This document provides an overview of key concepts in health financing for universal health coverage. It discusses UHC goals and objectives, important contextual factors that influence health policy, methods for analyzing health expenditures, reviewing financing arrangements, and assessing progress toward UHC. The document outlines a framework for conducting an integrated assessment of a country's health system to identify challenges and priorities for reform in order to make progress on achieving universal access to needed health services of sufficient quality.

1. HEALTH FINANCING
DIAGNOSTICS AND
GUIDANCE
DR. AKANDE O.W.

2. OUTLINE
• An introduction to health financing for universal health coverage: key
concepts and terms
• Key contextual factors that influence health financing policy and
attainment of policy goals
• Overview of health expenditure
• Review of health financing arrangements
• Analysis of the UHC goals and intermediate objectives
• Overall assessment: setting priorities for health financing reforms
• Summary
• References

3. HEALTH FINANCING FOR UNIVERSAL HEALTH
COVERAGE: KEY CONCEPTS AND TERMS
• UHC:
Provision of financial protection from the cost of using health services for
all people of a country, enabling them to access the sufficient quality of
health services to be effective that they need
• Specific policy goals of UHC
Equity in the use of health services
Quality of care
Financial protection

4. HEALTH FINANCING FOR UNIVERSAL HEALTH
COVERAGE: KEY CONCEPTS AND TERMS
• UHC intermediate objectives:
Equity in resource distribution
Efficiency
Transparency and accountability
• Health financing: generation, allocation and use of financial resources in
health systems, focusing on how to move closer to UHC. An important
building block of the health system
• Health financing functions:
1. Revenue raising
2. Pooling
3. Purchasing

5. HEALTH FINANCING FOR UNIVERSAL HEALTH
COVERAGE: KEY CONCEPTS AND TERMS
• Equity in finance: distribution of the burden of financing the health
system across socio demographic groups

6. HEALTH FINANCING FOR UNIVERSAL HEALTH
COVERAGE: KEY CONCEPTS AND TERMS

7. KEY CONTEXTUAL FACTORS THAT INFLUENCE
HEALTH FINANCING POLICY AND ATTAINMENT OF
POLICY GOALS
• What is a contextual factor?
Something outside the direct control of health sector decision makers
but has an important influence on the attainment of UHC goals or what
health financial reforms can be implemented, or both.
• 3 major contextual factors:
1. Fiscal context
2. Public administrative structure
3. Public sector financial management

8. Fiscal Context
• Fiscal envelope: overall level of government spending
• Fiscal capacity: government’s ability and willingness to mobilise public
revenues which in turn allows it to spend money on public services and
programs including health
↑fiscal capacity → ↑potential for spending on health
↑public spending on health → ↓dependence on OOPS for funding health
services → ↓financial barriers to the use of health services
• Fiscal space: ability of the government to devote more resources to the
health sector without distorting the sustainability of its financial position.
‘Does the government have the needed revenue to increase health
spending?’

9. Fiscal Context
• Key fiscal indicators to consider:
Government expenditure to GDP ratio
Government revenue to GDP ratio
Government debt to GDP ratio
Budget deficit
• Gross Domestic Product (GDP): broadest quantitative measure of a
nation’s total economic activity

10. Public Administrative Structure
• Extent of decentralization of the government and decision making
responsibilities at different levels
• Level at which public spending on health is made

11. Public Sector Financial Management (PFM)
• Comprises of the rules that govern the processes of:
Public sector budget formation
Distribution
Financial control
Expenditure reporting
• Has important implications on the decision making autonomy of the
health sector managers for both the objectives of the health system
and the ability to implement some reforms

12. OVERVIEW OF HEALTH EXPENDITURE
• Revolves around the National Health Account (NHA)
• NHA: systematic, comprehensive and consistent monitoring of
resource flows in a country’s health system
• NHA indicators on health expenditures and sources of finance:
1. Total Health Expenditure (THE) as a % of GDP
2. General Government Health Expenditure (GGHE) as a % of GDP
3. Per capita government expenditure on health, US $ adjusted for
purchasing power aka ‘purchasing power parity’

