Health Economics 584
Module 8
Provision of Health Services, the Benefit Package, Stewardship and Health System Performance
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This is the final module to deal with overall health care financing arrangements and other issues relating to the functions, policies and interactions within a health system. It covers a range of topics including the provision of health services, the benefit package, government stewardship and measuring health system performance.
On completion of this module you will be able to:
Discuss issues impacting on the efficient delivery of health services
Explain the concept of a benefit package and approaches to its definition
Discuss the central role of government stewardship in a health system
Outline how health system performance can be assessed
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Provision of services
The supply-side of the health care market has a considerable impact on the overall performance of the health system including on its efficiency, equity and quality of care. Important policy questions include:
The public-private distribution or provision of services. This is a keenly debated issue with both proponents and opponents of a greater role for the private sector in health care delivery. There is no strong evidence that one sector performs better than another, with studies evaluating their respective performance often finding the sectors performs differently across different criteria.
The extent to which the structure of service provision is competitive or monopolistic and how this varies in different markets in the country (e.g. urban and rural) and for different kinds of services (e.g. primary care, inpatient care, drugs, etc.). A competitive market environment can result in market forces being sufficient to achieve an efficient delivery of services through consumer choice. In non-competitive markets, other mechanisms may be required to improve the efficiency of service delivery and thus health outcomes.
What is the distribution of service providers? Are there parts of the country that have no effective access to health care? The question of access to health services is discussed further in the section below on the benefit package.
Health care reforms in many countries have paid increasing attention to the organisation and behaviour of health care providers at the institutional or micro level. Factors that have been addressed include improving the quality of care, the decentralisation of management to provider institutions, the shifting of boundaries of health care delivery, the structure of hospitals, an enhanced role for primary health care and human resource issues including workforce shortage and task substitution.
The benefit package
The benefit package refers to the list of services that the purchaser pays for from pooled funds and to which the population or beneficiaries of an insurance scheme are entitled. This section will focus on three aspects relating to this benefit package: defining the benefit package, the use of out of pocket payments and access to services in the benefit package.
Defining the benefit package
Scarcity of resources means that not all treatment can be included in the package of health care provided to a population or to beneficiaries of an insurance scheme, and decisions must be made about which interventions to include. Given limits to the revenue that is collected and pooled by purchasers, and the
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rapid advances in health technology and effective treatments, some form of rationing of health care is inevitable.
In some countries the rationing of health services has occurred implicitly through, for example, general practitioners acting as gatekeepers to specialist services or the existence of hospital waiting lists. However, more explicit approaches to defining the benefit package have been undertaken by governments, in a number of countries including the Netherlands, Sweden, Denmark, New Zealand, the UK and the state of Oregon in the US. The reading by Sabik and Lie (2008) provides a good overview as to the approaches used in these countries and their relative success in setting priorities, and selected country examples are discussed briefly below. Many of the priority setting approaches were initiated in or around the 1990s.
In the Netherlands, a committee was appointed in 1990 by the government to advise on the benefit package to be included in the social health insurance system. In considering how choices should be made, the committee provided a framework that recommended that services should be required to pass four sequential tests before they were included in the package (Figure 8.1). The first test was necessity, which was defined as care that responds to basic need and is necessary to restore maintain or restore health. The second test was effectiveness, according to which only the care that is effective in maintaining or restoring health should be included. The third test was efficiency, so that among the alternatives of effective care only the most cost-effective are included. The fourth test was individual responsibility, which means that only the care that cannot be left to an individual’s personal or individual responsibility is included. If services passed these tests then they would be included in the care package. If they did not they would be left to individuals to purchase from their own resources. Using this framework the committee argued that dental care for adults, homeopathic medicines and in vitro fertilisation should be left out of the care package. Beyond these proposals the committee argued that priorities should be set by assessing the effectiveness and cost-effectiveness of care and to drawing up guidelines for the provision of services.
In Sweden a similar committee was appointed by the government in 1993. This committee analysed the issue of priority setting and worked out principles that it argued should guide decision making. These principles included human dignity, need, solidarity and efficiency (Insert 8.1). These principles are listed in rank order, which means that in practice the cost-effectiveness principle is given relatively low priority. The committee specified that services should not be rationed according to age or income.
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Source: Ham, C. and F. Honigsbaun. 1998. Priority setting and rationing health services. In Critical challenges for
health care reform in Europe, ed. R.B. Saltman, J. Figueras and C. Sakellarides. Buckingham: Open University Press,
p. 120.
