Is Social Health Insurance the Right Health Financing System for Egypt?

Egypt's Road towards Social Health Insurance - The Road to be Traveled (7)

At a time when Egypt is doing relatively well in reducing its child and maternal mortality, while facing extreme pressure on its budget to meet various demands by the public, in presence of notable inefficiencies in the health system presented mainly by fragmentation in the financing and the delivery of health services, and at a time when a draft social health insurance is presented for public discussion in a post-revolutionary situation that might allow to revisit health strategies designed in an earlier phase of reform, a question might be  posed before a final decision is made. Should Egypt stick to Social Health Insurance (SHI) as its main health financing strategy or could a better alternative scheme be available for Egypt to adopt. Is it too late to ask that question?

Governments usually aim to achieve universal coverage for health care for their people and people usually demands a health care system that meet their needs in terms of improved health, financial protection, and a system that is responsive and treat them with dignity.  To achieve that in Egypt, continues efforts have been put to reform the health care system increasingly since 1997; however, with modest efforts to include the public in that reform.  

Looking back, it is intriguing to note that during the last 60 years almost every attempt to reform the health sector in Egypt aiming to achieve this universal coverage promoting one health system or another as a means to achieve this end, ends up with an application of mixed and fragmented systems that were not able to meet the expectations demanded by the people.  I’ve always encountered this statement recurring in many international and national reports describing the health system in Egypt as “a pluralistic health system, consisting of a number of parallel public and private health care delivery systems and multiple financing intermediaries”.  The attempts to reform were not able to address this plurality and usually lead to more fragmentation of the system either at the delivery and/ or at the financing side ending up in a health system with multiple personalities.

The origin of this fragmentation has started a few decades ago, probably in the 50s and 60s, when two sets of parallel legalizations established the foundation for treatment on the expense of state (Presidential Decree 1754 in 1959 followed by Presidential Decree 1069 in 1964) and social health insurance (Law 75 in 1963 and Presidential Decree 1209 in 1964), probably trying to satisfy the demand of the people for better health care as well as a translation to Egypt’s constitutions placing the responsibility of provision of health care (Constitution 1956) and social insurance (Constitution 1964) including health to all Egyptians on the state.  These were followed by multiple additional decisions that further fragmented the delivery side that led to the proliferation of a number of governmental and public services delivery systems in addition to those of the Ministry of Health.  

And the question is “why is this happening?” Which system would be better for Egypt? A system based on general revenues and taxes or a system based on social health insurance?

Those who are in favor of tax-based systems argue for their system based on three points: (i) SHI discourages firms from hiring workers, and hence reduces employment and encourages informal labor markets; (ii) lack of coverage among certain groups during the often long period between establishing SHI and achieving universal coverage, and (iii) systematic variations in benefit packages and quality of care across subpopulations. 

On the other hand, those who promote SHI do that based on two points: (i) SHI provides an important additional source of revenue for the health system; (ii) by separating the purchasing of health care from its provision and encouraging selective contracting between providers (including private sector ones), SHI systems are able to achieve better quality health care at a lower cost than tax-financed health systems.

Certain studies focusing on studying the impact of these health systems on health outcomes in OECD countries suggested that SHI systems, on balance (i) have certain characteristics that make them more expensive than tax-financed systems,  (ii) do no better in terms of most health outcomes that are amenable to medical care despite the extra spending, (iii) may do worse in respect of outcomes that require strong population-level public health programs, and (iv) do worse in terms of encouraging informal labor markets and discouraging employment.  The findings of this study raise the following questions:

•  Why do we apply a system that could cost us more with no additional improvement in health outcomes at a time when budgets are tight? Would this contribute to efficiency?
•  Why do we apply a system that could increase informality in the employment sector when already two thirds of those working are informal workers without protection? Would this contribute to financial and social protection?
• Are there dangers on our achievements in public health? As SHI systems focus on individual members, or even families, would we lose the focus on the entire population by public health programs financed by tax-financed systems?  Would this contribute to improved health status and outcomes?

All of the above would lead to the following question, and another two subsidiary questions?

Can we apply in Egypt a system that can capture the better of the two systems and avoid their problems?

Question 1:  Can we have a tax-based system with a directly managed provider network shift to a purchaser-provider-contracting model?

Under this scenario purchaser organizations contract with providers rather than manage them directly.  This can be done by adopting the SHI purchaser-provider split model where purchaser organizations contract with providers, including those which are not public providers.  This could lead to lower expenditures and better health outcomes.  However, to what extent this can be done without risking coherence and integration in its public health programs? The Egypt experience in introducing the Family Health Funds, governorate health insurance organizations that were established to do the purchasing function, is an example of an attempt in that regard. The ownership of these organizations between the Ministry of Health and the Health Insurance Organization remained for a long time and it failed to elaborate a national organization that would provide oversight for such decentralized bodies called the National Family Health Fund.  Further, this was countered by the Ministry of Health by establishing provider organizations at district level called the District Provider Organizations to ensure the flow of funds through its organization, which were dismantled later as the Egyptian health system geared more towards social health insurance..

