Raising revenues for the health sector

WHO Advanced Course on Health Financing for Universal Health Coverage
Barcelona, Spain, 8-12 June 2015
Revenue raising
Matthew Jowett
Senior Health Financing Specialist
WHO Geneva

Health Financing for UHC, Barcelona, Spain 8-12 June 2015
Service delivery
Stewardship/Governance/Oversight
Creating resources
(investment, HRH,
technologies, etc.)
Financial protection
and equity in finance
Quality
Final coverage
goals
UHC
intermediate
objectives
Health financing within the
overall health system
Equity in
resource
distribution
Efficiency
Transparency &
accountability
Utilization
Need
Revenue
raising
Pooling
Purchasing
Benefits

Overview
Revenue sources & guiding objectives
How much should a country spend on
health?
Developing revenue raising policy in support
of UHC
Concluding messages

References:
“More Money for Health” WHR 2010: Chapter 2
“Shared responsibilities for health: a coherent global
framework for health financing.” Chatham House
Report. London, May 2014

Revenue sources for health
PUBLIC
• Domestic
– Direct tax (income tax, payroll taxes)
– Indirect tax (value-added, sales, excise taxes)
– Non-tax revenues
• External
– Grants (bilateral/multilateral) flowing through
government
– Loans (bilateral/multilateral) flowing through
government
PRIVATE
• Out-of-pocket payment
• Voluntary prepayment (e.g. private insurance)
• Individual (medical) savings accounts
All countries rely on mixed sources of financing
Mandatory
Pre-paid
Pooled

GUIDING
OBJECTIVES FOR
REVENUE
RAISING IN
SUPPORT OF
UHC
ADEQUATE
level of public
spending on health
(absolute)
PREDOMINANT
reliance on public
sources (relative)
FAIR
i.e. progressive in
terms of the
burden of
financing
STABLE &
PREDICTABLE
OTHER
e.g. transparent,
administratively
efficient

ADEQUATE
AND
PREDOMINANTLY PUBLIC

How much is enough?
$12-22
per capita
1993
15% GGE
to health
2001
$34 per
capita
2001
$60 per
capita
2009
$44-$80
per capita
2010 $86 per
capita / 5%
GDP
2014
How much should a country spend?

Total health spending (per capita)
(International $)
Source: WHO National Health Accounts 2012
26
37 44 44 49 50
61 62 69 72 77 82 84 91 94 100
134
239
0
50
100
150
200
250
Totalhealthspendingpercapita(Int$)

21 23 21 29 32 26 30
49
63 64 61
52
37
59
50
83
99
219
0
50
100
150
200
250
Totalhealthspendingpercapita(Int$)
Private
Public
Public & private health spending (per capita)
(International $)
$86 per capita public
Indonesia is richer than
Gambia, and has higher
total per capita public
spending on health. But
public health spending
per capita is higher in
Gambia

How much does your gov. prioritise health?
5.2 5.9
6.7 6.9
7.6 7.7
8.8
9.4 9.5 9.5 9.7 10.2
10.6 11.1 11.2 11.9
12.9
13.2
15.4
16.3
22.3
10.2 10.4
12.1
0
5
10
15
20
25
GGHEas%GGE
15% THE

Public spending on health within the economy
1.2 1.2
1.3
1.7 1.7
1.8 1.9 1.9 1.9
2.7
2.8 2.8 3.0
3.3 3.4
4.1 4.2
4.3
4.6
6.1
7.0
2.7
3.6
4.3
0
1
2
3
4
5
6
7
8
GGHEas%GDP
5% GDP

How much is enough…..for what?
Financial protection
Source: Compiled by WHO from latest dataWHR 2010: Background Paper No. 19
Under or non-
utilisation of services is
also “catastrophic”
Public spending
threshold level?
+ve relationship
between public
spending and financial
protection

Your countries: public spending & financial protection
Nigeria
Indonesia
India
Bolivia Rwanda
0
10
20
30
40
50
60
70
80
0 5 10 15 20 25
Out-of-pocketpaymentsasa%ofTHE
General government health expenditure as a % of total government expenditure

Summary
Numerous attempts to define how
much a country should spend, in
both absolute and relative terms, in
order to progress towards UHC.
Spending targets send a clear
message that in in many countries it
will be difficult to make progress
without a significant increase in
levels of public spending on health
However, wide variations in UHC
performance in countries with
similar levels of public spending,
are observed. UHC progress is not
only about raising more public
money – efficient spending is
central.
Clear evidence that moving towards
a predominant reliance on public
sources is critical. Spending levels
should be guided by UHC
performance.