Figure 8.1
The four tests or ‘sieves’ for health services in the Netherlands
Source: Ham, C. and F. Honigsbaun. 1998. Priority setting and rationing health services. In Critical challenges for
health care reform in Europe, ed. R.B. Saltman, J. Figueras and C. Sakellarides. Buckingham: Open University Press,
p. 121.
Insert 8.1
The three principles for priority setting in Sweden
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An example of a rationing or priority setting exercise that did develop an explicit list of services to be included for funding was in the state of Oregon in the US (Insert 8.2). Reformers in Oregon were concerned that the constraint of the government budget had lowered the eligibility threshold for Medicaid (a combined federal/state government funded scheme for low income people) well below the federal poverty line and the number of beneficiaries had been cut down. As a result of this, fewer than 50% of the poor were covered by the program. It was argued that Medicaid coverage should be extended to all persons living below the poverty line, which given a fixed budget implied covering fewer services. A Health Services Commission was appointed and given the responsibility of creating a list of health services ranked from the most to the least important. The early efforts of the commission collected cost and effectiveness data and ordered their first prioritised list entirely by cost-effectiveness ratios. However, this list was considered by many observers to be deeply flawed and so the cost-effectiveness paradigm was dropped. Instead the commission divided treatment-condition pairs into three categories namely –
Essential: services that preserve life, maternity care, preventive care for children and adults, reproductive services and comfort for the terminally ill.
Very important: treatment for non-fatal conditions in which there is a full or partial recovery and treatment that will improve the quality of life.
Valuable to certain individuals: treatment for non-fatal conditions which merely speeds recovery and those in which treatment provides little improvement in quality of life.
In developing the final list of treatments to include in the list of services to be funded under Medicaid the commission also considered other factors such as prevention, quality of life, ability to function, equity, effectiveness of treatment, benefits for many, mental health and treatment for dependency, public choice, community compassion, impact on society, length of life and personal responsibility.
Regardless of whether countries have or have not undertaken national initiatives with regards to priority setting or rationing, all countries need to make difficult choices on the allocation of resources between competing demands. Likewise health insurance funds must make decisions on the relative priority attached to different services and which ones will be funded from pooled resources.
This defining of a benefit package that is to be funded from pooled resources entails difficult and sometimes controversial choices about which services should be accessible to everyone. A range of criteria can be used for identifying services, including effectiveness and cost-effectiveness of the services. In its decisions relating to defining essential packages of services for low and middle income countries, the World Bank used two criteria, namely the size of the burden caused by a particular disease, injury or risk factor and the cost-effectiveness of interventions to deal with it. It was suggested that for very poor countries, priority should be given to public financing of health care for the poorest of the poor and the most cost-effective interventions of the package, and for middle-income countries the government should finance all interventions in the minimum package for both the poor and the non-poor.
The question of priority setting, resource allocation and the benefit package is taken up again in Module 12.
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Source: Ham, C. and F. Honigsbaun. 1998. Priority setting and rationing health services. In Critical challenges for
health care reform in Europe, ed. R.B. Saltman, J. Figueras and C. Sakellarides. Buckingham: Open University Press,
p. 123.
Insert 8.1
Priority setting in the state of Oregon in the US
Role of out of pocket payments
Cost sharing can be an important part of strategic purchasing as it is a form of demand management that
can be used to reduce consumer moral hazard. However, it is a controversial area of policy too, with an
ideological divide between ‘free marketeers’ who view user fees for health care as an important demandmanagement
tool and ‘public good’ advocates who view user fees as adding to equity problems and access
problems for low income groups. The rationale for cost sharing is that it puts some financial burden on the
consumer to discourage ‘unnecessary’ use of health care. In low income countries, cost sharing is also a
means of revenue raising to help pay for the cost of health services. Out of pocket payments can also
comprise a substantial share of provider incomes in many parts of the world.
Direct payment by patients is conceptually linked to the concept of the benefit package. If a service is
‘fully covered’ from the pooled revenue funds then there is no requirement for patient payment. If a
service is ‘partially covered’ then patients have to pay something at the time of use (i.e. cost sharing),
but not the full cost. ‘Uncovered’ services are those which have to be financed entirely by the user.
Cost sharing policies have different characteristics to take account of the need to protect people against
out of pocket expenditures in case of severe illness. One feature is to specify an ‘out of pocket
maximum’, which defines a limit on the total out-of-pocket payments for which individuals are
responsible, with all the costs of care over this amount paid for from the pooled funds. This contrasts with
an alternative cost sharing feature of a ‘benefit maximum’, which means that there is a defined limit on
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the amount of health care costs that will be paid from the pooled funds by the purchaser. This leaves
individuals at risk for any expenditure above this amount.
