Efficiency, equity and feasibility of strategies to identify the poor: An application to premium exemptions under National Health Insurance in Ghana

Abstract

Objectives

This paper outlines the potential strategies to identify the poor, and assesses their feasibility, efficiency and equity. Analyses are illustrated for the case of premium exemptions under National Health Insurance (NHI) in Ghana.

Methods

A literature search in Medline search was performed to identify strategies to identify the poor. Models were developed including information on demography and poverty, and costs and errors of in- and exclusion of these strategies in two regions in Ghana.

Results

Proxy means testing (PMT), participatory welfare ranking (PWR), and geographic targeting (GT) are potentially useful strategies to identify the poor, and vary in terms of their efficiency, equity and feasibility. Costs to exempt one poor individual range between US$11.63 and US$66.67, and strategies may exclude up to 25% of the poor. Feasibility of strategies is dependent on their aptness in rural/urban settings, and administrative capacity to implement. A decision framework summarizes the above information to guide policy making.

Conclusions

We recommend PMT as an optimal strategy in relative low poverty incidence urbanized settings, PWR as an optimal strategy in relative low poverty incidence rural settings, and GT as an optimal strategy in high incidence poverty settings. This paper holds important lessons not only for NHI in Ghana but also for other countries implementing exemption policies.

Introduction

Currently many sub-Saharan African countries are exploring ways to replace user fees at point of service use with more equitable alternatives. Indirect payment systems such as social and community health insurance are of increasing interest [1]. Whether with user fees or insurance financing, exemptions are needed for the poorest to improve equity. Apart from the challenges of how to mobilize and pool adequate resources to finance such systems, there are challenges with effectively identifying and targeting the most vulnerable groups for exemptions. In low income countries, these challenges are related in part to large non formal sectors and corresponding difficulties in assessing income and living standards to minimize errors of inclusion and exclusion; constrained health budgets to cover the costs of identification, as well as the financing of such mandates given the large numbers of poor and low tax base [2]. Feasibility concerns and trade-offs between equity and efficiency continue to be an important point of debate.

Ghana passed a National Health Insurance (NHI) act in 2003, as part of financing reforms to address financial access constraints especially for the poor and improve equity in access to affordable and good quality care. By the end of 2007 a total of 145 District Wide Mutual Health Insurance Schemes were established, and more than 11 million people had enrolled representing 55% of the population [3].

Despite such strides recent empirical evidence suggests enrolment among the informal sector (including the poor) is relatively low [4], [5], [6]. The NHI act makes a provision for premium exemptions for the core poor (indigents) [5], but only a small proportion actually benefits. This is in part due to implementation problems related to difficulties in identifying the poor in the absence of clear guidelines/criteria and lack of detailed costing analysis to implement and fund the mandate [14]. In addition, there is a group of people in the “very poor” category who fall between the indigent category and those able to pay the minimum premium. They represent 18% of the population [7]. This group requires special protection arrangements to benefits from the NHIS [8], [9]. Consequently, to adopt a pro-poor strategy to the implementation of the NHIS, strenuous efforts to identify and enrol the poor are required as repeatedly stressed in MOH health sector reviews [10], [11], and other documents [12], [13], [14].

Against this background, this paper aims to identify potential strategies to identify the poor, and to judge their efficiency, equity and feasibility. The paper first reviews local and international experiences on identification of the poor. Since identification of the poor is an issue of concern beyond the health sector, the review includes experiences in health and non-health sectors. Next, the paper estimates costs of each strategy, and presents the trade-offs between feasibility (defined as practical ability to identify the poor in a given context), efficiency (defined by cost per exempted poor individual, and equity (defined by error of exclusion) of the different strategies. Finally, results are translated into a set of clear policy recommendations. This work has relevance not only for the health sector in Ghana but for other low and middle income countries that are struggling with issues around equitable health care financial protection whether through premium exemption as part of health insurance systems, user fee exemptions or conditional cash transfers.