TECHNICAL SUPPORT FOR UNIVERSAL HEALTH COVERAGE IN ARMENIA FINANCING UNIVERSAL HEALTH COVERAGE IN ARMENIA: WHY AND HOW? Seemi Qaiser Adanna Chukwuma Carolin Geginat Tania Dmytraczenko Sylvie Bossoutrot The urgent imperative for health reform in Armenia Rationale 1: Armenia is facing a growing burden of non-communicable diseases An Armenian born today can expect to live up to 75 years on average, an increase of seven years since 1990.1 Most of the rise in life expectancy in Armenia has resulted from falls in infectious diseases, and improved survival of children and mothers.1 While Armenians are living longer, Chronic illnesses, like heart disease and diabetes, they are not necessarily living account for over 500,000 years of life lost and healthier lives. Chronic illnesses, 280,000 years lived in disability annually. like heart disease and diabetes, account for over 500,000 years of life lost and 280,000 years lived in disabil- ity annually.2 Also, compared to countries with similar socioeconomic profiles, Armenia has a higher burden of heart disease, stroke, and diabetes.1 FIGURE 1: CHANGE IN BURDEN OF DISEASE IN ARMENIA IN 1990–2019 Both sexes, All ages, Disability-adjusted life years per 100,000 1990 RANK 2019 RANK 1 Cardiovascular diseases 1 Cardiovascular diseases 2 Neoplasms 2 Neoplasms 3 Unintentional injuries 3 Other non-communicable 4 Maternal & neonatal 4 Diabetes & Chronic kidney disease 5 Respiratory infections & Tuberculosis 5 Musculoskeletal disorders 6 Other non-communicable 6 Mental disorders 7 Mental disorders 7 Digestive diseases 8 Musculoskeletal disorders 8 Unintentional injuries 12 Digestive diseases 12 Respiratory infections & Tuberculosis 14 Diabetes & Chronic kidney disease 13 Maternal & neonatal same in 2019 increase in 2019 decrease in 2019 SOURCE: Institute for Health Metrics and Evaluation (IHME), 2021 2 Financing Universal Health Coverage in Armenia: Why and How? Chronic diseases are also an Every year, these illnesses cost the Armenian economic challenge. Every economy over 360 billion AMD due to losses year, these illnesses cost the in workforce productivity and the cost of care. Armenian economy over 360 billion AMD due to losses in workforce productivity and the cost of care (Figure 1).1 Yet, about 3,000 deaths and 53,000 years of life lost could be prevented annually with better access to and quality of health care respectively.3 Rationale 2: Private health spending creates financial barriers to access for the poor and sick For nearly one in five Armenians, In Armenia, out-of-pocket spending rises to an cost is the main barrier to using alarming 85 percent of health spending, higher than health care when needed.4 Afghanistan (76 percent) or Yemen (81 percent). In the average upper-middle -income country, one-third of all health spending is made by households, out-of- pocket (OOP), at the point of care. In Armenia, OOP spending rises to an alarming 85 percent of health spending, higher than Afghanistan (76 percent) or Yemen (81 percent) (Figure 2).4 Private health care spending is akin to a tax on the sick and poor in Armenia. Catastrophic health spending, a measure that captures if households allocate up to 10 percent of total spending to health care, is six times more common in households with at least one person living with hypertension. In 2018, 19 percent of Armenian households experienced catastrophic health spending, more than twice the average of seven percent in Europe. While 20 percent of the poorest households experienced catastrophic health spending, only 16 percent of the rich- est households did.3 FIGURE 2: ARMENIA HAS ONE OF THE HIGHEST LEVELS OF OOP HEALTH SPENDING GLOBALLY 90 OOP as % of Current Health Expenditure Armenia 80 Turkmenistan Azerbaijan 70 Tajikistan 60 Uzbekistan Kyrgyzstan 50 Ukraine Georgia 40 Kazakhstan 30 20 Sweden 10 Germany R2 = 0.7618 France 0 0 2 4 6 8 10 Domestic General Government Health Expenditure as % of GDP SOURCE: WHO Global Health Expenditure Database, 2018 3 OOP spending results in lost oppor- In 2015, the average Armenian visited an tunities to prevent disability, death, outpatient provider four times, far below the and low productivity from chronic average in Europe of seven times per person. diseases. In 2015, the average Arm- enian visited an outpatient provider four times, far below the average in Europe of seven times per person.4 The Armenian experience illustrates the critical role for public financing in ensuring access to care for all, regardless of socioeco- nomic status, a central tenet of Universal Health Coverage (UHC). Rationale 3: Low and inefficient public spending drives financial protection gaps OOP spending for