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Cover design: QUO Bangkok
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On COVID-19 Preparedness and Response
What Can Financing
Schemes and Payment
Systems Do to Improve
Pandemic Response?
September 2023
Authors
Tae-jin Lee
Professor at the Graduate School of Public Health,
Seoul National University
Juhyeon Moon
PhD candidate at the Graduate School of Public Health,
Seoul National University
4 | What Can Financing Schemes and Payment Systems Do to Improve Pandemic Response?
TABLE OF CONTENTS
Abstract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Country profiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
How have countries funded the health sectors in response
2.
to the COVID-19 pandemic? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
What kinds of provider payment measures have been used
3.
for income loss and extra expenses during COVID-19? . . . . . . . . . . . . . . . . . . . . . 12
4. Policy implications and lessons learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
LIST OF TABLES
Table 1: Relevant UHC data in the six countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 2: Six countries’ additional budget in response to the COVID-19 pandemic . . . . . . . . . . . . . . 11
Table 3: Countries’ provider payment systems by purpose and means . . . . . . . . . . . . . . . . . . . . . . . 12
Table 4: Extra fee-for-service payments in Republic of Korea (January 2020 to June 2022) . . . . 14
What Can Financing Schemes and Payment Systems Do to Improve Pandemic Response? | 5
ABSTRACT
The budget allocation in response to the COVID-19 pandemic indicates an
increase in both health and non-health sectors, together with policy prioritization
to mitigate socioeconomic damage globally. In contrast with responses to
previous economic crises, many governments instead expanded their budget,
resulting in increased support for the health care sector. However, a significant
portion of the budget was allocated to economic stimulus and industrial
investment. Accordingly, the budget allocated to prevention and response to
infectious diseases in the health care sector was relatively small, or it was spent
from ear-marked resources such as social health insurance. However, health
crises such as the pandemic required an essential workforce and additional
services to protect population health and expedite the socioeconomic recovery.
In this sense, strengthening the sustainability and resilience of the health care
system was a way toward national security and economic growth. Governments
would need to allocate additional budgets to the health sector in response to
health crisis, and mobilize earmarked funds collected from social insurance
contributions. The latter enables the provision of essential health services
with or without governments’ financial support. A mixed payment system could
boost surge capacity in the health care system and provide incentives for
medical providers.
6 | What Can Financing Schemes and Payment Systems Do to Improve Pandemic Response?
1. INTRODUCTION
The World Health Organization (WHO) declared the end of COVID-19 as public health emergency on May 5,
2023. It was the day that the cumulative cases and deaths of COVID-19 reached 764.70 million and 6.93 million,
respectively. The socioeconomic impact of COVID-19 was also profound, even with the policy responses to
minimize COVID-related patients and deaths. The economic growth rate was 2.8 percent in 2019, -2.8 percent in
2020, 6.3 percent in 2021, and 3.4 percent in 2022. The 2021 economic growth rate rebound was accompanied
by economic stimulus measures, vaccination rollout, and increased personal consumption, while the lower
growth in 2022 was attributable to the challenges from multiple new variants, supply chain bottlenecks, and
labor shortages (IMF 2022). Global growth in 2023 is projected at 2.8 percent due to the possibility of high and
long-term inflation, tightening of monetary policies, and expanding downside risks such as war. Governments
face an increasing burden of inflation and public debt that challenge the financial strategy in health systems.
The pandemic crisis has similarities to past economic crises (the 1997 Asian financial crisis and
2008 global financial crisis). Its socioeconomic impacts incurred economic slowdown and a rise in
unemployment and poverty rates. Moreover, the vulnerable were influenced disproportionately and struggled
with worsened income inequality. The number of people living in extreme poverty is projected to increase
from 8.23 percent in 2019 to 8.82 percent under the baseline scenario, or to 9.18 percent under the downside
scenario, in 2020 (WB 2020). The projected “new poor” will be concentrated in South Asian countries that had
already been struggling with high poverty rates.
The COVID-19 pandemic has also had negative impacts on population health and health inequality.
Increasing death tolls resulted in excess mortality and reduced life expectancy in many countries regardless
of income level. The number of excess years of life lost from the pandemic in 2020 was more than five times
higher than that from the 2015 seasonal influenza epidemic (Islam et al. 2021). The strategies and magnitude
of fiscal response depended on the COVID-19 caseload and structural factors, including income level, welfare
regime, and institutional buffer (Alberola et al. 2021; De Jong and Ho 2020).
