Pandemic Financing: How the World is Funding the COVID-19 Response (Part 3)

What mechanisms are available to fund the pandemic response?

The Ebola crisis in West Africa in 2014 highlighted the difficulty in rapidly organizing funding for an outbreak, especially among economically vulnerable countries. To address this and to prevent future financial catastrophes, several financing mechanisms have been presented to countries. These mechanisms aim to fund the potential gaps between a country’s financial capacity and its actual spending requirements in response to the pandemic. They typically fall into three categories: (1) reallocation/realigning of existing funds, (2) external/donor funding, and (3) taxation.

1.  Reprioritization and reallocation: Use of existing budget to fund first measures

Countries are rapidly mobilizing domestic resources to increase public funds that can be deployed quickly in response to the COVID-19 pandemic.10,18 Public financial management systems provide flexibility for governments to tap budgeted allocations to fund a pandemic response.6

Such is the case in the United States of America where the declaration of a national emergency by the President allows the government to utilize an emergency fund amounting to US$50 billion under the Stafford Act.6 Similarly, the declaration of a state of public health emergency in the Philippines allowed government agencies to utilize resources to implement urgent measures in response to the COVID-19 pandemic. This includes the mobilization of local disaster risk reduction management funds (formerly calamity funds) by local government units.19

Many countries have reprioritized their government budget through reallocation and virements to create a space that can accommodate additional financing requirements.5,11 Government agencies have worked together to ensure that reallocated funds are drawn from non-urgent and non-essential activities rather than budget cuts across the board.5 Hence, many countries have canceled the delivery of non-essential services to increase fiscal space and improve their health systems’ capacity to respond to the pandemic.5 Consequently, this will result in unfavorable effects due to unmet health needs and will, therefore, require adequate attention immediately after the pandemic’s urgent phase has passed.5

2.  International Insurance Scheme: World Bank’s Pandemic Emergency Financing Facility

The Pandemic Emergency Financing Facility or PEF was launched in 2017 as an innovative mechanism that will rapidly mobilize funds to low-income countries battling pandemics while placing some risks onto financial markets rather than governments.20 The PEF draws on funds from private investors through bonds and swaps in exchange for high-interest rates. The PEF has two components: (1) a cash window designed to rapidly release funding to eligible countries, and (2) an insurance window that will help increase the scale of response in the event of a worst-case scenario.20

The maximum payout for the COVID-19 pandemic is US$ 195.84 million. Only 64 of the world’s lowest-income countries who are members of the International Development Association are eligible for PEF financing.20 Specific funding allocations for each country are determined by population size and reported cases. Financial disbursements begin when eligible countries submit authorized funding allocation requests.20 Interestingly, receiving countries do not need to repay funds from PEF.

Sadly, the cash window has been depleted to pay for Congo’s Ebola response and has not yet been replenished.21 Hence, any funding for the COVID-19 outbreak has to come from the investment window. For the bond to be triggered, however, several pandemic-related criteria have to be met. This includes outbreak size, outbreak growth, and outbreak spread. While the criteria have already been satisfied,20 this set of triggers has been widely criticized for being stringent, making the financing mechanism slow and complicated.21–23 The bond’s triggers are very late and put vulnerable countries at an extreme disadvantage. How do we expect countries who have been struggling financially to be able to reliably record and report cases and deaths early into the pandemic? Essentially, the delay has prevented PEF from enhancing low-income countries’ capacity to respond to the pandemic. Should funds had been paid out earlier, they could have been used to prevent the spread of COVID-19 in severely affected low-income countries.

3.  Collecting additional revenue: Taxation during the pandemic

The idea of increasing tax rates has been proposed as a possible solution to the long-term economic and health impact of the COVID-19 pandemic.24–27 In particular, governments have been mulling about introducing higher wealth tax rates which supposedly can increase the available funds for the long-term pandemic response, specifically during the recovery phase.24,25 Wealth tax can be promising for countries like Saudi Arabia that rely almost exclusively on a single sector (i.e. oil industry) to fund its entire government.27 An increase in wealth tax applied across the board (i.e. flat tax) tends to favor the rich and disproportionately burden the poor. In the Philippines, other taxes have been imposed and will likely push low-income families into financial hardship. All of these happening at the same time when the government decided to increase the profit for huge conglomerates by reducing corporate income tax.26

Imposing direct and indirect additional taxes on low-income families during a public health crisis creates a cyclical problem of inequality. Increasing taxes of even the most basic goods for survival somehow cancels out emergency subsidies (e.g. social amelioration program in the Philippines) provided to individuals who live day-to-day on subsistence earnings (i.e. no work, no pay arrangement). Some countries are now looking at imposing taxes only on the wealthiest.25,26 In the US, a 5% tax on the wealthiest 5% of American households can collect up to $1 trillion.25 Meanwhile, in the Philippines, imposing a higher income tax rate on the wealthiest 2.5% of Filipino households can raise revenue to P127 billion annually.26

What is the way forward?

The COVID-19 pandemic has exposed the interdependence of health security and economic security. Thus, governments are confronted with the challenge to employ a comprehensive pandemic response that will contribute to both health security and economic security. Policies, therefore, should strive to keep health care providers and businesses financially viable while balancing the need to continue providing non-urgent or non-essential services. The following are proposed policies that can support the government’s pandemic response:

  1. Provide financial relief in the form of a “global budget” for primary care

Primary care facilities have traditionally relied on fee-for-service which depended on the number of clinic visits. Due to restrictions on in-person visits and challenges in maintaining operations due to reduced demand, primary care facilities can be provided financial relief by instituting global budgets.

As hospitals continue to care for patients in critical condition, primary care facilities will be at the forefront of managing non-COVID conditions such as mental illness, substance abuse, and poorly controlled chronic diseases. Using a global budget will contain costs and allow governments to repurpose available funds to the pandemic response. This type of provider payment should be accompanied by provider incentives to encourage efficiency and utilization and ensure the quality of services.

