Sustainability

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University of Navarra 48

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Prof. Magdalene Rosenmller

University of Navarra 49

University of Navarra 50

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Prof. Magdalene Rosenmller

Data Exercise
OECD Health Data Base
http://www.oecd.org/EN/document/0,,EN-document-12-nodirectorate-no-1-29046-12,00.html

WHO Europe HFA

Health for All Database
http://hfadb.who.dk/hfa/

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Thanks!!

University of Navarra

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