Frequently asked questions
Provider
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.
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.
Which deflator is most commonly used by countries?
In theory, the choice of deflator to be used to compare expenditure amounts over time depends on the nature of the question that the analysis seeks to illuminate. For example, if one were interested in tracking changes in the volume of household purchases of over-the-counter (OTC, or non-prescription) medications, then a price index or deflator specific for OTC products would be most appropriate. However, if the interest were in tracking changes in national health spending relative to purchasing power in the whole economy, the GDP deflator would be most appropriate.
In practice, usage differs from country to country. Probably, the GDP deflator is most commonly used; most middle- and lower-income countries do not have a very reliable health price index. In Health at a Glance 2003 (published by the OECD), due to limited availability of reliable health price indices, an economy-wide (GDP) price index was used in order to compare growth rates of OECD countries over time and across countries. (It should be noted that the limitation of this methods was also emphasized in the publication.)
The practice of OECD countries varies. For example, Canada calculates “constant dollar expenditure” using price indices for public and private expenditure separately. Implicit price indices (IPI) for government current expenditure are used to deflate public sector health spending, and the health component of the Consumer Price Index (CPI) are used to deflate private sector health care spending. Adjusted values of public and private expenditure are summed to obtain Canada totals at constant dollar values.
Statistics Norway developed a method for calculating volume indices (volume indices for inpatient care were calculated based on DRGs, and for out-patient care based on number of visits by specialists); and constant price values of health care and price indices were calculated by using volume indexes.
Statistics Netherlands creates an average price for the goods and services offered for every actor in the health care system (as much as possible in accordance with new EU regulations on price deflation, which means output oriented). Expenditure in real prices (measurement of quantity) is derived from this price level. A “quantity produced” measure is created In case of government providers, and the "price" for the goods and services is derived from this. In case no information on prices or quantities is available or cannot be derived in a reliable way, the CPI is used as a general deflator for the actor in question.
Kenya is a developing country example in which the health component of the CPI has been used to deflate out of pocket expenditures for purchase of services at traditional healers.
In summary, there is no clear answer to this question. Which set of measures to use depends upon the nature of the question asked and the types of price or quantity information available. Health accountants are encouraged to seek guidance from economic statistics authorities in the country on the most appropriate and reliable measure.
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 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).