International Social Security Association ISSA Regional Conference for in Asia aAsia and the Pacific

New Delhi, India, 21 23 November 2006

Sustainability and effectiveness of health care delivery

Aviva Ron Social Health Insurance Consultant

ISSA/ASIAPACIFIC/RC/INDIA/06/1

Sustainability and effectiveness of health care delivery

Aviva Ron Social Health Insurance Consultant

Introduction
Only a small number of countries in Asia and the Pacific has met the challenge of reaching universal health care coverage through social health insurance for their populations. The process was facilitated by the inclusion of all labour sectors as registered workers, and with their dependents covered within the same membership unit. The more industrialized among these countries, such as Australia, Japan, the Republic of Korea and Singapore, have maintained coverage through social health insurance through periodic changes mainly to deal with ageing populations and mergers to improve the pooling of risks. Their continued maintenance of universal coverage has not necessarily been a steady and timely process in response to changing needs. Since social security systems are bound by legislation, most reforms have come about through lengthy political processes, with compromise between the financial and health care professional partners involved. The important lesson we have from these countries is that they have opted to maintain social health insurance as their basic mechanism to finance health care, within a broad social security approach. With the addition of social assistance programmes for the population sectors that are unable to contribute; these countries have enabled equity in access to health care for the entire population and have avoided impoverishment due to health spending. The rise in poverty related to high health care costs is now increasing interest in social health insurance as a rational and stable financing mechanism. Concern is more acute with the realization that a very significant proportion of the population may not use services at all, or seeks care at a serious stage of illness and then may not continue treatment due to the lack of social protection. More recently, prompt medical attention has become a crucial factor in the control of the new emerging infectious diseases such as SARS and Avian flu. Control of these diseases at local, national and global levels clearly requires the removal of financial barriers to health care at the time of use. The Asia and Pacific region's nations have a very broad range of population size and of per capita income. The lowest income countries and small island states, some of which have established social security systems for their salaried worker populations,

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2 are struggling with finding social protection mechanisms before they apply user charges for health care in public facilities. Some middle and low-income countries in the Region, such as Malaysia and Sri Lanka, have so far managed to use tax-based financing to enable access to health care for all populations sectors. However, these countries are now concerned about the future adequacy of tax-based funds as well as the degree of subsidy involved in covering a large informal sector which does not generally contribute to the tax base. They are also concerned with the protection of equity as the higher income sectors of the population increasingly use private forprofit providers, at a time when user charges are being imposed for some services in the public sector. In most of the very high income countries, such as the oil-rich nations, health care is provided to all citizens free of charge through government funds. Some of these countries are now examining social health insurance as a form of rational costsharing by their populations, most of whom do not pay taxes on their incomes. There is also interest shown in social health insurance as a fair mechanism to impose employer liability for health care for the migrant worker population, which can be a considerable proportion of the total population. The challenge of demonstrating sustainability and effectiveness in the delivery of health care in social security systems is therefore timely. This paper will address this challenge by covering two questions, taking examples from the countries and member institutions in the region: Is social health insurance the optimal mechanism to finance health care? What factors promote or threaten sustainability and efficiency?

Is social health insurance the optimal mechanism to finance health care?

The title of this paper does not specifically limit sustainability and efficiency to social health insurance schemes, but this mechanism of providing protection against the high costs of health care is assumed to be the subject of our discussion. The first issue then is to confirm that social health insurance, with regular prepayment shared between partners for defined health care benefits, is indeed the optimal mechanism to finance health care. The ISSA member institutions are committed to this mechanism, as an integral part of broad social security for the populations they serve. Among the participants in this Regional Conference, we have institutions from countries in which the entire population is covered by social health insurance, in a single national scheme or various schemes. Examples are Japan, South Korea and Australia. Then we have member institutions from countries in which a significant part of the population is covered, and the national governments, as well as the social security institutions, are now looking for ways to reach universal coverage, such as China, India, Indonesia, the Philippines and Vietnam. And we have member institutions whose schemes still do not include health care, such as the social security schemes in most of the Pacific Island States. Several of these schemes are still in the process of reform, from provident funds to pension schemes, and have

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3 only now begun to be concerned with access to health care for their members. However, the concern with finding the optimal way to finance health care has become acute, as the health care systems in these countries are shifting from free of charge care in public health facilities, to applying user charges which could seriously affect access to care unless protection is put in place. If we believe that social health insurance, through the social security schemes represented here, is the optimal way to provide this protection, and to enable a stable and adequate financing mechanism for health care for the entire population, we need to first understand some of the underlying justifications. We can do this by looking at some of the inherent characteristics in social health insurance systems that contribute to sustainable and effective health care delivery.

