Assessing the Impact of Aging Populations in Developing Countries on Health Expenditures

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Assessing the Impact of Aging Populations in Developing Countries on Health Expenditures

Many middle and lower income countries are experiencing rapid growth in their older populations as a result of the health and demographic transitions. What will be the impact of these demographic changes on health care and health care spending? Are countries ready and able to meet this challenge?  IHSP researchers Profs.  Peter Berman and Ajay Mahal are collaborating with the Burden of Disease Unit at HSPH’s Center for Population and Development Studies under the National Institute of Aging-funded “Burden of Disease 2000 in Aging Populations” project. Component 8 of this project, “Health Costs of Aging, Present and Future Trends”, focuses on estimating the impact on health spending of aging populations in middle and lower income countries. The first phase of this work was to review the international literature on forecasting the impact on health spending of changing demographic, social, economic, and health system factors. A review paper is available. In lower income countries, all of these factors are changing fairly rapidly in complex ways, in contrast with the higher income countries where change in some factors is slower or more predictable. The current phase of the work is to develop estimates for several lower income countries of current spending on health of the elderly population and to examine the impact of specific factors on projections in that spending. Work is ongoing in India and Sri Lanka. Research may also be initiated in Turkey on this subject.

Health Expenditures and the Elderly: A Survey of Issues in Forecasting, Methods Used, and Relevance for Developing Countries Executive Summary

Over the course of the next fifty years, the share of the elderly (defined as those aged 65 years and above) is expected to climb from 6.9 percent in of the total population to 15.6 percent. The share of the elderly is expected to grow rapidly in the less developed countries of the world, rising from only about 5.1 percent of population in 2000 to 14.0 percent in 2050 as per projections of the United Nations. The rapidly increasing numbers of the elderly will have a number of significant economic consequences worldwide.

The purpose of this paper is to review the known links between ageing and health spending, and methods currently used to project the future health spending impacts of an ageing population. The existing literature, most of it relating to developed countries, suggests a relatively small effect of increases in the proportion of population that is elderly on health spending linked to acute care. Increasing life spans, while leading to ageing and increasing expenditures on the one hand, also lead to reductions in health spending on acute care account of reduced mortality at all ages, and may also be accompanied by declines in disability that also lead to lower acute health spending. However, factors that do appear to significantly impact on health spending are changes in the technology of care, incomes and the spread insurance. In the case of long-term care, the structure of the family, and changes in it over time, and public policy related to care also become relevant. The paper also reviewed approaches that use the linkages highlighted above to project health care spending. The methods range from the so-called “actuarial” methods and their more sophisticated variants, micro-simulation models, and econometric approaches to forecasting.

The survey yields four main conclusions that emerge for health expenditure forecasting for developing countries. First, existing methods call for a fairly large set of baseline information relating to population size and age-structure, health spending, disability and mortality patterns, and use patterns of care. Second, forecasting utilization patterns among the elderly will be a key in developing countries, given that many of the elderly, especially among the poor, will not be able to afford care outside the public sector and that social structures of support will rapidly change in the future. Third, the effects of HIV/AIDS on health spending of the elderly will have to be explicitly accounted for in forecasting exercises in the worst affected countries. Finally, technology change in developing countries would need to be carefully accounted for, given the potential rapid cross-border spread of information and potential of trade in health services.

Full Paper (PDF)

