Borghi, Jo

Hanson, Kara

Mtei, Gemini

English

Digital Library of the Tanzania Health Community

Health Financing equity in the context of health system 
financing reforms in Tanzania
Gemini Mtei1, Jo Borghi1,2, Kara Hanson2
1. Ifakara Health Institute; 2. London School of Hygiene and Tropical 
Medicine
2th Symposium on Health systems research 
Oct 31 – 3rd March, 2012
Beijing – ChinaBackground
• Tanzania adopted free health care policy immediately after
independence
– The objective was to achieve the goal of health care access to all as
also stipulated in the Alma Ata declaration of 1978
• In 1994 cost sharing policy was re-introduced
– Due to poor economic performance
• User fee introduction was accompanied by decrease in
governmentshare to health financing
– OOPs became the major source of financing health care
• From mid 1990s to early 2000 there were major reforms in
thetax structure
– E.g. Introduction of Tanzania Revenue Authority (TRA) in 1995 and
Value Added Tax (VAT) in 1998
• Tax reforms led to increase in revenue collection hence
increase in general tax budget allocated to health financing in
2000sPublic expenditure to health
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ePrepayment schemes
• In 2001 prepayment schemes (CHF and NHIF) effectively introduced at a
large scale
– There was a small pilot of CHF in 1996 in one district (Igunga)
• CHF cover informal sector and is limited to outpatient services in primary
health facilities and has fixed contribution amount
• NHIF is mandatory for formal public sector and has wider choice of
providers up to referral care
– Private formal sector employees are also allowed to join on voluntary basis
• There are also private for profit insurance schemes (about 7 firms in 2011)
and other micro health insurance schemes (about 12 schemes in 2007 and
43 in 2010)
• CHF and NHIF overall coverage was about 9% in 2008 (CHF 4%, NHIF 5%)
and 15% in 2011 (CHF 7.9, NHIF 7.1)
• Other insurance schemes covers about 1% of the population
• Contribution of prepayment schemes in total health financing is smallContributions of different  health care financing sources
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2000 2003* 2007
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Tax Donors OOPs NHIF CHF OtherObjectives
• Explore the equity implication of the adopted health financing 
reforms and changes in health system financing mixture
• Explore the association between health insurance and out of 
pocket progressivity and financial protectionMethodology-I
• Tanzania National Household Budget Survey (HBS) data for
2000 and 2007 used to explore the incidence of Tax sources
and out of pocket payments
• HBS 2001- sample size 22178 households
• HBS 2007- sample size 10752
• The incidence of health insurance contribution was analyzed
using SHIELD 2008 data
• Sample size 2234 households
• Tax sources analysed were
• Personal income tax, Corporate income tax, Value Added Tax, Excise tax and
Import duty
• Health insurance incidence analysis limited to NHIF and CHFMethodology-II
• The analysis of the incidence of out of pocket payments
disaggregated by type of payment
• Changes in progressivity explored using
• Graphs,Concentration curves and Kakwani index
• Dominancetest was also conducted
• Adult equivalent consumption used as a measure of living
standards
• Changes in risk protection explored using threshold method
(10% of total consumption and 40% of non food consumption)
• Two Part Model used to explore the association between
insurance and OOPs progressivity and catastrophic effectFINDINGSGini indices: 2000=0.421; 2007=0.432
Changes in income distributionChanges in Tax progressivity
2000
Quintile PIT CIT VAT EXCISE IMPORT DIRECT TAXES INDIRECT TAXES ALL TAXES
