Frequently asked questions
Debt/Interest payment
Is ‘loans and subsidies to providers’ a part of the value of services they deliver?
(See PG 12.23) New loans received by providers and loan repayments made by them are excluded from the value of goods and services they deliver. In cases where market or quasi-market prices are in effect, this restriction is not a problem. In cases where the value of the provider’s activity is estimated by adding together the values of inputs used, care must be taken to exclude any changes in financial assets that might appear in the provider’s records; usually this is not a problem because accounting principles call for the separation of balance sheet items from income and expense items. It is appropriate to include interest payments made on debt incurred in the course of health-related activity; again, most accounting systems will show these figures among income and expense items. This treatment of loans and loan repayments is the same as that for financing agents.
How to determine from payment on the "floating" debt, how much corresponds to health?
In theory, interest payments on floating debt held by financing sources should not be included in the health accounts. For example, interest payments on general government debt should be excluded from consideration.
However, debt incurred specifically for financing health care should be considered, and the interest paid on this debt should be attributed to health in proportion to the use of the principal to finance health care activities. For example, if the social security fund pays both pensions and health care expenses and has floating debt on which it pays interest, some of that interest should be counted as health expenditure. How this amount would be included depends upon which type of actor is involved:
In the case of market providers of care, there is no need to make an explicit estimate of the interest payments, as the market prices they charge and receive already measures the economic value of the health or health-related good or service they provide (that is, somewhere in HC.1 through HC.6 or HC.R.1 through HC.R.7).
In the case of non-market providers for whom the value of services is measured by the costs of resources they consume during the production process, any estimated interest payments would be included among these resource costs. Because of this, the interest payments appear in the value of the health or health-related goods or services provided.
In the case of financing agents, the value of interest payments would appear in HC.7. These costs should not be devolved to the types of services or goods financed, as the interest payments reflect the cost of doing business as a financing agent. As with providers of services and goods, an explicit accounting of interest payments is needed only if the value of the activity is being built up from the costs of the resources consumed.
In practice, determining the appropriate share of interest payments to be included in the health accounts may be difficult. Sources at the Ministry of Finance may be helpful when doing this for government entities; discussions with people familiar with the finances of nongovernment entities may be helpful in other cases. In the absence of any other information, the interest can be split between health and non-health functions in proportion to the value of services produced by function.