Overcoming Public Sector Inefficiencies Towards

Universal Health Coverage:

National Health Insurance in Asia and the
Pacific

Eduardo Banzon
Principal Health Specialist
Asian Development Bank

1
Asia and the Pacific countries are pursuing
Universal Health Coverage (UHC)
 Countries of Asia and the Pacific invest
more on health, in real terms
Average Domestic General Government Health
Expenditure for 34 countries of Asia and the Pacific, per
capita, in US$ (2000-2014)
400

350

300

250

200

150

100

50

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: authors
 BREAKING NEWS : Investing in National
Health Insurance (NHI)

From Korea and Thailand to…

• Philippines
• Indonesia
• Viet Nam
• Laos
• Nepal
• India
• Pakistan
ADDRESSING PUBLIC
SECTOR
INEFFICIENCIES
Identifying sources of inefficiencies in
the public sector

Source: Kutzin 2013

The inefficiency chain
Inefficiencies in
the public sector

Underperformed health
system functions

Missed health system

objectives (including but
not limited to efficiency)

Low performance of the

health system as a whole
 Sources of inefficiencies in the public
sector
Types of Differences Manifestation
Organizational Lack of • No price competition
incentives • Limited incentive for technical efficiency
• Soft budget constraint (incurring greater
health expenditure according to OECD 2010)
Personnel • Driven by independence and equity concern
restrictions • However rigidity in HR management
• Potentially lack of capacity and skills
• Impact both for health administration and
delivery
Procurement • Adoption of strict procurement rules
restrictions • Limited competition and higher prices
• Examples in the pharmaceutical sector but
also in terms of health financing
Budgetary • Allocations on an annual basis
restrictions • Lack of long-term vision and limited budget
responsiveness to needs
• Relevant for both administration and facilities
 Sources of inefficiencies in the public
sector (continued)
Types of Differences Manifestation
Individual differences • Less incentives for civil servants
• Maximization of prestige and power
instead of efficiency
• Increased organization size and higher
costs
• Agency problem – strict HR rules
Bureaucratic • Risk aversion
procedures and risk • Process and procedures valued over
aversion outcomes
• “Red tape”: excessive use of procedures
resulting in inefficiencies
• Impact on the motivation of public service
managers
How countries overcome public
sector inefficiencies with NHI
How countries overcome inefficiencies:
Organizational disincentives

THAILAND REPUBLIC OF KOREA

How countries overcome inefficiencies:
Personnel restrictions

LAO PDR PALAU

How countries overcome inefficiencies:
Procurement restrictions

THAILAND INDONESIA
How countries overcome inefficiencies:
Budgeting restrictions

PHILIPPINES BHUTAN
How countries overcome inefficiencies:
Individual Inefficiencies

INDIA
Bureaucratic behavior and risk aversion

PHILIPPINES INDIA
Source of inefficiency Type of Success strategy
inefficiency

Single purchaser
Lack of organizational Soft budget
incentives constraint Financial autonomy
and active purchasing

Training & additional

Skills & capacity
Personnel restrictions
capacity gap
Contracting out

Centralization of
Limited procurement
Procurement competition &
restrictions higher prices E-Procurement
Source of inefficiency Type of Success strategy
inefficiency

Minimum funding
threshold
Underfunding &
Budget restrictions
misallocations
Budgetary autonomy

Less Personnel incentives

Individual competition &
inefficiencies agency
problem Outsourcing

Process reforms
Bureaucratic behavior
Red tape
and risk aversion
Autonomy
 Being done with NHI
• Common features in Asia:
 A national agency or body serves with more or less autonomy
from the state, sometimes even as a legal entity apart from the
government

 This organization operationalizes health financing functions by

ensuring citizens’ financial protection, and purchasing health
services and goods on behalf of a population.

Potential to carry a stewardship function for the whole health
system, and provide an opportunity for efficiency gains in each
sub-function that is beyond operations by the public sector.

• Often referred to national health insurance, national health

service, national hybrid health insurance, national health
fund, national social security fund …
NHIs can take different legal
forms

MoH and private sector

implementers (India,
Pakistan)

MoH and Social Security

organization as NHI (Viet
Nam)
Further improving health system
performance through NHIs
Resource Raising
Stewardship
generation revenue

Creation of
Dedicated body for Sound and stable
efficiency
legitimation revenue generation
incentives

Separation from
Use of IT and push
Government and Diverse possibilities
for standardization
reduced level of to raise revenues
and interoperability
bureaucracy

Greater Single pool acting

accountability and as resources
financial control catalyzer

Maximization of
beneficiaries
empowerment
Further improving health system
performance through NHIs
Purchasing Health service
Pooling
services delivery

Maximization of risk Implementation of Quality improvements at the

provision level (more strategic
pooling and strategic purchasing payment mechanisms and non
economies of scale mechanisms financial incentives)

Single purchaser Harnessing the Health workers time

eliminating the need private sector better spent with less
for annual budget through contract administrative tasks –
for health coverage out greater efficiency

Greater
responsiveness
through autonomy

Purchaser/provider
split leading to
greater political
accountability
Success factors for NHIs implementation

① Shared awareness of health sector efficiency needs

and gains (culture of cost-effective management
among other governmental units as well as among
other stakeholders)

② Institutional and individual capacity as prerequisite

(required skills as part of curricula in national universities,
for example)

③ Responsiveness of procurement units and health

service providers to ensure the correct translation of
incentives into effective quality and efficiency
improvements  guarantee a level playing field to
ensure competition among providers
THANK YOU

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