When medical expenses lead to financial catastrophe

ACCESS to medicines is essential for health systems to function.

Access means having medicines continuously available and affordable that are within one hour’s walk from homes.

Limited availability and high prices are the most compelling challenges that account for the low access to quality essential medicines in the Philippines.

In part, this is brought about by the devolution of health services. Devolution, or decentralization, was to empower and provide autonomy to local governments so they can dispense basic services at the point where people needed them.

But an unintended effect that has never been acknowledged and consciously dealt with is the process of disengagement.

This has become apparent where local governments are presumed to be responsible for all the health needs of their constituents; and where local governments consider less and less expenditure in health and are shifting the burden to the people.

Only 11 percent of essential medicines are available in public health facilities and only 15 percent in private ones, according to a 2006 survey by the World Health Organization (WHO) and Health Action International.

In a decentralized system, availability of medicines is affected by inadequate budgets and entitlement for medicine for the poor and the vulnerable; and inefficient procurement and supply.

Using a basket of 30 essential medicines, a WHO case study in 2006 of 19 devolved health facilities in the Philippines showed that the availability ranged from zero percent to 33 percent. An inspection in one district showed none of the 30 medicines available at all during the time of the visit.

High prices

In 2008, the price of medicines in the Philippines was 3.4 to 184 times the international reference index.

In an inter-country price comparison study, the Philippines was procuring an original brand of Ciproflocacin at 33.6 times the international price index. The Philippines also has the second highest price for Atenolol among Asian countries.

Inefficient public procurement drives the prices of medicines up. An inter-country study shows that the procurement price in the Philippines for generics is 2.94 times the international reference index. The difference across regions ranges from 1 percent to 1.048 percent.

The most direct and immediate effects of devolution are patients paying out-of-pocket for health services, especially for medicines.

To an extent, devolution has contributed to wider disparities in the type of health services given to the poor. 

The national government needs to augment basic health services where they are not available or inadequate. For example, the provisions of equalization fund, established to support hospitals that are underfunded by local governments, need to be reconsidered.

At the local level, medical provisions, particularly for public health facilities, have been totally dependent on local budgets. Health budgets have to compete with other basic services such as social welfare, education and infrastructure.

As a way of dealing with budgetary constraints, local governments tend to disengage in the provision of basic medicines and look at them as something that must be contributed by patients.

Some local governments have engaged in “economic enterprise,” a policy adopted in the late 1990s to earn revenues from government operations. This is one adverse policy when applied to medicines and health services.

Although the aim was to increase the operational budget to improve services, it did not necessarily benefit patients. Today, many hospitals consider their pharmacies as profit centers to support over-all operations.

Policy interventions

Every national medicines policy must be anchored on the basic premise that access to essential medicines is a human right.

Medicines policies and programs should be anchored on rational selection, affordable prices, sustainable financing and reliable health and supply systems.

In the Philippines, the most urgent intervention is ensuring that medicines are available and that all patients, particularly the poor, are provided essential medicines.

High out-of-pocket payments need to be addressed. For those not covered by health insurance, expenses for medicines often lead to financial catastrophe.

The WHO has proposed that health expenditure should be viewed as catastrophic whenever it is greater than or equal to 40 percent of a household’s non-subsistence income, or income available after basic needs have been met.

When out-of-pocket expenditure is less than 15 percent of total spending, few household face catastrophic payments.

Public financing of drugs is required to ensure optimal consumption of drugs, which have a high degree of public benefit and to subsidize essential drugs for the poor. 

Source: Health Policy Notes