The prepayment commitment

The regular and defined prepayment to a public fund, governed by a body which includes all the contributing partners, creates a commitment to provide defined health care of assured quality and within a reasonable period of time when needed to all insured persons. This commitment is strengthened by legislation stipulating that funds accruing from the contributions are to be used for the defined benefits of the insured population and not for other purposes. As an insurance benefit, health care has quite a different nature as compared with other contingencies. Most of the insured population can be expected to use this benefit at least once a year, and without delay as soon as the need is perceived or prescribed by health care professionals. The insured persons and the contribution partners will not accept the inability to provide health care benefits of recognized or accredited quality and will not accept long delays in receiving the care. This is quite different from the planned frequency of the use of a pension benefit, for example, or the unwelcome, unplanned and infrequent use of a disability benefit. Because of the nature of health care, social health insurance schemes have to respect the commitment, and to assure their members of the provision of quality health services at all times. The schemes therefore need appropriate contracts with accredited providers for defined services. The schemes also have to monitor changes in the reasons for seeking and demanding health care, changes in the technologies or health care interventions to meet the health needs and changes in patient preferences. Use of this information facilitates better planning, recruitment of resources, in addition to cost control and better management. The acquisition and updating of such information have to be done by the scheme itself, by allocating adequate resources to the tasks. The data collection and analysis of changes related to the specific insured population are indeed internal concerns, but an organization such as the ISSA will provide the forum to compare with other populations and to learn of best practices in achieving the health care objectives.

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Predictability of revenues
When the necessary level of compliance in contribution payment is achieved, the prepayment of contributions creates the conditions for the management of predictable and stable revenues. Knowing the number as well as age and sex composition of the entire membership and the expected revenue from contributions facilitates better planning of the health services to meet the needs of the insured population. The predictable revenues also allow for more appropriate allocation of the funds, providing possibilities for the activities that have typically been excluded or neglected, such as health promotion and prevention activities directed to members' needs as well as staff training and updating of information systems.

Effectiveness in purchasing and providing health care benefits

The predictable revenues enable the fund to negotiate with accredited providers and to reach agreements which facilitate the provision of the appropriate benefits and quality assurance. With an appropriate provider payment mechanism in place, this predictable revenue at provider level can have important added value. It may and even should provide a mechanism to increase health care workers income, independent of the slow process of increases in the salaries of civil servants. The salaries of health workers, including professionals, are characteristically low in the public health facilities, although minimum wage laws in the same country may set higher amounts for salaries of unskilled factory workers, as in Vietnam, Cambodia and Lao Peoples Democratic Republic (PDR). This opportunity for higher income from the new and stable funding enabled by a social health insurance scheme, along with the potential for increase in the amount of provider revenue as coverage is extended, can create the necessary incentives for more responsive health care provision in the public sector. This can also apply to private sector providers, but we need to recall that in most countries, universal coverage means access to health care in all parts of the country, and the availability of accredited private health care is very often limited to major cities, leaving smaller towns and rural areas (and lower-income areas in general) dependent on public provision of care. The publication "Social Security Programs throughout the World: Asia and the Pacific, 2004" lists 48 countries with social security schemes. Of these, 15 countries have not yet introduced health care for any population sector, and these include most of the Pacific Island countries. Around 10 more countries only have limited health care benefits for civil servants or for salaried workers in large enterprises. This means that over half of the countries in the region are actively considering the introduction of social health insurance, or the extension of coverage within the framework of their social security systems. The health care financing alternatives to social health insurance are tax-based systems, high out-of-pocket expenditure at the time of use and high dependence on external funds. In countries with large informal economies, the opportunities for income tax based funding are limited. The situation may be different when adequate government resources can be committed from other sources, such as state-owned oil or mineral deposits. Such countries will need to weigh whether they want to continue

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5 to provide health care free of charge to the entire population, or only to citizens, without any contribution on their behalf. It is clear, however, that the social health insurance mechanism will enable the advantages described above: particularly the commitment created by prepayment between fund, insured and provider, predictable revenues and effectiveness in purchasing and providing health care.