health in Annual public spending in Armenia is USD 52 Armenia is high because public per capita, far lower than that of neighbouring spending on health care is Georgia who spends USD 123 per capita on low. Annual public spending in health care. Armenia is USD 52 per capita, far lower than that of neighbouring Georgia who spends USD 123 per capita on health care.5 At least 85 percent of health spending in Armenia is not pooled and does not spread the financial risks of illness. At the individual level, the size and timing of health spending are largely unknowable, making it difficult to plan for future needs. The net transfer of resources from rich to poor, through pooling, also increases population health and productivity, as the poor tend to have a worse health status.4 Compared to OOP spending, pooling health financing is more equitable and efficient. Health spending decisions tend not to be driven by the potential to advance UHC. The original role of the State Health Agency (SHA) was to contract pro- viders and pay for services covered by the benefits package. However, the SHA has been subordinated to the Ministry of Health (MoH), which through its involvement in service delivery prevents the separation of purchasing and pro- vision, and objective decision-making on provider selection for better quality. Meanwhile, the benefits package only covers limited medicines and hospital services for only 30 percent of the population.1 4 Financing Universal Health Coverage in Armenia: Why and How? FIGURE 3: HOW SPENDING DECISIONS HINDER IMPROVEMENTS IN HEALTH CARE PFM UNLINKED TO INEFFICIENCIES LIMITED FACILITY SERVICE DELIVERY GOALS IN HEALTHCARE ACCOUNTABILITY Lack of consolidated facility- Lack of approved str- Budget program Small-scale level financial information ategy for health sector framentation procurement or fixed asset registries Lack of health-system level framework linking Weaknesses goals, governance, and Underfunding of in internal and policy levers the benefits package external audit HEALTH SERVICE DELIVERY Lack of appr- CONSTRAINTS Lack of local needs Undersupply of oved guidelines reflected in planning skilled health workers for clinical care Inequitable distribu- tion of health workers High OOP Lack of equipment, Gaps in human resour- expenditure drugs, and supplies ces for health regulation INEQUITABLE ACCESS TO CARE GAPS IN QUALITY OF CARE SOURCE: World Bank, 2020 Decisions on provider payment Over 30,000 life years could have been saved in and selection of facilities for 2019 if spending within the budget were optimized, contracting are not tailored to based on health needs and cost-effectiveness. health needs or utilization pat- terns. Benefits package revisions are often driven by political considerations. Over 30,000 life years could have been saved in 2019 if spending within the budget were optimized, based on health needs and cost-effectiveness. In Figure 3, we highlight other opportunities to strengthen public financial management in Armenia to facilitate UHC.6 5 Evidence-driven reforms for UHC in Armenia Considering these challenges, the MoH is championing health financing reforms to ensure universal access to health care, by mobilizing domestic government revenue for health, setting up an accountable and effective purchasing agency, and introducing a benefits package that covers essential medicines, inpatient care, and more as determined by the population’s health needs. FIGURE 4: WORLD BANK TECHNICAL SUPPORT FOR UHC REFORMS IN ARMENIA • Actuarial costing of benefits • Revenue-raising options • Modeling macroeconomic impact of UHC MOBILIZING REVENUE TO FINANCE UHC ENSURING REFORMING SUPPORT FOR VALUE-DRIVEN HEALTH SERVICE UHC IN ARMENIA PUBLIC SPENDING DELIVERY ON HEALTH • Assess primary • Assess public financial health care management • Assess integrated care • Assess purchasing • Hospital quality man- LEARNING FROM in health agement roadmap GLOBAL • Model benefits package EXPERIENCE allocative efficiency • Harvard-World Bank Flagship Course • Study tour to South Korea • Policy and technical discussions SOURCE: World Bank, 2021 At the request of the MoH, the World Bank has provided technical support to inform the design of these reforms, through rigorous analysis, convening stake- holders, and facilitating knowledge exchanges with the other countries (Figure 4). Reports capturing the findings of these analyses have been published under the “Technical Support for Universal Health Coverage in Armenia” series. Below, we summarize three main recommendations for health financing reforms: 6 Financing Universal Health Coverage in Armenia: Why and How? Recommendation 1: Mobilize additional