A Primer on Introducing Universal Health Coverage

Many nations, both developed and developing, are working toward implementing some form of “universal health coverage” (UHC). I have been studying these efforts in several countries. This paper summarizes some of the critical factors I have found in a successful UHC initiative. It also offers suggestions for those wishing to promote the adoption of UHC.

 What is UHC?

 Every citizen of a country receives good quality health services of the kinds that they need without suffering financial hardship.

 This includes more than just the services a person requires when she is ill. True UHC encompasses health promotion, prevention, treatment, rehabilitation, and palliative care. Furthermore, the services must be of an acceptable level of quality. When the quest for health care services may result in financial hardship, patients may be discouraged from using the services. A useful UHC scheme, both its delivery and financing mechanisms, must protect against financial risk.

 Why is UHC a worthwhile goal?

 Intuitively, UHC sounds like a good idea. Almost everybody requires health care services at one time or another, and it certainly is desirable to have open access to them at the time. The importance of such open coverage is recognized in the UN Convention of Human Rights.

 “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social service, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.”

 It is possible to describe more specifically the benefits of UHC.

 If you are going to argue on behalf of UHC, it is a good to have a clear idea of the benefits that it will provide. They fall into three broad categories: health, economic, and political.

 Health benefits. Studies show that broader health coverage leads to better access to necessary care and improved population-level health. The greatest gains accrue to the poorest people.

 Economic benefits. The most common existing form of financing for health care is direct, out-of-pocket payments by patients for medical services and drugs at the time they are used. These payments often have a financially crippling effect and push patients below the poverty line. A modern UHC system protects against such harmful results through pre-paid pooled funds that can reduce or eliminate the financial risk associated with sudden, unpredictable health expenses.

 Political benefits. If a UHC system is financed sustainably and implemented competently, it can win votes for the politicians who sponsor it. But if those politicians and public administrators have not prepared the health care system for the inevitable increases in demand for health care that result, voter attitudes can change very quickly.

 How to design an effective UHC system.

 When planning to create a UHC system, it helps to look at it along three dimensions: 1) the people who will be covered, 2) the services that will be covered, and 3) the financial protection that the people will receive. So far, no country is providing every single one of its citizens with every health service they need and with full financial protection. Those working to introduce a complete UHC system should accept that it will be an ongoing process spread over many years, as the system’s coverage features are steadily expanded. No nation, even the most developed, has sufficient resources to set up UHC in its entirety at one time.

 Keep also in mind that it is not enough to make progress along only one of the three dimensions. Providing coverage to nearly all citizens is not very meaningful if it includes a limited range of low-quality services and minimal protection against financial risk.

 The best way to progress toward a UHC system that will satisfy the most people is to involve all relevant stakeholders from the beginning. This includes the general population that will benefit from the system as well as the health care professionals who will be responsible for implementing the system. Together, they should develop a multi-year strategy that prioritizes actions and investments. Keeping in mind that trade-offs will be necessary and that demands on the system will change over time as the economy develops, citizen expectations increase, population demographics evolve, medical technology advances, and disease burdens shift.

 How to finance an UHC system.

 It easy to announce that every citizen will be covered for all the health care services that he or she may ever need. The challenge is finding the money to pay for those services. The financing component of an UHC system has three primary functions.

• raising sufficient financial resources to pay the costs of the system
• pooling those financial resources to protect citizens from the financial consequences of their health problems
• making optimal use of the financial resources to purchase the required health care services

 Raising sufficient financial resources. As a general rule, countries need to rely increasingly on public funds to finance their health care systems. As their economies develop, they will devote a growing proportion of gross domestic product (GDP) to health. That GDP share ranges from less than 5% for low and middle income countries to over 10% for the most developed nations. The US spends 18% of its GDP on health care, but has a reputation for a very inefficient health care system..

 The problem for low-income countries is that domestic financing sources are often inadequate to support even a rudimentary UHC system. External aid financing is often needed to fill the gap.

 As a country grows and develops, two things will happen – its GDP will expand and its citizens' demands for health care will grow. The challenge is to keep them in rough balance.

 Pooling the financial resources. To minimize the financial risk for individual citizens, their prepaid contributions are combined or pooled with the contributions from other citizens which is then used to pay for services for all of them as they are needed. This allows the risk-spreading principles of “insurance” to take effect.

 There are two primary classifications of payments for health services – voluntary and compulsory. Examples of voluntary payment are non-mandatory individual insurance and out-of-pocket payments at the time of service. Involuntary payments include government taxes, fees, and other charges, and mandatory individual insurance. Let us look at these financing sources one at a time.