Developing National Health Accounts in Turkey
Turkey, a lower income member of the OECD, reports high health insurance coverage and relatively low health spending. Anecdotal reports note rapid private sector growth and many shortcomings of the existing public systems. Developing National Health Accounts for Turkey may be an essential precursor to serious health financing reform in the country. Prof. Berman is directing a study in Turkey to estimate national health accounts for that country, under contract with the Ministry of Health. IHSP is collaborating with the School of Health Administration, Hacettepe University. Prof. Mehtap Tatar of Hacettepe University is managing the project in Turkey. As part of this project, IHSP has worked closely with an interdepartmental steering committee of the Government of Turkey to develop an appropriate framework of model tables and classifications for Turkish health accounts. This framework is based on the OECD’s System of Health Accounts model. Turkey is an OECD member country and expects to be able to compare its health spending statistics with other country’s using this framework. Approximately 35 Turkish trainees attended a Turkish version of IHSP’s NHA training course, offered in Ankara in May 2002. A follow-up, training of trainers course, will be held in May 2003, to help strengthen local capacity to carry NHA work forward. The government’s State Institute of Statistics has been named as the site for future NHA work after the project is completed. Significant new data collection is also underway. This includes a national household health care utilization and expenditure survey, carried out in 2 rounds in 2002-03 and totaling over 10,000 households in a nationally and regionally representative population sample. A Turkey-based survey firm, Bigtas, is implementing the survey under the direction of Prof. Aykut Toros. A national hospital expenditure survey is also being carried out, covering over 150 public sector hospitals throughout the country. A companion survey of private hospitals is also underway. The project is expected to be completed by June 2003.


The Role of Private Health Care Providers in Priority Public Health Programs
Paradoxically, in many poor countries, private health care providers are the main source of care even for priority health problems that are the focus of government attention. IHSP has carried out extensive research in the past to document the significant role of private providers. But how are they involved in meeting the demand for services for priority diseases and health problems? What can be done by government to increase coverage, access, and quality? IHSP researchers Profs. Peter Berman, Yuanli Liu, Chi-Man (Winnie) Yip, Ajay Mahal, and Paolo Belli are collaborating with colleagues at Sweden’s Karolinska Institute and six developing countries to develop a major investigation of the role of public and private providers in addressing priority health needs. The study is in its initial phase of situation analysis and protocol development in six countries: China, Viet Nam, Laos, India, Uganda, and Zambia. IHSP researchers are initially focusing on collaborations with investigators in China, India, and Uganda. Financial support is provided by Sida of Sweden. The project was launched with a workshop in Stockholm in early 2002, which reviewed the issues and methodologies previously developed for private provision assessments, including that of IHSP researchers K. Hanson and Prof. Peter Berman. The initial phase of protocol development is planned for completion by June 2003. Project investigators will present preliminary findings in an invited session at the International Health Economics Association meeting in San Francisco in June 2003.

Health Systems Resource Center
IHSP has entered into a partnership with the Institute for Health System Development (IHSD), a London-based consultancy, and four other international partners to implement the Health Systems Resource Center (HSRC) for the UK’s Department for International Development (DfID). Complete information on HSRC can be found at the Center’s new website. IHSP will be playing a key role in one of HSRC’s “knowledge programs” related to developing strategies to increase the positive health contributions of private health care providers in lower income countries. The HSRC project also offers many opportunities for international technical assistance for IHSP researchers and other Harvard-based partners.

Health System Reform Strategy for Andhra Pradesh State, India
India has made significant investments in its government health care system over decades. The system is essentially run by state governments, with technical support and some resources from the national level. India’s health progress lags behind what it should be. What can be done to improve the overall health system performance in the country? The answers probably lie in innovative approaches to health system development in the states. IHSP researchers Profs.  Peter Berman, Tom Bossert, Ajay Mahal, and Marc Mitchell (Lecturer in Health Care Management at HSPH) have been contracted by DfID to work with the state government of Andhra Pradesh, India to develop a 3-5 year health system strategy and expenditure plan for the state. Andhra Pradesh (A.P.) is a southern Indian state, with a population of approximately 75 million. It is led by one of India’s most dynamic politicians, the Honorable Chief Minister K. Chandrababu Naidu. While A.P. has made significant health progress, improvements have stagnated in recent years. It lags somewhat behind it other southern state neighbors. C.M. Naidu has put forward an ambitious set of health system goals in his “Vision 2020” for the state. The IHSP team has been working closely with the state Department of Health and Family Welfare. DfID India has commissioned 14 focused studies and reviews to support the strategy development, which is also being coordinated with other international organizations such as the World Bank and the European Union.

IHSP is currently in Phase 2 of the strategy development, and in March 2003, they reviewed a draft strategy with senior state officers and the Honorable Chief Minister. The executive summary from the Phase 1 identification exercise is appended below.