Or Question 2: Can SHI system increase its reliance on tax revenues and capture some of the tax-based finance system functions?

This seems to be feasible to be done and the latest versions of the new social health insurance law provides different articles that attempt to increase its tax base and revenues from sources other than that from payroll taxes, although earmarked taxes is being proposed. This is the new experience that has been facing long debate before and after the January 25^th revolution, and seems to continue for a while. The linkage of health insurance to family health services could be the basis for protecting the screening functions of public health programs.

At the end, a decision will need to be made by those who will represent Egypt in the new People’s Assembly and will then need to be implemented by the newly elected government in a few months to come.  This decision will need to select the system, SHI systems or tax-financed systems, which on balance would spend less, achieve better health, easier to go through the transition, and lead to better labor market outcomes.  

Until we meet again...

Is a century required to universally cover Egyptians with Social Health Insurance (SHI)?

Egypt's Road towards Social Health Insurance - The Road to be Traveled (2)

How much time to be expected for the Egyptians to be covered by health insurance? It took Egypt almost half a century to reach half of the Egyptians with health insurance coverage. Does it need Egypt another half of a century to cover its other half of population?

Some experts predict that it would take between 35-50 years to achieve universal coverage depending on the status of economic development of the country. Another group states that these predictions are based on historical world experience and therefore could be labeled “conservative”.  Let’s have a look at the experience of some of the well known countries for implementing social health insurance systems.

It took Germany more than a century (127 years) to achieve universal health insurance coverage following its establishment by Bismarck in 1883 by passing its first sickness law and it seems to be still developing. The largest part, almost 85% of the population, is covered by a basic national health insurance plan provided by the state, providing a standard level of coverage. The remainder 15% opted for private health insurance, which frequently offers additional benefits. It is claimed that only 0.3% or about 250,000 people in Germany are not insured.  A few of these uninsured people are extremely rich, not needing insurance, and most of them are poor unable to afford it.

In Japan, it took about 39 years to achieve universal coverage ignoring that many community-based health insurance schemes prevailed before that for decades.  The first health insurance law was issued in 1922, delayed its implementation to 1927 because of the Great Kanto Earthquake of 1923. The first “region-based” national health insurance law was issued in 1938, and was revised a number of times until universal coverage was declared in 1961 and the establishment of a Social Insurance Agency in 1962. However, development and revision of laws continued until maybe 1997 indicating that the process of development of social health insurance does not stop by achieving universal coverage but there would be room for further improvement probably to introduce more efficiency. Still you could note a lot of ongoing debate about health insurance coverage and costs.

In the Republic of Korea (ROK), it took 26 years to achieve universal population coverage from the inception of the statutory Health Insurance Act in 1963. ROK introduced compulsory health insurance program in 1977, and universal coverage was claimed in 1989. However, this was preceded by a voluntary program in 1965.  The relatively fast transition to universal coverage is mainly attributed to unexpected impressive increase in the average annual growth rate in GNP per capita of 13.3 per cent during the period 1977-89.

Further, it took 118 years in Belgium, 79 years in Austria, 72 years in Luxembourg, 48 years in Costa Rica to achieve universal health insurance coverage. As could be concluded from the above, not only universal health insurance needs time to grow, develop, and expand, it also happens on stages mainly depending on a country’s economic development, its ethical value system and other factors.  For example, it took 40 years in Austria (from 1890 to 1930) for population coverage to grow from 7 to 60 percent, and then another 35 years (from 1930 to 1965) to reach 96 percent. Further, it took 20 years for SHI to reach population coverage of 17 percent in Costa Rica (from 1941 to 1961), another 5 years to double coverage to 34 percent (1966), another 12 years to again double coverage to 74 percent (1978), and then another 13 years to attain 83 percent coverage (1991). 

It could be stated that Egypt introduced its health insurance scheme in 1936 and not as commonly known in 1964 by issuing Law 64/1936 that established employer’s responsibilities for work injuries.  Additional 5 laws were issued during the period 1936-1964. A Health Workers Organization was established in 1961 to provide health care services for the workers, which later became the Health Insurance Organization (HIO).  However, 1964 was considered the benchmark for the formal launching of health insurance through issuing a presidential decree 1209/1964 establishing the HIO taking over the responsibilities from the General Authority for Social Insurance and building on two laws defining the SHI premiums for government employees (Law 75/1964) and for public and private sector employees (Law 63/1964). The HIO started working in Alexandria with the intention of expanding SHI geographically to other regions and to the entire population.  Later, premiums were decreased for government employees (Law 32/1975). In the same year 1975, another law was issued defining additional benefits to government, public and private sector employees, as well as extending benefits to pensioners and widows (Law 79/1975). The latter two groups were covered without an employer contribution. It was not until 1992, that coverage was extended to school children (Law 99/1992), and followed by extending coverage to pre-school children (Law 380/1997).  If we take in consideration the evolvement of social health insurance since 1936, then some people might consider that it took Egypt about 75 years to reach coverage of health insurance of 57% based on HIO statistics.

