Generating Financial Resources for Health

Government Financing Through General Revenue

Countries of South and Southeast Asia generally spend between 1% and 10% of their national GDP on health. During the last decade, the global average of total health expenditure (THE) as a percentage of GDP/GNP (gross national product) was 6%. World Health Statistics (WHS) 2019 reported that regarding health expenditure as a percentage of GDP in 2019 in East Asia and the Pacific, the lowest expenditure was in Myanmar (5.1%), while the highest was in Marshall Islands (23.3%) (World Health Organization, 2019). Japan and New Zealand have spent around 10% of their GDP. As part of the global health-for-all (HFA) indicators, in the 1980s, countries agreed to set a target that each would invest at least 5% of its GDP on health. Nearly 40 years ago, there was no clear explanation as to how this target was being set. After 20 years, an International Monetary Fund (IMF) study done in 2001 recommended that effective health service coverage would require spending around 12% of GNP in low-income countries, in order to meet the United Nations Millennium Development Goal (MDG) of reduced infant mortality (Gupta et al., 2001). To what extent a country should spend on healthcare depends on the unique challenges it faces, and it is difficult to establish an appropriate universal benchmark for healthcare expenditure as a percentage of GDP/GNP (Savedoff, 2007). As a general guideline, the World Health Organization (WHO) recommends that low-income countries should increase their THE as a percentage of GDP/GNP by 1%–2% annually, in view of the existing and future trends of economic growth.

Part of this low spending on health by many developing countries is because of allocation of relatively small shares of total government budget to health—levels that are inadequate to support coverage with quality essential health services for all. Government contributions to the health sector in fact depend on the allocation from the public general-tax revenue. There are variations in government investment on health as a proportion of THE across countries, from 23.4% in Japan to Myanmar’s 4.8%. Interestingly, Japan and Singapore spend over 23.4% and 13.6%, respectively, from public sources, but both have achieved UHC. The Republic of Korea (ROK) spent an equal amount as China, with a public contribution of around 10%, but only ROK has reached UHC.

Government Financing Through Public Health Insurance Schemes

Many governments in Asia have introduced various types of publicly financed health insurance schemes (SHI). In general, there are three systems of SHI. The most common system is the employment health insurance system or the health insurance under the social security schemes, in which employees of formal and informal sectors, employers and, in some cases, governments contribute to a central pool of fund, and from this source healthcare is financed. Many countries in Asia, such as Japan, ROK, China, India, Indonesia, Mongolia, the Philippines, Thailand, Laos and Vietnam, have adopted a nationwide SHI (social protection) scheme for some decades. The major challenge of extending coverage for health insurance is to cover people from the informal sector, who account for the majority of the population in these countries. China’s insurance system has evolved from centralised financing of the free Cooperative Medical System for government employees and urban centres to the introduction of a national SHI scheme as part of the social security programme for any employed person. The revenue of the Basic Medical Insurance system in China comes from premiums collected by three insurance schemes: (a) an SHI scheme, namely Urban Employees’ Basic Medical Insurance (UEBMI); (b) a community-based health insurance scheme, namely Urban Residents’ Basic Medical Insurance (URBMI); and (c) the New Rural Cooperative Medical Scheme (NRCMS). The government of China has subsidised 80% of URBMI and 70% of NRCMS, in addition to the individual premium for each scheme. The Chinese government also funds the National Essential Public Health Services (Myint et al., 2019; Qingyue et al., 2015).

Thailand also almost has UHC, financed through various social protection schemes. Indonesia and Philippines are also moving in a similar direction. The Indian government in 2018 launched the world’s largest government health insurance scheme, called Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY), incorporating the existing National Rural Health Mission (NRHM), Rashtriya Swasthya Bima Yojana, Senior Citizen Health Insurance Scheme (SCHIS), Central Government Health Scheme (CGHS), Employees’ State Insurance Scheme (ESIS), etc.

Private Health Insurance Schemes

The private sector, in providing healthcare, has expanded rapidly, because many national health systems are not able to cope with rising costs, especially for co-payment, and the increasing demand for services. The introduction of private health insurance has reduced OOP payments and, in the long run, could evolve a broader SHI system. Development and expansion of private health insurance schemes could be seen in the context of globalisation and rapid liberalisation of international trade, including opening of markets for the private sector. Three different types of private health insurance are identified: (a) private for-profit or commercial health insurance; (b) private not-for-profit health insurance (voluntary health insurance); and (c) community health insurance. The experience in many countries has shown that there is a continuum of arrangements between private insurance and SHI. Private health insurance can serve as one of the sources of coverage or augment co-payment to public health insurance/SHI. However, there is a need to have appropriate regulation of private health insurance schemes to ensure the basic principles of solidarity, solvency requirements, cross-subsidisation and control of exclusion (World Health Organization, 2004).

Out-of-pocket Expenses

As a result of the low levels of government spending, OOP payments by health consumers constitute a large share of health expenditures, amounting to more than US$0.5 trillion or US$80 per capita annually. As noted earlier, these payments deter some people from using needed health services and push others into a poverty trap. The majority of the population in Asia still incur a high proportion of direct OOP expenses. Studies have shown that OOP expenses account for nearly 80% of the total health expenditure in Myanmar, 75% in Cambodia and 44% in China. Countries with a high proportion of OOP financing—where individuals have to pay out of their pocket at the time of receiving healthcare—have concerns regarding equity in healthcare. High OOP payments could exclude poor people from the use of healthcare, thus restricting access to only those who can afford the fees.