FAIR
AND
EQUITABLE

Equity in financing: health spending as
% of household income
0%
2%
4%
6%
8%
10%
12%
Poorest 2nd 3rd 4th Richest
Household income quintile
Proportionate Progressive Regressive
Healthspendingasshare
ofhouseholdincome

Progressivity of revenue mix in US
0
5
10
15
20
25
30
35
40
45
Mean
USA
1 2 3 4 5 6 7 8 9 10
PercentageofPre-TaxIncome
Deciles of household income
General tax Payroll tax Premiums OOP
Source: T. Selden. 2009. “Using Adjusted MEPS Data to Study Incidence of Health Care Finance. Slide Presentation
from the AHRQ 2009 Annual Conference (Text Version). December 2009. Agency for Healthcare Research and
Quality, Rockville, MD

Revenue sources
Key differences in relation to objectives
Fair? Mandatory Pre-paid Risk
pooling
Redistribute
Direct taxes     
Indirect
taxes
?    
OOPs x x X x x
Voluntary
prepayment
x x   x
Payroll
taxes
x    

Direct patient payments – the retreat
Negative effect
on financial
coverage
Negative effect
on demand /
utilization / need
Often damages
fairness,
transparency
Credit: WHO/Pierre Albouy
“….universal coverage
cannot be achieved
through private market-
based systems of user fees
and private insurance, or
through voluntary
community-based
schemes.”
Credit: WHO/Pierre Albouy
“…even tiny out-of-pocket
charges can drastically
reduce their (the poor’s)
use of needed
services. This is both
unjust and unnecessary.”

Payroll tax impact on fairness
• Malaysia:
• Contribution ceilings are also
commonly used, and add a
regressive dimension
• In Europe, Bulgaria, Czech Republic,
Netherlands and Slovakia all
removed or revised ceilings as a
result of the recent financial crisis in
order to raise more funds, and
improve progressivity in the process

STABLE
AND
PREDICTABLE

External funding as % THE
Predictability and stability an issue in some countries
Malawi
Mozambique
0
10
20
30
40
50
60
70
80
90
100
Afghanistan
Bangladesh
Burundi
Cameroon
Egypt
Ethiopia
Ghana
India
Kenya
Liberia
Malawi
Mozambique
Nepal
Nigeria
Philippines
Rwanda
Sudan

IFFIm (funds GAVI)
ESTABLISHED IN 2006 TO ACCELERATE THE AVAILABILITY AND PREDICTABILLITY
OF FUNDS FOR IMMUNISATION PROGRAMMES

External funding – policy issues
• May be offset by reductions in domestic
health spending:
– Lu et al. suggested that for every $1 of development assistance
to governments, there was a decrease in GHE by $0.43-1.14.
– van der Gaag & Stimac found a positive elasticity of 0.138
against public spending on health
• Often earmarked for a single disease
programme – trend shows tailing off for
HIV-AIDS; with increasing allocations to
RMNCAH.
• Impact on pooling and fragmentation at
the country level (e.g. Ghana)? Aligned
with national priorities?

Earmarking as a strategy to increase level
and stability of revenues
Tobacco Alcohol Area
Cambodia ✓ Public lighting / electrification
Indonesia
✓ Tobacco industry, social environment, Illegal goods
control, public health, medical services
Lao PDR ✓ Tobacco control
Philippines
✓ ✓ Universal health care, medical assistance, health
facilities, tobacco farmers
Thailand
✓ ✓ Local funding, Thai Health Promotion Foundation,
Thai Public Broadcasting Service
Vietnam ✓ Tobacco control
South Korea ✓ ✓ Education, public health, environment
Mongolia ✓ ✓ Mongolian Health Promotion Foundation
FSM (Yap) ✓ ✓ Sports development
Tuvalu ✓ Tobacco control
26
East Asia and Pacific Regional Workshop
Tobacco and Alcohol Tax Reforms,
World Bank
27 February 2014

Philippines: a devolved system
Raising new finances to fund enrolment for the poor
PHIC sits alongside traditional budget
funding. Cost of enrolling the poor
was shared between national and
local government. But huge problems
in committing funds.
New “sin tax” legislation passed in
2012. Increased taxes on alcohol and
tobacco.
Funds transferred directly to PHIC in
support of the President’s UHC
reform agenda 2010-2016.
Recentralisation of funding. Briefly
considered multiple insurers.
Currently pushing for universal PHC
package.
Of the additional revenue raised,
85% earmarked for health, of which
80% used specifically to enrol the
poorest 40% of the population
nationally.