Executive Summary of India Andhra Pradesh Report Phase I

Development of a Medium Term Health Sector Strategy and Expenditure Framework for Andhra Pradesh

Between April 20 and May 10, 2002, a team from the International Health Systems Program, Harvard School of Public Health visited Andhra Pradesh, under contract to the Department for International Development, U.K.. The Institute of Health Systems, Hyderabad, provided a headquarters for the work and substantial local support. The objective of this visit was to assess the current situation and relevant previous work and to make recommendations to the GoAP for the development of a Medium Term Health Sector Strategy and Expenditure Framework. A Steering Committee of the GoAP is overseeing the work, chaired by Mrs. Rachel Chatterjee, Principal Secretary, Health. The IHSP team included the following people and main areas of focus:

  • Prof. Peter Berman: Team Leader and Private Sector Health Care Delivery
  • Dr. Ajay Mahal: Team Coordinator and Health Sector Financing
  • Dr. Thomas Bossert: Organization and Governance
  • Mr. Shiv Kumar: Organization and Governance
  • Dr. Marc Mitchell: Government Health Care Delivery
  • Dr. Vimla Ramachandran: Social Development
  • Dr. Hilary Standing: Social Development
  •             Dr. Prasanta Mahapatra: Burden of Disease and Health Priorities

This report consists of a main summary report and ten annexes. Annexes 1-7 include the reports of individual team members, covering the areas of focus listed above. Additional annexes list papers reviewed and persons met and attach the original Terms of Reference for the task. This Executive Summary focuses on the key issues identified, key recommendations, and summarizes priority areas for future action.

Background and context: The GoAP has made a strong commitment to improving its health situation. This is evidenced by the health goals and priorities expressed in Vision 2020, the state’s major development strategy document and the personal interest and involvement of the Chief Minister. Commitments have also been made to increase health expenditure as part of the State’s economic adjustment strategy. Health program performance goals are now routinely monitored at state and district level to try to increase the results of the sector.This team’s visit followed on almost two years of preceding work by various consultants and state counterparts and committees towards development of a medium term health strategy. Based on review of the documentation from these efforts and reports of key stakeholders, this process has not yet succeeded in producing a consensus on future development of the sector. The environment in A.P. is very favorable for the development of a significant new health sector strategy. There is high level political commitment to health in the state government. Senior managers in health and related departments are highly skilled and experienced. The state has made a commitment to increasing financial allocations to health from its own revenues. It also continues to receive some external financing through a recent structural reform loan and credit, ongoing World Bank loans, and grant funds through DfID and EU assisted state and national projects. It is possible that additional funds could be mobilized. Furthermore, A.P. has a history of innovative strategies in health that demonstrate an openness to reform. One of these strategies is the introduction of a state-wide effort to “operationalize” Vision 2020 goals, develop performance indicators, and monitor those indicators on a regular basis. This activist approach to public management is praiseworthy. But it also produces significant pressure on health system managers to focus on short-term actions that can improve indicators, rather than longer-term strategies for more basic reform. The challenge facing Andhra Pradesh in developing a health sector strategy is to balance short-term improvements at the margin with reforms to make it possible to achieve much higher levels of performance in the medium term.

Key Issues Identified in This Initial Phase of Work: The GoAP has made a high-level political commitment to health progress and announced specific and ambitious goals defining that progress in terms of health indicators. But there is not yet a well-defined strategy for how to achieve those goals. The team feels that to achieve the Vision 2020 goals, the GoAP must develop a strategy which addresses underlying “systemic” constraints to better performance, in addition to targeting “programmatic” constraints related to the operations and management of existing health programs . Our review of previous and current efforts concluded that, while valuable, these are not sufficient to offer a high probability of achieving the Vision 2020 goals. Specifically, previous health strategy exercises have been largely focused on increasing inputs to the existing public delivery system in a year-by-year program. The DoHMFW efforts to “operationalize” the Vision 2020 goals have mainly focused on strengthening existing service delivery structures, improving monitoring of outputs, and intensified management of programs at state and local levels. Even where there have been significant new initiatives, such as more intensive “performance monitoring” or developing community-based health workers in tribal areas, we feel that these will not be able to be managed at scale or in a sustainable way without addressing the systemic constraints. (India’s and AP’s previous experience with CHWs may provide a good case in point).

