Actuarial estimates : what would universal health insurance coverage by 2020 cost?

 April 2011 Policy and Discussion Notes 67943 Pop x [P x Q] + A = E € Indonesia Rp. 46,382 is only slightly Health Sector greater than the ‘High’ option CMPM for the Greater Jakarta region of Rp 45,494 . Review Actuarial Estimates : What would Universal Health Insurance Coverage by 2020 Cost? Introduction The cost of a health insurance program will be determined by a number of factors. These include the size and composition of the covered population, the benefit package, cost-sharing arrangements, the current and future supply of health care providers and facilities, and the provider payment mechanisms used. This policy brief summarizes in broad strokes the subset of possible Universal Coverage (UC) transition scenarios and their related costs in Indonesia. These scenarios were based on initial discussions with key stakeholders. Further broad-based discussion with stakeholders will be needed to finalize the design, financing and transition options. This brief shows how decisions regarding the transition steps, benefit package and the choice of eligible population will affect public Health Insurance (HI) expenditures as Indonesia transitions to UC. For more details, please see the publication on this subject. The Background In 2009, The World Bank report Health Financing The analysis showed that, no matter which path in Indonesia laid out a road map for achieving the Indonesia chooses, the move towards UC will Government of Indonesia’s 2004 promise to provide likely have a sizable impact on future government HI coverage to Indonesia’s entire population. The health spending. The report highlighted the need report assessed progress to date, the strengths and for Indonesia to start addressing the weaknesses in its weaknesses of the current health system and provided health system in order to lay the basis for a financially a comprehensive list of needed critical policy decisions sustainable future. It would be unwise to expand and three main options being considered in the debate coverage to over 100 million uninsured individuals on on UC. Given estimates of Indonesia’s future fiscal space, an inefficient base system. it also provided some very preliminary estimates of the potential future costs and sustainability of UC. Furthermore, given the paucity of sound actuarial covered and uncovered populations, the contents of analyses, largely due to the lack of up-to-date unit the basic insurance benefits package, cost-sharing cost, insurance claims and national health accounts provisions, provider payment methods and cost- information, the report stressed the critical policy containment measures, and supply-side availability. need for additional base data and actuarial studies. Future program cost estimates therefore need to take These latter issues are the subject of a follow-up into account, among other things, changes in demand note ‘Actuarial Costing of Universal Health Insurance and disease patterns, aging, technological advances, Coverage in Indonesia: Options and Preliminary Results and changes in supply. that provides estimates of the likely spending needed for a range of possible transition paths to achieving One of the major advantages of the study over UC. It also illustrates the impact of key policy choices previous studies is the use of detailed 2008 Askes on the costs of the program. claims data from the public employees’ health insurance program for the entire country. This It is important to note that the sophistication of is available at the individual level by age, sex and the analysis and models continues to be limited geographic area and covers some 14 million civil by data availability and quality. Moreover there is servants and dependents. By adjusting these data very limited information about the risk profiles of the for the UC options under consideration in terms of currently insured versus the currently uninsured. There the basic benefit package (BBP), cost sharing, and is also a lack of information on the government’s plans socioeconomic characteristics of the remaining to expand the severely constrained health service uninsured, detailed estimates of UC spending based delivery system. on the different risk and geographic profiles of the uninsured and/or specific groups of the uninsured (for In addition to providing senior government example women and children) can be made. decision makers and Members of Parliament with much needed data for decision making, the other In 2008, the average cost of the Askes program purpose of this new report is to provide technical was just under Rp 16,000 per member per month policy staff with both a methodological basis and (CMPM). The cost in Greater Jakarta is almost 2.5 times a tool for undertaking future estimates. The study higher than the cost in other regions of the country, highlights the type of data adjustments that need reflecting greater access, reimbursement rates and to be made to develop a sound actuarial model, as availability of services. After adjusting Askes data for well as approaches for estimating the impacts of such factors as population and age distribution, Class alternative policies. A spreadsheet model which has III hospital bed coverage (the likely service covered in been developed to underlie this study is being made a UC BBP), and tariff increases, the national average available to GoI technicians and other stakeholders. CMPM is Rp 11,671 and Rp 20,724 in Greater Jakarta. The study provides both health policy makers and These notional premium levels are well in excess of technical staff with a practical tool to estimate future the administratively set