Preface

Universal health coverage (UHC) is a major ambition of every health system in the world. It advocates that quality health services are to be accessed by all people, when needed, without being too expensive. This ambition has been clearly stated as a target for the Sustainable Development Goal defined by the United Nations in the UN Millennium Summit of 2000. The World Health Organization in 2013 published the 'World Health Report: Research for universal health coverage', which presented the importance of researching and discussing how to achieve universal health coverage. The main purpose of this book is contributing to the ongoing discussion on this topic.

This book starts with the chapter "Funding Universal Healthcare and Long-Term Care in an Aging Era" by Aida Isabel Tavares and Pedro Lopes Ferreira, where the concept of UHC is described as well as the funding of UHC and long-term care in the demographic scenario of aging. This chapter details several introductory concepts on UHC and relates them with LTC in aging societies.

Under the topic of funding, Abualbishr Alshreef wrote the next chapter "Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable Healthcare Coverage". One role of funding UHC is paying providers for the healthcare services supplied to people. The payment mechanism needs to be strategic in order to promote cost containment. This chapter reviews the problem of increasing cost in health services in low- and middle-income countries and explores the alternative payment mechanisms which may contain the rising costs and which may contribute to the implementation of UHC.

Funding is fundamental to ensure that UHC may be achieved and this includes the prevention of catastrophic health expenditures or financial hardship. The next chapter "Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable Healthcare Delivery" by Alex Asakitikpi addressed this topic. In Nigeria there have been several efforts to promote health equity and guarantee of access to all citizens; however, the results are worse than expected. The authors propose measures related to provider's payments that are all-embracing towards the provision of healthcare services to Nigerians and other low- and medium-income countries.

UHC foresees access to quality healthcare services. Sandra Pennbrant in the next chapter "Caring for Older Persons - Improving Healthcare Quality to Ensure Wellbeing and Dignity" discusses the importance of treating the elderly with dignity and a caring attitude and how this can be done. This is particularly important in a world where the aging phenomenon is changing the demographic structure.

The concern for quality continues in the next chapter entitled "An Intersectional Innovative Analysis of How Providers' Discourses Interacts with Universal Healthcare Access" by Lorena Saletti-Cuesta. Focusing on Argentina, the author explores how the intersectionality may help to understand the multiple axes of inequalities that cross healthcare providers' discourses on violence against women and health problems of migrant women.

**II**

**Section 4**

and Resistance

*by Stefano Neri*

of Italy

*by Telma Maria Gonçalves Menicucci*

Universal Healthcare Cases **85**

**Chapter 7 87**

**Chapter 8 103**

The Brazilian Unified Health System: Thirty Years of Advances

Economic Crisis, Decentralisation and Health Inequalities: The Case

The two last chapters of this book present the evolution of UHC in two very different countries: Brazil, a medium income country, and Italy, a European developed country.

The Brazilian case is presented by Telma Maria Menicucci and it focuses on the implementation of a universal health system. The chapter describes the last 30 years of history, the successes and the difficulties of implementing such health system in a large developing country. At the end of this chapter, the author highlights the challenges that are emerging in the Brazilian health system.

The Italian case is portrayed by Stefano Neri. This country has faced an economic crisis for the last 10 years and the negative impacts on the National Health System are now observable. Quality has suffered as well as access to healthcare services. The emerging social and territorial inequalities weaken the universalistic nature of the Italian Health System.

> **Aida Isabel Tavares** Lisbon School of Economics and Management, University of Lisbon, Lisbon, Portugal

> > Centre of Studies and Research in Health, University of Coimbra, Coimbra, Portugal

> > > **1**

Section 1

Introduction

Section 1 Introduction

**3**

**Chapter 1**

Health Coverage

*Aida Isabel Tavares*

**2. Universal health coverage**

**1. Introduction**

Introductory Chapter: Universal

Universal health coverage (UHC) is a major ambition of every health system around the world. It stands for the aspiration that health services are to be accessed by all people, when needed with quality, without falling in financial debt or bankruptcy. This ambition has been clearly stated as a target for the Sustainable Development Goal defined by the United Nations in the UN Millennium Summit of 2000. The World Health Organisation (WHO), in 2013, published the 'World health report: research for universal health coverage' [1] where it becomes evident the importance of researching and discussing how to advance towards universal health coverage. The main purpose of this book is contributing to the ongoing discussion on this topic.

Universal health coverage conveys an ambitious idea of ensuring health care services of quality to all people who are in need, without suffering financial hardship. According to the latest UHC monitoring by WHO, in 2017 [2], this goal is still a bit far away from what was defined initially. About 100 million of people in the world fall into extreme poverty because of out-of-pocket expenditures. Almost 180 million of people spend 25% or more of the household budget on health expenditures,

These astonishing numbers slowdown the movement towards the Sustainable Development Goals (SDG) [3], both the SDG1—ending poverty and the SDG3 ensuring healthy lives and promoting well-being. This later SDG includes Target 3.8 which is concerned precisely with the achievement of UHC. The importance of UHC has been recognised by governments, who have in several occasions committed moving towards UHC. Regardless numbers, there are good news. The latest report on monitoring UHC worldwide concluded that there has been some progress

The measurement of the movement towards UHC is based on three dimensions [1]: (i) who is covered, (ii) which services are covered and (iii) how much cost is covered. The first dimension measures the proportion of people who is covered and the aim is 100%. The second dimension measures the number and type of services to be supplied to people. The third dimension measures the cost-sharing of accessing to health services between people and the health system. The role of governments is then (i) to decide which are the health services to be included in the package of services and the quality of the services, and (ii) to ensure that people have access to these services in affordable way. This decision is different across

and this figure has been rising for about 5% each year globally.

towards UHC despite the unequal and slow speed of improvement.

#### **Chapter 1**

## Introductory Chapter: Universal Health Coverage

*Aida Isabel Tavares*

#### **1. Introduction**

Universal health coverage (UHC) is a major ambition of every health system around the world. It stands for the aspiration that health services are to be accessed by all people, when needed with quality, without falling in financial debt or bankruptcy. This ambition has been clearly stated as a target for the Sustainable Development Goal defined by the United Nations in the UN Millennium Summit of 2000. The World Health Organisation (WHO), in 2013, published the 'World health report: research for universal health coverage' [1] where it becomes evident the importance of researching and discussing how to advance towards universal health coverage. The main purpose of this book is contributing to the ongoing discussion on this topic.

#### **2. Universal health coverage**

Universal health coverage conveys an ambitious idea of ensuring health care services of quality to all people who are in need, without suffering financial hardship. According to the latest UHC monitoring by WHO, in 2017 [2], this goal is still a bit far away from what was defined initially. About 100 million of people in the world fall into extreme poverty because of out-of-pocket expenditures. Almost 180 million of people spend 25% or more of the household budget on health expenditures, and this figure has been rising for about 5% each year globally.

These astonishing numbers slowdown the movement towards the Sustainable Development Goals (SDG) [3], both the SDG1—ending poverty and the SDG3 ensuring healthy lives and promoting well-being. This later SDG includes Target 3.8 which is concerned precisely with the achievement of UHC. The importance of UHC has been recognised by governments, who have in several occasions committed moving towards UHC. Regardless numbers, there are good news. The latest report on monitoring UHC worldwide concluded that there has been some progress towards UHC despite the unequal and slow speed of improvement.

The measurement of the movement towards UHC is based on three dimensions [1]: (i) who is covered, (ii) which services are covered and (iii) how much cost is covered. The first dimension measures the proportion of people who is covered and the aim is 100%. The second dimension measures the number and type of services to be supplied to people. The third dimension measures the cost-sharing of accessing to health services between people and the health system. The role of governments is then (i) to decide which are the health services to be included in the package of services and the quality of the services, and (ii) to ensure that people have access to these services in affordable way. This decision is different across

countries and across time. It depends on several variables such as economic development, available technology, climate and epidemiology features.

#### **3. Investing in universal health coverage**

Investing in UHC is to have a stake in each country health system. The meaning of investing is wide and the impacts can also be wide, either immediate or medium and long-run impacts on the health system and population health.

The inputs of UHC where governments may invest include financing, producing health workforce, investing in medicines and infrastructures, as well as in information, and also creating a well-adjusted governance structure.

The immediate impact of these inputs is felt on the provision of services. Health services are expected to account for access, readiness, quality and safety. Inputs also allow for creating a financial pool needed to support UHC. The non-immediate impacts of investing in UHC happen on the desired outcomes. These are, in fact, the three dimensions used to measure the progress of UHC meaning coverage, financial risk protection and risk dispersion. The final and long-lasting impact is felt by the population: the improved health status and financial well-being, and by the health system itself: the increased responsiveness and health security.

Along the different stages of this chain of inputs and impacts, the social determinants are a permanent influence to be considered to ensure equity of coverage. At the end, from an overall view, investing and providing UHC implies producing health services in quantity and quality and in equitable base.

With this framework in mind, one realises that the research and analysis on the improvement of UHC is diversified and addresses several topics and issues, from the inputs, to the outputs and outcomes, ending at the population health, and going through social determinants, quality and equity. The ground for studying UHC is vast.

This book contributes to the discussion on the universal health coverage and no single topic is privileged. The main aim here is to joint different perspectives and contributions on how to improve UHC. The variety of topics presented and discussed along the book confirms the importance that UHC has for academics and health professionals. But it also remarks the controversies and challenges of its implementation and improvement.

#### **4. Invitation**

The reader is invited to read about a variety of topics emerging in the context of universal health coverage around the world and be involved in some of the current discussions.

**5**

**Author details**

Portugal

Portugal

Aida Isabel Tavares1,2

1 Lisbon School of Economics and Management, University of Lisbon, Lisbon,

2 Centre of Studies and Research in Health, University of Coimbra, Coimbra,

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

\*Address all correspondence to: aitavar@gmail.com

provided the original work is properly cited.

*Introductory Chapter: Universal Health Coverage DOI: http://dx.doi.org/10.5772/intechopen.89343*

*Introductory Chapter: Universal Health Coverage DOI: http://dx.doi.org/10.5772/intechopen.89343*

*Universal Health Coverage*

countries and across time. It depends on several variables such as economic devel-

Investing in UHC is to have a stake in each country health system. The meaning of investing is wide and the impacts can also be wide, either immediate or medium

The inputs of UHC where governments may invest include financing, producing health workforce, investing in medicines and infrastructures, as well as in informa-

The immediate impact of these inputs is felt on the provision of services. Health services are expected to account for access, readiness, quality and safety. Inputs also allow for creating a financial pool needed to support UHC. The non-immediate impacts of investing in UHC happen on the desired outcomes. These are, in fact, the three dimensions used to measure the progress of UHC meaning coverage, financial risk protection and risk dispersion. The final and long-lasting impact is felt by the population: the improved health status and financial well-being, and by the health

Along the different stages of this chain of inputs and impacts, the social determinants are a permanent influence to be considered to ensure equity of coverage. At the end, from an overall view, investing and providing UHC implies producing

With this framework in mind, one realises that the research and analysis on the improvement of UHC is diversified and addresses several topics and issues, from the inputs, to the outputs and outcomes, ending at the population health, and going through social determinants, quality and equity. The ground for studying UHC is vast. This book contributes to the discussion on the universal health coverage and no single topic is privileged. The main aim here is to joint different perspectives and contributions on how to improve UHC. The variety of topics presented and discussed along the book confirms the importance that UHC has for academics and health professionals. But it also remarks the controversies and challenges of its

The reader is invited to read about a variety of topics emerging in the context of universal health coverage around the world and be involved in some of the current

opment, available technology, climate and epidemiology features.

and long-run impacts on the health system and population health.

tion, and also creating a well-adjusted governance structure.

system itself: the increased responsiveness and health security.

health services in quantity and quality and in equitable base.

implementation and improvement.

**4. Invitation**

discussions.

**3. Investing in universal health coverage**

**4**

### **Author details**

Aida Isabel Tavares1,2

1 Lisbon School of Economics and Management, University of Lisbon, Lisbon, Portugal

2 Centre of Studies and Research in Health, University of Coimbra, Coimbra, Portugal

\*Address all correspondence to: aitavar@gmail.com

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

### **References**

[1] WHO. The World Health Report 2013: Research for Universal Coverage. Geneva: WHO; 2013

[2] WHO. Tacking Universal Health Coverage: 2017 Global Monitoring Report. World Health Organization and the International Bank for Reconstruction and Development / The World Bank; 2017

[3] UN. Sustainable Development Goals. 2019. Available at https:// sustainabledevelopment.un.org/topics/ sustainabledevelopmentgoals

**7**

Section 2

Funding

Section 2 Funding

**6**

*Universal Health Coverage*

Geneva: WHO; 2013

**References**

World Bank; 2017

[1] WHO. The World Health Report 2013: Research for Universal Coverage.

[2] WHO. Tacking Universal Health Coverage: 2017 Global Monitoring Report. World Health Organization and the International Bank for

Reconstruction and Development / The

[3] UN. Sustainable Development Goals. 2019. Available at https:// sustainabledevelopment.un.org/topics/

sustainabledevelopmentgoals

**9**

**Chapter 2**

**Abstract**

*Abualbishr Alshreef*

management information systems.

**1. Introduction**

healthcare costs.

expenditure and costs, cost containment, LMICs

Provider Payment Mechanisms:

Sustainable Healthcare Coverage

Globally, governments are seeking to develop equitable and sustainable healthcare systems for delivering universal healthcare coverage under budget constraints. This chapter provides an analysis of fee-for-service, a commonly used payment mechanism for reimbursement of healthcare providers, and proposes appropriate reform in order to promote cost containment in the context of low- and middleincome countries (LMICs). The analysis used secondary data derived from the literature. The analysis revealed that capitation, case-based, and global budget provider payment mechanisms have the potential to control healthcare costs by creating incentives for providers to reduce the volume of services. Capitation payment has the potential to promote provider efficiency, while global budget may reward inefficient hospitals if risk adjustors (such as gender and age) are not considered in the resource allocation formula. Both capitation payment and global budget have lower administrative costs compared to fee-for-service. Development of supporting measures is crucial including legal, financial, referral, quality assurance, and

**Keywords:** health reforms, funding, health insurance, provider payment,

Healthcare provider payment mechanisms can be used as powerful tools for promoting the development of health systems towards the achievement of health policy objectives by encouraging the effective and efficient use of scarce resources [1]. This chapter provides an in-depth review addressing the problem of the escalating costs of health services for low- and middle-income countries (LMIC) and explores alternative provider payment mechanisms for promoting cost containment and contributes to universal and sustainable healthcare coverage. This introduction section provides background information with more focus on the widely used fee-for-service (FFS) provider payment mechanism and its impact on

During the past four decades, the escalation of healthcare costs for LMICs has been an issue of concern at both operational and policy levels. Many policy tools

Effective Policy Tools for

Achieving Universal and

#### **Chapter 2**

## Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable Healthcare Coverage

*Abualbishr Alshreef*

#### **Abstract**

Globally, governments are seeking to develop equitable and sustainable healthcare systems for delivering universal healthcare coverage under budget constraints. This chapter provides an analysis of fee-for-service, a commonly used payment mechanism for reimbursement of healthcare providers, and proposes appropriate reform in order to promote cost containment in the context of low- and middleincome countries (LMICs). The analysis used secondary data derived from the literature. The analysis revealed that capitation, case-based, and global budget provider payment mechanisms have the potential to control healthcare costs by creating incentives for providers to reduce the volume of services. Capitation payment has the potential to promote provider efficiency, while global budget may reward inefficient hospitals if risk adjustors (such as gender and age) are not considered in the resource allocation formula. Both capitation payment and global budget have lower administrative costs compared to fee-for-service. Development of supporting measures is crucial including legal, financial, referral, quality assurance, and management information systems.

**Keywords:** health reforms, funding, health insurance, provider payment, expenditure and costs, cost containment, LMICs

#### **1. Introduction**

Healthcare provider payment mechanisms can be used as powerful tools for promoting the development of health systems towards the achievement of health policy objectives by encouraging the effective and efficient use of scarce resources [1]. This chapter provides an in-depth review addressing the problem of the escalating costs of health services for low- and middle-income countries (LMIC) and explores alternative provider payment mechanisms for promoting cost containment and contributes to universal and sustainable healthcare coverage. This introduction section provides background information with more focus on the widely used fee-for-service (FFS) provider payment mechanism and its impact on healthcare costs.

During the past four decades, the escalation of healthcare costs for LMICs has been an issue of concern at both operational and policy levels. Many policy tools

#### *Universal Health Coverage*

have been implemented to control the escalation in cost and/or to absorb its negative effect in many countries. This included revenue generation through the expansion of health insurance population coverage, strengthening contracting capacity, and reimbursement of pharmaceuticals based on essential medicines lists (EMLs). However, the cost of health services has remained a big challenge for healthcare systems in many LMICs.

As an alternative strategic approach, provider payment mechanisms can create incentives for wise and efficient use of resources and create a behavioural environment for healthcare providers to supply cost-effective health services [1–3]. By exploring alternative provider payment mechanisms and assessing their effect in controlling healthcare costs, potentially feasible measures based on good quality evidence may be proposed. Providing evidence for provider payment reform is strategically important to contribute to the decision-making process to tackle the increasing costs of health services for LMICs. This will contribute to the ongoing reforms towards universal healthcare coverage in many countries.

This chapter analyses the existing provider payment mechanism (widely used in LMIC context) and proposes payment system reform in order to promote cost containment. A conceptual framework was used to analyse the existing provider payment mechanism, explore alternative mechanisms and assess their potential in promoting cost containment in LMICs. The chapter identifies lessons learned from international experiences on cost containment for health insurance schemes (and similar funding structures) and assesses the most appropriate options. The feasibility of implementing the proposed cost containment measures in the context of LMICs is discussed.

This chapter is structured into five sections starting with this introductory section. Then, Section 2 describes the methodology and conceptual framework used for the analysis. Section 3 analyses the problem of the escalating costs of health services in LMIC context and uses the conceptual framework for the analysis of the existing FFS payment. Section 4 then analyses the alternative provider payment mechanisms for controlling healthcare cost using the same conceptual framework. Finally, Section 5 is a concluding section, summarises the key messages, suggests potential measures emerged from the analysis and assesses the feasibility of implementing the proposed reform in LMICs.

This chapter of the book is primarily intended for use by policymakers to contribute as evidence in the decision-making process for strategic purchasing of health services in LMIC context. The evidence provided would also be useful for researchers interested in healthcare financing and for other health insurance organisations in LMICs. Furthermore, international development partners interested in health insurance in LMICs may also be interested in this review, including World Bank (WB), International Labour Organisation (ILO) and World Health Organisation (WHO).

#### **2. Conceptual framework, data and limitations of the review**

Having addressed the background information and the aim of the review in the previous section, this section describes the conceptual framework used for the analysis, sources of data and the limitations of the review. This chapter of the book provides an in-depth review exploring alternative healthcare provider-payment mechanisms particularly capitation, case-based and global budget as potential policy tools for use in the LMICs. The review is based on secondary data from the literature combined with the author's 8 years of experience in LMIC context.

**11**

**Figure 1.**

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable…*

The conceptual framework used was adapted from the literature, bearing in mind a basic question: *"how provider payment mechanisms work to control healthcare costs?"*. The framework is schematically represented in **Figure 1**. It was developed to articulate the analysis of provider payment mechanisms presented in this chapter.

The conceptual framework illustrated in **Figure 1** is composed of three columns, which are clearly distinguished by different colours and these columns are interlinked by arrows to demonstrate conceptual relationships. The yellow column on the left side represents four provider payment mechanisms: the FFS currently used in many LMICs and the three alternative payment mechanisms explored in this review (capitation, case-based and global budget). The yellow arrows are pointing

The middle purple column illustrates the processes that affect each payment mechanism and, therefore, impact on the cost of health services [4]. Provider payment mechanisms work by creating incentives that affect the volume of supplied services, use of input resources, pharmaceuticals, admission rate, average length of stay and prevention of diseases [1, 4]. Administrative cost varies between the different payment mechanisms and may contribute significantly to the cost of health services for the insurer or healthcare commissioners [5]. These incentives and administrative costs affect the overall cost

The thick purple arrow emendating from the middle outputs column is pointing to the intended outcome (reduction of the overall health services cost). The small box that appears in the lower part illustrates efficiency as a criterion used for the analysis of provider payment mechanisms. The use of incentives, cost and efficiency in this study is explicitly defined in the following three subsections.

*DOI: http://dx.doi.org/10.5772/intechopen.86840*

*2.1.1 Description of the conceptual framework*

to the key output aspects outlined in the middle purple column.

of health services and the cost varies depending on the payment mechanism.

*Conceptual framework for the analysis of provider payment mechanisms.*

**2.1 The conceptual framework**

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable… DOI: http://dx.doi.org/10.5772/intechopen.86840*

#### **2.1 The conceptual framework**

*Universal Health Coverage*

systems in many LMICs.

of LMICs is discussed.

Organisation (WHO).

menting the proposed reform in LMICs.

have been implemented to control the escalation in cost and/or to absorb its negative effect in many countries. This included revenue generation through the expansion of health insurance population coverage, strengthening contracting capacity, and reimbursement of pharmaceuticals based on essential medicines lists (EMLs). However, the cost of health services has remained a big challenge for healthcare

As an alternative strategic approach, provider payment mechanisms can create incentives for wise and efficient use of resources and create a behavioural environment for healthcare providers to supply cost-effective health services [1–3]. By exploring alternative provider payment mechanisms and assessing their effect in controlling healthcare costs, potentially feasible measures based on good quality evidence may be proposed. Providing evidence for provider payment reform is strategically important to contribute to the decision-making process to tackle the increasing costs of health services for LMICs. This will contribute to the ongoing

This chapter analyses the existing provider payment mechanism (widely used in LMIC context) and proposes payment system reform in order to promote cost containment. A conceptual framework was used to analyse the existing provider payment mechanism, explore alternative mechanisms and assess their potential in promoting cost containment in LMICs. The chapter identifies lessons learned from international experiences on cost containment for health insurance schemes (and similar funding structures) and assesses the most appropriate options. The feasibility of implementing the proposed cost containment measures in the context

This chapter is structured into five sections starting with this introductory section. Then, Section 2 describes the methodology and conceptual framework used for the analysis. Section 3 analyses the problem of the escalating costs of health services in LMIC context and uses the conceptual framework for the analysis of the existing FFS payment. Section 4 then analyses the alternative provider payment mechanisms for controlling healthcare cost using the same conceptual framework. Finally, Section 5 is a concluding section, summarises the key messages, suggests potential measures emerged from the analysis and assesses the feasibility of imple-

This chapter of the book is primarily intended for use by policymakers to contribute as evidence in the decision-making process for strategic purchasing of health services in LMIC context. The evidence provided would also be useful for researchers interested in healthcare financing and for other health insurance organisations in LMICs. Furthermore, international development partners interested in health insurance in LMICs may also be interested in this review, including World Bank (WB), International Labour Organisation (ILO) and World Health

**2. Conceptual framework, data and limitations of the review**

Having addressed the background information and the aim of the review in the previous section, this section describes the conceptual framework used for the analysis, sources of data and the limitations of the review. This chapter of the book provides an in-depth review exploring alternative healthcare provider-payment mechanisms particularly capitation, case-based and global budget as potential policy tools for use in the LMICs. The review is based on secondary data from the literature combined with the author's 8 years of experience in LMIC context.

reforms towards universal healthcare coverage in many countries.

**10**

The conceptual framework used was adapted from the literature, bearing in mind a basic question: *"how provider payment mechanisms work to control healthcare costs?"*. The framework is schematically represented in **Figure 1**. It was developed to articulate the analysis of provider payment mechanisms presented in this chapter.

#### *2.1.1 Description of the conceptual framework*

The conceptual framework illustrated in **Figure 1** is composed of three columns, which are clearly distinguished by different colours and these columns are interlinked by arrows to demonstrate conceptual relationships. The yellow column on the left side represents four provider payment mechanisms: the FFS currently used in many LMICs and the three alternative payment mechanisms explored in this review (capitation, case-based and global budget). The yellow arrows are pointing to the key output aspects outlined in the middle purple column.

The middle purple column illustrates the processes that affect each payment mechanism and, therefore, impact on the cost of health services [4]. Provider payment mechanisms work by creating incentives that affect the volume of supplied services, use of input resources, pharmaceuticals, admission rate, average length of stay and prevention of diseases [1, 4]. Administrative cost varies between the different payment mechanisms and may contribute significantly to the cost of health services for the insurer or healthcare commissioners [5]. These incentives and administrative costs affect the overall cost of health services and the cost varies depending on the payment mechanism.

The thick purple arrow emendating from the middle outputs column is pointing to the intended outcome (reduction of the overall health services cost). The small box that appears in the lower part illustrates efficiency as a criterion used for the analysis of provider payment mechanisms. The use of incentives, cost and efficiency in this study is explicitly defined in the following three subsections.

#### *2.1.1.1 Incentives*

Incentives are defined in microeconomics as economic signals that can direct healthcare providers towards self-interested behaviours [1]. These behaviours can lead to beneficial or un-intended effects [6]. For example, one payment mechanism can encourage irrational use of pharmaceuticals as an unintended effect, while another mechanism can promote a reduction in the average length of stay in hospitals as a beneficial effect.

#### *2.1.1.2 Costs*

Costs refer to direct cost related to health services covered and reimbursed by health insurance schemes (or other payers) and have two components: (a) direct medical cost such as pharmaceuticals, consultations and laboratory tests and (b) direct non-medical cost such as administrative costs for processing provider claims for reimbursement [7]. These represent the cost from the healthcare system perspective, which this review aims to reduce.

#### *2.1.1.3 Efficiency*

Efficiency criterion is used to show the relationship between provider payment mechanisms and their incentives to promote effective and efficient use of resources to produce maximum outputs in health care [1, 4, 8]. By promoting efficiency at the supply side through different payment mechanisms, the overall cost of health services for healthcare systems may be reduced.

#### *2.1.2 Justification and use of the conceptual framework*

This conceptual framework represents the key aspects to be analysed in this review, thus keeping the analysis focused. It also helps to articulate the relationships between provider payment mechanisms and their relative incentives and administrative cost, which impacts on the cost of health services.

The framework will be used in Section 3 to discuss the role of the existing FFS payment mechanism in increasing the cost of health services for LMICs. While in Section 4, the framework will be used to guide the critical analysis of the alternative provider payment mechanisms (capitation, case-based and global budget) and assess their potential in reducing the cost of health services.

#### **2.2 Criteria for assessing the feasibility of proposed measures**

This has been adapted from [9, 10], and it includes (i) technical feasibility: this will be used in Section 4 to assess the potential of alternative payment mechanisms to control cost and (ii) organisational, financial and cultural feasibility: this will be used in Section 5 to assess the feasibility of implementing the proposed measures in LMIC context.

#### **2.3 Data sources and selection of papers for the review**

#### *2.3.1 Data sources*

A number of sources of information were used to collect secondary data for this review. These sources are grouped into four categories:

**13**

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable…*

• Internet search engines: University of Leeds's Library electronic catalogue and Google Scholar were the search engines used to find the full text of selected articles.

• Other sources of data: books, grey literature and author experiences.

• International Organisations' websites: World Bank, WHO and ILO. Research articles and working papers focused on the topic were retrieved from websites

Inclusion criteria include: (i) only articles published in English; (ii) articles on health insurance, national health insurance and social health insurance with FFS, capitation, case-based and global budget; (iii) articles from LMIC context and (iv) articles published after 1990 to consider the dynamics in implementing provider

Exclusion criteria include: (i) articles focused on health insurance coverage, premiums and benefit packages; (ii) articles discussing other provider payment mechanisms such as per diem, line item budget and pay for performance; (iii) articles focused mainly on developed countries were excluded due to variation from the LMICs context and (iv) articles published before 1990 in order to get the most updated evidence.

The main limitation of this review is the lack of published data from many LMICs for the analysis of country-specific existing provider payment system. However, the author has relied on grey literature including internal reports, conference presentations, other government documents and personal experience. Fortunately, evidence from some LMICs where the widely used FFS payment mechanism was implemented is available in the literature and has been utilised for

The author is also aware that there are other mechanisms for provider payment to tackle the increase in healthcare cost including pay for performance, which may be seen as a limitation. However, this review focuses only on the above-mentioned three alternative payment mechanisms mainly because of the experience of their

In summary, this section described this review as an in-depth study primarily based on secondary data. It described the conceptual framework and its use in this review for analysis for provider payment mechanisms. It described four sources of information used for data collection: electronic databases, search engines, international organisations' websites and other sources of information from LMICs. It highlighted the inclusion and exclusion criteria applied to select relevant papers for the review. The next section analyses existing FFS payment mechanism and its

**3. Analysing the existing fee-for-service provider payment mechanism**

Having discussed the conceptual framework for the analysis of provider payment mechanisms and the sources of data used in Section 2, this section analyses

analysis of the existing provider payment mechanism in Section 3.

• Electronic databases: web of science, global health and science direct electronic

*DOI: http://dx.doi.org/10.5772/intechopen.86840*

databases.

of these organisations.

*2.3.2 Inclusion and exclusion criteria*

payment mechanisms.

