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.

A selection of recent reforms in social security schemes worldwide compiled by the ISSA Social Security Observatory, with links to a full description of the reforms in the ISSA country profiles.

Argentina: Creation of a universal child allowance

The family allowances system of the Republic of Argentina was originally designed to award benefits of a contributory nature payable to workers and beneficiaries under the occupational risk and unemployment insurance scheme, and benefits of a non-contributory nature payable to beneficiaries of the public pensions system and non-contributory pension scheme.

Full article >>

ISSA Country profile: Argentina >>

Brazil: Investment limits relaxed for closed pension funds

On September 24, Brazil's National Monetary Council raised investment limits for closed pension funds, allowing them to shift more of their assets into riskier investments with potentially higher returns.

Full article >>

ISSA Country profile: Brazil >>

Ghana: Three-pillar system introduced

(Source: SSA) On September 16, Ghana's president introduced the country's new pension system, created by the 2008 National Pensions Act. The new system, which will be implemented on January 1, 2010, consists of three pillars.

Full article >>

ISSA Country profile: Ghana >>

Latvia: Cuts in social security benefits

From 1 July 2009, a number of social security benefits have been reduced due to the state budget curtailments caused by the world financial crisis.

Full article >>

ISSA Country profile: Latvia >>

Portugal: Innovative Strategic Asset Allocation for the Portuguese Reserve Fund

The contributory pension system in Portugal is a partially-funded, defined benefit program backed by a buffer fund, which is the Social Security Reserve Fund (FEFSS). The FEFSS optimal assets level is the equivalent of at least two years of annual expenditure in old age, disability and survivor benefits. Between 2/11 and 4/11 of employee contributions are transferred to the FEFSS.

Full article >>

ISSA Country profile: Portugal >>

Russian Federation: Employer contribution to replace the Single Social Tax

(Source: SSA) On July 24, President Medvedev signed into law a bill that changes the financing of social security benefits as of January 1, 2010. The law will replace the Single Social Tax system with a flat-rate employer contribution, change the collection process, increase the contribution rate, and introduce a ceiling on employer contributions.

Full article >>

ISSA Country profile: Russian Federation >>

South Africa: Tax simplification and incentives

(Source: SSA) On September 10, the National Assembly passed a package of laws that simplify the tax treatment of lump-sum benefits from occupational pension plans and provide tax incentives to encourage people to preserve their savings until retirement.

Full article >>

ISSA Country profile: South Africa >>

Spain: Extension of social security coverage for unemployed workers

The Government has established the Temporary Programme for Unemployment Protection and Insertion, the objective of which is to broaden on a temporary basis the protection afforded to unemployed workers who have exhausted their unemployment benefits and are in a situation of need due to the lack of other income.

Full article >>

ISSA Country profile: Spain >>

Thailand: Reduction of contributions and extension of coverage

(Source: SSA) Thailand's government temporarily reduced social security contributions, effective July 1, and has taken steps to establish a voluntary national retirement savings program. Both employers and employees are expected to benefit from lower social security contributions during the present economic slowdown, and the new nationwide retirement savings program would target individuals not covered by existing pension programs.

Full article >>

ISSA Country profile: Thailand >>

United Kingdom: "Backing Young Britain" youth unemployment scheme launched

Citing a "moral obligation and economic need" to mitigate the effects of the current economic recession on youth, the British government has launched a new youth unemployment scheme entitled "Backing Young Britain".

Full article >>

ISSA Country profile: United Kingdom >>

Uruguay: More flexible conditions for access to old age pensions

Act 18.395, which came into effect in Uruguay in July 2009, makes the conditions governing eligibility for retirement pensions more flexible.

Full article >>

ISSA Country profile: Uruguay >>

In many countries of Asia and the Pacific, a restricted number of people have access to social security coverage. However, as many entries to the ISSA’s “Good Practice Award” for Asia and the Pacific have underlined, the extension of social security coverage is an increasing policy priority for social security administrations and policy-makers.