Our conclusion that a strategy combining both systemic and programmatic efforts is needed is based on a preliminary diagnosis and causal analysis. Some of the key points of this analysis, which justify our proposal for a significant effort to develop new systemic and not only programmatic strategy, are:

  • Focusing only on existing government health care delivery programs cannot achieve the Vision 2020 targets.

-For example, the targeted IMR reduction will require broader social changes, such as increased age at marriage and improved maternal nutrition. These in turn may depend more broadly on increasing the status of women in the family and community and broader poverty alleviation efforts.

For many interventions which must be improved, government health services provide a relatively small share of the total access and coverage with interventions. Non-government providers, including less-than-fully-qualified providers, are likely to be the major source of treatment and advice. Significant efforts are needed to take advantage of the potential non-government providers may offer and to reduce their negative effects.

  • Insufficient and poorly organized health care financing fundamentally limits better performance for both government and non-government services.

  – More government spending on primary care is needed. Government spends too little on primary care to sustain the current extensive delivery system, much less expand it with new types of community-based workers. In addition, there is a large backlog of delayed maintainance and investment in existing facilities and staff vacancies.

– Organizing non-government spending, which is by far the largest share of total spending, especially household out-of-pocket spending is also needed to achieve better financial risk protection, access, and quality. Working models of how to do this need to be developed and tested.

      • Organizational issues hamper effective action or have not been sufficiently incorporated in strategies.

-The DoHMFW organization is fragmented and complex combining three separate departments, several parastatal organizations, and state and district level disease control societies. All of these entities rely on the same peripheral health facilities and workers to deliver their services.
– At the district and local level, new initiatives to decentralize authority (through PRIs) and to mobilize communities (e.g. Janmabhoomi) must be better incorporated in state health strategies.

        • Government and non-government health personnel are often poorly motivated to work and to achieve health goals. Underlying problems of good governance, including corruption, impede progress.

Broad Recommendations: Based on this preliminary analysis, the team recommends that GoAP embark upon a substantive process of developing a Medium Term Strategy and Expenditure Framework (MTSEF) for the improving health system performance in the state and achieving substantial progress towards the Vision 2020 goals. The MTSEF development should give explict attention to both systemic and programmatic issues and should propose short-term and medium-term action plans for addressing specific causes of poor performance. The MTSEF development should be directed by an inter-departmental steering committee at state level and should seek to incorporate wider stakeholder consultation and participation in developing and implementing a strategy. The MTSEF should be developed as a viable plan for a 3-5 year program of health system development and reform. The MTSEF should be based on a sound diagnosis of the problems and constraints of the health system and their linkage to the health and financial protection outcomes and the focus on poor and disadvantaged groups in the state. The team’s work offers a number of inputs to this diagnosis. This needs to be continued in a collaborative way with the Steering Committee and other stakeholders.

Based on this initial analysis, we propose five major areas of focus for development of the MTSEF:

  • Improving the functioning of governmental health care services and programs. (Focus more on programmatic and short-term changes, with some attention to systemic and longer-term changes).
  • Strengthening broader poverty and social development programs, and their linkages with health outcomes and health programs. (Focus more on social development and non-health-system determinants of outcomes and performance, and responding to local health status needs. Both shorter and longer-term changes).
  • Learning how to capitalize on ongoing decentralization and local governance reforms to improve health system performance at district and local level. (Focus on improving management skills, strengthen merit motivations, developing local accountability, and addressing local health needs and intra-district health disparities. Both shorter and longer-term actions)
  • Development of new policies and strategies to enhance the contribution of private providers. (Mainly systemic changes but some programmatic changes, with both shorter and longer-term actions).
  • Development of new financing strategies to mobilize resources and improve the use of resources. (Mainly systemic changes but some programmatic changes, with both short and longer-term actions).

