Health Financing Strategy Period 2016-2025 - EN - Copy 1

World Health
Ministry of Health
Organization
HEALTH FINANCING STRATEGY OF

VIETNAM (2016 - 2025)
Hanoi, March 2016

HEALTH FINANCING STRATEGY OF VIETNAM (2016-2020)
Table of Contents
Abbreviations .................................................................................................................................. 3
List of figures .................................................................................................................................. 4
0. Foreword: ............................................................................................................................................ 5
1. Some terms and concepts used in the document ................................................................................. 5
2. Health financing system, the objectives and functions of health financing ........................................ 7
Health financing system and the targets of health financing system .................................................. 7
The functions of health financing system ........................................................................................... 7
3. Current status of health financing system in Vietnam ........................................................................ 8
3.1. Some basic health indicators and indicators of expenditure on health ........................................ 8
3.1.1 Basic health indicators ........................................................................................................... 8
3.1.2. Basic indicators of expenditure on health ............................................................................. 8
3.2. Health financing system ............................................................................................................. 12
3.2.1. Funds for health .................................................................................................................. 12
3.2.2. Management of financial sources........................................................................................ 19
3.2.3. Allocation and use of health financing (purchasing) .......................................................... 22
3.3. The impact of financial mechanism on protection of financial targets of fairness and efficiency
.......................................................................................................................................................... 29
3.3.1. Financial protection............................................................................................................. 29
3.3.2. Equity in access to health care services .............................................................................. 31
3.3.3. Effectiveness ....................................................................................................................... 34
4. Challenges and priorities of Vietnam health financing system ......................................................... 35
4.1. Challenges from the perspective of health financing functions ................................................. 35
4.1.1. Financial sourcing: Financial sources for the health sector are not really sustainable........ 35
4.1.2. Fund collection and allocation ............................................................................................ 36
4.1.3. Fund usage/Purchase of health care services ...................................................................... 36
4.2. Challenges from the perspective of financial system impacts ................................................... 36
4.2.1. Financial protection............................................................................................................. 36
4.2.2. Equity in access................................................................................................................... 37
4.3. Challenges from the perspective of health financing system ..................................................... 37
4.3.1. Equity in population coverage (regarding HI coverage, rate of service access and usage) 37
4.3.2. Sustainability....................................................................................................................... 37
4.3.3. Performance ........................................................................................................................ 37
5. Strategic vision and objectives for Vietnam health financing system for the period 2016-2025 ..... 38
5.1. Vision ......................................................................................................................................... 38
5.2. Strategic objectives for health financing system for the period 2016-2025 ............................... 38
1
5.3. Strategic solutions ...................................................................................................................... 39

5.3.1. Mobilizing financial sources from HI and the State Budget ............................................... 39
5.3.2. Managing and allocating financial sources, and risk-sharing (pooling) ............................. 40
6. Roadmap ........................................................................................................................................... 43
7. Monitoring and assessment ............................................................................................................... 44
Reference ...................................................................................................................................... 46
2
Abbreviations
DRG Diagnosis-related groups

GDP Gross domestic product
HI Health insurance
INGO International non-governmental organization
MOF Ministry of Finance
MOH Ministry of Health
NCDs Non-communicable diseases
NGO Non-governmental organization
NTP National Target Programme on health
ODA Official development assistance
OOP Out-of-pocket payments
PPC Provincial People’s Committee
SI Social insurance
VSS Vietnam Social Security
WB World Bank
WHO World Health Organization
3
List of figures
Figure 1 Total expenditure on health compared with gross domestic incomes of some
countries in the region ................................................................................................................ 9
Figure 2 expenditure on health per capita (2008-2012) ........................................................... 10
Figure 3 expenditure on health per capita by socio-economic regions .................................... 10
Figure 4: Structure of funds for health, 2012 (Source: National Health Accounts 1998-2012)
.................................................................................................................................................. 11
Figure 5: The estimated growth rate of estimated state budget expenditure on health
compared to the growth rate of estimated state budget, 2011-2015 ........................................ 12
Figure 6: Structure of state budget expenditure on health ....................................................... 13
Figure 7: Percentage of target groups signing up for HI plans 2011-2014 .............................. 15
Figure 8: Percentage of out-of-pocket expenses in total expenditure on health, 2008-2012 ... 16
Figure 9: RATE of households facing catastrophic healthcare costs and impoverishment due
to health costs in 2004-2012 .................................................................................................... 30
FIGURE 10: RATE OF PEOPLE USING HEALTH CARE SERVICES FOR PAST 12
MONTHS BY 6 SOCIO-ECONOMIC REGIONS ................................................................. 32
FIGURE 11: RATE OF HOUSEHOLDS BEARING COSTS FOR HEALTH
CATASTROPHE BY 5 LIVING STANDARD GROUPS, 2012 ........................................... 32
FIGURE 12: AVERAGE TURNS OF USING HEALTH CARE SERVICES
(CARDS/YEAR) BY 6 GROUPS (2014)................................................................................ 33
FIGURE 13: local budget expenditure per capital in certain provinces for health care services,
2011-2012 ................................................................................................................................ 33
4
0. Foreword:
Objectives of the strategy:
Coordination between MOH departments as to ongoing reform plans
Coordination with other ministires
Joint vision of key stakeholders in Vietnam on the next steps (MOF; MOLISA; MOH;
VSS)
Donors to have clear guidance on how to align with government reforms
1. Some terms and concepts used in the document
Health insurance The term Health insurance used in this documument is

interpreted as social HI (see details below).
Commercial HI A form of health insurance policy sold by for-profit

insurers, of which the sign-up is voluntary, the premium
rate depends on the risk probability of diseases, and the
benefits depend on the premium rate.
Social HI A form of mandatory HI policy, of which the premium rate

depends on the financial capability, and the benefits do not
depend on the premium rate but the health status.
Universal health Ensuring that all people have access to the heath care
care coverage services with good quality as needed and do not suffer from
catastrophic health expenditures when using the health care
services. This should be differentiated from universal HI
coverage, of which the target is to make all people
participate in social HI.
Out-of-pocket Out-of-pocket (OOP) expenses include direct payments of