The importance of “good practice”

Although major differences in national contexts exist and although the driving forces behind choices concerning programme delivery can be varied and complex, information sharing on “good practices” presents, at the very least, opportunities for learning about specific solutions to what may be considered common problems.

Therefore, to the degree that the international diffusion of knowledge about “good practices” in social security may facilitate the possibility of learning about practical ways to improve the administration and delivery of national social security programmes for other organizations in other countries, it is important.

The International Social Security Association (ISSA) defines a “good practice” as any innovative measure implemented within a social security organization to address an identified challenge that is deemed to have resulted in enhanced administrative and operational capacities and/or the more efficient and effective delivery of benefit programmes and services.

The first two Good Practice Awards that accompanied the ISSA Regional Social Security Forums for Africa in 2008 and Asia and the Pacific in October 2009 underlined the commitment of ISSA member organizations to good practice knowledge exchanges (see Social Security Observer, No. 4 and No. 6).

Good Practice Award for Asia and the Pacific: Coverage extension in Jordan

Although the options for extending social security coverage can be varied, the choice of strategy should be defined by national context and circumstances and policy priorities. Against this background, the case of Jordan’s Social Security Corporation (SSC) is noteworthy. As of July 2009, less than 45 per cent of the Jordanian workforce was covered by social security. However, in the efforts of the SSC to extend social security coverage to workers in small enterprises (with less than five workers) and to nationals working abroad, Jordan exemplifies how a comprehensive and coordinated approach can achieve optimal results.

As a first step, the SSC developed a plan of action, which included amending the existing social security legislation to redefine the “insured person”. These amendments extended the legal right to social security coverage to previously excluded groups, such as agriculture workers, fishermen, housewives, employers and self-employed persons.

Other related developments in Jordan have included a major three-year effort by the SSC to engage in a process of national consultation. Since its launch in 2006, this consultation process has been pursued through extensive media campaigns, workshops, lectures and public meetings, aiming at informing and consulting the different stakeholders and the general public. The objective has been to raise awareness of the existing coverage gaps, to highlight the benefits for society of social security, to explain the positive impact of expanding coverage to the entire workforce, and to develop national consensus on the need for social security reform. As a result of the consultation process, a number of concrete suggestions were incorporated into the Social Security Draft Law, which is currently under discussion in Parliament.

An important aspect of the SSC coverage extension strategy is to include Jordanian citizens working abroad. To better achieve this, intensive work within and outside the country has been carried out. SSC service points, called SSC Ambassadors, have been installed in Jordanian embassies and consulates. And partnership and cooperation has been sought with the private sector. In support of this objective, and amongst other training measures, SSC personnel are now better prepared to provide information about mechanisms and procedures to facilitate the take up of voluntary coverage.

Of course, the success of the extension strategy is dependent on existing administrative capacities and the provision of new resources. In turn, there is a need to ensure the optimal use of financial and human resources during the strategy’s implementation. To this end, the SSC has identified prerequisites for success: key performance indicators; ICT infrastructure to enable staff prompt access to databases, to proceed with claims in the field, and to inquire about contributions; and internal capacity building, which is crucial to ensure a smooth transition during a process of change and to guarantee continuing quality of services.

The SSC coverage extension strategy was initiated in Jordan’s Aqaba region on 1 November 2008, and will be phased in gradually in other selected geographic areas. As one objective, it is expected that around 80 per cent of existing small enterprises will be covered by social security by 2011.

Overall, one of the main lessons learned from this “good practice” example is that a dynamic approach, as advocated by the ISSA’s Dynamic Social Security concept, is key to success; in this instance, by developing links with, and integrating, different actors and strategic partners involved in the reform process, with a view to gaining their support and building consensus.

The lessons of sharing “good practice”

The collection and dissemination of good practice examples enables actors involved in social security to build a culture of exchange about “what works” and, equally important, to diffuse understanding about “why, how and under what conditions”. However, and cognizant of their own specificities, it remains with national authorities to decide on what is worth learning from such examples, and how such learning should ultimately inform choices about policy design and implementation and programme delivery.