**2.4 Limitations of the review**

implementation in LMICs.

contribution to cost escalation in LMIC context.

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable… DOI: http://dx.doi.org/10.5772/intechopen.86840*


#### *2.3.2 Inclusion and exclusion criteria*

*Universal Health Coverage*

hospitals as a beneficial effect.

spective, which this review aims to reduce.

services for healthcare systems may be reduced.

*2.1.2 Justification and use of the conceptual framework*

trative cost, which impacts on the cost of health services.

assess their potential in reducing the cost of health services.

**2.3 Data sources and selection of papers for the review**

review. These sources are grouped into four categories:

**2.2 Criteria for assessing the feasibility of proposed measures**

Incentives are defined in microeconomics as economic signals that can direct healthcare providers towards self-interested behaviours [1]. These behaviours can lead to beneficial or un-intended effects [6]. For example, one payment mechanism can encourage irrational use of pharmaceuticals as an unintended effect, while another mechanism can promote a reduction in the average length of stay in

Costs refer to direct cost related to health services covered and reimbursed by health insurance schemes (or other payers) and have two components: (a) direct medical cost such as pharmaceuticals, consultations and laboratory tests and (b) direct non-medical cost such as administrative costs for processing provider claims for reimbursement [7]. These represent the cost from the healthcare system per-

Efficiency criterion is used to show the relationship between provider payment mechanisms and their incentives to promote effective and efficient use of resources to produce maximum outputs in health care [1, 4, 8]. By promoting efficiency at the supply side through different payment mechanisms, the overall cost of health

This conceptual framework represents the key aspects to be analysed in this review, thus keeping the analysis focused. It also helps to articulate the relationships between provider payment mechanisms and their relative incentives and adminis-

The framework will be used in Section 3 to discuss the role of the existing FFS payment mechanism in increasing the cost of health services for LMICs. While in Section 4, the framework will be used to guide the critical analysis of the alternative provider payment mechanisms (capitation, case-based and global budget) and

This has been adapted from [9, 10], and it includes (i) technical feasibility: this will be used in Section 4 to assess the potential of alternative payment mechanisms to control cost and (ii) organisational, financial and cultural feasibility: this will be used in Section 5 to assess the feasibility of implementing the proposed measures in

A number of sources of information were used to collect secondary data for this

*2.1.1.1 Incentives*

*2.1.1.2 Costs*

*2.1.1.3 Efficiency*

**12**

LMIC context.

*2.3.1 Data sources*

Inclusion criteria include: (i) only articles published in English; (ii) articles on health insurance, national health insurance and social health insurance with FFS, capitation, case-based and global budget; (iii) articles from LMIC context and (iv) articles published after 1990 to consider the dynamics in implementing provider payment mechanisms.

Exclusion criteria include: (i) articles focused on health insurance coverage, premiums and benefit packages; (ii) articles discussing other provider payment mechanisms such as per diem, line item budget and pay for performance; (iii) articles focused mainly on developed countries were excluded due to variation from the LMICs context and (iv) articles published before 1990 in order to get the most updated evidence.

#### **2.4 Limitations of the review**

The main limitation of this review is the lack of published data from many LMICs for the analysis of country-specific existing provider payment system. However, the author has relied on grey literature including internal reports, conference presentations, other government documents and personal experience. Fortunately, evidence from some LMICs where the widely used FFS payment mechanism was implemented is available in the literature and has been utilised for analysis of the existing provider payment mechanism in Section 3.

The author is also aware that there are other mechanisms for provider payment to tackle the increase in healthcare cost including pay for performance, which may be seen as a limitation. However, this review focuses only on the above-mentioned three alternative payment mechanisms mainly because of the experience of their implementation in LMICs.

In summary, this section described this review as an in-depth study primarily based on secondary data. It described the conceptual framework and its use in this review for analysis for provider payment mechanisms. It described four sources of information used for data collection: electronic databases, search engines, international organisations' websites and other sources of information from LMICs. It highlighted the inclusion and exclusion criteria applied to select relevant papers for the review. The next section analyses existing FFS payment mechanism and its contribution to cost escalation in LMIC context.

#### **3. Analysing the existing fee-for-service provider payment mechanism**

Having discussed the conceptual framework for the analysis of provider payment mechanisms and the sources of data used in Section 2, this section analyses

#### *Universal Health Coverage*

the existing FFS payment mechanism and its contribution in increasing the cost of health services for LMICs. There is a continuous escalation in the cost of health services, partly as a result of the implementation of FFS payment for reimbursement of healthcare providers in many LMICs.

#### **3.1 The existing fee-for-service provider payment mechanism in LMICs**

FFS is defined as a method for retrospective payment to reimburse healthcare providers for each unit of service provided [11]; for example, the unit of service can be a GP consultation or a laboratory test. Evidence suggests that healthcare systems in many LMICs rely entirely on FFS to reimburse healthcare providers including at primary care, outpatient departments and hospitals.

#### *3.1.1 Fee-for-service incentives to oversupply services and pharmaceuticals*

FFS creates strong incentives to provide services with high fee schedules, oversupply of the quantity of services and irrationally increase utilisation of pharmaceuticals; therefore, it leads to cost escalation [6, 12, 13]. Based on the conceptual framework, the following two subsections will analyse the incentives created by FFS to increase the volume of supplied services and induce irrational utilisation of pharmaceuticals as two main contributors for cost escalation in LMICs.

#### *3.1.1.1 Fee-for-service incentives to increase the volume of services*

FFS leads to excessive use of services by promoting supplier-induced demand phenomenon since insured patients depend on providers' information on their needs for healthcare [5]. This phenomenon is even higher under circumstances of third-party payers such as insurance-financed services [7]. This is because both providers and patients do not bear the financial risk for the cost of service provided [14]. From the author's experience, this practice can create satisfaction among patients who believe that high quantities and/or expensive treatments mean good quality of health care.

From the author's experience, there is a remarkable perception among insured patients to overuse healthcare services. This moral hazard is another phenomenon associated with increasing demand for free or subsidised service [15]. Such phenomena may continue to increase with the existing FFS reimbursement policy. This has added effect to increase utilisation of services and therefore contributes to cost escalation.

For instance in the National Health Insurance Fund in Sudan, the diagnostic and laboratory services account for 89% of all outpatient visits of which 92% was reported as visits for laboratory tests [16]. This implies significant irrationality in the use of service induced by FFS payment. This relationship is supported by the findings of a systematic review study that was conducted to compare capitation, salary and FFS payment mechanisms. The study revealed that FFS payment results in more primary care visits, specialist visits and more utilisation of diagnostic and curative services compared to capitation and salary payments [12]. Similar findings have been reported in Poland, where the average number of visits for dentists contracted under FFS payment was more than double compared to that provided by salaried dentists [17].

FFS is known for its potential to increase the number of patient visits to primary care, specialised, diagnostic and curative health services [12]. As thus, it contributes to the increased volume of provided services to meet the interest of providers leading to cost escalation.

**15**

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable…*

The cost of pharmaceuticals represents a big proportion of overall healthcare expenditure in LMICs (in some cases reached more 50%). During the past two decades, many interventions were implemented in various LMICs, including enforcement for implementing essential drug lists and increasing awareness among prescribers through rational drug use activities. However, the cost of pharmaceuticals continues to represent a high proportion of overall healthcare expenditure in many LMICs. Evidence from Taiwan showed that 94.3% of hospitals aggressively cut the costs of pharmaceuticals as a response to the shift from FFS to a case-based payment that was implemented by the National Health

From the author's experience, the pharmaceutical industry is also adding pressures on doctors to prescribe new medicines with a higher and sometimes unjustifiable cost. Under the FFS environment, where there are no limits for reimbursing medicine prescriptions, this factor represents one of the major challenges for health

The absence of Standard Treatment Guidelines (STGs) for use of pharmaceuticals in many LMICs (except for few conditions such as malaria and tuberculosis) has worsened the situation and added more incentives for providers to irrationally supply expensive and more quantities of medicines. For example, according to the author, a doctor can prescribe cefixime capsules to treat typhoid fever instead of chloramphenicol capsules as first-line treatment. The former drug could be 10 times more expensive than the later, which significantly contributes to the overall cost of treating typhoid fever cases. The author considers the absence of STGs for pharmaceuticals as one of the major challenges for LMICs to control cost escalation under

Co-payment or cost-sharing may be considered as a way to minimise the effect of FFS on cost escalation. However, evidence from Korea revealed that co-payment alone is not sufficient to tackle the increased volume of health services induced by healthcare providers [5]. Therefore, additional measures might be required to

The administrative cost for FFS payment is generally higher compared to other provider payment mechanisms since the insurer is required to process the auditing of detailed provider claims retrospectively based on smaller units [5]. From the author's knowledge, the poor management information system (MIS) has a negative impact on the administrative efficiency to check the accuracy of data submitted by providers. However, FFS has an advantage that the system is easy to design and

As seen up to now, the contribution of FFS in increasing the cost of health services for LMICs was identified. This section will discuss the need for reform from

Evidence from LMIC has shown a significant escalation of the cost associated with FFS payment. For example, in Taiwan, the annual per capita health expenditure increased by 15.7% during the period 1980–1994 [19]; and 20% annual cost escalation was reported in Thailand during the period between 1988 and 1997 as

*3.1.1.2 Fee-for-service encourages over utilisation of pharmaceuticals*

insurance schemes to control the cost of pharmaceuticals.

the current widely used FFS payment system.

*3.1.2 Administrative cost of fee-for-service*

**3.2 Moving away from fee-for-service**

result of FFS payment [20].

control the rising cost of pharmaceuticals for LMICs.

implement with minimal institutional capacity and training [1].

FFS to other methods in order to promote cost containment.

*DOI: http://dx.doi.org/10.5772/intechopen.86840*

Insurance Programme in 1995 [18].

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable… DOI: http://dx.doi.org/10.5772/intechopen.86840*

#### *3.1.1.2 Fee-for-service encourages over utilisation of pharmaceuticals*

The cost of pharmaceuticals represents a big proportion of overall healthcare expenditure in LMICs (in some cases reached more 50%). During the past two decades, many interventions were implemented in various LMICs, including enforcement for implementing essential drug lists and increasing awareness among prescribers through rational drug use activities. However, the cost of pharmaceuticals continues to represent a high proportion of overall healthcare expenditure in many LMICs. Evidence from Taiwan showed that 94.3% of hospitals aggressively cut the costs of pharmaceuticals as a response to the shift from FFS to a case-based payment that was implemented by the National Health Insurance Programme in 1995 [18].

From the author's experience, the pharmaceutical industry is also adding pressures on doctors to prescribe new medicines with a higher and sometimes unjustifiable cost. Under the FFS environment, where there are no limits for reimbursing medicine prescriptions, this factor represents one of the major challenges for health insurance schemes to control the cost of pharmaceuticals.

The absence of Standard Treatment Guidelines (STGs) for use of pharmaceuticals in many LMICs (except for few conditions such as malaria and tuberculosis) has worsened the situation and added more incentives for providers to irrationally supply expensive and more quantities of medicines. For example, according to the author, a doctor can prescribe cefixime capsules to treat typhoid fever instead of chloramphenicol capsules as first-line treatment. The former drug could be 10 times more expensive than the later, which significantly contributes to the overall cost of treating typhoid fever cases. The author considers the absence of STGs for pharmaceuticals as one of the major challenges for LMICs to control cost escalation under the current widely used FFS payment system.

Co-payment or cost-sharing may be considered as a way to minimise the effect of FFS on cost escalation. However, evidence from Korea revealed that co-payment alone is not sufficient to tackle the increased volume of health services induced by healthcare providers [5]. Therefore, additional measures might be required to control the rising cost of pharmaceuticals for LMICs.

#### *3.1.2 Administrative cost of fee-for-service*

The administrative cost for FFS payment is generally higher compared to other provider payment mechanisms since the insurer is required to process the auditing of detailed provider claims retrospectively based on smaller units [5]. From the author's knowledge, the poor management information system (MIS) has a negative impact on the administrative efficiency to check the accuracy of data submitted by providers. However, FFS has an advantage that the system is easy to design and implement with minimal institutional capacity and training [1].

#### **3.2 Moving away from fee-for-service**

As seen up to now, the contribution of FFS in increasing the cost of health services for LMICs was identified. This section will discuss the need for reform from FFS to other methods in order to promote cost containment.

Evidence from LMIC has shown a significant escalation of the cost associated with FFS payment. For example, in Taiwan, the annual per capita health expenditure increased by 15.7% during the period 1980–1994 [19]; and 20% annual cost escalation was reported in Thailand during the period between 1988 and 1997 as result of FFS payment [20].

*Universal Health Coverage*

quality of health care.

salaried dentists [17].

ing to cost escalation.

escalation.

ment of healthcare providers in many LMICs.

primary care, outpatient departments and hospitals.

the existing FFS payment mechanism and its contribution in increasing the cost of health services for LMICs. There is a continuous escalation in the cost of health services, partly as a result of the implementation of FFS payment for reimburse-

**3.1 The existing fee-for-service provider payment mechanism in LMICs**

*3.1.1 Fee-for-service incentives to oversupply services and pharmaceuticals*

pharmaceuticals as two main contributors for cost escalation in LMICs.

*3.1.1.1 Fee-for-service incentives to increase the volume of services*

FFS is defined as a method for retrospective payment to reimburse healthcare providers for each unit of service provided [11]; for example, the unit of service can be a GP consultation or a laboratory test. Evidence suggests that healthcare systems in many LMICs rely entirely on FFS to reimburse healthcare providers including at

FFS creates strong incentives to provide services with high fee schedules, oversupply of the quantity of services and irrationally increase utilisation of pharmaceuticals; therefore, it leads to cost escalation [6, 12, 13]. Based on the conceptual framework, the following two subsections will analyse the incentives created by FFS to increase the volume of supplied services and induce irrational utilisation of

FFS leads to excessive use of services by promoting supplier-induced demand phenomenon since insured patients depend on providers' information on their needs for healthcare [5]. This phenomenon is even higher under circumstances of third-party payers such as insurance-financed services [7]. This is because both providers and patients do not bear the financial risk for the cost of service provided [14]. From the author's experience, this practice can create satisfaction among patients who believe that high quantities and/or expensive treatments mean good

From the author's experience, there is a remarkable perception among insured patients to overuse healthcare services. This moral hazard is another phenomenon associated with increasing demand for free or subsidised service [15]. Such phenomena may continue to increase with the existing FFS reimbursement policy. This has added effect to increase utilisation of services and therefore contributes to cost

For instance in the National Health Insurance Fund in Sudan, the diagnostic and laboratory services account for 89% of all outpatient visits of which 92% was reported as visits for laboratory tests [16]. This implies significant irrationality in the use of service induced by FFS payment. This relationship is supported by the findings of a systematic review study that was conducted to compare capitation, salary and FFS payment mechanisms. The study revealed that FFS payment results in more primary care visits, specialist visits and more utilisation of diagnostic and curative services compared to capitation and salary payments [12]. Similar findings have been reported in Poland, where the average number of visits for dentists contracted under FFS payment was more than double compared to that provided by

FFS is known for its potential to increase the number of patient visits to primary care, specialised, diagnostic and curative health services [12]. As thus, it contributes to the increased volume of provided services to meet the interest of providers lead-

**14**

Due to the unintended effects of FFS, many countries in Asia and Latin America have implemented different reforms to their provider payment systems. For example, Korea and Taiwan implemented reforms from FFS to case-based and global budgeting mixed payment systems [6, 21]; in Argentina, there was significant reform where they moved from FFS to capitation payment [6]; and a report from World Bank suggested that China was advised to move away from FFS in order to control cost escalation in healthcare utilisation [22].

Based on the evidence explored from LMIC on FFS payment, many LMICs may need to consider moving away from FFS to improve efficiency and overcome the problem of cost escalation. The analysis for the alternative payment mechanisms in the next section will help to propose an appropriate reform for each specific context based on the best available evidence.

To summarise this section, the problem of cost escalation of health services for LMICs was demonstrated as partly attributed to the widely used FFS payment mechanism, as one of the main contributing factors. Then the FFS payment mechanism was analysed, and its potential in promoting excessive use of health services, rising cost of pharmaceuticals, and its higher administrative cost, were discussed. Finally, the section concluded with the necessities for LMICs to move away from FFS towards a more appropriate method for reimbursement of healthcare providers in order to tackle cost escalation.

In the next section, capitation, case-based and global budget hospital payment mechanisms will be analysed and the appropriate options for LMICs will be identified.

#### **4. Assessing the alternative provider payment mechanisms**

Section 3 discussed the role of the FFS payment mechanism as a contributing factor to cost escalation and suggested that healthcare systems in LMICs need to move away from FFS if cost escalation is to be controlled. This section will analyse three alternative payment mechanisms, capitation, case-based and global budget, and assess their potential to reduce the cost of health services for LMICs. The key issues analysed in this section are those illustrated in the conceptual framework (Section 2), particularly the incentives created by each payment mechanism and the relative administrative cost.

Unlike the retrospective FFS payment, capitation, case-based and global budget payments are prospective mechanisms. The term prospective refers to when the payment rate for a predefined package of health services for the fixed period of time is determined before the treatment takes place [10]. The units of payment are much more aggregated ranging from case treated, with case-based to the health facility, with a global budget [4].

#### **4.1 Capitation payment mechanism**

Capitation payment is defined as prospective, fixed payment to healthcare providers in order to care for a defined population for a defined period of time such as a year [11]. The key issue is that reimbursement for providers is not linked to inputs (such as diagnostic tests) or to the volume of service provided. Under capitation payment, providers bear more financial risk for the oversupply of services; therefore, they are more likely to use low inputs in healthcare to retain surplus and make profits [4, 23].

**17**

services [25].

competition.

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable…*

cost-effective health promotion and prevention interventions.

*4.1.1.1 Capitation incentives to improve providers' efficiency*

payment under the capitation system [24].

According to Cashin [24], capitation payment can create incentives for providers for efficiency improvement, the attraction of additional enrollees, an investment in

On the other hand, capitation payment can reduce the quality of care, encour-

ages providers not to enrol risky vulnerable patients and results in increased referrals to other providers [25–27]. Jegers et al. [26] suggested that this problem can be solved in the design of capitation payment rates by including risk adjustors (such as age, gender, chronic illness and socio-economic status of enrolled patients). The aim of this risk adjustment is to compensate providers for the higher predicted cost for the care of more costly groups of enrollees such as

Evidence from Thailand has revealed that the introduction of capitation payment in 1990 turned the main contracted providers into risk bearers. They, therefore, became financially responsible for the cost of healthcare for each enrolled patient [28]. This has created incentives to increase the risk pool by expanding population coverage through more enrolment and pass the risk to other subcon-

In the following subsections, three aspects affecting the cost of health services based on the conceptual framework discussed in Section 2 will be analysed. This will focus on incentives to improve efficiency, reducing volume and intensity of supplied service and promoting investment in prevention of

Capitation payment creates strong incentives to promote efficiency in the use of resources [4]. Since providers bear more financial risk for services they provide under capitation payment, they are more likely to control cost by selecting rational and cost-effective services [5]. This is because when providers achieve efficiency gains and spend less than the per capita allocated budget, the difference between revenue and expenditure is maximised, and this surplus is retained by the provider as profit. On the other hand, if a provider runs out of budget, there is no additional

Efficiency under a well-designed capitation payment system is promoted by the autonomy and flexibility in the use of resources [1]. This is because the available resources are closely linked to the number of population to be served as well as the health needs of each population [10]. This formula does not only encourage cost minimisation but also improves equity in the distribution of healthcare resources according to the health status of a population [1]. This directs providers to put more emphasis on primary and outpatient care rather than specialised and inpatient

The degree of incentives created by capitation payment depends on many issues including the health insurance benefit package, the regulations and medical practices existing in the system to prevent risk selection and the healthcare market structure [5]. For example, the availability of other competing providers in the same field encourages efficiency and patient satisfaction. Fortunately, the current health market structure in many LMICs can encourage competition because of the availability of enough numbers of healthcare facilities to ensure

*DOI: http://dx.doi.org/10.5772/intechopen.86840*

*4.1.1 Capitation payment incentives*

elderly patients.

tracted providers [28].

diseases.

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable… DOI: http://dx.doi.org/10.5772/intechopen.86840*

#### *4.1.1 Capitation payment incentives*

*Universal Health Coverage*

control cost escalation in healthcare utilisation [22].

based on the best available evidence.

in order to tackle cost escalation.

identified.

administrative cost.

with a global budget [4].

**4.1 Capitation payment mechanism**

Due to the unintended effects of FFS, many countries in Asia and Latin America have implemented different reforms to their provider payment systems. For example, Korea and Taiwan implemented reforms from FFS to case-based and global budgeting mixed payment systems [6, 21]; in Argentina, there was significant reform where they moved from FFS to capitation payment [6]; and a report from World Bank suggested that China was advised to move away from FFS in order to

Based on the evidence explored from LMIC on FFS payment, many LMICs may need to consider moving away from FFS to improve efficiency and overcome the problem of cost escalation. The analysis for the alternative payment mechanisms in the next section will help to propose an appropriate reform for each specific context

To summarise this section, the problem of cost escalation of health services for LMICs was demonstrated as partly attributed to the widely used FFS payment mechanism, as one of the main contributing factors. Then the FFS payment mechanism was analysed, and its potential in promoting excessive use of health services, rising cost of pharmaceuticals, and its higher administrative cost, were discussed. Finally, the section concluded with the necessities for LMICs to move away from FFS towards a more appropriate method for reimbursement of healthcare providers

In the next section, capitation, case-based and global budget hospital payment mechanisms will be analysed and the appropriate options for LMICs will be

Section 3 discussed the role of the FFS payment mechanism as a contributing factor to cost escalation and suggested that healthcare systems in LMICs need to move away from FFS if cost escalation is to be controlled. This section will analyse three alternative payment mechanisms, capitation, case-based and global budget, and assess their potential to reduce the cost of health services for LMICs. The key issues analysed in this section are those illustrated in the conceptual framework (Section 2), particularly the incentives created by each payment mechanism and the relative

Unlike the retrospective FFS payment, capitation, case-based and global budget payments are prospective mechanisms. The term prospective refers to when the payment rate for a predefined package of health services for the fixed period of time is determined before the treatment takes place [10]. The units of payment are much more aggregated ranging from case treated, with case-based to the health facility,

Capitation payment is defined as prospective, fixed payment to healthcare providers in order to care for a defined population for a defined period of time such as a year [11]. The key issue is that reimbursement for providers is not linked to inputs (such as diagnostic tests) or to the volume of service provided. Under capitation payment, providers bear more financial risk for the oversupply of services; therefore, they are more likely to use low inputs in healthcare to retain surplus and make

**4. Assessing the alternative provider payment mechanisms**

**16**

profits [4, 23].

According to Cashin [24], capitation payment can create incentives for providers for efficiency improvement, the attraction of additional enrollees, an investment in cost-effective health promotion and prevention interventions.

On the other hand, capitation payment can reduce the quality of care, encourages providers not to enrol risky vulnerable patients and results in increased referrals to other providers [25–27]. Jegers et al. [26] suggested that this problem can be solved in the design of capitation payment rates by including risk adjustors (such as age, gender, chronic illness and socio-economic status of enrolled patients). The aim of this risk adjustment is to compensate providers for the higher predicted cost for the care of more costly groups of enrollees such as elderly patients.

Evidence from Thailand has revealed that the introduction of capitation payment in 1990 turned the main contracted providers into risk bearers. They, therefore, became financially responsible for the cost of healthcare for each enrolled patient [28]. This has created incentives to increase the risk pool by expanding population coverage through more enrolment and pass the risk to other subcontracted providers [28].

In the following subsections, three aspects affecting the cost of health services based on the conceptual framework discussed in Section 2 will be analysed. This will focus on incentives to improve efficiency, reducing volume and intensity of supplied service and promoting investment in prevention of diseases.

#### *4.1.1.1 Capitation incentives to improve providers' efficiency*

Capitation payment creates strong incentives to promote efficiency in the use of resources [4]. Since providers bear more financial risk for services they provide under capitation payment, they are more likely to control cost by selecting rational and cost-effective services [5]. This is because when providers achieve efficiency gains and spend less than the per capita allocated budget, the difference between revenue and expenditure is maximised, and this surplus is retained by the provider as profit. On the other hand, if a provider runs out of budget, there is no additional payment under the capitation system [24].

Efficiency under a well-designed capitation payment system is promoted by the autonomy and flexibility in the use of resources [1]. This is because the available resources are closely linked to the number of population to be served as well as the health needs of each population [10]. This formula does not only encourage cost minimisation but also improves equity in the distribution of healthcare resources according to the health status of a population [1]. This directs providers to put more emphasis on primary and outpatient care rather than specialised and inpatient services [25].

The degree of incentives created by capitation payment depends on many issues including the health insurance benefit package, the regulations and medical practices existing in the system to prevent risk selection and the healthcare market structure [5]. For example, the availability of other competing providers in the same field encourages efficiency and patient satisfaction. Fortunately, the current health market structure in many LMICs can encourage competition because of the availability of enough numbers of healthcare facilities to ensure competition.

#### *4.1.1.2 Capitation incentives to reduce the volume and intensity of supplied services*

Capitation payment can effectively achieve the cost reduction goal by creating incentives for providers to control inpatient admissions and the average length of stay, and review the medical necessity for providing each service [29].

In addition, providers may sacrifice the quality of health services in order to contain costs [10]. Although quality is not the focus of this study, there is a continuous fight between reducing cost and improving quality of health services. Policy makers in LMICs need to make the necessary measures to ensure good quality of care under the expected reform in the provider payment system.

In Thailand, capitation payment was introduced in 1990 with the primary goal to contain the cost of healthcare [10]. As expected, evidence from Thailand has shown that providers responded to capitation incentives by greatly shifting to ambulatory outpatient care and reduced the inpatient services [6, 10]. To cope with this reform, providers undertook certain measures to reduce their cost for managing patients; for example, some hospitals dropped payment for doctor consultations by 30% for Social Security patients compared to regular patients [20].

#### *4.1.1.3 Capitation incentives to invest in health promotion and disease prevention*

When capitation payments are contracted for long-term periods with additional bonuses as incentives, providers invest in improving the health status of populations through more cost-effective health services like promotion and prevention interventions [5, 24, 29]. In Nicaragua, for example, capitation payment introduced in 1994 resulted in the adoption of a mixture of services with more emphasis on prevention and primary care than specialised high-level care [25]. This ultimately resulted in a reduction in the overall bill of healthcare for the Social Security Institute in Nicaragua [25].

#### *4.1.2 Administrative cost of capitation payment*

This is significantly lower than that of FFS because there are no claims to be processed on the insurer side [5]. Instead, the insurer is only required to audit the number of enrollees per provider to make the payment. However, a well-functioning referral system is required to ensure the cost-effectiveness of treatment at the selected level of care [10].

Administrative costs for managing capitation payment may increase if the health insurance decides to intervene in minimising risk selection by adding risk adjustors such as gender, age or chronic illness of enrolled patients [5, 24]. In such situations, the insurer incurs a more administrative cost for monitoring and tracking patients' enrolment for each provider. Although this can be a negative effect that increases cost, it promotes equity in healthcare and contributes to the overall aim of social health insurance schemes in LMICs.

#### **4.2 Case-based payment mechanism**

Case-based is a prospective reimbursement mechanism in which hospitals are paid for each discharged inpatient case, based on a previously defined rate for each group of cases with similar clinical conditions and resource requirement [30]. The International Classification of Diseases (ICD) developed by WHO is widely used to define these groups for the purpose of setting payment rates [1].

**19**

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable…*

Case-based payment mechanism provides significant incentives for cost reduc-

Unlike FFS, case-based payment has the potential to create incentives for promoting hospital efficiency and control the cost of healthcare [1, 24, 33]. However, it also encourages contracted hospitals to unnecessarily increase admissions and readmissions, reduce the intensity and quality of care, avoid severe cases and shift

Based on the conceptual framework, the following three subsections will analyse the relevant incentives that contribute to the cost of healthcare under case-based

Hospital efficiency under cased-based payment is promoted through minimising the inputs used for case management and reducing the average length of stay as intended effects [24, 31, 33]. This is because hospitals are paid a fixed rate for each

Case-based payment has been effectively used in many LMICs as a tool to control cost escalation during the past four decades. Stronger incentives to promote efficiency by controlling resources used per case were observed in Korea, Taiwan, Indonesia, China and Kyrgyz Republic [1, 18, 34]. For example, in Korea, the introduction of case-based payment in 1997 resulted in a 30% reduction in the use

In Latin America, case-based payment has also been in existence for the past 30 years, including in Argentina, Brazil and Chile [10]. In Brazil, for example, a mixed case-based and FFS payment system was introduced for reimbursement of both public and private healthcare providers [6]. Although this reform has created incentives for efficiency, evidence has shown that the low reimbursement rates have resulted in negative effects including the deterioration in quality of care and

A common problem with case-based payment is that it creates incentives for hospitals to increase admission and readmission rates [33]. However, one of the major advantages associated with case-based payment is the reduction in the average length of stay [24, 35], and it may create incentives for improving quality of care if payment rates are linked to the complexity of cases [10]. For example, the payment rate for complicated normal deliveries is higher than non-complicated ones. In the Korean reform, the average length of stay has dropped by 3% on average as a response to case-based implementation [21]. The outcome of implemented case-based payment in Kazakhstan during the period 1988–2001 has resulted in a stabilised number of hospital admission rate, a decline in inappropriate admissions,

In Taiwan, evidence has shown that during the first half year after implementation of case-based reform, both the average length of stay and cost per caesarean section admissions dropped significantly [6]. This reform has been confronted with

and the average length of stay has dropped by 2 days on average [24].

tion [5, 31, 32]. The output-based design of this method has generated major incentives for providers to contain cost per case by minimising the use of resources utilised per case [5], for example, reducing the unnecessary utilisation of diagnostic

patients for outpatient and community care for follow-up [24, 33].

case regardless of the volume and intensity of service provided.

