NTA Level 6 • Semester 1 • PST06105

Health Financing – Complete Full Notes

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PST 06105: HEALTH FINANCING

Session 1: Introduction to Health Financing

Learning Tasks

At the

end of this session students are expected to be able to

:

Explain the historical background of health financing

Describe various concepts of health financing

Historical

Background of Health Financing

H

ealth

financing has been one of the most important policy

agenda nationally

and internationally among health leaders and policy-makers.

Health

financing has risen on agenda of policy- makers due to the fact that

health systems

, especially developing countries, are facing what is known as a problem

of financial

(fiscal) sustainability.

Historical

Background of Health Financing

Problem of financial

sustainability:

exists

when health system or government is

unable

meet its obligations due to its

inability

unwillingness

to generate sufficient

revenue to

meet them

Historical

Background of Health Financing

Key symptoms of the problem of financial

sustainability:

(

World Bank, 1987, 1993):

Misallocation

and insufficient spending

on cost-effective health interventions

needed by

the population: public money

was/is

spent on health interventions of low

cost effectiveness

Internal

inefficiency:

much of the money spent on health is wasted:

brand-name pharmaceuticals

are purchased instead of generic drugs, health workers are

badly deployed

and

supervised, and hospital beds are underutilized.

Historical

Background of Health Financing

Key symptoms of the problem of financial sustainability:

( World Bank, 1987, 1993):

Inequity

in the distribution of benefits from health services:

The better-off in most had and continue to have better access to health care ; the poor lack access to basic health services and receive low-quality care

Difficulty in achieving or maintaining acceptable quality services within the government budget

Historical

Background of Health Financing

As result of these problems, world bank and others proposed

health sector

reforms

policies

that were intended to improve performance of health systems;

These

reforms, among, other recommended that health financing should be

strengthening by

introducing the following:

new

financing mechanisms such as user fees,

health

insurance

and other sick coverage; and

improved

management of public health services.

Activity: Brainstorming

What is the meaning of the term “health financing” and “sources of finances”?

Health

financing

defined variously by different experts:

R

efers

collection

of funds from various

sources (e.g

. government, individual, businesses, donors); pooling fund to share financial

risks across

larger population groups; and using them to pay for services from public

and private

health-care providers. (WHO, 2000)

Is the

process by

which revenues

are collected from primary and secondary sources, accumulated in fund

pools and

allocated to provider activities.

(

Mossialos

al,2003

is defined also as a process of raising financial resources to finance and pay

for health

services

Sources

of finances

T

main sources of finances for health care are:

Individuals

, households and employees

Firms

, corporate entities and employers

Foreign

and domestic NGO‟s and charities

Foreign

governments, companies multilateral agencies

Contribution

Mechanisms

The contribution mechanisms are the ways in which individuals, households, firms

and governments

do contribute funds to collecting agents.

The

main contributing

mechanisms are

:

Direct

and indirect taxes

Compulsory

insurance premiums

Voluntary

insurance premiums

Out-of-pocket

payment(user charges)

Donations

, grants and loans

Medical

savings accounts

Importance

or significance of health financing

The importance or significance of health financing has been stated by WHO (2003)

as follows

:

Adequate

and sustained financing is a critical factor in the

creation of a viable health

system

Fair

financing mechanisms allow people to

access health services

at the right time

and prevent

people against impoverishment

Financing is the mechanism by which plans and policies

are translated into

action

through

the allocation of

resources

Importance or significance of health financing

Without adequate financing, plans remain in the realm of rhetoric and good intentions

With

adequate financing, a resource base can be created for the operations and delivery of services, the development and deployment of a trained workforce and the required infrastructure and technology

Financing is a fundamental building block on which the other critical aspects (services, human resources, medicines and equipment, health information and leadership and management) of the health system rest

Also, financing is a powerful tool with which policy-makers can develop and shape health services and their impact in improving health of the population

Key points

Health financing is an important topic and sub-component of health system that

facilitate delivery

of health service and improvement of health of the population

There

are number of concepts that need to be understood for better understanding

of health

financing

Evaluation

What is the meaning of the following

terms

ealth

financing,

health

financing

functions,

sources

of finance,

contributing

mechanism, and

financing

option/ mechanism

What

are the symptoms the problem of financial

sustainability?

Reference

Gottret

, P.

Schieber

, G. (2006). Health financing revisited: a

practioner’s

guide.

Washington DC

, USA. World Bank

Green

, A. (2007). An introduction to health planning for developing countries (3rd Ed.)

London

: Oxford University Press.

Gruen

, R and

Howarth

, A. (2005). Financial management for health services. London:

Open University

Jiyenze

, M. K. (2013). Health care financing and resource allocation: handout for teaching

health

care financing.

Arusha

: CEDHA. [Notes: Unpublished]

Kutzin

, J (2001). A descriptive framework for country-level analysis of health care financing

arrangements

. Health Policy; 56, 171–204.

Reference

Tanzania

MoHSW

(2014). DHM Healthcare financing module. Dar

Salaam:

MoHSW

Mossialos

, et al (

) (2002). Funding health care: options for Europe. Buckingham: Open

University

Press.

WHO

(2003). Mental health financing. Geneva. Switzerland: WHO.

World

Bank (1987). Financing health services in developing countries: an agenda for

reform

. Washington, D.C: World Bank

World

Bank (1993). World Development Report 1993: investing in health. Oxford, UK:

Oxford

University Press.

PST 06105: HEALTH FINANCING

Session

: Health Financing System and Mechanisms

Learning Tasks

At the end of this session students are expected to be able to:

Describe

functions of health financing system

Describe

objectives of health financing system

List

financing mechanisms

Outline

the roles of government in medicines

Activity: Brainstorming

What are functions of health financing system?

