@@@Getting Health Sector Reform__ Right

Getting Health Reform Right By Marc J. Roberts William Hsiao Peter Berman Michael R. Reich October 2001 Table of Contents TOC \o "1-4" \h \z Preface 13 Chapter 1: Setting the Scene 16 1. Introduction 16 2. The Forces Driving Health Reform 21 2.1. Force #1: Rising Costs 22 2.2. Force #2: Rising Expectations 24 2.3. Force #3: Limited Capacity to Pay 25 2.4. Force #4: Skepticism of Conventional Ideas 28 3. Summary 29 References 31 Chapter 2: The Health Reform Cycle 32 1. Introduction 32 2. Steps in the Policy Cycle 34 2.1. Step #1: Problem Definition 34 2.2. Step #2: Diagnosing the Causes of Health Sector Problems 36 2.2.1.The Five Control Knobs 37 2.3. Step #3: Policy Development 40 2.3.1. New Ideas 40 2.3.2. Looking Forward 41 2.3.4. The Design Process 42 2.4. Step #4: Political Decision 42 2.5. Step #5: Implementation 43 2.6. Step #6: Evaluation 44 3. Conclusion 46 References 48 Chapter 3: Judging Health Sector Reform 49 1. Introduction 49 2. Ethical Theory #1: Consequentialism 50 2.1.Subjective Utilitarianism 50 2.2.Objective Utilitarianism 51 2.3.Some Utilitarian Complications: Uncertainty and Time 54 3. Ethical Theory #2: Liberalism 56 3.1.Liberalism and Health Care Financing 58 3.2.Helping the Worst Off 59 4. Theory #3: Communitarianism 60 5. The Problem of Justification 62 6. Developing An Ethical Position 63 7. Summary 65 References 66 Chapter 4: Criteria For Health System Evaluation 68 1. Introduction 68 2. Using and Choosing Criteria 69 3. Health Policy and General Social and Economic Policy 71 4. Core Health Sector Performance Criteria 73 4.1.Health Status 73 4.2.Citizen Satisfaction 75 4.3. Financial Risk Protection 77 5. The Role of Cost in Problem Definition 79 6. Intermediate Criteria 84 6.1.Efficiency 84 6.2.Access 86 6.3.Quality 87 6.4.Financial Burden 92 7. The Relationship Between Intermediate and Final Criteria 94 7.1. Poor Health Status 94 7.2. Citizen Satisfaction 95 7.3. Risk Protection 95 8. The Cultural Context and Community Values 96 9. Developing a Strategic Performance Problem Focus 98 Chapter 5:Political Analyses and Political Strategies 103 1. Introduction 103 2. Agenda-Setting for Health Reform 104 3. Politics of Health Sector Reform 108 4. Political Analysis 109 4.1.Sources of Power and Influence 112 4.2Position and Commitment 115 5. Political Strategies for Reform 116 5.1. Strategy #1: Bargain to Change the Position of Players 116 5.2. Strategy #2: Distribute Power Resources to Strengthen Friends and Weaken Enemies 117 5.3. Strategy #3: Change the Number of Players, by Creating New Friends and Discouraging Foes 118 5.4. Strategy #4: Change the Perception of the Problem and the Solution 120 6. Negotiation and Political Strategies 122 7. Political Strategies and Ethics 124 References 127 Chapter 6: From Diagnosis to Health Sector Reform 129 1. Introduction 129 2. Using the “Control Knobs”: Concepts and Evidence 130 3. Developing a Health System Diagnostic Tree 132 4. Linking Diagnosis to the Control Knobs 138 5. From Specific Problems to Major Health Sector Reform 139 6. The Process of Policy Development 141 7. Screening Tests for Policy Interventions 143 7.1.Implementability 143 7.2.Political Feasibility 144 7.3.Political Controllability 145 8. Finding and Using Evidence for Diagnosis and Therapy 146 9. Diagnosis and Policy Development: Some Final Observations 148 References 150 Introduction to Part II 151 Overview of the Control Knobs 151 1. Introduction 151 2. What is a health system control knob? 151 3. Using the Control Knobs to Improve Health Systems Performance 152 4. Factors Beyond the Control Knobs 153 5. Conclusion 154 Chapter 7: Financing 156 1. Introduction 156 2. Financing and Health System Outcomes 156 3. Principal Considerations in Financing Policy 157 3.1. Socioeconomic Development and Health Financing 157 3.2. Fiscal Capacity 159 3.3. Efficiency in Raising Funds 160 3.4. Political Feasibility 161 4. Key Considerations in Selecting Financing Modalities 162 5. Options in Financing 163 5.1. General Revenue Financing 163 5.1.1. Vertical and Horizontal Equity of Alternative Taxes 164 5.1.2. Economic Effects 166 5.1.3. Summary 166 5.2. Social Insurance 167 5.2.1. Equity in Financial Burden and Benefit 168 5.2.2. Economic Effects 168 5.2.3. Implementability 169 5.3.Private Insurance 169 5.3.1. Equity in Financial Burden and Benefits 170 5.3.2. Economic Effects 170 5.3.3. Implementability 171 5.4. Out-of-Pocket Payments 172 5.4.1. Equity in Financial Burden and Benefits 174 5.4.2. Implementability 175 5.4.3. Summary 176 5.5. Community Financing 176 5.5.1. Equity in Financial Burden and Benefits 178 5.5.2. Implementability 178 5.5.3. Summary 178 5.6. Comments 179 6. Resource Allocation and Rationing 179 6.1. Definitions 180 6.2. Dilemmas in Resource Allocation and Rationing 180 6.3. Mechanisms for Allocation and Rationing 181 6.4. Principles of Allocation and Their Implementibility 181 6.5. Political Economy of Resource Allocation 182 7. Conditional Guidance 184 Chapter 8: Payment Systems and Their Incentives 187 1. Introduction 187 2. Impact of Payment on Outcomes 189 3. Design Decisions 191 3.1.What payment method to use and how to define the unit of service to pay? 191 3.2. How to set the level of payment? 