*4.2.1.1 Case-based payment promotes hospital efficiency*

*4.2.1.2 Case-based incentives to increase admission rates*

of antibiotics for inpatient care [21].

reduced utilisation rates [6, 10].

*DOI: http://dx.doi.org/10.5772/intechopen.86840*

*4.2.1 Case-based payment incentives*

and imaging services.

reimbursement.

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable… DOI: http://dx.doi.org/10.5772/intechopen.86840*

#### *4.2.1 Case-based payment incentives*

*Universal Health Coverage*

patients [20].

Institute in Nicaragua [25].

selected level of care [10].

health insurance schemes in LMICs.

**4.2 Case-based payment mechanism**

*4.1.2 Administrative cost of capitation payment*

*4.1.1.2 Capitation incentives to reduce the volume and intensity of supplied services*

stay, and review the medical necessity for providing each service [29].

the expected reform in the provider payment system.

Capitation payment can effectively achieve the cost reduction goal by creating incentives for providers to control inpatient admissions and the average length of

In addition, providers may sacrifice the quality of health services in order to contain costs [10]. Although quality is not the focus of this study, there is a continuous fight between reducing cost and improving quality of health services. Policy makers in LMICs need to make the necessary measures to ensure good quality of care under

In Thailand, capitation payment was introduced in 1990 with the primary goal to contain the cost of healthcare [10]. As expected, evidence from Thailand has shown that providers responded to capitation incentives by greatly shifting to ambulatory outpatient care and reduced the inpatient services [6, 10]. To cope with this reform, providers undertook certain measures to reduce their cost for managing patients; for example, some hospitals dropped payment for doctor consultations by 30% for Social Security patients compared to regular

*4.1.1.3 Capitation incentives to invest in health promotion and disease prevention*

When capitation payments are contracted for long-term periods with additional bonuses as incentives, providers invest in improving the health status of populations through more cost-effective health services like promotion and prevention interventions [5, 24, 29]. In Nicaragua, for example, capitation payment introduced in 1994 resulted in the adoption of a mixture of services with more emphasis on prevention and primary care than specialised high-level care [25]. This ultimately resulted in a reduction in the overall bill of healthcare for the Social Security

This is significantly lower than that of FFS because there are no claims to be processed on the insurer side [5]. Instead, the insurer is only required to audit the number of enrollees per provider to make the payment. However, a well-functioning referral system is required to ensure the cost-effectiveness of treatment at the

Administrative costs for managing capitation payment may increase if the health insurance decides to intervene in minimising risk selection by adding risk adjustors such as gender, age or chronic illness of enrolled patients [5, 24]. In such situations, the insurer incurs a more administrative cost for monitoring and tracking patients' enrolment for each provider. Although this can be a negative effect that increases cost, it promotes equity in healthcare and contributes to the overall aim of social

Case-based is a prospective reimbursement mechanism in which hospitals are paid for each discharged inpatient case, based on a previously defined rate for each group of cases with similar clinical conditions and resource requirement [30]. The International Classification of Diseases (ICD) developed by WHO is widely used to

define these groups for the purpose of setting payment rates [1].

**18**

Case-based payment mechanism provides significant incentives for cost reduction [5, 31, 32]. The output-based design of this method has generated major incentives for providers to contain cost per case by minimising the use of resources utilised per case [5], for example, reducing the unnecessary utilisation of diagnostic and imaging services.

Unlike FFS, case-based payment has the potential to create incentives for promoting hospital efficiency and control the cost of healthcare [1, 24, 33]. However, it also encourages contracted hospitals to unnecessarily increase admissions and readmissions, reduce the intensity and quality of care, avoid severe cases and shift patients for outpatient and community care for follow-up [24, 33].

Based on the conceptual framework, the following three subsections will analyse the relevant incentives that contribute to the cost of healthcare under case-based reimbursement.

#### *4.2.1.1 Case-based payment promotes hospital efficiency*

Hospital efficiency under cased-based payment is promoted through minimising the inputs used for case management and reducing the average length of stay as intended effects [24, 31, 33]. This is because hospitals are paid a fixed rate for each case regardless of the volume and intensity of service provided.

Case-based payment has been effectively used in many LMICs as a tool to control cost escalation during the past four decades. Stronger incentives to promote efficiency by controlling resources used per case were observed in Korea, Taiwan, Indonesia, China and Kyrgyz Republic [1, 18, 34]. For example, in Korea, the introduction of case-based payment in 1997 resulted in a 30% reduction in the use of antibiotics for inpatient care [21].

In Latin America, case-based payment has also been in existence for the past 30 years, including in Argentina, Brazil and Chile [10]. In Brazil, for example, a mixed case-based and FFS payment system was introduced for reimbursement of both public and private healthcare providers [6]. Although this reform has created incentives for efficiency, evidence has shown that the low reimbursement rates have resulted in negative effects including the deterioration in quality of care and reduced utilisation rates [6, 10].

#### *4.2.1.2 Case-based incentives to increase admission rates*

A common problem with case-based payment is that it creates incentives for hospitals to increase admission and readmission rates [33]. However, one of the major advantages associated with case-based payment is the reduction in the average length of stay [24, 35], and it may create incentives for improving quality of care if payment rates are linked to the complexity of cases [10]. For example, the payment rate for complicated normal deliveries is higher than non-complicated ones.

In the Korean reform, the average length of stay has dropped by 3% on average as a response to case-based implementation [21]. The outcome of implemented case-based payment in Kazakhstan during the period 1988–2001 has resulted in a stabilised number of hospital admission rate, a decline in inappropriate admissions, and the average length of stay has dropped by 2 days on average [24].

In Taiwan, evidence has shown that during the first half year after implementation of case-based reform, both the average length of stay and cost per caesarean section admissions dropped significantly [6]. This reform has been confronted with

#### *Universal Health Coverage*

resistance from providers in Taiwan, but the insurer has utilised historical claims data to fairly set the case rates in order to minimise resistance from providers [6, 19]. Consequently, the coping strategies used by hospitals for inpatient admissions in Taiwan as a response to the implementation of case-based payment generally resulted in significant positive outcomes towards cost control [18].

#### *4.2.1.3 Case-based incentives to reduce the intensity of care*

Case-based payment has other major disadvantages including incentives to reduce the intensity of healthcare by prematurely discharging admitted patients, up-coding to higher classes in the payment schedule and shifting patterns of care and costs to non-case-based classes where mixed payment systems are used [1, 5]. The behaviour of premature discharge shifts the cost of healthcare from the hospital to the outpatient services and community outreach care, which contributes to increasing the social cost for healthcare. It could also result in high readmission rates [36].

Evidence has shown that up-coding to a higher point practised by providers was not random, but it was systematically favoured by providers and mainly driven by their interest to obtain larger reimbursements [5]; and if the insurer has not taken appropriate measures to reduce this behaviour, the cost of healthcare will increase.

However, Kwon [31] suggested that if the level of care is too high due to the oversupply of services, then the reduction in the intensity of care as a result of implementing case-based payment does not affect patient outcome negatively. Evidence from the Taiwanese experience also supports this point, where irrational use of antibiotics for inpatients was reduced by 30% to cope with case-based payment [18].

#### *4.2.2 Administrative cost of case-based payment*

The administrative cost of the case-based payment system primarily depends on the complexity of design for case grouping. The cost of administrating very complex case-based payment is very high for both providers to code cases, and for the insurer to monitor and process provider claims [5]. However, this cost can be lower than FFS in simply designed systems such as those used in Indonesia in the 1990s [5]. In Korea, the relatively high requirement for clinical and managerial information for case classification has been evident [31].

To avoid the higher administrative cost, less complex case-based systems can be designed based on broader categories of case grouping [1]. This approach has also been proposed by Kwon [31], to adopt an incremental implementation of the new case-based system starting with a simpler classification of diseases.

#### **4.3 Global budget hospital payment mechanism**

Global budget payment is defined as an aggregate cash sum, fixed in advance, intended to cover the total cost of a service provided, and it is usually set for 1 year ahead [37]. While the unit of payment in capitation payment is per enrollee, in the global budget, the facility is used as a unit of payment based on previous historical spending, the volume of service and hospital bed size, which are brought together in a resource allocation formula [1, 38]. Global budget provides a greater degree of hospital autonomy and increases transparency through the ease of auditing and accountability for allocated budgets and contributes to macro-economic efficiency [38].

**21**

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable…*

Based on the middle purple column of the conceptual framework (Section 2), the following subsections will focus on the analysis of incentives created by global

Global budget has a positive effect on controlling health insurance cost by creating incentives for hospitals to reduce the volume of services provided and encourages efficient resource utilisation [5]. Depending on the resource allocation formula, global budgeting has both positive and negative effects on the admission

With global budget, the volume of healthcare provided is minimised by hospitals due to the shared financial risk [39]. In the short term, the volume of healthcare and use of input resources are minimised and, therefore, can promote hospital efficiency [1, 5]. However, in the long-term period, the degree of incentives brought by this mechanism depends mainly on the resource allocation formula [5] and budget adjustor such as age, sex, morbidity and utilisation rates from previous years [10]. In this regard, policymakers of the health insurer need to keep their attention while using historical data for allocating resources to hospitals, because there are greater chances of repeating existing patterns of resource use. For example, if a non-efficient hospital is receiving global budget based on previous data, without consideration to other adjustors, inefficiency will

Based on the logic discussed above, if other resource allocation adjustors and performance measures are not considered, global budgeting will reward inefficient

The admission rates are also reduced under global budgeting since contracted

The major disadvantages of global budget payment are that it is not reflective of the actual activities carried out by the hospital, but rather it is based on the hospital bed capacity [38]. Unfortunately, complicated cases are also treated with the same level of funding, which may lead to the referral of severe cases [10, 38]. This can be minimised by introducing more complex resource allocation formula to reflect the

The administrative cost of the global budget is generally lower compared to other payment methods [5]. This cost is mainly brought by the resource allocation formula and there are no bills to prepare and no claim audits [1]. But, this cost may increase when using more complex resource allocation formulas such as risk-

adjusted or utilisation projection components in the formula [5, 38].

hospitals (higher spending now to ensure higher budget next year) [38].

*4.3.1.2 Effect of global budget on admission rate and the average length of stay*

hospitals bear some financial risk [4, 5]. When performance measures are introduced in the resource allocation, incentives among hospitals may change as a response to the chosen indicators [38]. For example, in Hungary, the average length of stay increased because global budgets were allocated based on occu-

budget payment and the relative administrative cost to run the system.

*DOI: http://dx.doi.org/10.5772/intechopen.86840*

*4.3.1 Global budget payment incentives*

continuously persist.

pancy rates [5].

severity of cases [10].

*4.3.2 Administrative cost of global budget*

rate and the average length of stay in hospital [14].

*4.3.1.1 Global budget incentive to reduce the volume of services*

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable… DOI: http://dx.doi.org/10.5772/intechopen.86840*

Based on the middle purple column of the conceptual framework (Section 2), the following subsections will focus on the analysis of incentives created by global budget payment and the relative administrative cost to run the system.

#### *4.3.1 Global budget payment incentives*

*Universal Health Coverage*

rates [36].

payment [18].

resistance from providers in Taiwan, but the insurer has utilised historical claims data to fairly set the case rates in order to minimise resistance from providers [6, 19]. Consequently, the coping strategies used by hospitals for inpatient admissions in Taiwan as a response to the implementation of case-based payment generally resulted

Case-based payment has other major disadvantages including incentives to reduce the intensity of healthcare by prematurely discharging admitted patients, up-coding to higher classes in the payment schedule and shifting patterns of care and costs to non-case-based classes where mixed payment systems are used [1, 5]. The behaviour of premature discharge shifts the cost of healthcare from the hospital to the outpatient services and community outreach care, which contributes to increasing the social cost for healthcare. It could also result in high readmission

Evidence has shown that up-coding to a higher point practised by providers was not random, but it was systematically favoured by providers and mainly driven by their interest to obtain larger reimbursements [5]; and if the insurer has not taken appropriate measures to reduce this behaviour, the cost of healthcare will increase. However, Kwon [31] suggested that if the level of care is too high due to the oversupply of services, then the reduction in the intensity of care as a result of implementing case-based payment does not affect patient outcome negatively. Evidence from the Taiwanese experience also supports this point, where irrational use of antibiotics for inpatients was reduced by 30% to cope with case-based

The administrative cost of the case-based payment system primarily depends on the complexity of design for case grouping. The cost of administrating very complex case-based payment is very high for both providers to code cases, and for the insurer to monitor and process provider claims [5]. However, this cost can be lower than FFS in simply designed systems such as those used in Indonesia in the 1990s [5]. In Korea, the relatively high requirement for clinical and managerial informa-

To avoid the higher administrative cost, less complex case-based systems can be designed based on broader categories of case grouping [1]. This approach has also been proposed by Kwon [31], to adopt an incremental implementation of the new

Global budget payment is defined as an aggregate cash sum, fixed in advance,

intended to cover the total cost of a service provided, and it is usually set for 1 year ahead [37]. While the unit of payment in capitation payment is per enrollee, in the global budget, the facility is used as a unit of payment based on previous historical spending, the volume of service and hospital bed size, which are brought together in a resource allocation formula [1, 38]. Global budget provides a greater degree of hospital autonomy and increases transparency through the ease of auditing and accountability for allocated budgets and contributes to

case-based system starting with a simpler classification of diseases.

in significant positive outcomes towards cost control [18].

*4.2.1.3 Case-based incentives to reduce the intensity of care*

*4.2.2 Administrative cost of case-based payment*

tion for case classification has been evident [31].

**4.3 Global budget hospital payment mechanism**

macro-economic efficiency [38].

**20**

Global budget has a positive effect on controlling health insurance cost by creating incentives for hospitals to reduce the volume of services provided and encourages efficient resource utilisation [5]. Depending on the resource allocation formula, global budgeting has both positive and negative effects on the admission rate and the average length of stay in hospital [14].

#### *4.3.1.1 Global budget incentive to reduce the volume of services*

With global budget, the volume of healthcare provided is minimised by hospitals due to the shared financial risk [39]. In the short term, the volume of healthcare and use of input resources are minimised and, therefore, can promote hospital efficiency [1, 5]. However, in the long-term period, the degree of incentives brought by this mechanism depends mainly on the resource allocation formula [5] and budget adjustor such as age, sex, morbidity and utilisation rates from previous years [10]. In this regard, policymakers of the health insurer need to keep their attention while using historical data for allocating resources to hospitals, because there are greater chances of repeating existing patterns of resource use. For example, if a non-efficient hospital is receiving global budget based on previous data, without consideration to other adjustors, inefficiency will continuously persist.

Based on the logic discussed above, if other resource allocation adjustors and performance measures are not considered, global budgeting will reward inefficient hospitals (higher spending now to ensure higher budget next year) [38].

#### *4.3.1.2 Effect of global budget on admission rate and the average length of stay*

The admission rates are also reduced under global budgeting since contracted hospitals bear some financial risk [4, 5]. When performance measures are introduced in the resource allocation, incentives among hospitals may change as a response to the chosen indicators [38]. For example, in Hungary, the average length of stay increased because global budgets were allocated based on occupancy rates [5].

The major disadvantages of global budget payment are that it is not reflective of the actual activities carried out by the hospital, but rather it is based on the hospital bed capacity [38]. Unfortunately, complicated cases are also treated with the same level of funding, which may lead to the referral of severe cases [10, 38]. This can be minimised by introducing more complex resource allocation formula to reflect the severity of cases [10].

#### *4.3.2 Administrative cost of global budget*

The administrative cost of the global budget is generally lower compared to other payment methods [5]. This cost is mainly brought by the resource allocation formula and there are no bills to prepare and no claim audits [1]. But, this cost may increase when using more complex resource allocation formulas such as riskadjusted or utilisation projection components in the formula [5, 38].

The administrative cost is also possible to increase by introducing better monitoring of performance measures such as result-based assessment and evaluation for hospitals contracted under a global budget [38, 40].

#### **4.4 Which payment mechanism is the best for LMICs?**

Policy makers in LMICs need to understand that all provider payment mechanisms have advantages and disadvantages and there is no perfect method. Langenbrunner [41] stated that "the whole point of provider payment systems is to change behaviour": that is, to change the way healthcare providers operate in response to different incentives discussed in this study under each method while achieving the policy objective of cost containment.

Mixed payment systems are widely used in different countries in Asia and Latin America: for example, (FFS, case-based and capitation) in Kyrgyzstan and Argentina, and (FFS and case-based) in Chile and Brazil [10]. The mixed system is adopted for practical reasons to counter the adverse incentives of using pure payment mechanisms [5]. For example, hospitals can be reimbursed on case-based, while primary care centres can be paid on a capitation basis. Mixed systems can even be used for one provider. This has been successful in Thailand where hospitals are reimbursed on a global budget to cover fixed costs and partly on case-based to cover variable costs for emergency cases [42].

According to Wouters [10], three main issues need to be considered when preparing for a payment system reform: (i) the potential of the payment mechanism to control cost; (ii) the supporting system requirement for implementing the new payment system and (iii) the expected effect on quality of care. Since quality of care is out of the scope of this review, only the first two elements (i and ii) are summarised in the following two subsections.

#### *4.4.1 The potential of alternative payment mechanisms to control cost*

Based on the analysis for provider payment mechanisms, the discussion above summarised the findings of key incentives and administrative costs for the three alternative payment mechanisms. The summary of findings from the analysis of the existing FFS payment is presented for comparison purposes (**Table 1**).

As you can see in **Table 1**, each of the alternative payment mechanisms creates both positive and negative incentives and all of them are technically feasible to reduce healthcare costs. However, case-based has higher administrative cost compared to capitation and global budget. In terms of organisational feasibility, the case-based method also requires a higher institutional capacity to run the system. Therefore, capitation and global budget may be the most viable options for LMICs.

#### *4.4.2 Supporting system requirements for implementation*

The success of provider payment mechanisms cannot be achieved as stand-alone interventions; other supporting measures are equally important including legal, financial, referral, quality assurance and MIS [10]. For example, capitation payment requires a very well-developed referral system to operate effectively, while case-based payment relies on a well-designed and functioning information system to ensure accurate coding and keeping clinical records for each case managed. **Figure 2** illustrates the relative level of complexity for supporting system requirements for implementing provider payment mechanisms.

To summarise this section, the three alternative provider payment mechanisms were analysed: capitation, case-based and global budget. The conceptual

**23**

compared.

**Figure 2.**

sures for provider payment reform in LMICs.

*Supporting system requirements. Source: adapted from [10].*

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable…*

± Increases or decreases admission rate and averages length of stay depending on resource allocation formula and performance

+ Reduces volume and intensity of service + Invests in health promotion and disease prevention

− Increases admission and readmission rates

− Selection of healthier enrollees

+ Reduces the volume of inputs

− Reduces the intensity of care

− May reward inefficient hospitals

− Does not promote provider efficiency − Increases volume of supplied service − Overutilization of pharmaceuticals + Improves access to healthcare

Global budget − Reduces the volume of supplied services

measures

*Findings from analysis for provider payment mechanisms.*

*Key: +, positive incentives; −negative incentives.*

**Incentives Administrative** 

**cost**

Low

High

Low

High

framework was used in the analysis and assessed the positive and negative incentives created by each payment mechanism. The relative administrative cost to run each of these mechanisms and their potential in controlling the cost of health services were also analysed. The relative requirements for supporting systems to run each of the alternative provider payment mechanisms were also identified and

The next section will present the conclusions of this study and potential mea-

*DOI: http://dx.doi.org/10.5772/intechopen.86840*

Capitation + Improves provider efficiency

Case-based + Improves hospital efficiency

**Payment mechanism**

Fee-forservice

**Table 1.**

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable… DOI: http://dx.doi.org/10.5772/intechopen.86840*


**Table 1.**

*Universal Health Coverage*

hospitals contracted under a global budget [38, 40].

achieving the policy objective of cost containment.

cover variable costs for emergency cases [42].

in the following two subsections.

**4.4 Which payment mechanism is the best for LMICs?**

The administrative cost is also possible to increase by introducing better monitoring of performance measures such as result-based assessment and evaluation for

Policy makers in LMICs need to understand that all provider payment mechanisms have advantages and disadvantages and there is no perfect method. Langenbrunner [41] stated that "the whole point of provider payment systems is to change behaviour": that is, to change the way healthcare providers operate in response to different incentives discussed in this study under each method while

Mixed payment systems are widely used in different countries in Asia and Latin America: for example, (FFS, case-based and capitation) in Kyrgyzstan and Argentina, and (FFS and case-based) in Chile and Brazil [10]. The mixed system is adopted for practical reasons to counter the adverse incentives of using pure payment mechanisms [5]. For example, hospitals can be reimbursed on case-based, while primary care centres can be paid on a capitation basis. Mixed systems can even be used for one provider. This has been successful in Thailand where hospitals are reimbursed on a global budget to cover fixed costs and partly on case-based to

According to Wouters [10], three main issues need to be considered when preparing for a payment system reform: (i) the potential of the payment mechanism to control cost; (ii) the supporting system requirement for implementing the new payment system and (iii) the expected effect on quality of care. Since quality of care is out of the scope of this review, only the first two elements (i and ii) are summarised

Based on the analysis for provider payment mechanisms, the discussion above summarised the findings of key incentives and administrative costs for the three alternative payment mechanisms. The summary of findings from the analysis of the

As you can see in **Table 1**, each of the alternative payment mechanisms creates both positive and negative incentives and all of them are technically feasible to reduce healthcare costs. However, case-based has higher administrative cost compared to capitation and global budget. In terms of organisational feasibility, the case-based method also requires a higher institutional capacity to run the system. Therefore, capitation and global budget may be the most viable options for LMICs.

The success of provider payment mechanisms cannot be achieved as stand-alone interventions; other supporting measures are equally important including legal, financial, referral, quality assurance and MIS [10]. For example, capitation payment requires a very well-developed referral system to operate effectively, while case-based payment relies on a well-designed and functioning information system to ensure accurate coding and keeping clinical records for each case managed. **Figure 2** illustrates the relative level of complexity for supporting system require-

To summarise this section, the three alternative provider payment mechanisms were analysed: capitation, case-based and global budget. The conceptual

*4.4.1 The potential of alternative payment mechanisms to control cost*

existing FFS payment is presented for comparison purposes (**Table 1**).

*4.4.2 Supporting system requirements for implementation*

ments for implementing provider payment mechanisms.

**22**

*Findings from analysis for provider payment mechanisms.*

**Figure 2.**

*Supporting system requirements. Source: adapted from [10].*

framework was used in the analysis and assessed the positive and negative incentives created by each payment mechanism. The relative administrative cost to run each of these mechanisms and their potential in controlling the cost of health services were also analysed. The relative requirements for supporting systems to run each of the alternative provider payment mechanisms were also identified and compared.

The next section will present the conclusions of this study and potential measures for provider payment reform in LMICs.

#### **5. Conclusions**

#### **5.1 General conclusions**

This chapter discussed the problem of cost escalation for providing healthcare in LMICs and analysed the existing FFS payment method for reimbursement of healthcare providers as the main contributor to this problem.

FFS payment significantly contributes to cost escalation by creating incentives for providers to unnecessarily increase the volume of supplied health services and irrationally increase the utilisation of pharmaceuticals. Moreover, the administrative cost of FFS is relatively high compared to capitation and global budget payment mechanisms. Evidence from LMIC in Asia and Latin America revealed a number of reforms during the past four decades where they moved away from FFS to prospective payment mechanisms to promote cost containment.

Fortunately, the analysis of findings from the assessment of the alternative provider payment mechanisms has demonstrated the potential of these methods in controlling cost and promoting efficiency. Capitation payment and global budget hospital payment mechanisms may be the two viable alternative options for implementation in LMICs.

Both capitation and global budget payment mechanisms create strong incentives for providers to reduce the volume of supplied health services and their administrative cost is low compared to the existing FFS payment method. Capitation payment has the potential to promote provider efficiency, while global budgeting may negatively reward inefficient hospitals if risk adjustors (such as gender and age) are not applied in the resource allocation formula.

Interestingly, capitation payment encourages healthcare providers to invest in health promotion and disease prevention activities to improve the health status of enrolled populations, but it can also discriminate against enrolling risky vulnerable and costly groups and select healthier enrollees.

Mixed provider payment systems can be used to absorb the adverse effects of using a pure payment mechanism and also for practical reasons in implementation. The success of implementing capitation and global budget payment mechanisms in LMICs requires other supporting systems with different degrees of complexity. Therefore, LMICs need to invest in strengthening both the financial information system and MIS. In addition, the utilisation management and quality assurance systems need to be introduced in the contractual requirements where separate payers such as health insurance schemes exist.

#### **5.2 Potential measures for provider payment reform in LMICs**

Based on the existing evidence and analysis provided in this chapter, a set of technically feasible potential measures is proposed for LMICs. The measures are summarised in two groups: short-term and long-term measures with a discussion of the feasibility (organisational, financial and cultural) for implementing each of these measures in LMIC context.

#### *5.2.1 Short-term measures*

• Adopt a policy reform for gradually shifting away from FFS towards the implementation of capitation and global budget provider payment mechanisms for reimbursement of healthcare providers.

**25**

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable…*

• Fair setting of reimbursement rates in the new payment system is required to avoid resistance from healthcare providers that may arise as a response to the

• Design of a mixed provider payment system with the following directions:

○ FFS payment may remain as a method for reimbursement to outpatient

• Make the necessary measures to keep the quality of healthcare at an acceptable level under the newly designed provider payment system as part of reform

• Recruit technical support from World Bank, WHO or other specialised institutions for designing the new provider payment system, which should include setting the payment rates, resource allocation formula, billing system and

• Strengthen the supporting systems to the relative degree of requirements to run the new provider payment system. These include the financial information system, MIS, integrated referral system and utilisation management and

• Evaluate the newly introduced provider payment system to assess its effectiveness in controlling the cost of health services and make periodical adjustments for payment rates based on data generated from the previous experience. A well-functioning MIS and reasonable financial budget are required to

• Expand capitation payment for reimbursement of health services provided at the primary care level. All supporting systems are required to be functioning to

• Expand global budget payment for reimbursement of contracted hospitals. A well-functioning MIS is required to apply risk adjustors (such as age and sex) in the resource allocation formula. Financial and human resources need to be mobilised for monitoring and evaluation of performance measures for

• A large amount of financial investment, as well as training for human

resources to administer the new system, is required.

improving the institutional capacity to run the new system. Technical support can be obtained through multilateral or bilateral development of cooperation projects.

○ Capitation payment for reimbursement to primary care facilities.

○ Global budget payment for smaller and district hospitals.

departments and specialised healthcare, where appropriate.

• Design and implementation of payment system reform are lengthy and detailed processes and need a legal framework for implementation

*DOI: http://dx.doi.org/10.5772/intechopen.86840*

proposed reform.

packages.

(legislation).

quality assurance system.

conduct this evaluation.

participating hospitals.

a higher degree of complexity.

*5.2.2 Long-term measures*

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable… DOI: http://dx.doi.org/10.5772/intechopen.86840*

	- Capitation payment for reimbursement to primary care facilities.
	- Global budget payment for smaller and district hospitals.
	- FFS payment may remain as a method for reimbursement to outpatient departments and specialised healthcare, where appropriate.

#### *5.2.2 Long-term measures*


*Universal Health Coverage*

**5.1 General conclusions**

This chapter discussed the problem of cost escalation for providing healthcare in LMICs and analysed the existing FFS payment method for reimbursement of

FFS payment significantly contributes to cost escalation by creating incentives for providers to unnecessarily increase the volume of supplied health services and irrationally increase the utilisation of pharmaceuticals. Moreover, the administrative cost of FFS is relatively high compared to capitation and global budget payment mechanisms. Evidence from LMIC in Asia and Latin America revealed a number of reforms during the past four decades where they moved away from FFS to prospective payment mechanisms to promote cost

Fortunately, the analysis of findings from the assessment of the alternative provider payment mechanisms has demonstrated the potential of these methods in controlling cost and promoting efficiency. Capitation payment and global budget hospital payment mechanisms may be the two viable alternative options for imple-

Both capitation and global budget payment mechanisms create strong incentives for providers to reduce the volume of supplied health services and their administrative cost is low compared to the existing FFS payment method. Capitation payment has the potential to promote provider efficiency, while global budgeting may negatively reward inefficient hospitals if risk adjustors (such as gender and age) are

Interestingly, capitation payment encourages healthcare providers to invest in health promotion and disease prevention activities to improve the health status of enrolled populations, but it can also discriminate against enrolling risky vulnerable

Mixed provider payment systems can be used to absorb the adverse effects of using a pure payment mechanism and also for practical reasons in implementation. The success of implementing capitation and global budget payment mechanisms in LMICs requires other supporting systems with different degrees of complexity. Therefore, LMICs need to invest in strengthening both the financial information system and MIS. In addition, the utilisation management and quality assurance systems need to be introduced in the contractual requirements where separate pay-

Based on the existing evidence and analysis provided in this chapter, a set of technically feasible potential measures is proposed for LMICs. The measures are summarised in two groups: short-term and long-term measures with a discussion of the feasibility (organisational, financial and cultural) for implementing each of

• Adopt a policy reform for gradually shifting away from FFS towards the

implementation of capitation and global budget provider payment mechanisms

healthcare providers as the main contributor to this problem.