Functions

of Health Financing System

Health financing system is a sub-system of the health system responsible for performing

the

functions of collecting, pooling and risk management, and allocating

financial resources

to purchase health services from the various health care providers

The

health financing system performs four main functions (

Kutzin

, 2003;

Mossialos

2002

):

Collecting

revenue

Pooling

Allocation

Purchase

service

Functions of Health Financing System

1. Revenue

collection

Collection

is a process of revenue gathering or

mobilizing

financing revenue from

various

sources

is a process by which the health system receives money from households and

organizations

or companies, as well as from donors

The

collection process involves three elements: source, contribution mechanisms and

collecting

agents

The

collecting agents may be:

Central

governments

Regional

governments

Local

governments

Independent

public body or social security agency

Private

not-for-profit or for-profit insurance funds

Providers ( health facilities)

Functions of Health Financing System

2. Pooling

of risk

Pooling

is the

‘accumulation

of prepaid health care revenues on behalf of a

population

‟

is a process of accumulation and management of revenues in such a way as to

ensure

that the risk of having to pay for health care is borne by all the members of

the pool

and not by each contributor individually.

Pooling

facilitates the pooling of financial risk across the population or a

defined subgroup

When

there is no risk pooling, individuals are responsible for meeting their

own health

care costs as they arise. This entails patients‟ meeting user fee charges as

they are

incurred.

Pooling

agents may be:

Ministry

of health: central and

decentralised

units

Local

government health department/boards

Social

health insurance fund (s)

Private

insurance companies

Provider-based

schemes

Functions of Health Financing System

3. Allocation

of financial resources

Resource

allocation is defined as :

“

Process by which available resources are

distributed between competing

uses

to achieve

a particular goal” (Pearson, 2003).

“

The distribution of resources

, in particular finance, from the

centre

the peripheral

level. It generally concern with broad levels of aggregated

financial resources

” (Green, 2007).

The

distribution of goods and services (e.g. funds, professional time, beds,

drugs, etc

.) among competing programs or people (e.g. prevention, acute care,

clinical programs

, groups, individual, etc.)

Allocation is also related to other concepts

(budgeting and virement).

According

to Green (2007)

budgeting

“implies the more detailed determination

of precisely

how funds will be used” and may be defined a process of deciding

what financial

resources will be spend in a defined period (usually a year)

Virement

or reappropriation (Green, 2007) is a process of adjusting the budget

to shift

resources from one area to another

Three

approaches are commonly used to allocate resources:

Negotiation

and political compromise

: under this approach, the distribution of

health

resources is heavily influenced by more vocal, urban populations and

by political

and other vested interests

Incremental

allocation:

resources, under this approach, are allocated based on

the past

rather than according to any concept of need but a percentage

is increased/decreased

to the previous allocation of resource

Need-based approach:

allocation of resources is based on health needs using objective indicators. Usually a formula is used to improve equity of resource allocation.

Need-based approach:

The

main components of a needs-based resource allocation

formula should

reflect the main reasons why health needs vary.

The

following proxies

3 are

generally used:

Population

size – a greater number of people will present with a greater

health needs

;

Age

and sex profiles of populations – the very young and very old and

women have

greater needs

Degree

of relative/absolute poverty – poverty causes ill health

In Tanzania, the allocation formula has the following proxy indicators components:

Population (70 %)

Poverty count (10 %)

District vehicle route (10%)

Under-five mortality (10%)

4. Purchasing

Purchasing

is “the transfer of pooled resource to service providers on behalf of the

population

for which the funds were pooled” OR “ is the process by which pooled

funds are

paid to providers in order to deliver a specified or unspecified set of

health interventions

”

Health

system may have separate entities responsible for purchasing and

service provision

Purchasing

agents may be:

Ministry

of Health

Regional

governments

Local

governments

Social

health insurance fund(s),

Private

insurance funds

Employers

Functions of Health Financing System

Objectives

of Health Financing System

Promoting

universal protection against the financial risks associated with ill health.

Financial

protection

aims to ensure that people do not become poor as a result

of using

health care;

Promoting

a more equitable distribution of the burden of financing the health system

–

equity in finance requires richer people to pay

for

health

care, as a

proportion of

their

income

, than poorer

people

;

Promoting

equitable use and provision of services – equity of access to health

care based

on need rather than ability to pay;

Objectives

of Health Financing System

Improving the transparency and accountability of the system – for example, ensuring that the entitlements and obligations of the population are well understood by all, addressing the issue of informal payments where relevant, auditing institutions

and monitoring

and reporting on performance;

Rewarding

good

quality care and providing incentives for efficiency in

service

organization

and delivery;

o Promoting

administrative efficiency by minimizing duplication of responsibility

for

administering

the health financing system and minimizing costs that do not

contribute to

achieving the aforementioned goals (set out earlier).

Activity: Brainstorming

What are the common financing mechanisms used to raise financial resources

in Tanzania

Common

Financing Mechanisms

Financing mechanisms refers to the options (alternatives/ means) for raising financial

resources

for the health sector.

There

are about seven commonest health financing mechanisms or alternatives for raising

financial

resources in the health sector:

User

fees for services

Tax

based system

National

health insurance

Private

insurance

Community

health insurance

Health

maintenance organizations

International

loan/grants

Common

Financing Mechanisms

Each country health system has a mix of financing mechanisms, which are determined

by a

number of factors ( Green, 2007):

History

reasons:

system financing mechanism developed by colonialist tend to be

most

dominant financing mechanism in colonized countries

Economic

basis:

countries that have developed industrially tend to have social health

insurance

, e.g. German

Ideology

:

countries(e.g. U.S.A) that are neo-liberal countries

favour

user charges as

the

principal financing mechanism

International pressures:

international agencies promote particular

financing

mechanism

. For example, the World Bank promotes user charges; UNICEF

advocates community

financing; and the ILO promote social insurance

Common

Financing Mechanisms

To achieve universal health coverage(means that all people in a society are able to

obtain the

health services that they need, of high-quality

);

WHO (2017)

commends

that

Countries to develop

financing mechanisms that rely predominantly on

public/compulsory funding

sources such as tax-based financing and social health insurance.

Roles

of Government in Financing Medicines and

Medical Supplies

Formulating

health financing policy and guidelines:

developing financing policies for

medicines

and related supplies

Financing

medicines:

raising funds from different source and use them for purchasing

medicines

Coordinating

implementation of health financing policies:

coordinating and

supervising

implementers of health financing policies

Monitoring

use of financial resources:

setting standards and enforcing standards for

effective

operation of pharmaceutical market

Key Points

A

health financing system perform four major functions and it is designed to achieve

a various

objectives

There

are seven financing mechanisms that are commonly used in different health systems

Government

has various roles in financing medicines and medical supplies

Evaluation

What are the functions of health financing

system?