Coverage of dependents
By covering the dependents of the worker through a single contribution, social health insurance has the ability to cover each non-economically active individual in his or her own right. In this way, the discrimination by age or gender which could ensue from having to pay for different family members at the time of use and from scarce household resources can be avoided. Several social health insurance schemes, as in China, Mongolia and Vietnam, have preferred up to now to cover only the workers and either have government pay the contributions for children or exempt them from user charges. In these cases, the contributions paid by government are often set at minimal levels so that the revenue accruing from such contributions is inadequate to meet the health care needs. At times, the payment of contributions for subsidized individuals has been delayed by government, leading to financial instability of the scheme. Government is the source of health care funding for children in some countries. However, public health care is typically underfunded in countries which have chosen this option, as in Vietnam and China, so that children are only eligible for what the government can afford at the time. Since dependent children should not be economically active and are the responsibility of their working parents, it is logical to cover them through the parents' contributions. In addition to the issue of adequate funding for the health care of children, the attractiveness of health insurance should be considered. The labour force is mainly composed of healthy working adults, many of them with young children. Young children are likely to be more frequent users of care than their parents and interest in the health care benefit in social security schemes is enhanced when these dependents are covered. The main issue, however, is not the level of contribution or government funding. It is the fact that universal coverage can be accelerated by including the dependents of all active and retired workers. Indonesia's new Social Health Insurance Act limits coverage to 2 children. If the intent is to limit family size in the overall population, using social health insurance coverage as the limiting factor may in fact delay universal coverage.

Factors which promote and threaten sustainability and efficiency in the delivery of health care
The factors that can impact on sustainability and efficiency in social health insurance schemes are varied. Some are basic design issues which can be changed by the scheme itself without outside intervention and may be based on knowledge about

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6 best practice or resources to update technology. Others are external, sometimes unpredictable and may require new partnerships which traditionally, social security schemes have been slow to establish. In the section below, these factors and some examples of social health insurance schemes that have made changes are described under two headings: health care benefits, and administrative and financing factors. The factors below have been selected because they are major issues, with significant roles in the sustainability and efficiency of social health insurance schemes and because they are relevant now in this region. Most of the necessary changes can be undertaken by the schemes themselves and are less related to external forces than other factors or events. If these changes cannot be carried out in full by the schemes, they can be initiated and can then be applied through collaboration with appropriate partners. The expected results of all the measures are: Cost control, demonstrated by an appropriate balance between revenues and expenditures, without resorting to frequent and unjustified increases in contributions or other payments by members and with reasonable but not excessive reserves; Improvement in the quality of the health care provided to members; and Increased satisfaction among the members, scheme administration at all levels and providers of health care.

Health care benefits

The inclusion of health promotion and prevention
The first factor is the spectrum of health care covered by social health insurance. Traditionally, the benefits were limited to curative care, in both community and hospital based facilities. However, disease risks and patterns are changing rapidly. In countries still coping with communicable diseases, changes in lifestyle and demography have led to an increase in chronic diseases, leading to a double disease burden. Since most countries recognize the positive impact of prevention in dealing with communicable diseases, there is interest in changing the statutory benefits to include health promotion and prevention and to achieve the potential gains of prevention in the new chronic diseases. The cost and worker productivity advantages of prevention in occupational diseases and accidents are not new to most social security schemes with work injury programmes. This extension of benefits is supported at the national level, as governments understand that economic growth is related to health, including healthy ageing, so that there are more healthy and productive years in life with less dependency. Social health insurance therefore is accepted as a mechanism to keep people healthy and not only provide protection when people are sick. In 2004, the ISSA together with the World Health Organization (WHO) launched an initiative to investigate approaches of enhancing health promotion in social insurance systems and to provide practical support to member states and institutions. To date, the activities have included a WHO/ISSA consultative meeting on social insurance

