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06BANGKOK2747 UNIVERSAL HEALTH CARE MENDING BONES BUT BREAKING BUDGETS

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“63421”,”5/10/2006 8:59″,”06BANGKOK2747″,

“Embassy Bangkok”,”UNCLASSIFIED”,””,”VZCZCXRO9348

PP RUEHCHI RUEHDT RUEHHM RUEHNH

DE RUEHBK #2747/01 1300859

ZNR UUUUU ZZH

P 100859Z MAY 06

FM AMEMBASSY BANGKOK

TO RUEHC/SECSTATE WASHDC PRIORITY 8471

INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY

RUEAUSA/DEPT OF HHS WASHINGTON DC PRIORITY

RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY”,

“UNCLAS SECTION 01 OF 04 BANGKOK 002747

 

SIPDIS

 

SIPDIS

 

STATE PASS HHS/OGHA FOR ELVANDER AND BHAT

COMMERCE FOR JKELLY

 

E.O. 12958: N/A

TAGS: ECON, EFIN, TH

SUBJECT: UNIVERSAL HEALTH CARE MENDING BONES BUT BREAKING

BUDGETS

 

1. Summary: Thailand\’s universal health care system

introduced by caretaker PM Thaksin has earned broad

popularity among the Thai public. However, it has faced

heavy criticism for being chronically underfunded, forcing

public hospitals to cut back on service and placing numerous

hospitals into the red and facing the possibility of

bankruptcy. At the same time, the expanding costs of the

program are fueling fears that the RTG health budget will be

overstretched and bring the entire health care system

crashing down with it. Although health care costs are rising

as a share of the national budget, analysts are confident

that with the expanding economy and concomitant tax revenue,

the national budget can handle the cost and that the

program\’s popularity will eventually translate into fuller

funding. End summary.

 

Shot in the arm to Thai health, but a pain in the budget

——————————————— ———–

 

2. In 2001, following on the campaign promises of newly

elected PM Thaksin, Thailand embarked on a universal health

care coverage system requiring a co-payment of only 30 baht

(75 cents) for virtually any medical treatment, including

medicines. The 30 Baht program, as it came to be known, has

been hugely popular among the Thai public, particularly among

the millions of previously uninsured who had rarely made use

of the health care system and often were plunged into heavy

debt when catastrophic illness struck.

 

3. Over 48 million Thais are covered by the universal

coverage (UC) system. The Civil Servant benefit scheme and

Social Security scheme cover much of the rest of Thailand\’s

64 million citizens, with private insurance covering those

who can afford it. The UC system is paid for out of the

general budget and administered by the semi-independent

National Health Security Office (NHSO). Hospitals receive a

monthly transfer from the NHSO based on the number of

registered beneficiaries in their area, multiplied by the

\”capitation rate\”, an amount the RTG determines annually

based on NHSO\’s projections of health care costs required per

person under the program. For FY 2006 the rate was set at

1659 baht (USD 44), with some adjustments for salaries and

other factors. The system is dominated by the country\’s

public hospitals (few private hospitals chose to join), which

are expected to manage their own books and cover their costs.

 

4. The lifeblood of the UC system is the capitation

payments to hospitals. At the outset of the UC program in

2001, Ministry of Public Health (MoPH) analysts projected a

capitation rate of 1200 baht would be sufficient to cover

costs, basing their analysis on a 1996 survey that outlined

costs and use of the health care system. However, hospital

visits boomed under the new program, and the NHSO quickly

recognized that they had seriously underestimated the initial

cost projections.

 

5. Although the RTG has steadily increased the capitation

rate over the past few years, the annual increases are

consistently below NHSO requests. In what has become a

recurring theme, NHSO recommendations for increases are

mostly ignored as the RTG shows a strong preference for low

end cost projections and lower capitation rates to ease

budget pressure. For FY 2005, NHSO calculated that a rate

between 1732 and 1510 baht would be necessary to meet costs

depending on a number of economic factors; the government

instead offered 1396. FY 2006 saw an increase to 1659 baht,

though independent researchers felt the number should be

closer to 2000 baht per head to meet hospital costs.

 

Hospitals on life support

————————-

 

6. The general consensus among health care analysts is

that the UC program is underfunded as a whole and critically

so in certain areas of the country. Out of 800-odd public

hospitals nationwide, approximately 200 are estimated to be

operating in the red, mostly those in the relatively poorer

Northeast region. Financing reform early in the program

focused on redistributing resources to deprived areas on a

more equal basis, and under-staffed rural hospitals in highly

populated areas benefited. However, the budget allocation

later changed in favor of larger hospitals, leaving some

district hospitals with a smaller per capita budget than

before the UC program. The overall budget was insufficient

to meet costs under the program, and within two years

hospitals of all sizes were in deep debt. A contingency fund

of five billion baht (USD 120 million) was set up to bail out

 

BANGKOK 00002747 002 OF 004

 

hospitals with severe financial difficulty, but the fund was

nearly exhausted after only one year.