What

are the objectives of a health financing system?

What

are the elements of resource allocation formula used to allocate resources in

Tanzania

Mention

financing mechanisms used in the health sector of Tanzania

What

are roles of government in financing government?

References

Gottret

, P.

Schieber

, G. (2006). Health financing revisited: a

practioner’s

guide. World Bank

Green

, A. (2007). An introduction to health planning for developing countries(3rd Ed.)

London

: Oxford University Press.

Gruen

, R and

Howarth

, A. (2005). Financial management for health services. London: Open

University

Jiyenze

, M. K. (2013). Health care financing and resource allocation: handout for teaching

health

care financing.

Arusha

: CEDHA. [Notes: Unpublished]

Kutzin

, J (2001). A descriptive framework for country-level analysis of health care financing

arrangements

. Health Policy; 56, 171–204.

Tanzania

MoHSW

& PMO-RALG (2011). Comprehensive council health planning

guidelines

. 4th Ed. Dar

salaam:

MoHSW

References

Tanzania.

MoHSW

(2014). DHM Healthcare financing module. Dar

Salaam:

MoHSW

Mossialos

, et al (

) (2002). Funding health care: options for Europe. Buckingham: Open

University

Press.

WHO

(2003). Mental health financing. Geneva: WHO.

World

Bank (1987). Financing health services in developing countries: an agenda for

reform

. Washington, D.C: World Bank

World

Bank (1993). World Development Report 1993: investing in health. Oxford: Oxford

University

Press

PST 06105: HEALTH FINANCING

Session

3: User

Fees in Health Care

Learning Tasks

At the end of this session students are expected to be able to:

Define

user fee

Explain

how user fee operates in the health sector

Enumerate

advantages and disadvantages of user fee

Activity: Brainstorming

What

is user fee?

User fee (

user charges)

I

a basic health financing mechanism where a user of health

services

is a charged a fee at the point of service delivery. A fee is charged to cover all

or part

of the cost of services provided

Is defined as a

“financing mechanism that has

two main

characteristics: payment is made at the point of service use and there is no

risk sharing

”

Lagarde

& Palmer (2008 p.839)

User fees charged to users of health services cover related drug costs, supply and

medical material

costs, entrance fees or consultation fees.

User fee is the commonest method of financing health services in Sub-Saharan

Africa which

was widely and actively promoted during health sector reforms in 1990s (

Gilson,1997

)

User fees commonly regarded as a means of raising revenue and as a means

of discouraging

what may be viewed as „unnecessary demand‟.

Operation

of User Fees

Operation

of User Fees

As shown

in the previous figure: user

fees financing mechanism involves two parties:

User

of health services

Provider

of health service.

Users

of health services pay financial resources (to cover partial or full cost of

healthcare

) in form of fees in order to receive health service from the providers.

The providers of

health services receive financial resources (incomes) from users of health services. The

Operation

of User Fees

In setting fees, providers of health services are guided by the following principles:

Ability

to pay: fees should be consistent with the ability to pay

Relating

quality to fees: fees and quality should be linked

Successful operation of user fees financing in public health facilities depend on

the presence

of the following conditions:

Well-defined

entrance points at the point of health facility

The

issuance of receipt with duplicate copies to serve as evidence of payment

A

rigorously enforced system for determining those eligible for exemption

Training

of staff to promote the importance of enforcing collection

Periodic

spot checks to establish that above points are being carried out by all staff

Periodic

audits of the financial transactions and flow of fund

Activity:

Small group discussion

What

are advantages and disadvantages of user fees

health financing

Advantages of

User Fees

generate

additional financial resources

for improving health services, range

in from

1.2-20% of total health expenditure

is simple and consistent with other goods and services

Drug

availability and the quality of care can be improved

Equity

is promoted because limited public resources can be targeted to those

most in

need

Decentralization

is reinforced through local control of

resource

allows some form of participation of health services by users (but not the

community

)

can be used to discourage bypassing of referral health systems

Disadvantages

of User Fees

User

fee tended to deter (delayed access and use care) the poor people from

utilization of

basic health services they needed than non-poor people

encourages self – medication and use of informal health services – health

risk behaviors

that are not conducive to good health

Costs

of collection and accounting may be significant

discourages real health needs of the poor and sick people: the most regressive (low

income

earners pay more) form of financing health care

may encourage impoverishment at family level

User

fee can encourage health service provider to have ineffective

behaviors

delivery

point services – provide unnecessary treatments that did not match

with health

needs

Exemption

policy implementation, aimed to protect the poor, is not

practiced effectively

Key Points

User

fees is one the common health financing mechanisms used to finance health

services in

developing and developed countries

User

fees involve two parties in health service: user of health services and provider of

the health

service

Successful

implementation of user fees in public health facilities depend meeting

some conditions

User

fees as a financing mechanism has both advantages and disadvantages

Evaluation

What

is a user fee?

What

are the conditions for effective implementation of user fees in Tanzania?• What are the advantages of user fees as a financing mechanism?

What

are three disadvantages of user fees as a financing mechanism?

Reference

Gilson

, L. (1997). The lessons of user fee experience in Africa. Health Policy and

Planning, 12(4

), 273-285.

Gottret

, P.

Schieber

, G. (2006). Health financing revisited: a

practioner’s

guide. World Bank

Green

, A. (2007). An introduction to health planning for developing health systems. Oxford:

Oxford

University Press.

Jiyenze

, M. K. (2013). Health care financing and resource allocation: handout for teaching

health

care financing.

Arusha

: CEDHA. [Notes:

Unpublished]

Mubyazi

, G.,

Massaga

, J.,

Kamugisha

, M.,

Mubyazi

, J. N.,

Magogo

, G. C.,

Mdira

, K. Y

Gesase

, S.,

Sukwaz

, T. (2006

). User

charges in public health facilities in

Tanzania: effect

on revenues, quality of services and people's health-seeking behaviour

for malaria

illnesses in

Korogwe

district. Health Services Management and

Research, 19(1

), 23-35.

Reference

Tanzania.