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7 and health promotion and an ongoing comparative research project analyzing the health promotion activities undertaken by social insurance schemes in five countries, including the Republic of Korea and Thailand. The efforts noted in the activities of the WHO/ISSA initiative so far include both changes in the benefit packages by the social health insurance scheme and the creation of new partnerships to deal with disease risks. Funds have been allocated as a regular part of the social health insurance budget to integrate the new promotion and prevention benefits. Social health insurance managers are beginning to accept that the yield from investment in health promotion requires a long-term approach and should also consider the savings in disability and the added value of better health on productivity and economic growth. Some examples of how health promotion and prevention services have been integrated into social health insurance schemes in Asia and the Pacific are briefly described below. The Health Insurance Commission (HIC) in Australia, which covers 20.5 million persons, initiated promotion and prevention through a strategy of Improving Australias health through payments and information. The HIC has invested in Health Information Services, in which statistical information collected by HIC programs is used (within privacy guidelines) to develop and provide health information for the Australian population and health sector. The information enables clinicians to evaluate and improve clinical practice, promote evidence based approaches to health care, coordinate care between medical practitioners and provide health care consumers with information to make more informed decisions and improve access to services. In 2001, the Australian HIC introduced a quarterly lifestyle magazine entitled Your Health Matters which is distributed free through health care providers, child centres and health food outlets. The HIC then started the Good Health TV network, which is shown in doctors' clinics throughout Australia and serves as another vehicle to provide consumer information. In India, the Employees State Insurance Corporation (ESIC), which currently covers over 33 million beneficiaries, has a network of its own clinics and hospitals. It is therefore in a unique situation regarding the shifting of resources from curative to more preventive care and health promotion. Infectious diseases still constitute the major causes of illness, and priorities for the promotion and prevention activities are determined according to the disease pattern. Since 2001, the ESIC began health check-up drives for early detection of various chronic diseases among its beneficiaries as well as activities for the prevention and control of HIV/AIDS, and the provision of Hepatitis B vaccination for children as a health insurance benefit. ESIC has also recently set up Occupational Disease Centres in four of its administrative zones to provide facilities for early detection and diagnosis of occupational diseases. The National Health Insurance Corporation (NHIC) in the Republic of Korea now covers 48 million persons. The merge to a single scheme in 2000 facilitated common policies and strategies regarding prevention and health promotion. An initial activity was to create a Records to Prevention and Promotion programme using the vast

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8 data banks required for management of membership and the review of claims. Regional authorities are alerted about vulnerable populations and thereby prioritize their disease control programmes. Individual insured persons can interact with the database to get information on their own health, add behavioural data and then have their own risks assessed. This approach is aimed at Making Information Alive for the insured; with two components: know your health leads to healthy behaviour and know your doctor leads to economic or rational utilization. The NHIC has broadened the Health Check Up programme of early detection of chronic diseases to campaigns for healthy living, rewards for families with healthy living styles, seminars on health promotion, sporting events and the production and use of brochures and videos on healthy living. The activities are also coordinated with the high level Presidential Advisory Committee on Ageing and Future Society in Korea. Another step initiated by the Korean social insurance system was improvement of emergency services. While this may not strictly be seen as health promotion, the improvement was significant in reducing complications and residual disabilities resulting from inadequate care for acute events and trauma.

Home care as a health care benefit

The need to provide care in members' homes has come about from a mix of reasons: more medical technologies can be provided in the home and can thereby reduce the need for more expensive hospital care; and members live longer, with more elderly people now living alone. New long-term insurance arrangements have been introduced in several countries in the Region but these generally cover benefits provided in institutions. The disabled and elderly persons who want to remain in their homes but have limited capacity to reach health care facilities on their own can be treated more effectively and at lower cost through home care services. Home care is also cost-effective as a mechanism to allow for early discharge from hospital after acute care for patients of all ages. Home care for the terminally ill has become an acceptable and cost-effective method of providing palliative care. The provision of home care as health insurance benefits is still limited but provides opportunities for cost control and increasing patient comfort.

