Universal coverage of social protection, including health care, is the stated goal for most countries, regardless of their level of national income. But achieving this goal is daunting for countries in which the majority of workers are in the informal economy. And it is especially so when the administrative capacities of formal social security systems remain underdeveloped and when general tax revenue, as a necessary source of health-care finance, is insufficient to cover more than only the very poorest.

Against such a backdrop, the Lao People’s Democratic Republic (hereafter, Lao PDR) has taken up the challenge of realizing universal health-care coverage by 2020. This is being pursued through a strategy focused on maximizing the pooling, both of risks and social protection funds, and through building enhanced operational efficiency. A key element in the strategy is the planned merger of existing health-care schemes, which currently operate under the separate mandates of two government ministries – the Ministry of Labour and Social Welfare (MOLSW) and the Ministry of Health (MOH).

Several countries, such as the Republic of Korea and Japan, have merged social health protection schemes in recent years, but these mergers occurred after reaching universal coverage. In contrast, Lao PDR is a low-income country where the majority of the population remains without health-care coverage. As a consequence, the implementation of these plans may present important lessons for other countries at a similar stage of economic development and with similarly low levels of health-care coverage.

If successful, the planned merging of social health protection schemes, which has broad political backing in Lao PDR, will lead to the consolidation and strengthening of health-care policies, organizations and capacity. It will enhance the country’s capacity to provide appropriate social health protection to all.

 

Setting the context

In 1997, Lao PDR introduced user fees for public health facilities. This change triggered a significant increase in “out-of-pocket” health-care expenditure. In response to growing health-care payments and to help prevent poverty, the government of Lao PDR established four social health-protection systems.

The four social health protection systems are:

 

Compulsory contributory social security schemes

There are two compulsory contributory social security schemes, which provide health care alongside social security cash benefits:

- Social Security Office (SSO), covering the private salaried sector.
- State Authority for Social Security (SASS), covering the public salaried sector (and which is also set to include police and military personnel).

 

Voluntary contributory social health-insurance scheme

- Community-Based Health Insurance Scheme (CBHI) covering the informal and non-salaried sector, but providing only health-care benefits.

 

Non-contributory social assistance system

- Health Equity Funds (HEFs), currently funded by bilateral donors and lending banks and implemented by external partners and non-governmental organizations, with the Ministry of Health stipulating that the funds be used to purchase CBHI membership for low-income families.

 

Collaboration between the MOLSW, the MOH and the major development partners – the International Labour Organization and the World Health Organization – resulted in all three contributory social insurance schemes having the same design features. All schemes provide coverage to the insured and his or her dependent family members. Health-care benefits cover ambulatory and in-patient care, without co-payment or limits on the number of contacts or services provided. In all the contributory schemes, capitation is the main provider payment method. The same classifications codes are used in their information systems.

The main objective of assuring this compatibility was to facilitate, at a future date, the shift to universal coverage. In August 2009, the total number of persons covered by all four social protection systems was approximately 465,000, or 7.82 per cent of the total population of Lao PDR of around 6 million.

Table 1 shows the current status and main characteristics of the four systems and their target populations.

The push for reform

To pursue reform, Lao PDR introduced a parallel approach of launching and extending social health protection to formal- and informal-economy workers while developing mechanisms to cover the poorest through social assistance. After eight years of the separate but slow development of contributory health-care schemes, the move to merge the schemes has been driven by political will and recognition of the scale of the challenge of extending coverage under each of the four systems.

 

Political will has manifested itself through:

1. The Sixth National Social Development Plan (2006-2010), which identifies health as one of the four sectors for development, and calls for full health-care coverage and equity of access by 2020;

2. A number of Resolutions taken by the Eighth Party Congress on financing health care, including the expansion of social health protection for the informal sector;

3. A Prime Ministerial request (March 2009) for the MOH and the MOLSW to move towards merging all social protection systems.

Importantly, the government has recognized the positive impact of the schemes to date. Utilization of health care has increased significantly. Table 2 shows comparative data for health-care utilization through SSO and CBHI alongside national estimates.

 

There has also been a substantial increase in revenue coming into public health facilities from the insured population and a reduction in out-of-pocket payments, which typically predominantly go to unregulated private providers.

The weaknesses of each system have also been recognized. In the SSO, compliance in registration and contribution collection is weak, with less than one-third of private-sector salaried workers covered. Membership is compulsory but the SSO’s legislative tool (Decree 207) has no sanctions to enforce an employer to register workers and pay contributions regularly. To date, the SSO operates in the capital Vientiane and three provinces, which were selected since they have large private-sector enterprises. The SSO is reluctant to expand to more provinces, because of the high operating costs incurred for a relatively small number of beneficiaries.