  1. Increase wealth tax of the rich and employ mandatory coverage of services

Taxation is the easiest revenue source of governments. The intention to impose taxes should be balanced out with the objective to level the playing field, especially in terms of accessing health care services. Higher taxes can substantially reduce disposable income which in turn lowers consumer demand. In this case, taxation during a pandemic can lower demand for health services especially when mechanisms to lower out-of-pocket payments have not been instituted. At the moment, a wealth tax for the wealthiest families and corporations seems to be one of the most rational and equitable sources of revenue for the pandemic response.

The issue of increasing health care expenditures (i.e. out-of-pocket payments) is compounded by economic issues, such as massive unemployment, leaving low-income households more vulnerable. Interestingly, moral hazard seems to have a smaller effect during a pandemic. This provides a stronger argument for governments to enforce a system of cross-subsidies; thus, ensuring financial coverage for accessing essential services. Mandatory coverage promises financial access to health services that may be beneficial for those at the lower end of the income distribution. Those at the lowest income quintiles are not likely to take out coverage voluntarily. The government can step in to stimulate the voluntary purchase of coverage by fully subsidizing it. Mandatory coverage can encourage service utilization and may prevent free-riding even for high-income groups.

In conclusion, the COVID-19 pandemic has exposed deep-rooted and neglected health system issues which will require long-term structural changes. Countries are presented with many policy options that will not only immediately finance pandemic response but also policies that try to achieve social justice and health equity. These policy alternatives should be evaluated to inform how governments can make health care financing, particularly pandemic preparedness, become more effective in the long term. Ultimately, this will have implications on how both domestic and international resources can be used to prepare against future pandemics and sustain effective service coverage.

REFERENCES

  1. World Health Organization. How to purchase health services during a pandemic ? Purchasing priorities to support the. 2020;(April). https://www.uhc2030.org/blog-news-events/uhc2030-blog/how-to-purchase-health-services-during-a-pandemic-purchasing-priorities-to-support-the-covid-19-response-555353/.
  2. World Health Organization. Maintaining essential health services : operational guidance for the COVID-19 context. 2020;(June). https://www.who.int/publications/i/item/covid-19-operational-guidance-for-maintaining-essential-health-services-during-an-outbreak.
  3. Kurowski C, Evans D, Irwin A, Postolovska I. COVID-19 (coronavirus) and the future of health financing: from resilience to sustainability. Investing in Health. https://blogs.worldbank.org/health/covid-19-coronavirus-and-future-health-financing-resilience-sustainability. Published 2020. Accessed June 13, 2020.
  4. Development Aid. Financing of pandemic response: where does the money come from? https://www.developmentaid.org/#!/news-stream/post/62753/financing-of-pandemic-response-where-does-the-money-come-from. Published 2020. Accessed June 13, 2020.
  5. Thomson S, Habicht T, Evetovits T. Strengthening the health financing response to COVID-19 in Europe. 2020.
  6. Barroy H, Wang D, Pescetto C, Kutzin J. How to budget for COVID-19 response? 2020;(March):1-5. https://www.who.int/who-documents-detail/how-to-budget-for-covid-19-response.
  7. World Health Organization. Health systems governance and financing & COVID-19. https://www.who.int/teams/health-financing/covid-19. Published 2020. Accessed June 14, 2020.
  8. World Health Organization. Priorities for the Health Financing Response to COVID-19. DOI:10.1596/33738
  9. Glassman A, Datema B, McClelland A. Financing Outbreak Preparedness: Where Are We and What Next? Cent Glob Dev. 2018. https://www.cgdev.org/blog/financing-outbreak-preparedness-where-are-we-and-what-next.
  10. Cylus J. HOW MUCH ADDITIONAL MONEY ARE COUNTRIES ALLOCATING TO HEALTH FROM THEIR DOMESTIC RESOURCES? https://analysis.covid19healthsystem.org/index.php/2020/05/07/how-much-additional-money-are-countries-putting-towards-health/. Published 2020. Accessed June 18, 2020.
  11. Stone M, Saxena S. Special Series on Fiscal Policies to Respond to COVID-19 Preparing Public Financial Management Systems for Emergency Response Challenges 1. https://blog-pfm.imf.org/pfmblog/2020/03/preparing-public-financial-management-systems-to-meet-covid-19-challenges.html.
  12. World Health Organization. Joint External Evaluation of IHR Core Capacities of the Republic of the Philippines. Geneva, Switzerland; 2019. DOI:10.1142/9789812817945_0010
  13. Gupta S, Barroy H. The COVID-19 Crisis and Budgetary Space for Health in Developing Countries. https://blog-pfm.imf.org/pfmblog/2020/03/preparing-public-financial-management-systems-to-meet-covid-19-challenges.html. Published 2020. Accessed June 21, 2020.
  14. Barroy H. No calm after the storm: time to retool country PFM systems in the health sector. https://p4h.world/en/who-wb-no-calm-after-the-storm-time-to-retool-country-pfm-systems-in-health-sector. Published 2020. Accessed June 21, 2020.
  15. Verma A, Raj A. PFM Solutions in India to Combat the COVID-19 Pandemic.
  16. Philippines Health Insurance Corporation. OFFICIAL STATEMENT ON THE ALLEGED UNPAID CLAIMS TO PRIVATE HOSPITALS RAISED IN A RESOLUTION IN CONGRESS. https://www.philhealth.gov.ph/news/2020/rsltn_stmnt.php#gsc.tab=0. Published 2020. Accessed June 21, 2020.
  17. World Health Organization. Role of Primary Care in the COVID-19 Response.; 2020. https://apps.who.int/iris/bitstream/handle/10665/331921/Primary-care-COVID-19-eng.pdf?sequence=1&isAllowed=y. Accessed June 21, 2020.
  18. Thomson S, Habicht T, Evetovits T. HOW ARE COUNTRIES MOBILIZING ADDITIONAL PUBLIC FUNDS FOR HEALTH? https://analysis.covid19healthsystem.org/index.php/2020/04/27/how-are-countries-mobilizing-additional-public-funds-for-health/. Published 2020. Accessed June 18, 2020.
  19. Office of the Presidential Spokesperson. Palace announces state of public health emergency in PH. https://pcoo.gov.ph/OPS-content/palace-announces-state-of-public-health-emergency-in-ph/. Published 2020. Accessed June 19, 2020.
  20. The World Bank. Fact Sheet: Pandemic Emergency Financing Facility. https://www.worldbank.org/en/topic/pandemics/brief/fact-sheet-pandemic-emergency-financing-facility. Published 2020. Accessed June 21, 2020.
  21. Pillinger BM. The World Bank’s 2017 pandemic response fund isn’t working. The Washington Post. https://www.washingtonpost.com/politics/2020/03/31/world-banks-2017-pandemic-response-fund-isnt-working/. Published March 31, 2020.
  22. Strohecker K. Coronavirus spread triggers World Bank pandemic bond payout. Reuters. https://www.reuters.com/article/health-coronavirus-pandemic-bonds/coronavirus-spread-triggers-world-bank-pandemic-bond-payout-idUSL8N2C861O. Published April 21, 2020.
  23. Evans P. Pandemic bonds were supposed to fund the cost of fighting the coronavirus — so why aren’t they paying off? CBC News. https://www.cbc.ca/amp/1.5469646?__twitter_impression=true. Published February 22, 2020.
  24. Laurent L. Globalization ’ s Winners Are Prime Pandemic Tax Targets. Bloomberg. https://www.bloomberg.com/opinion/articles/2020-06-03/coronavirus-taxation-can-be-done-right-in-post-pandemic-world. Published 2020. Accessed June 22, 2020.
  25. Taylor C. Coronavirus crisis could see wealth taxes implemented around the world , economist claims. CNBC. https://www.cnbc.com/2020/05/11/coronavirus-wealth-taxes-may-be-rolled-out-globally-economist-says.html. Published May 11, 2020. Accessed June 22, 2020.
  26. Africa S. Why make the poor pay for the coronavirus response ? Rappler. https://www.rappler.com/thought-leaders/261874-analysis-why-make-poor-pay-coronavirus-response. Published May 25, 2020.
  27. Fayyad A. Saudi Arabia Isn ’ t Just Raising Taxes. The Atlantic. https://www.theatlantic.com/international/archive/2020/06/saudi-arabia-taxes-coronavirus-pandemic/612493/. Published June 11, 2020.