Pros and cons of earmarking
PROS CONS
Can facilitate a shift in allocations e.g.
to increase funding for previously
neglected activities (e.g. between
hospital and PHC services)
Limits flexibility from a broader fiscal
perspective by introducing budget
rigidity and possible allocative
“inefficiency”
Potential to increase predictability of
revenue stream for programming
purposes
May simply be offset by reductions
in other budget allocations with no
increase in overall public envelope
Relatively popular with general public,
as experienced with environmental
taxes in many countries
Limits decision making of politicians
– democracy not in action
• There are examples of earmarking working, and not working, in European countries
• Some countries without earmarking have stable and predictable funding
• More important than earmarking is political commitment to health

Summary
Different revenue sources have
a different impact on equity in
finance.
Voluntary sources are
generally regressive, especially
out-of-pocket payments.
Public sources are generally
progressive / proportionate,
although each country
situation needs analysing. VAT
often regressive, but depends
e.g. on exemptions.
Recent years have seen efforts
to stabilize external funding for
specific interventions.
Alignment with domestic
priorities and systems is
critical.
Earmarking is increasingly used
to protect revenues for health;
beware offsetting. Political
commmitment matters more
than earmarking per se.

DOMESTIC EFFORTS
TO MOVE TOWARDS
PREDOMINANTLY
PUBLIC REVENUE
SOURCES

Health-specific payroll taxes
A large number of countries now
have a payroll tax for health, or are
considering introducing one, under
a national health insurance scheme.
Several countries, including Kenya,
the Philippines, Sudan, Ghana have
long-established schemes with
payroll taxes.
What is the role of these agencies
under the push for UHC?
Bangladesh, Mozambique, Liberia,
Ethiopia, Malawi (?) are considering
introducing payroll taxes for health
as part of new public health
insurance schemes
FACT:
Richer countries are reducing
reliance on payroll taxes for a
number of reasons (tax burden on
labour, in particular on employer
contributions, ageing population /
dependency ratios)

Payroll taxes alone are never enough
Ghana 2011
Japan 2011
Philippines 2012

Payroll tax: constraints and concerns
• In low/middle income countries, a large % population not in
formal employment, and hence payroll taxes offer a very
limited levy base
• How to enrol/cover those not in salaried employment?
• Are government subsidies transferred to the “insurer /
purchaser” on behalf of those outside formal sector?
• If enrolment is subsidised, what is the basis for transfers?
Stable? Predictable? Decided annually, or through a formula?
• Pooling: are revenues from payroll taxes kept in a separate
pool to, for example, a fund for the poor with separate
entitlements for the beneficiaries?
• Payroll taxes are effectively “earmarked taxes” and hence face
potential offsetting e.g. of budget allocations.

Kazakhstan: new earmarked payroll taxes led to
lower public funding for health
3.0%
2.9%
2.7%
2.0%
2.4%
0.4%
0.6% 0.5%
2.5%
2.1%
1.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1995 1996 1997 1998 1999
Healthspendingas%GDP
All public MHIF State budget
Earmarked payroll tax introduced
1996 and abolished1998
Revenue from new tax offset by
reduction in unearmarked tax

Togo
Proposed new tax revenue sources
• Increase in existing tax rate on alcohol
• Introduction of new taxes on mobile phone use, and airline tickets
• Analysis suggested no negative impact on economic activity, but a positive
effect on public health (alcohol)
• Earmarking still under discussion
• If earmarked, it is estimated new revenues would be equivalent to
minimum 8.5% of current health budget
• (Tobacco tax level already at maximum under regional customs union)

Liberia – options under consideration
(pre-Ebola)
POTENTIAL REVENUE SOURCE PROBABILITY OF CAPTURING
Social security Medium to High
NGO tax Medium
County development fund Low to Medium
Sin taxes & airline levies Medium to High
Payroll taxes High
Other corporate social responsibility by
expatriate corporations
Low to Medium
Individual premiums High
Vehicle-related fees Medium to High