The introduction of new health technologies

The addition of new medical technologies, including prescription drugs as well as services requiring high tech equipment, is a constant challenge in social security schemes. It is impossible to include every new drug or diagnostic test as these become available globally, and the schemes often rely first on Ministry of Health regulations regarding country-specific use. It is then up to the scheme to decide whether the new technology is cost-effective and whether it in fact can replace several lower cost technologies. The next issue is how to regulate use, as there may be a difference in what members need and what they expect and demand, particularly when health professionals, marketing and the media promote use of a new method without identifying the indications for appropriate use. The initial approach in the Republic of Korea was to exclude new high cost technologies. This led to very high out-of-pocket payments in the private sector, so

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9 that equity was negatively affected. There is now more effort to include high tech services as benefits and to constantly update the list of drugs covered. The Social Security Office in Thailand has used its Medical Committee to continually update the benefit package to include new cost-effective services and has imposed referrals mechanisms that do not lead to delays in the provision of high technology services which are outside the capitation agreement with providers.

Administrative and financial factors which promote or threaten sustainability and efficiency
Membership growth
The current global coverage of social health insurance is estimated to be about 20 percent of the world's population. Coverage in many developing countries is still very low at less than 3 percent, as in Lao PDR. In some countries going through transition to market economies, such as Mongolia, social security coverage has even decreased, as the reduction in the number of civil servants linked to privatization of state owned enterprises and streamlining of civil service has not been matched by registration of workers in the informal economy. The failure to extend membership, and more so decreasing membership, are threats to social health insurance schemes. Stagnation in membership size limits the ability to pool risks over larger populations, and over time, when the life expectancy and risk of chronic diseases of the core members increases. Small schemes may lose the advantages of economies of scale in administrative costs and in negotiating terms with providers. They are less likely to develop the newer cost effective mechanisms, such as computerized information systems and health promotion and prevention activities. They are also less likely to introduce new technologies. Perhaps the biggest threat is the potential loss of contribution membership from higher income workers as the economy grows and inadequate attention is given to compliance in the private sector. Compliance depends first on legislative tools and the inspection capacity of the social insurance schemes. In transition economies, it may also be linked to an unwritten agreement not to impose new taxes on new private enterprises, often with foreign investment. The practice is unfortunate and certainly not helpful for financial sustainability of social insurance schemes. The difficulty in enrolling the self-employed, particularly those in the informal economy, is well recognized. However, if the excluded population grows, it is likely that inequities in social protection will grow and the existing social security schemes will not be able to make their contribution to the preservation of national solidarity. Not all the self-employed and informal economy workers have low incomes and the failure to facilitate voluntary enrolment is likely to encourage this population to seek alternative insurance arrangements in the commercial for profit sector. As the private commercial insurance companies grow in membership, there is a danger of the social insurance schemes being perceived as schemes for low-income workers and elderly populations.

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10 Several countries in the region have made substantial efforts to extend membership, both to achieve better pooling and to preserve equity. In China, reform for the urban workers shifted the level of pooling from the single enterprise level to municipal level and in some cases, to county level. The second feature was the creation of both individual accounts and pooled funds, with the individual accounts to be accessed for minor illness and the pooled funds for major illness requiring hospital care. Efforts to redevelop the rural cooperative medical system now focus on county rather than village level schemes. County funds subsidize the farmers' contribution and enable broader pooling. In Japan, the government intends to phase in the consolidation of all social insurance schemes. The original Law of 1927 included two separate structures: a centrally administered system for companies with 5 and more employees and a societymanaged system. A society was established as an independent insurer by companies with more than 300 employees. This explained the vast number of health insurance societies that operated in Japan until recent legislation allowed for mergers to enable broader pooling and a reduction in administrative costs. Recent reforms permit companies with over 300 salaried employees to consolidate their insurance societies with those of other companies. In the Republic of Korea, the over 350 health insurance societies managed different funding arrangements and benefit schemes by 1999. To improve the quality of health care and also to contain the increasingly higher costs of health care, the Korean Parliament passed the National Health Insurance Act in 2000, which mandated the consolidation of all health insurance funds into a single fund, bringing the pooling level to the maximum. The health care financing reform of the Kyrgyz Republic first dealt with the pooling of funds as the oblast level in 2001 and then proceeded to pooling at national level by 2006. In the Philippines, the National Insurance Act of 1995 called for universal coverage within 15 years. PhilHealth, the administration responsible for implementation, is now attempting to accelerate enrolment of the self-employed including informal economy workers. The campaign is now focused on members of cooperatives and informal sector associations, which often seek to extend their solidarity mechanisms to health care. The Law also allows for the accreditation of existing community based schemes into the national system. Lao PDR has followed a strategy of parallel development of compulsory social health insurance for the formal private labour sector through the Social Security Office (SSO), reform of the civil servants welfare system and voluntary community based health insurance (CBHI) for the informal sector. From 2001, efforts have been made to extend coverage in both formal and informal sectors, as the new SSO expands its operations and the CBHI takes on rural and semi-urban communities. The parallel development has led to increased awareness and interest in health protection, and the demands for extension are now coming from the communities. An eventual merger is currently planned for 2012 but is dependent on the extension and capacity of the SSO to take on the registration and contribution collection of individual households. In the meantime, there is close coordination between the two schemes and maintenance of close similarity in design.