 

Pen Point 51

The deluge of health information poses a great challenge to patients, especially if the information cannot be critically analyzed and synthesized. Therefore, it is incumbent for health care providers to examine and integrate into a coherent whole all the pieces of evidence coming from disparate sources, and help patients make sense of the rapidly changing health care landscape.

Pen Point 50

Evidence-informed policies sound sensible, right? But why does it not often happen, especially in the Philippines? While the use of evidence in decision-making seems logical, policy-making (sadly) often isn’t rational. It’s almost always political.

Pandemic Financing: How the World is Funding the COVID-19 Response (Part 2)

What are the considerations in the provider payment mechanism?

How we raise money to pay for health care is an important issue. But equally important are the daunting tasks of organizing health service delivery, and compensating individuals and organizations that provide these services. To meet the increasing demand for health care services, health care workers need enough flexibility on methods of service delivery as well as in compensating for financial losses brought about by changing health care needs.

Service providers, especially those who are paid based on service outputs and volume (i.e. case-based payment or fee-for-service), will likely suffer from severe and sudden revenue losses due to the cancellation of elective and other non-urgent medical services.1,5 Moreover, some providers will be confronted with increased expenditure and costs (e.g. purchase of new equipment and supplies, higher staffing needs, etc.) which cannot be paid from their usual revenue sources.1,5 Thus, health and financing systems should quickly provide additional funds to hospitals and primary care facilities to compensate for both actual and anticipated revenue losses.

For health facilities, such as hospitals, who have been paid retrospectively based on fee-for-service or case-based payments, there is a call for a shift to other modes of provider payment.1 It has been suggested that the problem of maintaining provider revenue to prevent bankruptcy can be averted by front-loading budgets or capitation. In such a way, provider payment that would otherwise come through retrospective reimbursement of insurance claims will be paid in advance by providing a budget upfront based on historical utilization levels.1,5 In the Philippines, for example, Philhealth has released more than P43 billion to accredited hospitals to help them in the pandemic response of the country.16

Primary care, on the one hand, provides an essential foundation for the global response to the COVID-19 pandemic. It serves as a gatekeeper that can reduce the demand for hospital services. The main principles of primary care concerning the current pandemic include: (1) identify and manage potential cases as soon as possible, (2) avert the risk of transmission to contacts and health care workers, (3) maintain delivery of essential health services, (4) enhance existing surveillance, and (5) strengthen risk communication and community management.17

Inevitably, as the number of COVID-19 cases increases, the demand for primary care services will also increase. Therefore, health authorities should recognize the need to take immediate action to support the management of COVID-19 cases at the primary care level. Similar to hospitals, this will entail strategies to increase surge capacity and maintain stocks of personal protective equipment and other essential supplies, among others.17 The success of these strategies will be contingent on the availability of funds to support them. As such, widening the fiscal space for primary care facilities should come hand in hand with improving the health financing system for hospitals. This will ensure timely measures to address the needs of vulnerable groups in communities, and that essential health services are maintained to reduce preventable deaths.

In light of the pandemic, primary care also calls for support in innovations in service delivery. These innovations, such as teleconsultation and outside hospital care, aim to minimize the risk of COVID-19 transmission and maintain the provision of essential health services at the primary care level.5 Financial incentives can support the attainment of these objectives. Some European countries have already introduced or amended provider payment mechanisms to remunerate new forms of service delivery.5

Additional funds may also be needed to incentivize essential staff for their dedication and hard work during the pandemic. Pay-for-performance mechanisms are being revisited to adjust performance targets and ensure quality care is provided and incentives are appropriately given to deserving service providers1. Finally, health professionals who will have reduced income due to postponed or canceled elective procedures should also be compensated. Although some revenue may be derived from the adoption of telemedicine in numerous aspects of primary care, many medical and surgical specialties will have to deal with a significant decline in revenue.

