Understanding the concept of risk pooling
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The document outlines the concept of risk pooling as a critical function of health financing, emphasizing its role in achieving universal health coverage (UHC) through the collection and redistribution of prepaid resources. It discusses characteristics of effective pooling, the necessity to avoid fragmentation in health insurance schemes, and the importance of governance and strategic purchasing to enhance health equity and economic prosperity. Key recommendations include aligning policies with objectives, expanding inclusive pools, and ensuring government subsidization to support vulnerable groups.
Understanding the concept of risk pooling
- 1. Abt Associates Inc. In collaboration with: Avenir Health | Broad Branch Associates | Development Alternatives Inc. (DAI) | Johns Hopkins Bloomberg School of Public Health (JHSPH) | Results for Development Institute (R4D) | RTI International | Training Resources Group, Inc. (TRG) Dr. Gafar Alawode, COP HFG Understanding the Concept of Risk Pooling June 28, 2016
- 2. Outline Session objectives What is pooling? Situating pooling within HCF framework Cross subsidy and redistribution Pooling and UHC Characteristics of effective pooling Insurance schemes as pooling mechanisms What should change and why? Governance and effective pooling
- 3. Session objectives To deepen understanding of concept of pooling as a health financing function; To describe basic principles of risk pooling that promote access, financial protection and equity; To describe pooling function of insurance schemes; and To highlight Implications of good risk pooling for UHC
- 4. Situating Pooling within HCF Framework
- 5. Pooling as a health financing function Pooling: Accumulation of prepaid health resources on behalf of population across risk divides for eventual purchase of health services. For raised revenue to achieve the intended purpose of improved access, financial protection and equity we must: Collect the money in advance – Prepayment contribution Contribution should be based on ability to pay Access should be based on need A mix of contributors is needed (contribution>need, contribution =need, contribution <need and zero contribution with need) We pool two things: Funds and risk
- 6. Pooling Across Social Divides
- 7. Risk Pooling: Cross-Subsidy /Redistribution
- 8. Pooling and UHC: The Causal Pathway UHC is about Population, cost and service coverage Effective pooling is needed to reduce OOP Effective pooling is needed for expanding population coverage Effective pooling is needed to expand benefit package
- 9. Pooling in practice INCOME EXPENDITURE Lagos State Health Fund (LASHEF) Take-off Grant Formal Sector Fund Informal Sector contributions Equit y Fund Funds from FMOH (Emergency Funds) NHIS and NPHCDA & Grants- in-Aid Funds from HMOs Fines & Commissions Appropriationsearmarked by Nat ional, Stat e and Local Governments Funds from Lagos State PHCB Dividends & interest on investments All other funds which may accrue LagosState Health Plan (LSHP) Formal Health Plan LagosState Private Health Plan Others Administrative Charges Cost of Agency administration Board members allowancesand benefits LASHMA employee salaries, allowances & benefits Maint enance of LASHMA property CBN Treasury Bills invest ment HMO Healthcare Providers M HA
- 10. Characteristics of Effective Pool Size: Large or small pool Diversity: Diverse or similar pool Participation Compulsory vs voluntary participation Subsidization Subsidization + cross-subsidy vs cross-subsidy only
- 11. Level of pooling
- 12. Why we should continue to pool more funds
- 13. Insurance Schemes as Pooling Mechanism Insurance scheme Size Diversity Participation Subsidization National health insurance Large size Highly diverse Usually compulsory Highly subsidized Social insurance Varies Mainly working class Usually compulsory Subsidized Private health insurance Usually small Mostly affluent population Voluntary Not subsidized CBHIS Varies but usually small Not usually diverse Mostly voluntary Usually subsidized by donor or govt.
- 14. Fragmentation is the enemy Supply side fragmentation Fragmentation of PHC mgt. MoLG, SMoH, LGSC, SPHCA and LGAs fund PHC PHCOUR will remove fragmentation Demand side fragmentation Several small pools of CBHIS across the country Fragmented pools will not achieve the goals of HCF reform A,B,C,D
- 15. The cost of fragmentation Inefficiencies lead to greater costs Hinders redistribution of prepaid funds Limits the ability to cross-subsidize Want more pre-payment - not more prepayment schemes Risk pool 1 Risk pool 2 Risks not pooled Source: Joe Kutzin, Presentation to Regional Forum on Health Care Financing, Phnom Penh, Cambodia 2012 WHO
- 16. What should change and why? Align context-appropriate policy instruments with policy objectives; Introduction of schemes that pool funds and risk; Prioritization of the vulnerable groups in the pool; Coalesce existing pools into larger pools and avoid further fragmentation; The need for subsidization by government is crucial; Effective risk pooling and strategic purchasing will not only improve health but it will improve economic prosperity Poverty reduction Improved productivity and GDP Increased employment opportunity
- 17. Governance and Effective Pooling Policy environment: Necessary laws, policy, strategy and understanding of PE Institutional capacity and arrangement; For managing various insurance functions Management systems ICT for registration, claim management and accountability Fiscal Space Analysis and resource tracking Benefit Incidence Analysis Coordination and collaboration For synergy and resource mobilization Voice, accountability and oversight Three dimensional accountability and oversight: Executive, Legislative and citizen
- 18. Main messages on pooling Core objectives: Maximize redistributive capacity Size (bigger) and diversity more (more) Voluntary pool will Not lead to UHC Fragmentation is the enemy Governance is the glue Government subsidy Is crucial
- 19. Abt Associates Inc. In collaboration with: Avenir Health | Broad Branch Associates | Development Alternatives Inc. (DAI) | Johns Hopkins Bloomberg School of Public Health (JHSPH) | Results for Development Institute (R4D) | RTI International | Training Resources Group, Inc. (TRG) Thank you www.hfgproject.org