The persistent COVID-19 pandemic has implications for health financing from two aspects. First, policy
measures (such as travel restrictions, quarantine, and lockdown) that governments implemented in response
to COVID-19 contributed to income loss due to unemployment and bankruptcy, and thus to the consequent
decrease in government fiscal revenue. In contrast, a tremendous amount of cash was distributed into the
households and market by government subsidies, liquidity assistance, and tax cuts, all of which contributed
to worsening the government fiscal deficits. This unbalanced budget has implications for health financing at a
macro level in the sense that it can cause tight health financing. Second, a variety of nonpharmaceutical policy
measures influenced human behavior including medical usage. Medical providers experienced income loss due
to fewer visits to health care facilities. In contrast, an increased number of suspected and confirmed COVID-19
patients increased extra expenses for medical providers. To keep the health care systems functioning during the
pandemic, governments needed to compensate for income loss and extra expenses of clinics and hospitals at a
micro level. Meanwhile, patients’ out-of-pocket (OOP) expenditure may have reduced due to decreased medical
usage and lowered copayment implemented temporarily in many countries during the pandemic.
Each country has implemented different financial measures to cope with the impact of COVID-19 on the
health care system. During the pandemic, it was well known that the health sector needed investment (Thomas
et al. 2020). But optimizing resource allocation and payment systems during the pandemic was difficult and
often controversial within and across countries. Each country had to make decisions and develop strategies
within a limited time and with evolving evidence. Therefore, it would be useful to examine how countries have
funded health sectors in response to the COVID-19 pandemic and the kinds of provider payment measures
that have been used to compensate for income loss and extra expenses. This thematic note aims to focus
on the national-level budget allocation and payment strategies in response to the COVID-19 pandemic. For
this purpose, six countries (Ghana, Indonesia, Japan, Republic of Korea [Korea], Thailand, and the United
What Can Financing Schemes and Payment Systems Do to Improve Pandemic Response? | 7
Kingdom [UK]) were included. This selection of countries ensured a representation of different regions, income
levels, and health financing mechanisms.
Country profiles
Table 1 shows the general information related to demographics and health care expenditure in the six countries
in 2020. All these countries have a population of at least 30 million and have attempted or achieved reforms
toward universal health coverage (UHC). The United Kingdom (UK) is well known for its National Health Service
(NHS), which was established in 1948 and became the basis for universal health coverage. Social health
insurance has been implemented under different schemes in countries including Japan (1961), Korea (1977),
Thailand (2001), and Ghana (2008) (WHO 2013). Indonesia also launched a single insurer system by merging
multiple insurance funds to achieve UHC in 2014 (Bazyar et al. 2021).
Table 1: Relevant UHC data in the six countries
United
Ghana Indonesia Japan Korea Thailand
Kingdom
General status in 2020
Total population (thousands) 32,180 271,858 126,261 51,836 71,476 67,081
Life expectancy at birth (years) 64.11 68.81 84.56 83.43 79.27 80.35
Population ages 65 and above
3.41 6.71 29.58 15.83 13.85 18.72
(% of total population)
GDP (USD billions) 70.0 1,058.7 5,040.1 1,644.3 499.7 2,704.6
GDP growth (annual %) 0.51 -2.07 -4.51 -0.71 -6.2 -11.03
Health expenditure in 2020
Total current health expenditure 2,735 36,147 549,586 136,995 21,806 330,210
(USD millions, % of GDP) (4.0) (3.4) (10.9) (8.4) (4.4) (12.0)
by government (%) 40.1 37.3 9.7 12.0 61.6 82.8
by compulsory health insurance (%) 13.6 17.7 74.6 50.6 11.4 0.0
by voluntary payment schemes (%) 15.5 13.2 3.1 9.7 16.4 4.6
by out-of-pocket payment (%) 30.8 31.8 12.6 27.7 10.6 12.5
National Health
National National Health National
Health Insurance
Health Health Insurance Health
Primary health financing scheme Insurance (multiple
Insurance Insurance (multiple Service
(single payers) w/
Scheme (JKN) payers) (NHS)
payer) tax subsidy
Fee-for- FFS,
Ghana Capitation, service Capitation,
Diagnostic- Diagnosis- (FFS), Fee-for- Thai- Capitation,
Dominant provider payment system Related related Diagnosis- service Diagnosis- Block
Groups group related (FFS) related contracts
(G-DRGs) (DRG) group group
(DRG) (DRG)
Source: World Bank DB, WHO Global Observatory Database, WHO Global Health Expenditure Database
Advanced countries with higher gross domestic product (GDP) are likely to have a longer life expectancy
and a higher proportion of older people over 65 years, with higher health expenditure. As of 2020, Japan
spent US$549,586 million (10.9 percent of GDP) on health, followed by the UK, with US$330,210 million (12.0
percent of GDP), and the Republic of Korea, with US$136,995 million (8.4 percent of GDP). Thailand, Ghana, and
Indonesia had relatively low health expenditures—4.4, 4.0, and 3.4 percent of GDP, respectively.