health service users paid for service providers, co-payments
as well as the amounts paid for drugs and medical supplies.
Private expenses Private expenses for health care include out-of-pocket

expenses (OOP - see this term above), and payments for
commercial HI
Catastropic Health care costs so high that a household must reduce their
expenditures essential living expenses (such as expense for food), sell
assets or borrow money and may become poor. The health
care costs are considered as costs at disaster level when
5
exceeding the household’s affordability, exceeding 40% of

non-food expenses of the household according to WHO.
Co-payment Co-payment is stipulated as a part of the costs for health

care services paid by insured person, in addition to the
amount paid by HI provider for such health care services.
Formal sector Is formal sector of an economy managed by the social

institutions, where employees have formal employment
relations through labor contracts.
Informal sector An informal sector of an economy where employees do not

have formal employment relations (freelances or employees
without a formal employment contracts).
“Cream skimming” Insurers (normally for-profit insurers) sell HI for healthy

citizens who have fewer needs for health care services
Pooling of funds Pooling of funds or fund pooling is a function of the

financial system, which collects health care financing
sources, for example the source of HI premiums from
individuals and organizations, into a fund, for the purpose
of sharing the financial risks in a large community, so that
the large health care costs are shared equally among the
individuals and households.
Adverse selection This happens when more people who are sick and in need
of health care services sign up for an HI plan than healthy
people
Service cost The amount of money paid directly to the provider of health
care services when using the health care services
Capitation payment Prepaid payment method quarterly or monthly, made to

method services provider a predetermined amount per person (base
rate) for a predefined range of services (usually primary
health care services)
Fee-for-service Payment method for health care costs based on the cost of
payment method each service used for patient.
General taxes General taxes consist of direct or indirect taxes
Public finance The financing source from taxes (state budget) and social
health insurance premiums
6
2. Health financing system, the objectives and functions of health

financing
Health financing system and the targets of health financing system

According to WHO, health financing is a function of a health system concerned
with the mobilization, accumulation and allocation of money to cover the health care
needs of people, individuals and community. 1
Health financing is not just generating sufficient funds for health care, but also
creating a fair financial source (whose contribution and how much contribution), and
using the obtained money in the most effective way. Moreover, in 2007, WHO said
that “A good health financing system raises adequate funds for health, in ways that
ensure people can use needed services and are protected from financial catastrophe or
impoverishment associated with having to pay for them.[1] Health financing systems
that achieve universal coverage in this way also encourage the provision and use of an
effective and efficient mix of personal and non-personal services.”.2
According to WHO (2010)3, the purpose of health financing systems that all
countries, both rich and poor, are reaching is to improve access to good quality health
services for all people without suffering from financial hardship. Three core missions
of the health financing system are:
 Raising funds for health;
 Reducing financial barriers to access and reducing risks of financial hardship
for people when using the health care services;
 Allocating or using funds in a way that promotes efficiency and equity.
The functions of health financing system

The health financing system has 3 main functions, namely revenue collection,
pooling purchasing.
Revenue collection function specifies how funds for health are raised. Health
financing is funded from the contributions of households, businesses and the state, as
well as support from international sources. The forms of financial contributions for
health care include people’s contributions through general taxes, specific taxes,
(mandatory and voluntary) health insurance premiums, or direct payments when using
health care services (payments for services charges).
1
WHO, 2000: “function of a health system concerned with the mobilization, accumulation and allocation of
money to cover the health needs of the people, individually and collectively, in the health system”
2
“A good health financing system raises adequate funds for health, in ways that ensure people can use needed
services, and areprotected from financial catastrophe or impoverishment associated with having to pay for them.
It provides incentives for providers and users to be efficient”
3
WHO, World Health Report 2010, Financing for Universal Coverage
7
Pooling function performs the collection and management of funds for health
so that the financial risks are not only suffered by the sick people but also shared by
all people when using health care services,. Risk sharings can only be performed when
people make financial contributions before they become sick (through payments of
taxes and HI premiums).
Purchasing function prioritizes and defines the purchasing of health care
services which are cost-effective, and meet the health care needs in the context of
limited resources and how to pay to service provider.
3. Current status of health financing system in Vietnam

3.1. Some basic health indicators and indicators of expenditure on health
3.1.1 Basic health indicators
The health status of people in Vietnam in recent years has been continuously
improved; a number of basic health indicators are higher than that of other countries
with similar levels of per capita income. In 2013, the average life expectancy of
Vietnam reached 73.1 years, higher than that of other Asian developing countries with
income equivalent to Vietnam; the maternal mortality ratio was estimated at
49/100,000 live births; the infant mortality rate (IMR) was 15.3/1,000 live births,
which was lower than China. The <5 underweight rate in Vietnam was 15.3% and the
<5 stunting rate was 25.9%, which are relatively low compared with other developing
countries in Asia.
3.1.2. Basic indicators of expenditure on health

Total expenditure on health compared to GDP
The level of expenditure on health in Vietnam continues to rise and is high
compared with some other countries in the region. According to data from the
National Health Accounts, the total expenditure on health for the society in Vietnam
in 2012 was estimated at 6% of GDP. In the period 2010-2012, the annual average
rate of increase in total expenditure on health was 2.9%, lower than the average GDP
growth rate in the same period of 6.7% (at constant prices). In the previous period
from 1998-2008, the annual average rate of increase in expenditure on health was
9.8%, higher than the annual average GDP growth rate of 7.2% 4. Compared with
many other countries in the region, Vietnam has high rate of total expenditure on
health compared with GDP (Figure 1).
4
Ministry of Health - Development partners. Health Overview Report 2010
8
8 7.3
7
6
6 5.4
5 4.4 4.5
4 4.2
4
3
3
1.8 1.9
2
1
0
Figure 1 Total expenditure on health compared with gross domestic incomes of