192 3.3. Will the payment level be set prospectively or retrospectively? 193 3.4. How is the payment level updated? 194 4. Payment Methods 194 4.1. Health Care Providers……………………………………………………194 4.1.1.Payment Methods for Physicians and Other Health Professionals 195 4.1.2. Payment Methods for Hospitals and Provider Institutions 199 4.2 Patients 203 5. Conditional Guidance 206 Chapter 9: Organization 210 1. Introduction 210 2. Conceptual Approach 211 3. Using the Organization Control Knob: Macro and Micro Strategies 214 4. Macro Strategies 214 4.1. Macro Policy Strategy I: Changing the Public-Private Mix in Health Care Provision 214 4.2. Macro Policy Strategy II: Changing the Provider Mix 217 4.2.1. Scale 218 4.2.2. Scope 219 4.2.3.Integration 220 4.2.4.Providing Services to Rural Areas 221 4.2.5. Influencing provider mix 222 4.3. Macro Policy Strategy III: Fostering Centralization or Decentralization 223 4.4. Macro Policy Strategy IV: Fostering Competition In Private Markets 226 4.5. Macro Policy Strategy V: Using Contracting 228 5. Micro Strategies 230 5.1. Micro Policy Strategy I: Corporatization and Autonomization 230 5.2. Micro Policy Strategy II: Contracting Out 233 5.3. Micro Policy Strategy III: Improving Public Sector Performance 234 5.4. Micro Policy Strategy IV: Altering the Distribution of Inputs 236 5.4.1. Personnel 236 5.4.2. Capital equipment 237 5.4.3. Pharmaceuticals 237 6. Concluding Observations 238 Chapter 10: Regulation 240 1. Introduction 240 2. What is Regulation and Why Regulate? 241 2.1 What? 241 2.2. Why? 241 3. Regulation and Health System Objectives 244 4. Key Considerations for Effective Regulation 245 4.1. Competence in Designing Regulations 247 4.2. Enforcement 247 4.3. Organization 248 4.4. Political Feasibility 249 5. Major Categories of Regulation 249 5.1. Public Health and Health Services 251 5.1.1. Establish Basic Conditions For Market Exchange 251 5.1.2. Perfect What Markets Cannot Do—Enhance Equitable Distribution 251 5.1.3. Correct Market Failures and Provide Public and Merit Goods 251 5.2. Correct Market Failures ..............................................................................260 5.2.1. Establish Basic Conditions for Exchange 262 5.2.2. What Perfect Markets Can’t Do 262 5.2.3. Correct Market Failures 263 5.2.4. Correct Unacceptable Market Results 264 6. Conditional Guidance 264 6.1. Major Regulatory Failures 265 6.2. Guidance On the Use of Regulations 265 References 268 Chapter 11: Behaviour 270 1. Introduction 270 2. Categories of Individual Behavior 273 2.1. Treatment-seeking behaviors 273 2.2. Health professional behaviors 274 2.3. Patient compliance behaviors 275 2.4. Lifestyle behaviors 275 3. Basic Elements of Social Marketing 276 3.1. Product 276 3.2. Place 278 3.3. Price 280 3.3.1. Maximizing the number of product adopters 281 3.3.2. Social equity 281 3.3.3.Cost recovery 281 3.3.4. Demarketing 282 3.3.5. Profit maximization 282 3.4. Promotion 282 4. Discussion 285 References 294 Chapter 12: Conclusions 296 Preface This book represents the culmination of four years of intense collaboration and cooperation among the authors. In the deepest sense, it is a joint product: the result of innumerable meetings (lasting from two hours to two days), notes and memos containing suggestions and ideas, conversations and confrontations – ranging from the delightful to the heated. Chapters have been drafted and redrafted, edited and critiqued and drafted again. We each brought different skills and capacities to our work, some did more writing, others more critiquing. Some were especially good at conceptualizing, others had insights and wisdom derived from years of hard-won experience. No two or three of us could have produced what the four of us have produced together. In this preface we explain the process of producing the book and acknowledge the inspiration and help of many people. How did four individuals with disparate training and experience come to cooperate on a book on health sector reform? The credit for initiating the project has to go to Paul Shaw at the World Bank Institute. In 1996, Shaw organized a major teaching program at the Bank on health sector reform and financing. He organized an advisory group that included Berman and Hsiao and from his efforts emerged the design of what became known as the “Flagship Course on Health Sector Reform and Sustainable Financing.” The course included a series of modules, and Shaw asked Hsiao to take responsibility for organizing an introductory module on health systems assessment and diagnosis. Hsiao, acutely aware of the multidisciplinary nature of the task, recruited Berman, Reich and Roberts to join the team, and our collaboration began. In the summer