13. NHA indicators cont’d
4. GGHE as a % to the total General Government Expenditure (GGE)
Abuja target – 15%
5. GGHE as a % to THE
6. Private Health Expenditure (PHE) as a % of THE
7. External sources for health (EXT) as a % to THE
8. Out of Pocket Spending (OOPS) as a % of THE
9. Private prepaid plans (VHI) to the THE

14. REVIEW OF HEALTH FINANCING ARRANGEMENTS
• Revenue Raising Mechanisms
1. Compulsory prepayment
a. General revenues of central and local government: direct taxes, indirect
taxes and revenues from government owned assets
b. Revenue specifically earmarked for the health system: alcohol/tobacco
taxes
c. Social health insurance schemes
2. Voluntary prepayment
3. Household OOPS
4. Foreign sources

15. Fund Pooling Mechanisms
• Main aim is to maximize the redistribution capacity of prepaid funds
• 3 characteristics of pools that influence redistribution:
1. Size: the larger the pool, the greater the capacity to provide cross
subsidies to support those with greater health needs
2. Diversity: increased diversity would mean having individuals with a mix
of health risks and this facilitates cross subsidizing from the healthy to
the sick
3. Compulsory or voluntary participation: compulsory inclusion of
populations in pool is much more effective. Sicker people tend to join
voluntary schemes
• Fragmentation: major challenge which means barriers to redistribution of
available prepaid funds, leads to a lower potential for cross subsidies to
flow across the health system

16. Purchasing
• Transfer of pooled funds to the providers
• Analysis of purchasing functions:
1. What services?: benefit entitlement policies
2. How are the providers paid?: provider payment mechanisms and
incentives
3. Who are the purchasers?: organizational structure and governance
of purchasers

17. Policies for Benefit Design and Rationing
Coverage cube:
• Section of the population
covered
• Services covered for which
population group
• Proportion of the cost covered

18. Passive and Strategic Purchasing
• Passive purchasing: follows a predetermined budget or simply paying
bills when presented
• Strategic purchasing: continuous search for the best way to maximize
health system performance by deciding which interventions should
be purchased, how and from whom

19. Key Issues in Purchasing
• What is the nature of the purchasing organization?
• What is the market source of the provider?
• Is there a selection process for providers?
• Is there a contract agreement specifying expectations from the providers?
• What provider payment mechanisms are used? Does it provide incentives to
promote efficient delivery? Are they constraints e.g. PFM?
• Is the purchaser able to influence payment rates?
• Is there an information system used to support provider payment?
• Does the purchaser have effective mechanisms to identify fraud and ensure
expenditure does not exceed resources?
• Are there mechanisms to hold the purchasers accountable?

20. ANALYSIS OF THE UHC GOALS AND INTERMEDIATE
OBJECTIVES
• UHC perspective considers the overall performance of the health
system
• Analysis is conducted at the system level

21. Financial Protection and Equity in Finance
2 indicators are used for financial protection:
1. Proportion of households that incur catastrophic spending on health services:
calculated using health spending as a % of capacity to pay (total income/total
consumption expenditures/non-subsistence expenditures e.g. spending beyond
basic food items) and comparing to a specific threshold.
2 commonly used thresholds for international comparison that may be considered
catastrophic:
a. Out of pocket expenditure on health care that is ≥ 25% of total household
expenditure
b. Out of pocket expenditure on health care that is ≥ 40% of non food household
expenditure
2. Number of households that are impoverished due to health care expenditure

22. Financial Protection and Equity in Finance
• For interpretation of national data, it is important to have information at least
2 points in time for comparison on the level of OOPS and health service
utilization
• Equity in finance: Kakwani index is used
• Kakwani Index: compares the distribution of health payments across
households, ordered according to their socio economic status.
• Financing incidences can be
1. Progressive: +ve Kakwani index
2. Proportional: Zero Kakwani index
3. Regressive: -ve Kakwani index