some countries in the region
(2012) Source: World Health Statistics 2015
Expenditure on health per capita
The expenditure on health per capita of Vietnam is also higher than that of
other Southeast Asian countries. Expenditure on health per capita in Vietnam in 2012
was VND 2,184,000, approximately USD 300 purchasing power parity (PPP), higher
than some other countries in the Southeast Asia (USD 79), as well as compared to
countries with low average income (USD 86).5
The expenditure on health per capita has increased in recent years. Calculated
at current prices, the expenditure on health per capita increased by 3.5 times in 5 years
from 2008 to 2012, but when adjusted by deflator with the base year in 1994 of
Vietnam, the increase of expenditure on health per capita was 1.3 times. (Figure 2).
There was a relatively clear difference in the expenditure on health per capita
among the socio-economic regions in the country. Averagely, a person in the
Southeast region had a expenditure on health 2 times higher than a person in the
Northwest region (Figure 3). The difference in the expenditure on health reflects the
differences in the frequency of the use of health care services as well as prices of
health care services in these regions.
5
WHO statistics 2015.
9
2,500,000
2,000,000
1,500,000
1,000,000
500,000
-
2008 2009 2010 2011 2012
Chi y teexpenditure
Health bình quân đầu
per người
capita (giá thựcprices)
(current tế)
Chi y teexpenditure
Health bình quân đầu
per người
capita (giá so sánh
(constant 2010)
prices of 2010)
FIGURE 2 EXPENDITURE ON HEALTH PER CAPITA (2008-2012)

- Source: National Health Accounts 2012
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
- Red North- North- North Cetral Cetral South- Mekong

ĐBriver
sông Đông
east Tâywest
bắc Bắc coastal
cetral Duyên highlan
Tây Đông
east ĐBriver
sông
Hồng bắc
delta region region Trung
region hải miền nguyên
region ds Nam bộ delta
region Cửu
Bộ trung long
FIGURE 3 EXPENDITURE ON HEALTH PER CAPITA BY SOCIO-ECONOMIC

REGIONS
(Source: National Health Accounts 2012)
The percentage of financial sources in total expenditure on health
10
The out-of-pocket payments for health care are still at a high level. The percentage
of out-of-pocket payments of households for health care in 2012 was 48.8%, the
percentage of public expenditure on health care (including the state budget and HI)
was 42.6% (Figure 4). The aid accounted for 1.5%, and the remaining 7.1% from
other sources.
02
07
27
49 16
State Households’
SI Aid
out-of-pocket
NSNN
budget BHXH
premium Hộ gia đình Viện trợ KhácOthers
expenses
FIGURE 4: STRUCTURE OF FUNDS FOR HEALTH, 2012 (SOURCE: NATIONAL

HEALTH ACCOUNTS 1998-2012)
The percentage of expenditure by areas and activities of health care
There were still inadequacies in the percentage of expenditure on health by

health care sectors and health care activities. The majority of expenditure was for
treatment activities, and drugs accounted for a high percentage in expenses for
treatment. According to the National Health Accounts, 2011, 70.8% of total
expenditure on health was for treatment activities, while the percentage of expenditure
on preventive medicine and public health was only 27.9%, the indirect costs
accounted for 1.2%. Of the total expenditure in hospitals, the percentage of
expenditure for human ranged from 22-45% (compared with the 70-80% percentage
of expenditure for human in developed countries, the percentage of expenditure on
drugs was high, while the controlling of drugs supply and use was rather difficult.
According to the National Health Accounts, 2011, in the total expenditure of
state budget for health care, the expenditure for investment and development
(including purchase of fixed assets and construction) was low, at 7.8%. Recently,
thanks to the funds from the Government bonds, the percentage of expenditure for
investment and development of the health sector has increased significantly.
11
3.2. Health financing system

3.2.1. Funds for health
The health financing system of Vietnam is a mixed system with multiple
financing sources from the state budget, health insurance premiums, households’ out-
of-pocket payments, aid and other sources.
State budget
Like many low- and average-income countries in the world, the health
financing system of Vietnam is a mixed system, in which the state budget has an
important role to perform the state’s functions in protecting public health and
ensuring equity in health care.
For years, the State has always determined budget priorities for the health
sector, prioritized the goal of increasing the share of the state budget for health over
increasing growth rate of state budget, reforming the health budget allocation
mechanism, in which 20% of the health budget is used to support the insured people.
According to the National Health Accounts 2012, the state budget expenditure
accounted for 26.8% of total financial sources for health, slightly lower than 29.4% in
2010. According to the Ministry of Health’s data, in 2014, the percentage of
expenditure on health accounted for 8.2% of the total expenditure, an increase of 7.7%
compared with 2010. According to data in the report on estimates in health sector in
2011-2015, the state budget expenditure on health in 2011-2015 increased annually at
a higher rate than the state budget expenditure, meeting the targets under the National
Assembly’s Resolution 18 (except for the negative growth rate of 2011 after deducting
GDP deflator) (Figure 4).
Percentage
of state
budget
increase
Percentage
Percentage
of state
budget
increase for
health care
FIGURE 5: THE ESTIMATED GROWTH RATE OF ESTIMATED STATE BUDGET

EXPENDITURE ON HEALTH COMPARED TO THE GROWTH RATE OF ESTIMATED
STATE BUDGET, 2011-2015
Source: Department of Planning & Finance, Ministry of Health
12
However, state budget expenditure on health has not yet reached the level of
10% set forth in the Plan for the Protection, Care and promotion of People’s Health in
2011-2015. On the other hand, it should be noted that the high increase of the state
budget expenditure on health in recent years was partly due to the large impact of
Government bonds for the projects to upgrade the health care facilities including the
project to upgrade district hospitals under the Decision No. 47/2008/QD-TTg and the
project to upgrade provincial and central hospitals under the Decision No. 930/QD-
TTg. Therefore, this cannot be considered as a stable level for the coming years.
Of the total state budget expenditure on health, the percentage of expenditure
for investment and development, including investment from the Government bonds,
was around 20% (Figure 5). Regular expenditure accounted for about 55% in which
the majority was allocated to the local areas. The percentage of state budget
expenditure for wholly or partially supporting the purchase of HI cards for people
defined under the Law on Health Insurance was about 20% of the total state budget
expenditure on health. The funds financed from the Government bonds for the
projects to upgrade health care facilities including the project to upgrade district
hospitals under the Decision No. 47/2008/QD-TTg and the project to upgrade
provincial and central hospitals under the Decision No. 930/QD-TTg (2009) and
investment in developing district health centers and commune health centers under the
Decision No. 950/QD-TTg (2007).
2015
2014
2013
2012
2011
0% 20% 40% 60% 80% 100%
Chi đầu
Expenditure for tư XDCB
infrastructure Investment
Chi ĐTPT từfor TPCP
development from Government bonds
Expenditure for NTP