MoHSW

(2014). DHM Healthcare financing module. Dar

Salaam:

MoHSW

WHO

(2003). Mental health financing. Geneva, WHO.

World

Bank (1987). Financing health services in developing countries: An agenda for

reform

. Washington: International Bank for Reconstruction and Development/

he World

Bank.

World

Health Organization. (2017). Developing a national health financing strategy: a

reference

guide. Geneva: World Health

Organization

Gilson

, L. (1997). The lessons of user fee experience in Africa. Health policy and

planning

, 12(3),

273-285.

Lagarde

, M., & Palmer, N. (2008). The impact of user fees on health service utilization in

low-and

middle-income countries: how strong is the evidence?. Bulletin of the

World Health

Organization, 86, 839-848C.

PST 06105: HEALTH FINANCING

Session

: Tax-based Financing

Learning Tasks

At the end of this session students are expected to be able to:

Define

tax-based financing

Explain

how tax-based financing operates in the health sector

Enumerate

advantages and disadvantages tax-based

Activity: Brainstorming

What is tax-based financing?

Tax-based financing

Tax-based

financing (public financing) is a financing mechanism whereby financial

resources

are raised through

taxes

by the

government. There

are two types of taxes that the government use to raise financial

resources:

Direct

taxes:

taxed levied on wealth and incomes; example direct taxed are property

tax

, income tax, and corporate

tax

Indirect

taxes:

taxes levied on expenditure and services; examples are value added

tax(VAT

), excise duty, betting tax, and vehicle

license

duties

Tax-based

financing is a predominant form of health care financing in most of

Sub- Saharan

Africa, including Tanzania

is a suitable for most countries that have the administrative and economic capacity to

raise

taxes, establish an efficient network of providers, and the capacity to target the poor

Tax-based

financing mechanism constitutes the most widespread health financing

mechanism

around the world.

Activity: Brainstorming

What are the main parties that form a tax-based financing mechanism?

Operation

of Tax-based Financing

Operation

of Tax-based Financing

Tax- based financing mechanism involves three parties:

citizen and users

health services

governmental

organizations,

and

providers of health

service

In tax-based financing,

citizen and users

of health services pay taxes to government organizations (e.g. Ministry of Finance through revenue entities and local governments) to enable the government to obtain financial resources for provision of health services and other services that citizen need.

Governmental

organizations

, responsible for collection of governmental revenues (taxes

), disburse

the collected financial to providers of health services (e.g. doctors, hospitals,

and pharmacies

Providers

of health services

in turn use the financial resources to acquire health

resources (e.g

. staff, medicines, buildings, and equipment). The acquired health resources are

used by

health service providers to provide health services to citizen when they need

such services

Activity:

Small group discussion

What are three advantages and disadvantages of tax-based financing?

Advantages of

Tax-based Financing

Tax-based

financing has potential for

financing health services

to a large number of

population

members

. More revenue can

be generated for services and used for comprehensive cover of the community.

The

income generated is usually

stable

; where stability depends on

political commitment

and economic condition of a country

Financial

resources raised through tax

is flexible

:can be used for different uses

or expenditures

Payment of taxes is not related to health need, it has

potential equity

depending on

tax system

of countries

Disadvantages of

Tax-based Financing

Sometimes the finance raised through this means is

unstable

, especially

during economic

crisis and in large informal sector, where many people do not pay taxes

may

encourage inequity

if the tax based system depends much on indirect

taxes rather

than direct taxes like income taxes

most cases, in developing countries, it has

failed to meet the health needs

the poor

thus leading to the introduction of other financing mechanisms notably

Social Health

Insurance (SHI) and Community Health Insurance (CHI) schemes

Key Points

Tax-based

financing mechanism constitutes the most widespread health

financing mechanism

around the world and financing resources are raised mainly through

various taxes

paid by citizens

Tax-based

involve three parties in health service: citizen and user of health

services, government

, and provider of the health service

Tax–based

financing has both advantages and disadvantages

Evaluation

What

is tax-based financing?

List

three parties involved in tax-based financing

What

are the three advantages and disadvantages of tax-based financing?

References

Evans

, R. G.( 2002).Financing health care: Taxation and the alternatives. in

Mossialos

, E.,

Dixon, A.,

Figueras

, J.,

Kutzin

, J., Funding Health Care: options for Europe.

Buckingham & Philadelphia: Open University Press.

Folland

, S., Goodman, A. C., &

Stano

, M. (2007). The economics of health and health

care

.New York: Pearson

Getzen

, T. E. (2013). Health economics and financing. Hoboken, NJ:

Wiley.

Gottret

, P.

Schieber

, G. (2006). Health financing revisited: a

practioner’s

guide. World Bank

Green

, A. (2007). An introduction to health planning for developing health systems. Oxford:

Oxford

University Press.

Guinness

, L and Wiseman V (2011). Introduction to health economics.

Mainhead

: Open

University

Press.

References

Jiyenze

, M. K. (2013). Health care financing and resource allocation: handout for teaching

health

care financing.

Arusha

: CEDHA. [Notes:

Unpublished]

Mossialos

, E., Dixon, A.,

Figueras

, J.,

Kutzin

, J. Funding Health Care: Options for Europe.

UK

: Open University Press,

2002.

Olsen

, J. A. (2009). Principles in health economics and policy. Oxford: Oxford University

Press

Savedoff

, W. D. (2004). Tax-based financing for health systems: options

and

experiences.Geneva

:

WHO

Tanzania

MoHSW

(2014). DHM Healthcare financing module. Dar

Salaam:

MoHSW

WHO (2003). Mental health financing. Geneva, WHO.

World

Health Organization. (2017). Developing a national health financing strategy:

reference

guide. Geneva: World Health Organization.

PST 06105: HEALTH FINANCING

Session 5: Social Health Insurance

Learning Tasks

At the end of this session students are expected to be able to:

Define

social health insurance

Explain

how social health insurance operates in the health sector

Enumerate

advantages and disadvantages social health insurance

Activity: Brainstorming

What is social health insurance?

Social

Health

Insurance (SHI)

Historically, health insurance developed as a way of solving the problem of access to an

income

to replace earnings when sick, and generally later to secure the provision of

an acceptable

standard of health care

Those

originally covered from the early nineteenth century were the more skilled

workers and

not too poor farmers.