of 1997, we produced a six-chapter background note for the Flagship Course, along with various teaching materials. The course included modules developed by various groups around the world, and took place in Washington, DC, with 90 participants from many countries. Our background papers, entitled “Diagnostic Approaches in Assessing Health Care Systems,” became the basis for this book. After the course was over, we reviewed our materials and agreed that much more work was required. In the summer of 1998, the Bank retained Roberts to rewrite those materials – and the resulting draft moved us another step forward. Realizing that a great deal more work was needed, the four of us agreed to collaborate in turning the background papers into a book manuscript. The subsequent multi-year effort was financed in part by a grant to Reich from the Edna McConnell Clark Foundation. In addition, we received continuing support from the Bank to each of us for preparing and teaching in the Flagship course in Washington and in courses offered at partner institutions around the world. As we went along, all the chapters were written and re-written many times and the current manuscript emerged. In Chapter 1 we identify six key conceptual contributions of this book; here we note briefly the initial source for each one. The policy cycle formulation emerged from work that Roberts did with a colleague, Christian Koeck, for a course that they taught on health policy. The ethical framework was developed by Roberts and Reich, together with a colleague, Karl Lauterbach, for a course they have taught on public health ethics for the past decade. The political analysis approach used in this book was developed by Reich, along with accompanying software he has produced, called Policymaker (with David Cooper). The concept that health systems are means to ends and the performance criteria formulation were developed by Hsiao from his research and advisory role to many countries. Roberts and Berman elaborated the core and intermediate criteria and the relationship to the ethical framework. The control knob conceptualization was developed by Hsiao—with three of the specific knobs, organization, regulation and behavior, extensively deepened and expanded from our conversations. The diagnostic tree approach came from Roberts. All of these ideas play a role in the book that follows. We do want to stress, however, the critical conceptual armature around which our book is built. We consider this to be the core idea of the technical means-end perspective embodied in the control knobs and the performance criteria, with the broader perspective of ethics and politics as the inescapable (and legitimate) context within which problems are identified and solutions developed. Now for some words about responsibility for the current draft. Chapters 1 (introduction), 2 (policy cycle), and 4 (core criteria) were written by Roberts with substantial substantive and editorial input from Reich. Chapter 3 (ethics) is by Roberts and Reich. Chapter 5 (politics) is by Reich. Chapter 6 (diagnosis and policy development) is by Berman and Roberts. Chapter 7 (financing) is by Hsiao and Roberts. Chapter 8 (payment) is by Hsiao, Chapter 9 (organization) by Roberts and Berman, Chapter 10 (regulation) is by Hsiao and textual input from Roberts. Chapter 11 (behavior) is by Reich. Chapter 12 (conclusion) is by all of us. Of course, each of us contributed important ideas to all of the chapters, not adequately reflected in this list. A project of this complexity and duration is only possible with the support of many people. Our greatest debt is to Anne Johansen of the World Bank. As the organizer of many of the courses in which we have taught, and as a teacher herself in the courses, she has contributed many crucial insights over the years. She has pushed us repeatedly to clarify our ideas—and not infrequently made useful suggestions as to how we might do so. Paul Shaw, who began this whole effort, and Hadia Karam, also of the World Bank Institute, have likewise been valued critics, commentators, and partners. Others who have taught in the course have contributed greatly to our thinking include Ricardo Bitran, Alan Maynard, Alex Preker, George Schieber, and Melitta Jakob. We also wish to thank our colleague at Harvard, Tom Bossert, whose work on decentralization we drew on extensively, and who provided thoughtful comments on several chapters. Our editor, Donald Halstead, improved our writing and continuity with good will and graciousness. Several people helped over the years with typing and revisions, including Katrina Meyer, Betsy Barker, Vanessa Bingham, and Margaret Ou. We also appreciate the support from colleagues who taught with us – especially Miklos Soska and Tomas Etavitz in Budapest. Finally, we want to thank the literally hundreds of participants in Flagship courses both in Washington and around the world. Their energy, ideas, suggestions, and responses were invaluable, as they struggled