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11 In Thailand, the growth in membership was given a serious boost when the law was amended to cover enterprises with less than 10 workers, and eventually even one salaried worker. An earlier change in regulation enabled the continued membership of retired workers eligible for pensions. Universal coverage was finally achieved through a government initiative, termed the 30-Baht scheme, to cover all those persons excluded from the social security system, including dependents of workers through government funds. Even after the passage of legislation, as in the Philippines and Indonesia, it is extremely difficult to achieve compliance in registration and contribution collection in the informal economy population. Flexibility in the administrative functions of registration and contribution collection will be necessary, and these can only be implemented if the social security system itself understands the importance of taking on the new populations. At the same time, the perceived attractiveness of membership can be problematic. For all populations, interest in joining the scheme is not limited to the affordability of the contributions for the non-salaried sector. If membership is associated with poor quality care and negative attitudes of health care providers, as well as excessive bureaucracy in affiliation, the extension of coverage will remain low. If government is the main provider of health care, as is still the case in most developing countries in the Region, its delivery system should be very interested in the revenue that social health insurance can provide for its generally underfunded facilities. The health insurance schemes may need to take initiatives to strengthen the links with government providers and dispel any perceptions of poor quality care or long waiting times that is sometimes associated with care in public facilities. The use of reserves in the Vietnam Social Insurance System to improve patient conditions in a provincial hospital led to a dramatic increase in registration of new members. Every country will have a population which is both vulnerable to health care risks and unable to pay contributions on its own. External donors are not a sustainable source of social protection for this population and government will eventually need to allocate funds for social assistance. Equity in access to health care is enhanced when social assistance funds are used to pay for the contributions of the vulnerable population, as in the case of Vietnam's Health Care Fund for the Poor which covers health insurance cards for up to 14 million people through the Vietnam Social Insurance system.

Legislative factors
In the Asia and Pacific region, we find two major problems in the area of legislation that impede rather than promote sustainability and efficiency. First, we have countries in which items requiring change over time, such as the actual contribution rate, the contribution ceilings as a specific amount and a rigid list of health care benefits are included in the mandatory social health insurance laws rather than regulations. Inclusion of the specific items in the law usually means a lengthy parliamentary process, whereas the inclusion of these items in the regulations can mean fairly rapid changes requiring only ministerial level interventions. As examples of the effect of such inclusions, we have the Philippines which needed several years to change the contribution ceiling even after this amount was less than minimum

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12 wage in the country. The change obviously allowed for a significant increase in contribution revenues. In Thailand, several years were needed to amend the law to include workers in enterprises with less than 10 workers. Rigid lists of health care benefits in the body of the law have limited or delayed the introduction of costeffective new health services, such as personal preventive services. The second legislative problem is the type of tool. In China and Vietnam, the nature of the legislative tool may be the root cause of low compliance among private sector enterprises. In these two countries, all social security was governed by decrees rather than laws. Decrees may be faster and easier to enact, but do not have the punitive sanctions needed for compulsory schemes requiring regular contributions by both employer and employee. After almost 15 years of operations, Vietnam passed a Social Security Law in 2006 and will submit a draft social health insurance law to the National Assembly in 2007. An appropriate legal framework was considered the most important requirement for progress in social health insurance in Moldova. The law on compulsory health insurance adopted in 1998 stipulated the establishment of the National Health Insurance Corporation in 2001, the beginning of operations in one pilot region in 2003 and finally application in the whole country in 2004. A system of penalties for late payment of contributions is included in the law.