 

7. The current discrepancy between total costs and the UC

budget has narrowed, but hospitals say the budget is

insufficient to maintain the level of quality of health care.

Hospitals complain that the annual increases in the

capitation rate fail to keep up with inflation and rising

health care costs, including doctor salaries and prices of

medicines. Despite the stresses put on the health care

system, the UC system has yet to bankrupt a hospital and most

are surviving if not thriving. As Dr. Viroj Naranong, a

health care researcher at the influential Trade and

Development Research Institute (TDRI), put it, \”they survived

on 1396 baht, they\’ll survive on 1659.\” NHSO has asked for

2059 baht for FY 2007, an amount that if approved promises to

reduce much of the financial handwringing.

 

Thaksin the CEO manages costs

—————————–

 

8. Dr. Viroj placed much of the blame for the underfunding

on caretaker PM Thaksin. After taking office Thaksin focused

on maintaining economic growth and keeping taxes low, and

forced the UC program to compete for funds like every other

government program. Says Viroj, \”Thaksin didn\’t dispute the

NHSO analysis on capitation rates, he just didn\’t have the

money.\” However, Viroj speculated that financial constraints

were not the only reason for the underfunding and suggested

that the MoPH deliberately set the capitation rate below

actual costs in order to force cost-saving management reforms

throughout the health care system.

 

9. Health care, and the UC system in particular, is an

increasing share of the national budget, but analysts are

confident the national budget can handle the extra weight of

the UC program. For FY 2006, the UC program will cost the

RTG approximately 81 billion baht (USD 2.1 billion),

approximately 5.5 percent of the national budget. In an era

of economic growth and increasing government revenues, TDRI\’s

Dr. Viroj felt the RTG had the wherewithal to fully fund it.

However, Viroj predicted that the government would wait until

the program was in serious financial danger before coming to

the rescue with more funds. In a recent tiff between the

Ministry of Public Health and TDRI, former TDRI President

Ammar Siamwalla claimed the RTG had sufficient funds to fully

fund the UC program but had chosen not to, and accused

Thaksin of neglecting the UC program in favor of other

spending more likely to earn votes in the most recent

election.

 

Putting hospitals on the road to recovery

—————————————–

 

10. Faced with shortfalls in operating budgets, hospitals

are tightening up management and cutting back on immediate

nonessentials, most notably capital investment. For FY

2006\’s capitation rate of 1659 baht, NHSO budgeted 100 baht

for capital expenditure, but TDRI estimates hospitals are

utilizing only 40 baht for this purpose. A separate study by

TDRI estimated that capital expenditures of 200-300 baht per

head would be necessary to maintain an acceptable level of

capital replacement and modernization. Most hospitals have

deployed other cost-saving strategies as well, using more

generic and locally produced medicines instead of imported

brand name drugs, trimming preventive medicine programs,

overtime staff, and other non-medical care expenses. More

drastically, hospitals in serious financial trouble have

found that reducing and refusing service to patients often

brings a chorus of complaints to government officials and a

quick infusion of funds from the central government.

 

11. Doctors at public hospitals have bridled at the extra

workload brought in by the UC scheme and defections to

private hospitals are common. As it reduced the financial

barrier to medical care, the UC program expanded the demand

for health services. Use of health care facilities rose by

25% in the first two years of the program, 54% in district

hospitals alone. A 2003 poll of health care providers found

that more than 70% of healthcare workers claimed that their

workload increased due to the UC policy, a particular burden

in district hospitals that were already understaffed.

Discontent was furthered by widely diverse salaries between

public and private hospitals. Despite increased financial

incentives for doctors working in public hospitals, including

a 20,000 baht (USD 500) bonus for working in rural hospitals,

NHSO\’s Dr. Pongpisut Jongudomsuk said MoPH\’s eventual goal

 

BANGKOK 00002747 003 OF 004

 

was to build public hospital salaries up to 80 percent of

private hospital salaries. The UC system has taken the blame

for sparking an exodus of doctors to private hospitals, but

Dr. Pongpisut noted that Thailand\’s improving economy enabled

private hospitals to afford increasingly higher salaries that

public hospitals could not match, a situation that would have

existed without the UC program.

 

12. In addition to cutbacks, hospitals have met shortfalls

by expanding revenue from other sources. Dr. Vithit

Artavatkun, director of Ban Phaew Hospital south of Bangkok,

a hospital considered to be a success story for UC, told

Econoff that although 80 percent of their patients used the

UC program, only 30 percent of their revenue came from the UC

budget. To cover the gap, the hospital shifts some of its

costs onto the more generous (and less regulated) civil

servant scheme. Patients looking for extras, such as private

rooms, get to pay out of pocket. Ban Phaew works on

community involvement and pockets additional funds from local

business and foundations that recognize the contribution the

hospital makes to the community. Ban Phaew and other

hospitals with specialists and state-of-the-art technology in

various treatments have advertised their specialties,

attracting patients from outside their area willing to pay

out of pocket for better care.