compulsory, pre-paid, and pooled public financing An estimated 310 billion AMD is needed in 2031 to subsidize 95 percent of house- hold expenditure for health care.5 In 2019, the health budget was 103.8 billion AMD, leaving a financing gap of approximately 206 billion AMD.4 The necessary funding should be mobilized through compulsory prepayments with subsidies for vulner- able groups, in line with global evidence, and pooled to share risk and facilitate strategic purchasing of health services. “No nation achieves universal coverage without subsidization and compul- sion. Both elements are essential. Subsidies without compulsion will not work; indeed, they could make matters worse since the healthy flee from the subsi- dized common pool, only to return when they expect to use a great deal of care. Compulsion without subsidies would be a cruel hoax for the millions of poor and sick who cannot afford health insurance.” –Victor Fuchs, 1996 FIGURE 5: SUMMARY OF FISCAL SPACE PROJECTIONS SUMMARY OF FISCAL SPACE PROJECTIONS PROJECTED REVENUE (IN BILLION AMD) 142.9 160 140 113.3 120 94.9 85.7 82.2 100 Reprioritization of health 71.5 68.9 80 Excise tax 49.2 50.1 45.6 53 52 60 Payroll tax 41.1 43 40 23.7 Value-Added tax 22.1 14.3 11.8 20 Increase in turnover tax Reducing threshold 0 turnover tax 2021 2023 2031 YEAR SOURCE: World Bank, 2021 7 Analysis conducted by the Armenia could raise an additional 11.18 - 85.70 billion World Bank has explored AMD of additional fiscal space through taxation in 2021. a range of options, where the final decision will be made by the Government. Armenia could mobilize 50 billion AMD in 2021 by matching peers like Georgia on the percentage of the budget allocated to health. Armenia could raise an additional 11.18 - 85.70 billion AMD of additional fiscal space through taxation in 2021 (Figure 5).5 Regardless of how these funds are raised, we find that GDP growth becomes positive by 2050, due to increases in productivity from better health (Table 1).5,7 TABLE 1: THE ECONOMIC RETURNS TO INVESTING IN UHC IN ARMENIA TAX IMPACT ON SHORT-TERM LONG-TERM Additional SCENARIO GDP (%) revenue by 2031 2021 2050 Total Rich Poor Total Rich Poor (in Billion informal household household informal household household AMD) employment welfare welfare employment welfare welfare Payroll tax -2.85 -0.43 - + + + - - 142.90 Excise tax -4.43 -0.11 - + + + + - 113.37 Value- -1.68 +0.04 - + + + - - 71.45 added tax Direct tax -0.87 +1.00 + + + + + - NA (exclud- ing payroll tax) Corporate -0.52 +0.18 + + + + - + NA income tax SOURCE: World Bank, 2020 negative impact positive impact Recommendation 2: Institute an accountable and independent purchasing agency To maximize value for money, To maximize value for money, there is a need to insti- there is a need to institute an tute an accountable, evidence-driven, and independent accountable, evidence-driven, institution to undertake purchasing of health services and independent institution - including benefits package design, provider payment, to undertake purchasing of facility selection, and provider monitoring. health services - including benefits package design, provider payment, facility selection, and provider moni- toring. For the Armenian population, value means better access, quality, efficiency, and health outcomes. 8 Financing Universal Health Coverage in Armenia: Why and How? We recommend that this agency – SHA or a new body – be able to make objective and transparent decisions and be legally autonomous from the MoH, but account- able to an external advisory board that is chaired by the Minister of Health and involves representatives from patient associations, provider groups, the Ministry of Finance (MoF), and other stakeholders (Figure 6). FIGURE 6: PROPOSED GOVERNANCE STRUCTURE FOR PURCHASING AGENCY EXTERNAL ADVISORY BOARD CHAIR: Minister of Health (Representatives from patient associa- tions, provider associations, the MoH, and the MoF) Oversees hiring of internal management board with legally defined positions Fills a public declaration of interest annually to promote transparency and accountability INTERNAL MANAGEMENT BOARD DIRECTOR Director participates in external advisory board meetings sans voice and vote SOURCE: World Bank, 2020 Given the advantages of pooling, we highly recommend a single purchasing agency be responsible for procuring services within the scope of the benefits package. The roles of private insurers can be limited to providing additional coverage for services outside the package for self-funding individuals and households.4 Recommendation 3: Undertake evidence-driven purchasing for improved access and quality Drawing on the vast amounts