Chi CTMTQG Chi mua of
Purchase BHYT
HI forcho các ĐT
people
Chi TXforcho
Expenditure localTƯ
areas Chi TX cho
Expenditure forđịa phương
central
FIGURE 6: STRUCTURE OF STATE BUDGET EXPENDITURE ON HEALTH

Source: Department of Planning & Finance, Ministry of Health
Since 2013, a new financing source has been added to the state budget
expenditure on health, that is the Fund for Family Smoking Prevention and Tobacco
Control. According to the Family Smoking Prevention and Tobacco Control Act, the
Fund for Family Smoking Prevention and Tobacco Control is formed with the
13
contributions of the enterprises producing or importing tobacco. Annually, about 400-

500 billion VND are contributed to the Fund and used entirely for the smoking
prevention and tobacco control actitivities, education anf communication, policy
development, oversea study tours, etc.
Health Insurance Premiums

Implementing the policy on development of social HI to be a main financing
mechanism for Vietnam health care, the HI policies were implemented since 1992, the
Health Insurance Law was enacted in 2008 and amended in 2014. The Government
has approved the roadmap for universal health insurance coverage; in 2014, 71% of
the population signed up for HI plans.
However, the financial contribution of HI to the total expenditure on health of
the entire society has not commensurated with the percentage of the insured people. In
2012, the contribution of HI was approximately 16% of the total expenditure on health
of the entire society.6 This level did not match the health insurance coverage of 66.4%
of the population. The health insurance premiums also increased with the schedule for
salary increase.
Many businesses have not complied with the regulation on paying health
insurance premiums, the due amounts of SI and HI premiums have been constantly
increasing. According to figures recently published by the Vietnam Social Security
(VSS), 400 enterprises have owed SI and HI premiums with the outstanding amount
of VND 8,700 billion as of November 2012, of which the outstanding amount of HI
premiums was VND 2,100 billion. The causes of this condition involve many issues:
because the interest rate on late payment of social insurance is lower than the interest
rate of bank loans, the majority of businesses deliberately owe SI premiums, accepting
fines to misappropriate SI funds; sanctions for violations in SI sector are still
inadequate, such as low fines, complex sanction procedures, no criminal sanctions for
misappropriating SI premiums of employees; VSS does not have the function of
inspecting and enforcing sanctions on SI violations so upon inspection and detection
of employers who violate the laws on SI, it just reminds and request the businesses to
comply, the procedure ends at reporting to the province or district People’s Committee
for resolutions.
The coverage (rate of participation in) of HI plans was good in both high-
income sector and low-income sector, but the coverage was poor in the informal labor
sector with average income (“missing middle problem”) and the labor groups in the
businesses. The groups which have almost 100% coverage were public administrative
groups, group of retired people receiving SI pension benefits, group of poor people,
and ethnic minorities. The percentage of students and pupils signing up for HI plans
was also very high, up to 94% in 2014. Both groups are supported by the state budget
for part of HI premiums. The percentage of group signing up for HI voluntary plans
and the business groups were at the lowest level (Figure 6).
6
National Health Accounts 1998-2012
14
120
100
80
60
40
20
-
2,011 2012 2,013 2,014
Aministrative
- Hành chính and professional group
sự nghiệp Businesses
- Doanh and other
nghiệp và tổorganizations
chức khác
Retired people receiving SI pension
- Hưu trí, trợ cấp BHXH - Poor
Ngườipeople and ethnic
nghèo, dânminorities
tộc thiểu số
Children under 6y Near poor people
- Trẻ em dưới 6 tuổi Cận nghèo
Students People signing up for voluntary HI plans
HSSV Tự nguyện
FIGURE 7: PERCENTAGE OF TARGET GROUPS SIGNING UP FOR HI PLANS 2011-

2014
Source: VSS, May 2015
The current HI premium rate is 4.5% for employed workers, but the application
of the statutory contribution rate of 6% is difficult to implement in the short term,
because the HI fund in the period of balancing income and expenditure (continuous
positive balance in three years with the estimated cumulative balance of VND 7,722
billion in 2012) and because the macroeconomy and business production operations
are currently facing difficulties.
The problems on adverse selection are evident in the group of people signing
up for voluntary HI plans. This group contributes only 9% to the HI fund while
accounting for 11.4% of the total number of insured people, and having many times
higher frequency and cost of health care than other groups.
The commercial HI is fast-growing but lacking the State management. The
activities of commercial HI is regulated by the Law on Insurance Business. The
commercial HI plans or non-life insurance have covered tens of millions of people,
mainly aimed at healthy or high income people. However, there were no data on
monitoring and assessment of the commercial HI activities and contribution of
commercial HI to expenditure on health in Vietnam.
Households’ out-of-pocket payments

Despite many efforts to increase public financial sources through increasing
state budget expenditure on health and HI expansion, the percentage of households’
15
out-of-pocket expenses of Vietnam remained high at 48.8% in 2012 and showed a

slight increase in recent years. Analysis of historical data showed that in the period
2008-2012 a clear change of this indicator was witnessed (Figure 7). The percentage
of out-of-pocket expenses fell from 52.4% in 2008 to 44.8% in 2010, but it then
tended to rise to nearly 50% in 2012. According to the World Health Organization, it’s
hard to achieve universal coverage of health care services if the out-of-pocket
expenses on health accounted for more than 30% of the total expenditure on health.
Clearly, there is still a great distance for Vietnam to reach this goal.
52.4
50.5
48.8
45.6
44.8
2008 2009 2010 2011 2012
FIGURE 8: PERCENTAGE OF OUT-OF-POCKET EXPENSES IN TOTAL