Social

health insurance (SHI) is a modern socio-economic prepayment mechanism that

is based

on mutual support (Norman and Weber, 1994).

Social

Health

Insurance (SHI)

M

inimum

features

of SHI (McIntyre

, et al, 2003):

legislated by governmen

t and requires regular, compulsory contributions by

specified

population groups (usually initially covering those in formal

employment and

their

dependents,

and then gradually extending to other groups);

Has

income-related contribution schedule

(i.e. premiums are calculated

according to

ability to pay), which is uniform even if the SHI consists of a number of

health funds

serving as the financing intermediaries for the SHI; and

Has

a standardized, prescribed minimum benefit package

Social

Health Insurance (SHI)

SHI has two functions(Abel-Smith,1992):

is a way of raising all or part of the money to pay for health care

is a way of securing the provision of services SHI, together with user fee, were initially advocated by the World Bank (1987 and 1993 reports) and strategy to reduce the 1970-1990‟s health finance gap in developing countries

Many countries, including Tanzania, have adopted health insurance to achieve the three health policy

objectives which are:

Improved

financial base for health services;

Improved

health system performance in term of access and equity

Containing

cost escalation

Social

Health Insurance (SHI)

Tanzania Mainland has a social health insurance known as

National Health Insurance

Fund

(NHIF)

Currently NHIF covers several categories of members such as from public

institutions, cooperative

Health (tobacco, coffee, cotton,

cashnut

), staff of Religious

Denomination, Toto

Afya

Card, students, Private Groups of Entrepreneurs, Private

Membership (individuals

and private companies

Activity: Brainstorming

How does social health Insurance operate in health sector?

Operation

of Social Health Insurance

Operation

of Social Health Insurance

SHI involves three parties:

citizen and users of health services,

insurance

organization,

and

providers

of health

services

Arrangement of SHI

Are compulsory

,risk pooling and prepayment schemes

Individuals

or organizations pay compulsory premiums related to income not health needs

In social health insurance, specified group of people (e.g. public sector employees) pay premium to government-owned insurance organizations before they fall sick.

Operation

of Social Health Insurance

Arrangement

SHI:

Insurance

organizations

collect,

pool,

manage

and use financial resources to pay or reimburse providers of health services (e.g. doctors, hospitals, and pharmacies).

Providers of health services in turn use the financial resources to acquire health resources (e.g. staff, medicines, buildings, and equipment). The acquired health resources are used by health service providers to give health services to citizen when they need such services

Activity:

Small group discussion

What are the advantages and disadvantages of social health insurance?

Advantages of

Social Health Insurance

SHI

has potential

for generating sufficient financial

resources to cover large numbers

populations, depending on the size of formal sector of a country

Social

health insurance is an

easy and effective

way to raise resources to improve

health

The

funds raised by social health insurance are stable and they are not affected by

these

changes and the income is earmarked solely for health sector

This

stability is maintained by the regulations and laws that govern the allocation and

expenditure

Advantages

of Social Health Insurance

SHI tend to be more equitable: clients tend to pay according to income and

avoids experiential

risk which is common to private insurance

Health insurance can improve and promote efficiency in health service provision.

This can

take place through active contracting and purchasing, accreditation of

health providers

and monitoring health service providers.

Insurance allows individuals to seek treatments early than uninsured people (Hsiao

et al

, 2007) who tend to seek treatment late and at advanced stage of the disease

process and

therefore treated at high cost

Citizens may be more willing to pay their contributions because the destination of

the money

is visible, specific, and related to a vital need

Disadvantages

of Social Health Insurance

There are

difficulties of administration

in informal economies, where income of the

many

members of the community do not have reliable income

There may be

stratification

between various schemes with equity implications

SHI may give

“paper rights” to benefit package

: package stated in document but not

provided

to members of SHI

SHI has potential for inducing

provider moral hazard

, providing unnecessary

treatments

and tests to members of the scheme

Possible

exclusion of the poor,

it first covers civil servants

Disadvantages

of Social Health Insurance

SHI

has potential for inducing

clients moral hazard

, using unnecessary treatments and

tests

included in the package

Potentially, it increases

employment costs

, as employers are required to contribute

financial

resources for their employees

Many insurance schemes use encourage

cream-skimming strategies

enroll

members

Social health insurance can

generate an excess demand

for health services, leading to

escalating

costs

Key Points

SHI

is now an important financing mechanisms both in developing and developed

for raising

financing resources for the health sector and for ensuring that people have

access to

health services

SHI

involve three parties in health service: citizen and user of health

services, government-own

health insurance, and an network of providers of the health service

SHI

has both advantages and disadvantages

Evaluation

What

is social health insurance?

What

are the three parties involved in SHI?

What

are advantages and disadvantages of SHI?

Reference

Abel-Smith

, B. (1992). Health insurance in developing countries: lessons

from experience

Health policy and Planning, 7(3), 215-226.

Escobar

Griffin,C.C

, & Shaw R.P(2010).

Impact of health insurance in low- and

middle- income

countries.Washington

DC: The Brookings

Institution.

Evans

, R. G.( 2002).Financing health care: Taxation and the alternatives. in

Mossialos

, E.,

Dixon, A.,

Figueras

, J.,

Kutzin

, J.,

Funding Health Care: options for

Europe.

Buckingham

& Philadelphia: Open University Press.

Folland

, S., Goodman, A. C., &

Stano

, M. (2007).

The economics of health and health

care

.New York: Pearson

Getzen

, T. E. (2013).

Health economics and financing. Hoboken, NJ:

Wiley.

Gottret

, P.

Schieber

, G. (2006).

Health financing revisited: a

practioner’s

guide. World Bank

Reference

Jiyenze

, M. K. (2013). Health care financing and resource allocation: handout for teaching

health

care financing.

Arusha

: CEDHA. [Notes:

Unpublished]

Mossialos

, E., Dixon, A.,

Figueras

, J.,

Kutzin

, J. Funding Health Care: Options for Europe.

UK

: Open University Press,

2002.