What are the implications to the patient payment system within countries?

Citizens should be able to understand the importance of timely diagnosis and treatment of COVID-19. Concerns about the affordability of health care should not be a factor in health-seeking decisions as it may delay people from seeking treatment or be prevented from obtaining the services they need.5,8 Out-of-pocket payments, user fees, and co-payments at the point of care for essential services have been constant financial barriers to accessing health services, and sometimes push people to financial hardship.2,5 It has been argued that co-payments and user fees for all patients, including for non-COVID-19 health services, should be suspended.2,5

When user fees have to be suspended, it must be communicated clearly to people that services are free at the point of care.2,5 Patient benefits should be clearly defined and included in risk communication strategies and public announcements. However, the mere statement of free services might not be enough, especially in countries where people face other barriers to access (e.g. transportation costs).8

Unemployed or self-employed people, and those working in the informal economy, may not be able to pay their insurance contributions. In turn, this may render them ineligible to access health care particularly in health systems where entitlements are linked to payment contributions. To address this, some countries have already extended benefit entitlements to ensure wider coverage.5 In the long run, however, countries that have suspended co-payments / user fees and expanded insurance coverage will need additional resources to compensate service providers for lost user fee revenues.

References:

  1. World Health Organization. How to purchase health services during a pandemic ? Purchasing priorities to support the. 2020;(April). https://www.uhc2030.org/blog-news-events/uhc2030-blog/how-to-purchase-health-services-during-a-pandemic-purchasing-priorities-to-support-the-covid-19-response-555353/.
  2. World Health Organization. Maintaining essential health services : operational guidance for the COVID-19 context. 2020;(June). https://www.who.int/publications/i/item/covid-19-operational-guidance-for-maintaining-essential-health-services-during-an-outbreak.
  3. Kurowski C, Evans D, Irwin A, Postolovska I. COVID-19 (coronavirus) and the future of health financing: from resilience to sustainability. Investing in Health. https://blogs.worldbank.org/health/covid-19-coronavirus-and-future-health-financing-resilience-sustainability. Published 2020. Accessed June 13, 2020.
  4. Development Aid. Financing of pandemic response: where does the money come from? https://www.developmentaid.org/#!/news-stream/post/62753/financing-of-pandemic-response-where-does-the-money-come-from. Published 2020. Accessed June 13, 2020.
  5. Thomson S, Habicht T, Evetovits T. Strengthening the health financing response to COVID-19 in Europe. 2020.
  6. Barroy H, Wang D, Pescetto C, Kutzin J. How to budget for COVID-19 response? 2020;(March):1-5. https://www.who.int/who-documents-detail/how-to-budget-for-covid-19-response.
  7. World Health Organization. Health systems governance and financing & COVID-19. https://www.who.int/teams/health-financing/covid-19. Published 2020. Accessed June 14, 2020.
  8. World Health Organization. Priorities for the Health Financing Response to COVID-19. DOI:10.1596/33738
  9. Glassman A, Datema B, McClelland A. Financing Outbreak Preparedness: Where Are We and What Next? Cent Glob Dev. 2018. https://www.cgdev.org/blog/financing-outbreak-preparedness-where-are-we-and-what-next.
  10. Cylus J. HOW MUCH ADDITIONAL MONEY ARE COUNTRIES ALLOCATING TO HEALTH FROM THEIR DOMESTIC RESOURCES? https://analysis.covid19healthsystem.org/index.php/2020/05/07/how-much-additional-money-are-countries-putting-towards-health/. Published 2020. Accessed June 18, 2020.
  11. Stone M, Saxena S. Special Series on Fiscal Policies to Respond to COVID-19 Preparing Public Financial Management Systems for Emergency Response Challenges 1. https://blog-pfm.imf.org/pfmblog/2020/03/preparing-public-financial-management-systems-to-meet-covid-19-challenges.html.
  12. World Health Organization. Joint External Evaluation of IHR Core Capacities of the Republic of the Philippines. Geneva, Switzerland; 2019. DOI:10.1142/9789812817945_0010
  13. Gupta S, Barroy H. The COVID-19 Crisis and Budgetary Space for Health in Developing Countries. https://blog-pfm.imf.org/pfmblog/2020/03/preparing-public-financial-management-systems-to-meet-covid-19-challenges.html. Published 2020. Accessed June 21, 2020.
  14. Barroy H. No calm after the storm: time to retool country PFM systems in the health sector. https://p4h.world/en/who-wb-no-calm-after-the-storm-time-to-retool-country-pfm-systems-in-health-sector. Published 2020. Accessed June 21, 2020.
  15. Verma A, Raj A. PFM Solutions in India to Combat the COVID-19 Pandemic.
  16. Philippines Health Insurance Corporation. OFFICIAL STATEMENT ON THE ALLEGED UNPAID CLAIMS TO PRIVATE HOSPITALS RAISED IN A RESOLUTION IN CONGRESS. https://www.philhealth.gov.ph/news/2020/rsltn_stmnt.php#gsc.tab=0. Published 2020. Accessed June 21, 2020.
  17. World Health Organization. Role of Primary Care in the COVID-19 Response.; 2020. https://apps.who.int/iris/bitstream/handle/10665/331921/Primary-care-COVID-19-eng.pdf?sequence=1&isAllowed=y. Accessed June 21, 2020

Pen Point 49

Various provider payment mechanisms will continue to exist in the country’s health care system. Emphasis is placed, however, on the current movement towards using performance-driven, prospective payments (e.g. Global Budget Payment) based on diagnosis-related groups (DRG). The shift to DRG-based GBP will not be easy. Mechanisms should be in place to avoid underprovision and ensure quality health care.

At the end of it all, “mixing” of provider payment mechanisms can be complementary or compensatory. It is promising how incentives will come into play when these mechanisms align themselves during the implementation of the UHC law.

Happy to know that PHIC is now working on this with various agencies. Very few hands on deck though.

