Estimation of Fairness in Health Financing Among IDP and non-IDP populations in Georgia
Research Proposal for Open Society Institute’s International Policy Fellowship Program
Introduction
Societies have long demonstrated a special concern about the models and mechanisms of health
sector financing. How the health systems are financed can have a profound effect on
populations’ access to healthcare and thus on the health status of each individual. Much of the
public discourse in countries undertaking health sector reform is focused on the design of health
system financing and its fairness.
According to World Health Organization (WHO) one of the challenges common to health
systems in developing countries is to achieve fairness in the distribution of the financing burden,
and protection of households from the risk of financial loss. Fairness in financing and protection
against financial risk is based on the notion that every household should pay a fair share. What
constitutes a fair share depends on people’s normative expectations as to how health systems are
financed. Nevertheless, in all countries, fairness in financing embraces two critical aspects; that
of risk pooling between the healthy and the sick and risk sharing across wealth and income
levels. Risk pooling denotes the premise that the contributions for those that are healthy pay for
the care of those that are sick, so that individuals who become sick are not struck by a double
burden of sickness and financial costs of health care.
Achieving fairness in health related financial contribution should be one of the priorities of the
health systems around the world. The health system should be considered as one of many
mechanisms to redistribute income and should thus be evaluated in terms of how well it achieves
this intrinsic goal. Health systems that fairly redistribute income are likely to give more access
to the poor and thus lead to better health outcomes. The measure of fairness of health financing
is part of a framework being applied by the WHO to assist countries to assess the overall
performance of their health systems. The WHO framework sets out three intrinsic goals:
improving health, enhancing the responsiveness of the system to the legitimate expectations of
the population; and assuring fairness in financial contribution.
Project objectives:
The proposed research is intended to measure the extent to which the Georgian health financing
system helps households to avoid making catastrophic payments for their health, the extent to
which individuals in similar circumstances contribute the fare amount for their health services
and the extent to which the rich bear some of the health costs of the poor.
The elements of fairness will be captured by examining selected household’s contributions to the
health system through taxes, social insurance, private insurance and out-of pocket payments as a
share of their capacity to pay (capacity to pay is a household’s effective income minus
expenditure required for subsistence needs). The fairness of health financing and its distribution
among households will be summarized using a methodology elaborated by WHO. To allow for
comparison among different socio-economic groups, the fairness of health care financing will be
measured comparatively among IDP and non-IDP populations residing in Samegrelo region of
western Georgia. Studies show that these two groups, although cohabitating at the same location
for almost a decade, significantly differ by income levels and welfare. Using before (Fairness of
Health Finance in Georgia 1997, WHO study) and after measures, the results of the research
will be applied to analyze the success of health financing reforms in Georgia since 1997 in
achieving greater fairness. The study results will be also highly applicable to the study of
particular components of the health care system of Georgia, such as: the comparison of fairness
of the portion of finance that comes from general taxes or social insurance to out of pocket
payments; drug spending as compared to hospitalization or other sub-sectors; and, geographic
variation. Another interesting component of the research will be considering the level of fairness
de jure (based on legislation or constitutional rights) versus de facto given the actual
distribution of health payments, where the latter do not depend on assuming that de jure
provisions actually determine households’ contributions.
Need for the Research
The estimation of fairness in health financing in Georgia was conducted by WHO experts only
for 1997 year. Since then the conduction of similar researches in Georgia was not possible
because of limited public health resources. Currently the Ministry of Labor Health and Social
Affairs (MoLHSA) does not possess appropriate information to translate it into adequate
strategies through comprehensive analysis. Evidence-based approaches should become the basis
for priority setting in health sector, especially with regard to the use of public funds. Therefore, it
has become imperative to conduct the research in Georgia, creating the complete picture with
country’s macro and micro economic profile, public health financing, population’s ability to
cover health expenses, with further intention to develop strategic options for comprehensive
health financing policy framework.
Implementation Strategy
In order to evaluate allocation and utilization of public finances for health, health system
performance, impact of the reform; also for generating evidence for further analysis and the
development of recommendations for policy/strategy improvement, the project will support the
following activities:
a) Conducting special focus group survey among IDP and local population in Samegrelo
region of Western Georgia;
b) Analyzing economic and health profiles of IDP and non-IDP populations in the region
by evaluating existing data produced by the State Department of Statistics, Center for
Medical Statistics, MoLHSA, Ministry of Economics as well as by international
organizations.
c) Evaluating Fairness of Health Financing in Georgia by calculating Health Financing
Contribution and Inequality Indices (defined below) for different socio-economic groups;
d) Elaborating recommendations for MoLHSA and Georgian Health Financing Policy
planning.
Data Requirements
The household is the basic unit of analysis for this research, therefore the estimation of fairness
in health financing will be based primarily on information gathered through national household
surveys conducted annually by State Department of Statistics and special focus group (IDP)
survey that will be carried out for the research purposes in the largest IDP community in
Samegrelo Region of Western Georgia. The information obtained through surveys will be
combined with detailed information on the rules governing taxation and social security payments
for health, and National Health Accounts estimates.
Implementation Plan
As mentioned before the research will utilize WHO fairness in health finance assessment
methodology, which is designed and developed to be applicable across and within countries with
varying types of health systems and at different stages of development and of the health
transition. The methodology focuses on how health care is financed by households through outof-pocket payments, tax contributions, social insurance, and private insurance.
According to the methodology and using the above mentioned sources of information and data,
the basic indicator of fairness in health financing - Health Financing Contribution (HFC) index
at the household level will be estimated. The health financing contribution of a household is
defined as the ratio of total household spending on health and it’s total capacity to pay.
The health financing contribution of a household (or HFCh) can be summarized in the following
formula.
HFC h 
Total health spending h
Capacity to pay h

HS h
( Exp  aTax  Food ) h
The numerator (HSh) is the total household spending on health including all payments towards
the financing of the health system through taxation, social security contribution, private
insurance, and out-of-pocket payments.
Health finance is considered perfectly fair if the ratio of total health contribution of households
to their total non-food spending is identical for all households, regardless of their income, their
health status or their use of the health system. The methodology is based on separating the
financing of health care (by individuals and families) from the utilization of health care.
To facilitate comparison of different countries and different socio-economic groups and to rank
them according to fairness in health financing, an inequality index (II) will be computed using
the following formula
Inequality Index (II)
n

 HFC
i 1
i
 HFC
3
n * 0.125
The Inequality index is intended to reflect inequality in household financial contribution but
particularly reflects those households at risk of impoverishment from high levels of health
expenditure. The index is designed to weight highly households that have spent a very large
share of their income beyond subsistence on health.
Project Deliverables

The financial burden caused by health related expenditures for the IDP and non-IDP
populations of Georgia estimated;

The performance of health care finance system and the effectiveness of health reforms
since 1997 in Georgia assessed;

The ability of the health finance system to exempt poor from making catastrophic
payments for health estimated;

The level of access to health services for the poor in relation to cost of health care and
their ability to pay assessed;

Key policy issues identified and addressed in order to improve access to and coverage
with effective interventions for the IDP population with implications for non IDP population
as well;

Specific recommendations and policy documents elaborated and submitted to the Ministry
of Labor, Health and Social Affairs and other policy-making agencies.