Olsen

, J. A. (2009). Principles in health economics and policy. Oxford: Oxford University

Press

Savedoff

, W. D. (2004). Tax-based financing for health systems: options

and

experiences.Geneva

:

WHO

Tanzania

MoHSW

(2014). DHM Healthcare financing module. Dar

Salaam:

MoHSW

WHO (2003). Mental health financing. Geneva, WHO.

World

Health Organization. (2017). Developing a national health financing strategy: a

reference

guide. Geneva: World Health Organization.

PST 06105: HEALTH FINANCING

Session 6: Community-based Health Insurance

Learning Tasks

At the end of this session students are expected to be able to:

Define

community-based health insurance

Explain

how community-based health insurance operates in the health sector

Enumerate

advantages and disadvantages community-based health insurance

Activity: Brainstorming

What is community-based health insurance?

Community-based

Health

Insurance (CHI)

Community-based health insurance (CHI) is part of an overall health financing strategy in

number of developing

countries are

sometimes referred to as health insurances for

the

informal sector, micro–health insurances, mutual health organizations, or

micro insurance schemes

CHI is

defined as a

not-for-profit prepayment

plans for health care controlled

by community

and have voluntary membership

Community

, using representatives, manages the collection of resources and purchase

of health

services

CHIs

were actively promoted by UNICEF for people in the informal sector in

1980-1990s through

Bamako Initiative

is a voluntary and prepayment scheme where community pay a set premium to

the scheme

Community-based

Health

Insurance (CHI)

The

premium is based on community rating (based on pooled risk of defined population)

The

prominent community-based health insurance in Tanzania is known as Community

Health

Fund (CHF), which currently operated by local governments within a

local government

There

two forms of CHF in Tanzania:

Ordinary

CHF:

Improved

CHF

Community-based

Health Insurance

Ordinary CHF

has the following features:

separation between purchaser and providers of health services, that is, the

Council Health

Service Board represents both the interests of CHF members and health

care providers

(health facilities)

Weak

data management system

Passive

enrolment strategy based on health facilities

Restricted

benefit package with card applicable at the enrolled facility and rarely

involving

hospital services

Passive

to no community

sensitization

campaigns

Identity

card given to head of the household (only one card for the household)

Community-based

Health Insurance

Improved CHF

has the following features:

Reorganized

structure that displays the different roles of purchaser (CHF) and health

care

provider (health facilities)

Reform

of data management system by installation and use of an insurance

management

system with a central server with online and offline modes

Active

close‐to‐client strategy with village‐level enrolment officers

Expanded

range of services to include

hospitalisation

and portability of CHF cards

within

the region

Active mobilization

campaigns with social marketing strategies that involve both

community‐based

campaigns and mass media campaigns

Each

member of the household is given individual membership cards

Activity: Brainstorming

How does community-based health insurance operate?

Operation of Community-based Health Insurance

Operation

of Community-based Health Insurance

CHI involves two parties:

citizen

and

users

of health services and

providers

of health

services

CHI arrangement,

specified

group of people or households (e.g. within a

local government

) pay premium to providers of public health services (.e.g. dispensaries,

health

centres

, hospitals) before they fall

sick

Addition

to premium paid, households receive a “matching grant” from the

central government

, which is equivalent to the premiums paid by the enrolled households

in Tanzania

return, insured members of the community receive health services when they fall sick

Providers

of public health services

collection,

and use financial resources pay

for medicines

costs, laboratory tests, supply and medical material costs, entrance

fee or

consultation

fees

Additional details of CHF are provided in

Hand out 1

Operation

of Community-based Health Insurance

T

here

are factors, reported by researchers that influence operation of CHF in Tanzania;

these factors are reported in the following table 5.1 below.

Activity:

Small group discussion

What are the advantages and disadvantages of Community-based health insurance?

Advantages of CHI

Advantages

(strengths) of CHI are as follows:

Provide

better access to health care for low-income people or the informal sector

CHI

do provide additional financial resources earmarked for health

Provide

some protection to their members

Disadvantages of CHI

CHI has limited ability to raise significant resources due to low overall income of the

community

Limited

population coverage due to: people do not understand the need for health

insurance

, voluntary nature of schemes, and they do not trust the managers of

the scheme

Sustainability

is questionable for most CHIs due to small size of the

pool(population coverage

), which makes many community based health insurance schemes

vulnerable to

failure

Voluntary

community health insurances are liable to risks related to

adverse selection(individuals

are able to purchase insurance at rates that are below

actuarially fair

rates and cream skimming (seek to

enroll

only so called good risks and

avoid enrolling

customers whose profile suggests that they are unhealthy with

chronic disease

)

Key Points

CHI

is now promoted as an alternative financing in developing for raising

financing resources

for the health sector and for ensuring that people informal sector have access to

health

services

CHI

involve two main parties in health service: citizen and user of health services and

an network

of providers of the health service

CHI

has both advantages and disadvantages

There

are factors that constraint the performance and operation of CHI

Evaluation

What

is community-based health insurance?

List

are the parties involved in CHI

What

are advantages and disadvantages of CHI?

What

are the factors that facilitate operation of CHF in Tanzania?

Reference

Ekman

, B. (2004). Community-based health insurance in low-income countries: a

systematic review

of the evidence. Health policy and planning, 19(5), 249-270

Gottret

, P.

Schieber

, G. (2006). Health financing revisited: a

practioner’s

guide. World Bank

Green

, A. (2007). An introduction to health planning for developing health systems. Oxford:

Oxford

University

Press

Kalolo

, A., Gautier, L.,

Radermacher

, R.,

Stoermer

, M.,

Jahn

, A.,

Meshack

, M., &

Allegri

, M. (2018). Implementation of the redesigned Community Health Fund in

the Dodoma

region of Tanzania: A qualitative study of views from

rural communities

. The International journal of health planning and management, 33(1

), 121-135

Tanzania

MoHSW

(2014). DHM Healthcare financing module. Dar

Salaam:

MoHSW

WHO

(2003). Mental health financing. Geneva, WHO.

PST 06105: HEALTH FINANCING

Session

7:

Private Health Insurance

Learning Tasks

At the end of this session students are expected to be able to:

Define private health insurance

Explain how private health insurance operates in the health sector

Enumerate advantages and disadvantages private health insurance

Activity: Brainstorming

What is a private health insurance?