**5. Conclusions**

containment.

mentation in LMICs.

not applied in the resource allocation formula.

and costly groups and select healthier enrollees.

ers such as health insurance schemes exist.

these measures in LMIC context.

*5.2.1 Short-term measures*

**5.2 Potential measures for provider payment reform in LMICs**

for reimbursement of healthcare providers.

**24**

### **Acknowledgements**

The author acknowledges that an early version of this report has been submitted in partial fulfilment of the requirements for the award of Master of Public Health (International) at Nuffield Centre for International Health and Development, University of Leeds, UK.

### **Author details**

Abualbishr Alshreef School of Health and Related Research, University of Sheffield, Sheffield, UK

\*Address all correspondence to: a.o.alshreef@sheffield.ac.uk

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

**27**

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable…*

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[17] Domagala A et al. Public Service Reforms and Their Impact on Health Sector Personnel in Poland. Krakow: World Health Organization and

International Labour Organization; 1999

World Bank; 2005

Inc; 2001

2007. pp. 1-27

[9] Wally J, Wright J. Public Health an Action Guide to Improving Health. 2nd ed. Oxford: Oxford University Press;

[10] Wouters A. Alternative provider payment methods: Incentives for improving health care delivery. In: Terrell N, Moll L, Laughrin A, editors. Primer for Policymakers Series. Partnerships for Health Reform. Bethesda, MD: Abt Associates Inc; 1998

[11] Waters HR, Hussey P. Pricing health services for purchasers—A review of methods and experiences. Health Policy.

[12] Gosden T, et al. Capitation, Salary, Fee-For-Service and Mixed Systems of Payment: Effect on the Behaviour of Primary Care Physicians (Review). The

[13] Cashin C. Fee-For-Service Payment Systems, in Strategic Purchasing for Social Protection: A Short Course for Capacity Development. Bangkok: Centre for Health Economics, Chulalongkorn University; 2009

*DOI: http://dx.doi.org/10.5772/intechopen.86840*

[1] Langenbrunner JC, Cashin C, O'Dougherty S. Designing and Implementing Health Care Provider Payment Systems: How-to Manuals. Washington, DC: World Bank; 2009

[2] WHO. World Health Report, Health Systems Financing: The Path to Universal Coverage. Geneva: World Health Organization; 2010. pp. 87-97

Issues. 2019;**19**:65-74

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[4] Maceira D. Provider payment mechanisms in health care: Incetives, outcomes, and organizational impact in developing countries. In: Major Applied Research 2, Working Paper 2. Partnership for Health Reform Project. Bethesda, MD: Abt Associates Inc; 1998

[5] Barnum H, Kutzin J, Saxenian H. Incentives and provider payment methods. International Journal of Health Planning and Management.

[6] Bitran R, Yip WC. A review of health care provider payment reform in seleced countriesd in Asia and Latin America. In: Major Applied Research 2, Working Paper 1. Partnership for Health Reform Project. Bethesda, MD: Abt Associates

[7] Wonderling D, Gruen R, Black N. Introduction to Health Economics. Glasgow: Bell & Bain Ltd; 2005

[8] McGlynn EA. Identifying, Categorizing, and Evaluating Health Care Efficiency Measures. In: The Southern California Evidence-based Practice Center. Rockville, MD: RAND

Corporation; 2008

[3] Alshreef A et al. Cost-effectiveness of docetaxel and paclitaxel for adjuvant treatment of early breast cancer: Adaptation of a model-based economic evaluation from the United Kingdom to South Africa. Value in Health Regional

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*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable… DOI: http://dx.doi.org/10.5772/intechopen.86840*

#### **References**

*Universal Health Coverage*

**Acknowledgements**

University of Leeds, UK.

**26**

**Author details**

Abualbishr Alshreef

School of Health and Related Research, University of Sheffield, Sheffield, UK

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

The author acknowledges that an early version of this report has been submitted in partial fulfilment of the requirements for the award of Master of Public Health (International) at Nuffield Centre for International Health and Development,

\*Address all correspondence to: a.o.alshreef@sheffield.ac.uk

provided the original work is properly cited.

[1] Langenbrunner JC, Cashin C, O'Dougherty S. Designing and Implementing Health Care Provider Payment Systems: How-to Manuals. Washington, DC: World Bank; 2009

[2] WHO. World Health Report, Health Systems Financing: The Path to Universal Coverage. Geneva: World Health Organization; 2010. pp. 87-97

[3] Alshreef A et al. Cost-effectiveness of docetaxel and paclitaxel for adjuvant treatment of early breast cancer: Adaptation of a model-based economic evaluation from the United Kingdom to South Africa. Value in Health Regional Issues. 2019;**19**:65-74

[4] Maceira D. Provider payment mechanisms in health care: Incetives, outcomes, and organizational impact in developing countries. In: Major Applied Research 2, Working Paper 2. Partnership for Health Reform Project. Bethesda, MD: Abt Associates Inc; 1998

[5] Barnum H, Kutzin J, Saxenian H. Incentives and provider payment methods. International Journal of Health Planning and Management. 1995;**10**:23-45

[6] Bitran R, Yip WC. A review of health care provider payment reform in seleced countriesd in Asia and Latin America. In: Major Applied Research 2, Working Paper 1. Partnership for Health Reform Project. Bethesda, MD: Abt Associates Inc; 1998

[7] Wonderling D, Gruen R, Black N. Introduction to Health Economics. Glasgow: Bell & Bain Ltd; 2005

[8] McGlynn EA. Identifying, Categorizing, and Evaluating Health Care Efficiency Measures. In: The Southern California Evidence-based Practice Center. Rockville, MD: RAND Corporation; 2008

[9] Wally J, Wright J. Public Health an Action Guide to Improving Health. 2nd ed. Oxford: Oxford University Press; 2010

[10] Wouters A. Alternative provider payment methods: Incentives for improving health care delivery. In: Terrell N, Moll L, Laughrin A, editors. Primer for Policymakers Series. Partnerships for Health Reform. Bethesda, MD: Abt Associates Inc; 1998

[11] Waters HR, Hussey P. Pricing health services for purchasers—A review of methods and experiences. Health Policy. 2004;**70**:175-184

[12] Gosden T, et al. Capitation, Salary, Fee-For-Service and Mixed Systems of Payment: Effect on the Behaviour of Primary Care Physicians (Review). The Cochrance Library; 2009

[13] Cashin C. Fee-For-Service Payment Systems, in Strategic Purchasing for Social Protection: A Short Course for Capacity Development. Bangkok: Centre for Health Economics, Chulalongkorn University; 2009

[14] Preker AS, Langenbrunner JC. Spending Wisely: Buying Health Services for the Poor. Washington, DC: World Bank; 2005

[15] Folland S, Goodman AC, Stano M. The Economics of Health and Health Care. 3rd ed. New Jersey: Printice Hall Inc; 2001

[16] MCoAS, Sudan. National Health Insurance Assessment Study. Khartoum: Muhanna and Co. Actuarial Services; 2007. pp. 1-27

[17] Domagala A et al. Public Service Reforms and Their Impact on Health Sector Personnel in Poland. Krakow: World Health Organization and International Labour Organization; 1999 [18] Huang CC et al. Effectiveness of coping strategies used by hospitals in response to implementation of casebased payment system by ther National Health Insurance Programme. Journal of the Formosan Medical Association. 2005;**104**(7):468-475

[19] Chiang T-l. Taiwan's 1995 health care reform. Health Policy. 1997;**39**(3):225-239

[20] Mills A et al. The response of providers to capitation payment: A casestudy from Thailand. Health Policy. 2000;**51**:163-180

[21] Kwon S. Payment system reform for health care providers in Korea. Health Policy and Planning. 2003;**18**(1):84-92

[22] Yip W, Eggleston K. Provider payment reform in China: The case of hospital reimbursement in Hainan Province. Health Economics. 2001;**10**:325-339

[23] Robinson J, Cassalino L. Vertical integration and organizational networks in health care. Health Affairs. 1996;**15**(1):7-22

[24] Cashin C et al. The Design and Implementation of Per Capita Payment Systems in the Context of Primary Health Care-Centered Health System Development in Low- and Midle-Income Countries. Bethesda, MD: Abt Associates, Inc; 2007

[25] Ubilla G, Espinosa C, Bitran R. The use of capitation payment by the social security institute and previsional medical enterprises in Nicaragua. In: Major Applied Research 2, Working Paper 3. Partnership for Health Reform. Bethesda, MD: Abt Associates, Inc.; 2000

[26] Jegers M et al. A typology for provider payment systems in health care. Health Policy. 2002;**60**:255-273 [27] Robinson J. Payment mechanisms, non-price incentives, and organizational innovation in health care. Inquiry. 1993;**30**:228-333

[28] Yip WC et al. Impact of capitation payment: The social security scheme of Thailand. In: Major Applied Research 2, Working Paper 4. Partnerships for Health Reform Project. Bethesda, MD: Abt Associates Inc; 2001

[29] Keckley PH, Underwood HR, Frink B. Episode-Based Payment: Perspectives for Consideration. Washington, DC: Deloitte Center for Health Solutions; 2009

[30] Telyukov A. Prospective casebased payment for hospitals: A guide with illustrations from Latin America. In: Health Sector Reform Initiative. Bethesda, MD: Abt Associates Inc; 2001

[31] Kwon S. Case-based payment systems for health care providers. In: Strategic Purchasing for Social Protection: A Short Course for Capacity Development. Bangkok: Centre for Health Economics, Chulalongkorn University; 2009

[32] Miller HD. From volume to value: Better ways to pay for health care. Health Affairs. 2009;**28**(5):1418-1428

[33] World Bank. Health Provider Payment Reforms in China: What International Experience Tells Us, in Working Paper No. 58414. Washington, DC: World Bank; 2010

[34] Wagstaff A. Health systems in East Asia: What can developing countries learn from Japan and the Asian tigers? Health Economics. 2007;**16**:441-456

[35] World Bank. Healthy Development: The World Bank Strategy for Health, Nutrition and Population Results. Washington, DC: World Bank; 2007

**29**

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable…*

*DOI: http://dx.doi.org/10.5772/intechopen.86840*

[36] Cashin C et al. Case-based Hospital Payment Systems: A Step-By-Step Guide for Implementation in Low- and Middle-Income Countries. Washington,

DC: United States Agency for International Development; 2005

[37] Oxley H, MacFarlan M. Health care reform: Controlling spending and increasing efficiency. In: OECD Economic Studies No. 24. Paris: Organization for Economic Co-operation and Development; 1995

[38] Aljunid SM. Provider payment mechanism: Global budget. In: Strategic Purchasing for Social Protection: A Short Course for Capacity Building. Bangkok: Centre for Health Economics,

Chulalongkorn University; 2009

[39] Dredge R. Hospital Global Budgeting, in Health, Nutrition and Population (HNP) Discussion Paper. Washington, DC: World Bank; 2004

[40] Munkhtsetseg AB. Global budget experience in Mongolia. In: Strategic Purchasing for Social Protection: A Short Course for Capacity Building. Bangkok: Centre of Health Economics, Chulalongkorn University; 2009

[41] Langenbrunner JC. Provider payment: Which one? How do you implement. In: Strategic Purchasing for Social Protection: A Course for Capacity Building. Bangkok: Centre for Health Economics, Chulalongkorn

[42] Sriratanaban J. Health care purchasing and provider responses in Thailand. In: Strategic Purchasing for Social Protection: A Course for Capacity Building. Bangkok: Centre for Health Economics, Chulalongkorn

University; 2009

University; 2009

*Provider Payment Mechanisms: Effective Policy Tools for Achieving Universal and Sustainable… DOI: http://dx.doi.org/10.5772/intechopen.86840*

[36] Cashin C et al. Case-based Hospital Payment Systems: A Step-By-Step Guide for Implementation in Low- and Middle-Income Countries. Washington, DC: United States Agency for International Development; 2005

*Universal Health Coverage*

2005;**104**(7):468-475

1997;**39**(3):225-239

2000;**51**:163-180

2001;**10**:325-339

1996;**15**(1):7-22

Associates, Inc; 2007

[19] Chiang T-l. Taiwan's 1995 health care reform. Health Policy.

[20] Mills A et al. The response of providers to capitation payment: A casestudy from Thailand. Health Policy.

[22] Yip W, Eggleston K. Provider payment reform in China: The case of hospital reimbursement in Hainan Province. Health Economics.

[23] Robinson J, Cassalino L. Vertical integration and organizational

[24] Cashin C et al. The Design and Implementation of Per Capita Payment Systems in the Context of Primary Health Care-Centered Health System Development in Low- and Midle-Income Countries. Bethesda, MD: Abt

networks in health care. Health Affairs.

[25] Ubilla G, Espinosa C, Bitran R. The use of capitation payment by the social security institute and previsional medical enterprises in Nicaragua. In: Major Applied Research 2, Working Paper 3. Partnership for Health Reform. Bethesda, MD: Abt Associates, Inc.;

[26] Jegers M et al. A typology for provider payment systems in health care. Health Policy. 2002;**60**:255-273

[21] Kwon S. Payment system reform for health care providers in Korea. Health Policy and Planning. 2003;**18**(1):84-92

[18] Huang CC et al. Effectiveness of coping strategies used by hospitals in response to implementation of casebased payment system by ther National Health Insurance Programme. Journal of the Formosan Medical Association.

[27] Robinson J. Payment mechanisms, non-price incentives, and organizational innovation in health care. Inquiry.

[28] Yip WC et al. Impact of capitation payment: The social security scheme of Thailand. In: Major Applied Research 2, Working Paper 4. Partnerships for Health Reform Project. Bethesda, MD:

[29] Keckley PH, Underwood HR, Frink B. Episode-Based Payment: Perspectives for Consideration. Washington, DC: Deloitte Center for Health Solutions;

[30] Telyukov A. Prospective casebased payment for hospitals: A guide with illustrations from Latin America. In: Health Sector Reform Initiative. Bethesda, MD: Abt Associates Inc; 2001

[31] Kwon S. Case-based payment systems for health care providers. In: Strategic Purchasing for Social Protection: A Short Course for Capacity Development. Bangkok: Centre for Health Economics, Chulalongkorn

[32] Miller HD. From volume to value: Better ways to pay for health care. Health Affairs. 2009;**28**(5):1418-1428

[33] World Bank. Health Provider Payment Reforms in China: What International Experience Tells Us, in Working Paper No. 58414. Washington,

[34] Wagstaff A. Health systems in East Asia: What can developing countries learn from Japan and the Asian tigers? Health Economics. 2007;**16**:441-456

[35] World Bank. Healthy Development: The World Bank Strategy for Health, Nutrition and Population Results. Washington, DC: World Bank; 2007

DC: World Bank; 2010

University; 2009

1993;**30**:228-333

2009

Abt Associates Inc; 2001

**28**

2000

[37] Oxley H, MacFarlan M. Health care reform: Controlling spending and increasing efficiency. In: OECD Economic Studies No. 24. Paris: Organization for Economic Co-operation and Development; 1995

[38] Aljunid SM. Provider payment mechanism: Global budget. In: Strategic Purchasing for Social Protection: A Short Course for Capacity Building. Bangkok: Centre for Health Economics, Chulalongkorn University; 2009

[39] Dredge R. Hospital Global Budgeting, in Health, Nutrition and Population (HNP) Discussion Paper. Washington, DC: World Bank; 2004

[40] Munkhtsetseg AB. Global budget experience in Mongolia. In: Strategic Purchasing for Social Protection: A Short Course for Capacity Building. Bangkok: Centre of Health Economics, Chulalongkorn University; 2009

[41] Langenbrunner JC. Provider payment: Which one? How do you implement. In: Strategic Purchasing for Social Protection: A Course for Capacity Building. Bangkok: Centre for Health Economics, Chulalongkorn University; 2009

[42] Sriratanaban J. Health care purchasing and provider responses in Thailand. In: Strategic Purchasing for Social Protection: A Course for Capacity Building. Bangkok: Centre for Health Economics, Chulalongkorn University; 2009

**31**

country.

**Chapter 3**

**Abstract**

for long-term care.

**1. Introduction**

themselves to financial hardship.

an Aging Era

Universal Health Coverage,

*Aida Isabel Tavares and Pedro Lopes Ferreira*

**Keywords:** universal health coverage, long-term care, funding, aging

Development Goal (SDG 3.8 [2]) to be achieved by 2030 [3].

Universal health coverage (UHC) has been gaining a wider attention since the beginning of the 2000s, and it has become an ideological reference for health systems across the world. UHC stands for ensuring that health services, needed by people, are of sufficient quality, and that people may access them without exposing

The historical background of UHC goes back to the period immediately after World War II. In 1948, WHO's constitution considered health as a human right; in 1978, the Alma Ata declaration sustained the importance of primary healthcare to grant "Health for All"; in 2005, members of WHO signed a resolution aiming at the implementation of universal coverage [1]; recently, in 2018, in the Declaration of Astana governments recommitted to the importance of primary healthcare as a major pillar of UHC. Additionally, the UN has set UHC as a target for Sustainable

Funding UHC has been one of the major challenges faced by governments. Not only funding has to be efficient to guarantee people's access to health services when they are needed but it also has to ensure equity across people in the

Today governments have to deal with the new reality of aging societies. This demographic phenomenon is taking place all over the world, although some countries are aging more rapidly than others. For instance, in EU, it is expected that

Long-Term Care, and Funding in

Universal health coverage has been gaining a wider attention since the beginning of the 2000s, and it has become an ideological reference for health systems across the world. Funding universal health coverage has been a major challenge faced by governments. Not only funding has to be efficient to guarantee people's access to health services when they are needed, but also it has to ensure equity across people in the country. Aging implies a new constraint to funding as more people contribute less to the collection of financial revenues and more people are in need of healthcare, due to morbidity and end-of-life needs. This chapter aims to present the concept of universal health coverage and LTC and also to discuss how it may be financed under the current scenario of demographic aging and increasing demand

#### **Chapter 3**

## Universal Health Coverage, Long-Term Care, and Funding in an Aging Era

*Aida Isabel Tavares and Pedro Lopes Ferreira*

#### **Abstract**

Universal health coverage has been gaining a wider attention since the beginning of the 2000s, and it has become an ideological reference for health systems across the world. Funding universal health coverage has been a major challenge faced by governments. Not only funding has to be efficient to guarantee people's access to health services when they are needed, but also it has to ensure equity across people in the country. Aging implies a new constraint to funding as more people contribute less to the collection of financial revenues and more people are in need of healthcare, due to morbidity and end-of-life needs. This chapter aims to present the concept of universal health coverage and LTC and also to discuss how it may be financed under the current scenario of demographic aging and increasing demand for long-term care.

**Keywords:** universal health coverage, long-term care, funding, aging

#### **1. Introduction**

Universal health coverage (UHC) has been gaining a wider attention since the beginning of the 2000s, and it has become an ideological reference for health systems across the world. UHC stands for ensuring that health services, needed by people, are of sufficient quality, and that people may access them without exposing themselves to financial hardship.

The historical background of UHC goes back to the period immediately after World War II. In 1948, WHO's constitution considered health as a human right; in 1978, the Alma Ata declaration sustained the importance of primary healthcare to grant "Health for All"; in 2005, members of WHO signed a resolution aiming at the implementation of universal coverage [1]; recently, in 2018, in the Declaration of Astana governments recommitted to the importance of primary healthcare as a major pillar of UHC. Additionally, the UN has set UHC as a target for Sustainable Development Goal (SDG 3.8 [2]) to be achieved by 2030 [3].

Funding UHC has been one of the major challenges faced by governments. Not only funding has to be efficient to guarantee people's access to health services when they are needed but it also has to ensure equity across people in the country.

Today governments have to deal with the new reality of aging societies. This demographic phenomenon is taking place all over the world, although some countries are aging more rapidly than others. For instance, in EU, it is expected that

within five decades, the number of elderly aged over 80 will triple and there be only two active people (15–64 y.o.1 ) for each older person (+65 y.o.) [4].

Aging implies a new constraint to funding as more people contribute less to the collection of financial revenues and more people are in need of healthcare, due to morbidity and end-of-life needs.

In this chapter, we aim to present the concept of universal health coverage and LTC and also to discuss how it may be financed under the present scenario of demographic aging and increasing demand for long-term care.

#### **2. Universal health coverage and aging**

Universal healthcare coverage is the natural evolution of health systems since the World War II. UHC may be described as a general coverage framework where people receive health services needed with quality, without suffering financial hardship [5]. So, the two main objectives may be listed. First, all people should have access to a package of services in wide range of healthcare spectrum, including treatment, promotion, prevention, rehabilitation, long-term care, and palliative care. This objective guarantees that healthcare services may be available to everybody, with quality when they are needed. Therefore, quality and equity are core to this objective.

The second objective ensures that people do not get bankruptcy because of health-care expenditures. The best way to prevent this financial hardship on people is by compulsory prepayment to a fund. The payments done by people are according to their ability to pay, which implies that there are always some people in the population who need to be subsidized because they are poor or cannot contribute to the fund.

UHC requires efficient management and fairness-sustainability trade-offs because UHC does not mean unlimited resources nor services provided. The general long-lasting aim of UHC is to expand coverage on a three- dimensional cube (**Figure 1**): breadth, depth, and height. Breadth of coverage measures the

**33**

**Figure 2.**

*Universal Health Coverage, Long-Term Care, and Funding in an Aging Era*

proportion of people who are covered or entitled; depth reflects the healthcare services that are included in the package of UHC; and finally, height shows the proportion of costs that are shared between people and the health system.

which displays the projected evolution of older age groups for Europe.

aging and health has been described from three different perspectives:

condensed in the last part of the life cycle;

moderate disability or illness severity.

*medium variant projections of age groups for Europe.*

Nowadays aging is a major demographic phenomenon taking placing. People are getting older, and so there is change in the age distribution pictures from a pyramidal shape to inverted pyramidal shape. The fast growing percentage of elderly in the population is expected to take place in the next decades, as shown in **Figure 2,**

There are three trends that may explain the current aging phenomenon [8]. They include (i) the increased longevity of people as people they live longer, (ii) the declined fertility as women have less children, and (iii) the aging of "baby boom"

This demographic scenario raises the concern of how living longer is related to people's health, in particular, in later stages in life. In fact, the relationship between

i. a compression of morbidity, proposed by Fries [9], where morbidity is

ii. an expansion of morbidity, proposed by Gruenber [10] and Kramer [11], where the increased life years are unhealthy and spent with morbidity; and

Depending on the country or the region, these three perspectives may be found. However, in all of them, the increasing need of long-term care (LCT) is inevitable. What may differ across each of them is the kind of LCT needed and provided.

LTC may be defined as the range of services and assistance for people who, as a result of mental and/or physical frailty and/or disability over an extended period of

*Projections of percentage of age group in population in Europe. Source: Based on UN data [7]—Based on* 

iii. a dynamic equilibrium, proposed by Manton [12], which is something in between the two previous proposals, meaning that, there is a constant proportion of healthy life in the overall life cycle of people. According to this proposal, the gains obtained of life span without disability are balanced by losses in healthy life span. The dynamic equilibrium may also be described by the balance between the decreasing/constant proportion of life span with serious illness or disability, and the increasing proportion of life span with

*DOI: http://dx.doi.org/10.5772/intechopen.89618*

**3. Aging effect**

generations.

**Figure 1.** *UHC cube. Source: Based on WHO [6].*

<sup>1</sup> y. o.—years old.

proportion of people who are covered or entitled; depth reflects the healthcare services that are included in the package of UHC; and finally, height shows the proportion of costs that are shared between people and the health system.

### **3. Aging effect**

*Universal Health Coverage*

this objective.

two active people (15–64 y.o.1

morbidity and end-of-life needs.

**2. Universal health coverage and aging**

within five decades, the number of elderly aged over 80 will triple and there be only

Aging implies a new constraint to funding as more people contribute less to the collection of financial revenues and more people are in need of healthcare, due to

In this chapter, we aim to present the concept of universal health coverage and LTC and also to discuss how it may be financed under the present scenario of

Universal healthcare coverage is the natural evolution of health systems since the World War II. UHC may be described as a general coverage framework where people receive health services needed with quality, without suffering financial hardship [5]. So, the two main objectives may be listed. First, all people should have access to a package of services in wide range of healthcare spectrum, including treatment, promotion, prevention, rehabilitation, long-term care, and palliative care. This objective guarantees that healthcare services may be available to everybody, with quality when they are needed. Therefore, quality and equity are core to

The second objective ensures that people do not get bankruptcy because of health-care expenditures. The best way to prevent this financial hardship on people is by compulsory prepayment to a fund. The payments done by people are according to their ability to pay, which implies that there are always some people in the population who need to be subsidized because they are poor or cannot contribute to the fund. UHC requires efficient management and fairness-sustainability trade-offs because UHC does not mean unlimited resources nor services provided. The general long-lasting aim of UHC is to expand coverage on a three- dimensional cube (**Figure 1**): breadth, depth, and height. Breadth of coverage measures the

demographic aging and increasing demand for long-term care.

) for each older person (+65 y.o.) [4].

**32**

<sup>1</sup> y. o.—years old.

*UHC cube. Source: Based on WHO [6].*

**Figure 1.**

Nowadays aging is a major demographic phenomenon taking placing. People are getting older, and so there is change in the age distribution pictures from a pyramidal shape to inverted pyramidal shape. The fast growing percentage of elderly in the population is expected to take place in the next decades, as shown in **Figure 2,** which displays the projected evolution of older age groups for Europe.

There are three trends that may explain the current aging phenomenon [8]. They include (i) the increased longevity of people as people they live longer, (ii) the declined fertility as women have less children, and (iii) the aging of "baby boom" generations.

This demographic scenario raises the concern of how living longer is related to people's health, in particular, in later stages in life. In fact, the relationship between aging and health has been described from three different perspectives:


Depending on the country or the region, these three perspectives may be found. However, in all of them, the increasing need of long-term care (LCT) is inevitable. What may differ across each of them is the kind of LCT needed and provided.

LTC may be defined as the range of services and assistance for people who, as a result of mental and/or physical frailty and/or disability over an extended period of

#### **Figure 2.**

*Projections of percentage of age group in population in Europe. Source: Based on UN data [7]—Based on medium variant projections of age groups for Europe.*

time, depend on help with daily living activities and/or are in need of some permanent nursing care" [4]. The living activities for which people may need help include both activities of daily living (ADL) and instrumental activities of daily living (IADL). The ADL include basic self-care tasks such as healthcare and personal care (e.g., help with hygiene) and also household help (e.g., shopping). IADL include activities related to independent living and include preparing meals, managing money, shopping for groceries or personal items, performing light or heavy housework, doing laundry, and using a telephone.

Long-term care is often under looked in the package of UHC, even though its provision has been increasing in several countries, in particular, in Northern Europe. The provision of LTC can take different forms: health or social nature, cash or in-kind benefits, and institutional/formal or home/informal care.

The variability of long-term care systems across countries is so large that comparisons are difficult to perform. For instance, when comparing the long-term care expenditures (both social and health) as a share of current health expenditures across EU countries, it becomes clear that all LTC systems tend to be different (**Figure 3**).

Comparing different forms of LTC provided across countries becomes even harder as shown in **Figure 4**, when comparing expenditures in LTC per capita and the structure of expenditures in type of LTC.

#### **Figure 3.**

*Share of total current health expenditure (%CHE), 2016. Source: Based on Eurostat data [13].*

#### **Figure 4.**

*Expenditures on different types of long-term care, 2016. Note: Includes government schemes and compulsory contributory health-care financing schemes; monetary unit: Purchasing power standard (PPS) per inhabitant. Source: Based on Eurostat data [13].*

**35**

*Universal Health Coverage, Long-Term Care, and Funding in an Aging Era*

depth of the benefits and the other is the organization.

LTC system but rather multiple benefits and entitlements.

some established threshold are entitled to receive such coverage.