To take account of the special circumstances of low income people, cost sharing polices can have special
exemptions for low income individuals that are typically means tested in some way.
Access to health services
Many countries have health policy goals relating to equitable access to health care. Access can be
characterised as a multidimensional concept, which includes availability or physical access, affordability
or financial access and accessibility or cultural access. A promise of insurance protection for a package of
health services is meaningless for people who do not have reasonable physical access to these services.
Therefore analysis of the benefit package must include an assessment of the geographic distribution of
providers. The affordability dimension concerns the ‘degree of fit’ between the cost of accessing health
services and individuals’ ability to pay. This aspect of the access dimension is linked to the financial risk
of ill health and the role of the health system in protecting households and communities from this risk.
This access dimension has dominated the debate around equity in health care and relates to the
alternative revenue collection mechanisms and out of pocket payments or cost sharing. Acceptability
refers to the nature of service provision and how it is perceived by individuals and communities. The way
in which health services are delivered and in which patients are attended to may accommodate patients’
beliefs or sensitivities or it may deter them from using the services to the desirable extent.
Figure 8.2 presents these three dimensions as the three points of a triangle, which together constitute
access. The linkage lines in the triangle highlight that the dimensions are interrelated (yet deal with
distinct issues). For example, poor availability of services in relation to the geographic distribution of
providers impact affordability. The figure also highlights that the foundation of the access concept is the
interaction between the health system and individual or household factors within each dimension. Access
is the ‘degree of fit’ between the health system and its clients. This concept refers to a dynamic
interaction, with potential for both the health system and individuals to adapt and address or improve the
interaction between the two sides.
Source: Thiede, M., P. Akweongo and D. McIntyre 2007. Exploring the dimension of access. In The economics of health
equity, ed. D. McIntyre and G. Mooney. Cambridge: Cambridge University Press, p. 107.
Figure 8.2
The access framework
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Stewardship
A central function of a health system is that of stewardship. Broadly defined, stewardship is ‘the careful and responsible management of the well-being of the population’, and this guiding of the health system as a whole is the responsibility of government – usually through the Ministry of Health. Responsibilities for different aspects of stewardship may be divided (intentionally or otherwise) between central and sub-national health authorities, insurance funds, other purchasing agents (sometimes including donors) and even some providers. But a country’s government, through its Ministry of Health, remains the ‘steward of stewards’ for the health system, with a responsibility to ensure that they collectively provide effective stewardship.
The Murray and Frenk reading for this module identifies three key aspects of stewardship (p.726): setting, implementing and monitoring the rules for the health system; assuring a level playing field for all actors in the system (particularly purchasers, providers and patients); and defining strategic directions for the health system as a whole. The article discusses six core domains or sub-functions that collectively are argued to constitute effective health system stewardship that leads to better outcomes. These include overall system design, performance assessment, intersectoral advocacy, regulation and consumer protection.
The question of health system performance is discussed below.
Assessing health system performance
The World Health Organisation in its world health report for 2000 (Health Systems – Improving Performance) stated that with respect to clients ‘health systems have a responsibility not just to improve health but to protect them from the financial cost of illness and to treat them with dignity’. It identified three fundamental goals of a health system, namely:
– Improve the health of the population they serve.
– Respond to people’s expectations (i.e. responsiveness).
– Provide financial protection against the costs of ill health (i.e. fairness in financing).
These objectives are discussed in the Murray and Frenk reading (pp. 719-721). In relation to improving the health of the population and responsiveness, the WHO argued that two aspects are important – both the overall level and the distribution within the population (see Figure 2 in the article, p. 321). However, fair financing is only concerned with distribution; it is not related to the total resource bill or how the funds are used. This provides five measures of the three goals of a health system, which can be used to assess health system performance. In addition to assessing performance against these five indicators, the WHO also considered the question of efficiency, or how well health systems were doing compared with the best they could be expected to do given available resources.
In its report the WHO weighted its five measures of health system performance, and then related this overall performance to the available resources for health services in each member state to obtain a rank of the performance of each country.
Summary Summary Summary
Modules 5 to 8 have presented a framework for analysing the key functions and interactions within a health system. This framework tracks the financial flow of funds across the different functions in a health system including revenue collection, pooling of resources, purchasing health care services and the provision of services. In addition to these functions, Module 8 has discussed the benefit package, the central role of stewardship in a health system and measuring health system performance. Analysis of the components of a health system using the framework presented in Modules 5 to 8 highlights the interactions of various policies within a health system, and the impact of alternative policy levers to enhance overall health system performance across the different measures.
Modules 9 to 11 move on to another area in health economics, namely methods of economic evaluation and its use in decision making.