Private

health insurances

Private health insurances are voluntary and for profit prepayment schemes

operated by

individuals

or private

organizations

Individual

persons

voluntarily subscribes

to the insurance by paying the prescribed

premium

The

premium

is determined based

on individual health status, individual and risk rated

premium

They

complement coverage

provided by national or social health insurances

Activity: Brainstorming

What parties

are involved

in a private health insurance?

Operation

of Private Based Financing

Operation

of Private Based Financing

Private health insurance, like SHI, involves three parties:

citizen

and users of

health services

profit

making and private insurance organization, and

providers

health services

The

arrangement of private health insurance is shown in

the previous figure

private health insurance, a segment of population pays premium to

privately-owned insurance

organizations before they fall sick on voluntary basis.

Private

Insurance organizations are responsible for collection,

pooling,

management

and using

financial resources to pay or reimburse providers of health services (e.g.

doctors, hospitals

, and pharmacies).

Providers

of health services in turn use the financial resources to acquire health

resources (e.g

. staff, medicines, buildings, and equipment). The acquired health resources are

used by

health service providers to give health services to citizen when they need

such services

Activity:

Small group discussion

What are the advantages and disadvantages of private health insurance?

Advantages of

Private Health Insurance

They

generate financial

resources for health services

They

are prepaid schemes for financing covered for enrolled members

Private

health insurance reduces the burden of health services provided by the state;

so that

the poor may get more coverage in public health services

Disadvantages

of Private Health Insurance

They pools risk based on individual risks (premium based on individual

risks)experiential or risk rating

There

are significant administrative costs in relation to population coverage (size)

of the

insurances

They

tend to be curative oriented

There

are may be difficulties in controlling costs

Key Points

Private

health insurances are now providing health insurance to people not covered

by community

or social health insurance in Tanzania and other countries.

Private

health insurance involve three parties in health service: citizen and user of

health services

, private health insurance organization, and providers of the health service

Private

health insurances have both advantages and disadvantages

Evaluation

What

is private health insurance?

What

are the parties involved private health insurance

What

are three advantages and disadvantages of private health insurance?

Reference

Drechsler

, D., & Jutting, J. (2007). Different countries, different needs: the role of

private health

insurance in developing countries. Journal of Health Politics, Policy

and Law

, 32(3), 497-534

Folland

, S., Goodman, A. C., &

Stano

, M. (2017). The economics of health and health

care

.New York:

Pearson

Getzen

, T. E. (2013). Health economics and financing. Hoboken, NJ:

Wiley.

Gottret

, P.

Schieber

, G. (2006). Health financing revisited: a

practioner’s

guide. World Bank

Green, A. (2007). An introduction to health planning for developing health systems. Oxford:

Oxford

University Press

Guinness

, L and Wiseman V (2011). Introduction to health economics.

Mainhead

:

Open University

Press

Sekhri

, N., &

Savedoff

, W. (2005). Private health insurance: implications for developing

countries

. Bulletin of the World Health Organization, 83, 127-134

Tanzania

MoHSW

(2014). DHM Healthcare financing module. Dar

Salaam:

MoHSW

WHO

(2003). Mental health financing. Geneva, WHO.

PST 06105: HEALTH FINANCING

Session 8: International Health Financing

Learning Tasks

At the end of this session students are expected to be able to:

Define

international health financing

Explain

how international health financing operates in the health sector

Enumerate

advantages and disadvantages international health financing

Activity: Brainstorming

What is international health financing?

International

Health financing

International health financing is a form of financing where external (or non-domestic)

finances

and other resources are

channeled

in a country to support the health sector

in order

to supplement and complement the government health financing in providing

public health

services to the general populations

External

funds

are

used to finance health service delivery

Funds

are obtained from external donors or development partners ( e.g. IMF

, WHO

UNICEF

, DANIDA, SIDA, USAID, Governments, OXFAM)

Resources

are mobilized in form of grants, loans or donations in form of monetary,

technical

assistance or in kinds (in form medicines, equipment etc.).

Activity: Brainstorming

What parties involved in international health financing?

Operation

of International Health Financing

International Funds mobilized from

government

of developed countries, international

organizations

, or private sector organizations to health sector of developing

countries.

International

funds are

channeled

through different routes of the government:

ministries of finance through general budget to support the economy and

other government

projects and

programmes

support health sector through sector-wide approaches, health projects and

health

programmes

; e.g. some of the international funds are pooled in fund known as

health basket

fund, which is used to support health sector

support health activities, projects, and

programmes

of NGOs -international

, national

or local

Activity:

Small group discussion

What are the advantages disadvantages of international health financing?

Advantages

International Health Financing

They

contribute significant amounts

of financial resources for the health

sector, especially

in developing country health systems

When

used effectively

, they contribute to

improvement

of health of the poor people

They

can contribute potentially to

improve management and administrative processes

health sector in a recipient country through sector- wide approaches and

general budget

support

Disadvantages

of International Health Financing

Finance generated through international health financing are not so stable ;

they fluctuate

depending on socio-economic condition or current political relations of

the donor

countries

External finances come with conditions, may not be in line with country

or organization

priorities and policies

When

poorly coordinated, they may bring fragmentation to a health system

and additional

transactional costs

the government relies too much on this mode of financing health services, it

may reduce

innovativeness in seeking and allocating adequate local funds to the

health sector

Key Points

International

financing constitutes the most widespread health financing mechanism

in the

developing countries

Financial

resources and other resources are

channeled

to ministry of finance,

health sector

, health

programmes

, health project and NGOs working in the health sector.

International

health financing has both advantages and disadvantages

Evaluation

What

is international health financing?

How

international health financing operate in the health sector of Tanzania?

What

are three advantages and disadvantages of international health financing?

Reference

Gottret

, P.

Schieber

, G. (2006). Health financing revisited: a

practioner’s

guide. World Bank

Green, A. (2007). An introduction to health planning for developing health systems.

