Spotlight

June, 2013

Issue 17

Increased public and donor funding does not guarantee equity in out-of-pocket payments Key Points

Donor support as a share of total health sector funding increased from 23% to 44% between 2000 and 2007Out-of-pocket payments were more regressive in 2007 than they were in 2000. The intensity of catastrophic payments was higher among the poorest in 2007 than in 2000.

very small share of funding from prepayment schemes. The share of out-of-pocket payments in total health sector funding in real terms significantly decreased from about 43% in 2000 to about 18% in 2006 (Figure 1). Figure 1: Contribution of different financing sources to total health care funding

Increasing donor/public funding to the health sector does not guarantee greater financial risk protection against out-of-pocket payments among the poorest. To reduce the burden of out-of-pocket payments among the poorest, donor funds should be allocated on the basis of needs of the poorest and other vulnerable groups. By Gemini Mtei and Josephine Borghi

Background

The government of Tanzania has demonstrated commitment to Universal Health Coverage (UHC) by introducing health insurance in 2001 [6] and is currently in the process of developing a National Health Financing Strategy (HFS) that will help to promote UHC goal. The need for an increase in prepayment funding for the health sector, is widely accepted as a means of reducing out-of-pocket payments (OOP) and enhancing UHC objectives [2-5]. Total health sector funding has been increasing over time from a total of about TZS 275 billion in 2000 to TZS 1,333 billion in 2006 in real terms [7, 8]. The mix of funding sources has also changed during this period. For example, the share of development partner funding doubled from 22% in 2000 to 44% in 2006 [7, 8]. The share of general tax funding has marginally increased (Figure 1), as has the

Source: Mtei (2012) using HBS 2000/01 and 2007 data and budget speeches; NHA 2001 and NHA 2008

Note: OOPs= Out of pocket payments; Insurance includes National Health Insurance Fund (NHIF) and Community Health Fund (CHF); Other includes other health insurance and NGO funding.

Increased public sector funding through donor support and reduced reliance on OOP to fund health care appear consistent with universal coverage goals in Tanzania. This brief examines whether there have been changes in the share of income consumed by out-of-pocket payments among the wealthiest and poorest groups (financing equity) and whether the burden of out-ofpocket payments has reduced (that is, whether there is greater financial risk protection in 2007 than in 2000. Variation by type of OOP is also explored.

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Study methods

Household Budget Survey (HBS) data for the years 2000 and 2007 were used to explore changes in equity of outof-pocket payments and financial risk protection. Equity was analysed using graphs of the distribution of health care payments as a proportion of household income across wealth groups and the Kakwani progressivity index (See box 1). Catastrophic payments were defined as outof-pocket expenditures exceeding 10% of total household income, measured using household consumption [9].

Disaggregated analysis by type of health care payments shows that expenditures on drugs as a share of income actually increased in 2007 compared to 2000 (Figure 3). The increase was higher among the poorest households compared to the wealthiest. Payments to traditional healers and traditional medicine were more concentrated among the poorest in both years. Figure 3: Distribution of out-of-pocket by type of payment across wealth groups

Box 1: Definition of Kakwani index

The Kakwani index is used to quantify the magnitude of inequity embedded in the distribution of health care financing burden. The index is defined as the difference between the concentration index of health care payments and the Gini index of income distribution [1]. The concentration index of health care payments is a summary measure of inequalities existing in the distribution of payments across the population. The Gini index is a summary measure of inequality in the income distribution across population groups. Health financing is considered to be equitable (progressive) if the Kakwani index is positive (>0) and inequitable (regressive) if the Kakwani index is negative (<0). The system is proportional (both the poorest and the wealthier pay an equal share of their income to finance health care) if the Kakwani index is zero.

Changes in the distribution of out-ofpocket payments

The proportion of household income spent as out-ofpocket payments for health care has declined between the two periods across all income groups (Figure 2). Out-of-pocket payments were more regressive in 2007 (Kakwani index -0.07) than they were in 2000 (Kakwani index -0.03). 1

Note to Figure 3: Other OOPs include payments for consultation fee, registration fee and diagnosis fee

Changes in financial risk protection

The proportion of households who incurred a catastrophic level of out-of-pocket payments between the two periods decreased from 2.9% in 2000 to 1.8% in 2007 (Figure 4). The likelihood of catastrophic payments was higher among the poorest than the wealthiest in both periods. The intensity of catastrophic payments was higher among the poorest in 2007 (concentration index2 -0.16) than it was in 2000 (concentration index -0.12). Figure 4: Proportion of households who incurred catastrophic health payments

Figure 2: Distribution of out-of-pocket payments across wealth groups

Conclusions and policy recommendations

o Out-of-pocket payments were more regressive in 2007 than they were in 2000. Despite the decline in the proportion of the population incurring

1 Household consumption was used as a proxy of income in this brief

2

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2 Concentration index in this case compares the burden of catastrophic payments between the poorest and the rich. A negative index implies that the poorest suffers more catastrophic health care payments than the rich.