To overcome comparisons across countries, OECD [14] has proposed one classification of LTC systems. Two criteria are used to classify LTC coverage: one is the

The depth of the benefits measures the scope of the entitlement of the LTC benefits, i.e., either universal or means-tested; the organization criterion assesses how the LCT is covered, either by a single system or by a multiple benefits, services, and programs. Based on these two criteria, three groups of countries are identified. The first group includes countries with a universal coverage based on a single program (e.g., Nordic countries, Belgium, and Japan). This system may be separate from the health system, or be part it, and LTC is provided to everyone eligible. This does not mean free provision because there may be means of payment such as co-payments or user

The second group considers mixed systems (e.g., Italy, Czech Republic, Ireland, Australia, France, Greece, Spain, and Switzerland), meaning a mixture of universal with means-tested LTC programs and benefits. In these countries, there is no single

Finally, the third group includes countries with means-tested safety net schemes (e.g., USA). Under this type of LTC coverage organization, income and/or assets are used to assess the eligibility to publicly funded care. People with means lower than

The allocation of LTC benefits varies across countries, and all countries end up facing the same trade-off between fair protection and fiscal sustainability. The allocation of resources to LTC usually does not provide full costs of LTC to all older people. Benefits are to be distributed according to the three vectors of UHC: eligibility or entitlement rules (breadth), depth of services covered, and the height of cost sharing.

Health systems are expected to perform several functions, and funding is one of them. This function financially supports three aims of any health system: improving population health, responding to people expectations, and providing financial protection against the costs of ill health, including health decline due to age [15]. Funding health systems aims to "provide people with access to needed health services, including prevention, promotion, treatment, and rehabilitation, of sufficient quality to be effective and to ensure that the use of those services do not expose people to financial hardship" [15]. According to this definition, there are three roles that funding has to perform: (i) collecting funds, (ii) pooling funds and

Collecting funds means raising revenues, using several sources and contribution mechanisms; pooling funds and risk translates the arrangements to gather the prepaid funds and diversify the individual risk across the pool of participants; purchasing healthcare services comprises the way that the funds are transferred to providers, either by provider payment mechanisms (PPM) or by institutional

A more in-depth explanation is next presented for each of these roles of funding.

Today, it is widely accepted that the best way to fund healthcare systems is based

on prepaid mechanism gathered from a large pool of contributing individuals. Funding mechanisms include the voluntary and the mandatory mechanisms (and some low- and medium-income countries (LMIC) may also find external sources of

*DOI: http://dx.doi.org/10.5772/intechopen.89618*

charges subject to income thresholds.

**4. UHC, funding, and LTC**

structure of purchasers [16].

**4.1 Collecting funds**

risk, and (iii) purchasing healthcare services.

financing obtained from international donors).

To overcome comparisons across countries, OECD [14] has proposed one classification of LTC systems. Two criteria are used to classify LTC coverage: one is the depth of the benefits and the other is the organization.

The depth of the benefits measures the scope of the entitlement of the LTC benefits, i.e., either universal or means-tested; the organization criterion assesses how the LCT is covered, either by a single system or by a multiple benefits, services, and programs.

Based on these two criteria, three groups of countries are identified. The first group includes countries with a universal coverage based on a single program (e.g., Nordic countries, Belgium, and Japan). This system may be separate from the health system, or be part it, and LTC is provided to everyone eligible. This does not mean free provision because there may be means of payment such as co-payments or user charges subject to income thresholds.

The second group considers mixed systems (e.g., Italy, Czech Republic, Ireland, Australia, France, Greece, Spain, and Switzerland), meaning a mixture of universal with means-tested LTC programs and benefits. In these countries, there is no single LTC system but rather multiple benefits and entitlements.

Finally, the third group includes countries with means-tested safety net schemes (e.g., USA). Under this type of LTC coverage organization, income and/or assets are used to assess the eligibility to publicly funded care. People with means lower than some established threshold are entitled to receive such coverage.

The allocation of LTC benefits varies across countries, and all countries end up facing the same trade-off between fair protection and fiscal sustainability. The allocation of resources to LTC usually does not provide full costs of LTC to all older people. Benefits are to be distributed according to the three vectors of UHC: eligibility or entitlement rules (breadth), depth of services covered, and the height of cost sharing.

#### **4. UHC, funding, and LTC**

*Universal Health Coverage*

work, doing laundry, and using a telephone.

the structure of expenditures in type of LTC.

time, depend on help with daily living activities and/or are in need of some permanent nursing care" [4]. The living activities for which people may need help include both activities of daily living (ADL) and instrumental activities of daily living (IADL). The ADL include basic self-care tasks such as healthcare and personal care (e.g., help with hygiene) and also household help (e.g., shopping). IADL include activities related to independent living and include preparing meals, managing money, shopping for groceries or personal items, performing light or heavy house-

Long-term care is often under looked in the package of UHC, even though its provision has been increasing in several countries, in particular, in Northern Europe. The provision of LTC can take different forms: health or social nature, cash

The variability of long-term care systems across countries is so large that comparisons are difficult to perform. For instance, when comparing the long-term care expenditures (both social and health) as a share of current health expenditures across EU countries, it becomes clear that all LTC systems tend to be different (**Figure 3**). Comparing different forms of LTC provided across countries becomes even harder as shown in **Figure 4**, when comparing expenditures in LTC per capita and

*Expenditures on different types of long-term care, 2016. Note: Includes government schemes and compulsory contributory health-care financing schemes; monetary unit: Purchasing power standard (PPS) per inhabitant.* 

*Share of total current health expenditure (%CHE), 2016. Source: Based on Eurostat data [13].*

or in-kind benefits, and institutional/formal or home/informal care.

**34**

**Figure 4.**

**Figure 3.**

*Source: Based on Eurostat data [13].*

Health systems are expected to perform several functions, and funding is one of them. This function financially supports three aims of any health system: improving population health, responding to people expectations, and providing financial protection against the costs of ill health, including health decline due to age [15].

Funding health systems aims to "provide people with access to needed health services, including prevention, promotion, treatment, and rehabilitation, of sufficient quality to be effective and to ensure that the use of those services do not expose people to financial hardship" [15]. According to this definition, there are three roles that funding has to perform: (i) collecting funds, (ii) pooling funds and risk, and (iii) purchasing healthcare services.

Collecting funds means raising revenues, using several sources and contribution mechanisms; pooling funds and risk translates the arrangements to gather the prepaid funds and diversify the individual risk across the pool of participants; purchasing healthcare services comprises the way that the funds are transferred to providers, either by provider payment mechanisms (PPM) or by institutional structure of purchasers [16].

A more in-depth explanation is next presented for each of these roles of funding.

#### **4.1 Collecting funds**

Today, it is widely accepted that the best way to fund healthcare systems is based on prepaid mechanism gathered from a large pool of contributing individuals. Funding mechanisms include the voluntary and the mandatory mechanisms (and some low- and medium-income countries (LMIC) may also find external sources of financing obtained from international donors).

Voluntary financing mechanisms account for the out-of-pocket payments and voluntary insurance. Out-of-pocket payments are the most regressive form of funding the health system, and they may contribute to catastrophic expenditures and poverty. Voluntary insurance may be a secondary layer of health insurance but it is inequitable as it does not extend to all people.

Mandatory funding mechanisms are the most efficient mechanism to guarantee a prepaid healthcare expenditure and to finance UHC. There are, however, two basic forms of these mechanisms: social insurance and taxation, each rooted in its historical proponent. The former funding system was proposed by Otto von Bismark, who implemented the sickness funds system financed by payroll taxes in 1883, in Germany. The later funding proposal was given by William Beveridge, who suggested the national health system financed by taxes in 1948, in UK.

These two approaches to finance health systems, either social insurance or tax based, are also the same financing mechanism of long-term healthcare. While the advantages of the tax-based system are the broader base of funding and greater flexibility and adaptability in providing benefits, the social insurance-based system ensures higher transparency and predictable revenues. On the other hand, the tax-based system has no link between the revenues and the provided benefits while the social insurance-based system is inflexible in the benefits awarded and ends up requiring public budget contribution for those who are not able to pay the for the social insurance contribution [17].

The large majority of health systems nowadays is mainly or partially financed by taxes, either because the major financing source is taxes or because insurance funds do not cover the whole population and so complementary financial source is needed.

Low- and middle-income countries with high unequal income distribution face a taxing challenge: to tax the wealthy and powerful country elites to finance in an equitable way the health system of the country. Because in most cases these elites are also the political and governing ones, it ends up that equitable collecting funds for the health system do not occur.

User fees are one source of funding which raise some controversy. While some argue that user fees reduce utilization by poorer people, others consider that user fees cannot be ignored as an important funding source in some countries. In particular, in countries where resources are limited and institutions are weak, as happens in several LMIC. It is argued that if there is a well-designed user's fee policy, which includes waiver mechanisms and compensating procedures to providers, and as long as those public fees are lower than private fees, then user fees may be an efficient and less inequitable source of funding.

Funding LTC either by taxes or by social contribution may not be enough to accommodate all the people in need of care. So other funding alternatives, which may complement taxes or social contributions, are required to be collected.

Wouterse and Smid [18] have proposed four LTC funding mechanisms: (i) payas-you-go system, (ii) collective saving funds, (iii) pensioner tax, and (iv) cohortspecific savings. The differences across these alternatives are the distribution of costs along time and across age groups.


**37**

*Universal Health Coverage, Long-Term Care, and Funding in an Aging Era*

burden of LTC costs of an older generation.

which aim to generate a steady level of income without threatening the initial value. This idea is basically creating a pre-funding mechanism to be used in the future [19]. Pre-funding may be full or partial. By partial it is meant that LTC contributions are expected to cover only part of the LTC costs of the individual. This partial contribution seems to ensure some intergenerational fairness because the younger generation does not assume the complete

iii.The third proposal is the pensioner tax which is a specific tax on pension incomes. This is a premium rate levied on pension income and it provides an increasing source of LTC funding as the group of pensioners is increasing. This works like tax broadening strategy for an intra-generational pooling of

iv.Finally, the idea supporting the cohort-specific savings is that each birth cohort funds its own additional LTC expenditures. This is like tying pre-

Pooling funds are a key factor in well-functioning healthcare systems aiming to UHC. Accumulating and managing financial resources from a large pool of individuals ensures that the individual risk of paying for healthcare expenditures is in fact dispersed by all the individuals in the pool. The channel through which such dispersion happens is called cross-subsidization. This takes place by having higher income people paying for lower income people, lower risk people paying for higher illness-risk people, and active people paying for inactive people, such as children and elderly. The second advantage of large pools is the potential to obtain economies of scale and market power. Large funding pools

Countries with fragmented insurance system do not have pools of individuals large enough to ensure that an individual unpredictable financial risk becomes predicted and distributed among all the individuals contributing to the insurance funding pool. This is the case in several LMIC where there may coexist different health insurance. These multiple insurance pools result in increasing administrative costs, individual's selection risk, and individual's segmentation according to income

However, the fragmentation of the funding pools is not bad *per se*. Countries may choose to have one pool organized under a single organization or allow the co-existence of several insurances (or pools), which may (or not) compete among themselves. The government decision about the organization and the structure of the pool of individuals has to guarantee that it is equitable and there is no risk selection. So the two necessary conditions to finance a UHC are "compulsion" of a contributions and "subsidization" across individuals, as explained by Fuchs [20]. How these conditions are met depends on the government choice. Pooling against LTC risk is a basic social concern since potentially all citizens are in risk of needing

In aging societies such as in Europe, the group of elderly who are at risk of becoming frail and developing multi-morbidity conditions is large and increasing. So, the risk of being in need of LTC is rising and it requires large pool of funding in

funding to specific age-related costs as suggested by OECD [19].

work more efficiently with less administrative costs and with lower

LTC and the poorer ones are at risk of financial hardship.

order to disperse this risk by all contributors.

*DOI: http://dx.doi.org/10.5772/intechopen.89618*

funds.

negotiated prices.

and wealth.

**4.2 Pooling funds and risk**

*Universal Health Coverage, Long-Term Care, and Funding in an Aging Era DOI: http://dx.doi.org/10.5772/intechopen.89618*

> which aim to generate a steady level of income without threatening the initial value. This idea is basically creating a pre-funding mechanism to be used in the future [19]. Pre-funding may be full or partial. By partial it is meant that LTC contributions are expected to cover only part of the LTC costs of the individual. This partial contribution seems to ensure some intergenerational fairness because the younger generation does not assume the complete burden of LTC costs of an older generation.


#### **4.2 Pooling funds and risk**

*Universal Health Coverage*

inequitable as it does not extend to all people.

social insurance contribution [17].

for the health system do not occur.

costs along time and across age groups.

be an efficient and less inequitable source of funding.

Voluntary financing mechanisms account for the out-of-pocket payments and voluntary insurance. Out-of-pocket payments are the most regressive form of funding the health system, and they may contribute to catastrophic expenditures and poverty. Voluntary insurance may be a secondary layer of health insurance but it is

Mandatory funding mechanisms are the most efficient mechanism to guarantee a prepaid healthcare expenditure and to finance UHC. There are, however, two basic forms of these mechanisms: social insurance and taxation, each rooted in its historical proponent. The former funding system was proposed by Otto von Bismark, who implemented the sickness funds system financed by payroll taxes in 1883, in Germany. The later funding proposal was given by William Beveridge, who

These two approaches to finance health systems, either social insurance or tax based, are also the same financing mechanism of long-term healthcare. While the advantages of the tax-based system are the broader base of funding and greater flexibility and adaptability in providing benefits, the social insurance-based system ensures higher transparency and predictable revenues. On the other hand, the tax-based system has no link between the revenues and the provided benefits while the social insurance-based system is inflexible in the benefits awarded and ends up requiring public budget contribution for those who are not able to pay the for the

The large majority of health systems nowadays is mainly or partially financed by taxes, either because the major financing source is taxes or because insurance funds do not cover the whole population and so complementary financial source is needed. Low- and middle-income countries with high unequal income distribution face a taxing challenge: to tax the wealthy and powerful country elites to finance in an equitable way the health system of the country. Because in most cases these elites are also the political and governing ones, it ends up that equitable collecting funds

User fees are one source of funding which raise some controversy. While some

Funding LTC either by taxes or by social contribution may not be enough to accommodate all the people in need of care. So other funding alternatives, which may complement taxes or social contributions, are required to be collected.

Wouterse and Smid [18] have proposed four LTC funding mechanisms: (i) payas-you-go system, (ii) collective saving funds, (iii) pensioner tax, and (iv) cohortspecific savings. The differences across these alternatives are the distribution of

i.The pay-as-you-go system is described as a financing system where contributions come from actual workers to pay the current retirement benefits. So the additional spending available for LTC in some year is matched by the

ii.The second funding mechanism is saving fund which is created by the contribution of people. Collective saving funds are a form of pooled funds

additional premium payments collected in that year.

argue that user fees reduce utilization by poorer people, others consider that user fees cannot be ignored as an important funding source in some countries. In particular, in countries where resources are limited and institutions are weak, as happens in several LMIC. It is argued that if there is a well-designed user's fee policy, which includes waiver mechanisms and compensating procedures to providers, and as long as those public fees are lower than private fees, then user fees may

suggested the national health system financed by taxes in 1948, in UK.

**36**

Pooling funds are a key factor in well-functioning healthcare systems aiming to UHC. Accumulating and managing financial resources from a large pool of individuals ensures that the individual risk of paying for healthcare expenditures is in fact dispersed by all the individuals in the pool. The channel through which such dispersion happens is called cross-subsidization. This takes place by having higher income people paying for lower income people, lower risk people paying for higher illness-risk people, and active people paying for inactive people, such as children and elderly. The second advantage of large pools is the potential to obtain economies of scale and market power. Large funding pools work more efficiently with less administrative costs and with lower negotiated prices.

Countries with fragmented insurance system do not have pools of individuals large enough to ensure that an individual unpredictable financial risk becomes predicted and distributed among all the individuals contributing to the insurance funding pool. This is the case in several LMIC where there may coexist different health insurance. These multiple insurance pools result in increasing administrative costs, individual's selection risk, and individual's segmentation according to income and wealth.

However, the fragmentation of the funding pools is not bad *per se*. Countries may choose to have one pool organized under a single organization or allow the co-existence of several insurances (or pools), which may (or not) compete among themselves. The government decision about the organization and the structure of the pool of individuals has to guarantee that it is equitable and there is no risk selection. So the two necessary conditions to finance a UHC are "compulsion" of a contributions and "subsidization" across individuals, as explained by Fuchs [20]. How these conditions are met depends on the government choice. Pooling against LTC risk is a basic social concern since potentially all citizens are in risk of needing LTC and the poorer ones are at risk of financial hardship.

In aging societies such as in Europe, the group of elderly who are at risk of becoming frail and developing multi-morbidity conditions is large and increasing. So, the risk of being in need of LTC is rising and it requires large pool of funding in order to disperse this risk by all contributors.

#### **4.3 Purchasing healthcare services**

Purchasing healthcare services comprises three areas of concern. The first one addresses the decision of which services are included in the package of UHC and which services are to be bought; the second concern is the choice of providers; and the third concern relates on the form to purchasing and provision the healthcare services.

The decision on which services are included is not identical across countries. High-income countries may include services which in LMIC may not be in the UHC package because of strong funding restrictions. These countries may be more interested in including services more suitable for their reality such as malariarelated services, HIV antiretroviral therapy, diphtheria-tetanus-pertussis vaccine, or they may be more interested in improving the quality of the services already provided [21].

Considering that the provided care must be fair and efficient, the decision on the services included in a LTC package may be difficult to decide. OECD [14] has proposed the idea of targeted universalism of LTC, that is, the target of care covered is where the need is highest. This idea grounded on the fact that universal LTC may not be attainable for all, but it should be for those in greatest need [22].

The choice of providers may be passive by just assigning a predetermined budget or paying bills or it may be done strategically, meaning that it is a process that aims to maximize performance [15]. Concerning this choice of providers in LTC care, it is diverse, including health or social sector and from institutional/formal care or home/informal care. Informal care may be funded by public subsidization since this form of care has been accepted as cost-effectiveness [23].

The decision concerning the form of purchasing is highly dominated by the choice of the provider payment mechanisms (PPM) and contractual arrangements (discussed in more detail in Chapter 3 of this book). This choice is fundamental to ensure efficiency and transparency of the system. Provider payment mechanisms have a particular role in providing the correct incentives to providers to guarantee access, quality, and efficiency. The PPM comprises several possible arrangements such as global budget, fee for service, capitation, *per diem*, case based, and pay-forperformance [24].

The organization of the purchasers in the health system depends on the competition established among them. There are different forms of organization of the providers purchasing market as described by Kutzin [16]. The simplest form is the single payer system, where there is only one national institution which is responsible for the payments to providers (e.g., in Japan). When there are multiple payers, meaning multiples insurers, there is a distinction between the case when the population covered is in one area, or in different geographical areas. When it covers different geographical areas, more than one regional body is responsible for purchasing and it is a subset of the simple payer system (e.g., in Canada). If the population covered is in the same geographical area, then there may be, or not, competition for the people covered by the insurers. In this way, there are multiple noncompeting insurers (e.g., in France) or there are multiple competing insurers (e.g., in Germany) [16].

#### **5. Classification of LTC systems in the European Union**

Universal long-term healthcare is a difficult concept to achieve and to compare internationally. Several difficulties arise related to the decisions over the three dimensions of UHC: (i) eligibility, (ii) package of services, and (iii) cost sharing.

**39**

**Figure 5.**

*Blue—Cluster D; Pink—Cluster E.*

*Universal Health Coverage, Long-Term Care, and Funding in an Aging Era*

Eligibility is defined by the high-care needs felt among the oldest cohort. This group of people not only has severe functional limitations but also has run-down most of their savings and assets. The package of services included in LTC needs to balance the cost and effectiveness of different modes of providing services. This may not be easy to assess. Some questions may then be raised, e.g., "how to decide what support is given to IADL?" or "how to decide to support in cash or in services?" Cost sharing is supposed to be based on the ability to pay; however, it may not be easy to define the fair share between public and individual responsibilities of pay. On the other hand, using saving and assets may be unfair as those individuals

*Classification of LTC provision in EU. Legend: Yellow—Cluster A; Orange—Cluster B; Green—Cluster C;* 

The EU Commission [25] has suggested a typology of LTC provision for the EU members, enabling some international comparisons. This typology is built based on three criteria concerning the features of formal care. The first criterion is the organization of LTC which can be public, private, or non-for-profit. The second criterion corresponds to funding classified in general taxation, compulsory social insurance, voluntary private insurance, or out-of-pocket. Finally, the third criterion is provision which may take place at home or in an institution. Applying these criteria, it is possible to group the EU countries into five clusters, also presented in **Figure 5**.

• Cluster A (in yellow) includes countries with public provision of LTC financed by general taxes, low informal care, high informal care support, and modest

• Cluster B (in orange) includes countries with medium public (mainly financed by compulsory social insurance) and low private formal care, high informal

cash-for-care benefits (Denmark, Netherlands, and Sweden).

did not spend their money in past while others did.

*DOI: http://dx.doi.org/10.5772/intechopen.89618*

*Universal Health Coverage, Long-Term Care, and Funding in an Aging Era DOI: http://dx.doi.org/10.5772/intechopen.89618*

*Universal Health Coverage*

services.

provided [21].

performance [24].

(e.g., in Germany) [16].

**4.3 Purchasing healthcare services**

Purchasing healthcare services comprises three areas of concern. The first one addresses the decision of which services are included in the package of UHC and which services are to be bought; the second concern is the choice of providers; and the third concern relates on the form to purchasing and provision the healthcare

The decision on which services are included is not identical across countries. High-income countries may include services which in LMIC may not be in the UHC package because of strong funding restrictions. These countries may be more interested in including services more suitable for their reality such as malariarelated services, HIV antiretroviral therapy, diphtheria-tetanus-pertussis vaccine, or they may be more interested in improving the quality of the services already

Considering that the provided care must be fair and efficient, the decision on the services included in a LTC package may be difficult to decide. OECD [14] has proposed the idea of targeted universalism of LTC, that is, the target of care covered is where the need is highest. This idea grounded on the fact that universal LTC may

The choice of providers may be passive by just assigning a predetermined budget or paying bills or it may be done strategically, meaning that it is a process that aims to maximize performance [15]. Concerning this choice of providers in LTC care, it is diverse, including health or social sector and from institutional/formal care or home/informal care. Informal care may be funded by public subsidization since this

The decision concerning the form of purchasing is highly dominated by the choice of the provider payment mechanisms (PPM) and contractual arrangements (discussed in more detail in Chapter 3 of this book). This choice is fundamental to ensure efficiency and transparency of the system. Provider payment mechanisms have a particular role in providing the correct incentives to providers to guarantee access, quality, and efficiency. The PPM comprises several possible arrangements such as global budget, fee for service, capitation, *per diem*, case based, and pay-for-

The organization of the purchasers in the health system depends on the competition established among them. There are different forms of organization of the providers purchasing market as described by Kutzin [16]. The simplest form is the single payer system, where there is only one national institution which is responsible for the payments to providers (e.g., in Japan). When there are multiple payers, meaning multiples insurers, there is a distinction between the case when the population covered is in one area, or in different geographical areas. When it covers different geographical areas, more than one regional body is responsible for purchasing and it is a subset of the simple payer system (e.g., in Canada). If the population covered is in the same geographical area, then there may be, or not, competition for the people covered by the insurers. In this way, there are multiple noncompeting insurers (e.g., in France) or there are multiple competing insurers

Universal long-term healthcare is a difficult concept to achieve and to compare internationally. Several difficulties arise related to the decisions over the three dimensions of UHC: (i) eligibility, (ii) package of services, and (iii) cost sharing.

not be attainable for all, but it should be for those in greatest need [22].

form of care has been accepted as cost-effectiveness [23].

**5. Classification of LTC systems in the European Union**

**38**

**Figure 5.** *Classification of LTC provision in EU. Legend: Yellow—Cluster A; Orange—Cluster B; Green—Cluster C; Blue—Cluster D; Pink—Cluster E.*

Eligibility is defined by the high-care needs felt among the oldest cohort. This group of people not only has severe functional limitations but also has run-down most of their savings and assets. The package of services included in LTC needs to balance the cost and effectiveness of different modes of providing services. This may not be easy to assess. Some questions may then be raised, e.g., "how to decide what support is given to IADL?" or "how to decide to support in cash or in services?" Cost sharing is supposed to be based on the ability to pay; however, it may not be easy to define the fair share between public and individual responsibilities of pay. On the other hand, using saving and assets may be unfair as those individuals did not spend their money in past while others did.

The EU Commission [25] has suggested a typology of LTC provision for the EU members, enabling some international comparisons. This typology is built based on three criteria concerning the features of formal care. The first criterion is the organization of LTC which can be public, private, or non-for-profit. The second criterion corresponds to funding classified in general taxation, compulsory social insurance, voluntary private insurance, or out-of-pocket. Finally, the third criterion is provision which may take place at home or in an institution. Applying these criteria, it is possible to group the EU countries into five clusters, also presented in **Figure 5**.


care and high informal care support, and modest cash-for-care benefits (Belgium, Czech Republic, Germany, Slovakia, and Luxembourg).


Despite the funding criterion, clusters of countries include different mechanisms of funding LTC, both tax and social contribution based. So, clustering of LTC provision across countries in Europe may contribute to meaningful international comparisons of LTC policies, as well as the efficiency and fairness of funding strategies.

#### **6. Sustainability challenges**

Aging is expected to double public spending in LTC in the period 2010–2060. The current scenario of aging population and increasing of the LTC costs raises several challenges, including the question, "how to finance equitable and high quality LTC in fair manner?"

To assess this question, two overall challenges appear related to the sustainability of LTC under the UHC umbrella: first the financial sustainability and second the political and social sustainability.

The financial sustainability implies that there is some resource collection mechanism allowing a balance between the decreasing number of active people and the increasing number of elderly. Some countries have an underdeveloped LTC provision which makes financial sustainability a major concern given the increasing demand for LTC.

On the other hand, funding needs to be economic sustainable so that the share of GDP resources is collected and applied on LTC do not risk the country in a debt crisis. The funding mechanisms of health systems adapting to an aging society need to be carefully thought, in particular in countries where public debt is already a problem [18].

Second, political and social sustainability means that people in a country have decided and support how much they are willing to pay to finance LTC within UHC, in particular, to finance healthcare to those who are in need and cannot afford to pay for it [26]. Since complete universalism of LTC may not be feasible and tradeoffs must be done, target universalism may be the most fair and efficient path to be chosen. The fairness of funding has to be not only intra-generational but also inter-generational. For target universalism to be successful, it has to be socially accepted and supported. This implies that the relative importance of social values is not dominated by economic values.

**41**

*Universal Health Coverage, Long-Term Care, and Funding in an Aging Era*

Informal care is a cornerstone of sustainable LTC provision, and it contributes to the financial sustainability. But informal care itself faces challenges related to care and attendance allowances, as well as opportunity costs for predominantly female informal care workers. These women need to be carefully considered in the system in order to make informal care possible to families [27]. On the other hand, informal care contributes to the closing gap between the fast increasing demand of LTC and the slow increase of its supply. The political support and the social sustainability of informal care are steps toward the implementation of the (target)

The aim of this chapter was to present the concept of universal health coverage and of long-term care and to discuss how it may be financed under the current scenario of demographic aging and increasing demand for long-term care.

Universal health coverage is the main aim of health systems all over the world. The achieved universalism is measured along three dimensions—breath, depth, and height of a UHC cube. Long-term care is one of the services provided by UHC,

In a fast aging society, the importance of LTC is increasing. This means that funding should register a corresponding increasing funds collection. The difficult of LTC funding emerges because there are less and less people active contributing to the collective funds and more and more older people in need of LTC. This implies, first, the use of alternative forms of funding, which should be based on a large pool of individuals, and, second, the use of strategic purchasing and provider payment

The variety of LTC systems across countries makes comparisons difficult, so a possible classification proposed by the EU Commission is described in the chapter. Funding criterion does not dominate the clustering of countries. There are equally important features (organization and provision), which contribute to the character-

UHC and LTC are expected to be sustainable and fair, and target universalism is a possible answer. The implementation of the desired health system needs to respond to sustainability challenges, either financial or socio-political. The response to these challenges will guarantee people access to LTC when needed in an equitable way, without suffering hardship late in their life years. So, not only a more active and socially focused leadership is needed across countries but also better governance is expected so that social values are considered with comparable weight as

Health systems being very complex in terms of demographic, economic, legal and regulatory, epidemiological, socio-cultural and political, and technological aspects, an improvement in one of these areas necessarily has an impact on a global improvement of the universality of coverage. Therefore, it is expected that governments strengthen these components of the health system to make it possible to achieve its goals and provide a high-quality healthcare. In economic terms, not to defend the universality of access, more than an ideological act, would be a serious

which needs rules of eligibility, of services provided, and of cost- sharing.

*DOI: http://dx.doi.org/10.5772/intechopen.89618*

universal LTC.

**7. Conclusion**

mechanisms.

istics of the LTC system.

economic values.

economic error.

**Conflict of interest**

The authors declare no conflict of interest.

*Universal Health Coverage, Long-Term Care, and Funding in an Aging Era DOI: http://dx.doi.org/10.5772/intechopen.89618*

Informal care is a cornerstone of sustainable LTC provision, and it contributes to the financial sustainability. But informal care itself faces challenges related to care and attendance allowances, as well as opportunity costs for predominantly female informal care workers. These women need to be carefully considered in the system in order to make informal care possible to families [27]. On the other hand, informal care contributes to the closing gap between the fast increasing demand of LTC and the slow increase of its supply. The political support and the social sustainability of informal care are steps toward the implementation of the (target) universal LTC.