Energy density (kJ 100 g-1)
Fatcontent(g100g-1)
SUPERMARKET READY
MEALS
Burgers
Fried chicken
Fries (chips)
S'market pies, pasties
FAST FOODSFAST FOODS
S'market
healthy options
Gambian main meals
GAMBIAN +GAMBIAN +
HEALTHY CHOICEHEALTHY CHOICE
S'market ready
meals (Indian)
S'market ready
meals (Italian)
S'market pizzas
SUPERMARKET READY
MEALS
Energy & fat in foods in Gambia
PrenticeAM,JebbSA.Fastfoods,energydensityandobesity:a
possiblemechanisticlink.ObesRev[Internet].2003Nov[cited2010
Apr1];4(4):187-194.>>

Richer countries moving ahead….slowly
Country Measures taken Expected revenues
Hungary
€0.016 per litre of soft drinks
€0.33 per kg for pre-packaged
sweetened products,
€0.67 per kilogram for salty snacks
€0.84 per litre of energy drinks
€74-170m per annum
Earmarked for health system
France €0.036 per litre tax on sweetened
drinks
€150m per annum
Denmark
Levy of €2.41 per kg of saturated
fat, when reaches more than 2.3%
of content of a particular food
(October 2011)
Unavailable.
POLICY NOW DISCONTINUED
• See table on page 29 of the WHR 2010 report. List of options together with
fundraising potential, country examples and some implementation / policy issues.

Are new taxes the answer?
• Many such efforts in lower/middle income countries
relatively new – ongoing analysis. Philippines case is
positive.
• Efforts to improve fiscal capacity / tax compliance, in
order to increase total government budget, together with
efforts to increase priority for health, also likely to have a
significant impact.
• Furthermore, moving towards a predominant reliance on
public sources, in support of UHC, requires more than
raising more public revenues for health.

0
5
10
15
20
25
30
35
40
45
0
10
20
30
40
50
60
70
80
90
100
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
GGHEpercapitaUS$
Privateas%totalhealthspending
PHILIPPINES: GENERAL GOV. HEALTH EXPENDITURE PER CAPITA &
PRIVATE SPENDING ON HEALTH AS % TOTAL
SOURCE: WHO NHA DATABASE 2015

0
20
40
60
80
100
120
140
0
10
20
30
40
50
60
70
80
90
100
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
GGHEpercapitaUS$
Privateas%totalhealthspending MOLDOVA: GENERAL GOV. HEALTH EXPENDITURE PER CAPITA &
Insurance
reforms

0
5
10
15
20
25
30
35
40
45
0
10
20
30
40
50
60
70
80
90
100
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
GGHEpercapitaUS$
Privateas%totalhealthspending
RWANDA: GENERAL GOV. HEALTH EXPENDITURE PER CAPITA &

Summary
Many countries have introduced/are
introducing health-specific payroll
taxes. High levels of informality raise
serious limitations on their impact in
terms of revenue-raising.
Introduction of such payroll taxes
raise numerous issues & concerns
e.g. how to cover non-formal sector;
nature of transfers if any; possible
fragmentation.
New taxes e.g. tobacco, alcohol,
mobile phones, unhealthy foods are
of growing interest, and are often
earmarked, raising offsetting issue.
Impact still unclear given early days.
Domestic sources dominate in most
countries, even in countries with
payroll taxes, and in those with high
external support. Moving towards
predominantly public spending
requires more than revenue-raising
efforts.

CONCLUDING
MESSAGES
Be guided by overall
health system
objectives, and health
system performance
when designing
revenue raising policy.
The source affects
fairness in financing.
Levels of public
financing drive health
system performance in
terms of UHC, for
example in terms of
financial risk
protection. Threshold
level around 20-30%?The health budget, allocated
from general government
revenues, will remain in
most cases the single largest
source of funding, even
where payroll taxes exist,
new taxes are introduced, or
external financing high.
Think about the overall
envelope of public
funding for health;
external sources, and
earmarked taxes are
often offset during
budget allocations
Moving towards
predominant public
financing requires
action beyond
revenue raising policy
alone.

Raising revenues for the health sector

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