EXPENDITURE ON HEALTH, 2008-2012
Source: National Health Accounts 1998-2012
Analysis of National Health Accounts data in 2011 showed that the entire
households’ Out-of-pocket expenditure is for health care in which 55.8% is paid for
inpatient health care services and 43.7% is paid for medicine by themselves, only
0.5% is spent on outpatient health care services. In the total households’ out-of-pocket
expenditure on health, 62.5% is paid for public health care facilities, 37.5% is spent on
private health care facilities.
Out-of-pocket expenditure at 48.8% is a big challenge for Vietnam to
implement its goal of general health care coverage. Such indicators of financial
protection as the percentage of household having to pay catastrophic health costs and
the impoverishment rate due to health care costs have not been improved remarkably.
There has been no convincing evidence of the financial protection impact of HI.
Patients with HI still have to pay on their own when receiving health care services
because of many factors, for example, insured patients not using their HI cards,
bypassing, or self-referral. One of the downsides and risks of implementing hospital
autonomy policy is the increase of patients’ out-of-pocket costs, including insured
patients.
16
Aid and loans

In the context where Vietnam has become the country with low average
income, the aid for Vietnam tends to be cut. The percentage of expenditure on health
from aid and loans have fallen quite clearly for recent years. In 2012, this percentage
was estimated at 1.6%, an decreased compared with the previous years (2.9% in 2010
and 2.3% in 2011).
The outside fund for health managed by the Ministry of Health include two
sources, namely official development assistance (ODA) and aid from non-
governmental organizations (NGOs). For ODA, during the period 1993-2013, the
Ministry of Health managed 162 programs and projects including 130 non-refundable
aid projects, 24 loan projects and 08 mixed projects (both loans and non-refundable).
The total cost of the programs and projects was USD 2.7 billion, of which the ODA
was USD 2.5 billion, accounting for 90.8% of the total fund of programs and projects
and the counterpart fund was USD 252 million, accounting for 9.2% of the total fund
of programs and projects. In the total ODA of the programs or projects, the ODA from
non-refundable aid was USD 1.2 billion, accounting for 48.3%, the ODA from loans
was USD 1.28 billion) accounting for 51.7%. 7 The main areas supported by ODA
projects include upgrading infrastructure and facilities, providing health care
equipment and preventive medicine assistance, supporting local health facilities,
supporting the implementation of NTP for Health, supporting health development,
developing policies to improve management capacity.
For non-governmental aid, for 10 years from 2003 to 2013, the total number of
projects managed by the Ministry of Health was 384 projects with a total value of over
USD 400 million. Besides, INGOs also provided a large number of projects in the
health sector through PPCs/City PCs across the country. In total 383 projects managed
by the Ministry of Health, the U.S. NGOs took lead in terms of the number of projects
and the total amount of aid funded for the health sector, with 175 projects accounting
for 46% of the total number of projects and total fund of USD 213.7 million,
accounting for 49.7% of the total non-governmental fund in this period, followed by
the INGOs of France, Japan, Australia, Netherlands, England, Switzerland, Belgium,
Sweden, GAVI, etc. 8 The INGO aid projects covered many health care areas,
contributed to improving infrastructure, technology, improving the quality of health
services in local areas and prioritizing the allocation to preventive medicine, local
health facilities, mountainous and remote areas and supporting the social policy
beneficiaries, implementing equity in health care, contributing to the overall
achievement of health sector in the care for people’s health.
Regarding aid, some major issues relating to the effectiveness and

disbursement have emerged. To effectively use the aid which tends to decrease, the
health sector had final reports to review and analyze the causes limiting the
effectiveness of aid relating to: (i) The coordination of aid; (ii) The administrative
procedures; (iii) The implementation capacity; (iv) the monitoring and evaluation.
7
Ministry of Health, Report on 20 years of cooperation for development between Vietnam and sponsors, 2013
8
Ministry of Health, Report on 20 years of cooperation with non-governmental organizations, 2013
17
The international financial aid for Vietnam’s health are predicted to decrease
with less preferential conditions due to the growth of Vietnam economy. Since 2010
when Vietnam reached a per capita GDP of more than USD 1,000/year, ODA loans
with preferential conditions for Vietnam would fall, instead of this, the ODA loans
with less preferential conditions would increase. For the health sector, the
international aid, even for a modest proportion, are still within the general strategy of
the sponsors and policy guideline of the Government regarding the allocation,
management and use of this fund source. The general forecasting is that the
international aid for health will change in structure, form and content. Sponsors can
pay more attention to the national target programs in parallel with the demands of the
new approach, program support and sectoral access.
Although Vietnam’s public debt remains safe, there is less ability to borrow.
The current total government debt of Vietnam is 37% of GDP,9 still in the range of
safety (40% of GDP is the safe level recommended by the IMF), but the ability to
borrow of Vietnam is not much. For the health sector, the sudden lack of international
aid will increase the financial burden, especially on the local budget in difficult areas
and some large programs (for example, HIV/AIDS Prevention Program). Similarly,
the investment in facilities for preventive medicine system is heavily dependent on
aid. Moreover, the aid has an important role in the transfer of advanced technologies
and are the “midwives” to develop appropriate strategies for the sector.
Other sources
In addition to the main financial sources as above, the funding investment in
health care was also mobilized from the private sector in the form of “social
mobilization”. Implementation of Resolution No. 46 on “encouraging economic
sectors to invest in developing the health care and health promotion services,” the
mobilization of non-state budget resources for public health facilities is currently
being implemented in two main forms:
 Joint venture and association to invest in upgrading health care equipment in
public hospitals.
 Developing on-demand services in public hospitals.
Investing in public health facilities from socialization source has contributed to the
innovation of technical equipment to meet the health care needs but it also has
undesirable effects. Report on Hospital Inspection 2014 recorded that most of major
hospitals have established Faculty of On-demand Health Care, which is invested with
modern infrastructure facilities and equipment from socialization source. The joint
venture and association activities in public hospitals have contributed to meeting
urgent needs for innovation of technical health care equipment, especially the high-
tech equipment, serving the health care needs of people while the State budget is not
sufficient to purchase this equipment. However, the hospitals tend to pay attention to
the areas with revenue only, spending funds for development of on-demand services;
the investment for equipment is incommensurate with competence, professional
9
MPI 2007
18
qualifications, health care needs; provision of services exceeding the necessity of

socialized equipment, insufficient attention to the inspection, supervision and
implementation of democratic regulations. 10 The private contribution of funds and
operation for profit in the joint venture investment projects for health care equipment
in the public health facilities potentially increases unnecessary indications, leading to
the increasingly higher percentage of health care expenditure paid by people if there is
no mechanism to control the designation and use of high-tech equipment.
3.2.2. Management of financial sources

