Health Reform and Drug Financing. Selected Topics - Health Economics and Drugs Series, No. 006
(1998; 49 pages) [French] [Spanish]
Table of Contents
View the documentAcknowledgements
View the documentExecutive summary
Close this folder1. Introduction
View the document1.1 Reform and models of development
View the document1.2 Health sector reform
View the document1.3 Pharmaceuticals and reform
Open this folder and view contents2. Financing reforms
Open this folder and view contents3. Affordability and efficiency
Open this folder and view contents4. Organizational reforms
View the documentConclusions
View the documentReferences
View the documentBack Cover

1.2 Health sector reform

Objectives and principles

Health sector reform has been described in various ways [1, 8, 11]. However, the objectives of the health sector, and therefore of its reforms, can be described as tri-fold:

1. equity, which comprises ensuring access to essential health services to the portions of the population at financial and geographical disadvantage;

2. quality, which incorporates the effectiveness of treatment and consumer satisfaction with services;

3. efficiency1, which includes:

• allocative efficiency (which results in the distribution of resources across services so as to maximize health benefits);

• administrative efficiency (the management and structure of the health system are designed to promote most efficient use of resources);

• technical efficiency (services are provided at the lowest possible cost).

1 Strictly speaking, quality is incorporated within efficiency because this latter is concerned with optimizing health outcomes given certain available resources, thereby linking quality to cost-containment. However, for the purposes of discussion, it is often useful to separate these two. When quality is mentioned as a separate health sector objective, “efficiency” is closely related to cost-containment and productivity maximization.

Reforms are fundamental changes intended to find sustainable solutions to those problems in the existing system which limit the achievement of these objectives. In reality there can exist a certain tension among these goals, and solutions may involve trade-offs. The true challenge of health sector reform is to find responses which maximize the overall health utility (which depends on all three objectives) in a manner consistent with the values and identity of a particular society.

Therefore, certain tenets should be adhered to in a reform process. For example, during the recent reform in Mexico, the following principles were identified [11]:

• health as a right (access to health services is a fundamental right);

• universal access (certain essential services should be available to the entire population);

• solidarity (individuals contribute to the extent which they can, and receive based on need);

• pluralism (options which combine both public and private initiatives should be made available to the individual).

Functional and organizational aspects

We can analyse reform in terms of two linked aspects: functional strategies for the health sector (how resources are mobilized and spent, how efficiently this is done, and which services are made available to whom); and the organization and administration of the health sector.

A variety of functional strategies have been proposed and tried in the past. These include those which focus on developing new funding sources, such as revolving drug funds with user fees and the creation of public and/or private insurance mechanisms, among others. Other strategies, such as selecting and making available essential health packages, are aimed at improving efficiency and affordability. Combinations of these strategies exist (e.g. Bamako Initiative programmes).

Reform also involves changes to organizational structures which, in many cases, translates into a reassessment of the role of the public sector in health. Government intervention in the health sector is needed because social objectives, such as equity, cannot be met through market mechanisms alone. Also, health markets suffer from failures which imply that they cannot optimally allocate resources due to factors such as information imbalances. Market externalities (public advantages or costs associated with private actions) also exist and justify governmental action.

Policy and regulatory frameworks must be established by governments. Beyond this, there exists a wide range of other possible government interventions including direct public sector financing and provision of services, and the creation of incentives to improve the functioning of the private market. The degree of public sector intervention, whether this intervention should be decentralized, and what mechanisms can be used to make the public sector more efficient, are frequently debated topics. Common reform measures include shifts in both the extent and nature of government involvement as well as changes regarding the involvement of the private sector (for-profit and not-for-profit).

There is, in fact, a third dimension to reform which is critical to its success. This involves the dynamics of the process - how reforms are to be implemented and who is likely to support or oppose them. In particular, it deals with the interactions within a government and among the government, health providers, patients, professional associations, health workers’ unions, pharmaceutical manufacturers, donors, development banks and others, regarding the development and implementation of policy.

As this paper focuses on policy choices for pharmaceutical financing in the context of reform, the two aspects concerned with the content of reform -functional strategies and sector organization - will be discussed in depth. Issues relating to the dynamics of reform are discussed, where most pertinent, within this framework.

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