Pandemic Financing: How the World is Funding the COVID-19 Response (Part 1)

Introduction

Many countries are scrambling to respond to the COVID-19 pandemic. The primary focus has been on strengthening health systems to improve surge capacity1,2. At the same time, countries are faced with the difficulty of balancing the demands of responding to the pandemic with the need to maintain the delivery of essential health services2. This increasing demand for health care can further strain health systems around the world. Thus, resulting in a dramatic increase in direct mortality from the outbreak and indirect mortality from preventable and treatable health conditions2.

A key challenge to the pandemic response is the struggle to reconcile scarce resources with many competing priorities. Many health systems, however, were already overwhelmed and underfunded even before the pandemic3. Unsurprisingly, the COVID-19 pandemic has caused a significant blow on the global economy, further constraining the fiscal capacities of economically-vulnerable countries3,4.

Timely policy actions are crucial to mitigate both the health and economic shocks brought about by the pandemic5. Therefore, governments must create a public finance environment that can provide sufficient funding to ensure a comprehensive pandemic response while also taking into account economic and fiscal constraints6.

How is the expression of health valuation and prioritization highlighted in the COVID-19 response?

Health financing policies are required to strengthen the pandemic response. Such policies should focus on (1) raising adequate revenues, (2) organizing these revenues to maximize risk-sharing across the entire population, and (3) mobilizing public funds so that they can be effectively translated into the provision of health services7.

Population-based services, such as comprehensive surveillance, data and information systems, and communication and information campaigns, take priority in the pandemic response. Funding these health services will help ensure that public health functions needed to respond to the crisis are all in place8. Unfortunately, in many countries, investment in the national capacity to prevent, detect, and respond to pandemics was not prioritized in recent years8. In some countries, a systematic financing response has not been established to help address these capacity gaps9.

Additional domestic spending can come from a mix of sources and is used to address different health system issues arising from the pandemic5. In Lithuania, the additional expenditure amounting to $386 purchasing power parity (PPP) per person was intended to cover equipment, salaries, and social security coverage10. In contrast, some countries, such as Bosnia and Latvia, have allocated less than $20 PPP per person from domestic resources for their pandemic response10. It is also interesting to note the variation of health spending across countries. Some countries have large additional budgets but have spent only a fraction so far. France and Croatia spend less than 2% of their regular health spending while Cyprus and Lithuania spend 12.4% and 27.2% of their regular health spending, respectively10.

The situation, then, begs us to ask the question, “How much additional funding should countries spend on their COVID-19 response?” Truth be told, it is difficult to determine the right amount of health spending for a pandemic response. The answer is probably context-specific and highly depends on the needs of the country. What is certain, however, is the fact that more additional funding will be required to meet the growing demand for non-essential health services together with the public health measures employed in the pandemic response. Undoubtedly, there will be higher health expenditure and more budget injections throughout the COVID-19 pandemic.

What are the challenges in financing the COVID-19 response?

In response to this, many countries have already reconfigured health service delivery to meet the immediate health care needs of their populations. However, a supportive health financing response is necessary to scale up both population-based and individual services, especially in countries that heavily rely on out-of-pocket payments1,8. Many of these countries were already experiencing significant gaps in health system coverage which can pose additional challenges to mitigating both health and economic shocks caused by the COVID-19 pandemic5.

1.  Inadequate sources of funding

Like previous public health emergencies (e.g. Ebola), the COVID-19 pandemic will again test public financial management systems in their capacity to support fiscal objectives. Challenges that these systems will face may come from (a) reassessing fiscal policy needs and identifying additional financial resources; (b) ensuring timely availability of funds to service delivery units; (c) tracking accounting for transparent reporting; and (d) ensuring business continuity11. Some countries will have an array of emergency response mechanisms at their disposal and most countries will utilize one or more of the available health financing tools to cope with emergency spending. Through public financial management systems, some governments have the capacity to activate contingency funds in emergency situations including pandemics5,6.

Arguably, major gaps in the health financing system are more challenging to address at the subnational level. In the Philippines, for example, funding level and spending capability vary substantially by local government unit. Some local government units have insufficient funds or sub-optimal budget allocation to implement an effective response to public health emergencies12. Thus, funding for a pandemic response may not always be allocated or readily available to support priority public health measures, especially at the subnational level.

Reprioritization through virements between government programs has been considered the primary action in securing budget funding for immediate pandemic response6. Private donations from individuals and local businesses have also been relied on as secondary sources of additional funding. Reallocating existing health budgets and private donations, however, may not be enough to fund health financing needs in the long run10. Conversely, many of the countries with low levels of an additional spending budget will eventually rely on funding from external donors such as the World Bank10.

2.  The need for timely and appropriate fund disbursement

More than the availability of funds, a financing mechanism is essential for the timely response to public health emergencies. Timely and appropriate financial decision-making requires a coordinated and harmonized governance structure across government agencies. The speed by which a country can respond to a public health emergency may depend on its public financial management system which establishes the rules and regulations for budget allocation and spending. In Australia and France, these rules are flexible which allowed for the rapid reallocation of program-based budgets and the immediate release of such funds to health care providers13.

An accelerated disbursement process will allow advance appropriation and fast-track payments to meet the spending needs of health systems. Several countries have explored different approaches to accelerate the release of public funds to government agencies and/or health service providers both in national and subnational levels14. In India, for example, procedures for fiscal transfers to subnational levels have been accelerated by authorizing emergency spending transactions without the approval of the Minister of Finance15.

In the Philippines, a quick response fund of the Department of Health is available and can be accessed when needed during times of emergencies and disasters. However, there is limited coordination and flexibility to reallocate or transfer the quick response fund to other key government agencies to support the response to public health emergencies12. The total turn-around time for the release of this fund takes about one to three weeks. When the disbursement of the fund is anticipated to last more than one week, the requesting office is asked to initially utilize their regular funds12. Hence, there is a need to enhance the capacity to optimize resource allocation by instituting innovative financing mechanisms that can hasten the disbursement of funds where they are needed most.