Poorest 20%  0.48% 2.28% 5.13% 3.16% 5.45% 1.08% 4.66% 3.96%
2nd quintile 1.54% 3.67% 8.80% 5.12% 9.09% 2.25% 7.85% 6.76%
Middle 7.57% 5.68% 12.85% 7.85% 12.47% 6.94% 11.43% 10.56%
4th quintile 7.82% 15.74% 20.03% 12.58% 18.86% 10.47% 17.82% 16.39%
Least poor 20% 82.60% 72.63% 53.19% 71.29% 54.13% 79.26% 58.23% 62.35%
KI 0.410 0.367 0.145 0.266 0.146 0.394 0.175 0.221
Std. Err 0.452 0.409 0.026 0.043 0.025 0.322 0.027 0.073
Dominance against Lorenz 
curve
D- D0 D- D- D- D- D- D-
2007
Quintile PIT CIT VAT EXCISE IMPORT DIRECT TAXES INDIRECT TAXES ALL TAXES
Poorest 20%  0.53% 1.90% 5.64% 1.82% 7.29% 1.07% 4.74% 3.66%
2nd quintile 1.35% 3.26% 8.93% 3.74% 11.08% 2.11% 7.69% 6.05%
Middle 2.70% 5.50% 13.55% 6.95% 16.02% 3.81% 11.94% 9.54%
4th quintile 11.62% 14.89% 22.45% 16.05% 23.13% 12.92% 20.63% 18.35%
Least poor 20% 83.79% 74.46% 49.43% 71.44% 42.47% 80.10% 55.01% 62.40%
KI 0.410 0.294 0.138 0.320 0.062 0.369 0.183 0.236
Std. Err 0.000 0.000 0.000 0.000 0.000 0.123 0.026 0.048
Dominance against Lorenz 
curve
D- D- D- D- D- D- D- D-
%Change in KI 0.0% -19.8% -4.7% 20.4% -57.9% -6.2% 4.6% 6.6%Out of pocket and Insurance progressivity
2000
Quintile OOPs NHIF CHF Total insurance ALL*
Poorest 20%  10.41% N/A N/A N/A 7.92%
2nd quintile 13.01% N/A N/A N/A 10.60%
Middle 17.88% N/A N/A N/A 15.05%
4th quintile 21.49% N/A N/A N/A 19.52%
Least poor20% 37.20% N/A N/A N/A 46.91%
KI -0.028 N/A N/A N/A 0.07
Std. Err. 0.026 N/A N/A N/A 0.03
Dominance against Lorenz curve D+ N/A N/A N/A D-
2007
Quintile OOPs NHIF CHF Total insurance ALL*
Poorest 20%  10.06% 0.06% 22.45% 1.14% 5.87%
2nd quintile 14.09% 0.34% 26.87% 1.62% 8.64%
Middle 18.77% 2.30% 28.73% 3.58% 12.34%
4th quintile 25.06% 12.23% 15.47% 12.39% 19.56%
Least poor 20% 32.01% 85.06% 6.48% 81.27% 53.59%
KI -0.070 0.498 -0.478 0.285 0.121
Std. Err. 0.001 0.122 0.087 0.078 0.035
Dominance against Lorenz curve D+ D- D+ D- D-
%Change in KI 152.1% N/A N/A N/A 72.8% *All includes taxes
• Without insurance (i.e. Taxes plus OOPs) Kakwani index in 2007=0.115Disaggregated OOPs progressivity analysis
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0.5%
1.0%
1.5%
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2.5%
3.0%
Poorest 20%  2nd quintile Middle 4th quintile Least 
poorest 20%
Poorest 20%  2nd quintile Middle 4th quintile Least 
poorest 20%
2001 2007
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Drugs Traditional healer Traditional medicine Other OOPsDisaggregated OOPs-Kakwani indices
2000 2007
Kakwani index
Dominance against 
Lorenz curve
Dominance 
against 45 degree 
line
Kakwani
index
Dominance against 
Lorenz curve
Dominance 
against 45 degree 
line
Drugs
Std. Err.
-0.025
(.038)
D+ D-
-0.096
(0.030)
D+ D-
Traditional healer
Std. Err.
-0.245
(0.065)
D+ D-
-0.194
(0.075)
D0 D0
Traditional medicine
Std. Err.
-0.285
(0.054)
D+ D-
-0.296
(0.066)
D+ D-
Other 
Std. Err.
0.004
(0.033)
Dx D-
-0.028
(0.033)
D0 D-Progressivity dominance test across years
Financing source Concentration curves dominance test Progressivity dominance test
Personal income tax ND ND
Corporate income tax ND ND
Value Added Tax ND D07
Excise tax D00 D00
Import duty D07 D07
Total direct taxes ND ND
Total indirect taxes ND ND
All taxes ND ND
Out-of-pocket payments D07 D07
Taxes plus out-of-pocket payments ND NDTotal health financing distribution
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1%
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5%
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8%
Poorest 20%  2nd quintile Middle 4th quintile Least poor 
20%
Poorest 20%  2nd quintile Middle 4th quintile Least poor 
20%
2000 2007
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OOP NHIF CHF TaxesChanges in Catastrophic payments
Measure of catastrophe
