How to work towards an equitable healthcare system in Egypt

REUTERS// Mohamed Abd El Ghany

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The health of any economy stems from the actual physical health of its citizens. Around the world, developed countries, with notable exceptions, are working to expand their health coverage systems in pursuit of a universal right to free and high-quality healthcare.

In Egypt, with the biggest population in the region, the challenge is real. Enshrined in the 2014 constitution, however, is a right for every Egyptian to access quality healthcare services. The same constitution earmarked 3 percent of national GDP to be spent on healthcare. However, what is the healthcare reality Egyptians are dealing with today?

Cairo University’s Faculty of Economics’ researchers Yara Ahmed, Racha Ramadan and Mohamed Fathir Sakr, recently published a research paper in which they aim to evaluate the equity and progressivity of health-care financing in Egypt, using CAPMAS data to reach a set of compelling results.

Sources of healthcare financing in Egypt

One of the most significant aspects to dissect when examining the equity of any healthcare system is the sources of funding for that system. In countries like Canada, one of the world’s best in the field, high income and health taxes for all citizens are used to finance universal healthcare coverage, regardless of income or other socioeconomic factors.

In general, healthcare financing comes from five sources; out-of-pocket payments (OOPP), private health insurance, social health insurance, health-taxes and general government revenues. The less individuals have to spend out of pocket for quality healthcare is generally regarded as a positive sign for the equity of the system.

“Egypt’s healthcare system is pluralistic and fragmented, with numerous sources of financing, financing agents and providers,” reveals the paper. “It is estimated that in 2016, 62 percent of the total health expenditure was financed by private out-of-pocket payments (OOPPs) – the highest among all middle-income countries in the region.”

Furthermore, government expenditure on health as a share of GDP has reached 4.64 percent in 2016, which, despite fulfilling the mandated 3 percent in the constitution, is still one of the lowest spending on the sector among middle-income countries in the region.

“While all five sources play a role in financing Egypt’s healthcare system, the dominance of OOPP is alarmingly high,” explains the paper. “OOPP comprised around 70 per cent of health-care spending in 2008/ 2009, followed by government financing at 25 percent of total health expenditure. An earmarked health-tax on cigarettes finances the remainder of health expenditure in Egypt.”

It is also important to note that “total health expenditure has risen in Egypt from EGP 7.5bn in 1994/95 to EGP 61.4bn in 2008/09, with per capita health expenditure also growing during this period from EGP 127 to EGP 800, and has stood at EGP 1273 in 2014.”

Healthcare equity in Egypt

Generally speaking, the fewer individuals have to spend out of pocket on quality health services, the more equitable the system is, considering other factors are balanced.

As the paper found, a more accurate figure of OOPP in Egypt is 87.3 percent of total health expenditure in Egypt’s in urban households, and 92.1 percent of rural households . “This confirms that Egyptian households finance almost all of their healthcare spending OOP,” stated the paper.

A significant category for out of pocket healthcare spending isn’t even about accessing quality hospitals, but buying pharmaceutical products – a category in which most Egyptians spend regardless of their income or health insurance status.

“Pharmaceutical products represent more than 50 per cent of total health expenditure in both urban and rural areas,” estimates the paper. “This is consistent with the finding of the National Health Authority that the bulk of spending on pharmaceuticals in Egypt is directly borne by households, given that even for the insured, most insurance plans do not cover pharmaceuticals.”

What’s more is that OOPP spending disproportionately affects the most vulnerable.

“Numerous studies have shown difficulty in reaching the poorest groups of society through targeted assistance, with rural women being particularly vulnerable despite being among those most in need,” elaborated the paper.

“Those vulnerable groups either use publicly provided, subsidized health services, characterized by long waiting times and substandard quality, or pay for privately provided healthcare OOP, which can have catastrophic impoverishing effects.”

Higher income groups don’t seem to find it much of a challenge to pay for high quality private care, which, even when out of pocket, still constitutes a smaller portion of their income than what lower income households spend out of pocket for healthcare.

“Therefore, poorer households are bearing a larger burden of OOPP in Egypt relative to their ability to pay. Their inability to access the same quality of healthcare services such as richer households, because of the OOPP barrier, is another dimension of healthcare financing inequity.”

Another inequity dimension can be found in the earmarked cigarette tax, which is the source of only 0.29 percent of total health expenditure in Egypt. The issue here is that the cigarette tax is the same regardless of the quality or price of the cigarettes brand in question, posing an inequity dilemma.

“If the logic suggesting that smokers’ choice of cigarette brand is influenced by their income level is followed, it can be assumed that lower income smokers will consume the low-priced category, whereas the better-off will consume mid-priced brands and higher income smokers will opt for premium brands,” suggests the paper.

“Given the way the earmarked tax is structured, lower income households with smokers will be effectively paying a higher tax in percentage terms than higher income households whose smokers consume premium brands. This makes the earmarked health tax on cigarettes a regressive source of financing.”

Raising flags

The government of Egypt has been mobilized to address the inequities and structural quality issues of the sector, working towards a universal health insurance scheme that started with the city of Port Said. While a positive step indeed, the researchers are wary of falling victim to old traps.

“A common problem of social health insurance-type systems as proposed by the new law is that patients have no incentive to limit demand and medical providers have no incentive to limit supply,” warns the paper. “Overconsumption of health services, as well as possible over-prescription, could, therefore, be negatives of the new system. Policymakers need to be aware of this potential moral hazard issue and institute proper regulation to monitor the practice of healthcare providers.”

How to avoid such a hazard?

“Having copayments for services is important to curb overconsumption of health-care services. Upgrading the quality of service provision in public healthcare facilities should be at the top of policymakers’ agendas to ensure that increased social health insurance coverage under the new law translates into lower out-of-pocket payments.”

Another important issue to address for the new system to succeed is the quality of public healthcare services.

“If public facilities serving the insured under the new system do not match the quality of private sector providers, Egyptians will continue to pay for private healthcare OOP. Another policy option to consider is including private providers in the network of facilities serving the insured under the new SHI system.”

Access the full paper here.

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