Frequently asked questions
Insurance
Do we include insurance benefits or insurance premiums under NHA?
(See PG 10.18) Actually, both insurance benefits and insurance premiums are included in the accounts. The benefit figure is used to estimate total personal expenditure on health, and the premium figure (together with any subsidies) is used to calculate national health expenditure. The difference between premiums and benefits, which is called the net cost of health insurance, is classified among the administrative functions. If this figure is negative, a financing source in FS.2.4.2 (ICHA code) should be established to channel funds from retained earnings to current operations. However, entities cannot finance losses from retained earnings for long without becoming insolvent, so it is prudent to check for the existence of subsidies from government or from external sources as a form of revenue of insurance companies.
How are government subsidies to truly private insurance schemes recorded?
(See PG 10.19) If an insurance scheme truly is private – that is, not controlled by the government – then the government (or other entity) should be shown as a source of funds for the insurance scheme to the extent of any subsidy. Of course, if the government materially controls the insurance scheme, then the scheme is not truly private and should be treated as an extrabudgetary entity. The total addition to national health expenditure of the insurance scheme is the value of the premiums it earns plus subsidies received to supplement those premiums.
How can I estimate insurance benefit from premium data or vice-versa?
(See PG 10.20) In the case of there being only a benefit figure for insurance, the premium figure must be estimated. This can be done by finding or estimating what is called a “loss ratio”, which is the ratio of benefits to premiums, and dividing aggregate benefits by that ratio. Alternatively, an estimate of total administrative expenses (either in monetary units or as a percentage of benefits) could be added to total benefits. These estimates or figures can come from consultation with knowledgeable people, from experiences in countries similar in terms of the maturity of the insurance industry, or from some other type of process (such as the professional judgement of the NHA team). If all that is known is the premium figure, benefits must be estimated through the reverse of the process described.
How are “taxes earmarked for social security" accounted for?
(See PG 11.14) In the NHA, taxes that are earmarked for social security are allocated to the source groups that paid them. Employers are the source of the taxes they pay, and households are the source of taxes paid by employees. The reason for this treatment is that such taxes are in essence a form of premium, and should be treated in the same way as premiums paid to private social insurance or voluntary medical insurance. Taxes used to support other government health care programmes are counted as general revenue, which is attributed to government as a source.
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.
Why does my NHA show different figures for household spending than does the household survey?
There may be several answers to this question. First, the definition of what comprises household spending may differ between the household survey and the national health accounts. Often a household survey will try to measure all outlays by households for health care. Thus “household spending” in the survey most closely matches “household funds” (FS.2.2) in the financing sources dimension. But category FS2.2 includes payroll deductions for health care (FS.2.2xHF.1.2 or FS.2.2xHF.2.1) in addition to cash payments made by households. The cash payments include copayments and purchases of noninsured services (FS.2.2xHF.2.3) plus cash purchase of insurance premiums (FS.2.2xHF.2.1 or FS.2.2xHF.2.2). Thus, no single category from the health accounts exactly matches what is being called “household spending for health” in the household survey.
Another possible answer is that the household survey was not used for all of the pieces of household spending for health in the NHA. For example, social insurance premium figures may have been taken from the Insurance agencies, or other types of substitutions may have been made (See PG paras 10.13 and 11.32 for a discussion and example of this).
Finally, it is possible that the household survey includes types of spending that are outside the boundaries of the health accounts. Perhaps the survey includes an estimate of informal transportation costs and the NHA has been defined to exclude this type of expenditure.
How should the administrative cost of a medical saving account (MSA) be captured for NHA purposes?Should one include the total administrative cost of managing a savings account, which includes the substantial cost of collection and investments etc? Or should one try to estimate the administrative cost related to actually paying out for medical benefits?
Medical savings accounts (MSAs) are arrangements in which individuals pay into a personal fund, typically using pre-tax income. The only withdrawals from the fund that are permitted are for medical expenses; the fund balance typically accrues interest or dividends from year to year. The amount included in the health accounts in a given year equals the disbursements from the MSA plus the administrative cost.
In theory, only part of the administrative cost of the MSA should be included in the health accounts. MSAs are part savings accounts and part mechanisms for paying for medical care. Administrative expenses attributable to managing the savings account aspect of the MSA should be excluded.
Suppose, for example, that one division of the insurance company handles collection and disbursement, and that another division of the company handles investment and financial management. In that case, a plausible argument could be made that the first division's costs would be included in the NHA figures (including some portion of the insurer’s general administration costs) and that the second division's would be excluded because the division was uninvolved in the health insurance aspects of the MSA.
In this respect the treatment may appear to depart from the treatment of regular health insurance. There, the value of the insurance in total health expenditure is premiums earned (plus subsidies, if any); the value in personal health care expenditure is total benefits incurred. Because there is a real transaction involved in the purchase of insurance, it is not necessary to look at the components of administrative expenses to place a value on the insurance. However, the two approaches really are compatible; the MSA approach simply partitions "lines of business" for the MSA steward and omits the non-health line.