#### **7. Conclusion**

*Universal Health Coverage*

strategies.

**6. Sustainability challenges**

political and social sustainability.

not dominated by economic values.

ity LTC in fair manner?"

demand for LTC.

problem [18].

care and high informal care support, and modest cash-for-care benefits (Belgium, Czech Republic, Germany, Slovakia, and Luxembourg).

• Cluster C (in green) accounts for countries with medium public and private formal care (financed social insurance and general revenue), high informal care use and high informal care support, and high cash-for-care benefits

• Cluster D (in blue) includes countries with modest social insurance against LTC risks; low public and high private LTC funding, high use of informal care but low informal care support, and low cash-for-care benefits (Hungary, Italy,

• Cluster E (in pink) group includes countries with little social insurance against LTC risks; very low public spending, very high informal care use but no support of it, and no or very low cash-for-care benefits (Bulgaria, Cyprus,

Despite the funding criterion, clusters of countries include different mechanisms of funding LTC, both tax and social contribution based. So, clustering of LTC provision across countries in Europe may contribute to meaningful international comparisons of LTC policies, as well as the efficiency and fairness of funding

Aging is expected to double public spending in LTC in the period 2010–2060. The current scenario of aging population and increasing of the LTC costs raises several challenges, including the question, "how to finance equitable and high qual-

To assess this question, two overall challenges appear related to the sustainability of LTC under the UHC umbrella: first the financial sustainability and second the

The financial sustainability implies that there is some resource collection mechanism allowing a balance between the decreasing number of active people and the increasing number of elderly. Some countries have an underdeveloped LTC provision which makes financial sustainability a major concern given the increasing

On the other hand, funding needs to be economic sustainable so that the share of GDP resources is collected and applied on LTC do not risk the country in a debt crisis. The funding mechanisms of health systems adapting to an aging society need to be carefully thought, in particular in countries where public debt is already a

Second, political and social sustainability means that people in a country have decided and support how much they are willing to pay to finance LTC within UHC, in particular, to finance healthcare to those who are in need and cannot afford to pay for it [26]. Since complete universalism of LTC may not be feasible and tradeoffs must be done, target universalism may be the most fair and efficient path to be chosen. The fairness of funding has to be not only intra-generational but also inter-generational. For target universalism to be successful, it has to be socially accepted and supported. This implies that the relative importance of social values is

(Austria, England, Finland, France, Spain, and Ireland).

Greece, Poland, Portugal, and Slovenia).

Estonia, Lithuania, Latvia, Malta, and Romania).

**40**

The aim of this chapter was to present the concept of universal health coverage and of long-term care and to discuss how it may be financed under the current scenario of demographic aging and increasing demand for long-term care.

Universal health coverage is the main aim of health systems all over the world. The achieved universalism is measured along three dimensions—breath, depth, and height of a UHC cube. Long-term care is one of the services provided by UHC, which needs rules of eligibility, of services provided, and of cost- sharing.

In a fast aging society, the importance of LTC is increasing. This means that funding should register a corresponding increasing funds collection. The difficult of LTC funding emerges because there are less and less people active contributing to the collective funds and more and more older people in need of LTC. This implies, first, the use of alternative forms of funding, which should be based on a large pool of individuals, and, second, the use of strategic purchasing and provider payment mechanisms.

The variety of LTC systems across countries makes comparisons difficult, so a possible classification proposed by the EU Commission is described in the chapter. Funding criterion does not dominate the clustering of countries. There are equally important features (organization and provision), which contribute to the characteristics of the LTC system.

UHC and LTC are expected to be sustainable and fair, and target universalism is a possible answer. The implementation of the desired health system needs to respond to sustainability challenges, either financial or socio-political. The response to these challenges will guarantee people access to LTC when needed in an equitable way, without suffering hardship late in their life years. So, not only a more active and socially focused leadership is needed across countries but also better governance is expected so that social values are considered with comparable weight as economic values.

Health systems being very complex in terms of demographic, economic, legal and regulatory, epidemiological, socio-cultural and political, and technological aspects, an improvement in one of these areas necessarily has an impact on a global improvement of the universality of coverage. Therefore, it is expected that governments strengthen these components of the health system to make it possible to achieve its goals and provide a high-quality healthcare. In economic terms, not to defend the universality of access, more than an ideological act, would be a serious economic error.

#### **Conflict of interest**

The authors declare no conflict of interest.

*Universal Health Coverage*

#### **Author details**

Aida Isabel Tavares1,3\* and Pedro Lopes Ferreira2,3

1 ISEG-UL, Lisbon School of Economics and Management, University of Lisbon, Portugal

2 FEUC, Faculty of Economics of the University of Coimbra, Portugal

3 CEISUC, Centre of Studies and Research in Health of the University of Coimbra, Portugal

\*Address all correspondence to: aitavar@gmail.com

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

**43**

*Universal Health Coverage, Long-Term Care, and Funding in an Aging Era*

[10] Gruenberg E. The failures of success. Mills Memorial Fund Q.

[11] Kramer M. The rising pandemic of mental disorders and associated chronic diseases and disabilities. Acta Psychiatrica Scandinavica. 1980;**62**(Suppl. 285):282-297

[12] Manton K. Changing concepts of morbidity and mortality in the elderly population. The Milbank Memorial Fund Quarterly Health and Society.

[13] Eurostat. Expenditure for Selected Health Care Functions by Health Care Financing

[14] Colombo F, Llena-Nozal A, Mercier J, Tjadens F. Help Wanted? Providing and Paying for Long-Term Care. OECD Health Policy Studies.

OECD Publishing; 2011

[15] Evans D, Elovainio R,

Switzerland: WHO; 2010

ocId=13220&langId=en

2001;**56**:171-204

Humphreys G, WHO. The World Health Report—Health Systems Financing: The Path to Universal Coverage. Geneva,

[16] Kutzin J. A descriptive framework for country-level analysis of health care financing arrangements. Health Policy.

[17] Rodrigues R. Long-Term Care—The problem of Sustainable Financing (Ljubljana, 18-19 November 2014). Peer Review on Financing of Long-Term Care; Slovenia. 2014. Available from: http://ec.europa.eu/social/BlobServlet?d

[18] Wouterse B, Smid B. How to finance the rising costs of long-term care: Four

Schemes [hlth\_sha11\_hchf ]. 2019. Available from: http://appsso. eurostat.ec.europa.eu/nui/show. do?dataset=hlth\_sha11\_hchf&lang=en

1977;**55**:3-24

1982;**60**:183-244

*DOI: http://dx.doi.org/10.5772/intechopen.89618*

[1] WHO. Resolution WHA58.33. Sustainable health financing, universal coverage and social health insurance. In: Fifty-Eighth World Health Assembly; 16-25 May 2005; Geneva. Vol. 1. Geneva:

[2] UN. Road Map Towards the

[3] UN. About the Sustainable Development Goal. 2015. Available

sustainabledevelopment/sustainabledevelopment-goals/ [Assessed: July 1,

[4] EU. Adequate social protection for long-term care needs in an ageing society. In: Report Jointly Prepared by the Social Protection Committee and the European Commission. Luxembourg:

[5] WHO. Arguing for Universal Health Coverage. Geneva: Switzerland; 2013

[6] WHO. Health Financing for Universal Coverage. 2019. Available from: https://www.who.int/health\_ financing/topics/benefit-package/ UHC-choices-facing-purchasers/en/

[7] UN. World Population Prospects 2019. United Nations: Department of Economic and Social Affairs, Population Division; 2019. Available from: https://

[8] Bloom D, Canning D, Fink G. Implications of Population Aging for Economic Growth. NBER Working

[9] Fries J. Ageing, natural death, and the compression of morbidity. The New England Journal of Medicine.

population.un.org/wpp/

Paper No. 16705. 2011

1980;**303**:130-135

from: https://www.un.org/

Implementation of the United Nations Millennium Declaration: Report of the Secretary-General. New York: UN;

**References**

WHO; 2005

2001

2019]

EU. 2014

*Universal Health Coverage, Long-Term Care, and Funding in an Aging Era DOI: http://dx.doi.org/10.5772/intechopen.89618*

#### **References**

*Universal Health Coverage*

**42**

**Author details**

Portugal

Portugal

Aida Isabel Tavares1,3\* and Pedro Lopes Ferreira2,3

\*Address all correspondence to: aitavar@gmail.com

provided the original work is properly cited.

1 ISEG-UL, Lisbon School of Economics and Management, University of Lisbon,

3 CEISUC, Centre of Studies and Research in Health of the University of Coimbra,

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

2 FEUC, Faculty of Economics of the University of Coimbra, Portugal

[1] WHO. Resolution WHA58.33. Sustainable health financing, universal coverage and social health insurance. In: Fifty-Eighth World Health Assembly; 16-25 May 2005; Geneva. Vol. 1. Geneva: WHO; 2005

[2] UN. Road Map Towards the Implementation of the United Nations Millennium Declaration: Report of the Secretary-General. New York: UN; 2001

[3] UN. About the Sustainable Development Goal. 2015. Available from: https://www.un.org/ sustainabledevelopment/sustainabledevelopment-goals/ [Assessed: July 1, 2019]

[4] EU. Adequate social protection for long-term care needs in an ageing society. In: Report Jointly Prepared by the Social Protection Committee and the European Commission. Luxembourg: EU. 2014

[5] WHO. Arguing for Universal Health Coverage. Geneva: Switzerland; 2013

[6] WHO. Health Financing for Universal Coverage. 2019. Available from: https://www.who.int/health\_ financing/topics/benefit-package/ UHC-choices-facing-purchasers/en/

[7] UN. World Population Prospects 2019. United Nations: Department of Economic and Social Affairs, Population Division; 2019. Available from: https:// population.un.org/wpp/

[8] Bloom D, Canning D, Fink G. Implications of Population Aging for Economic Growth. NBER Working Paper No. 16705. 2011

[9] Fries J. Ageing, natural death, and the compression of morbidity. The New England Journal of Medicine. 1980;**303**:130-135

[10] Gruenberg E. The failures of success. Mills Memorial Fund Q. 1977;**55**:3-24

[11] Kramer M. The rising pandemic of mental disorders and associated chronic diseases and disabilities. Acta Psychiatrica Scandinavica. 1980;**62**(Suppl. 285):282-297

[12] Manton K. Changing concepts of morbidity and mortality in the elderly population. The Milbank Memorial Fund Quarterly Health and Society. 1982;**60**:183-244

[13] Eurostat. Expenditure for Selected Health Care Functions by Health Care Financing Schemes [hlth\_sha11\_hchf ]. 2019. Available from: http://appsso. eurostat.ec.europa.eu/nui/show. do?dataset=hlth\_sha11\_hchf&lang=en

[14] Colombo F, Llena-Nozal A, Mercier J, Tjadens F. Help Wanted? Providing and Paying for Long-Term Care. OECD Health Policy Studies. OECD Publishing; 2011

[15] Evans D, Elovainio R, Humphreys G, WHO. The World Health Report—Health Systems Financing: The Path to Universal Coverage. Geneva, Switzerland: WHO; 2010

[16] Kutzin J. A descriptive framework for country-level analysis of health care financing arrangements. Health Policy. 2001;**56**:171-204

[17] Rodrigues R. Long-Term Care—The problem of Sustainable Financing (Ljubljana, 18-19 November 2014). Peer Review on Financing of Long-Term Care; Slovenia. 2014. Available from: http://ec.europa.eu/social/BlobServlet?d ocId=13220&langId=en

[18] Wouterse B, Smid B. How to finance the rising costs of long-term care: Four

alternatives for Netherlands. Fiscal Studies. 2017;**38**(3):369-391

[19] OECD. Growing Unequal? Income Distribution and Poverty in OECD Countries. Paris: OECD Publishing; 2008

[20] Fuchs VR. Economics, values, and health care reform. American Economic Review. 1996;**86**(1):1-24. Available from: https://web.stanford.edu/~jay/ health\_class/Readings/Lecture01/ fuchs\_health\_survey.pdf

[21] Rubinstein A, Barani M, Lopez A. Quality first for effective universal health coverage in low-income and middle-income countries. The Lancet Global Health. 2018;**6**(11):e1142-43.

[22] Powell J, Menendian S, Ake W. Targeted Universalism: Policy and Practice. Haas Institute for a Fair and Inclusive Society. Berkeley: University of California; 2019

[23] Geyer J, Haan P, Korfhage T. Indirect fiscal effects of long-term care insurance. Fiscal Studies. 2017;**38**(3):393-415

[24] Kazungu KS, Barasa EW, Obadha M, Chuma J. What characteristics of provider payment mechanisms influence health care providers' behaviour? A literature review. The International Journal of Health Planning and Management. 2018;**33**:e892-e905

[25] EU Commission. Long-Term Care in Ageing Societies—Challenges and Policy Option. Accompanying the Document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee adn the Committee of the Regions. Towards Social Investment for Growth and Cohesion - Including Implementing

the ESF 2014-2020. SWD 41 Final. Brussels: European Commission. 2013

Chapter 4

Abstract

Alex E. Asakitikpi

healthcare services in the country.

1. Introduction

45

health-seeking behavior, healthcare delivery

Healthcare Coverage and

Healthcare Delivery

Affordability in Nigeria: An

Alternative Model to Equitable

Healthcare delivery in Nigeria has faced major challenges toward achieving universal health coverage. While significant progress was made in the first two decades after the country's independence in 1960, the economic downturn resulting from the plummeting of oil price of which Nigeria was dependent led to a series of twists and turns in the health sector. Health policies were subsequently influenced by external forces, and the adoption of the structural adjustment program signaled a shift from a predominantly welfare scheme to the introduction of user fee and the resultant proliferation of private healthcare provision. This paper discusses the crises that followed the turbulent health policies ever since by identifying some key factors that were glossed over by successive government regimes in formulating health policies in Nigeria. The paper concludes by suggesting a more inclusive model that will ensure equitability in the health sector and accessibility to

Keywords: Nigeria, health policy, healthcare coverage, universal healthcare,

Health policies in Nigeria have undergone tremendous evolution in the past 60 years but without the desirable quality of healthcare delivery system in place to advance the health status of Nigerians. While successive governments have made concerted efforts to promote health equity and ensure unrestrained access to health services, majority of the citizens are still grappling with various health challenges. These challenges are copiously reflected in the current World Health Organization (WHO) statistics where maternal mortality is among the highest in the world accounting for 19% of global maternal deaths [1]. The estimate of infant mortality rate in the country is 19 deaths per 1000 births with mortality among children under 5 at 128 per 1000 [2]. Furthermore, the average life expectancy of Nigerians is estimated by the World Health Organization to be 54.4 with women having a life expectancy of 55.4 and men of 53.7 [3]. These dismal health indicators have necessitated the call from researchers and other stakeholders for the Nigerian government to consider creative ways of responding to healthcare issues in the country.

[26] Cheng TM. Universal Health Coverage: An Overview and Lessons from Asia. Harvard Public Health Review 4—Global Health. 2015

[27] Mosca I, van der Wees PJ, Mot ES, Wammes JJ, Jeurissen PP. Sustainability of long-term care: Puzzling tasks ahead for policy-makers. International Journal of Health Policy and Management. 2017;**6**(4):195-205

#### Chapter 4

*Universal Health Coverage*

2008

alternatives for Netherlands. Fiscal

[19] OECD. Growing Unequal? Income Distribution and Poverty in OECD Countries. Paris: OECD Publishing;

the ESF 2014-2020. SWD 41 Final. Brussels: European Commission. 2013

[26] Cheng TM. Universal Health Coverage: An Overview and Lessons from Asia. Harvard Public Health Review 4—Global Health. 2015

[27] Mosca I, van der Wees PJ, Mot ES, Wammes JJ, Jeurissen PP. Sustainability of long-term care: Puzzling tasks ahead for policy-makers. International Journal of Health Policy and Management.

2017;**6**(4):195-205

[20] Fuchs VR. Economics, values, and health care reform. American Economic Review. 1996;**86**(1):1-24. Available from: https://web.stanford.edu/~jay/ health\_class/Readings/Lecture01/

Studies. 2017;**38**(3):369-391

fuchs\_health\_survey.pdf

2018;**6**(11):e1142-43.

2017;**38**(3):393-415

2018;**33**:e892-e905

[22] Powell J, Menendian S,

Ake W. Targeted Universalism: Policy and Practice. Haas Institute for a Fair and Inclusive Society. Berkeley: University of California; 2019

[23] Geyer J, Haan P, Korfhage T. Indirect fiscal effects of long-term care insurance. Fiscal Studies.

[24] Kazungu KS, Barasa EW, Obadha M, Chuma J. What

characteristics of provider payment mechanisms influence health care providers' behaviour? A literature review. The International Journal of Health Planning and Management.

[25] EU Commission. Long-Term Care in Ageing Societies—Challenges and Policy Option. Accompanying the Document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee adn the Committee of the Regions. Towards Social Investment for Growth and Cohesion - Including Implementing

[21] Rubinstein A, Barani M, Lopez A. Quality first for effective universal health coverage in low-income and middle-income countries. The Lancet Global Health.

**44**

## Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable Healthcare Delivery

Alex E. Asakitikpi

### Abstract

Healthcare delivery in Nigeria has faced major challenges toward achieving universal health coverage. While significant progress was made in the first two decades after the country's independence in 1960, the economic downturn resulting from the plummeting of oil price of which Nigeria was dependent led to a series of twists and turns in the health sector. Health policies were subsequently influenced by external forces, and the adoption of the structural adjustment program signaled a shift from a predominantly welfare scheme to the introduction of user fee and the resultant proliferation of private healthcare provision. This paper discusses the crises that followed the turbulent health policies ever since by identifying some key factors that were glossed over by successive government regimes in formulating health policies in Nigeria. The paper concludes by suggesting a more inclusive model that will ensure equitability in the health sector and accessibility to healthcare services in the country.

Keywords: Nigeria, health policy, healthcare coverage, universal healthcare, health-seeking behavior, healthcare delivery

#### 1. Introduction

Health policies in Nigeria have undergone tremendous evolution in the past 60 years but without the desirable quality of healthcare delivery system in place to advance the health status of Nigerians. While successive governments have made concerted efforts to promote health equity and ensure unrestrained access to health services, majority of the citizens are still grappling with various health challenges. These challenges are copiously reflected in the current World Health Organization (WHO) statistics where maternal mortality is among the highest in the world accounting for 19% of global maternal deaths [1]. The estimate of infant mortality rate in the country is 19 deaths per 1000 births with mortality among children under 5 at 128 per 1000 [2]. Furthermore, the average life expectancy of Nigerians is estimated by the World Health Organization to be 54.4 with women having a life expectancy of 55.4 and men of 53.7 [3]. These dismal health indicators have necessitated the call from researchers and other stakeholders for the Nigerian government to consider creative ways of responding to healthcare issues in the country.

In an attempt to understand healthcare problems in Nigeria, two major schools of thoughts are discernible. The first supports the neoliberal health policy that anchors its philosophy on market forces and the introduction of user fee for the provision of health services [4]. On the other hand, there are others such as the Nigerian government who promotes the continued expansion of public health centers by introducing health insurance, which is supposed to insure patients at all times, thereby expanding coverage and accessibility [5]. While these positions have their merits and, in one way or another, have been implemented in the past six decades with little success, there are some salient issues that have been glossed over which militate against the successes of health policies in Nigeria as they have evolved over the years. In this paper, we discuss the shortcomings of earlier policies and argue that the lack of a proper understanding and contextualization of citizens' health needs and their health-seeking behaviors is critical in designing appropriate health policies in the country toward the provision of quality health and access to services to the generality of the population. We identify the shortcomings that are associated with the theoretical framework of previous policies and discuss the implication of these on healthcare provision in Nigeria. Finally, we propose a model that is all-embracing toward providing universal healthcare services to Nigerians.

awarding scholarships to indigenous students to study medicine, nursing, and other allied professions abroad. At the same time, the government of the day was also building hospitals (orthopedic, specialist, and general hospitals) both in capital cities in the states and in key urban centers. Equipping hospitals with personnel and consumables became the priority of the government. On their return from overseas, the early trained medical doctors were placed in key positions in the health sector, while the public was encouraged by the government to patronize public hospitals and Western pharmaceuticals that were provided free or heavily subsidized by the government. This welfare orientation of Nigeria's First Republic, incidentally, could not be sustained for long due to the downturn in oil price and the increasing corruption in political circles. The consequences of this development were dire: consumables became scarce commodities in hospitals, epileptic payment of salaries of health workers became the order of the day, and a deteriorating condition of service precipitated the mass exodus of medical personnel out of the country. At the same time, most health posts in rural and semi-urban communities were abandoned, and the rural folks who had initially had access to Western medicine and government generosity were left to fend for themselves. On the other hand, the patronage of Western medicine at the expense of traditional medicine had led to the dearth of highly skilled and knowledgeable traditional medical practitioners as most of them died without passing on their knowledge to the younger generation. Even if they had wanted to do so, it was difficult for them because majority of the younger generation had been introduced to Western education and religion (Christianity especially), which influenced their perception of traditional medicine as inferior to Western medicine and evil in their religious conviction. The confusion that these developments generated precipitated the rise of private medical practice both in urban centers and rural communities. The need to meet Nigeria's health challenges and the gap that was created by the exodus of qualified Western-trained practitioners as well as the dearth of skilled traditional medical practitioners paved the way for the proliferation of quacks and fake drugs from the 1980s onward [7, 8]. The introduction of private health practitioners led to the informal introduction of user fee in healthcare delivery and a concomitant rise in the cost of healthcare services. However, because of the economic downturn in the country starting from the late 1970s and the structural adjustment program that was initiated in the mid-1980s leading to the mass retrenchment in both the public and private sectors, fewer people could access private healthcare services [9]. This situation led to the massive importation of sub-standard drugs into the country. Furthermore, the breakdown of state machinery and the poor coordination of activities in the health sector encouraged unqualified personnel to set up health centers, quasi hospitals, chemist shops, and drug hawkers [10]. This situation generated an outcry for the complete overhaul of the health sector which culminated in the promulgation of Decree 34 of 1999 that established the National Health Insurance Scheme (NHIS).

Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable…

DOI: http://dx.doi.org/10.5772/intechopen.85978

3. Health-seeking behavior in Nigeria

47

The evolution of health policies in Nigeria has inevitably influenced the healthseeking behaviors of Nigerians. Incidentally, scholars who have examined health policies and their challenges in the country tend to lump the health-seeking behavior of the people and analyze it as a monolithic pattern [11]. On the contrary, however, patterns of health-seeking behavior in Nigeria are complex and multidirectional. Although economic analysts have classified Nigeria into two broad categories, namely, the super rich (the elites) and the masses, in reality, there are three broad groups: the upper class represented by the extremely wealthy including

#### 2. Contextualizing healthcare delivery in Nigeria

For a proper understanding of the current health situation in Nigeria, it is expedient to historicize the evolution of its healthcare system and within that framework examine some of the pitfalls that are associated with various policies. Prior to the coming of Europeans to Nigeria, the indigenous peoples that make up the country relied entirely on indigenous herbal and fauna knowledge to resolve various health conditions. The healthcare system was based on the quality knowledge of practitioners as well as defined ways of apprenticeship to qualify as a healthcare provider [6]. The medical student was expected to go through years of training both in herbal knowledge, therapeutic processes, and psychosocial relations. The underlying principle of traditional medical system was a sacred calling toward the preservation of lives and to serve as a cohesive element in the society. While traditional medical practitioners may charge "fees" (in the form of barter and general reciprocity), this did not form the bases for practice as there was no fixed and clear-cut "cost" for services rendered. Within this reciprocal framework, medical practitioners were regarded as custodians of life and were accorded the utmost respect in the society. With the coming of Europeans from the fifteenth century and the subsequent introduction of Western medicine, healthcare services became monetized so that health services were rendered for a standard fee. Although the colonial government did not overtly introduce Western medicine to rural folks, the importation of Western-trained medical doctors as well as Western medicine coupled with the influx of missionaries that used Western drugs as a means of evangelism, the seeds of drastic change in traditional medicine were sown. One key factor that led to the undermining of traditional medicine and its subsequent neglect was the missionaries' association of traditional medicine with witchcraft, Satanism, and evil. By 1960 when Nigeria gained her independence, Western medicine had been firmly established in urban centers, while missionary activities had also penetrated some rural communities. It was this skeletal framework that incipient indigenous governments built on after independence.

The underpinning philosophy of the First Republic was to ensure that Westernstyled healthcare delivery became the primary source of health service in the country, and in order to achieve this, the government invested heavily in health by

#### Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable… DOI: http://dx.doi.org/10.5772/intechopen.85978

awarding scholarships to indigenous students to study medicine, nursing, and other allied professions abroad. At the same time, the government of the day was also building hospitals (orthopedic, specialist, and general hospitals) both in capital cities in the states and in key urban centers. Equipping hospitals with personnel and consumables became the priority of the government. On their return from overseas, the early trained medical doctors were placed in key positions in the health sector, while the public was encouraged by the government to patronize public hospitals and Western pharmaceuticals that were provided free or heavily subsidized by the government. This welfare orientation of Nigeria's First Republic, incidentally, could not be sustained for long due to the downturn in oil price and the increasing corruption in political circles. The consequences of this development were dire: consumables became scarce commodities in hospitals, epileptic payment of salaries of health workers became the order of the day, and a deteriorating condition of service precipitated the mass exodus of medical personnel out of the country. At the same time, most health posts in rural and semi-urban communities were abandoned, and the rural folks who had initially had access to Western medicine and government generosity were left to fend for themselves. On the other hand, the patronage of Western medicine at the expense of traditional medicine had led to the dearth of highly skilled and knowledgeable traditional medical practitioners as most of them died without passing on their knowledge to the younger generation. Even if they had wanted to do so, it was difficult for them because majority of the younger generation had been introduced to Western education and religion (Christianity especially), which influenced their perception of traditional medicine as inferior to Western medicine and evil in their religious conviction. The confusion that these developments generated precipitated the rise of private medical practice both in urban centers and rural communities. The need to meet Nigeria's health challenges and the gap that was created by the exodus of qualified Western-trained practitioners as well as the dearth of skilled traditional medical practitioners paved the way for the proliferation of quacks and fake drugs from the 1980s onward [7, 8].

The introduction of private health practitioners led to the informal introduction of user fee in healthcare delivery and a concomitant rise in the cost of healthcare services. However, because of the economic downturn in the country starting from the late 1970s and the structural adjustment program that was initiated in the mid-1980s leading to the mass retrenchment in both the public and private sectors, fewer people could access private healthcare services [9]. This situation led to the massive importation of sub-standard drugs into the country. Furthermore, the breakdown of state machinery and the poor coordination of activities in the health sector encouraged unqualified personnel to set up health centers, quasi hospitals, chemist shops, and drug hawkers [10]. This situation generated an outcry for the complete overhaul of the health sector which culminated in the promulgation of Decree 34 of 1999 that established the National Health Insurance Scheme (NHIS).

#### 3. Health-seeking behavior in Nigeria

The evolution of health policies in Nigeria has inevitably influenced the healthseeking behaviors of Nigerians. Incidentally, scholars who have examined health policies and their challenges in the country tend to lump the health-seeking behavior of the people and analyze it as a monolithic pattern [11]. On the contrary, however, patterns of health-seeking behavior in Nigeria are complex and multidirectional. Although economic analysts have classified Nigeria into two broad categories, namely, the super rich (the elites) and the masses, in reality, there are three broad groups: the upper class represented by the extremely wealthy including

In an attempt to understand healthcare problems in Nigeria, two major schools of thoughts are discernible. The first supports the neoliberal health policy that anchors its philosophy on market forces and the introduction of user fee for the provision of health services [4]. On the other hand, there are others such as the Nigerian government who promotes the continued expansion of public health centers by introducing health insurance, which is supposed to insure patients at all times, thereby expanding coverage and accessibility [5]. While these positions have their merits and, in one way or another, have been implemented in the past six decades with little success, there are some salient issues that have been glossed over which militate against the successes of health policies in Nigeria as they have evolved over the years. In this paper, we discuss the shortcomings of earlier policies and argue that the lack of a proper understanding and contextualization of citizens' health needs and their health-seeking behaviors is critical in designing appropriate health policies in the country toward the provision of quality health and access to services to the generality of the population. We identify the shortcomings that are associated with the theoretical framework of previous policies and discuss the implication of these on healthcare provision in Nigeria. Finally, we propose a model that is all-embracing toward providing universal healthcare services to Nigerians.

2. Contextualizing healthcare delivery in Nigeria

Universal Health Coverage

ient indigenous governments built on after independence.