Actionable recommendations: Launch MTSEF Development: The GoAP is committed to providing a preliminary MTSEF document by October 2002 and a more complete strategy and expenditure framework by March 2003. The team recommends that a program of technical assistance and collaborative strategic planning be launched as soon as possible to assist the GoAP steering committee to meet these commitments. The team’s work suggested that some elements of the MTSEF can be accomplished through a process of external consultation and collaboration with GoAP counterparts to carry out problem identification and assessment and propose strategies for incremental changes. However, we also note that some key elements of the MTSEF, especially those related to the more fundamental systemic reforms, may require new data collection and analysis and longer process of strategy development, including experiments/pilot programs and their monitoring and evaluation. We are enthusiastic about working with the Steering Committee to meet its immediate commitments. But we also urge the Committee and DfID to assure support for adequate development of key systemic reforms. We believe that some key systemic reforms are essential to achieving GoAP goals for health. This will require work which extends beyong March, 2003.The following paragraphs summarize some of the key actionable recommendations as examples of some of the areas where work could begin immediately. A list of action priorities should be developed in consultation with the Steering Committee, but could be based on the items listed in Tables 5 and 6 of the Summary Report.

Financing: The financing aspects of the MTSEF development require immediate and ongoing attention. The scope for health system improvement will depend crucially on the mobilization of additional financing, both from government sources as well as other sources. The GoAP has made a commitment to increase financing for primary health care, but what actually is realized from this commitment will depend on how expenditures are defined and what conditions are imposed on the total health resource envelope. We recommend that, as part of the MTSEF development, the DoHMFW:

Develop state-level health accounts to provide the financing analysis needed to support claims for newresources and to monitor current and prospective resource allocation.

  • Develop financing plans for short- and medium-term actions envisaged under the MTSEF. This must be done in collaboration with the technical teams working on different action plans.
  • Review, design and pilot innovative efforts to increase other sources of funds for health, including community financing, reformed user fees, etc.

Improving government service delivery is clearly a central element of the MTSEF. Team members identified a number of critical issues to that end. The DoHMFW has also received reports from other consultants and teams on strategies to strengthen specific service programs, such as TB and RCH. Each of these programs has its own specific technical and implementation issues, which need to be addressed by working groups concerned with the different programs. This process could be coordinated as part of the MTSEF development. We recommend at least the following:

  • Review, in collaboration with the Steering Committee and interested donor agencies, recent program-specific reviews and operational strategies to develop priorities for action plans to improve programs.
  • Development of additional program-specific reviews, e.g. maternal mortality and malaria, by qualified technical experts and DoHMFW counterparts as needed.
  • Analysis of the numbers, impact, and causes of staff vacancies at district, block, and mandal level and development of a strategy to address them. Review of experience with contract higher of medical and paramedical staff.
  • Appraisal of the roles and training of MPWs in relation to priority health goals.

A.P. has made exciting advances in broader social development activities, including the mobilization of community and women’s groups for social and economic development. There are also successful, though relatively small scale, efforts to link social development with health programs and goals. The team identified this as a key area for further development as part of the MTSEF. We feel that achieving the ambitious health goals of Vision 2020 will require movement beyond the formal governmental health care delivery system. We recommend:

  • Strengthening the consultative mechanisms linking the health sector with social mobilization and poverty alleviation program in the state with a specific mandate to identify opportunities for increasing health activities through community-level initiatives.
  • Expanding coverage to scale with positively evaluated community programs like urban link volunteers
  • Developing health and monitoring data to capture socio-economic and gender differences and inter and intra-district disparities.
  • More involvement of social development NGOs in health initiatives
  • Development of community-based financing/insurance schemes in collaboraton with poverty alleviation programs

Another key area is strengthening the role of district and local governments in health, through well-designed decentralization of funds, authorities, and accountability and involvement of civil society institutions. This will also require significant new investments in capacity-building, monitoring, and evaluation. Our recommendations include:

  • Training programs for district, block, and mandal officials to strengthen awareness of health issues and develop local planning.
  • Review of formulas used for resource transfer to districts to better reflect health needs and disparities
  • Piloting of reforms to authority of district institutions in running priority health programs and in including civil society representation on district-level health committees.
  • Matching grants program to encourage district and local level financing and health system innovations

