A sustainable healthcare funding model
Today, an overwhelming number of governments worldwide are facing a formidable healthcare challenge, the root of which arises directly from rapidly rising costs.
Over the past few decades, healthcare spending has on a global level surged at an alarming pace as a result of a number of factors, including high prevalence of noncommunicable diseases (NCDs); ageing populations; rapid evolution of medical technology, and soaring life expectancies.
There is no doubt that the economic burden of healthcare is a complex matter one that Gulf Co-operation Council (GCC) states have certainly not been immune to. In recent years, the steadfast growth of healthcare expenditures has taken a particularly heavy toll on GCC governments. Unfortunately, however, this trend shows no sign of abating at least for the next two decades. According to a recent estimate, the regions total healthcare spending could reach US$100 billion by 2028.
In order to address the healthcare cost looming crisis adequately and comprehensively, it is important to understand the root causes first. At present, in the GCC, the vast majority of healthcare spending is funded by governments, and in most GCC countries, healthcare is the second or third largest component of the state budget, after defence and education.
The crux of the problem lies here: a healthcare scheme that is exclusively and solely funded by the government is, simply put, not financially sustainable in the long run, even for rich countries. Healthcare when offered for free, like any other service, will experience infinite demand leading to systematic increased costs.
In line with this, to ensure their healthcare systems sustainability, GCC governments must secure new sources of funding; and this, in turn, entails a greater reliance on the population and the private sector.
This funding formula is already in full motion in both Abu Dhabi and to some extent in the Kingdom of Saudi Arabia, where nationals working in the private sector are offered private health insurance paid for by employers. Qatar has also followed through in the last couple of years with the introduction of a private health insurance scheme by establishing SEHA - the National Health Insurance Company.
Following these examples, GCC states need to redesign their healthcare financing models in ways that align providers behaviour with the needs of a modern and sustainable healthcare system that aims first and foremost at maintaining and improving the health of its population. One of the key levers in shaping providers behaviour is the incentive system used, i.e. the payment model.
One of the most widely used payment models in the region is the Fee For Service model (FFS). The main disadvantage associated with the widely used FFS model is the potential to incentivize providers for activities rather than for outcomes and which can lead to over-consumption of medical services and hence increased costs. It is a model where providers may be incentivized to encourage unnecessary medical interventions and treatments. Ideally, GCC governments should avoid following the same paths as other more developed healthcare systems and move straight towards more sustainable models where health systems are focused on outcomes rather than on ensuring capacity.
There are two essential steps that GCC governments must take to control the rise in healthcare costs successfully. Firstly, as previously mentioned, they have to diversify their healthcare funding sources. Secondly, GCC countries must shift from a traditional FFS payment model to a more diverse payment structure, including outcomes-based payment model for certain procedures. This is a formidable task in this region as public hospitals (they are the dominant providers across the GCC countries) have been traditionally funded through global budgets. Governments typically prefer this method as it is fairly predictable, stable, and administratively simple.
The downside of this approach is that it offers little incentive for providers to be efficient or improve quality; also, providers do not have the incentive to change their service offering in response to the population needs or targeted priority areas (e.g. the MERS epidemic in KSA). Private hospitals, on the other hand, generally obtain their funding via FFS payments. That is precisely why it is so imperative that GCC governments adopt a more sophisticated payment structure that mixes and matches the models with objectives they want to achieve and especially introducing the outcomes-based payment model.
Ahead of the curve
Interestingly, the Qatari government is well ahead of the curve when it comes to setting up a multi-source healthcare funding structure. As part of its National Health Strategy 2011-2016 (NHS), devised in conjunction with the objectives of the Qatar National Vision 2030, Qatar has infused a set of reforms into its healthcare sector. These improvements were especially initiated to enhance the overall system and, ultimately, contribute to the development of a healthy population. The NHS comprises a total of 35 health programs, one of which aims to help the nation to transform its universal-access healthcare program into an employer-based health insurance program tailored to meet the needs of both nationals and expatriates.
Qatar has long understood the importance of involving the private sector so it can play a powerful role in its healthcare system including provision and financing. In accordance with this vision, Qatar created a national health fund designed to aggregate sources of funding from the private sector, diversify the sources of risk and establish the foundations of a sustainable healthcare funding model.
This, of course, marks a major milestone in Qatars journey towards a more sustainable healthcare model. Still, the existing system could benefit from a few additional tweaks: for example, even today, the Qatari government uses only a FFS payment model which is driving costs up at an alarming speed. With the further deployment of the health insurance scheme put on temporary hold, it is a great opportunity for Qatar to take stock of its short yet valuable experience in health insurance and identify what has worked and what has not.
We believe that to reap the full rewards of its reform efforts, Qatar will absolutely have to make the transition from a generic FFS model to a more sophisticated payment model and leapfrog over other developed countries by adopting an outcomes-based payment model for certain procedures. Value-based Healthcare (VBHC) is a model of care that aims for the best outcomes for patients based on evidence and facts at the best cost structure. The goal of VBHC is not to minimize costs but to maximize value, defined as patient outcomes divided by costs. To implement VBHC, providers and payers must identify, codify, and promote treatment protocols that are proven to yield better, more cost-effective care. It stands out from the rest by placing patients wellbeing at the core of the equation.
Needless to say, healthcare reform is a multi-faceted, multi-phased process that requires colossal changes across a slew of fronts. For example, besides the structural changes to the system, Qatar will need to continue encouraging its population to be responsible for its own health and continue to promote lifestyle changes intended to optimize citizens overall health and deliver long-term results.
As the cost of healthcare continues to spiral out of control, governments across the GCC will have to follow in Qatars footsteps and institute a more sustainable system. Moving forward, they will also have to look into providing citizens with the right type of care at the right location. This means building more robust home healthcare platforms and dedicated long-term care facilities, which are proven to offer better quality and value.
Date of upload: 10th May 2015
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