In the three functions of health financing system, pooling function is an
important function to ensure the goal of risk sharing and financial protection of
households. This function is implemented through tax-based health financing
mechanism or state budget and social HI. The following section will analyze the
centralization and management of financial funds under these two forms in Vietnam.
State budget management

The state budget for health care is planned and allocated by the Law on State
Budget. Currently, the planning and allocation of state budget for health care are being
done according to the Law on State Budget. Poor provinces are supported with
adjustments/allocations transferred from the central budget to those provinces to cover
their costs. The budget source is annually planned under an approval process and is
granted directly to the units providing services through the Ministry of Health (the
hospitals and units directly under the central government) or departments of
health/departments of finance for the provincies.
The state budget for health care is allocated to each province according to its
population, is adjusted by region; localities with decentralized authorities to decide
on the budget allocation for local health agencies. Local budget for health care is
allocated based on their population and adjusted by region according to the Decision
No.151/2006/QD-TTg by the Prime Minister. Specific allocation norms such as
allocation for prevention, treatment, allocation for each type of hospital, each
preventive medical unit. Provincial People's Committees based on allocation norms
specified by the Government, local financial capacity and conditions submit to the
People's Council for approval. The fact that local authorities are highly decentralized
in revenue and expenditure decisions in general and the health sector in particular not
only enables the localities to decide the use of the budget according to the current
situation and priority targets of their province, but also may hurt local budget for
health care if the provincial health sector's ability to plan and protect the budget is not
strong enough.
The budget is mainly allocated under the input in most localities. In fact, most
provinces still rely on the old method of allocation in accordance with hospital beds
for treatment facilities and in accordance with the health workers and the population
for preventive health facilities. Thus, the state budget allocation for health facilities is
10
Report on hospital inspection, 2014
19
mainly based on targets with plan and administration, regardless of service quality and
output.
The percentage of health budget allocated per the total budget expenditure
depends on each local situation and there are differences between localities.
According to the Law on State Budget, the Ministry of Health only manages and
operates the budget of dependent units and the central budget for local support. At
local level, the allocation of state budget and financial management shall be decided
by the People's Council and People's Committee. With management mechanism and
budget allocation under the Law on State Budget, the health sector has difficulty in
operation in an effective way, because the tasks assigned to the units are not attached
to the budget and financial allocation, particularly in disease prevention. The data of
some provinces shows that the proportion of budget expenditure for health care varies
widely between provinces, 5.5% - 6%, or 8%, depending on the interest of local
authorities as well as the ability of the local budget. When budget allocation is
performed, the localities must focus on priorities of infrastructure, economic
development, education, environment, etc., thus, some localities have difficulty in
increasing local budget for health care.
The health sector has implemented a number of policies to enhance the
efficiency of state budget in the health sector, including the policies of medium-term
expenditure plans and policies of autonomy under the Decree No. 10 and the Decree
No. 43. The development of medium-term expenditure plans will help to allocate
resources more effectively under the priorities and objectives of the health sector in
particular and socio-economic development objectives of the country in general. The
implementation of medium-term expenditure plans is considered as a significant step
in the process of budget planning to enhance the efficiency in the allocation and use of
state budget for health care according to defined objectives based on information of
accuracy, consistency and transparency. However, the medium-term expenditure plan
has not been effectively applied in our country's health care system, particularly at the
local level, in order to support the health sector to actively understand applicable
medium-term financial resources.
The autonomy for public service units under the Decree No. 10/2002/ND-CP
and the latter is the Decree No. 43/2006/ND-CP has made a significant change in the
financial management mechanism for public hospitals. This policy allows hospitals'
autonomy, particularly in finance and human resources in hospital, in order to
simultaneously manage revenues and expenditures, facilitate non-business units to
increase revenues to cover operational expenditure. The positive aspect of this policy
is creating stronger economic incentives for staff and employees and strengthening the
authority of managers in health care facilities, promoting and enhancing technical
efficiency in the provision of health services.
On the other hand, the redirection of funding from agencies providing services
to users of health care services through support to buy health insurance is considered
an effective method to ensure fairness and efficiency in the use of state budget for
health care.
Using the state budget for health care
20
Currently, the majority of state budget for health care is used to pay salaries,
allowances and social insurance contributions for health workers, accounted for nearly
60% of total regular expenditure of the state budget, considered as appropriate.
In addition to spending on health careers, the state budget is also allocated
according to objectives or tasks of expenditure, such as health care programs for the
poor, health care for children under 6 years of age, national target programs for
prevention of social diseases, dangerous epidemic and HIV/AIDS, etc. These subsidy
programs are aimed at better ensuring fairness for vulnerable groups such as the poor,
children, people living in remote, mountainous areas.
Despite the limitations in the allocation and efficient use of state budget for
health care, it's still an important financial mechanism, especially in the
implementation of risk-sharing, regulation of financial resources for disadvantaged
areas, the subjects who should be prioritized.
Risk pooling in health insurance