References:

  1. World Health Organization. How to purchase health services during a pandemic ? Purchasing priorities to support the. 2020;(April). https://www.uhc2030.org/blog-news-events/uhc2030-blog/how-to-purchase-health-services-during-a-pandemic-purchasing-priorities-to-support-the-covid-19-response-555353/.
  2. World Health Organization. Maintaining essential health services : operational guidance for the COVID-19 context. 2020;(June). https://www.who.int/publications/i/item/covid-19-operational-guidance-for-maintaining-essential-health-services-during-an-outbreak.
  3. Kurowski C, Evans D, Irwin A, Postolovska I. COVID-19 (coronavirus) and the future of health financing: from resilience to sustainability. Investing in Health. https://blogs.worldbank.org/health/covid-19-coronavirus-and-future-health-financing-resilience-sustainability. Published 2020. Accessed June 13, 2020.
  4. Development Aid. Financing of pandemic response: where does the money come from? https://www.developmentaid.org/#!/news-stream/post/62753/financing-of-pandemic-response-where-does-the-money-come-from. Published 2020. Accessed June 13, 2020.
  5. Thomson S, Habicht T, Evetovits T. Strengthening the health financing response to COVID-19 in Europe. 2020.
  6. Barroy H, Wang D, Pescetto C, Kutzin J. How to budget for COVID-19 response? 2020;(March):1-5. https://www.who.int/who-documents-detail/how-to-budget-for-covid-19-response.
  7. World Health Organization. Health systems governance and financing & COVID-19. https://www.who.int/teams/health-financing/covid-19. Published 2020. Accessed June 14, 2020.
  8. World Health Organization. Priorities for the Health Financing Response to COVID-19. DOI:10.1596/33738
  9. Glassman A, Datema B, McClelland A. Financing Outbreak Preparedness: Where Are We and What Next? Cent Glob Dev. 2018. https://www.cgdev.org/blog/financing-outbreak-preparedness-where-are-we-and-what-next.
  10. Cylus J. HOW MUCH ADDITIONAL MONEY ARE COUNTRIES ALLOCATING TO HEALTH FROM THEIR DOMESTIC RESOURCES? https://analysis.covid19healthsystem.org/index.php/2020/05/07/how-much-additional-money-are-countries-putting-towards-health/. Published 2020. Accessed June 18, 2020.
  11. Stone M, Saxena S. Special Series on Fiscal Policies to Respond to COVID-19 Preparing Public Financial Management Systems for Emergency Response Challenges 1. https://blog-pfm.imf.org/pfmblog/2020/03/preparing-public-financial-management-systems-to-meet-covid-19-challenges.html.
  12. World Health Organization. Joint External Evaluation of IHR Core Capacities of the Republic of the Philippines. Geneva, Switzerland; 2019. DOI:10.1142/9789812817945_0010
  13. Gupta S, Barroy H. The COVID-19 Crisis and Budgetary Space for Health in Developing Countries. https://blog-pfm.imf.org/pfmblog/2020/03/preparing-public-financial-management-systems-to-meet-covid-19-challenges.html. Published 2020. Accessed June 21, 2020.
  14. Barroy H. No calm after the storm: time to retool country PFM systems in the health sector. https://p4h.world/en/who-wb-no-calm-after-the-storm-time-to-retool-country-pfm-systems-in-health-sector. Published 2020. Accessed June 21, 2020.
  15. Verma A, Raj A. PFM Solutions in India to Combat the COVID-19 Pandemic.

 

NOBODY LEFT BEHIND: THE CHALLENGE OF ENSURING PHILHEALTH COVERAGE AMONG OFWS

EXECUTIVE SUMMARY

In order to reduce the financial uncertainties associated with future illnesses, Overseas Filipino Workers are encouraged to enroll themselves in the national health insurance program. However, not all OFWs are enrolled in the program or are actively paying their premiums. The reasons behind this include limited knowledge about Philhealth and its services. This, coupled with poor health-seeking behaviors, had economic and health consequences making it necessary for the government to intervene.

Philhealth is suffering from low premium collections brought about by a decline in membership among OFWs observed in previous years. Therefore, Philhealth is challenged to identify effective strategies that can improve OFWs’ health-seeking behaviors and access to health insurance.

Some strategies that can be considered include the following:

  • Expansion of the coverage of information, education, and communication campaign
  • Partnerships with government and private agencies to jointly promote public awareness
  • Inventory and system for reproducing, updating, and sharing of customized IEC materials
  • Digital platforms that remotely provide essential services and address learning needs

Investment in these strategies will be required to address information issues. Such investment, however, will require significant political will, support, and financial investment.

INTRODUCTION

The government plays a crucial role in ensuring that Overseas Filipino Workers (OFWs) and their dependents have access to quality health services without experiencing financial hardship. Through Philhealth, OFWs are guaranteed financial risk protection against the financial uncertainties associated with the need to use and pay for health care services.

The establishment of the National Health Insurance Program should have led to a steady increase of OFWs who are enrolled as members of Philhealth. Unfortunately, the opposite is true. In 2016, the premium payments of OFW Philhealth members amounted to only P823 million. This is below the P1.2 billion premium payments collected in the previous year. Such a decline has been attributed to a huge drop in membership among OFWs.1

Education, sex, civil status, income, among others, were identified as significant factors associated with OFWs’ health-seeking behavior, and membership in and access to social health insurance.2 In an attempt to address the problem of declining membership, Philhealth has conducted various strategies to increase awareness and understanding of OFWs on the promising contributions of Philhealth that ensure access to health care without the risk of financial catastrophe.

But even with these strategies, only 3.6 million out of approximately 10 million OFWs are Philhealth members. OFWs paid a total of P1 billion in premiums in 2019, significantly lower than the P1.7 billion in benefit claims that Philhealth paid out to them and their dependents in the same year.3 Therefore, there is an urgent need to look at other measures and/or improve current methods that can effectively deliver health messages and membership-related information to OFWs. Philhealth’s awareness campaign should go beyond the traditional and seek to use more effective strategies that can address the knowledge deficit in target audiences.