Egypt might not be different from other countries and would need to own the enabling environment that allows social health insurance coverage to expand to the other half of the population. This would be the subject of a future blog.  

Until we meet again…

Egypt's Road towards Social Health Insurance - The Road to be Traveled (1)

In 2005, Egypt formally declared universal health insurance coverage of its population as its objective through the adoption of social health insurance (SHI).  This was an expansion to the original program that was introduced to Egypt's workers in 1964.  This coverage was expanded to those working in formal jobs in the public and private sector at different rates of contribution, allowing rich companies to opt out of the system. In addition, coverage was expanded to pensioners and widows. The latter coverage imposed additional burden on the system and it’s financing given the absence of contributions similar to those paid by the employers and due to the fact that these services are more expensive. All these measures might have disrupted the risk pooling function of the scheme limiting its capacity to raise enough funds to finance the system and its ability to provide the protection it is supposed to do. Thirty years later, with the inability of the system to cope with its expenses, SHI coverage was further compulsory expanded to Egypt's school children, and later, voluntary expanded to Egypt's preschool children. 

To date, insurance coverage has reached about half of the population, however; inequity is still a concern.  At the household level, a head of a family who is a civil servant and his daughter at school would be insured, while his housewife and his son in college wouldn’t be. Usually the poor and those working in the informal sector would not have access to health insurance services and would be expected to receive services at public health facilities.

The delay in expanding SHI coverage to the remaining half of Egypt’s population was blamed mainly on the underfunding of the health sector. Projections of a few billions of Egyptian pounds were quoted to be needed to fund the system in a sustainable manner.  While this remains true in case cost projections were built on estimating the cost per person for a certain package of services for a period of time; however, more money might not always mean better health; there might be room to introduce efficiency in the current system and make more funds available through running the system better.  Besides efficiency, there could be other areas that need to be examined.  Data indicates that the percent of Egypt’s GDP spent on health increased from 3.7% in 1995 to 5.9% in 2009; however, during the same period, the percentage of public health expenditures (which is what the government spends on health) from total expenditures on health decreased from one third to one fourth. Significantly, out-of-pocket expenditures (which are what the people spend on health) increased from half of the total expenditures on health in 1995 to nearly three quarters in 2009. These are considerably huge amounts of funds floating out of the pool of funds of SHI and decreasing more its ability of expanding its coverage.  Further and consistently, Egyptians spend one third of their treatment costs on pharmaceuticals. All of that suggest that there could be other factors that present obstacles on Egypt’s path to reach universal health insurance coverage.

But why do nations resort to SHI schemes in the first place? The most direct answer is to mobilize additional funds for health care. Underfunding of health care will lead to poor health outcomes, one of three main objectives of a health system.  The other two are usually rarely mentioned or given attention by those running health care systems, namely financial protection and client satisfaction, sometimes referred to as dignity. Financial protection means protection from large health expenditures that could bankrupt families leading to their impoverishment. Health expenditures were shown to be a primary cause of impoverishment, even for the rich and better off. Client satisfaction usually means to be treated in a humane form by your health care provider; in addition to many other things such as the perception that you are receiving quality care.  There are other reasons that a nation would resort to social health insurance.  William Hisao, the SHI guru mentioned some of these below, which could be valuable objectives by themselves: 

• to subsidize premiums for the poor rather than financing and providing universal health care for all, in case tax revenues are inadequate to fund health care of a reasonable quality for everyone
• to free up public funds so they can be targeted to public health goods and services;
• to separate the responsibilities for collecting and managing SHI financing from the responsibilities for providing health care to patients, whereby services are contracted from providers that are separate entities to be accountable to patients for the quality of services;
• to use the capacity of nongovernmental organizations (NGOs) and private providers to improve access by the insured to health care by means of contracting.

He concludes that SHI is a financing approach for mobilizing funds and pooling risks. The newly mobilized funds should be allocated for the poor and near-poor to improve their financial access to health care. SHI may be a solution for a critical part of a nation’s systemic health care problem, but is not necessarily a solution for the whole problem.

This is the first of a series of blogs that will discuss the application of social health insurance in Egypt and its feasibility within the guidance provided by international literature.

Until we meet again...