In the SASS, all civil servants are registered by the government (as the employer) and its operations are meant to extend to all provinces and districts. However, the scheme’s legislative tool (Decree 70) has so far only been implemented in the capital Vientiane and Vientiane Province, while the other provinces are still under the previous system of reimbursement for health-care expenses (which has higher actual expenditure per person compared with the population covered by the new capitation system).

In CBHI, low compliance is reflected by late payments, and some families pay again when they need care. CBHI members do not represent the wealthier population in the informal economy. They are typically low-income families, and many are near-poor families with incomes above the official poverty line but insufficient to pay contributions on a regular basis. The government has recognized that their contributions need to be subsidized, because they are at risk of falling into poverty as a result of often having to pay high and unpredictable amounts for health care. The extension of coverage in CBHI has been hampered by the scattered development of CBHI across the country, which has occurred without first reaching substantial coverage at the village and district level. In part this situation is linked to a lack of trained staff to launch CBHI in new sites. However, this is a common problem: all contributory schemes suffer from a lack of trained staff, particularly at the provincial and district levels.

The rationale for merging the social health protection systems therefore is to:

- Consolidate and increase technical capacity, to introduce new legislative tools, and to better inform the public.

- Increase membership, with subsidies needed for the poor and near-poor population to reduce the risk of poverty as a result of paying for health care.

- Increase utilization to facilitate improvements in health, reduce unmet needs and facilitate the achievement of the Millennium Development Goals.

- Increase coverage to increase the revenue potential of the prepayment and capitation methods for health-care providers.

 

What will the merger achieve?

With a longer-term goal of realizing universal coverage, it is expected that the merging of the systems will lead to:

- Enhanced equity and solidarity among all population groups through the maximal pooling of risks and social protection funds.

- Greater efficiency in the administration of social protection.

- The creation of one fund with adequate reserves and allocations for high-cost care, health promotion and prevention and appropriate research and documentation.

- The assurance of portability in social protection between public, private, self-employed and informal-economy workers.

In the proposed merger, a single authority, the National Social Security System, will be responsible for the registration of, and collection of contributions from, all population sectors (see Figure 1.). The National Social Health Protection Board will have a tripartite structure, compatible with the current Medical Boards of SSO and SASS, and allow for appropriate representation of the informal sector, health-care providers and civil society. The MOH will retain the responsibility for health-care policy development.

 

 

 

Prerequisites and risks

Important prerequisites for the proposed merger are financial support, acceptance by health-care providers for improved quality of care, appropriate legislative tools, and adequate technical capacity through consolidation and strengthening of all professionals into a single institutional framework.

The salaried-sector schemes provide a broad range of cash benefits, as well as health care. The cash benefits include a retirement pension, income replacement for short-term sickness absenteeism, invalidity, maternity, survivor’s benefit and funeral grant. The comprehensive nature of these benefits will need to be maintained after any merger. It is hoped that in the future, additional social protection benefits, such as old-age benefits and the funeral grant, will be available for all population sectors, including those in the informal economy.

Potential sources of revenue for subsidies include Health Equity Funds and additional government funds. Other potential revenue sources are an increase in the Vehicle Road Tax to support the treatment of road accident injuries, and revenue from fines imposed for the late payment of contributions.

To deal with low compliance and to improve institutional arrangements, a Social Security and Social Health Protection Law is planned to be enacted and phased in from 2015 to 2020. The degree of urgency surrounding the development of the law is to counteract the risk that existing social protection systems become entrenched and resistant to reform.

 

Two merger options

Two merger options are currently under discussion. After a first phase in which the Lao National Social Security System and the National Social Health Protection Fund are introduced nationally, the existing SASS offices throughout the country could be used to register and collect contributions for all the schemes. This would require the rapid extension of the implementation of the SASS reform, but could be operational by 2012. Alternatively, after the creation of the new national institutions, the merging of functions could follow a process of extending coverage under the three contributory schemes and the HEFs, in which case half of the provinces could be covered by 2014.

 

Sources:

Carrin G.; James, C.  2005. “Social health insurance: Key factors affecting the transition towards universal coverage”, in International Social Security Review , Vol. 58, No. 1.

Schremmer, J.; et al.  2009. “Extending health care coverage: Potential linkages between statutory social security schemes and community-based social protection”, in International Social Security Review , Vol. 62, No. 1.

Ron, A.; Bayarsaikhan, D.; Sein, T. (eds.).  2005. Social health insurance: Selected case studies from Asia and the Pacific (SEARO regional publication, No. 42). Manila and New Delhi, World Health Organization – South-East Asia and Western Pacific Regional Offices.