with various versions of this material. We hope that our efforts will help them with the vital work they do every day, trying to improve the functioning of health care systems around the world. Chapter 1 Setting the Scene 1. Introduction Throughout the world, governments are engaged in health sector reform. The transitional economies of Eastern Europe are full of new social insurance schemes. Nations in South America are experimenting with ways to extend insurance coverage to both the rural and urban poor. In Africa, experiments with fiscal decentralization have produced additional revenues for hospitals, but also additional inequality between rich and poor regions. To improve efficiency, many nations are also experimenting with both new payment systems and new ways to organize health care delivery. Too often, however, conflicting political calculations, economic implications, and ethical concerns have led to a confused national debate: How can we deal with doctors’ demands for more money? What strategies exist to reduce costs for medical care while expanding social insurance to cover the poor? Should we expand the system of publicly provided health centers, or move more to private practice family physicians? Should we ask patients to pay more out of pocket, or make more use of general tax revenues? Is the answer more new technology or less? More doctors or fewer medical schools? Building new hospitals or spending more on anti-smoking campaigns? This book is intended to help health reformers develop the skills they need to answer these questions. It introduces a set of concepts that can facilitate systematic and critical thinking about health sector reform. Our experience in many countries is that such careful analysis is both possible and potentially very useful, as we hope to demonstrate in the pages that follow. Our discussion draws on a range of disciplines. For an understanding of how money is raised and spent, we make extensive use of economic analysis. For insight into how individuals and organizations react to those incentives, we call on sociology, psychology, and organizational theory. For guidance on how to get programs adopted in the real world of government decision-making, we rely on political analysis. In addition, for thinking about how to define problems, we devote significant attention to moral philosophy. Our criteria for the use of theory have been pragmatic: Which conceptual tools and ways of thinking can help real people succeed at the real work of health sector reform? Simply reading a book about how to do health sector reform cannot prepare someone for the work at hand. On the contrary, much of what is required resembles a skill or a craft, like cooking, kicking a football, sailing a small boat, or playing the trumpet. Such skills are best developed through supervised practice. The materials presented here, therefore, need to be supplemented by active discussion, both of case examples and personal experiences. Applying these concepts to specific cases reveals how the ideas are both helpful for solving particular problems and yet also have their limits. Such explorations can develop the intuition and judgment that are needed for successful action in a particular context. The goal of this book is to develop a more reasoned and effective approach to improving the performance of health care systems. The ideas and methods are based on our own engagement with health reform in many parts of the world, in countries with different types of problems and different attempts at solutions, not all of which have been successful. We have also taught this approach to of practitioners around the world, from Malaysia, Kazakhstan and China, to Hungary, Lebanon and Russia, to Mexico, Chile and Washington, DC. In developing these materials over the course of several years, we have challenged each other to clarify ideas, and to make general arguments relevant to actual practice. The result is a book addressed primarily to practitioners – people concerned with making health reform happen – although we hope that researchers will also find it stimulating and provocative. We want to stress that our approach is based on looking at the health care system as a means to an end. We can only know whether the system is working well or badly, or identify promising reforms, by keeping this perspective clearly in mind. Thus our method focuses on the need to identify goals explicitly, diagnosis causes of poor performance in a systematic way and devise reforms that will produce real changes in performance. We will argue again and again that reform must be strategic, based on honest means-ends analyses of what is likely to happen in a particular national context. Reforms need to be judged not on reformers’ intentions, but by the changes they actually produce. Too often, advocates of particular health sector reform ideas do not offer arguments that meet this burden. Instead they uncritically urge adoption of their favorite idea: be i