[Trends in Health Financing: The Move from Passive to Strategic Purchasing in Middle- and Low-Income Countries].

Strategic purchasing is not new, rather it first started in Western Europe in the 1960s, as an approach to improving health system responsiveness, as well as for them more effective matching of supply and demand. In the 1960s some Western European facilities were affected by empty beds, others by overcrowding. Doctors were not showing up for work, due to the establishment of dual practice. There were consumer queues, and complaints that providers were inhumane. There was a shift purchasers in High Income Countries like Organization and Economic Cooperation for Development (OECD) countries, from paying for inputs to outputs and now outcomes. These challenges are yet to be overcome by non-OECD countries. In this article, we discuss the shift towards strategic purchasing in Middle Income Countries (MICs) and Lower Middle Income Countries (MLICs). There are successful models in both categories of emerging markets. The article begins with an overview of health funding, then focuses on the allocation of funds and strategic purchasing.

Pathways to DRG-based hospital payment systems in Japan, Korea, and Thailand.

Countries in Asia are working towards achieving universal health coverage while ensuring improved quality of care. One element is controlling hospital costs through payment reforms. In this paper we review experiences in using Diagnosis Related Groups (DRG) based hospital payments in three Asian countries and ask if there is an "Asian way to DRGs". We focus first on technical issues and follow with a discussion of implementation challenges and policy questions. We reviewed the literature and worked as an expert team to investigate existing documentation from Japan, Republic of Korea, and Thailand. We reviewed the design of case-based payment systems, their experience with implementation, evidence about impact on service delivery, and lessons drawn for the Asian region. We found that countries must first establish adequate infrastructure, human resource capacity and information management systems. Capping of volumes and prices is sometimes essential along with a high degree of hospital autonomy. Rather than introduce a complete classification system in one stroke, these countries have phased in DRGs, in some cases with hospitals volunteering to participate as a first step (Korea), and in others using a blend of different units for hospital payment, including length of stay, and fee-for-service (Japan). Case-based payment systems are not a panacea. Their value is dependent on their design and implementation and the capacity of the health system.

The role of purchasing in hospital performance.

In this article the authors review the core messages on getting value for public money spent on healthcare presented in a recent World Bank publication, Spending Wisely: Buying Health Services for the Poor, edited by the same authors. The authors discuss how interest of the poor would often be better served through a fundamental shift in the way public money is spent on the health services--notably by moving away from passive budgeting within the public sector towards strategic purchasing or contracting of services from non-governmental providers. The shift from hiring staff in the public sector and producing services "in house" to strategic purchasing of non governmental providers--outsourcing--has been at the centre of a lively debate on collective financing of healthcare during recent years. Its underlying premise is that it is necessary to separate the functions of financing from the production services to improve performance and accountability. Promoting good health and confronting disease challenges of course requires action across a broad range of activities in the health system. This includes improvements in the policymaking and stewardship role of governments, better access to human resources, drugs, medical equipment and consumables, and a greater engagement of both public and private providers of services. Managing scarce resources and healthcare effectively and efficiently in the hospital sector through more strategic purchasing is an important part of this story. This is the second in series of articles on the economics of hospital care. In the first article on the "Economics of organizational reform" the authors, Alexander S. Preker and April Harding, examined the role of economic incentives to good governance and performance in the hospital sector. A more detailed discussion on this topic can be found in the World Bank publication Innovations in Health Care: The Corporatization of Public Hospitals, 2003, edited by the same authors.

Emerging challenges in implementing universal health coverage in Asia.

As countries in Asia converge on the goal of universal health coverage (UHC), some common challenges are emerging. One is how to ensure coverage of the informal sector so as to make UHC truly universal; a second is how to design a benefit package that is responsive and appropriate to current health challenges, yet fiscally sustainable; and a third is how to ensure "supply-side readiness", i.e. the availability and quality of services, which is a necessary condition for translating coverage into improvements in health outcomes. Using examples from the Asia region, this paper discusses these three challenges and how they are being addressed. On the first challenge, two promising approaches emerge: using general revenues to fully cover the informal sector, or employing a combination of tax subsidies, non-financial incentives and contributory requirements. The former can produce fast results, but places pressure on government budgets and may induce informality, while the latter will require a strong administrative mandate and systems to track the ability-to-pay. With respect to benefit packages, we find considerable variation in the nature and rigor of processes underlying the selection and updating of the services included. Also, in general, packages do not yet focus sufficiently on non-communicable diseases (NCDs) and related preventive outpatient care. Finally, there are large variations and inequities in the supply-side readiness, in terms of availability of infrastructure, equipment, essential drugs and staffing, to deliver on the promises of UHC. Health worker competencies are also a constraint. While the UHC challenges are common, experience in overcoming these challenges is varied and many of the successes appear to be highly context-specific. This implies that researchers and policymakers need to rigorously, and regularly, assess different approaches, and share these findings across countries in Asia - and across the world.

Supplemental health insurance: did Croatia miss an opportunity?

Croatia continues to face a health-funding crisis. A recent supplemental health insurance law increases revenues through first increasing co-payments, then raising the payroll tax to cover those co-payments. This public finance "slight-of-hand" will not solve the system's structural issues and may worsen system performance both in terms of efficiency and equity. Should Croatia have considered private supplemental insurance as an alternative? There is a new single private supplemental health insurance market now evolving over the EU countries and into Eastern Europe. Croatians could take advantage of lowered costs due to larger risk pooling and the lower administrative overhead of mature insurance organizations. Private supplemental insurance, when designed well, can address several objectives, including a) increased revenues into the health sector; b) removal of the public burden of coverage of selected services for certain population groups; and c) encourage new management and organizational innovations into the sector. Private and multiple company insurance markets are thought to be superior in terms of consumer responsiveness; choice of benefits; adoption of new, more expensive technology; and use of private sector providers. Private sector insurers may also encourage "spillover" effects encouraging reforms with public sector insurance performance. There is already an emerging private insurance market in Croatia, but can it be expanded and properly regulated? The private insurance companies might capture as much as 30-70% of the market for certain services, such as high cost procedures, preferred providers, and hotel amenities. But the Government will need to strengthen the regulatory framework for private insurance and assure that there is adequate regulatory capacity.