8 | What Can Financing Schemes and Payment Systems Do to Improve Pandemic Response?
The proportion of financial resources varies by country depending on financing schemes and population
coverage. The UK runs the NHS, which is funded out of general taxation and accounted for 82.8 percent of
total health expenditure in 2020. On the other hand, the countries with the maximum population enrolled
in compulsory health insurance are Japan and Korea, where insurance-based financing was the largest at
74.6 percent and 50.6 percent, respectively. Governments’ tax accounted for 9.7 percent and 12.0 percent,
respectively, of their total health expenditure. Thailand also achieved population coverage with a multiple
insurer system. Unlike Japan, Thailand’s government played a significant role in population coverage expansion
and financial protection, subsidizing 61.6 percent of the total. Therefore, 11.4 percent was financed by social
insurance premiums. Indonesia and Ghana are still pursuing population coverage based on a single-insurer
system like Korea’s. These two countries had financial resources for health care from general tax—37.3 percent
and 40.1 percent, respectively—and from insurance premiums—17.7 percent and 13.6 percent, respectively.
Less than half of the total population had enrolled or renewed its membership until 2017, despite the decade-
long effort to implement a National Health Insurance Scheme (NHIS) in Ghana since 2004 (Nsiah-Boateng and
Aikins 2018). In Indonesia, OOP payments contributed to the largest proportion of health expenditure despite
an 84 percent enrollment rate in the Indonesian National Health Insurance Scheme, called Jaminan Kesehatan
Nasional (JKN), in 2019 (James et al. 2018). In 2020, the first year of the COVID-19 pandemic, the share of OOP
expenditure in Indonesia and Ghana was second largest to that of government expenditure. Considering that
the share of OOP expenditure was larger than that of government expenditure before the pandemic, this is a
noticeable change as a result of the governments’ response to the pandemic.
Although health outcomes and medical expenditure are generally proportional to the size of a country’s
economy as represented by GDP, the provider payment systems have been blended by historical and
contemporary payment reforms. Until 2019, Korea showed higher OOP payments by more than 30 percent,
driven by expedited supply-side market growth under the fee-for-service (FFS) payment system (Kwon
2018). The Korean reform toward diagnosis-related groups (DRG) was sluggish, unlike in the other two Asian
countries, Japan and Thailand, where DRG reforms were in line with financial arrangements (Annear et al.
2018). Indonesia and Ghana, where social insurance coverage is low, struggled with low contribution bases and
partial purchasing power. In a move from DRG-based and FFS payments, both countries have been pursuing
reforms toward capitation-based payments (Abiiro, Alatinga, and Yamey 2021; Tan and Qian 2019). The UK,
known for capitation-based primary health care, offers block contracts for hospitals to undertake acute care in
a particular area (Jenkins and Maheswaran 2020).
2.
HOW HAVE COUNTRIES FUNDED
THE HEALTH SECTORS IN RESPONSE
TO THE COVID-19 PANDEMIC?
Unlike past experiences during other economic crises, where governments responded with long-term
austerity, structural adjustment, and cost-containment measures, a series of fiscal stimulus packages were
deployed to minimize health and socioeconomic impacts. Governments in advanced economies deployed
fiscal stimulus by increasing public spending on health, liquidity support, cash transfer, or social welfare
payments to rouse economic activity (Makin and Layton 2021). Low- and middle-income countries raised public
spending and debt despite the decreased amount of tax revenue due to the economic slowdown in the trade
and tourism industries. Table 2 provides data from the IMF database on fiscal policy response to COVID-19,
summarizing government measures from January 2020 to September 2021.