Without any government assistance, OOP expenses can push households into poverty through borrowing of money or sale of assets, or can preclude access to needed care. Analysis of information from 89 countries reported a strong correlation between OOP payments and incidence of catastrophic health expenditure (Xu et al., 2007). An increase of 1% in the proportion of total health expenditures from OOP was associated with an average increase of 2.2% in the proportion of households experiencing catastrophic consequences. About 10.5% of households in Vietnam and 5% in Cambodia experienced catastrophic healthcare events. User fees can also lead to unethical practices in healthcare.

Needed and Generated Resources

A health system can be viewed as a dynamic system consisting of inputs and outputs. Inputs to a health system include the financial and human resources, infrastructure and consumables, whereas the outputs include trained human resources, specification and production of commodities, like drugs, provision of facilities and management of knowledge. A tremendous number of human resources, ranging from policymakers and administrators to medical, paramedical and ancillary personnel, and even health volunteers, are needed for effective functioning of health systems. As per World Health Statistics 2019, in Japan, the registered number of physicians per a population of 10,000 was 24.1, that of dentists was 8, that of nurses 115 and that of pharmacists 18. The physician-to-population ratio was 51.4 for Australia, 17.9 for China, 8.6 for Myanmar and 3.8 for Indonesia. Across Asia, there are inequities in the distribution of health professionals, especially in nursing, psychiatry and pharmacy.

Many countries have invested substantial funds for setting up diagnostic and treatment facilities with high technology. However, they have failed to set up an effective and efficient maintenance mechanism, mainly due to lack of human resources. In addition, the health system has to provide facilities in which the patients can receive safe and get effective health treatments. Even to date, there is a significant informal sector of drug peddlers and unqualified practitioners who run allopathic-type medical facilities and whose quality is a cause of concern for patients’ safety.

Another important aspect of the health system is knowledge management. Health systems routinely gather a large volume of information, ranging from tabulation of hospital products and accounts to records of incidence and prevalence of diseases and conditions. In most countries, essential health information is collected and managed in a hierarchical manner, from the primary health care facilities to the central level of management. Due to the sluggish nature of the Health Management Information System (HMIS) used by many East Asia–Pacific countries, often such information is late and incomplete; therefore, there is difficulty in rendering any action for averting an epidemic or developing evidence-based health policy.

Inefficiencies and inequities in health financing are widespread. Estimates suggest that between 20% and 40% of health funding is wasted across all countries, on average. In terms of equity, poor people often contribute a higher proportion of their incomes in health payments than the rich, without subsequent compensation through fiscal transfers in cash or in kind, while frequently receiving less health services of lower quality.

Rapid increases in development assistance for health (DAH) since 2000 have resulted in major health gains in the poorest countries, yet DAH levels have stagnated in recent years. DAH must evolve to help accelerate progress towards UHC (Global Burden of Disease Health Financing Collaborator Network, 2019). In the past, DAH has predominantly supported infectious-disease programmes, like those for human immunodeficiency virus/acquired immunodeficiency syndrome (HIV/AIDS), malaria and tuberculosis. Additional international assistance is needed to catalyse similar advancements in other disease areas, especially with regard to non-communicable diseases, strengthen health systems, support governments in tackling low government revenue generation and strengthen their capacities to carry out all health financing functions required for accelerated progress towards UHC. A substantial increase in DAH, with support to develop the capacity to absorb external financing, stronger engagement of the private sector and innovative health financing policy solutions in countries would all be needed for countries to have a chance of reaching UHC and realising the ensuing benefits of sustainable, inclusive growth.

Conclusion

In 2019, the world had spent nearly US$8 trillion on health, close to 7% of the global GDP. Actually, high-income countries, with only 16% of the world’s people, accounted for 80% of the global health spending. Conversely, 76% of the world’s people living in middle-income countries accounted for less than 20% of the global health spending, and the low-income countries, with more than half a billion people, accounted for less than 1% of the world’s health spending. In 2019, the global average health spending per capita was US$1,000, which actually conceals a very large difference between the highest- and lowest-spending countries, with the expenditures ranging from over US$9,000 to less than US$200 per capita. People spend more on health through OOP payment in constant absolute terms for all income groups. Today, there are 1 billion people living in countries where OOP spending is 50% or more (Xu et al., 2018).

The way healthcare is financed varies considerably across countries. Middle- and high-income countries tend to have a higher share of health spending that is funded by compulsory prepaid sources, such as government budgets (from various types of taxes) and/or SHI contributions. Many LMIC still rely heavily on the contribution of external assistance to health expenditure, estimated at about one-third on average. There is evidence of fungibility of external funds, particularly in low-income countries. In addition, there is evidence of non-additionality of development assistance for health, whereby development assistance is spent on the health sector but the recipient government reallocates its own resources to fund other priority areas. The proliferation of bilateral and multilateral donors, multiple global initiatives and international non-governmental organizations (NGOs) also generates the potential for weakening health systems, rather than strengthening them, allowing countries to avoid issues like long-term sustainability.