46

The underpinning philosophy of the First Republic was to ensure that Westernstyled healthcare delivery became the primary source of health service in the country, and in order to achieve this, the government invested heavily in health by

For a proper understanding of the current health situation in Nigeria, it is expedient to historicize the evolution of its healthcare system and within that framework examine some of the pitfalls that are associated with various policies. Prior to the coming of Europeans to Nigeria, the indigenous peoples that make up the country relied entirely on indigenous herbal and fauna knowledge to resolve various health conditions. The healthcare system was based on the quality knowledge of practitioners as well as defined ways of apprenticeship to qualify as a healthcare provider [6]. The medical student was expected to go through years of training both in herbal knowledge, therapeutic processes, and psychosocial relations. The underlying principle of traditional medical system was a sacred calling toward the preservation of lives and to serve as a cohesive element in the society. While traditional medical practitioners may charge "fees" (in the form of barter and general reciprocity), this did not form the bases for practice as there was no fixed and clear-cut "cost" for services rendered. Within this reciprocal framework, medical practitioners were regarded as custodians of life and were accorded the utmost respect in the society. With the coming of Europeans from the fifteenth century and the subsequent introduction of Western medicine, healthcare services became monetized so that health services were rendered for a standard fee. Although the colonial government did not overtly introduce Western medicine to rural folks, the importation of Western-trained medical doctors as well as Western medicine coupled with the influx of missionaries that used Western drugs as a means of evangelism, the seeds of drastic change in traditional medicine were sown. One key factor that led to the undermining of traditional medicine and its subsequent neglect was the missionaries' association of traditional medicine with witchcraft, Satanism, and evil. By 1960 when Nigeria gained her independence, Western medicine had been firmly established in urban centers, while missionary activities had also penetrated some rural communities. It was this skeletal framework that incippoliticians, the middle class consisting of the working class urbanites, and the lower class comprising urban squatters and the rural masses. Even at that, in practical terms, there are still some finer divisions in these categories. For example, among the upper class are those that are extremely wealthy and, as a rule, do not receive medical treatments in the country, and this category may be referred to as the upper-upper class category. They travel out of the country for their regular checkup and for their medication. Those that occupy the lower upper class patronize both international (foreign) medical service and, for minor ailments, exclusive local private health centers.

Nigerians, neoliberal framework has significant constraints in its applications in the country. The African health system, with its humanistic face and barter system, still demanded some form of reciprocity from patients and their households. The missionary hospitals also had some form of market orientation in its healthcare delivery system, and through the years Nigerians are well acquainted with paying for health services [14]. Despite the welfare scheme during the First Republic, majority of the citizens were still prepared to pay for health services when the state could not sustain its welfare scheme. With the proliferation of private healthcare and the importation of sub-standard drugs, which questioned the quality of healthcare delivery in the country, most people became weary of Western medical care and resorted to other forms of healthcare services including spiritual healing. If assured of high-quality drugs as well as quality healthcare services, most Nigerians will still be prepared to pay for these services. Despite the dislocation of healthcare systems leading to eclectic health-seeking behavior in response to the proliferation of healthcare services, most Nigerians especially those in the middle and lower class still have difficulties accessing these services due to their prohibitive costs and questionable quality of drugs. The World Bank's [15] estimates of over 60% of Nigerians living below the poverty line indicate that a significant portion of the Nigerian public cannot access quality health service due to the concomitant high costs that are associated with neoliberal reforms. Within this theoretical framework, majority of the Nigerian public are faced with a dilemma: either the government subsidizes for quality healthcare services for the majority of citizens to enjoy quality healthcare or the majority of citizens must access other forms of services with questionable quality. The government's efforts at restructuring the health system by providing funds for the rehabilitation of dilapidated hospitals and ensuring uninterrupted supply of quality drugs mean that costs of health services will inevitably go up. As reported by researchers [16], there is an inverse relationship between the cost of health service and patronage with the poor responding sharply to changes in cost of service. With such neoliberal reforms, the suspicion of the public toward the government regarding health services as experienced from the late 1970s only exacerbate their suspicion of the government regarding healthcare delivery and government's conspiracy to strip them of their citizens' right to quality health. This suspicion means that increase in health cost is translated as a conspiracy between local politicians, policy makers, and global economic forces represented by the international pharmaceutical industry. This conspiracy theory reverberates in

Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable…

DOI: http://dx.doi.org/10.5772/intechopen.85978

Besides cost, access becomes an important issue in discussing healthcare delivery within the neoliberal framework. As noted in the previous section, the structural adjustment program, which led to the reduction in health personnel and the abandonment of health centers in rural areas and semi-urban centers, meant that with the introduction of user fee, the ratio of health personnel to the population as well as the ratio of health centers to the population dramatically increased. On the other hand, the restructuring and rehabilitation of health centers led to more Nigerians in the upper middle and upper class reverting to accessing health services within the country, thereby pushing away lower middle-class members who hitherto accessed health services in urban centers. This disparity in healthcare accessibility is an important consequence of the neoliberal reform which skewed significantly those who have access to quality Western medical health services and those who do not. What this means is that the reforms initiated by the Obasanjo administration starting from 1999 only favored a few who occupy the highest echelon of the society and disempowered the majority of citizens. This scenario has left the majority of the citizens to seek for alternative healthcare services both in the informal private sector and the patronage of quacks and drug hawkers. The conclusion to be drawn

most sections of the Nigerian society.

49

The working class citizens who constitute the middle class also have subcategories. Those who occupy managerial positions in the organized private sector, directors and director general in the public sector, as well as owners of mediumscale companies usually patronize exclusive private health centers within the country, while those who occupy the middle sub-category within the middle class patronize private health services and specialized hospitals (such as orthopedic and teaching hospitals) in the country. Those who belong to the lower middle-class category primarily access private hospitals as well as general hospitals. The majority of the lower class access state general hospitals, chemist shops, drug hawkers, and traditional health practitioners that are ubiquitous in the society. Theoretically, while this categorization may be useful for analytical purposes, the reality in Nigeria is that there is a lot of crisscrossing in terms of health-seeking behaviors so that even those who occupy the upper class also combine their foreign medical services with local and spiritual means which the lower class also patronizes. This convergence in health-seeking behavior should not be analyzed as monolithic as the quality of care received by individual groups differ significantly and, thus, have bearing on their overall health status. While those who occupy the upper class use traditional health or spiritual health service merely as complimentary to the health services they receive outside the country, those who occupy the lower class sometimes use spiritual home, traditional medicine as their primary source of healthcare either due to the unavailability of other forms of healthcare services or the lack of funds to access these facilities. These patterns of health-seeking behavior are partly influenced by the health policies that have evolved in Nigeria. This recognition as well as the beliefs of the people is significant in developing a more holistic health policy that will provide universal healthcare coverage.

While neoliberal healthcare reforms have succeeded in providing healthcare services both for the upper and middle classes, they have neglected or technically excluded the lower class, which constitutes the majority in Nigeria. The reforms that were carried out in respect of revamping the ailing health sector (re-equipping government hospitals, ensuring constant power supply, provision of Western drugs and other consumables) have mainly benefitted the upper class and the upper middle class. The restructuring and commercialization of these health centers mean a higher cost of accessing them which the lower class cannot afford [12, 13]. The same is true of the NHIS, which has as its primary focus on those who work in the public and organized private sectors. Overall therefore, the neoliberal reforms in the health sector tend to privilege the upper and middle classes and disempower those in the lower class who make up over 75% of the approximately 190 million citizens.

#### 4. The challenges of neoliberal health reforms

The philosophical underpinning of neoliberal health reforms in Nigeria as elsewhere is anchored on the logic of market forces. Although not entirely new to

#### Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable… DOI: http://dx.doi.org/10.5772/intechopen.85978

Nigerians, neoliberal framework has significant constraints in its applications in the country. The African health system, with its humanistic face and barter system, still demanded some form of reciprocity from patients and their households. The missionary hospitals also had some form of market orientation in its healthcare delivery system, and through the years Nigerians are well acquainted with paying for health services [14]. Despite the welfare scheme during the First Republic, majority of the citizens were still prepared to pay for health services when the state could not sustain its welfare scheme. With the proliferation of private healthcare and the importation of sub-standard drugs, which questioned the quality of healthcare delivery in the country, most people became weary of Western medical care and resorted to other forms of healthcare services including spiritual healing. If assured of high-quality drugs as well as quality healthcare services, most Nigerians will still be prepared to pay for these services. Despite the dislocation of healthcare systems leading to eclectic health-seeking behavior in response to the proliferation of healthcare services, most Nigerians especially those in the middle and lower class still have difficulties accessing these services due to their prohibitive costs and questionable quality of drugs. The World Bank's [15] estimates of over 60% of Nigerians living below the poverty line indicate that a significant portion of the Nigerian public cannot access quality health service due to the concomitant high costs that are associated with neoliberal reforms. Within this theoretical framework, majority of the Nigerian public are faced with a dilemma: either the government subsidizes for quality healthcare services for the majority of citizens to enjoy quality healthcare or the majority of citizens must access other forms of services with questionable quality. The government's efforts at restructuring the health system by providing funds for the rehabilitation of dilapidated hospitals and ensuring uninterrupted supply of quality drugs mean that costs of health services will inevitably go up. As reported by researchers [16], there is an inverse relationship between the cost of health service and patronage with the poor responding sharply to changes in cost of service. With such neoliberal reforms, the suspicion of the public toward the government regarding health services as experienced from the late 1970s only exacerbate their suspicion of the government regarding healthcare delivery and government's conspiracy to strip them of their citizens' right to quality health. This suspicion means that increase in health cost is translated as a conspiracy between local politicians, policy makers, and global economic forces represented by the international pharmaceutical industry. This conspiracy theory reverberates in most sections of the Nigerian society.

Besides cost, access becomes an important issue in discussing healthcare delivery within the neoliberal framework. As noted in the previous section, the structural adjustment program, which led to the reduction in health personnel and the abandonment of health centers in rural areas and semi-urban centers, meant that with the introduction of user fee, the ratio of health personnel to the population as well as the ratio of health centers to the population dramatically increased. On the other hand, the restructuring and rehabilitation of health centers led to more Nigerians in the upper middle and upper class reverting to accessing health services within the country, thereby pushing away lower middle-class members who hitherto accessed health services in urban centers. This disparity in healthcare accessibility is an important consequence of the neoliberal reform which skewed significantly those who have access to quality Western medical health services and those who do not. What this means is that the reforms initiated by the Obasanjo administration starting from 1999 only favored a few who occupy the highest echelon of the society and disempowered the majority of citizens. This scenario has left the majority of the citizens to seek for alternative healthcare services both in the informal private sector and the patronage of quacks and drug hawkers. The conclusion to be drawn

politicians, the middle class consisting of the working class urbanites, and the lower class comprising urban squatters and the rural masses. Even at that, in practical terms, there are still some finer divisions in these categories. For example, among the upper class are those that are extremely wealthy and, as a rule, do not receive medical treatments in the country, and this category may be referred to as the upper-upper class category. They travel out of the country for their regular checkup and for their medication. Those that occupy the lower upper class patronize both international (foreign) medical service and, for minor ailments, exclusive local

The working class citizens who constitute the middle class also have subcategories. Those who occupy managerial positions in the organized private sector, directors and director general in the public sector, as well as owners of mediumscale companies usually patronize exclusive private health centers within the country, while those who occupy the middle sub-category within the middle class patronize private health services and specialized hospitals (such as orthopedic and teaching hospitals) in the country. Those who belong to the lower middle-class category primarily access private hospitals as well as general hospitals. The majority of the lower class access state general hospitals, chemist shops, drug hawkers, and traditional health practitioners that are ubiquitous in the society. Theoretically, while this categorization may be useful for analytical purposes, the reality in Nigeria is that there is a lot of crisscrossing in terms of health-seeking behaviors so that even those who occupy the upper class also combine their foreign medical services with local and spiritual means which the lower class also patronizes. This convergence in health-seeking behavior should not be analyzed as monolithic as the quality of care received by individual groups differ significantly and, thus, have bearing on their overall health status. While those who occupy the upper class use traditional health or spiritual health service merely as complimentary to the health services they receive outside the country, those who occupy the lower class sometimes use spiritual home, traditional medicine as their primary source of healthcare either due to the unavailability of other forms of healthcare services or the lack of funds to access these facilities. These patterns of health-seeking behavior are partly influenced by the health policies that have evolved in Nigeria. This recognition as well as the beliefs of the people is significant in developing a more holistic health policy that

While neoliberal healthcare reforms have succeeded in providing healthcare services both for the upper and middle classes, they have neglected or technically excluded the lower class, which constitutes the majority in Nigeria. The reforms that were carried out in respect of revamping the ailing health sector (re-equipping government hospitals, ensuring constant power supply, provision of Western drugs and other consumables) have mainly benefitted the upper class and the upper middle class. The restructuring and commercialization of these health centers mean a higher cost of accessing them which the lower class cannot afford [12, 13]. The same is true of the NHIS, which has as its primary focus on those who work in the public and organized private sectors. Overall therefore, the neoliberal reforms in the health sector tend to privilege the upper and middle classes and disempower those in the lower class who make up over 75% of the approximately 190 million

The philosophical underpinning of neoliberal health reforms in Nigeria as else-

where is anchored on the logic of market forces. Although not entirely new to

private health centers.

Universal Health Coverage

will provide universal healthcare coverage.

4. The challenges of neoliberal health reforms

citizens.

48

from this assessment is that neoliberal reforms in the health sector did not succeed in providing universal health coverage and accessibility but succeeded in upgrading the healthcare system with a tiny minority of the population as its main beneficiary. The realization of this shortcoming prompted the federal government to initiate the NHIS with its cardinal aim of universal health coverage as well as accessibility and equity among the population.

be accountable to the people [10]. In cases where professionals such as medical doctors, nurses, and other health workers have engaged in social protests such as strikes, the government of the day had handled such social protests with a heavy hand leading to the mass exodus of highly qualified personnel in the health industry, which further compounded the problem. The near collapse of the health sector in Nigeria is one of the most important factors for the proliferation of various cadres of healthcare services and the concomitant eclectic health-seeking behavior of

Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable…

Various scholars who have discussed healthcare provision in Nigeria although have identified key healthcare providers in the country have failed to match these various providers with those that patronize them and why. Some scholars [20, 21] correctly dissected the various providers of health services in Nigeria which can broadly be classified into two groups: government-owned health centers and those owned by private organizations and individuals. While health services were predominantly provided by the government up to the mid-1980s, private health providers have exponentially increased in the last 30 years. Government health services are generally regarded as public hospitals and those owned by other groups as private, but this nomenclature may not be entirely correct in the twenty-first century and therefore may be misleading. It is true that before the introduction of user fees in government health centers, the general public had access to these health centers. However, the transformations of various government regimes initiated in the health sector have technically excluded majority of the public making it a "public-private" health center. On the other hand, private health centers such as hospitals and maternity homes that are owned by Christian missionaries although regarded as private have become more public than government-owned hospitals primarily because of the cost differentials between government-owned and missionary-owned hospitals. Furthermore, some of these missionary hospitals and maternities are sited in rural areas and semi-urban centers giving access to rural dwellers, thereby making the missionary hospitals more accessible to

In addition to the abovementioned forms of health providers is the proliferation

Incidentally, drug peddlers fill a unique gap in the health market as they source their drugs mainly from China, Thailand, India, and other Asian countries targeting a section of the population that is made up of unskilled and manual workers. The drugs that are usually sold include energy-boosting drugs, multivitamins, blood

of other healthcare providers, namely, the private hospitals that are owned by qualified medical practitioners, licensed pharmacists, the unqualified and unlicensed chemist shop owners, the ubiquitous drug peddlers, traditional drug hawkers, knowledgeable traditional herbal healers, and other forms of health providers including spiritual homes and churches. The high cost of accessing government specialist hospitals as well as teaching hospitals and the bureaucratic structure of general hospitals has increased the demand for private health provision, which predominantly caters for the middle-class cadre. Because of the availability of genuine drugs and the services rendered by private practitioners, the costs are generally high and are, thus, not easily accessible to the masses. Although the licensed pharmacist on the other hand sells genuine drugs, there are instances where some have engaged in sharp practices by mixing genuine and fake drugs or sometimes leasing out their certificates to unqualified personnel to set up

Nigerians.

6. Healthcare providers in Nigeria

DOI: http://dx.doi.org/10.5772/intechopen.85978

underserved communities.

chemist shops [7].

51

#### 5. Challenges of the NHIS

The philosophy behind the NHIS and its design seems promising especially in terms of equity and accessibility [10, 17]. Although a relatively new concept in the health sector in the country, insurance itself is not a novel phenomenon to Nigerians. The concept of insurance as it applies to various aspects of the Nigerian life has been in existence since the country's independence. But 10 years after the launching of the NHIS, no significant progress has yet been made. Only about 10% of the Nigerian population is covered by the scheme with the vast majority still left to fend for their health needs [18]. While the government has patted itself on the back for the modest progress in health insurance coverage, the reality is that most of the insured are private employees and government officials who are coerced to patronize the scheme. The exclusion of certain drugs and diseases such as diabetes, sickle cell anemia, HIV, cancer, and other chronic diseases also means that even those that are insured will seek alternative means to meet some of their health challenges. More importantly is the unwillingness of low- and medium-scale entrepreneurs to register their employees with the insurance scheme as stipulated by the Act. Entrepreneurs connive with their employees not to register with the NHIS as it is profitable for both parties to do so. The rationale behind this noncompliance is based primarily on the seeming benefits that both employers and employees believe they will enjoy since the Act mandates employers to pay 7.5% of the premium and the employees to pay another 7.5% of the total premium. The general belief is that registering for the NHIS would not guarantee access to quality health service due to various historical antecedents that are associated with insurance schemes in Nigeria [10, 19].

Various insurance schemes such as house insurance, education insurance, and life assurance that were introduced in Nigeria in the 1960s and early 1970s did not meet the expectations of those who embraced the schemes as their claims were not paid when the need arose. This disappointing experience led to the unofficial appellation of "pen robbers" that was associated with insurance companies. A similar case is the Nigerian pension scheme which also suffered a major scandal as a result of the nonpayment of retirees due to corrupt practices of government officials that were responsible in managing the pension funds. These historical experiences have significant bearing on the average Nigerian's perception regarding the sincerity of the government and the efficacy of its policies especially those that encourage contributions from the general public for a common good such as the NHIS. The government's alignment with global practice of neoliberal ideology is therefore seen by the middle and lower classes as a grand conspiracy by the ruling class to perpetuate the enormous gap between the elitist class and the masses. This conspiracy theory is grounded not only in the experiences of citizens in the health sector but in almost all facets of life in the Nigerian society. The gross neglect of the Nigerian public by successive regimes, starting from the mid-1980s, significantly eroded any confidence the people have in the government. It is precisely because of this disconnect between the state and its citizens that there is a lack of any meaningful social movement that forces the government to take up its responsibility and Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable… DOI: http://dx.doi.org/10.5772/intechopen.85978

be accountable to the people [10]. In cases where professionals such as medical doctors, nurses, and other health workers have engaged in social protests such as strikes, the government of the day had handled such social protests with a heavy hand leading to the mass exodus of highly qualified personnel in the health industry, which further compounded the problem. The near collapse of the health sector in Nigeria is one of the most important factors for the proliferation of various cadres of healthcare services and the concomitant eclectic health-seeking behavior of Nigerians.

#### 6. Healthcare providers in Nigeria

from this assessment is that neoliberal reforms in the health sector did not succeed in providing universal health coverage and accessibility but succeeded in upgrading the healthcare system with a tiny minority of the population as its main beneficiary. The realization of this shortcoming prompted the federal government to initiate the NHIS with its cardinal aim of universal health coverage as well as accessibility and

The philosophy behind the NHIS and its design seems promising especially in terms of equity and accessibility [10, 17]. Although a relatively new concept in the

Nigerians. The concept of insurance as it applies to various aspects of the Nigerian life has been in existence since the country's independence. But 10 years after the launching of the NHIS, no significant progress has yet been made. Only about 10% of the Nigerian population is covered by the scheme with the vast majority still left to fend for their health needs [18]. While the government has patted itself on the back for the modest progress in health insurance coverage, the reality is that most of the insured are private employees and government officials who are coerced to patronize the scheme. The exclusion of certain drugs and diseases such as diabetes, sickle cell anemia, HIV, cancer, and other chronic diseases also means that even those that are insured will seek alternative means to meet some of their health challenges. More importantly is the unwillingness of low- and medium-scale entrepreneurs to register their employees with the insurance scheme as stipulated by the Act. Entrepreneurs connive with their employees not to register with the NHIS as it is profitable for both parties to do so. The rationale behind this noncompliance is based primarily on the seeming benefits that both employers and employees believe they will enjoy since the Act mandates employers to pay 7.5% of the premium and the employees to pay another 7.5% of the total premium. The general belief is that registering for the NHIS would not guarantee access to quality health service due to various historical antecedents that are associated with insurance schemes in

Various insurance schemes such as house insurance, education insurance, and life assurance that were introduced in Nigeria in the 1960s and early 1970s did not meet the expectations of those who embraced the schemes as their claims were not paid when the need arose. This disappointing experience led to the unofficial appellation of "pen robbers" that was associated with insurance companies. A similar case is the Nigerian pension scheme which also suffered a major scandal as a result of the nonpayment of retirees due to corrupt practices of government officials that were responsible in managing the pension funds. These historical experiences have significant bearing on the average Nigerian's perception regarding the sincerity of the government and the efficacy of its policies especially those that encourage contributions from the general public for a common good such as the NHIS. The government's alignment with global practice of neoliberal ideology is therefore seen by the middle and lower classes as a grand conspiracy by the ruling class to perpetuate the enormous gap between the elitist class and the masses. This conspiracy theory is grounded not only in the experiences of citizens in the health sector but in almost all facets of life in the Nigerian society. The gross neglect of the Nigerian public by successive regimes, starting from the mid-1980s, significantly eroded any confidence the people have in the government. It is precisely because of this disconnect between the state and its citizens that there is a lack of any meaningful social movement that forces the government to take up its responsibility and

health sector in the country, insurance itself is not a novel phenomenon to

equity among the population.

Universal Health Coverage

5. Challenges of the NHIS

Nigeria [10, 19].

50

Various scholars who have discussed healthcare provision in Nigeria although have identified key healthcare providers in the country have failed to match these various providers with those that patronize them and why. Some scholars [20, 21] correctly dissected the various providers of health services in Nigeria which can broadly be classified into two groups: government-owned health centers and those owned by private organizations and individuals. While health services were predominantly provided by the government up to the mid-1980s, private health providers have exponentially increased in the last 30 years. Government health services are generally regarded as public hospitals and those owned by other groups as private, but this nomenclature may not be entirely correct in the twenty-first century and therefore may be misleading. It is true that before the introduction of user fees in government health centers, the general public had access to these health centers. However, the transformations of various government regimes initiated in the health sector have technically excluded majority of the public making it a "public-private" health center. On the other hand, private health centers such as hospitals and maternity homes that are owned by Christian missionaries although regarded as private have become more public than government-owned hospitals primarily because of the cost differentials between government-owned and missionary-owned hospitals. Furthermore, some of these missionary hospitals and maternities are sited in rural areas and semi-urban centers giving access to rural dwellers, thereby making the missionary hospitals more accessible to underserved communities.

In addition to the abovementioned forms of health providers is the proliferation of other healthcare providers, namely, the private hospitals that are owned by qualified medical practitioners, licensed pharmacists, the unqualified and unlicensed chemist shop owners, the ubiquitous drug peddlers, traditional drug hawkers, knowledgeable traditional herbal healers, and other forms of health providers including spiritual homes and churches. The high cost of accessing government specialist hospitals as well as teaching hospitals and the bureaucratic structure of general hospitals has increased the demand for private health provision, which predominantly caters for the middle-class cadre. Because of the availability of genuine drugs and the services rendered by private practitioners, the costs are generally high and are, thus, not easily accessible to the masses. Although the licensed pharmacist on the other hand sells genuine drugs, there are instances where some have engaged in sharp practices by mixing genuine and fake drugs or sometimes leasing out their certificates to unqualified personnel to set up chemist shops [7].

Incidentally, drug peddlers fill a unique gap in the health market as they source their drugs mainly from China, Thailand, India, and other Asian countries targeting a section of the population that is made up of unskilled and manual workers. The drugs that are usually sold include energy-boosting drugs, multivitamins, blood

tonic, general pain killers, and other drugs that are associated with common health complaints associated with this group of people. The majority of customers who patronize drug peddlers are those in the low-income bracket, and although may patronize chemist shops, their major source of drug supply is through peddlers who also act as health advisers. These health "advisers" are usually strategically positioned in busy bus stops, marketplaces, and commercial busses. Traditional drug hawkers, like drug peddlers, also meet the need of specific categories of clients although sometimes the clientele spectrum cuts across economic classes. The traditional hawkers represent people who have some knowledge of traditional medicine or those who are recruited by traditional medical experts. Usually most of these traditional medicines are packaged in various forms (in bottles, wrapped in paper, nylon sachet, etc.) which are sold to the public. The illness types they target include children-related diseases (such as infections, diarrhea, skin rash, etc.), pile, eczema, dysmenorrhea, ring worm, poor sexual performance, and low sperm count, among others. This category of health providers enjoys large patronage primarily because of the low cost of the drugs and the cultural engagement the providers have with their customers. The cost of these traditional drugs is relatively cheap because they are locally sourced, while hawkers display a high level of familiarity with the drugs they sell and the diseases they are supposed to cure [22]. It is common to see these hawkers in strategic points such as crowded bus stops, marketplaces, and commercial busses (a major means of transport for low-income earners). They advertise their products with bull horns and other forms of public address systems to attract their audience. Sometimes they use patients who are suffering from ailments they claim their drugs can cure to demonstrate the efficacy of their products.

very few studies have been carried out to identify areas of relative strengths of traditional health practitioners. The general tendency of discussing traditional medicine as monolithic and unspecialized is grossly misleading and gives the erroneous impression that traditional medical practitioners are static in their knowledge and do not in any way improve upon the existing knowledge they received during their training. The policies have neglected these critical areas of healthcare provision, and the need to evolve some innovative ways of incorporating them into the

Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable…

DOI: http://dx.doi.org/10.5772/intechopen.85978

Similar to the above, very few scholars have discussed the emergence and prevalence of religious and spiritual health centers and the role they play in healthcare delivery. These centers are different from missionary hospitals that were discussed above. By religious/spiritual health centers, we mean the rise of new religious movements (such as Pentecostalism and syncretic forms) as major providers of healthcare services that rely on patients' faith and spiritual leaders' ability to manipulate spiritual elements to achieve miraculous healing. By employing religious artifacts and relying on the efficacy of prayer for healing purposes, prophets and pastors encourage their congregation to combine faith with Western medicine or to wholly depend on the supernatural for their healing and miracles. Religious/spiritual health centers began to emerge as a major alternative source of healing in the 1980s. This is not surprising as it coincides with the period when the government public hospitals began to lose their appeal as a result of their neglect by the government. The patronage of this form of healthcare cuts across all spectrum of socio-

overall healthcare policy must be initiated, developed, and executed.

economic status. Those who patronize this form of healthcare, however,

7. Toward an alternative model for equitable healthcare delivery

and acupuncture, among others, as complimentary medicines.

53

The complex relationship between health-seeking behavior, the production and distribution of medicines, and health conditions in Nigeria requires a perceptive understanding of their interconnectedness and the development of an appropriate framework that will synthesize these patterns toward developing health policies that will reduce mortality and morbidity rates as well as improve the quality of life of citizens. The Nigerian government has not made significant progress in reducing maternal and child mortality as well as meeting the United Nations' health-related millennium development goals and the current sustainable development goals precisely because of this lack of coordination in the health sector. The neoliberal transformation in the health sector with its global perspective that anchors its principles on free market enterprise does not square with the sociocultural reality in Nigeria. While neoliberal reform took for granted basic social and economic factors in developing its structure and modalities, the neglect of these factors has far-reaching consequences in dealing with health issues in Nigeria. One of such sociocultural factors is the health-seeking behavior of citizens. In Europe and North America, response to ill health is essentially unidirectional and embraces Western medicine, but the same is not true in Nigeria as has been espoused in this paper. This is not to say that citizens in the West do not explore other forms of healthcare; what is essential is that they mostly utilize other sources such as yoga

attracting people from all cadre of the social strata.

compliment the services with other forms of health provision; religious extremists completely rely on this form of healthcare for various ailments including child delivery and reproductive health more generally. These health providers may constitute a tiny minority, their influence is increasing, nevertheless, and they are

The marketing strategy of these hawkers is also displayed in commercial busses by engaging commuters first by praying in the local language and wishing everyone "Alafia" or good health. The hawker then proceeds by listing series of symptoms associated with a variety of diseases and then presenting their audience with the drugs that are applicable to cure the ailment. It is not uncommon to hear them discuss about Western medicines and their efficacy, but they are quick to also point out the high cost of purchasing them as well as the side effects they leave in the human body. This display of medical knowledge seems to be an effective way of convincing commuters to patronize their products. It is interesting to note that not only the uneducated public patronizes these traditional hawkers but the educated public also and some who belong to the middle-income class.

