Frequently asked questions
Health expenditure
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.
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 should expenditure on health by international organizations be accounted for?
(See PG 10.21) The provision of external assistance for health in low-income and middle-income countries poses particular problems for NHA analysts. Generally, expenditures from international organizations, both cash and in kind, whose primary purpose is the production of health and health-related goods and services for the residents of the recipient country should be counted as part of the health expenditure of that recipient country. In contrast, activity of such organizations where the primary purpose is to assist the external organization with the planning and administration of such assistance should not be counted as expenditure in the recipient country’s NHA. For example, the costs associated with the embassy staff who report on programme activities to the donating country should be excluded.
How much is “a significant amount" of difference?
(See PG 11.08) Health accounting is as much an art as a science, so it is not really possible to give a specific answer to the question of how much is “a significant amount” of difference. The acceptable level of difference depends partly on the type of data being dealt with and partly on the size of the total estimate.
For example, when dealing with reliable audited expenditure data presented according to strict public accounting rules, one should be very suspicious of any differences and look for errors in data entry. On the other hand, when dealing with data that are known to be estimates, a more tolerant attitude can be adopted. For example, discrepancies of up to 50% could be accepted when dealing with estimates of traditional providers, subject to the following comment:
- Whatever the type of data, the other important aspect is the size of the estimate itself; For example, a 15% discrepancy in a cell accounting for half of total spending is more serious than a 100% discrepancy in a cell contributing only 3% of the total. As a rule of thumb, there is cause for concern if a discrepancy between two estimates amounts to 2% of the total figure for national health expenditure.
- As experience grows in dealing with data sources and in working with the health accounts, health accountants will also develop an intuitive sense of when a discrepancy is important.
Is household production of health care a part of NHA?
(See PG 12.22) Unpaid family care is not considered to be part of national health expenditure. Households and families provide a lot of inputs to health care, through their uncompensated time and effort. For example, family members take time to care for the sick at home or to stay with them in hospital. In keeping with the current practice in the system of national accounts, the value of such uncompensated activities and non-monetary inputs is not counted as health expenditure in NHA. These inputs may be very significant, as in the case of home-based care for people living with HIV/AIDS. The value of these activities can be estimated, but it is not part of the total used for comparison of health expenditure with other economic aggregates or for international comparison of health spending.
What should be used at the municipal level to estimate health expenditures as a share of total municipal expenditures?
Health expenditures encompass those activities whose primary intent is to restore maintain and restore health (PG 3.02 and 3.03). Any and all of the health and health-related functions described in the SHA framework can be carried out or financed at municipal level and should be included. At the conceptual level one must decide which activities to include; the PG offers some guidance (see PG 3.06-3.11), but ultimately the decision falls upon the judgment of the health accounts team and their advisors.
The practical problem is that delivery and financing of health activities may be intermingled with non-health activities. Typically this is a problem common to all types of actors in the health system but especially troublesome at the municipal level. Specific advice is hard to give here, as the best solution varies according to the type of data and information available to the health accounts team. Typically some form of judgment is needed; in some cases, one may be able to use time and motion studies or other similar analysis (see PG 13.21-13.26), or the informed judgment of key staff familiar with the programmes in question.
The choice of denominator in the ratio of health expenditure as a share of total municipal expenditure depends upon what message is to be conveyed. A municipal equivalent to GDP is not necessarily meaningful even where it is available. One might try to develop regional GDP estimates using proxy or key measures such as wages to prorate national GDP, or use data from a household survey to develop regional shares of total national household consumption. However, these measures remain at best a crude approximation of regional/municipal domestic product.
However, if the analytic question is more focused there may be a better measure available. For example, if one wants to know how health rates as a municipal priority, one could construct a ratio of municipal public health expenditures to total municipal government revenues or expenditures, and compare the ratio across municipalities or against the national average. Similarly, one could compare household out-of-pocket spending to total household spending at the subnational level and compare this ratio across municipalities and against the national figure. In other words, by restricting the analysis to a particular group of actors one may be able to find a valid and reliable denominator that reflects the total resources available to those actors.
Mexico has done some interesting analysis looking at per capita expenditures on health by state, compared to an index of health status for each state. This analysis is useful for assessing health expenditures relative to need and was used by the Ministry of Health to guide transfers from the central level to various states.
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.
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.
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).
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.