Spotlight Issue 17 June, 2013

catastrophic levels of out-of-pocket payments between the two periods, the intensity of catastrophic payments was higher among the poorest in 2007 than it was in 2000. While public funding, including donor funding is proposed to be the most equitable mechanism of financing health care this does not necessarily improve equity and financial risk protection in relation to out-of-pocket payments. o The current review of the regional resource allocation formula that the Ministry of Health and Social Welfare is undertaking could be used to address equity in the distribution of public resources and protect the poorest against catastrophic out-of-pocket payments. To improve equity the formula might include variables to capture differences in utilization by socioeconomic status[3], proportion of the population that are uninsured, the the proportion of the population that are marginalized (e.g. homeless, orphans, etc), district ability to generate own revenue and prevalence of high cost illnesses, in addition to disease burden and poverty level variables which are currently embedded in the formula. o The resource allocation formula should not only guide public resource allocation at the national level (at Ministry of Finance and Ministry of Health and Social Welfare level), but also be 3 This is a challenging variable to capture but the Household Budget Surveys (HBS) could be used to establish such an indicator by collecting information on health care utilization by socio-economic status across districts

used to allocate resources up to the point of service utilization (distribution across facilities) in the districts. Funds allocated using the poverty level variables in the resource allocation formula should be used to specifically fund the needs of the poorest in the districts through prepayment schemes such as CHF and NHIF. o As the government through the Ministry of Health and Social Welfare is making an effort to develop a health care financing strategy (HFS), it is important that the strategy pay a special consideration to the way purchasing arrangements (the way decisions are made to allocate funds to buy/provide needed health services) using public resources are organized to ensure equity and financial risk protection. Public funds should be used to purchase needed services and subsidize large health care expenditures especially among the poorest.

Acknowledgement

We acknowledge that part of the analysis in this edition of Ifakara Health Institute (IHI) Spotlight was done at the time when the first author was a PhD student at the London School of Hygiene and Tropical Medicine funded by the Commonwealth Scholarship Commission. Final analyses and writing were done under the Universal Insurance in Tanzania and South Africa (UNITAS) project funded by the EU under FP7-CP-FP-SICA funding scheme grant number 261349. We acknowledge the support of the IHI Resource Centre for editing this Spotlight.

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References 1.

2.

3.

4.

Kakwani, N., C, Measurement of Tax Progressivity: An International Comparison. The Economic Journal, 1977. 87, No. 345: p. 71-80. World Health Organization, Health Systems: Improving Performance, in The World Health Report 2000. 2000, WHO: Geneva, Switzerland. Organization of African Union. Abuja Declaration on HIV/AIDS, Tuberculosis and Other Related Infectious Diseases. in African Summit on HIV/AIDS, Tuberculosis and Other Related Infectious Diseases. 2001: OAU/SPS/ ABUJA/3. World Health Organization. Social health insurance: Sustainable health financing, universal coverage and social health insurance. in Fifty -Eight World Health Assembly, Report by the Secretariat. 2005a. Geneva, Switzerland: WHO.

5.

World Health Organization. Resolutions and decisions. in Fifty-Eighth World Health Assembly. 2005b. Geneva, Switzerland: WHO.

6.

Ministry of Health and Social Welfare, Health Sector Strategic Plan III. 2008, MOHSW: Dar es Salaam.

7.

Ministry of Health, Tanzania National Health Accounts. 2001, Ministry of Health.

8.

Ministry of Health and Social Welfare, Tanzania National Health Account 2002/03 - 2005/06. 2008, Ministry of Health.

9.

Wagstaff, A. and E. van Doorslaer, Catastrophe and impoverishment in paying for health care: with applications to Vietnam 1993-1998. Health Economics, 2003. 12(11): p. 921-934.

Ifakara Health Institute. Plot 463, Kiko Avenue, Mikocheni. P.O. Box 78373, Dar es Salaam, Tanzania. Web: www.ihi.or.tz ; E-mail address: [email protected]; Phone: +255 (0)22 2774756; Fax: +255 (0)22 2771714.