Frequently asked questions
Financing agent
What should the health accountant do when an entity is known to be a financing agent but no figure is available for that agent’s spending?
(See PG 10.14) At this point, not much can be done. The best course of action is to leave the financing agent in the list without any associated amount. In later steps there may be an opportunity to estimate a figure for the financing agent. (In one sense, this is just a special case of there being a number of possible values for the spending of financing agents.)
Should ‘user charges’ at government facilities be included?
(See PG 10.15) User charges at government facilities definitely should be included in the accounts to the extent that they support and maintain health facilities or programmes. The question is which entity to credit as the financing agent. In many countries, user charges for health services delivered by publicly funded health facilities are retained by the facility concerned or considered part of that facility’s budget (for example, most cost recovery programmes implemented in Africa and in Latin America in the 1980s and 1990s). In other countries, the fees are returned to the central ministry and are included in that budget. Regardless of the arrangement, where the fees have been paid by consumers in return for delivery of services, the household is the appropriate financing agent (for the amount of the fees). Expenditures by government as a financing agent should be net of those fees.
For example, suppose that the ministry of health operates a hospital at a cost of 2500, and that the hospital collects 150 in user charges from households. In the accounts, households would be the financing agent for 150 and the ministry of health would be the financing agent for 2350, for a total of 2500. If user fees are returned to the ministry of health, the ministry’s books will show a figure of 2500; it is essential that the user charges not be included in the ministry’s outlays in order to avoid double counting those expenditures. However, if the fees are retained as additional resources by providers, i.e. they supplement ministry of health spending, the ministry’s books will show a figure of 2350 and the user charges do not need to be subtracted from the ministry total.
Should indirect expenditures for support and maintenance be included in NHA?
(See PG 10.16)It is easy to overlook indirect expenditures for support and maintenance, because it is not uncommon for support services necessary for the maintenance of core health programmes to be budgeted under and provided by other non-health departments. Typical examples include provision of building construction and maintenance services by public works departments, printing of hospital forms and stationery by government printing departments, and auditing services by the government auditor. To the extent that these are support services related to the direct production of health services they should be treated as inputs to the production of health services. Otherwise, problems will arise in comparing government and private spending or in comparing the country’s spending with that in other countries. While preparing the estimates, it may be advisable to keep each support agency as a separate financing agent, consolidating them in presentation tables.
Should non-contributory pensions and other staff benefits be included in NHA?
(See PG 10.17) In many countries, personnel working in the health system receive forms of compensation that are not recorded in the budgets of the relevant organizations. A typical example of this is non-contributory pensions, which are funded by the government from general revenue and which are not recorded as expenditures of the employing agency. In theory, the portion of these benefits that goes to health system workers is health expenditure and should be counted as such, with general government or the pension department listed as the financing agent. In practice, the value of these pensions (not directly paid by employing agencies) is often impossible to determine, and this problem is ignored. If data do exist, however, an imputation should be made to reflect the value of such unfunded benefits in current expenditures.
How are funds coming from lotteries accounted for?
(See PG 11.15) In some countries, government programmes or the activities of nongovernmental organizations are partially funded by lotteries explicitly designed to produce health care funds. However, because lottery players are not obliged to participate, and do so with the intent of winning money rather than funding health care, it is appropriate to treat lottery revenue as though it were general revenue. That is, the recipient programme or nongovernmental organization is treated as the financing agent, and government as the financing source (see paragraphs 4.23 to 4.25 of the Producers’ Guide).If these lotteries are of particular policy significance they can be assigned their own subcategory in the FS (funding sources) classification schedule under territorial government funds FS.1.1.
How are funds from special taxes treated?
(See PG 11.16) If a special tax (such as a transaction tax) is earmarked for health care purposes –– even if it is levied on non-health activities such as bank transactions –– it should still be treated as though it were general revenue, because it is essentially fungible with general tax revenue. Thus, the recipient government programme is treated as the financing agent, and the government as the financing source (see paragraphs 4.22 and 4.23 of the Producers’ Guide). As with lotteries, if the special tax has policy significance it can be assigned its own subcategory within FS.1.1.
Where are the funds transferred from the central government to regional governments recorded?
(See 11.17) The distinction between a financing source and a financing agent is that the financing agent controls the use of the funds. When a grant-in-aid is used as a non-specific fiscal transfer from government unit A to government unit B, unit A should be considered to be the source and unit B to be the financing agent for the purposes of the health accounts. So, if the regional government has the discretion of dividing the money among various functions (including health), then the regional government is the financing agent and the central government is the financing source.
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.
Which table should I start with: ‘Financing agents by Functions’ or ‘Providers by Functions’?
