Owen Smith – World BankWashington DC – February 1st, 2011

Health care financing in Georgia

Ultimately two main objectives for a health financing system

To improve health outcomes: Reduce mortality and morbidity – especially for

the poorTo protect against high out-of-pocket payments

(OOP):People should be not forced into poverty by ill

health

How can Georgia use the health financing system to improve its performance vis-à-vis these two goals?

Objective #1: Improving health outcomes Life expectancy gap with US has widened since 1970

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1970

-197

5

1975

-198

0

1980

-198

5

1985

-199

0

1990

-199

5

1995

-200

0

2000

-200

5

2005

-201

0

Life

exp

ecta

ncy

at b

irth

US

Georgia

Source: UN

How have US & Europe accomplished these life expectancy gains since 1960s?

Major factors:Decline in smoking ratesPharmaceuticals for cardiovascular diseases:

ACE-inhibitors, beta-blockers, statins, etc.Cardiac surgery: bypass, angioplastyEarly detection and treatment of certain

types of cancer (e.g., breast, colon)Neo-natal intensive care units

Very low coverage of these interventions in Georgia

Health financing to improve health outcomes: Key messagesNeed for additional funding for health

Very low budget allocation to health by international standards

Making progress against non-communicable diseases is typically more expensive than maternal & child health, infectious diseases

Aim to extend a larger benefit package to more peopleSince it cannot be afforded all at once, need to

prioritize:Target expansions to the poorer segment of the

population first (e.g., by expanding Medical Insurance Program (MIP) for poor)

Offer coverage of most cost-effective services firstMeasure health outcomes – both nationally and within

health facilities – and hold insurers/hospitals/doctors accountable for their performance

Objective #2: Prevent poverty due to ill healthPoverty headcount in Georgia rises by

about 3 percentage points – from about 24% to 27% – due to out-of-pocket spending on health

This is one of the largest impacts on poverty due to OOP in the world (e.g., compare Georgia with Montenegro…)

0

100

200

300

400

500

600

700

800

900

1000

1 51 101 151 201 251 301 351 401 451 501 551 601 651 701 751 801 851 901 951 1001 1051 1101 1151

Pre

-an

d p

ost

-OO

P m

on

thly

co

nsu

mp

tio

n

Households ranked in ascending order of total consumption (per adult equivalent)Source: HBS 2008

Largest share of OOP is for drugs:

Compare Georgia’s retail drug prices to EU

Brand drugs generally cost more in Georgia…

…and most generics cost less

EU price source: OBIG/PPRI

Strong relationship between size of government health budget and level of OOP

Albania

Armenia

Austria

Azerbaijan

BelarusBelgium

Bosnia

Bulgaria

Croatia

Cyprus

Czech Rep Denmark

EstoniaFinland

France

Georgia

Germany

Greece

Hungary

Ireland

Italy

Kazakhstan

Kyrgyzstan

Latvia

Lithuania

Luxembourg

MaltaMontenegro

Netherlands

Norway

Poland Portugal

Moldova

Romania

Russia

Serbia

Slovakia

Slovenia

Spain

Sweden

Switzerland

Tajikistan

Macedonia

Turkey

Turkmenistan

Ukraine

United Kingdom

Uzbekistan

02

04

06

08

0O

ut o

f po

cke

t sp

en

din

g a

s sh

are

of to

tal

0 2 4 6 8Government spending on health as share of GDP

Two major ways to lower OOP in Georgia

Lower OOP without more spending:-- reforms to promote affordability of drugs

Lower OOP with more spending-- expand publicly-subsidized insurance programs

Health financing to lower out-of-pocket payments: Key messagesAdditional government spending will be required

Almost all countries spend ~4-8% of GDP on health (public + private), and Georgia is no different (~6%)

The share that is not covered by budget will be left to OOP

No low or middle-income country has found a way to finance a significant share of OOP through private, voluntary insurance

Expand Medical Insurance Program (MIP) to more people Promote lower drug prices

Recent steps to relax rules for importing New measures to oblige doctors to prescribe generic

medicationsUse government purchasing power to buy and promote

lower-price generics

Thank you