Managing Expenditure Pressures for Sustainability and Growth
In sum, addressing the challenge of improving health outcomes in Georgia will require higher utilization, broader population coverage, and an expanded benefit package to provide greater access to key interventions. A key public spending priority for consideration going forward in the health sector, subject to budget availability, could be to achieve expanded coverage of the interventions discussed above that are likely to have the largest impact on health outcomes. This is particularly applicable to the strengthening of primary care, as discussed below.
3.4. Health spending and financial protection
This section looks at public expenditures through the lens of the second major objective of a health system: to provide households with financial protection against ‘impoverishing’ or ‘catastrophic’ health payments in the event that they fall ill. As shown in Table 3.1 above, the largest share of out-of-pocket spending for health in Georgia is spent on drugs (about 61 percent), while the remainder is spent mainly on inpatient and especially outpatient care. A precise breakdown of formal vs. informal payments is difficult to estimate for a range of reasons, including a lack of full understanding by the population (and sometimes providers) about what services are covered by state programs.
Concerns about large household expenditures for health care stem from the fact that such spending is typically different from most other household purchases. At least three reasons stand out. First, the spending is often not ‘voluntary’ (for example, if arising due to an unwanted health shock), and may have more to do with overcoming illness than adding to a household’s overall consumption or living standards, as is usually the case with other goods. Second, the uncertainty and potentially high cost associated with health expenditures (we often do not know when we will become sick and how much it will cost if we do) make them amenable to prepayment and risk-pooling arrangements. Third, access to health care is often viewed as a ‘merit good’ which should not be determined primarily by ability to pay. For these reasons, a more desirable counterfactual to high out-of-pocket spending on health would be some form of pooling mechanism (whether through general taxes or a contributory insurance scheme), as well as cross-subsidization, to provide financial protection against health shocks. This has been achieved in many countries, but not yet in Georgia for those who do not benefit from statefunded insurance. High out-of-pocket payments for health can also cause a household to fall below the poverty line—that is, they can be “impoverishing”. If a household has total consumption expenditures (including OOP) above the poverty line, but their total non-medical spending (excluding OOP) is below the poverty line, they could be considered to have suffered impoverishment due to OOP for health. Figure 3.7 shows this graphically based on 2010 data. Households are ranked along the horizontal axis by total consumption. The vertical drip lines represent OOP for health, and the poverty threshold is indicated by the horizontal line. Applying this approach to 2011 household survey data and using an international poverty line of $5/day, it has been estimated that an additional 9 percent of Georgian households were poor as a result of OOP for health.26 Consistent with Georgia’s
26 Whether this is an accurate way to evaluate the true poverty impact of OOP is a matter for debate, since in reality households are likely to draw on several possible coping mechanisms that would allow for consumption smoothing, such as drawing down savings, borrowing, or selling assets. Thus, a costly illness episode in one period would not necessarily have an immediate and commensurate impact on total consumption in the same period. Nevertheless, the concept can be useful for international comparisons of financial protection.
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Chapter 3. Health Expenditures