Globally, an average of 13.1 percent of GDP was spent in response to the pandemic crisis (IMF 2021). The
budget allocation in response to the pandemic indicates an increase in both health and non-health
sectors, despite a solid policy prioritization of mitigation of socioeconomic damage. In the six countries,
government spending increased through collection of a supplementary budget, raising public debt, or cutting
taxes for households and businesses. In the order of largest budget expenditure, the UK spent 18.9 percent
of its GDP, Japan 16.7 percent, Thailand 14.6 percent, Indonesia 9.3 percent, Korea 6.4 percent, and Ghana 3.3
What Can Financing Schemes and Payment Systems Do to Improve Pandemic Response? | 9
percent (IMF 2021). The Thai government further pooled a minimum of 10 percent of the ministries’ budget for
redistribution and used in-kind donations and government loans to raise financial capacity from early 2020
(Sachdev et al. 2022).
It should be noted that revenue collected from insurance premiums is not included in the amount of the
sectoral budget in the health sector. The UK had relatively large spending in the health sector, 25.1 percent of
additional budget, equivalent to 4.8 percent of its GDP. Unlike during the period of low funding growth over a
decade prior to the pandemic, the NHS was called on to prevent SARS-COV-2 infection and treat and trace
those with suspected or diagnosed cases. The UK government wrote off the £13.4 billion (UK pounds) debt
of the NHS in April 2020 (Kraindler 2020). Additional cash injections to the NHS to support infection control
measures, hospital discharge programmes, and routine surgeries continued in 2021, reaching over £34 billion
(Kraindler 2020). The UK also relieved value-added tax (VAT) and customs duties for imported medical goods
since January 2020.
Japan and Korea, two prominent countries with social health insurance, spent a relatively low proportion (12.4
percent and 11.4 percent, respectively) of additional budget in the health sector compared to the other countries.
Japan’s additional budget was about eight times larger than that of Korea. Unlike Japan, where the budget
execution was decentralized, the central government in Korea led the health-sector response by budgeting
for testing and tracking, compensation to and investment in medical institutions, and vaccine development. In
Korea, most costs of tests, treatments, and vaccinations were covered by national health insurance (NHI), so that
lower share of additional funding from the government, equivalent to 0.7 percent of GDP, was allocated to the
health sector. This is in contrast to the UK NHS, where tests, treatments, and vaccinations had to be covered by
the government budget, requiring a higher share of additional funding.
Indonesia and Ghana, respectively, allocated 22.2 percent and 33.6 percent of the total additional budget
to the health sector in response to COVID-19. Indonesia announced several fiscal packages and earmarked
a substantial amount to the health sector, resulting in a budget equivalent to 2 percent of GDP (Kwon and
Kim 2022). Health care, economic rescue, and financial sector stabilization were the government priorities in
Indonesia (Haniyah and Putra 2021). The Ghanaian president initiated the Coronavirus Alleviation Programme
(CAP) in May 2020. The CAP included large-scale construction of over a hundred district- and regional-level
hospitals, two psychiatric hospitals, and three infectious disease control centers. Other measures consisted of
the COVID-19 Emergency Preparedness and Response Plan (EPRP) for economic stimulus and procurement
of drinking water, food, sanitation, and relief funds for frontline health workers (personal protective equipment
[PPE], tax waivers, allowances, transportation, and insurance for COVID-19 infection) (MoF 2021; Abor and Abor
2020). All six countries, in common, spent some budget on the procurement and distribution of medical supplies
and equipment (masks, testing kits, or ventilators).