of data on population health, service delivery, and pro- vider behavior, the purchaser can make strategic decisions that promote access, quality, and efficiency, in collaboration with the MoH. Financing Universal Health Coverage in Armenia: Why and How? 9 We propose that revisions We propose that revisions of the benefits package be of the benefits package be based on a defined, legally backed process, that incor- based on a defined, legally porates assessments of the disease burden, budgetary backed process, that incor- impact, and cost-effectiveness, in addition to inclusive porates assessments of the stakeholder consultations on proposed revisions. disease burden, budgetary impact, and cost-effectiveness, in addition to inclusive stakeholder consultations on proposed revisions (Figure 7). The responsibility for technical assessments can be housed in a research or academic institution.4 FIGURE 7: AN INCLUSIVE AND OBJECTIVE APPROACH TO BENEFITS PACKAGE REVISION COMMITTEE FOR STAKEHOLDERS STAKEHOLDER RESEARCHERS BENEFIT PACKAGE HEALTH WORKING GROUP DEVELOPMENT INSURANCE BOARD Assessment of Submission of new Prioritization of Appraisals based Decision on inclusion cost-effectiveness, interventions for intervention topics on assessments or exclusion needed coverage, consideration and recommenda- and budget impact tions to board of interventions SOURCE: Ministry of Public Health, Thailand; World Bank, 2021 To strengthen the link between health spending and quality of care, we also recommend that the MoH and purchasing agency implement quality-based pur- chasing, through defining indicators for priority health conditions, monitoring of provider performance on said indicators, publication of provider performance, selection of providers for contracts based on quality (where possible), and paying for improvements in quality. An evidence-based approach to purchasing health services from providers will require the regular supply and use of relevant and accurate data. We recommend that designated officials in the SHA be allowed unfettered access to ArMed, the electronic health system, to include or exclude indicators for quality, access, and efficiency. ArMed should also be made interoperable with other databases in the health sector, including from the National Institute of Health.4 We also advise that the MoH require the national e-health operator to implement for the SHA an operations dashboard that analyzes and visualizes the selected indicators in real–time to provide feedback on purchasing decisions. The dash- board can be revised on an annual basis, following approvals of revisions by the external advisory board.4 10 Financing Universal Health Coverage in Armenia: Why and How? Endnotes 1. Fraser, Nicole; Chukwuma, Adanna; Koshkakaryan, Marianna; et al. 2021. Reforming the Basic Benefits Package in Armenia: Modeling Insights from the Health Interventions Prioritization Tool. World Bank, Washington, DC. © World Bank. 2. Institute for Health Metrics and Evaluation. GBD Results Tool | GHDx. http:// ghdx.healthdata.org/gbd-results-tool. 3. Wagstaff, Adam; Flores, Gabriela; Hsu, Justine; et al. Progress on cata- strophic health spending in 133 countries: a retrospective observational study. Lancet Glob. Health 6, e169–e179 (2018). 4. Chukwuma, Adanna; Meessen, Bruno; Lylozian, Hratchia; et al. 2020. Strategic Purchasing for Better Health in Armenia. World Bank, Washington, DC. © World Bank. 5. Maduko, Franklin; Chukwuma, Adanna; Minasyan, Gevorg; et al. 2021. More Money for Health: Resource Mobilization for Universal Health Coverage in Armenia. World Bank, Washington, DC. © World Bank. 6. Chukwuma, Adanna; Gurazada, Srinivas; Jain, Manoj; et al. 2020. FinHealth Armenia: Reforming Public Financial Management to Improve Health Service Delivery. World Bank, Washington, DC. © World Bank. Dudu, Hasan; Chukwuma, Adanna; Manookian, Armineh; et al. 2021. 7.  Macroeconomic Effects of Financing Universal Health Coverage in Armenia. World Bank, Washington, DC. © World Bank. 11 About this brief This brief was developed under the technical support for UHC in Armenia which includes Advisory Services and Analytics aimed at supporting the government’s efforts to expand access to high-quality health care. This brief, “Financing Universal Health Coverage in Armenia: Why and How?”, is a chapeau piece draw- ing on the volume series to provide tailored recommendations for financing health coverage in Armenia. This technical support was funded by Gavi, the Bill and Melinda Gates Foundation, the World Bank, the Korea-World Bank Partnership Facility, and the Global Fund. 12 Financing Universal Health Coverage in Armenia: Why and How? 13 14