Importantly, by providing ISSA member organizations with greater access to knowledge about the experiences of others, organizations should be better able to reach informed decisions on the choices appropriate for their own circumstances.

ISSA Good Practice Award for Asia and the Pacific

Social security organizations in Jordan and Saudi Arabia have received the first ISSA Good Practice Award for Asia and the Pacific for their innovative and exemplary approaches to extend social security coverage. The Awards were presented by the ISSA during a ceremony on 21 October in Manila, Philippines.

In the next issue of Social Security Observer, we will present the second of the ex aequo winners, the joint project The Unified Law of Insurance Protection Extension for the Gulf Cooperation submitted by the General Organization for Social Insurance of Saudi Arabia, which the Jury commended for its efforts to extend social security coverage to all citizens working in the six Gulf Cooperation Council States.

The full results of the first Good Practice Award for Asia and the Pacific are available on the ISSA Website:

Brochure: ISSA Good Practice Award – Asia and the Pacific 2009: Competition results >>

Good Practices database

For the ISSA, a good practice is defined as any type of experience (e.g. an action, a measure, a process, a programme, a project, a technology) implemented within a social security organization that is focused on the improvement of administrative and operational capacities and/or the efficient and effective delivery of programmes. In November 2008, a new database on good practices in social security was launched by the ISSA, with the aim of providing a unique source of data on developments in social security practice.

Good Practices in Social Security Database >>

From country to country, and even within national frontiers, social security coverage levels vary widely. While the richest economies have nearly universal coverage, some countries in sub-Saharan Africa and South Asia have coverage levels of less than 10 per cent of the population.

An important new study carried out by the International Social Security Association (ISSA), “Examining the Existing Knowledge on the Extension of Social Security Coverage”, has just been published. Its results provide an overview of global trends and challenges facing the extension of social security, review the main concepts for measuring performance, and identify both lessons learnt and gaps in knowledge as a basis for future action.

The study analyses important developments in Africa, Asia and the Pacific, Latin America and the Caribbean, and includes case studies on the People’s Republic of China, Senegal and Uruguay as well as on selected high-income countries. Five papers examine cross-cutting issues, such as workers in the informal economy, pension and health-care coverage, migrant workers and the importance of social security statistics.

Papers of the ISSA Project on examining the existing knowledge of social security coverage 2009 >>

As announced during the ISSA’s Crisis Seminar last April, the Secretariat has established a monitoring system of the impact of the crisis on social security and on social security responses to the crisis. In order to give members easy access to the information collected and analysed, including responses of the ISSA and individual members, a special web-feature has been published - “In Focus: Social security responding to the financial crisis”. This valuable new resource envelopes all knowledge currently available to the ISSA on the subject and is updated on a continuous basis.

In Focus: Social security responding to the financial crisis >>

Rising public health care spending remains a problem in virtually all OECD and EU member countries. As a consequence, there is growing interest in policies that will ease this pressure through improved health system performance. This report examines selected policies that may help countries better achieve the goal of improved health system efficiency and thus better value for money.

Executive summary and order information (external link):

http://www.oecd.org/document/42/0,3343,en_2649_33929_44043754_1_1_1_37407,00.html

The important demographic changes in Europe are causing tangible effects, both economically and socially. Economically, there is an increase in public expenditure on account of the ageing population, on pensions and health costs. Added to the effects of the collapse of public revenues by the birth deficit, this expenditure may lead to the reduction / elimination of social benefits and finally the bankruptcy of the welfare state.

Download (external link):

http://www.ipfe.org/Report_evolution_on_the_family_in_Europe_2009.pdf

In 2010, the ISSA is organizing the following major events:


Regional Social Security Forum for Europe
03.03.2010 - 05.03.2010 | Warsaw, Poland

Regional Social Security Forum for the Americas
24.05.2010 - 27.05.2010 | Brasilia, Brasil

International Policy and Research Conference on Social Security
29.09.2010 - 01.10.2010 | Luxembourg

World Social Security Forum
29.11.2010 - 04.12.2010 | Cape Town, South Africa

More information on upcoming ISSA events >>

Information on other social security events >>