Table 2: Six countries’ additional budget in response to the COVID-19 pandemic
Total Additional Budget Sectoral Budget (USD Billion, %) Percent of GDP (%)
(USD Billion, % of GDP) Health Non-Health Health Non-Health
Global 11,194 (13.1) 1,451 (13.0) 9,743 (87.0) 1.7 11.5
Japan 844 (16.7) 105 (12.4) 739 (87.6) 2.1 14.7
United Kingdom 522 (18.9) 131 (25.1) 391 (74.9) 4.8 14.3
Republic of Korea 105 (6.4) 12 (11.4) 93 (88.6) 0.7 5.7
Indonesia 99 (9.3) 22 (22.2) 77 (77.8) 2.0 7.3
Thailand 73.2 (14.6) N/A N/A N/A N/A
Ghana 2.2 (3.3) 0.8 (33.6) 1.5 (66.4) 1.1 2.2
Notes: The data includes additional spending or forgone revenues and COVID-19-related measures from January 2020 to
September 2021, regardless of how they are financed or their net impact on the government budget. The global sum and
percentages of GDP were recalculated using country-specific figures from the raw data.
Source: IMF (2021).
10 | What Can Financing Schemes and Payment Systems Do to Improve Pandemic Response?
3.
WHAT KINDS OF PROVIDER
PAYMENT MEASURES HAVE BEEN
USED FOR INCOME LOSS AND EXTRA
EXPENSES DURING COVID-19?
The pandemic caused unexpected losses and expenses due to sudden changes in patient flows across
departments and regions. This became challenging for provider payment systems that have been instituted and
reformed for decades: global budget, salary, capitation, fee-for-service (FFS) payment, per diem payments, DRG
payment, and other systems. European countries adopted and developed provider payment and compensation
measures for both income loss and excess expenses (Waitzberg et al. 2021; Waitzberg et al. 2020). Income loss
was caused by reductions in usage of health services by patients having non-COVID-19 illnesses or by those
fearful of the risk of being infected. In contrast, clinics and hospitals required extra expenses and workloads to
treat an increased number of patients who were vulnerable to, suspected of having, or diagnosed with COVID-
19. Most measures implemented in an ad hoc fashion as a tentative means were influenced by countries’
existing payment systems.
Table 3: Countries’ provider payment systems by purpose and means
Before COVID Income Loss Extra expenses Medical Accessibility
Ghana,
Global budget or salary United Kingdom
United Kingdom
Capitation United Kingdom
Indonesia, Japan, Japan,
Japan,
Fee-for-service payment Republic of Korea, Republic of Korea,
Republic of Korea United Kingdom
Thailand
Indonesia, Japan,
DRG-based payment Thailand Thailand
Thailand
Compensation for overhead Ghana, Indonesia,
costs including supplies, Thailand,
equipment, and utilities United Kingdom
Compensation based on the
Republic of Korea,
previous year’s turnover or
United Kingdom
income threshold
Cash- or in-kind benefits Ghana, Indonesia,
for patient Republic of Korea
Sources: Authors’ compilation from government reports
In the UK, the NHS offered block contracts for all NHS trusts and foundation trusts with local variation
adjustment (NHS 2020). General practitioners (GPs) or specialists used to receive salaries or capitation
payments, which served as safety nets. During the pandemic, overtime was paid with higher payment rates
(Waitzberg et al. 2021). GPs were also compensated based on the previous year’s turnover instead of contact
capitation, combined with some FFS payments. Emergency funding ensured new fees. Funding arrangements
for public hospitals were also changed from an activity-based payment scheme to block contract since April
2020. The block contract system aimed to simplify and alleviate the administrative burden, provide sufficient
funding for the workforce, and ensure service delivery in response to COVID-19 (NHS 2020).
What Can Financing Schemes and Payment Systems Do to Improve Pandemic Response? | 11
To ensure that essential health
services were provided without disruption
during the pandemic, the Korean
government implemented various
types of payment methods including
extra fees and early payment.
However, many countries outside Europe often had different market landscapes, with the majority having
private providers or feeble purchasing power. In Ghana, patients who worried about the risk of infection opted
for self-medication and home treatments (Abor and Abor 2020). This resulted in the adverse effect of those
patients becoming reluctant to stay enrolled in the National Health Insurance scheme. Hospitals could not
adhere to clinical guidelines due to a lack of resources even before COVID-19. The Ghanaian case shed light on
the fact that payment and reimbursement are prerequisites for appropriate and sufficient service delivery.
To ensure that essential health services were provided without disruption during the pandemic, the
Korean government implemented various types of payment methods including extra fees and early
payment. In Korea, the social discussion and providers’ requests for the lost compensation began during the
2015 Middle East Respiratory Syndrome (MERS) outbreak (Baek and Kim 2020). At that time, a private hospital
brought the case to the court by suing the health authority. Even though Korean health authorities regarded
medical services as goods of public interest, medical institutions insisted that government intervention was
violating individual property rights. The gap in perspectives recurred with the COVID-19 pandemic.