POLICY ISSUE

Philhealth is suffering from low premium collections brought about by a decline in membership among OFWs observed in previous years. Various factors have been looked at as possible barriers or facilitators to membership in and access to Philhealth.  In 2017, sociodemographic characteristics (i.e. age, sex, level of education, income, number of children, and having or not having a partner) were found to be associated with health-seeking behaviors and/or OFW membership in Philhealth.2

Information campaigns tend to have a one-size-fits-all design. Limited knowledge of Philheath membership and premiums and poor health-seeking behaviors were found in some subpopulations (e.g. women, individuals with low education, unmarried, young adults). Thus, increasing the need for audience-specific programs. This is challenging for Philhealth because of the range of migrant occupations and diversity of backgrounds of OFWs. These profiles are essential to consider when developing information, education, and communication (IEC) materials.4 

Information is disseminated through limited means. The majority of OFWs get information about Philhealth in pre-departure orientations usually organized by government agencies and private recruitment agencies. It remains unclear whether OFWs acquire the necessary information from these orientation seminars. There have been reports that some agencies do not provide the required seminar but still issue certificates to OFWs.4

Information dissemination lacks coordination among government agencies. In 2015, the POEA stopped collecting OFW Philhealth premium payments which forced Philhealth to market services on its own. Law has also mandated Philhealth to establish overseas satellite offices, or where it is not feasible, designate a focal person in every Philippine Consular Office in all countries where there are Filipino citizens. In 2010, there were only three Philhealth offices abroad.5

Despite efforts to increase awareness among OFWs, Philhealth still fails in effectively delivering its message to the target audience. Thus, membership and premium contributions continue to decline despite government effort to ensure that OFWs and their dependents equally enjoy the promise of universal health care, which is #HealthForAll.

POLICY ALTERNATIVES

To address the issue of declining membership, there is a need to analyze several policy alternatives to increase knowledge and understanding of OFWs of Philhealth programs and services. Some of these alternatives were inspired by the best practices of other government agencies in providing services to OFWs. The proposed alternatives are presented below.

  • Expand the coverage of information, education, and communication campaign with the help of tri-media

There may not be a need to extend the length of orientations. However, expanding coverage should mean including family members in pre-departure orientation seminars. Whether families remain behind or accompany OFWs, there are issues that might need to be addressed during these seminars. Moreover, pre-departure seminars are not the only means to reach OFWs. Print, broadcast (television and radio), and new media (digital and social media) can also be suitable channels for information dissemination. These platforms, however, are less participatory and more expensive.

  • Forge partnerships with government and private agencies to jointly promote public awareness on coverage and benefits for OFWs

Similar to the strategy of several agencies, Philhealth can establish a massive information campaign together with other government agencies that are directly involved in overseas employment. Some examples include the regional information caravans being conducted by OWWA6; comprehensive pre-employment and pre-departure orientation seminars jointly conducted by POEA, OWWA and the Insurance Commission7; and the placement of co-branded promotional displays in airports across the country in partnership with the Bureau of Immigration.8

  • Create an inventory and system for reproducing, updating, and sharing of customized IEC materials

Information campaigns for programs and services can be more effectively delivered when anchored to health risks and consequences. An inventory of customized materials produced by government agencies and NGOs, and a system of reproducing, updating or sharing these materials, can be established. Customized materials should address the learning gaps of target populations to achieve a more targeted approach to information dissemination.

  • Invest in digital platforms to remotely provide essential services and to address the learning needs of OFWs

Technology is evolving and so should the approach in changing how people live, behave, and decide for their health. Philhealth can develop a suite of digital tools that meets user needs and are free at the point of use. A Facebook or website bot that can provide answers to questions in a personal one-to-one way using mobile phones can be considered. Similarly, online learning systems, such as those being developed by the Department of Labor and Employment, can be vital in reaching OFWs with varying learning needs. Finally, a Philhealth member mobile app can be developed to view statements of accounts and pending payments, apply for reimbursements, upload important documents, and electronically pay for due premiums. Mobile apps can make transactions easier in the comfort of members’ homes. 

CONCLUSION AND RECOMMENDATIONS

Based on this analysis, it is recommended for Philhealth to address the policy issue using an integrated approach comprised of all the suggested alternatives. These alternatives are effective communication strategies ensuring better coverage and access to essential information related to Philhealth programs and services. These alternatives have been used by other agencies around the world and have been proven effective in changing the perception and behavior towards health.

To maximize the benefits of the use of these alternatives, it is recommended that Philhealth invests in studies seeking to enumerate other strategies that prospective members find useful and effective. The use of tri-media and technology can inform a larger audience while considering the unique needs of target subpopulations in most need of information. While Philhealth and the national government can appropriate funds for the implementation of these alternatives, local government units can shoulder some of the implementation costs as part of their health promotion activities.

Policy changes in information, education, and communication can have a synergistic effect in terms of increasing awareness or understanding of Philhealth’s programs and services, providing access to these services especially for those working overseas, and improving health-seeking behaviors. Using evidence-based strategies to address information needs, and thereby increase Philhealth membership, ensures that in our journey to universal health care nobody is left behind.

REFERENCES:

1 Why is there a steep decline in OFW contributions to PhilHealth? – The Manila Times. (2020). The Manila Times. Retrieved 28 May 2020, from https://www.manilatimes.net/2017/03/27/opinion/analysis/steep-decline-ofw-contributions-philhealth/319359/

2 Jabar, M. A. (2019). Factors influencing health-seeking behavior among overseas Filipino workers. International Journal of Healthcare Management, 1-13.

3 Yee, J. (2020). PhilHealth to hike premium rates starting next yearNewsinfo.inquirer.net. Retrieved 28 May 2020, from https://newsinfo.inquirer.net/1177046/philhealth-to-hike-premium-rates-starting-next-year

4 Asis, M., & Agunias, D. R. (2012). Strengthening pre-departure orientation programmes in Indonesia, Nepal and the Philippines. International Organization for Migration and Migration Policy Institute.