 

Code Blue ) HIV/AIDS and kidney treatment could spike UC

——————————————— ———–

 

13. The future financial viability of the UC program will

be tested by a recent RTG decision to place HIV/AIDS

treatment under UC coverage, and plans to expand the system

to include kidney transplant and dialysis as well. In

October 2005, MoPH committed to providing anti-retroviral

treatment to all HIV positive patients who require it,

approximately 80,000. Although Thailand produces a cheap,

generic anti-retroviral, the drug loses its effectiveness

after a number of years and patients must move to more

expensive second-line treatments. As Thailand expands the

life-saving treatment, the number of patients being treated

yearly will only increase and costs could increase

exponentially.

 

14. TDRI estimates that adding HIV and kidney treatment

would necessitate a substantial increase in the capitation

rate. The current budget for HIV treatment is 2.7 billion

baht for FY 2006, only about three percent of the UC budget,

but an increase in HIV prevalence or a failure to lower costs

of antiretrovirals could quickly increase that percentage.

For now the MoPH is keeping a separate budget for HIV/AIDS

treatment and will create another for kidney treatment, but

NHSO says the split is more for psychological reasons, not

wanting to appear to be swamping the UC system. A pilot

project for kidney dialysis is actually under budget, but

primarily because there is a shortage of doctors qualified to

provide the treatment.

 

Financing options to put UC back on its feet

——————————————–

 

15. Concerned that the UC program\’s funding through general

revenues makes it vulnerable to competition for funds between

ministries and political manipulation, UC advocates are

seeking a stand alone financing mechanism to support the

system. The 30 baht co-pay is at the moment the only source

of independent funds, but makes up only two percent of

revenues for hospitals from the UC program. NHSO staff are

somewhat wistful that the UC program earned the moniker \”30

Baht program\”, making it that much more difficult to increase

the level of co-payment.

 

16. A recent study by the International Health Policy

Program (IHPP) recommended generating revenue for the UC

program by raising \”sin taxes\”, earmarking two-thirds of

additional tobacco tax revenues and half an increase in

excise tax on alcohol and beer. TDRI\’s Dr. Viroj supported

the idea of a separate fund, but questioned the wisdom of

relying on revenue that fluctuates with economic conditions,

noting that revenue from sin taxes dropped significantly

during the 1997-8 financial crisis. IHPP proposed also that

the Social Security system, which relies on employer and

employee contributions as well as government funds, be

widened to include non-working spouses and dependents of SS

recipients, taking six million people off the UC rolls. IHPP

also recommended that a premium on auto insurance be

transferred to the NHSO to cover the over seven billion baht

(USD 190 million) annual cost to the UC system to care for

 

BANGKOK 00002747 004 OF 004

 

victims of traffic accidents.

 

Hospitals hurting, but patients feel better

——————————————-

 

17. Despite the numerous complaints about the

administration of the UC program, nearly everyone in the

health care field agrees that the program has been a boon to

health care in Thailand. WHO\’s local rep, Dr. William Aldis,

pointed to improving infant and maternal mortality

statistics, two of the best indicators of how well a health

care system is functioning. The use of smaller primary care

units in the field (cheaper than tertiary care in hospitals)

has improved health in rural areas by improving access. The

December 2004 tsunami that hit Thailand demonstrated the

sturdiness of the system. 13,000 patients hit the health

care system at the same time, many with massive head trauma

and nasty fractures, yet the case fatality rate remained low

and no hospitals broke under the strain.

 

18. A recent poll of healthcare professionals rated the

quality of services provided to all patients as \”good\” or

\”very good\”, but they ranked the quality provided to UC

beneficiaries lower than that provided to Social Security and

Civil Service beneficiaries. However, 85 percent of patients

surveyed said they were satisfied with the medical services

they received under the UC program, and 75 percent said their

quality of life in terms of health had improved since the

inception of the program in 2001. Only one percent said it

had worsened.

 

19. Comment: The UC program is still identified with the

ruling Thai Rak Thai party and Thaksin himself, but broad

political support among diverse political parties and

overwhelming popularity among the Thai public should ensure

that the program will continue past Thaksin\’s tenure as PM.

Like other similar systems, the 30-baht policy has stimulated

demand while suppressing supply. The dislocation and

financial distress that the UC system brought to hospitals

has been rough on many, but increasing demands for proper

funding promises to put the program on surer footing. The

expanding costs of the UC program have taken a sizable chunk

out of the national budget, but health officials recognize

that the total health expenditure for Thailand (about four

percent of GDP) needs to be raised. They see growing

expenditures not as a financial threat, but as a worthy

investment in improving public health and believe that the

time has come for Thai society to accept the necessary

financial commitment. End comment.

BOYCE

Written by thaicables

July 11, 2011 at 8:12 am

Posted in Economy, Unclassified

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