government contribution health care spending under alternative UC policy of just over Rp 4,000 CMPM that was made in 2008 scenarios, an area that has been badly neglected by for the one-third of the population covered by the the international community. government’s Jamkesmas program for the poor and near poor, suggesting that there will be a significant Factors Affecting the Costs of UC expenditure increase needed to continue coverage of this group under a uniform national UC program. In theory, from an aggregate perspective, estimating the costs of expanding HI coverage is The adjusted CMPM of Rp 11,671 is low and may conceptually straightforward–population covered suggest that UC could be achieved at reasonable times unit price of service times quantity of service cost. However, this significantly underestimates the plus administrative costs. Operationalizing these real cost as it does not include extensive out-of-pocket simple price and quantity concepts is, however, far from (OOP) expenses (for example some 40 percent of all straightforward. First, what does the concept of price health spending in Indonesia), large subsidies to the mean–for example efficient unit costs of production public system and serious supply constraints. Including or the fee schedules paid by insurers or set by private estimates of these ‘costs’, assuming various scenarios, providers. Does it include supply-side subsidies to provides a more realistic expenditure estimate ranging public institutions in the form of salaries and capital? from Rp 19,258 CMPM to Rp 36,029. The latter assumes Second, service use will also depend on both demand access and availability of services as currently seen in and supply factors such as the risk profiles of the Greater Jakarta. Indonesia Health Sector Review 2 Future Program Costs Policy Options Projecting costs forward to 2020 suggests that On the policy side, the government needs to clarify UC in Indonesia is likely to require an expenditure its primary goals in establishing its universal health range between Rp 127 trillion (6.7 percent of total care program. Is the purpose to improve the level public expenditures and 1.17 percent of GDP) and of care and health outcomes for the poor, focus on Rp 221 trillion (11.6 percent and 2.03 percent). specific objectives such as maternal or child mortality, The lower estimate assumes low levels of OOP and provide protection against catastrophic medical care increased supply while the higher estimate assumes expenses, or some other objective? Will all types of that the rest of the country catches up to Greater interventions be covered, and if so, what treatment Jakarta access and utilization of services. In terms of protocols will be covered and what will be the cost partial coverage options, a UC package for maternity sharing and other revenue-raising arrangements? How services only would cost between Rp 16-30 trillion in will service be provided in areas with an undersupply 2020, 0.86-1.58 percent of total public spending, and of medical services? 0.15 to 0.28 percent of GDP. Health system reform involves difficult political These estimates assume gradual expansion toward and ethical decisions. The country’s value system, UC between 2010 and 2020, factoring in aging and finances, and health care priorities will have a strong epidemiological changes as well as advances in impact on the final system design. All health care medical technology and increased demand. These systems everywhere in the world ration health expenditures do not include public spending for other care. This can be done through benefit package public health activities such as health promotion, design, market mechanisms, waiting lists, coverage, surveillance or training, and do not include private restrictions on the use of technology, limitations on spending on health which is currently almost one-half covered pharmaceuticals, and many other methods. of total health spending. Moreover, this study focuses on the expenditure implications of UC and does not Indonesia has a severe shortage of facilities and (except in one case) deal with alternative revenue- medical personnel in many parts of the country raising options in terms of alternative forms of public and limits on the amount it can afford to spend on funding (for example general revenues vs payroll health care. Consequently, it is not possible to provide taxes vs earmarking) as well as different cost-sharing everything to everybody and hard choices will have and premium structures for the nonpoor, especially to be made about where to focus limited resources. informal sector workers. While this is a serious limitation Nevertheless, estimates of program costs and their of the approach, it is an area that can be readily sensitivity to various policy choices will provide policy accommodated in future permutations of the model. makers with important base information upon which to assess tradeoffs and under these complex policy Other scenarios for achieving UC, starting with decisions. coverage of vulnerable populations, are also developed as alternatives and as inputs to the ongoing debate on the various transition paths to achieve UC and make good on the promise made with the passage of Law No. 40/2004 on Social Security. Much work remains to be done to finalize the design and cost of universal health care in Indonesia. The estimates in this report give an idea of the possible range of spending required under various assumptions and provide a useful modifiable tool for undertaking further estimates. However, the data are not sufficiently robust to estimate: (i) spending for programs that cover a more limited package of medical interventions (for example, not covering tertiary care); (ii) the impact of changes in the supply of medical services; or (iii) the impact of changing technologies on utilization patterns. Indonesia Health Sector Review 3 The following figures in Table 1 below present by the government and Ministry of Health. Although several different scenarios for achieving UC by child mortality has declined substantially and 2020. The simplest case is to assume that the Askes Indonesia is set to attain the MDG for child mortality benefits package expands gradually from a 50 percent by 2015, child health remains a serious concern. The coverage rate in 2010, to 75 percent in 2015 and figures present the costs in three ways: (i) total annual full coverage by 2020. The second option extends expenditures in Rupiah; (ii) annual expenditures as a Jamkesmas to the entire population. Under the third percentage of GDP; and (iii) annual expenditures as a and fourth options, coverage is phased in for pregnant percentage of government spending. women and children under 15 years of age. This reflects the high priority placed on maternal and child health Table 1: Cost Summary Baseline Data for Cost per Member per Month (CMPM) Based on Askes Data Askes Adjusted by : Adjusted by: Population 2008: • Remove additional cost for • Medical fee increases 2010 adjusted class I & II of 20% • Increase CMPM capitation • Pharmaceutical cost National fee by Rp. 1000 increases of 10% National Rp. 15,879 • correct underexposure • Age specific rates Rp. 11,671 ages 0-14 Population 2010 loaded Baseline range Low baseline High baseline Greater Jakarta and future costs Assumptions: Assumptions: baseline • Add 10% administration cost • Add 10% administration cost Assumptions: • Both Supply side subsidy and OOP • Both Supply side subsidy and OOP • Add 10% administration cost costs are set to 30% costs are set to 50% • Both Supply side subsidy and OOP • Future costs increase by elasticity • Future costs increase by elasticity except for Greater Jakarta costs are set to 50% except for Greater Jakarta population where the increase is • GJKT cost levels for entire population population where the increase is • Future costs are increased gradually 3%/year 3%/year to reach Higher case Greater Jakarta CMPM : Rp. 20,542 Population costs by 2020 CMPM : Rp. 25,677 CMPM : Rp. 36,029 • Same level of supply constraints as exists today. Excludes adverse selection and assumes a normal pooling of good and bad risks • Amounts in Rupiah are expressed in real terms. There is no adjustment for inflation • The amounts include only public expenditures on health insurance. Government budget spending and out-of-pocket costs are excluded Estimating cost for Achieving Universal Coverage for All Indonesians Gradually (2010:50%, 2015:75%, 2020: 100%) Scenario Low case High case Greater Jakarta case Year 2010 2015 2020 2010 2015 2020 2010 2015 2020 CMPM 20,542 28,442 39,835 25,677 35,553 49,793 36,029 56,705 69,222 Annual exp (trillion Rp) 30 65 127 37 82 159 52 130 221 Estimating cost for expanding Jamkesmas to Entire Population Scenario National Greater Jakarta case Year 2010 2015 2020 2010 2015 2020 CMPM 11,671 16,160 22,633 16,377 25,775 31,465 Annual exp (trillion Rp) 17 37 72 24 59 101 Assumptions: a) Only for class III coverage, large number of people not seeking care due to poor quality. No reduction in subsidies or out-of-pocket expenses. Administrative costs paid by government Estimating cost for maternity care - universal coverage Scenario Low case High case Greater Jakarta case Year 2010 2015 2020 2020 2015 2020 2010 2015 2020 Annual cost per birth 1,582,117 2,314,200 3,407,389 3,407,389 2,773,292 4,136,806 2,593,496 4,454,219 5,913,974 Annual exp (trill. Rp) 8 12 17 17 14 21 14 23 30 Assumptions : Assumption - Estimated number of births : (2010:5.250.086) - Short term abortion not covered - Estimated include 4 times ANC visit - Proportion delivery in hospital 75% by 2020 (2015:5.157.102) (2020:5.090.825) - 10% complication, 6% require c-sections - Cost of drug 25% professional fee - Per diem 2 person for 6 days Estimating cost for children < 15 years old - universal coverage Scenario Low case High case Greater Jakarta case Year 2010 2015 2020 2010 2015 2020 2010 2015 2020 Monthly cost per child 14,925 19,714 26,650 18,656 24,643 33,312 22,189 29,328 33,730 Annual exp (trill. Rp) 11 15 20 14 19 25 17 22 26 Note : Estimated number of children < 15 years old : (2010:62.919.300) (2015:63.907.900) (2020:63.403.800) Indonesia Health Sector Review 4  Total Annual Expenditures Scenarios Total Annual Expenditures as % of GDP as % of Government Expenditure Askes Design     Jamkesmas For All     Maternity Care Only     Children Ages 0-14     Indonesia Health Sector Review 5 1. This policy brief was prepared by the World Bank Indonesia team including: Claudia Rokx (Lead Health Specialist), George Schieber (Senior Health Policy Advisor), Mitch Wiener (Senior Social Protection Specialist), Pandu Harimurti (Health Specialist), Eko Pambudi (Research Analyst) and Ajay Tandon (Senior Economist) and is based on the recently published Actuarial Costing Note by Yves Guerard et al (2011). Funding for this note was made available by the UKAID from the Department for International Development. 2. The details can be found in the World Bank publication on which this brief is based: Actuarial Costing of Universal Health Insurance in Indonesia: Options and Preliminary Results. This work follows closely the earlier World Bank report Health Financing in Indonesia; A Road Map for Reform. For more information please contact Pandu Harimurti (pharimurti@worldbank.org) or visit the WB website. Indonesia Health Sector Review 6