Vietnam social health insurance is managed under a single fund that is central
Vietnam Social Insurance is the agency directly under the Government and 63 social
agencies in provinces. In principle, a single fund model will be optimized for
performing the health insurance function of risk pooling.
However, the fact shows that the management of social insurance funds in
Vietnam has still many factors that limit the level of risk-sharing with division,
fragmentation among insured groups and across provinces. According to the Law on
Health Insurance, the health care funds are determined in each province with 90% of
total revenues of health insurance performed in such province. Thus, the health care
funds per capita in each locality depend on the premium per capita in each province,
creating differences between the rich and the poor.
When the health insurance fund of the province is not used up in the year, 80%
of unused funds will be transferred to the reserve fund in Vietnam Social Insurance,
20% will be transferred to such province (by 2021 total unused funds will be
transferred to the reserve fund). The main function of reserve fund is to regulate and
balance overspending provinces. However, insured people at some poor, mountainous
provinces are less likely to use health services (due to many factors, including the
limitations of the service delivery system, geographical/transportation, cultural factors
and especially the financial ability of the poor in terms of the costs out of health
insurance), so there is generally health insurance surplus, while health insurance funds
in large provinces/cities with socio-economic development conditions often fall into
deficit. Thus, the regulatory mechanism through the reserve fund has caused the fact
that health insurance funds of poor areas subsidize big, rich cities instead.
Also, the status of "adverse selection", the sick, the elderly, people with high
health care needs and more participation in health insurance reduce the risk-sharing of
health insurance, affecting the balance of health insurance fund.
The capacity of social insurance conducting health insurance policies is still
limited, and its professionalism is not high, especially in the field of health care,
21
controlled supply of health care services. The lack of staff and limited capacity of staff
in charge of verification work sometimes affect the interests of insured people as well
as make it difficult for the settlement between medical facilities and social insurance
agencies.
The verification process of social insurance is inclined to control of costs, lacks
evaluation indicators of specific health care quality in consistent with payment
methods being applied as service fees and capitation. Due to limited technical
capacity, the verification of health insurance is much difficult. The increasing health
insurance coverage requires the enhanced capacity of health insurance management
apparatus. Currently there is no uniform health insurance system software and
personal code to manage insured patients, as well as medical costs under health
insurance. The health insurance fund is managed together with other funds of different
nature in the same social insurance apparatus, such as pension funds, so there is lack
of professionalism and specific operational skills. On the other hand, the manpower
shortage is worsening, especially when the health insurance coverage is increasing.
Verification activities in checking, evaluating the reasonableness of designated
use of drugs, laboratory tests, imaging, etc. often lack staff and necessary tools. It is
also one of the reasons that lead to disagreement, unified agreement on
professionalism and expenses required to have health insurance payments between
health facilities (providing services) and health insurance agencies (paying).
3.2.3. Allocation and use of health financing (purchasing)

The function of "purchasing health services", or "using health financing" has a
decisive role in ensuring the effectiveness and sustainability of health financing
mechanism and significantly contributing to financial protection for people. The
content below will analyze and evaluate the use of financial resources from the state
budget and from health insurance funds, focusing on aspects:
 The method used to allocate and use the budget on health recurrent
expenditures (public health expenditures)
 Identifying the benefit package of health insurance
 Managing price of drugs and medical supplies
 Payment method of health insurance
 Heath insurance co-payment
a. Allocation of health budget

The state budget for health care services (recurrent expenditures) from the
central government is allocated to the provinces and cities directly under the central
government (hereinafter referred to as the provinces), then the provincial People's
Councils preserve the right to decide the allocation of the budget to health units under
the Department of Health.
Budget allocation from central to local levels
22
The budget for health care service (recurrent expenditure) is allocated from the
Central government to provinces/cities per capita and adjustment coefficients
according to area, region in order to ensure fairness and budgetary priorities for
disadvantaged areas. Accordingly, the island region has 2.47 times higher norms of
state budget allocation than the plain area; the urban area is 1.83 times higher than the
delta area. The mountainous areas - ethnic areas in remote plain area have 1.77 times
higher budget allocation norms than that of the urban areas and 1.3 times higher than
the delta areas.
To increase health funding for the provinces with low population, the health
budget allocation is also made based on the coefficient of population scale. However,
the coefficient of population scale is still low, so the provinces with large population
scale have more favor of budget allocation per capita than the provinces with small
population scale.
In addition to the budget allocated for recurrent expenditures, the budget is
also allocated to support the subjects to buy health insurance, calculated by norms per
capita, to overcome restrictions in each locality with rates of poor and poverty
threshold households and the subjects in need of different support.
The health budget is also supplemented to the hospitals in provinces in charge
of local duty, providing health care services to patients from other provinces in the
region as stipulated by the Ministry of Health.
Overall, although the budget allocation for health care service in each province per
capita and regional coefficient tends to fair targets, with priority for the disadvantaged
areas, it does not actually guarantee fairness and has difficulty in meeting specific
health care needs, disease patterns, as well as the availability of health services of each
locality.
The state budget allocation at local level

The local authorities of provinces, cities (People's Council, People's Committee
through relevant departments) may decide to allocate the state budget for public health
facilities (including prevention and treatment) according to the principle where at least
30% is spent on preventive medicine. The primary method of allocation is per hospital
bed/payroll for prevention and healthcare as follows:
Allocation for preventive health activities: The state budget for preventive health
activities in provinces is allocated to preventive health facilities mainly per payroll,
only a few provinces conduct allocation per capita. Because the number of preventive
health workers is not evenly distributed among the provinces and under health care
needs of each province, the allocation method per payroll is not based on health care
needs of people. The state budget for preventive medicine is also additionally
allocated under the budget items for operations against diseases when diseases occur.
In fact, most localities have yet to allocate at least 30% of allocation spent for
health service per capita to preventive medicine (many localities spend only 12-13%
of total expenditure for health service for prevention activities). With low allocation
23
norms, salary often accounts for 70-80% of the estimated budget, the remaining
funding is insufficient to implement their professional activities and prevention
operations. To perform professional activities, the preventive medicine units must
depend on the budgets of national target programs which, however, have been cut off
much in recent years.
Commune and ward health stations are health centers directly under preventive
health centers at district level, but in many localities spending from the communal
budget. Most medical facilities are allocated with only 10 to 20 million VND/year,
unable to meet the demand for primary health care of communcal heath stations.
Allocation for health care activities: Provincial and municipal governments
allocate the state budget to the health care units per capita - per hospital bed without
relying on the capacity of hospital bed utilization and outcomes of health care
facilities. Allocation norms per hospital bed is very different between localities; delta
provinces and cities allocated with higher budget norms per hospital bed than the
mountainous and island provinces. There are provinces with allocation norms per
hospital bed insufficient for salaries and allowances.
b. The scope of health insurance benefits and health insurance package