In practice, it may be impossible to separate the two different parts of the administrative cost of the MSA. In that case, the NHA team must decide to include the entire administrative cost in the health accounts or to use some type of professional judgment to estimate the two pieces. In either case, the decision and steps should be documented.
However one handles MSA administrative costs, the MSA administration-to-benefit ratio will likely be very large compared to “conventional" insurance -- but that is the nature of MSAs.
In my country the bulk of hospital income is from budgetary transfers, social insurance payments and user charges. But they also have a line item for income from the hospital's own commercial activities. This is not much, but apparently in rural areas, many hospitals maintain their own herds of cows, sheep, etc, and use the profit as an additional source of cash income to maintain operations, in addition to feeding their patients, staff, etc. In most cases, the hospital used its operational savings to purchase these productive assets.
How should one treat this type of income?
At first glance, the best way to go would be to classify the funds as FS.2.4 -- in a very tangible sense, revenues could be seen as a return on assets, but it probably would be better to call them "other" funds and stick them in FS.2.4.2 (see table 4.5 in section 4.20 of the PG). Following along that line, one would establish a financing category HF.2.9 called "nonpatient revenue of providers." I would recommend against showing the revenue in HF.2.5, as that line seems destined to hold monies spent for patient care of employees.
However, there is a tricky part to this question: whether the hospitals are treated as market or non-market producers. (This stems from the statement that the hospitals bought their flocks using operational savings.) Let's suppose two hypothetical expense and revenue accounts:
If the hospital were a nonmarket producer, then the value of output would equal the cost of production of patient care. In Example A this would be 100+45+20+10+8=183; financing would be 23+140+13=176, requiring 7 of nonpatient revenue to bring the total to 183. In Example B, expenses add to 100+45+20+7+8=180. In this example financing is 23+140+17=180. No nonpatient revenue is required to balance the account.
If the hospital were a market producer, you would strike the nonpatient activity from both sides of the ledger (and adjust the surplus). In the examples above, patient revenue in Example A is 194-18=176 and patient expenses are 176, so no balancing is required. Similarly, in Example B patient revenue is 194-14=180 and patient expenses are 180, requiring no adjustment. Note that if the patient surplus (patient revenue minus patient expenses) were negative—and persistently negative—this would indicate product cross-subsidization and you would book enough nonpatient revenue to make the deficit zero (de facto duplicating the steps taken for valuing the nonmarket provider).
The essential problem here is one of a producer with multiple outputs, some of which are inside the NHA boundary and others of which are outside. The approach outlined addresses the problem.
Call the purchase of livestock a health investment probably stretches the definitions in the NHA too far, so none of that money would show in HC.R.1 or HC.R.nsk
A similar type of accounting is needed in developed countries (specifically in the USA), as many nonprofit hospitals use nonpatient revenue to subsidize their patient care. This revenue, mostly from gift shop sales and television rental, is booked as nonpatient revenue and is included in the "other private funds" line in the USA accounts; the amounts from the detailed HFxHP tables.
How should one account for a company insurance scheme where staff pay in a premium and get a reimbursement from the enterprise’s own in-house insurance?
The firm is self-insured against medical costs. Employees contribute to a fund (or virtual fund) and medical costs are paid out of that fund. Because this is group insurance, this plan should be classified as HF.2.1 (private social insurance).
The discussion to follow assumes that the insurance scheme is an integral part of the firm’s activity. If the plan has a separate fund that is distinct from the firm’s books, then it is appropriate to treat it as though it were purchased insurance. NHE attributable to a self-insured scheme equals the value of benefits paid out plus the administrative costs of the scheme.
The employee contribution to the scheme (FS.2.2 x HF.2.1) equals the amount of premiums paid. Note that employee copayments do not enter into this calculation; they appear as FS.2.2xHF.2.3.
The employer contribution (FS.2.1 x HF.2.1) is found as a residual.
If the firm has a health room (infirmary) where staff go when they are sick on the job, need a physical, etc., is that considered as "firms and employer-paid medical services” (HF.2.5)?
For the most part, yes. First, the value of services provided by the on-site clinic (counted as HP.3.4) is equal to the cost of its operation. Note that explicit administrative expenses of the clinic are included in HP.3.4 as well and are not included in HP.6; further, these costs are counted as part of the care received (HC.1) and not program administration (HC.7).
Employee co-payments would show in HF.2.3xHP.3.4. Reimbursements from other payers (including payments from the firm’s self-insurance fund if such exists) are treated comparably.
After known reimbursements and copayments have been accounted for, the balance is attributed to HF2.5. The example below assumes that the clinic only receives employee copayments.
