Subsidized health insurance is unlikely to lead to Universal Health Coverage (UHC); insurance coverage doesn’t always improve financial protection and, when it does, doesn’t necessarily eliminate financial protection concerns; and tackling provider incentives may be just as – if not more – important in the UHC agenda as demand-side initiatives. These are the three big and somewhat counterintuitive conclusions of the Health Equity and Financial Protection in Asia (HEFPA) research project that I jointly coordinated with Eddy van Doorslaer and Owen O’Donnell.

As we all now know, UHC is all about ensuring that everyone – irrespective of their ability to pay – can access the health services they need without suffering undue financial hardship in the process. The HEFPA project set out to explore the effectiveness of a number of UHC strategies in a region of the world that has seen a lot of UHC initiatives: East Asia. The project pooled the skills of researchers from six Asian countries (Cambodia, China, Indonesia, the Philippines, Thailand and Vietnam), several European universities and the World Bank.

We have you covered – or do we? 

The lever that policymakers have tended to reach for first in their quest to achieve UHC is the financial protection scheme. In many countries, this has meant bringing people not covered by a health insurance scheme into an existing scheme, or creating a new scheme for these hitherto ‘uncovered’ groups. The poor often have their contributions paid by the tax-payer, while families above the poverty line are eligible for partial subsidies if they enroll voluntarily. The problem is that in many countries they don’t. Coverage rates among these families is often very low, leading to a ‘missing middle’ in coverage: poor families are covered at the tax-payer’s expense, and the better off are covered by schemes for formal-sector workers or by schemes for civil servants, but families in the middle remain uncovered.

One of the questions the HEFPA project asked was: How far would coverage rates rise if those in the missing middle were given fuller information about the scheme, and/or given a more generous subsidy? To answer this, the HEFPA teams in the Philippines and Vietnam – two countries where the missing middle problem is most pronounced – set up randomized control trials (RCTs).

In the Philippines a ‘treatment’ group was offered an information package (including enrollment forms) and a 50% subsidy via a voucher, and a control group was given neither. In Vietnam one treatment group was given information, another was given a 25% subsidy, and a third was given both. In neither country, did the treatment groups come anywhere close to 100% enrollment: in the Philippines, the intervention increased enrollment from 10% to just 15% around a year later; in Vietnam the most effective intervention increased enrollment from 6% to just 7% 12 months later.

A neat feature of the Philippines study was the sub-experiment implemented towards the end of the 12 months. The team tracked enrollment in the administrative data and could see before its end that the experiment was having a very limited impact. So the team decided to do an ‘experiment within an experiment’. Ten months into the project, it divided the ‘non-compliers’ (the households who had been given the subsidy voucher but hadn’t used it) randomly into two groups. One group was given the information package all over again. The other got a lot of hand-holding in the enrolment process: during the endline survey, the enumerator offered to help the family complete its application form, took the completed form and the family’s subsidy voucher and payment to the health insurance agency, and had the ID card mailed to the family. This intervention worked much better: it got the enrollment rate up to 40%, compared to 3% in the non-complier control group. But even this much more costly intervention left 60% of families choosing not to enroll – hardly a reassuring tale for policymakers planning to achieve 100% coverage through subsidized voluntary enrollment.

We have you covered – now what?

In fact, the countries that have successfully covered large sections of the population who are not civil servants or formal sector workers have mostly done so by financing coverage through general government revenues, or through donor funding, as in Cambodia where ‘health equity funds’ have been set up to pay for free care at (some) government facilities, and vouchers have been used to give pregnant women free maternal services. (In Asia the big counterexample is China whose government subsidizes the insurance scheme for rural residents but leaves people free to make the decision whether to enroll – most do.)

For these countries and subpopulations, the interesting question is not how to cover people but rather whether the coverage works. Does it push the country towards the twin goals of UHC? Does it raise use of needed services including among the poor? And does it reduce the financial hardship associated with usage of health services?

Here rather than implement RCTs, the HEFPA teams used quasi-experimental methods, taking advantage of quirks in the implementation of the coverage expansion programs such as a phased rollout across the country, or finding a group whose coverage wasn’t affected by the rollout.

First the good news: the teams found extensive evidence that when insurance coverage was acquired utilization increased, at least among some groups. This was seen in Indonesia and Thailand, as well as in Cambodia among poor women who were given vouchers to cover the cost of maternal care. In China, too, more generous coverage led to higher utilization.

Now the less good news: the HEFPA teams found mixed evidence on the degree to which coverage limited how much people paid for health services. In Indonesia, there was no evidence of any negative impact on out-of-pocket spending; in fact, among urban residents just the opposite. In China, the project confirmed the finding of some of the previous studies on the topic, namely that China’s rural health insurance scheme has not improved financial protection. More encouraging were HEFPA’s findings in Cambodia, where health equity funds reduced out-of-pocket spending by 26% (by even more among the poor), and in Thailand where the so-called universal coverage (UC) scheme reduced out-of-pocket spending on average by one-third, the probability of a family spending more than 10% of the household budget on health care (‘catastrophic’ spending) fell by 35%, and large out-of-pocket expenditures (expenditures at the 95th percentile) dropped by one-half.