The Korean government mobilized government officials who were paid on a seniority-based payroll system
and used primary health centers and public hospitals (10 percent in total) to implement policy measures. It also
implemented a prepayment method in which 90 to 100 percent of the average monthly reimbursement of the
previous year was paid in advance, and an early payment method in which 90 percent of the claimed payment
was reimbursed per se before the claim review was settled. Both methods require auditing but made faster the
financial flow to prevent deficits in medical institutions. Furthermore, the government prepared a legal basis for
compensation for income losses (Lee et al. 2022). The compensation could be provided not only to medical
institutions, but also to other businesses that adhere to government guidelines and quarantine policies. For
medical institutions, compensation was funded from the government budget for secured hospital beds, income
loss due to the decrease in non-COVID-19 patients, and income loss due to temporary closures or excess
expense for disinfection procedures. In the case of a week’s hospital closure, the average paid leaves for the
private provider totaled about ₩3.6 million (Korean won) on average (equivalent to US$2800) (Park, Lee, and
Kim 2020).
In December 2020, the first administrative order for mandating hospital beds for COVID-19 patients was
initiated for tertiary and general hospitals in the Seoul metropolitan area. Subsequently, providers criticized the
abuse of executive orders a total of six times in the second half of 2021, during August, September, November,
and December. According to the guidelines applied from December 2020 to December 2021, an intensive care
unit (ICU) bed for COVID-19 patients would be reimbursed five times if not used, or 10 times if used, compared
to the pre-existing fee per day. Even beds for treating moderate patients could be reimbursed two times if not
used, or five times if used, compared to the pre-existing fee per day. The reimbursement rates began to be
differentiated in December 2021. Due to the Omicron variant, the rate increased to 14 times higher during the
first five days of hospitalization. Table 4 summarizes extra provider payments in Korea during the pandemic.
12 | What Can Financing Schemes and Payment Systems Do to Improve Pandemic Response?
Table 4: Extra fee-for-service payments in Republic of Korea (January 2020 to June 2022)
Amount Amount
Type Subtypes
(KR₩ Billion) (US$ Million)
• For infection control related to COVID-19 8.8 8.0
Infection Control
• For long-term-care hospitals 214.5 195.0
and Prevention
• For mental health hospitals 40.2 36.5
• Using a polymerase chain reaction (PCR) test kit 1,531.2 1,392
Testing
• Using a rapid antigen test kit 807.3 733.9
COVID-19
• Using a PCR test kit for influenza and SARS-CoV-2 4.1 3.7
• Admission and treatment for severely ill patients 1,284.8 1,168
diagnosed with COVID-19
• Treatment of mildly ill patients diagnosed with COVID-19
1. At a community treatment center 149.8 136.2
Treatment
2. By telemedicine (home treatment) 1,363.2 1,239.3
3. For in-person care 81.8 74.4
• Emergency care to prepare and respond to COVID-19 92.4 84.0
patients
• For telemedicine 102.7 93.4
• For national relief hospitals 136.1 123.7
Non-COVID Care • For designated clinics for respiratory infection 167.5 152.3
• For surgery and childbirth for COVID patients 2.5 2.3
• For hemodialysis 13.3 12.1
• For nursing management at night 43.9 39.9
Workforce
• Incentive for COVID response health care workforce 140.1 127.4
• COVID-19 diagnosis prescription fee 59.8 54.4
Others
• COVID vaccination service fee 858.8 780.7
Total 7,102.8 6,457.1
Source: Author-modified data from government press releases
In Japan, provider payments for treating critically ill patients in the ICU were raised to three times higher
since May 2020 (Kwon and Kim 2022). In December 2020, when Korea began mandating hospital beds, the
Japanese government provided up to US$142,000 per bed for COVID-19 patients. These measures helped
secure less than 1 percent of hospital beds for COVID-19 patients (Kwon and Kim 2022). Unlike Korea and Japan,
Thailand mandated private hospitals to treat COVID-19 patients and banned balance billing. A DRG-based
payment was provided for hospitalized patients, with a regularly updated fee schedule to reflect market rates.
