Back Matter

Appendix: Reforms in Advanced Countries—A Typology

Reforms implemented in advanced countries over the past three decades can be grouped into three categories (Oxley and MacFarlan, 1995):

Macro-level controls

  • Budget caps: These are the bluntest instrument for restraining resources allocated to the public health sector. They can be expressed as limits on overall healthcare spending or on sub-sectors, such as hospitals or pharmaceuticals. Examples include global budgets for hospitals or expenditure ceilings for general practitioners.

  • Supply constraints: Here the focus is on regulating the volume of either inputs into or outputs from the health care system. Input controls include limits on admittance to physician training colleges, defining positive lists for drugs, or rationing of high-tech capital equipment. Output controls include delisting of certain treatments, such as eye tests and dental treatment.

  • Price controls: Price controls regulate prices of inputs or outputs. They include wage controls for health care professionals, reference pricing for pharmaceuticals products, price controls on specific treatments, and set case-based payments such as capitation or diagnosis related groups (DRGs).

Micro-level reforms

  • Public management and coordination: These reforms seek to alter the organizational arrangements between different parts of the health care system in order to reduce costs through improved coordination, alignment of responsibility and accountability, better incentive structures, and/or reduction in overlap or redundancy. Examples of such changes include abolition of managerial levels, decentralization of health care functions, and introduction of gatekeeping arrangements (i.e., a physician who manages a patient’s healthcare services, coordinates referrals to secondary and tertiary levels, and helps control healthcare costs by screening out unnecessary services).

  • Contracting: How providers are reimbursed is one of the most important factors impacting the micro-level efficiency of health spending. There are many different ways to pay physicians, hospitals, and other providers but three of the most general methods include: (i) salaries or budgets; (ii) case-based payment like capitation or DRGs, and; (iii) fee-for-service.

  • Market mechanisms: These reforms seek to improve micro-level efficiency and/or control costs by introducing varying degrees of market mechanisms into the health sector. These reforms operate not so much on the supply side, as on the nexus between supply and demand. Examples include the creation of internal markets (e.g., where primary care physicians purchase services from hospitals), separating the purchase of health services from provision (thus allowing competition), and promoting patient choice (e.g., where patients can chose among primary care providers and hospitals).

Demand-side reforms

These reforms include policies intended to increase the share of health care costs borne by patients, often with the objective of avoiding excessive consumption of specific health services. The two important issues on the demand side are the level of patient cost sharing (this can take form of lump-sum or percentage copayments) and the tax treatment of private health insurance.

References

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1

For all of the countries, the five-year moving average of public health spending to GDP declined.

2

Gatekeeping is a system in which a primary physician manages a patient’s health care services, coordinates referrals, and helps control healthcare costs by screening out unnecessary services.

3

Universal health coverage has a long history in Canada. Universal hospital coverage and universal access to essential medical services were introduced in all provinces by 1958 and 1971, respectively.

4

The legislative act that incorporates these reforms was the Established Program Financing Act (1977).

5

Federal funding for provinces had two components: a tax transfer and a cash transfer. Since 1977, the cash component was derived by linking the growth rate of the transfer to the growth rate in per capita output—in effect, a budget cap. This “escalator” factor was extended to all transfers in 1982. Since then, the government has regularly adjusted the escalator to contain costs: the escalator was reduced twice, in 1986 and 1989, to increase 2 percentage points and 3 percentage points below the growth of Gross National Product, respectively.

6

In some Canadian provinces where individual physicians are reimbursed according to a fee-for-service schedule, once a certain billing threshold is reached, a declining fraction of the negotiated fee is reimbursed.

7

Therapeutic price referencing relates the value of an innovative patented product to the price of the established treatments on the market, including off-patent products deemed therapeutically equivalent.

8

Excess cost growth is defined as the difference between real public health spending growth and real GDP growth.

9

In the United Kingdom, in contrast, private insurance is allowed for a large number of services and generally used as a top up to the NHS, although many treatments are not covered or are restricted.

10

The Hospital Act (1990); the Specialized Medical Care Act (1991).

11

DRGs specify treatment protocols and medical conditions and provide an associated price schedule. DRGs can help control spending by reducing incentives for unnecessary treatments to address a given medical condition. Where reimbursement is based on DRGs, health providers are not compensated for costs of treatment that go above the price schedule associated with a given DRG.

12

Before 1993 hospitals received around half of their revenues from state and the other half from municipalities.

13

In the previous system, past expenditures were used as the basis for calculating subsidies.