These findings from Cambodia and Thailand are encouraging in that they show that the schemes did achieve a reduction in out-of-pocket spending. But it’s important to keep in mind that neither eliminated out-of-pocket spending; nor is it clear that they even reduced out-of-pocket payments to a level that eliminated financial protection concerns. In Cambodia, in areas acquiring a health equity fund, 44% of families still incurred out-of-pocket spending after the funds arrived, 4% still had health-related debt, and out-of-pocket spending as a share of total consumption was still 6%; these statistics reflect the fact that at the time the funds subsidized care only at public hospitals.  Thailand achieved (approximately) 33% reductions in out-of-pocket spending as a share of consumption and in the risk of catastrophic spending. Thailand didn’t achieve 100% reductions. Among the UC scheme target subpopulation, even after the scheme was rolled out, 67% still reported out-of-pocket spending, the share of consumption absorbed by out-of-pocket health spending was 2%, and catastrophic spending was 4.5%.

It’s not clear then that either country can be said to have reduced out-of-pocket payments to a level where people can use health services without suffering undue financial hardship. None of this is to belittle the achievements of the Cambodian and Thai initiatives, or to say that the government and donor funding involved wasn’t money well spent. Rather we need to be clear that a UHC initiative can be successful in terms of pushing a country toward the goals of UHC, without necessarily getting it all the way there. Which prompts the question:  What complementary levers might policymakers reach for to help their country get further down the road to UHC?

“I want to go into medicine and help people who can pay out-of-pocket” 

Out-of-pocket payments are a cost to a family, but a source of income to a health provider. Such payments persist even after health insurance coverage expansions – or perhaps even partly because of health insurance coverage expansions – because providers rely on them for their income. Where providers are paid fee-for-service, there’s a strong temptation to focus on treating more patients, doing more tests, prescribing more – and more expensive – drugs, and so on. Shifting from fee-for-service toward payment methods such as capitation and salaries, and combining these with incentives for delivering good quality care, may be a more effective approach to reducing out-of-pocket spending. It may also help curb unnecessary care, thus helping a country get toward the first of the UHC twin goals – making sure that everyone gets the care they need.

To explore this idea, the HEFPA project set up yet more RCTs, this time in China – the country in East Asia where provider incentives are most skewed towards the delivery of costly and unnecessary care. In two provinces – Shandong and Ningxia – the HEFPA team helped local government officials shift from fee-for-service to capitation, but also randomly assigned some township health centers to a payment regime where facilities earned points according to the quality of the care they delivered. Given the problem of overprescribing in China, many of the indicators focused on prescribing patterns – use of antibiotics, intravenous drugs, steroids, etc. The points were used to calculate how much of a facility’s capitation budget that was withheld at the start of the monitoring period would be ‘returned’ to it to at the end of the monitoring period. In the case of Shandong, performance was compared to pre-announced targets, and the maximum a facility could earn was 100% of its capitation budget. In Ningxia, a facility’s performance was compared to average performance in the county, and above-average performers in effect earned a supplement to their capitation budget.

In Ningxia, pay-for-performance (P4P) led to improvements in prescribing behavior (e.g. fewer antibiotics, and fewer injected antibiotics). In Shandong, P4P improved the quality of care in the first of the two study counties, but not in the second. The reason for the difference is linked to the fact that payments in the Shandong experiment were based on performance relative to targets. By the time the study started most facilities in the second county had already achieved their targets; by contrast, those in the first had not and thus had an incentive to continue to improve their prescribing quality indicators.

On the second of the UHC twin goals – financial protection – neither experiment produced the hoped-for result; only in village posts in Ningxia did P4P reduce the amount that a patient paid out-of-pocket during a visit, and even then the reduction was just 3%.

Where does this leave us? 

So the HEFPA project has given us some important insights into achieving UHC. Subsidized health insurance doesn’t look like it’s the answer to UHC’s ‘missing middle’ problem. In any case, expanding insurance coverage doesn’t seem to be the silver bullet many seem to think it is: insurance coverage doesn’t always improve financial protection, and when it does, doesn’t necessarily eliminate financial protection concerns. That points us toward grappling with provider incentives, and the conclusion that addressing them may be just as – if not more – important in the UHC agenda than working on demand-side interventions.

But the project also makes clear that we also have some work still to do. Yes, P4P holds some promise as a potential UHC policy instrument. But the China HEFPA studies suggest caution is warranted. We haven’t yet got the formula for a P4P scheme (for rural China, at least) that will help us toward both of the UHC goals. So like all good research projects, HEFPA generated some important actionable insights but also highlighted areas where more research is needed.

Published in collaboration with the World Bank Blog

Author: Adam Wagstaff is Research Manager of the Human Development and Public Services team in the Development Research Group.

Image: A nurse poses for a photo in a trauma center of the University of Mississippi Medical Center in Jackson, Mississippi October 4, 2013. REUTERS/Jonathan Bachman