23. Equity in Service Use and Distribution of
Resources
• 2 utilization incidences:
1. Pro rich utilization: +ve concentration index
2. Pro poor utilization: -ve concentration index
• Utilization rates: calculated using analysis on distribution of service across
socioeconomic groups, household survey and routine health information system
• Could be compared with proxy indicators of need (population size and
demographic composition) or relative deprivation (per capita income, poverty
rates) across geographic area
• It is the distribution of financial resources that influences the distribution of other
resources- human resources, drugs and medical supplies, infrastructure

24. Health Service Quality
• Input related indicators:
1. Availability of staff and staff workload
2. Availability of functional equipment
3. Routine availability of essential drugs
• Process indicators:
1. Extent to which treatment is appropriate for diagnosis
2. Assessment of the rational use of drugs

25. Health Service Quality
• Outcome related indicators:
1. % cure rates for diseases
2. % of patients with chronic illnesses that are appropriately controlled
3. Post-surgical infection rates
4. Hospital mortality rates
• Others:
1. Patient satisfaction with services
2. Presence of an incentive promoting environment for providers to give
high quality services

26. Health System Efficiency
• Efficient use of limited resources is essential for achieving UHC
• Indicators for assessing possible sources of inefficiency:
1. Medicines:
• Underuse of generics
• Higher than necessary prices
• Substandard and counterfeit medicines
• Inappropriate and ineffective use
2. Health care products and services
• Overuse or supply of equipment, investigations and procedures
• Inappropriate hospital admission and length of stay
• Inappropriate hospital size
• Medical errors and sub optimal quality of care

27. Health System Efficiency
3. Health care workers
• Inappropriate or costly staff mix and unmotivated workers
4. Health system leakages
• Waste, corruption and fraud
5. Health interventions
• Inefficient mix/inappropriate level of strategies
6. Passive purchasing

28. Transparency and Accountability
• Transparency- ensuring entitlements and obligations are well understood by
everyone
• Sources of data on transparency:
oPatient exit interview
oHousehold survey data
oCommon knowledge on whether or not under table payments are
widespread
• Accountability – regular public reporting on key performance indicators by
health financing institutions or individual managers

29. OVERALL ASSESSMENT: SETTING PRIORITIES FOR
HEALTH FINANCING REFORMS
• Help to reach the conclusions on the likely causes of under performance of the
system
• For an integrated assessment, the following should be made clear:
1. How the system is organized and how it functions
2. How the system is doing in terms of policy objectives and attaining UHC
3. Key contextual factors

30. Assessing Universal Financial Protection
• Extent of catastrophic health expenditure and impoverishment
• OOPS as a share of THE
• Mandatory prepayment funding in THE
• Equity in health financing
• Fiscal, labour force and demographic context
• Pooling arrangement
• Purchasing function and benefit entitlement
• Efficient use of resources
• Transparency, accountability and governance

31. Assessing Universal Access to Needed Health
Services of Sufficient Quality to be Effective
• Equity in health service utilization relative to need
• Mandatory prepayment funding mechanism as a % of THE
• Pooling arrangement
• Purchasing and benefit entitlements
• Revenue raising and fiscal context
• Political administration and financial management context
• Transparency, accountability and governance

32. OVERALL ASSESSMENT: SETTING PRIORITIES
FOR HEALTH FINANCING REFORMS
• Analysis of the financial protection and access to sufficient and
effective health services helps to identify:
1. The main causes of inadequate financial protection
2. The main contributory factors to inadequate/inequitable access to
quality health care based on need
3. The challenges that need to be addressed to make progress towards
UHC
• Priority is given to challenges that are most subjective to health policy
action by the health sector decision makers

33. SUMMARY
• An in-depth study of a country’s situational analysis of it’s health
financing system and an assessment of it’s existing system is vital in
achieving the goals and intermediate objectives relative to the goal of
UHC

34. REFERENCES
• Health Financing Country Diagnostic (Health Financing Diagnostics
and Guidance) : a foundation for national strategy development /
Diane McIntyre and Joseph Kutzin.

35. THANK YOU