2000 2007 %  Change
TC NFD TC NFD TC NFD
Catastrophic headcount 2.92% 0.96% 1.82% 0.39% -37.61% -59.09%
Std. Err. 0.0031 0.0015 0.0023 0.0010
Concentration index -0.12 -0.25 -0.17 -0.33 38.08% 28.42%
Std. Err. 0.0004 0.0011 0.0017 0.0071
Catastrophic overshoot 0.16% 0.12% 0.11% 0.04% -31.29% -64.95%
Std. Err. 0.0002 0.0003 0.0002 0.0001The association between health insurance and OOP progressivity and 
risk protection- Two Part model selected results
VARIABLES Probability of 
utilization
Share of out-of-pocket Probability of catastrophic 
payment
Income 0.101* -0.063*** -0.516***
se (0.054) (0.019) (0.153)
NHIF 0.380*** -0.951*** -9.456***
se (0.098) (0.251) (3.083)
CHF 0.381*** -0.628** -6.067*
se (0.053) (0.267) (3.149)
NHIF interaction with income 0.068*** 0.696***
se (0.019) (0.233)
CHF interaction with income 0.046** 0.437*
se (0.022) (0.259)
Constant -2.518*** 0.930*** 6.377***
se (0.698) (0.246) (1.954)
Observations 11,097 1,481 1,481
Pseudo R-sqaure/R-square 0.0518 0.168 0.1462Discussion I
• Government efforts to reform the health system have resulted into an increase 
in public funding to the health sector between 2000 and 2007
– Mostly contributed by donor funding
• The share of out of pocket payments has decreased over this period
– However the share of drug expenditure has increased
• Changes in the amount of general tax allocated to health financing is small
• General taxation has become more progressive
– Mainly contributed by changes in the progressivity of Excise Tax
– Import duty has become less progressive
• Increase in consumption of imported commodities
• Contributions to NHIF are progressive while those to CHF are highly regressive
• The influence of health insurance on overall progressivity is small
– Due to limited coverage, hence limited amount of funds (small pool)Discussion II
• Despite the observed massive increase in public 
funding (Tax plus Donor funding), 
• regressivityof out of pocket payments has increased 
– Possibly because
• Increased resources are not allocated to improve health services 
which are consumed by the poor (especially public facilities)
– Hence the poor purchase expensive private care
• CHF that targets the poor is limited to primary care and does not 
cover catastrophic spending at hospitals and referral facilities
• There has been a decrease in the proportion of 
households incurring catastrophic spending, however;
• Catastrophic payments concentrates among the poor in 2007 than 
was in 2000
– Same reasons above apply hereDiscussion III
• Health insurance reduce regressivity and 
catastrophic risk of out of pocket payments
• OOPs progressive among insured
• Insurance reduce the probability of incurring 
catastrophic payments
• CHF has a limited protection against 
catastrophic risk compared to NHIF
• CHF does not cover catastrophic expenditures except 
for few districtsConclusions
• Equity in health financing does not only imply
• Increase in public funding and health insurance and decrease 
in out of pocket payments
– But also
• Whether increased prepayment resources are used to fund the 
health care needs of the poor
– Distributional issues
• There is a need of promoting health insurance and 
harmonize formal and informal sector insurance 
schemes (to reduce fragmentation)
– This will help the poor to enjoy wider benefit package 
hence protection against catastrophic risk
• Reducing fragmentation is a major ingredient 
towards achieving Universal CoverageThank you

Health Financing Equity in the Context of Health System Financing Reforms in Tanzania

http://ihi.eprints.org/809/1/Mtei_31Oct_205E_15.30_2224_jose.pdf

Health Financing Equity in the Context of Health System Financing Reforms in Tanzania

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