The Thai government pursued public financial management by requiring all public and private hospitals to report
allocation, disbursement, and use of resources, and that information is publicly available (Sachdev et al. 2022).
Thailand and Indonesia used standard claim-based financial arrangements in the public health insurance
scheme (Kwon and Kim 2022). The hospital capacity was measured and monitored, including the number
of ICU beds, ventilators, and health workers. Additionally, Indonesia established a special payment scheme
based on a per-diem rate to accommodate hospital-level care for COVID-19 patients (Nugraha et al. 2022).
A mixed payment and compensation system, combining prospective payments with retrospective ones,
helped to ensure essential health services by preventing disruption, fluctuation, or delay in financial
arrangements. Retrospective payments such as FFS payment could put medical providers at financial risk
during the pandemic because providers’ incomes are based on the volume of services provided. In contrast,
prospective payments such as capitation or global budgets could reduce such financial risk. In Korea, the
COVID-19 pandemic led some of medical providers to pay attention to other types of payments than FFS,
What Can Financing Schemes and Payment Systems Do to Improve Pandemic Response? | 13
even after the pandemic ended, because they realized that prospective payments could serve as a safety net
in a health crisis.
New types of health services delivery models can be used to compensate for the providers’ income loss,
as well as to ensure the patients’ access to essential health services. One example is telemedicine services
in Korea. Telemedicine had been banned prior to the pandemic mainly due to the objections of the medical
providers. However, it was allowed temporarily to lower the possibility of spreading infection, and the medical
providers were reimbursed at 30 percent higher than usual fee levels (Lee et al. 2022).
4. POLICY IMPLICATIONS
AND LESSONS LEARNED
Protecting population health was the most effective and resilient political strategy. The world has been
overflowing with an unprecedented amount of financing set for the single purpose of responding to COVID-19.
However, more of this budget was allocated and spent on economic stimulus and industrial investment, and
relatively less went to public health responses. For instance, many countries extended fiscal and monetary
support to prevent an economic slowdown after lockdowns. Public debt was one of the means to offset the
revenue shortage. Meanwhile, low- and middle-income countries had already been struggling with low tax
revenues and accrued debts (Tandon et al. 2020). Low- and middle-income countries may place health care in
low priority due to challenges in increasing the tax base or paying off public debts.
Therefore, strengthening the sustainability and resilience of the health care system is the way toward
national security and economic growth (Sundararaman, Muraleedharan, and Ranjan 2021; Thomas et al. 2020).
In the health care system, health financing has played a pivotal role in accelerating preparedness and response
to the pandemic. This policy note concludes with the following three lessons, interrelated and drawn from the
country cases that have used health financing and provider payment systems to compensate for income loss or
extra expenses during the pandemic:
1. Governments should allocate additional budget to the health sector in response to a health crisis
such as the COVID-19 pandemic. The health care system has a pivotal role in treating those diagnosed
with infectious diseases and treating critically ill or vulnerable patients. There should be alternatives and
supplementary measures to improve access to care for pregnant women, newborns, the elderly with chronic
diseases, the disabled, and those having mental diseases. Extensive financial management is required to
strengthen the surge capacity and prevent excess mortality.
2. Earmarked funds collected from social insurance contributions enabled provision of essential health
services with or without governments’ financial support. For extra expenses from tests, treatments, and
vaccinations, social health insurance (SHI) schemes could require tax subsidies to the health sector depending
on the SHI’s funding capacity and institutional arrangements. Schemes could also contribute to governments
distributing more tax revenue to the non-health sector to give priority to mitigation of socioeconomic
damage. Thus, a social insurance scheme with a tax subsidy could increase the overall capacity and resilience
of public funding in response to population health and economic impact.
3. A mixed payment system could boost surge capacity in the health care system and provide incentives
for medical providers. The purpose and strategy of combining payment measures often depend on an
existing payment system and governance. Under a volume-based payment system, which is vulnerable to
reduced usage in a pandemic, introducing prospective payments, such as capitation or global budgets,
offsets the income loss of medical providers and creates a safety net by making provider payments unlinked
to service volumes. Advance payments based on previous years’ turnover can be a good example. Some
provider payment or compensation measures can be used temporarily or lead to payment reform, enhancing
the resilience of the health care system.
14 | What Can Financing Schemes and Payment Systems Do to Improve Pandemic Response?
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