A.P. has a large, widely dispersed, and diverse private health care provision sector which is barely being tapped for its potential to enhance coverage and impact with priority health interventions. The DoHMFW could initiate some immediate actions to strengthen the contribution of private providers in improving health outcomes. We recommend:

  • Review, inventory, and assess all current efforts to develop public-private partnerships in health in A.P. involving private sector stakeholders.
  • Creating a senior post in DoHMFW to develop government-private provider collaborations focused on priority problems.
  • Develop action plans for all major disease control programs on public-private collaboration. Include initiatives for information and training, financial incentives, regulation.
  • Economic and effectiveness assessment of Sukhibhava program
  • Develop database on private providers and NGOs in health, including less-than-fully-qualified providers

Tables 5 and 6 in the Summary Report list some of the key recommendations for short- and medium-term action emerging from the team’s work. These can provide the basis for specific planning for Phase 2.

Proposal for Phase 2:The team proposes that the GoAP steering committee and DfID staff review this report to decide on whether to proceed with Phase 2. We recommend that Phase 2 be planned for 12-18 months. It could begin at the end of July 2002 with a launch workshop or consultations with State counterparts to which this Phase 1 report and its recommendations for short- and medium-term actions would be a major input.

Phase 2 would assist the GoAP to produce the MTSEF reports it needs by October 2002 and March/April 2003. Phase 2 would also develop some of the background analysis needed to plan and cost priority reform innovations as recommended by the team. It could include initial investments in field experiments that could be continued under a possible Phase 3. GoAP should consider that a serious program of sectoral reform should be planned for at least a 3-5 year period, with continuous technical support inputs.

HIV/AIDS and Health Expenditures in Nigeria
Nigeria is on in the midst of a rapidly increasing HIV/AIDS epidemic. What will be the impact of this public health crisis on the economy and the health system?Under the auspices of HSPH’s AIDS Prevention Initiative in Nigeria (APIN), IHSP researchers Ajay Mahal and Prof.  Peter Berman collaborated with faculty from the Nigeria Institute of Social and Economic Research (NISER), in Ibadan, Nigeria to develop a proposal to do an AIDS-specific national health expenditure account for Nigeria. The report of that design exercise is appended here (add bookmark to report below, which will be emailed to you). Phase 2 of that work, including likely implementation of the AIDS Accounts, is expected to begin in mid-2003.

Nigeria HIV/AIDS Accounts Report

Nigeria HIV/AIDS Accounts Report

Out-of-pocket Payments and Informal Payments for Health in Middle Income European Countries

Since the late 1980s, central and eastern European (CEE) countries have opened up their economies to market forces and made a dramatic political transition. Under communist rule, health care was guaranteed to all without cost to patients. In the new economy, most CEE countries have created new social insurance schemes and opened up health care to private market forces. Families and individuals are finding that they have to bear a significant share of health care costs, both in the form of formal or official payments, as well as through informal, illegal, or unofficial payments to providers and health care institutions. IHSP researchers are working with colleagues in 6 countries in the European region to carry out detailed studies to estimate out-of-pocket and informal payment in these transition health systems. Studies have been completed in the following countries: (1) Poland (with the Zbisek Krol of the Foundation for Public Health, Krakow); (2) Czech Republic (with Ivan Mali of the Dept. of Economics, U. of Brno); (3) Hungary (with Peter Gaal of the Institute for Health Care Management, Budapest); (4) Romania Aurora Dragomiristeanu of the Institute of Health Services Management, Bucharest, Romania and (5) Croatia (with Dr. Stipe Oreskovic of the Andrija Stampar School of Public Health, University of Zagreb). A sixth study is underway in collaboration with Professor Mehtap Tatar, Drs. Hacer Ozgen and Bayram Sahin of the School of Health Administration, Hacettepe University, Ankara.

A report on results of the first four studies completed is provided at

In most of the countries, OOP and informal payments are quite significant. But the patterns are very different across countries, with much lower payments in the Czech Republic, and different mixes of formal and informal payments, and burdens for hospital and ambulatory care and retail drug purchases. In all countries where informal payments are significant, they are an important constraint to effective health financing reform.

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