5 Philhealth Advisory No. 11-02-2010. Philhealth.gov.ph. Retrieved 28 May 2020, from https://www.philhealth.gov.ph/advisories/2010/adv11-02-2010.pdf

6 OWWA holds reintegration info caravan, membership campaign. (2019). Pia.gov.ph. Retrieved 28 May 2020, from https://pia.gov.ph/news/articles/1029385

7 Pre-departure awareness on insurance benefits for OFWs set | Department of Labor and Employment. (2017). Dole.gov.ph. Retrieved 28 May 2020, from https://www.dole.gov.ph/news/pre-departure-awareness-on-insurance-benefits-for-ofws-set/

8 Pag-IBIG and Bureau of Immigration join hands to promote OFW membership – ADFIAP. (2015). ADFIAP. Retrieved 28 May 2020, from http://www.adfiap.org/news/members-news/pag-ibig-and-bureau-of-immigration-join-hands-to-promote-ofw-membership/

Health Economics Series: Cost Efficiency and Allocative Efficiency

A government can be cost-efficient but have poor allocative efficiency. Cost efficiency achieves the maximum health benefit at a given cost while allocative efficiency maximizes the health of society by achieving the right mixture of health goods and services according to preferences.

Say for example the government wants to produce more midwives under a national scholarship program to address the lack of health care professionals in community health care settings, particularly in BEMONC facilities. The choice of producing more midwives gained traction because it was perceived as relatively cheaper than producing medical doctors. If the cost of producing one midwife is 150,000, the cost of producing one doctor is 200,000 and the budget is 100,000,000, the government will have to look for a combination of inputs that results in the maximum output at minimal costs in order to be cost-efficient.

The red points in the first graph (Figure 1) shows different combinations at which the production of midwives and doctors are technically efficient. The green point shows the maximum number of midwives and doctors that can be produced at the given budget of 100,000,000. In this example, the government is cost-efficient if it produces 400 midwives and 200 doctors.

While producing these numbers of midwives and doctors are said to be cost-efficient, it would not immediately mean that the action depicts allocative efficiency. This type of efficiency occurs when goods (midwives/doctors) are distributed or allocated according to consumer preferences. Usually, allocative efficiency is seen as an output level where price (P) is equal to the marginal cost (MC) of production because the willingness to pay is equivalent to the marginal utility derived from the good consumed. Thus, the optimal distribution is achieved when marginal utility (MU) equals marginal cost.

At an output of 100, the marginal cost of the good is roughly 100 (Figure 2). But at is this output, society is willing to pay a price of 600. Therefore, society is said to be under-producing midwives. At an output of 500, the marginal cost is 600, but society is willing to pay only 100. Thus, society is said to be over-producing midwives. In this example, allocative efficiency will occur at a price of 350 with an output of 300. This is the point where the marginal cost is equal to marginal utility.

Health Economics Series: Average Productivity and Marginal Productivity

Average productivity (AP) is simply the quotient of the total output (O) divided by the number of units of a certain input (I) [i.e. AP = O / I]. Marginal productivity (MP), on one hand, is the additional output derived from an additional unit of a certain input [i.e. MP = ∆O / ∆I].

Example: Suppose that the Philippine Congress is currently deliberating on a bill that seeks to convert the Aparri District Hospital to Aparri Regional Hospital. One of the factors considered in this type of hospital conversion is the increase in the hospital’s authorized capacity which entails the creation of new plantilla positions. We take nursing personnel in the Out-Patient Department as the focus of this example. Table 1 shows the relationship between the nursing input (number of nursing staff), and the desired output (measured in the number of patient visits / attended).

Table 1. Input, Output, Average Productivity and Marginal Productivity for a Proposed Staffing Complement
Input

(Nursing

Staff)

Output

(Patient

Visits)

Average

Productivity

(O/I)

Marginal

Productivity

(∆O / ∆I)

0 0 0
5 10 2.0 2
10 30 3.0 4
15 45 3.0 3
20 50 2.5 1
25 55 2.2 1
30 60 2.0 1

The average productivity provides an insight into the “production process”. This product simply presents the average quantity of service (in this case, nursing services) produced by a nurse. With five nurses, a nurse can attend an average of two patients. Ten and 15 nurses tend to produce the same average productivity per nurse which happens to be the highest among the other averages. At first glance, decision-makers are given the option to choose whether to allocate funds for ten or 15 nurses. Choosing the latter would mean more nurses employed in the government nursing service.

Since decision-makers want to maximize total product, they will look at how adding extra nurses affects marginal product which contributes to the total product. The table shows that adding more nurses generates fewer services in that it demonstrates the law of diminishing marginal productivity. The incremental nurses become less productive due to constraints imposed by other fixed inputs. Thus, at higher levels of output, the marginal productivity of nurses begins to decline. In order for the government to get value for money, decision-makers will look at options where the marginal product continues to rise. In this case, it is at option 3 (ten nurses). While the average productivity of 15 nurses is the same as that of ten nurses, the marginal productivity actually decreased when five more nurses were added to the nursing pool.

Health Economics Series: Uncertainty and Asymmetric Information

Uncertainty is a situation where it is impossible to know the likelihood (unknown probabilities) of an event occurring while information asymmetry is a situation in which one party has more / better information than the other party.

Many Filipinos exhibit the first type of information failure: uncertainty. Filipinos are not keen on examining the financial implications of contracting a disease/illness. Because of the perceived uncertainty of acquiring the disease and its associated financial repercussions, many Filipinos do not know their need for health care. Two policy responses are widely accepted in the country (social health insurance and private insurance) to help address this. Through these insurance schemes, financial uncertainties directly connected to future disease or disability are minimized.

Information asymmetry is seen in the classic case of tobacco smoking. Smokers usually do not know the addictive properties and health consequences of tobacco use. As such, in 2014, the Graphic Health Warnings bill was signed into law. This law seeks to curb tobacco smoking by providing health information through graphic health warnings in tobacco product packages. The law is the government’s response to information asymmetry happening between tobacco manufacturers and tobacco smokers.