Often this category and the former category, namely, the hawkers of Asian drugs complement each other as it is not uncommon to see traditional medicine hawkers also selling Asian drugs. These two categories of health providers are the most common sources of healthcare service among the vast majority of low-income earners in urban centers, thereby occupying a strategic position in healthcare delivery in Nigeria. Skilled practitioners of traditional medicine although could be found in urban centers are predominantly the major source of healthcare in rural areas. They still retain the informal traditional structure of healthcare, but they have also introduced monetary rewards for the health services they render. While scholars have argued that traditional medical practitioners lack precise knowledge of diseases and have been criticized for the unhygienic environment in which they operate as well as lack of standardization of their therapy, they still constitute an important source of healthcare delivery in Nigeria. Although it is true that some practitioners do not have precise knowledge and skills to handle some form of ailments, credit must be given to them for their ability to treat common diseases and sometimes complex ailments such as mental illness, thereby creating stability in rural communities. Despite the general onslaught of medical practitioners and health scholars on traditional medicine and its practitioners, the fact remains that

#### Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable… DOI: http://dx.doi.org/10.5772/intechopen.85978

very few studies have been carried out to identify areas of relative strengths of traditional health practitioners. The general tendency of discussing traditional medicine as monolithic and unspecialized is grossly misleading and gives the erroneous impression that traditional medical practitioners are static in their knowledge and do not in any way improve upon the existing knowledge they received during their training. The policies have neglected these critical areas of healthcare provision, and the need to evolve some innovative ways of incorporating them into the overall healthcare policy must be initiated, developed, and executed.

Similar to the above, very few scholars have discussed the emergence and prevalence of religious and spiritual health centers and the role they play in healthcare delivery. These centers are different from missionary hospitals that were discussed above. By religious/spiritual health centers, we mean the rise of new religious movements (such as Pentecostalism and syncretic forms) as major providers of healthcare services that rely on patients' faith and spiritual leaders' ability to manipulate spiritual elements to achieve miraculous healing. By employing religious artifacts and relying on the efficacy of prayer for healing purposes, prophets and pastors encourage their congregation to combine faith with Western medicine or to wholly depend on the supernatural for their healing and miracles. Religious/spiritual health centers began to emerge as a major alternative source of healing in the 1980s. This is not surprising as it coincides with the period when the government public hospitals began to lose their appeal as a result of their neglect by the government. The patronage of this form of healthcare cuts across all spectrum of socioeconomic status. Those who patronize this form of healthcare, however, compliment the services with other forms of health provision; religious extremists completely rely on this form of healthcare for various ailments including child delivery and reproductive health more generally. These health providers may constitute a tiny minority, their influence is increasing, nevertheless, and they are attracting people from all cadre of the social strata.

#### 7. Toward an alternative model for equitable healthcare delivery

The complex relationship between health-seeking behavior, the production and distribution of medicines, and health conditions in Nigeria requires a perceptive understanding of their interconnectedness and the development of an appropriate framework that will synthesize these patterns toward developing health policies that will reduce mortality and morbidity rates as well as improve the quality of life of citizens. The Nigerian government has not made significant progress in reducing maternal and child mortality as well as meeting the United Nations' health-related millennium development goals and the current sustainable development goals precisely because of this lack of coordination in the health sector. The neoliberal transformation in the health sector with its global perspective that anchors its principles on free market enterprise does not square with the sociocultural reality in Nigeria. While neoliberal reform took for granted basic social and economic factors in developing its structure and modalities, the neglect of these factors has far-reaching consequences in dealing with health issues in Nigeria. One of such sociocultural factors is the health-seeking behavior of citizens. In Europe and North America, response to ill health is essentially unidirectional and embraces Western medicine, but the same is not true in Nigeria as has been espoused in this paper. This is not to say that citizens in the West do not explore other forms of healthcare; what is essential is that they mostly utilize other sources such as yoga and acupuncture, among others, as complimentary medicines.

tonic, general pain killers, and other drugs that are associated with common health complaints associated with this group of people. The majority of customers who patronize drug peddlers are those in the low-income bracket, and although may patronize chemist shops, their major source of drug supply is through peddlers who also act as health advisers. These health "advisers" are usually strategically positioned in busy bus stops, marketplaces, and commercial busses. Traditional drug hawkers, like drug peddlers, also meet the need of specific categories of clients although sometimes the clientele spectrum cuts across economic classes. The traditional hawkers represent people who have some knowledge of traditional medicine or those who are recruited by traditional medical experts. Usually most of these traditional medicines are packaged in various forms (in bottles, wrapped in paper, nylon sachet, etc.) which are sold to the public. The illness types they target include children-related diseases (such as infections, diarrhea, skin rash, etc.), pile, eczema, dysmenorrhea, ring worm, poor sexual performance, and low sperm count, among others. This category of health providers enjoys large patronage primarily because of the low cost of the drugs and the cultural engagement the providers have with their customers. The cost of these traditional drugs is relatively cheap because they are locally sourced, while hawkers display a high level of familiarity with the drugs they sell and the diseases they are supposed to cure [22]. It is common to see these hawkers in strategic points such as crowded bus stops, marketplaces, and commercial busses (a major means of transport for low-income earners). They advertise their products with bull horns and other forms of public address systems to attract their audience. Sometimes they use patients who are suffering from ailments they

Universal Health Coverage

claim their drugs can cure to demonstrate the efficacy of their products.

public also and some who belong to the middle-income class.

52

The marketing strategy of these hawkers is also displayed in commercial busses by engaging commuters first by praying in the local language and wishing everyone "Alafia" or good health. The hawker then proceeds by listing series of symptoms associated with a variety of diseases and then presenting their audience with the drugs that are applicable to cure the ailment. It is not uncommon to hear them discuss about Western medicines and their efficacy, but they are quick to also point out the high cost of purchasing them as well as the side effects they leave in the human body. This display of medical knowledge seems to be an effective way of convincing commuters to patronize their products. It is interesting to note that not only the uneducated public patronizes these traditional hawkers but the educated

Often this category and the former category, namely, the hawkers of Asian drugs complement each other as it is not uncommon to see traditional medicine hawkers also selling Asian drugs. These two categories of health providers are the most common sources of healthcare service among the vast majority of low-income earners in urban centers, thereby occupying a strategic position in healthcare delivery in Nigeria. Skilled practitioners of traditional medicine although could be found in urban centers are predominantly the major source of healthcare in rural areas. They still retain the informal traditional structure of healthcare, but they have also introduced monetary rewards for the health services they render. While scholars have argued that traditional medical practitioners lack precise knowledge of diseases and have been criticized for the unhygienic environment in which they operate as well as lack of standardization of their therapy, they still constitute an important source of healthcare delivery in Nigeria. Although it is true that some practitioners do not have precise knowledge and skills to handle some form of ailments, credit must be given to them for their ability to treat common diseases and sometimes complex ailments such as mental illness, thereby creating stability in rural communities. Despite the general onslaught of medical practitioners and health scholars on traditional medicine and its practitioners, the fact remains that

The conspicuous neglect in Nigeria's health policies in the variety of ways of seeking healthcare has greatly undermined the reality; hence the key principles of equity and coverage are severely compromised. Furthermore, the organic structure of the Ministry of Health even though has clearly defined hierarchy with local governments in charge of healthcare provision at the grassroots, state governments in charge of general hospitals in urban and semi-urban centers, and the federal government coordinating these tiers including tertiary health institutions and specialist hospitals, there is no officially recognized structure that coordinates other forms of healthcare providers. This lack of cooperation either at the federal or state government and the scattered informal healthcare providers is critical in understanding why various types of health providers with questionable skills and competence flourish in the country. This factor could be identified as the singular most important reason why mortality rates in Nigeria are still high especially in urban and semi-urban centers. On the other hand, mortality rates are also high in rural areas not necessarily because of the absence of state presence in these areas but because traditional medical knowledge has, since independence, been grossly neglected, thereby giving room for quacks to hijack by masquerading themselves as skilled medical practitioners. These traditional quacks and charlatans are primarily responsible for the high mortality rates that are recorded in rural communities. To overcome this challenge, the government needs to erect structures to coordinate the activities of skilled traditional medical practitioners and set up a formal standard to exclude quacks. In the long term, the government needs to set up research institutes that will encourage and support skilled traditional medical practitioners to document, research into the working models of traditional medicines, and explore ways of improving such knowledge. Since rural dwellers are comfortable with traditional medicine and because traditional healthcare practitioners have devised informal but effective ways of relating with patients in rural communities, government and medical research scientists need to explore these ways of patient-doctor relationship to serve as important innovations for policy implementation. Studies have shown that the formal and sometimes arrogant doctor-patient relationship in government hospitals is a significant factor why utilization is low [23–25]. Exploring this important dimension of healthcare provision and identifying alternative ways that are more culturally sensitive to the people will go a long way in achieving universal health coverage.

the ability of the government to sustain the huge cost that is associated with healthcare delivery. User fee experience in Africa toward the purchase of Western drugs indicates varied results. For example, Gilson [14] in her review of user fee experience on the continent noted that a significant number of African countries have not benefited from this kind of healthcare reform. Similarly, the review made by Lagarde and Palmer [27] regarding user fee experience in Africa indicates varied experiences with Nigeria having recorded mixed utilization rates. One reason for these mixed results is the complete reliance of African government on the importation of Western drugs and other consumables without a concomitant framework for the production of traditional medicines. The relative economic weakness of most African countries and their low GDP make it extremely difficult for African countries to sustain this expensive enterprise. As noted above, while Nigerians, especially those in urban centers, have embraced Western medicine and some can even afford it, majority of the citizens in rural areas as well as the urban poor are still comfortable with traditional medicine, and it is within their reach. There is a need therefore for the government to include in its health policy and within the ambit of the Federal Ministry of Health to encourage the local production and fair distribution of African medicines. Such herbal production should be closely monitored to meet the basic standards that the government will set for the purpose of quality control. Such efforts will not only create jobs for indigenous citizens, but more importantly, indigenous medical knowledge will also become fully developed and contribute to global herbal knowledge. Such projects when embarked upon will trigger a series of development within the country, one of such being the need to intensify campaign for faunal and floral renewal as these are the primary sources of

Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable…

DOI: http://dx.doi.org/10.5772/intechopen.85978

The pervasiveness of religion in Nigeria and the increasing use of spirituality to meet health needs are critical in the healthcare equation even if not for curative purposes, but for therapeutic processes. Studies have shown that religion and spirituality are important coping strategies that patients use as part of their therapy. Studies conducted by Koenig [28] and in an extensive review of the literature [29] revealed a positive relationship between religion/spirituality and health outcomes; these results have far-reaching implications for healthcare delivery and health policy formulation in Nigeria especially so when almost all citizens have some religious affiliation and are spiritual in nature. Although still informal in the country, there are indications that both patients and providers actively seek the spiritual assistance of religious members as part of the therapeutic package. While this is a positive development, there is a need for the government to officially recognize this form of

healthcare and incorporate it in its health policy for proper coordination.

independence in 1960. While significant progress was made in the first two decades, the economic downturn resulting from the plummeting of oil price of which Nigeria was dependent led to a series of twists and turns in the health sector. The structural adjustment program signaled a significant shift from a predominantly welfare scheme to the introduction of user fees and the subsequent prolifer-

ation of private healthcare provision. The chaos that followed this highly

unregulated private healthcare and the introduction of fake drugs into the market precipitated an unprecedented maternal and child mortality as well as a general reduction of life expectancy in Nigeria. This chaotic situation led to the launching of the National Insurance Scheme that encouraged co-payment for healthcare services.

Healthcare delivery has undergone tremendous transformation since Nigeria's

traditional medicine.

8. Conclusion

55

The recognition of African medicines and their practitioners by the WHO and its recommendation to African governments to adopt it in their health policy are in order, and there seems to be some progress made in this direction. For example, the number of African countries with national African medicine policies increased from 8 in 1999–2000 to 39 in 2010, and those with national African medicine strategic plans rose from 0 to 18. Countries' regulatory frameworks increased from 1 in 1999–2000 to 28 in 2010. Also, by 2010 eight countries had institutionalized training programs for African medicine practitioners [26].

However, despite the abovementioned progress, the issue of sustainability is still a recurring decimal in the analysis of healthcare provision in Africa. In Nigeria, as in other African countries, approach to healthcare sustainability still persistently tilts toward a global capitalist perspective which attempts to address this issue by encouraging the government to expand its budgetary allocation to the health sector for the supply of very expensive Western medicines that are beyond the reach of the average Nigerian. For example, the WHO has subscribed a minimum of 25, 18, and 14% at various times as the minimum budgetary allocation for healthcare. However, with poor economic craftsmanship, structural adjustment programs that were implemented in most African countries, corruption among government officials, and the competing needs of other sectors of the society have all undermined

#### Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable… DOI: http://dx.doi.org/10.5772/intechopen.85978

the ability of the government to sustain the huge cost that is associated with healthcare delivery. User fee experience in Africa toward the purchase of Western drugs indicates varied results. For example, Gilson [14] in her review of user fee experience on the continent noted that a significant number of African countries have not benefited from this kind of healthcare reform. Similarly, the review made by Lagarde and Palmer [27] regarding user fee experience in Africa indicates varied experiences with Nigeria having recorded mixed utilization rates. One reason for these mixed results is the complete reliance of African government on the importation of Western drugs and other consumables without a concomitant framework for the production of traditional medicines. The relative economic weakness of most African countries and their low GDP make it extremely difficult for African countries to sustain this expensive enterprise. As noted above, while Nigerians, especially those in urban centers, have embraced Western medicine and some can even afford it, majority of the citizens in rural areas as well as the urban poor are still comfortable with traditional medicine, and it is within their reach. There is a need therefore for the government to include in its health policy and within the ambit of the Federal Ministry of Health to encourage the local production and fair distribution of African medicines. Such herbal production should be closely monitored to meet the basic standards that the government will set for the purpose of quality control. Such efforts will not only create jobs for indigenous citizens, but more importantly, indigenous medical knowledge will also become fully developed and contribute to global herbal knowledge. Such projects when embarked upon will trigger a series of development within the country, one of such being the need to intensify campaign for faunal and floral renewal as these are the primary sources of traditional medicine.

The pervasiveness of religion in Nigeria and the increasing use of spirituality to meet health needs are critical in the healthcare equation even if not for curative purposes, but for therapeutic processes. Studies have shown that religion and spirituality are important coping strategies that patients use as part of their therapy. Studies conducted by Koenig [28] and in an extensive review of the literature [29] revealed a positive relationship between religion/spirituality and health outcomes; these results have far-reaching implications for healthcare delivery and health policy formulation in Nigeria especially so when almost all citizens have some religious affiliation and are spiritual in nature. Although still informal in the country, there are indications that both patients and providers actively seek the spiritual assistance of religious members as part of the therapeutic package. While this is a positive development, there is a need for the government to officially recognize this form of healthcare and incorporate it in its health policy for proper coordination.

#### 8. Conclusion

The conspicuous neglect in Nigeria's health policies in the variety of ways of seeking healthcare has greatly undermined the reality; hence the key principles of equity and coverage are severely compromised. Furthermore, the organic structure of the Ministry of Health even though has clearly defined hierarchy with local governments in charge of healthcare provision at the grassroots, state governments in charge of general hospitals in urban and semi-urban centers, and the federal government coordinating these tiers including tertiary health institutions and specialist hospitals, there is no officially recognized structure that coordinates other forms of healthcare providers. This lack of cooperation either at the federal or state government and the scattered informal healthcare providers is critical in understanding why various types of health providers with questionable skills and competence flourish in the country. This factor could be identified as the singular most important reason why mortality rates in Nigeria are still high especially in urban and semi-urban centers. On the other hand, mortality rates are also high in rural areas not necessarily because of the absence of state presence in these areas but because traditional medical knowledge has, since independence, been grossly neglected, thereby giving room for quacks to hijack by masquerading themselves as skilled medical practitioners. These traditional quacks and charlatans are primarily responsible for the high mortality rates that are recorded in rural communities. To overcome this challenge, the government needs to erect structures to coordinate the activities of skilled traditional medical practitioners and set up a formal standard to exclude quacks. In the long term, the government needs to set up research institutes that will encourage and support skilled traditional medical practitioners to document, research into the working models of traditional medicines, and explore ways of improving such knowledge. Since rural dwellers are comfortable with traditional medicine and because traditional healthcare practitioners have devised informal but effective ways of relating with patients in rural communities, government and medical research scientists need to explore these ways of patient-doctor relationship to serve as important innovations for policy implementation. Studies have shown that the formal and sometimes arrogant doctor-patient relationship in government hospitals is a significant factor why utilization is low [23–25]. Exploring this important dimension of healthcare provision and identifying alternative ways that are more culturally sensitive to the people will go a long way in achieving universal

The recognition of African medicines and their practitioners by the WHO and its recommendation to African governments to adopt it in their health policy are in order, and there seems to be some progress made in this direction. For example, the number of African countries with national African medicine policies increased from 8 in 1999–2000 to 39 in 2010, and those with national African medicine strategic plans rose from 0 to 18. Countries' regulatory frameworks increased from 1 in 1999–2000 to 28 in 2010. Also, by 2010 eight countries had institutionalized

However, despite the abovementioned progress, the issue of sustainability is still a recurring decimal in the analysis of healthcare provision in Africa. In Nigeria, as in other African countries, approach to healthcare sustainability still persistently tilts toward a global capitalist perspective which attempts to address this issue by encouraging the government to expand its budgetary allocation to the health sector for the supply of very expensive Western medicines that are beyond the reach of the average Nigerian. For example, the WHO has subscribed a minimum of 25, 18, and 14% at various times as the minimum budgetary allocation for healthcare. However, with poor economic craftsmanship, structural adjustment programs that were implemented in most African countries, corruption among government officials, and the competing needs of other sectors of the society have all undermined

training programs for African medicine practitioners [26].

health coverage.

Universal Health Coverage

54

Healthcare delivery has undergone tremendous transformation since Nigeria's independence in 1960. While significant progress was made in the first two decades, the economic downturn resulting from the plummeting of oil price of which Nigeria was dependent led to a series of twists and turns in the health sector. The structural adjustment program signaled a significant shift from a predominantly welfare scheme to the introduction of user fees and the subsequent proliferation of private healthcare provision. The chaos that followed this highly unregulated private healthcare and the introduction of fake drugs into the market precipitated an unprecedented maternal and child mortality as well as a general reduction of life expectancy in Nigeria. This chaotic situation led to the launching of the National Insurance Scheme that encouraged co-payment for healthcare services. Although these efforts have recorded some gains, the result is still far from the expected target of the federal government which was to meet the MDGs. We have argued in this paper that the neoliberal reforms in the health sector, which is today epitomized in the NHIS, are defective in significant ways leading to problems of inequity, accessibility, and sustainability. While the core of the health policy may be maintained to continue to cater for the elite group in Nigeria, there is a need to expand the boundaries of the policy to accommodate and recognize other forms of healthcare service including indigenous healing practices and religious/spiritual healing by taking into consideration the complex nature of Nigeria's health-seeking behavior. Such expansion will not only reduce maternal and child mortality due to increase in accessibility and utilization, but more importantly, it will help to address the issue of sustainability. Generating drugs locally will meet the basic health needs of citizens especially those in rural communities, empower rural folks, and involve them as important stakeholders in the process of transforming Nigeria into a healthier nation.

References

[1] WHO. Trends in Maternal Mortality: 1990 to 2015. Estimates by WHO, UNICEF, UNFPA, World Bank Group and the United Nations Population Division. Geneva, 2015. Accessed from: https://data.unicef.org/wp-content/ uploads/2015/12/MMR\_executive\_ summary\_final\_mid-res\_243.pdf Accessed [March 16, 2019]

DOI: http://dx.doi.org/10.5772/intechopen.85978

Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable…

scheme limitations in Nigeria. African Development. 2016;XLI(4):29-45

[11] Chukuneke FN, Ezeonu CT, Onyire BN, Ezeonu PO, Ifebunandu N, Umeora MC. Health seeking behaviour and access to health care facilities at the

primary level in Nigeria: Our experience. Ebonyi Medical Journal.

[12] Alabi CT. Nigeria: Poor Nigerians Still Lack Access to Basic Health Care— Physicians. Daily Trust, 8 April 2018. Available from: https://allafrica.com/ stories/201804090025.html [Accessed:

[13] Riman HB, Akpan ES. Healthcare financing and health outcomes in Nigeria: A state level study using multivariate analysis. International Journal of Humanities and Social

[14] Gilson L. The lessons of user fee experience in Africa. Health Policy and

[15] The World Bank. Nigeria: Bi-Annual Economic Update: Fragile Economy. 2017. Available from: http://documents.

349511494584937819/pdf/114996-WP-P163291-PUBLIC-NEUNoFinalfromPub lisher.pdf [Accessed: March 16, 2019]

[16] Wang'ombe J. Cost recovery strategies: The sub-Saharan Africa experience. Paper presented at the international conference of the World Bank in Washington DC; 10–11 March;

[17] Eboh A, Akpan GO, Akintoye AE. Health care financing in Nigeria: An assessment of the National Health Insurance Scheme (NHIS). European Journal of Business and Management.

1997

2016;8(27):24-34

Planning. 1997;12(4):273-285

worldbank.org/curated/en/

2012;11(2):51-57

March 16, 2019]

Science. 2012;2:296-309

[2] UNICEF. 2019. Available from: https://www.unicef.org/nigeria/ situation-women-and-children-nigeria

[3] WHO. 2019. Available from: https:// www.who.int/countries/nga/en/ [Accessed: March 15, 2019]

[4] WHO. Sustainable health financing structures and universal coverage. Report of the sixty-fourth World Health

[5] Federal Ministry of Health. National Health Financing Policy. Abuja, Nigeria;

[6] Ityavyar DA. Background to the development of health services in Nigeria. Social Science and Medicine.

[7] Alubo SO. Death for sale: A study of drug poisoning and deaths in Nigeria. Social Science and Medicine. 1994;

[8] Akinyandenu O. Counterfeit drugs in Nigeria: A threat to public health. African Journal of Pharmacy and Pharmacology. 2013;7(36):2571-2257

[9] Olukoshi A. Introduction: From crisis to adjustment in Nigeria. In: Olukoshi A,

[10] Asakitikpi AE. Healthcare targets and the national health insurance

editor. The Politics of Structural Adjustment in Nigeria. Vol. 1993. Ibadan: Heinemann; 1993. pp. 1-15

[Accessed: March 15, 2019]

Assembly. Geneva; 2018

1987;24(6):487-499

38(1):97-103

57

2006

#### Conflict of interest

The author declares no conflict of interest for this article.

### Author details

Alex E. Asakitikpi Monash University South Africa, Johannesburg, South Africa

\*Address all correspondence to: alex.asakitikpi@monash.edu

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Healthcare Coverage and Affordability in Nigeria: An Alternative Model to Equitable… DOI: http://dx.doi.org/10.5772/intechopen.85978

#### References

Although these efforts have recorded some gains, the result is still far from the expected target of the federal government which was to meet the MDGs. We have argued in this paper that the neoliberal reforms in the health sector, which is today epitomized in the NHIS, are defective in significant ways leading to problems of inequity, accessibility, and sustainability. While the core of the health policy may be maintained to continue to cater for the elite group in Nigeria, there is a need to expand the boundaries of the policy to accommodate and recognize other forms of healthcare service including indigenous healing practices and religious/spiritual healing by taking into consideration the complex nature of Nigeria's health-seeking behavior. Such expansion will not only reduce maternal and child mortality due to increase in accessibility and utilization, but more importantly, it will help to address the issue of sustainability. Generating drugs locally will meet the basic health needs of citizens especially those in rural communities, empower rural folks, and involve them as important stakeholders in the process of transforming Nigeria into a

The author declares no conflict of interest for this article.

Monash University South Africa, Johannesburg, South Africa

\*Address all correspondence to: alex.asakitikpi@monash.edu

provided the original work is properly cited.

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

healthier nation.

Author details

Alex E. Asakitikpi

56

Conflict of interest

Universal Health Coverage

[1] WHO. Trends in Maternal Mortality: 1990 to 2015. Estimates by WHO, UNICEF, UNFPA, World Bank Group and the United Nations Population Division. Geneva, 2015. Accessed from: https://data.unicef.org/wp-content/ uploads/2015/12/MMR\_executive\_ summary\_final\_mid-res\_243.pdf Accessed [March 16, 2019]

[2] UNICEF. 2019. Available from: https://www.unicef.org/nigeria/ situation-women-and-children-nigeria [Accessed: March 15, 2019]

[3] WHO. 2019. Available from: https:// www.who.int/countries/nga/en/ [Accessed: March 15, 2019]

[4] WHO. Sustainable health financing structures and universal coverage. Report of the sixty-fourth World Health Assembly. Geneva; 2018

[5] Federal Ministry of Health. National Health Financing Policy. Abuja, Nigeria; 2006

[6] Ityavyar DA. Background to the development of health services in Nigeria. Social Science and Medicine. 1987;24(6):487-499

[7] Alubo SO. Death for sale: A study of drug poisoning and deaths in Nigeria. Social Science and Medicine. 1994; 38(1):97-103

[8] Akinyandenu O. Counterfeit drugs in Nigeria: A threat to public health. African Journal of Pharmacy and Pharmacology. 2013;7(36):2571-2257

[9] Olukoshi A. Introduction: From crisis to adjustment in Nigeria. In: Olukoshi A, editor. The Politics of Structural Adjustment in Nigeria. Vol. 1993. Ibadan: Heinemann; 1993. pp. 1-15

[10] Asakitikpi AE. Healthcare targets and the national health insurance

scheme limitations in Nigeria. African Development. 2016;XLI(4):29-45

[11] Chukuneke FN, Ezeonu CT, Onyire BN, Ezeonu PO, Ifebunandu N, Umeora MC. Health seeking behaviour and access to health care facilities at the primary level in Nigeria: Our experience. Ebonyi Medical Journal. 2012;11(2):51-57

[12] Alabi CT. Nigeria: Poor Nigerians Still Lack Access to Basic Health Care— Physicians. Daily Trust, 8 April 2018. Available from: https://allafrica.com/ stories/201804090025.html [Accessed: March 16, 2019]

[13] Riman HB, Akpan ES. Healthcare financing and health outcomes in Nigeria: A state level study using multivariate analysis. International Journal of Humanities and Social Science. 2012;2:296-309

[14] Gilson L. The lessons of user fee experience in Africa. Health Policy and Planning. 1997;12(4):273-285

[15] The World Bank. Nigeria: Bi-Annual Economic Update: Fragile Economy. 2017. Available from: http://documents. worldbank.org/curated/en/ 349511494584937819/pdf/114996-WP-P163291-PUBLIC-NEUNoFinalfromPub lisher.pdf [Accessed: March 16, 2019]

[16] Wang'ombe J. Cost recovery strategies: The sub-Saharan Africa experience. Paper presented at the international conference of the World Bank in Washington DC; 10–11 March; 1997

[17] Eboh A, Akpan GO, Akintoye AE. Health care financing in Nigeria: An assessment of the National Health Insurance Scheme (NHIS). European Journal of Business and Management. 2016;8(27):24-34

[18] Onyeji E. NHIS: Regulators should be Blamed for Poor Coverage of Nigerians—Official. Premium Times, Sunday, March 3 2019. Retrieved from: https://www.premiumtimesng.com/ news/more-news/260920-nhisregulators-blamed-poor-coveragenigerians-official.html [Accessed: March 16, 2019]

[19] Edeh JN, Udoikah JM. National Health Insurance Scheme and healthcare administration in Nigeria: An assessment. International Journal of Social Science Research. 2015;6(4): 2383-2394

[20] Alubo SO. Underdevelopment and the health care crisis in Nigeria. Medical Anthropology. 1985;9:319-335

[21] Alubo SO, Hunduh V. Medical dominance and resistance in Nigeria's health care system. International Journal of Health Services. 2017;47(4):778-794

[22] Makanjuola AB. A cost comparison of traditional and orthodox mental health care. The Nigerian. Postgraduate Medical Journal. 2003;10(3):155-161

[23] Abiola T, Udofia O, Abdullahi AT. Patient-doctor relationship: The practice orientation of doctors in Kano. Nigerian Journal of Clinical Practice. 2014;17(2): 241-247

[24] Onotai LO, Ibekwe U. The perception of patients of doctor-patient relationship in otorhinolaryngology clinics of the University of Port Harcourt Teaching Hospital (UPTH) Nigeria. Port Harcourt Medical Journal. 2012;6(1):65-73

[25] Onotai LO. Inpatients' perception of doctors' attitude towards the management of their ill health in a Nigerian University Teaching Hospital. IOSR Journal of Dental and Medical Sciences. 2017;16(1):102-109

[26] World Health Organization. Progress Report on Decade of Traditional Medicine in the African Region. AFR/RC61/PR2, 5 July 2011. Available from: https://afro.who.int/ sites/default/files/sessions/working\_ documents/AFR-RC61-PR-2-Progressreport-on-decade-of-traditionalmedicine-in-the-African-Region.pdf [Retrieved: March 20, 2019]

[27] Lagarde M, Palmer N. The impact of user fees on health service utilization in low- and middle-income countries: How strong is the evidence? Bulletin of the World Health Organization. 2008; 86(11):817-908

[28] Koenig HG. Religion, Spirituality and Health: The Research and Clinical Implications. 2012. Available from: http://www.hindawi.com/journals/isrn/ 2012/278730/[IPMC [Retrieved: March 16, 2019]

[29] Koenig HG. Religion, spirituality, and health: A review and update. Advances in Mind-Body Medicine. 2015; 29(3):19-26

**59**

Section 3

Providing Quality
