Cash-flow analysis for the Catastrophic Expenses Fund

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Cash-flow analysis for the

Catastrophic Expenses Fund

María-Cristina Gutiérrez-Delgado

Economic Analysis Unit,

Mexican Ministry of Health

Second International Colloquium Dresden, April 2004.

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Contents.

• Background.

• Reform to the Mexican General Health Law.

• The Catastrophic Expenses Fund.

• Results, conclusions and recommendations.

• Next steps.

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Background.

The Mexican health system.

Private sector Middle class Poor Urban/Rural Public Private

Functions

Provision Financing Stewardship Non-salaried workers in informal sector

Population groups

Federal and state Social Security IMSS ISSSTE Salaried workers in formal sector

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Financial characteristics.

• 1. Level: insufficient investment (5.8% of GDP)

• 2. Source: predominance of out-of-pocket payments (55%) • 3. Distribution

– Among populations: 1.7 times between insured and uninsured

– Among states: 7 to 1 between the state with the highest expenditure on the insured and the one with the lowest on the uninsured

• 4. State contributions: 109 to 1

• 5. Allocation items: payroll expenditure vs. investment

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Distribution of healthcare expenditure.

42%

3%

55%

Public Out-of-pocket Pre-paid services Federal Gv´t State Gv´t Social Security Uninsured 31.8% 6.6% 61.6% 31.8% 61.6%

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Reform to the General Health Law.

System of Social Protection in Health.

Aims

• Offer financial protection to uninsured through a

public healthcare insurance scheme.

• Promote a culture of pre-payment among uninsured.

• Strengthen a culture of preventive healthcare.

• Decrease the number of uninsured families facing poverty

because of healthcare costs at point of delivery.

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System of Social Protection in Health.

Healthcare goods and funds.

Personal health services (Popular Health Insurance) Public health goods

Budget of the Federal Ministry of Health Catastrophic Expenses Fund Personal Health Services Fund Community Health Services Fund

Funds

•Catastrophic interventions •Essential health interventions •Stewardship function

•Information, research &

human resources development

•Community health

services

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Structure of Financial Contributions.

Universal Health Insurance.

Source: Mexican Ministry of Health,2003. **Proposal for future reform to ISSSTE Law.

Popular Health Insurance, SSPH

(informal sector,

self-employed and unself-employed)

ISSSTE (public-sector salaried employees) ** IMSS (private-sector salaried employees) Federal Government (social contribution) State Gov´t Public employer Contributors Public Insurance Scheme Federal Gov´t Employee Employee Family Private employer Federal government (social contribution) Federal government (social contribution) solidarity contribution

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Structure of Financial Contributions.

SSPH.

Social Contribution Federal Solidarity Contribution State Solidarity Contribution Contributions to SSPH: USD$675.52 per family during 2004

89 %

USD$675.52

USD$601.21 Personal Health Services 8 %

3 %

USD$ 54.04 Catastrophic Expenses

USD$ 20.27 Annual budget reserve

Family Contribution

Operative

reserve for drugs and medical material necessary for essential interventions According to socioeconomic conditions

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The Catastrophic Expenses Fund.

Source: Mexican Ministry of Health,2003.

Aim

Purchasing of covered catastrophic expenses.

Catastrophic expenses

Those derived from the treatment of diseases which pose a

financial burden to the SSPH.

Coverage of catastrophic expenses will be gradual

following criteria defined in the General Health Law.

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Diseases or treatments that

generate catastrophic expenses.

The General Health Council is responsible for the identification of diseases, definition of treatments and drugs that generate catastrophic expenses for the SSPH.

Total

Dialysis

Transplants

Neonatal intensive care Rehabilitation

No.

53 2 6 8 6

No.

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Financial cash-flow.

CEF

Covered

Services

Interest Balance of annual budget reserve at

end of tax year

Cash in-flow

(income)

Payment to authorized providers (Operative expenses)

Cash out-flow

(expenses)

Administrative expenses 8% of Federal & States contributions

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Financial sufficiency.

How many diseases or treatments can

be covered with available resources?

• Short and mid-term financial sustainability.

• Selection of diseases, based on budgetary

resources, cost-effectiveness, infrastructure and

national healthcare priorities, is responsibility of

the National Commission of Social Protection in

Health.

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Available information.

Set 4 plus bone marrow transplant. 5

Set 1: 2004; Set 2: 2005; Set 3: 2006; Set 4: 2009; Set 5: 2010.

6

Set 3 plus kidney transplant. 4

Set 2 plus breast cancer. 3

Set 1 plus acute myocardial infarctation. 2

HIV/AIDS, acute lymphoblastic leukemia, cervix-uterine cancer.

1

Disease or treatment

Set

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Available information.

Short & mid-term projections.

Biometric: Target population; affiliation rates; incidence rates; mortality rates not included.

Financial: Minimum daily wage, interest rates; inflation rates.

Expenses: Annual number of cases per disease/treatment; annual average cost per case; annual

administrative expenses; quarterly payment. Income: Quarterly budget income; interest accrued

quarterly; balance of annual budget reserve at end of tax year.

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Results under initial assumptions.

Paquete 1 -5 10 15 2004 2005 2006 2007 2008 2009 2010

Miles de millones de pesos

Año Acumulado Gasto Paquete 4 -5 10 15 2004 2005 2006 2007 2008 2009 2010

Año

Acumulado Gasto

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Results discounting the inflation effect.

Paquete 1 -5 10 15 2004 2005 2006 2007 2008 2009 2010

Año

Acumulado Gasto

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Results under decrease of annual

average cost per case.

Paquete 1 -5 10 15 2004 2005 2006 2007 2008 2009 2010

Año

Acumulado Gasto

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Results under increase of annual

average cost per case.

Paquete 1 -5 10 15 2004 2005 2006 2007 2008 2009 2010

Año

Acumulado Gasto

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Conclusions and recommendations.

• Key factor for sufficiency is the initial number of

diseases or interventions to be covered.

• Second most important factor is annual average cost

per case.

• Ratio between general and medical services inflation

rates is very important.

• Increases in target population show little impact in

cash-flow, but might become important once the

“universal coverage” is attained.

• Results help recommending to policy-makers starting

operations with most conservative set.

• Annual evaluation of CEF performance for

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Next steps

• Incidence and prevalence rates among target population for

the 53 diseases?

• Mortality rates among target population for the 53 diseases? • Cost of treatment for the 53 diseases?

• Risk premiums for the 53 diseases? • Operative reserve for the CEF?

Cash-flow analysis for the Catastrophic Expenses Fund