Oxford: Oxford

University Press

Tanzania

MoHSW

(2014). DHM Healthcare financing module. Dar

Salaam:

MoHSW

WHO

(2003). Mental health financing. Geneva, WHO

PST 06105: HEALTH FINANCING

Session 9: Concepts and Principles of

Financial Management

Learning Tasks

At the end of this session students are expected to be able to:

Describe

financial management concepts

Describe

financial management functions

Outline

financial management weaknesses in the public sector

Explain

principles of financial management

Financial Management Concepts

Finance is

key resource

in any organization and used for acquiring human and

non human resources

Thus

, financial management is a

key management

function in any

organization

Financial

Management is a process of planning, mobilizing, allocating, and using

financial

resources effectively and efficiently to meet the needs or objectives of

an organization

Financial Management Functions and Responsibilities of Manager

The following are the functions of financial management:

Financial planning

Mobilizing

or obtaining financial resources

Disbursing

funds

Financial

reporting and risk management of financial resources

effective financial management requires a financial management system that have:

Clear

strategic direction, as indicated by strategic plan

Defined

financial process and procedures

Defined

roles and responsibilities within an organization

Effective

information

base

Financial Management Functions and Responsibilities of Manager

effective financial management requires a financial management system that have:

Technical

capacities, as indicated by staff knowledge and skills

Owned

by the organization

Health

managers have the following specific responsibilities in relation to

financial resources

:

Preparing

a sound budget

Monitor

or control expenditure: using line item control method, using activity control

method

or variance analysis technique.

Participate

effectively during auditing process

Activity:

Small group discussion

What

are financial management weaknesses encountered in

public sector?

Financial Management Weaknesses in

Public Sector

The public sector experiences a number of weaknesses related financial

management; financial

management weaknesses include the following:

Revenue

management

Missing

revenues earnings receipt books

Failure

to adequate collect revenue from various sources

Failure

to monitor revenue collection

Cash

management

Bank

reconciliation is not done on monthly basis

Surprise

cash survey is not conducted

Financial Management Weaknesses in

Public Sector

Expenditure management

Inadequately

supported expenditures

Missing

payment vouchers

Missing

acknowledgement receipts from recipients of funds

Expenditure

charged to wrong account codes

call allowances received but not paid

Payments

not subjected to pre-audit

Lack

of proper authorization of expenditure

Unspent

balances for Community Health Fund

Expenditure

incurred contrary to CHF Operations Guidelines

Outstanding

claims not paid by the National Health Insurance Fund

Financial Management Weaknesses in

Public Sector

Procurement

of goods and services without tender board approval

Procurement

of services from unapproved suppliers

Procurements

made without competitive bidding

Stores/goods

not recorded in ledgers

Goods paid for but not delivered

Inadequate documentation of contracts and projects

Financial Management Weaknesses in Public Sector

Weaknesses in the financial management in public organizations are due to failure

of managers

to apply principles of financial management. Failure to apply principles

of financial

management may be due to

poor understanding of these principles

Thus

, the weaknesses in financial management can be addressed by understanding

and applying

principles of financial management in the public sector, including health sector

Principles of Financial Management

Principles of financial management are guidelines or good practices that ensure that

an organization

uses its resources to achieve organizational goals.

Financial

management principles are based on the following financial controls:

Control

environment: consists of the actions, policies, and procedures that

provide overall

guidance to an organization: e.g. financial policies, procedures,

organizational structure

, and audit committees.

Principles of Financial Management

Financial

management principles are based on the following financial controls:

Control

procedures- refer to:

Segregation

of duties (authorization, record keeping, and custody of assets)

Proper

procedures for authorizations: only authorized people should

authorize expenditure

Physical

control over assets and records: physically control access to assets

and records

Adequate

documents and records: keep and maintain records and documents

as evidence

during auditing

Independent

checks on performance: conducting auditing, both internal

and external

auditing

Principles of Financial Management

External auditing

– auditing conducted by an external auditor- an independent

individual (not

employee of the organization to be audited) assigned for auditing purposes

Internal

auditing

– conducted by an employee of an organization

Auditors

conduct auditing

to determine independently the performance of organization

generation, development, allocation, and use of various resources in organizations

Auditors

give their opinions which has various meaning and implications to

management

and use of resources

Principles of Financial Management

The following are four types of auditors‟ opinions and their related meaning:

Unqualified

opinion:

an unqualified audit opinion is issued when the financial

statements

of an organization has been prepared, in all material respects and in

accordance

with the applicable financial reporting framework.

Qualified opinion:

A qualified audit opinion is issued when there are

material misstatements

in the financial statement due to the disagreements with

management or

limitation of scope which is neither material nor pervasive

Adverse

Opinion:

audit opinion shall be expressed when there evidence

of misstatements

, individually or in the aggregate that are both material and pervasive

to the

financial statements prepared by an organizations.

Disclaimer

Opinion:

given when auditors fail to obtain audit evidence

for/from opinion

on financial statements of organization

Key points

Health

professional, including pharmaceutical personnel, are now playing key role

in financial

management

order to play their key role in financial management, health professionals need

to understand

and effectively use principles of financial management in the

health sector

Evaluation

What

is financial management?

What

are the functions of financial management?

What

are responsibilities of a health manager on financial management?

State

four principles of financial management

Activity:

Assignment

Download and read the current report of Auditor and Control General of one

local governmental Authority (

Organisation

) in the country

Outline

common weaknesses reported by the auditor from that report

Reference

Cammack

, J. (2007). Building capacity through financial management: practical guide.

London

: Oxfam.

Creese

AL & Parker D. (1994). Cost analysis in primary health care: A training manual for

programme

managers. Geneva: WHO.

Green

, A.T. (2007). An introduction to health planning for developing health systems. 3rd

. Oxford: Oxford University

Press.

Green,A

.,Collins

, C. &

Mirzoev,T

.( 2012) Management and planning for global health in:

Merson

, M. H.,. Black, R. E., Mills, A. J( Ed.).(2012).Global health:

diseases, programs

, systems and policies. 3rd ed. Burlington: Jones & Bartlett Learning

Gruen

, R and

Howarth

, A. (2005). Financial management for health services. London: Open

University

Law

, J. (2006). Oxford dictionary of business and management. 4th Ed. Oxford: Oxford

University

Press.

Millichamp

, A. (2002). Auditing. 8th Ed. London: Continuum.

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