The distribution of health financing reveals a high percentage of public expenditure (the state plus Social Security) and a very low percentage of private expenditure. An estimate was completed during preparation of the national health accounts for 2001 (Table 8.3).155 In 2001, the public share of expenditure stood at 74 percent, versus 26 percent for private expenditure. For the Middle East and North Africa region, these figures were 46 percent and 54 percent respectively, and were 48 percent and 52 percent for middle-income countries (WDI 2005). Although revealing, these figures need qualification.156 The social security system is the main source of public financing. It provided 41.6 percent of health sector resources versus 33 percent from the budget. However, this too requires a caveat. If one looks at care and prevention activities and excludes cash payments financed by the social security system (sickness allowances, disability pensions), the situation becomes more balanced: the state’s portion would be 33 percent of the total versus 30 percent by Social Security.
Tableau 8.3 Sources of Health System Funding, 2001
The bulk of budgetary health sector funding—87 percent in 2001—comes from the Ministry of Health. Other ministries also contribute. The Ministry of Defense funds military hospitals; the Ministry of Higher Education and Research covers the salaries of university hospital physicians; the Ministry of Education and the Ministry of Youth and Sports conduct prevention activities; while other ministries finance health facilities for particular population groups. Nonetheless, no available public document traces accurately and in detail the state effort in the health sector.157
The Health Ministry expenditure share of the state’s budget is low. The share of total recurrent spending varied between 3.9 percent in 1996 and 5.2 percent in 2005. Data for capital spending are only available for 2001 and 2002. They reveal that the Health Ministry’s share of total government capital spending for the two years was very low, at 2 percent and 1.2 percent respectively. Moreover, while investment in the health sector should rise significantly as a result of the five-year program 2005–09, the health sector’s share is still only 2 percent (DA 85 billion of the initial PCSC total allocation of DA 4,202.7 billion). This is partially explained by the fact that health sector investments (except for a few big hospital projects) are by nature less costly than those in such sectors as transportation and housing.
For its part, the social security system’s health care spending has recently increased sharply. It increased by 70 percent between 2000 and 2004 (Table 8.4). These funds come essentially from the CNAS, which accounted for nearly 96.5 percent of the total in 2004, versus 3.5 percent for the CASNOS.
Table 8.4 Social Security System Health Outlays (executed expenditures)
2000
2001
2002
2003
2004
CNAS
45.33
49.33
57.59
67.43
77.12
Trend n+1 /n (%)
8.8
16.7
17.1
14.4
CASNOS
1.17
1.47
1.63
2.18
2.89
Trend n+1 /n (%)
25.6
10.9
33.7
32.6
Total
46.50
50.80
59.22
69.61
80.01
Trend n+1 /n (%)
9.2
16.6
17.5
14.9
Source: Ministry of Labor and Social Security
Note: Expenditures are in billions of dinars.
It is unlikely that social security resources devoted to the health system can continue to rise over the medium term at the same pace as in recent years.The social security system is laboring under a number of constraints:
Tax evasion is widespread in Algeria, although no studies accurately gauge the scope of underreporting and nonreporting of income. Tax evasion primarily affects the CASNOS, which looks after non-wage earners, although the CNAS may also be affected, particularly by underreporting. During the review of public social expenditure in 2002, it was estimated that only 20 percent of persons who should be affiliated with the CASNOS actually were. The MOL estimates that only 450,000 contributors are up-to-date in their contributions, out of 1.2 million surveyed. Thus, tens of billions of dinars escape the social security system. This explains why the CASNOS is unable to contribute to hospital financing despite legal stipulations to do so. The scope of tax evasion also creates problems in fairness since those who do not pay their contributions are treated the same as those who do, at least in the public sector. Except for a few pilot hospitals, public health care facilities generally do not check whether patients being admitted are up-to-date in their contributions.
Beyond this phenomenon of “social evasion,” high unemployment severely curtails social security system funding.
Moreover, the public pension system has nearly always been in deficit since the early 1990s (the deficit stood at DA 6.35 billion in 2004), primarily because contributions have not kept pace with benefit provisions at a time when dependency ratios are rising.158
Finally, the contribution rate of 34.5 percent to the social security system as a whole is particularly high. Increasing it further without reducing employment is unlikely, and is difficult to envision since the unemployment rate is already considerable.