 The simplest and most natural method of financing health care is out-of-pocket payments by patients at the time they receive the care. It also is universally agreed that it is the worst way to finance a health system. There is very little financial risk protection, and patient costs and benefits are not distributed equitably. UHC initiatives should move away from out-of-pocket payments as quickly as possible, making sure that quality of care does not deteriorate or that formal charges are not replaced by “informal” payments.

 For pooling to take place, financing must occur through some form of insurance system. Voluntary health insurance is the case when people or their employers (on their behalf) choose whether they want to buy insurance or not; under a compulsory insurance scheme, people are required by law to enroll in an insurance plan or are automatically covered because of their citizenship, national residence, or membership in a defined group (i.e., below poverty level).

 Under voluntary health insurance, people choose to make regular premium payments in return for financial risk protection. In addition, they may make a few direct payments like co-payments, coinsurance, and deductibles.

 While they do allow for risk-sharing, voluntary systems have two significant flaws – the poor often cannot afford even voluntary premium payments and “adverse selection” attracts primarily older and sicker people. Because of these shortcomings, no country in the world has come close to UHC by using voluntary insurance as its primary financing mechanism. Progress towards UHC requires much larger risk pools to enable redistribution to the sick and the poor. For this to happen, system enrollment has to be compulsory.

 It is generally acknowledged that predominant reliance on mandatory member contributions is crucial to establishing an equitable health care financing system. These contributions occur through two mechanisms: general taxation and charges (i.e., direct taxes on income and profits, indirect taxes on the sales of goods and services, and import duties) and mandatory payments to social health insurance programs (i.e., obligatory deductions from people’s salaries or their employers).

 No social health insurance system relies solely on wage-based deductions. General government revenues are the dominant source of revenue for modern, progressive health care systems. The mandatory feature is more likely to produce an UHC scheme that is effective, efficient, and equitable.

 There is one other point. In low-income countries, even if health care is funded heavily through public revenues and they are pooled efficiently, there is not likely to be enough money to finance services of sufficient quantity and quality for the entire population. It will be necessary to rely to some degree on external aid financing. However, if it is to be useful in advancing UHC, it should be dedicated to augmenting pooled domestic resources (e.g., added to the general budget) rather than financing fragmented individual projects.

 Spending the financial resources wisely. One way to stretch the limited funds available for health care financing is to spend them as wisely as possible. There is a multitude of ways to get greater value for money spent. These are some cases where efficiency can be improved in the areas of service delivery, staff management, information management, financing, and governance.

• Under-utilizing generic medicines and allowing unnecessarily high medicine prices
• Allowing the use of substandard and counterfeit medicines
• Using medicines inappropriately and ineffectively
• Oversupply and overuse of health care products, equipment, procedures, and other services
• An inappropriate or costly mix of workers and staff, often poorly motivated
• Inappropriate hospital admissions, lengths of stay, and readmissions
• Inappropriate facility size, resulting in low occupancy and utilization
• Medical errors and generally poor quality of care
• Waste, corruption, and fraud throughout the health care system
• Inefficient balance between levels of care, prevention, promotion, and treatment

 There are numerous proven initiatives for reducing and eliminating these inefficiencies.

 Suggestions for promoting the introduction of UHC

 These are a few strategies that can be employed to promote improvements in national health care financing, leading ultimately to some form of UHC.

•  Advocate higher levels of public spending on health care, often best measured as a percentage of GDP.
• Encourage politicians, policymakers, and government officials to replace voluntary financing mechanisms with more efficient and equitable mechanisms based on compulsory contributions that are pooled to spread risk across the population.
• Advocate for reducing the fragmentation of risk pools with contributions made to them according to the member’s ability to pay.
• Challenge strategies that create separate risk pools for more privileged groups in society (i.e., civil servants, formal sector workers).
• Argue in favor of allocations from the government’s health budget be made efficiently and equitably. Watch for disproportionate allocations to tertiary hospital care over local primary health care, to treatment over prevention and promotion, and to urban infrastructure and care over that in rural areas.
• Conduct equity audits of health financing policies to ensure that high-need and vulnerable groups receive their fair share of benefits (i.e. women, children, elderly, disabled, low-income, ethnic groups, chronic illness sufferers, and rural populations).
• Publicize good and bad examples of health financing policies.
• Mobilize support for including UHC as high-priority development goal.