Functional classification of health expenditures 2
CORE FUNCTIONS OF MEDICAL CARE 5
F1 Personal health services 5
F2 Distribution of medical goods 11
F3 Collective health services 13
F4 Health programme administration and health insurance 15
HEALTH RELATED FUNCTIONS 16
F5 Investment in medical facilities 16
F7 Health Research & Development 16
F8 Expenditure on environmental health 16
F9 Administration and provision of cash benefits 16
Review of International Practice 18
Core functions of medical care 18
Health related functions 39
Note on preparation Prepared by Dr. Ravi P. Rannan-Eliya and Ms. Aparnaa Somanathan, Institute of Policy Studies, Sri Lanka (Consultants to Harvard University). The authors acknowledge the assistance during preparation of the international review of Manfred Huber of the OECD Secretariat in Paris, and of Dr. Peter Berman of Harvard University, and the inputs of the task groups appointed by the Health and Welfare Bureau of the Hong Kong SAR Government.
This document provides a set of classifications for use in Hong Kong DHA, developed through a process of review of international practice and deliberation by task groups appointed by the Hong Kong SAR Government Health and Welfare Bureau. Included is a review of current definitions and classifications used in NHA work by the Organisation of Economic Co-operation and Development (OECD) and four OECD member countries, USA, UK, Canada and Japan. The four countries were selected on the basis of feedback received from the DHA Team appointed by the Hong Kong government. On the basis of these approaches, a draft working paper was produced with recommendations as to options for the framework to be used in Hong Kong’s DHA and distributed among members of the DHA team. The paper was revised to incorporate comments made by the DHA team. This current paper is based on a previous paper by the same authors, Review of international NHA classifications and definitions for preparation of HK DHA, (March 1998).
Preparation of this document involved a systematic review of the current definitions used by the four countries concerned, the definitions used by the OECD secretariat in preparing its 1998 estimates of health spending in OECD member countries (to be published later in 1998, and referred to herein as OECD 1998), and a draft proposal for collecting international health statistics under preparation by the OECD secretariat in October 1997 (unpublished document made available to Institute of Policy Studies by OECD, referred to herein as OECD Proposal).
OECD 1998 is the most recent version of the set of definitions used by OECD in preparing its annual estimates of health spending in the OECD. It has been developed over several years in an ongoing attempt to standardise the available data reported by member countries, and therefore reflects substantially the structure of the health expenditure reporting systems in individual countries, in particular those of USA.
OECD Proposal (October,1997 version) is a new set of classifications and frameworks prepared by the OECD secretariat for measuring health expenditures in a manner consistent with other UN statistical reporting systems and the existing OECD database. It differs from OECD 1998 in that it proposes a different breakdown or classification of health expenditures, and in that it provides much more detailed sets of definitions for the various types of expenditures. Its functional classification of health expenditures, the ICHE (International Classification of Health Expenditures), is presented in four levels of disaggregation, each level of which is labelled according to a system of 1-4 digit codes. OECD plans to test this new approach during the next two years, and based on resulting modifications and feedback from non-OECD countries and experts to propose a revised version of the Proposal to Eurostat and other UN agencies as a global standard for health expenditure estimation. We have included the OECD Proposal in our review, as it is likely that it will lead eventually to a new international system of health expenditures estimation. However, the OECD Proposal is yet to be ratified by the OECD itself, and currently contains several major defects, which we believe will force major modifications. For this reason, we have focused on those elements in the OECD Proposal which are most useful and likely to stand the test of time.
Functional classification of health expenditures
OECD Proposal’s functional classification makes a basic distinction between core functions of health care and other health related functions. This same distinction is used in Hong Kong DHA, as it separates those expenditures for which there is universal agreement about their classification as health, from those for which there is considerable national variation and dispute. OECD Proposal then disaggregates core functions into four types at the first level (or one digit level of the ICHE):
Health programme administration and health insurance
The draft functional classification used in Hong Kong DHA uses this same classification. At the next level of disaggregation, Hong Kong DHA deviates from that presented by the OECD Proposal (2 digit level in ICHE), and instead follow the general practice used in national NHA work by USA and that used in OECD 1998. The OECD Proposal presents a substantially different functional classification at its two digit level, which does not differentiate between inpatient and outpatient expenditures, and instead focuses on the clinical purpose of patient treatment expenditures. In our judgement, this new classification is unlikely to survive subsequent revisions, as most policy makers are actually interested firstly in knowing the inpatient/outpatient breakdown, and since most countries do not have the data to allow estimation of the categories proposed in OECD Proposal.
Table 1 gives the functional classification for health expenditures used in Hong Kong’s DHA. It includes the codes proposed for Hong Kong and the corresponding International Classification for Health Expenditures (ICHE) codes. ICHE is a standard developed by the proposed OECD manual. The remaining part of the document concentrates on presenting the definitions used by national agencies when reporting national statistics on health expenditures, or in their national health accounts, as well as those in use or proposed currently by OECD.
The format of this document is as follows. The definitions used in Hong Kong DHA for each item in the classification system are presented first. This is followed by a discussion of the relevant OECD and national definitions for those items. In many cases the only OECD definitions are those from OECD 1998. The definitions given for individual countries are the ones used in reporting national health expenditures through the OECD secretariat, where they deviate from the OECD 1998 definitions.
This document is a draft, and should be treated as a work in progress.
Table 1: Functional classification of health expenditures in Hong Kong