Title: COUNTRY CASE STUDIES
Author: Diane McIntyre
Last saved by: Faculty of Humanities
Company: Health Economics Unit, University of Cape Town

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Issue | Chile | Costa Rica | Korea | Sri Lanka | Ghana | South Africa

How is revenue collected?

•	Dedicated payroll tax of 7% for all workers
•	General taxes (subsidised membership for the poor etc.)
•	Direct contributions to ISAPREs for ‘top-up’ insurance
•	Out-of-pocket (OOP) co-payments

•	Employer and employee payroll contributions 
•	General tax revenue
•	National lottery contributions
•	Dedicated ‘sin’ taxes
•	OOP for use of private sector facilities – limited

•	Employer and employee contributions (<8% of salary; 4.21% for those in formal sector who are not self-employed)
•	General tax revenue
•	Large co-payments 
•	Collection by NHIC

•	General tax revenue (50% of funds) – progressively structured income tax
•	OOP payments (50% of funds, paid to private practitioners and pharmacies)

•	General tax
•	Donor funds
•	Dedicated sales tax for NHI
•	Payroll deductions for NHI
•	Individual payments – OOP payments & contributions to mutual health insurance

•	General tax
•	Employer & employee community-rated contributions to private insurers (medical schemes)
•	OOP payments (co-payments etc. by scheme members & direct payments to private providers & user fees by non-scheme members)

How are funds pooled?

•	FONASA (public insurer) covers 68% of population (poor and low- to middle-income)
•	ISAPREs (private insurers) cover 18% (high- & middle-income) – no pooling across individual ISAPREs

•	Nearly 90% of population covered by single pool/social insurance (CCSS)
•	About 10% (richest) pay OOP for private ambulatory care

•	Previously fragmented into hundreds of different insurers
•	Single NHIC pool since 2000

•	Through the tax system – 100% of population covered
•	No insurance and no pooling via OOP

•	16% covered by NHI (formal sector, some informal sector, some poor)
•	Rest covered by tax funded services, but OOP payments high (no pooling via OOP)

•	Through the tax system for the majority of the population, but minority of the funds
•	Pooling within individual benefit options in schemes (fragmented risk pools); no pooling in MSAs 
•	Risk-equalisation will increase risk pooling between schemes

How are services purchased?

•	FONASA purchases mainly from public facilities
•	ISAPREs purchases from public and private (for profit and NGO) facilities

•	Facilities owned by the CCSS and funded by global budgets (and staff on salary) – comprehensive package
•	Performance agreements recently used to allocate a percentage of budget
•	Fee-for-service for private sector doctors (small)

•	No active purchasing; simply reimbursement of mainly private providers on a fee-for-service basis
•	Recent efforts to change reimbursement mechanism (DRGs for key inpatient services

•	Public facilities are allocated budgets by the MOH, which they use to provide services
•	Private sector services are purchased by individuals on a fee for service basis

•	Public facilities are allocated budgets
•	Mission facilities also have budgets (NGO, donor & tax funding)
•	User fees at public & mission facilities according to service type
•	NHI – more active purchasing of comprehensive benefit package

•	Public facilities are allocated budgets and staff salaried (plus small user fees)
•	Private providers paid on fee-for-service basis

What were the motivations for this financing approach?

•	Development of health system very strongly influenced by ideology of changing governments
•	Initially, strong public sector  based on social solidarity principles
•	Introduction of private insurance under Pinochet; part of ‘free market’ policies

•	Initially seen as ensuring workers rights are met
•	Social security seen as pillar of democracy
•	Ensure access to quality health care on universal basis

•	Commitment to ensuring that all citizens have access to acceptable quality health care
•	Universal insurance coverage

•	Universal access to free care at all levels of care
•	Explicit political commitment to social development (and not just economic development) and to social justice

•	To provide financial protection for  households and to move away from user fees towards pre-payment

•	Medical schemes established to ensure healthy workforce and provide for health care needs of high-income employees
•	Government commitment to health care for all, hence ensuring reasonably strong public sector for those not covered by schemes

How equitable is financing & what contributes to equity or inequity?

•	Proportional tax, cap on maximum payroll contributions, anyone can opt out of the public insurer, lower SES groups with public and higher SES groups with private insurers
•	All suggest inequities
•	But, the indigent do not have to make contributions yet receive comprehensive care
•	Recent efforts to guarantee care for key diseases

•	Single pool, no cap on maximum payroll contributions, the wealthy can’t opt out of the CCSS, full tax funding of vulnerable groups
•	Similar utilisation patterns across socio-economic groups
•	All suggest equitable and progressive system with strong cross-subsidies (income and risk)

•	Single pool, full tax funding of poor
•	Proportional payroll deductions
•	High co-payments compromise equity, both in terms of burden of health payments and distribution of service benefits (lower utilisation by low-income groups)

•	Direct taxes are strongly progressive
•	Indirect taxes are proportional
•	OOP are mostly incurred by high income groups and are therefore marginally progressive (but only the rich that benefit from these services)
•	The poor benefit more than the rich from publicly funded hospitals

•	The vast majority of funding is via OOP (nearly 70%) which does not allow for cross-subsidies
•	Flat contribution by informal sector to NHI is not equitable
•	NHI has potential for considerable cross-subsidies, especially if the poor are appropriately identified and contributions funded from tax & donors

•	Public-private mix is main equity challenge: schemes only cover 14% of the population, but about 60% of funds in private sector
•	Income cross-subsidies through tax system, but no income cross-subsidies in schemes and no income or risk cross-subsidies between public and private sectors

To what extent are households financially protected?

•	Poor are protected (no contribution or co-payments)
•	Middle- and high-income groups pay co-payments up to 20% of cost – can be considerable

•	Good financial protection for households
•	Only the wealthiest use private doctors on OOP basis

•	High co-payments compromise financial protection, especially for low-income earners

•	Households are well protected as no payment is required at the point of service and there is a good geographic distribution of facilities
•	But, some (particularly the chronically ill) are incurring relatively high transport costs
•	Levels of catastrophic spending are low

•	Coverage by NHI still quite low (16%)
•	The remainder continue to bear a heavy burden from user fees

•	Free primary care & fee exemptions for poor at public hospitals do provide protection, but low-income employed have to pay OOP for public hospital care
•	PMB ensures unlimited care for certain conditions, but large OOP payments by scheme members for care outside benefit package and co-payments

Promoting Equitable Access to Health Care for Households by Di McIntyre, Health Economics Unit, Health Sciences, UCT is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 2.5 South Africa License, 2011. Contributors include: Di McIntyre, Lucy Gilson, Vimbayi Mutyambizi, Myrtle Perera, Philippa Bird, Godfrey Gunatilleke, Aditi Iyer, Shon John, Gita Sen, Asha George. Source work available here. Permissions beyond the scope of this license may be available at www.healthedu.uct.ac.za, or email healthoer@uct.ac.za.