Provider payment and impact on health care providers

In recent years, there has been an increase in interest in changing provider payment methods from the conventional fee-for-service billing to mechanisms based on flat amounts, such as capitation for each insured person, hospital day payments, and case payments for each admission, some applying Diagnostic Related Groups (DRGs) and global budgets for services owned and operated by the scheme itself. There is interest in moving away from fee-for-service as a provider payment method as it may encourage health care providers to generate unnecessary services in order to increase revenues. Unnecessary services are more likely when changes in government regulations allow the public provider institutions (clinics and hospitals) to retain revenues from patient charges and insurance sources, rather than having to remit all these funds to government. Among the flat amount payment methods, case payments (whether using DRGs or not), still have the potential to generate revenues as the number of cases can be increased by providers. Health insurance schemes are often caught between provider pressure to be paid (and patient pressure to be reimbursed) and their own capacity for reliable review. Claims of inappropriate use, misuse or abuse are difficult to prove when clinical decisions of health care professionals are involved and inspection capacity of the schemes is weak. If provider income is dependent on the volume of care provided, conflicts develop between the scheme, provider and the insured, as occurred in Mongolia, Vietnam and the Philippines. Providers want to generate use, patients are angered by the co-payments (the amount can be substantial and the percentage system is regressive) while the schemes run out of funds.

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13 Schemes using fee-for-service as the main provider payment method (Australia, Japan and the Republic of Korea) have applied mechanisms to limit payment to specific providers and to prevent abuse. All use fixed fee schedules, negotiated between the health insurance schemes with providers and these are updated according to regulations. Some schemes have incorporated financial caps on the earnings of providers whose incomes from insurance go above set levels. These schemes have sophisticated and expensive computerized claims review systems with the capacity to target patterns of inappropriate provision of care by specific providers. It has taken these well-established health insurance systems many years to reach such procedures. Yet all these countries are now experimenting with DRG payments for hospital care (mainly in university teaching hospitals), which is expected to result in better case management and reduce the duration of stay per case. The newer social health insurance schemes, however, are keen to shift to other mechanisms, such as capitation. Through regular prepayment to providers for a defined list of members and for a defined list of health services over a fixed period, capitation has been successfully applied in several countries in the Region. The Social Security Office of Thailand began its operations in 1991 with capitation, and the marked success led to the application of capitation by government in the 30-baht scheme to cover the rest of the population. In the Lao PDR, both the Social Security Office, which includes health care, and the government supported CBHI have used capitation from the start. Contrary to initial expectations, capitation is now preferred by the providers in these countries. The method implies that the provider is paid in advance, regardless of actual use by the insured population. Public and private hospital directors are interested in having a regular input of funds from a third party source, which does not necessitate running after individual patients for payment. The predictability of the payment, and the fact that there is no need to generate more services for more revenue, are attractive to the administration and health care professionals. Any payment method can be problematic in countries with new social health insurance schemes. If the public hospitals are under funded to start with, the low and irregularly paid staff may not welcome patients who have prepaid for their care. Opportunities for under the table payments are reduced by such schemes. As the capitation method implies a fixed amount at regular intervals regardless of use, the revenues can be used to increase the incomes of the providers health workers according to a planned allocation of the predictable revenues from health insurance and negotiated agreements with the staff. This may be more difficult to do under feefor-service payment. The major disadvantage of the capitation method is the potential for under-service to the patient, and this needs to be controlled through an appropriate quality assurance and utilization review system. Since quality assurance is a necessary component of any health insurance scheme, it does not constitute an additional budgetary burden. From the view point of the scheme, capitation reduces the need for sophisticated claims review. It also allows for shifting of the real cost control burden to the provider,

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14 while allowing the provider to use revenues according to needs, including the need to improve the income of health workers.