The sharing financing arrangement between the state and the social security does not work satisfactorily.The 1992 budget law states that the financing of public health facilities should be shared “on the basis of contractual relationships between the social security system and the Health Ministry.” The details of such contracts are to be established by regulation. Indeed, the sharing formula in effect since the 1994 Budget Act, and reaffirmed in each successive budget act, is clear: the state must finance “expenses for prevention, training, medical research, and care provided to indigent persons without social insurance.” The social security system is supposed to cover “the medical costs of social insurees and their eligible dependents.” Finally, policy also requires that spending on indigent persons be financed from budget appropriations of the Ministry of Employment and National Solidarity. Each year the ministry is to use these appropriations to finance care to indigent persons by the MOHPR.159
In practice, however, these legal provisions have never been applied. Each year the Ministry of Finance sets a flat social security contribution that takes no account of the actual costs incurred by health institutions in caring for social insurance patients, but essentially reflects the views of the hospitals. This explains why there have been significant changes over time that bear no relation to the number of persons covered by the two sources: Between 1980 and 2005, the state contribution has increased from 49 to 65 percent of the total; while the social security contribution has decreased from 46 to 34 percent, with the remainder comprised of revenues from user fees (see Table A.7.5 for the full 25-year trend). Finally, the financial sharing arrangement is blurred even more by the fact that a lump-sum payment from the state covers a portion of the costs of indigent patients affiliated to the CNAS.
Delays in contracting health services damage the health care financing system.On one hand, the government is unaware whether it is subsidizing the social security system and, if so, by how much. On the other hand, both the government and the social security system behave as “blind buyers” of health care. Thus there is no real separation between care payer and care supplier that might encourage health institutions to improve service efficiency and quality. A direct consequence is that hospitals have no incentive to calculate unit delivery costs for health services, which deprives them and the Ministry of Health of a very useful management tool. Finally, this situation generates tensions among the ministries of labor and social security, finance, and health.
Efforts to introduce health service contracting face a number of obstacles. The lack of up-to-date records makes it impossible to identify indigents and social insurance holders accurately. Even if this could be done, one would have to provide different health cards to each person in these two groups in order to monitor the costs incurred by public health facilities for each patient, and to define how to set rates for invoicing those costs to the different funding sources. The health and labor ministries are still discussing the latter point. The Ministry of Health favors a method based on the “average daily cost,” while the Ministry of Labor and Social Security is calling for a diagnosis-related group system. In fact, the Ministry of Health wants to avoid a method so complicated that hospitals cannot apply it for lack of technical means (computerization) and human resources. The Ministry of Labor and Social Security, on the other hand, wants a method that would spare it the costs of inefficiencies in certain hospitals. It would therefore prefer to define “norms” as the basis for invoicing. Whatever method is finally chosen, implementation of contracting will be a major managerial improvement of an Algerian health system in which unit costs are generally unassessed.
Private contributions to financing public sector health services are low.The Algerian health system is still deeply influenced by the doctrine of free care. This principle was enshrined in the Constitution until 1996. The 1996 Constitution drops reference to free health care.160 On the other hand, the law of February 17, 1985, still in force, contains such references (Articles 20 and 22) even if, paradoxically, it also authorizes charging user fees (Article 231). Quite apart from these legal considerations, the principle of free public sector health care is deeply anchored in the minds of patients and health system workers alike. Thus, public sector patients are expected to make only modest contributions. Every person treated in a public institution is supposed to pay a user fee for each procedure. This fee is set at rates that were determined in 1987 for social health insurance reimbursements in the private sector. They are very low in comparison to the real cost of care, and there are numerous legal exceptions (chronic illnesses, children, the indigent) as well as nonlegal loopholes (uncharged amounts when the patient has friends among hospital staff, for example) whereby patients avoid payments. Hence, self-generated revenues still represent a very low portion (1.5 percent in 2003) of the recurrent budget of public health care institutions (Table A.7.6).
To increase funding for the public sector, a January 2002 decree reassessed mandatory user fees, but its provisions have gone unenforced in the face of stiff public pressure. The planned increases were very significant (contributions were to rise from DA 50 to DA 250 for a consultation with a general practitioner, and from DA 100 to DA 450 for a visit to a specialist). It also appears that the decree was not adequately vetted with health system users or health professionals. This bad experience has made the Algerian authorities very cautious about asking patients to pay an increased share of health costs.
Private sector expenditures on private health services are of three kinds. The first category is spending by 35 mutuelles (cooperatives), with a total of 1.6 million members. Mutuelles supplement benefits from the sickness funds up to 100 percent of the regulatory rate. Second are the health expenditures (financing medical and occupational health centers) made by large corporations for their staff. Finally, the bulk of such spending comes from outlays by households for private-sector care, totaling about 38.4 billion dinars (Table A.7.7). Lack of systematic reporting means that little is known about this spending. However, such spending likely has spiked in recent years, given the accelerated proliferation of private service providers. Additionally, international assistance to the health sector traditionally has been low: US$2.7 million in 2001.161 It is targeted exclusively at certain national programs, such as the AIDS campaign.