(See PG 13.06)Developing the distributional tables requires combining expenditure data on payers, providers, functions, and specific distribution-related characteristics of people using or receiving health goods and services. Two NHA statistical tables are important sources of information: those showing the financing agents by functions (FAxF, See Table 5.4 of the Producers’ guide) and the providers by functions (PxF, See Table 5.3 of the Producers’ guide). Which table –– FAxF or PxF –– is of greater policy relevance is a matter for local decision. In some countries, the policy emphasis is on where various services are provided; in such cases, the PxF table is useful. In others, the emphasis is on who pays for various services; here, the FAxF table is useful. Operationally, however, it is likely that one table cannot be populated without working on the other as well, and both may be needed for distributional analyses.
Experience in various countries suggests that preparing these tables is not a straightforward task. If the payment systems mostly pay by item of service (usually where social insurance is predominant), and if corresponding data are available, then direct estimation of the FAxF table may be feasible. More typically, however, public sector budgets are not allocated or reported by function. Rather, fixed amounts are allocated to providers (sometimes at the input level of budget, as for pharmaceuticals or salaries). In such settings, direct estimation of the FAxF table is only possible for part of the total expenditures – and even then for a relatively small part. If this is the case, then FAxP may be easier.
To populate the PxF and FAxF tables, the best course of action is probably the following sequence of steps:
• to break down as much as possible each financing agent’s payments by function;
• to estimate a table of providers by functions (PxF);
• to construct the financing agents by functions (FAxF) table by combining and reconciling the results of these two estimations.
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.
Where should I include user fees paid to public facilities?
What people pay at public facilities is part of household activity as a financing agent. Therefore, these copayments appear in the NHA as FS.2.2xHF2.3, not as FS.2.2xHF.1.1 or FS.2.2xHF.1.2 (see PG pages 36 and 42 and paragraph 10.15).
User charges at government facilities definitely should be included in the accounts to the extent that they support and maintain health facilities or programmes. The question is which entity to credit as the financing agent. In many countries, user charges for health services delivered by publicly funded health facilities are retained by the facility concerned or considered part of that facility's budget (for example, most cost recovery programmes implemented in Africa and in Latin America in the 1980s and 1990s). In other countries, the fees are returned to the central ministry and are included in that budget. Regardless of the arrangement, where the fees have been paid by consumers in return for delivery of services, the household is the appropriate financing agent (for the amount of the fees). Expenditures by government as a financing agent should be net of those fees. For example, suppose that the ministry of health operates a hospital at a cost of 2500, and that the hospital collects 150 in user charges from households. In the accounts, households would be the financing agent for 150 and the ministry of health would be the financing agent for 2350, for a total of 2500. If user fees are returned to the ministry of health, the ministry's books will show a figure of 2500; it is essential that the user charges not be included in the ministry's outlays in order to avoid double counting those expenditures. However, if the fees are retained as additional resources by providers, i.e. they supplement ministry of health spending, the ministry's books will show a figure of 2350 and the user charges do not need to be subtracted from the ministry total.
How does one treat expenditures associated with “medical tourism”? Consider two situations:
1. An individual (Person X) from Country A is a resident in Country B. How should expenditures on health in Country B for this person be treated?
2. Person X from Country A goes to Country B for a medical procedure. How should expenditures in Country B for that person be treated?
In some countries medical tourism can be a major issue and hence Country B would like to count expenditures by foreigners (temporarily visiting their country) against their overall health expenditures. For example it has been suggested that in one of the countries in the MENA region total health expenditures excluding medical tourism was $800 million and medical tourism was estimated to be $600 million.
In situation 1, the health expenditures of Person X should be counted in the NHA of Country B because X is a resident in that country. This is a fairly easy situation to handle from a health accounts perspective.
Situation 2 requires more work from the health accountants. This case involves what is essentially a matter of export and import. Country B clearly produced the medical care but it is treated as an export to Country A. For Country A it is a clear case of imported health care, and should be included in Country A’s final consumption.
Thus, health accountants in Country B (the exporters) ought to make an estimate of the amount spent to treat Person X and deduct that amount from their NHA figure. Further, they should deduct that spending from the total payments by Country B financing agents (FAs) on behalf of Person X. For example, if X received free treatment at a municipal clinic, the value of that treatment should be deducted from the total expenditures made through the clinic. To preserve the total expenditure figure, Country B health accountants may wish to present an exhibit table or addendum table showing the value of medical tourism and known financing agents.
Health accountants in Country A (the importers) should include this expenditure in their health accounts. This would be done using the regular classification schedules for health functions and financing agents. The appropriate provider classification is HP.9 (rest of world), and any payments made by Country B financing agents would show as HF.3 (rest of world). The amounts expended would be expressed in currency units of Country A.
However, data limitations may preclude the treatment from being implemented – in either or both countries. Thus a default treatment of leaving the expenditure on person X in Country B's accounts is the result of "flawed" implementation rather than flawed concept. How much time and effort is spent to identify these expenditures depends upon the resources available to the health accounts team and upon the estimated magnitude of medical tourism (either from the perspective of importation or exportation).