Conclusions
This paper first covered the advantages of social health insurance as the main health care financing mechanism. The areas noted included the committed created by prepayment, the predictability of revenues, effectiveness in purchasing and providing health care benefits and the potential to reach universal coverage by including dependents of the insured members. This section should help member institutions which have not yet included health care to deal with the question of whether health care be introduced as a new social security benefit for the populations covered. Or, should the responsibility for financing health care be left to ministries of health through combinations of tax-based government funds, out-of-pocket household financing through user charges and private commercial insurance? The first option should result in more stable schemes which contribute to the achievement of universal coverage through social protection. The second option could mean a loss of opportunities for broader social protection, for better pooling, stronger ties with health care providers to enable appropriate service delivery as well as opportunities to reduce poverty caused by high health care costs. Factors which enhance sustainability and efficiency in social insurance schemes were then reviewed. The scope of factors covered was small, but these are considered crucial issues at this time. The section on benefits essentially dealt with the extension of benefits to meet new needs arising from demographic as well as medical technology developments. Membership growth focused on strategies to improve pooling through mergers of small schemes, and to take on populations which may have been excluded till now. Partnerships with other agencies can be crucial for the effective extension of coverage. It is up to the social security schemes to seek these partnerships, with the intention of extending coverage to reach the entire population. In the process, existing schemes will face the question of whether to allow for the inclusion of health care as a social security benefit for all population sectors, without necessarily applying all the existing benefits to all populations. That is, can the self-employed and informal economy households be enrolled for a single short-term benefit health care rather than the entire social security package? This question is particularly relevant in countries in which the majority of the labour force is in the informal economy and where the importance of access to health care is recognized both as a means of preventing poverty and of accelerating economic growth. Legislative issues were shown to be crucial in achieving compliance, which is at the core of financial sustainability. Adequate preparation of social insurance laws and regulations needs to reflect our concern with developing a health insurance scheme with a broader range of objectives than merely creating a financing mechanism. The objectives will therefore include improvement in equity and access, in efficiency and in the quality of care provided to the beneficiaries.

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15 The section on provider payment focused on capitation as an optimal method, partly because of its potential to give public health care providers predictable revenues and opportunities to increase incomes of their health workers. The common elements of all these are awareness and capacity to change. The achievement of sustainability and efficiency is a dynamic process, requiring constant change. Social insurance systems need first the willingness to change, and then the information, from their own systems, from national development and from international experience which should lead to effective decision making. It is hoped that the presentations and deliberations at this Regional Conference will contribute to this process.

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16 REFERENCES Carrin, G. Social health insurance in developing countries: A continuing challenge. International Social Security Review, Vol.55. 2002 Commission on Macroeconomics and Health (2001). Macroeconomics and Health: Investing in Health for Economic Development. (Geneva:WHO). ILO, Ort Health Plus Scheme in the Province of La Union, Philippines: A case study of a community-based health micro insurance scheme, Strategies and Tools against Social Exclusion and Poverty (STEP) Programme, ILO, Geneva, 2002, ISBN 92-2112964 Killingsworth, J., Yang, Hongwei, Best practices for Rural Cooperative Medical System Development in China SPPD Document - CPR/01/408/A/08/14, WHO UNDP,2002. Kupferman, A and Ron, A. Structuring Demand and Supply in Community Health in Philippine Insurance, in Social Reinsurance: a new approach to sustainable community health financing (Ed. David M. Dror and Alexander S. Preker), International Labour Organization, World Bank, September 2002, ISBN 0-8213-50412 SKU: 1504 Ron, A. Social Insurance and Health Promotion: Health promotion in social health insurance: Current involvement and future needs to prevent disability, WHO ISSA Consultative Meeting on Social Insurance and Health Promotion, Helsinki, Finland, 27028 May, 2004 Ron, A., Carrin, G. and Tien, V.T. Vietnam: The development of national health insurance. International Social Security Review, Vol.51, 3/98, 1998. Van Ginnekin, W. Extending social security: Policies for developing countries, Extension of Social Security (ESS) Paper No. 13, Social Security Policy and Development Branch, ILO, Geneva, 2002. Van Ginneken, W., Social security for the informal sector: A new challenge for developing countries, International Social Security Review, 1999, 52: 49-69. Social Security Administration, Social Security Programs throughout the World, 2004, ISSA Publication, 13-11805, Washington, USA, 2004. World Health Report 2000, Who Pays for Health Systems? Chapter 5 in World Health Report 2000, 95-115, WHO, Geneva, 2000. WHO (Ron, A., Bayarsaikhan, D. and Than Sein (Eds.): Social Health Insurance: Selected Case Studies from Asia and the Pacific, WHO South East Asia and Western Pacific Regional Offices, March, 2005, ISBN 92 9022 239 5 Yu, S.H. and Anderson, G. Achieving Universal Health Insurance in Korea, Health Policy, 1992, 20: 289-299.

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