14

Over 2000–07 various acts and regulations affecting health spending were passed: The 2000 Reform of Statutory Health Insurance Act; in 2001, The Diagnosis Related Groups Financing in Hospitals Act and the Pharmaceutical Budget Redemption Act; in 2002, The Case Fees Act and the Pharmaceutical Expenditure Limitation Act and the Contribution Rate Stabilization Act; and in 2004, The Health System Modernization Act.

15

The Act introduced community-rated flat-rate insurance for dentures. This was followed by, the Act to Adjust the Financing of Dentures, which was introduced in July 2005. This imposed a 0.4 percent of gross income copayment for dentures (Busse and Riesberg, 2004).

16

Each service is allocated a number of points and lists certain preconditions for claiming reimbursement, such as particular indications for use or exclusions of other services during the same visit. At the end of each quarter, every office-based physician invoices the physicians’ association for the total number of service points delivered. The actual reimbursement will depend on a number of factors including the available budget allocation.

17

Under a system of capitation, physicians generally are guaranteed a minimum income, even if they see a small number of patients.

18

Spending on care provided by allied health professionals, medical devices, and transport/emergency services was less effectively curbed.

19

This regulation led to lower-than-calculated savings for two reasons. First, pharmaceutical companies partly introduced “dummy” drugs with high prices. In effect, this meant that drugs being heavily used were no longer expensive relative to other options (that is, the newly introduced dummy drug). The heavily used drug, therefore, would be unaffected by the reference pricing system and the requirement to use relatively inexpensive drugs. After the change in the reference pricing system in 2004, this strategy was no longer effective. Second, the regulation failed because the companies often did not comply with it (Busse and Riesberg, 2004). For an overview of pharmaceutical reforms in Germany, see Paris and Docteur (2008).

20

In practice, essential levels of care are hard to define.

21

A positive list is a list of drugs that are reimbursable. At times governments define negative lists which include medicine that cannot be reimbursed.

22

Delisting implies that a drug will no longer be eligible for reimbursement from the public sector.

23

Number of expected in-patient days, admissions, day-treatments, and visits to the out-patient clinics per hospital per year were considered.

24

Dekker Plan (1987) and Simons Plan (1989).

25

Pharmaceutical cost groups and diagnostic cost groups are proxies for health status.

26

The Health and Medical Care Act (1982), the Dagmar reform (1985), and the ÄDEL reform (1992).

27

Purchaser-provider splits separate the role of purchasing and providing health care services within government, allowing for more active contracting for health care services by primary care providers (Italy, Sweden, and the United Kingdom).

28

Age structure, local inputs costs, and standardized mortality rates were originally used as weighting factors.

29

Managed care is a general term for health plans that are proactive in seeking to affect the type or amount of care their enrollees receive. Unlike traditional insurance-based plans, they tend to have detailed contractual or employment relationships with health care providers. Cost-containment approaches used by managed care include requiring pre-authorization for services (gatekeeping), selective contracting with providers who are willing to accept the plan’s payment arrangements and utilization reviews.

30

The Health Insurance Act.

31

Hospital Master Plan 2015.

32

Health Care Services Organization Act that took effect in 2001.

33

Based on CEIC data, public health spending has increased by 0.8 percentage point of GDP since 2007. CEIC data are generally lower than WHO data. In 2007, CEIC estimated public health spending at 0.8 percent of GDP, while WHO data indicate spending of 1.9 percent of GDP.

34

Studies suggest that this resulted in a shift from high-tech to basic professional services and a reduction in growth rates of expenditures for secondary and tertiary hospitals, but high-tech services still appears to be very profitable (Eggleston and others, 2008).

35

Payment reforms have been associated with lower expenditures, compared with FFS; however, evaluation of the effects on quality of care, risk selection, and cost shifting are not yet available (Eggleston and others, 2008).

36

Studies show that the NCMS and other insurance have been unable to reduce out-of-pocket spending and improve access to care and health outcomes (Lei and Lin, 2009; Wagstaff and others, 2009a).

37

The remainder (18 percent) is covered by other not-for-profit agencies or has no coverage (about 10 percent, evenly distributed across income quintiles).

38

UF is an inflation-indexed unit, worth about US$40 in August 2010.

39

Health Authority and Management Law, the Private Health Law, Financing Government Expenditure Law, and Regime of Explicit Guarantees in Health Law (AUGE).

Macro-Fiscal Implications of Health Care Reform in Advanced and Emerging Economies - Case Studies
Author: International Monetary Fund