The scope of health insurance benefits in Vietnam today is limited in
therapeutic field, not including preventive health care services.
The scope of health insurance benefits in treatment is quite comprehensive,
including all emergency and health care services (inpatient, outpatient), prenatal care,
childbirth, medications, medical supplies, transportation of patients from the district
level to the upper level for some insured subjects. Health insurance benefits also
include modern engineering services such as dialysis, organ transplantation,
cardiovascular invasive treatment, computed tomography and magnetic resonance
imaging, etc.
The list of drugs covered by HI has been updated several times by the Ministry
of Health, recently by the Circular No. 40/2014/TT-BYT issuing the list of
pharmaceuticals covered by health insurance funds under the Circular 40/2014/TT-
BYT, in replace of the Circular No.31/2011/TT-BYT. The list includes 845 active
ingredients, 1064 pharmaceuticals; 57 radioactive drugs and marking compounds. The
list is added with 37 specialty drugs, extended dosage forms and 77 drug types with
extended level used to increase demand for primary care treatment.
c. Situation of establishment of health insurance benefit package

Although the scope of health insurance benefits in therapeutic field in Vietnam
is considered to be fairly comprehensive, but establishing benefits package, including
forming a list of drugs, medical supplies, medical service portfolio covered by health
insurance is mainly based on recommendations of medical facilities without evidence-
based cost-effectiveness evaluation. The board members who form a list of drugs,
medical supplies not only give principles on drug and medical supplies choice, but
also put drugs and medical supplies into the list. Thus, it lacks separation between the
24
people who give principles and who form a list of drugs, while the evidence on the
cost effectiveness is less considered during the selection of drugs and medical
supplies.
Similarly, the councils approving the list of technical services applied in
diagnosis and treatment at medical facilities primarily review the technical capacity of
such medical facilities without referring to the cost effectiveness of rendered medical
services. Normally, when the process of technical services within the scope of health
insurance benefits (health care and rehabilitation) is approved for implementation in a
medical facility and the competent authority approves the price, such service will be
covered by health insurance. So it means that a number of drugs, medical supplies,
technical service without evidence of cost-effectiveness or low cost effectiveness is
still on the list of payments from current health insurance fund in Vietnam.
To overcome this problem, the Ministry of Health is working with the
stakeholders (Vietnam Social Insurance, the Ministry of Finance, etc.), international
and domestic partners search for resources and solutions to form basic medical service
package paid by health insurance and issued before January 1, 2018. A number of
studies assessing health technology, the cost effectiveness of medicines and services
are being carried out simultaneously in Vietnam, as a first step in forming the package
of basic health services based on evidence of cost effectiveness and health technology
assessment in Vietnam.
d. Management of drug prices and medical services

Many policies and measures to strengthen management of drug prices have
been enacted and implemented. In recent years, the Government has issued many legal
documents on management of drug prices such as: Pharmaceutical Law, the Decree
No. 79, Joint Circular No. 11 and the Circulars on bidding of drugs in institutions
providing health services (Circular No. 01) and many other guiding documents of the
Government, the Ministry of Health for the state management and control of drug
prices at local level.
One of the important measures to manage drug prices is now to implement the
provisions on procurement of medicines paid by the State Budget, the Health
Insurance Fund and managed by revenues of hospital fees. Currently, the units are
performing bidding under the new regulations on drug bidding including: the Joint
Circular No. 01/2012/TT-BYT-BTC dated January 19, 2012; the Circular No.
36/2013/TTLT-BYT-BTC dated November 11, 2013 amending and supplementing
the Joint Circular No. 01/2012/TT-BYT-BTC; the Circular No. 37/2013/TT-BYT
dated November 11, 2013 by the Ministry of Health guiding the establishment of Drug
Bidding Documents in medical facilities in replacement of the Circular No.
11/2012/TT-BYT dated June 28, 2012. The Drug Administration has improved the
provision of information to support units with implementation of procurement under
the Circular No. 01 in construction procurement plan as well as evaluation and
approval of bidding results. The provision of information about the original brand-
name drug, drug lists evidenced by bioequivalence documents, drugs withdrawn from
25
the Drug list evidenced by bioequivalence documents are published regularly on the
website of the Drug Administration and portals on other legal documents.
The implementation of legal documents on the management of drug prices and
drug procurement has started to take effect, to help reduce the cost of medicines in
hospitals. In many localities the price of winning drug has reduced by 20-30%
compared to the planned price of packages. 11 According to statistical data of 26
Departments of Health and hospitals, institutes with hospital beds directly under the
Ministry of Health, new regulations on the procurement of medicines have helped
reduce price of winning drug by 35.33%. 12 The proportion of drug made in the
country in total value of winning drugs in hospitals rose to 1.01% at the central
hospitals and 2.41% at the provincial and district hospitals. This increase reaches
objectives in the Project "The Vietnamese people use drugs made in Vietnam”.
Research on generic and brand-new drug price according to the method of WHO
shows that the winning price is at a lower level or average level compared to
international data.13
The function of purchasing drug and health services of nearly 60 million people
with health insurance, social insurance in Vietnam is enhancing the role in cost control
and payment of health insurance drug price. The electronic portal of Vietnam Social
Insurance regularly publishes results of bidding drugs and medical supplies of all units
and localities. If any noticeable problem is detected about the winning price and the
drug price in health insurance, social insurance, it is necessary to give opinions timely
to hospitals and localities about this issue..
However, the control of drug price ensures the relevance of drug price with
much difficulty and inadequacy. The application of Circular No. 01 on drug
procurement has exposed some shortcomings such as too much focus on cost criteria,
lack of balance between price and quality; in the cost criteria, only the price of each
drug item is concerned rather than the cost of protocol and therapy; the distribution of
drug groups under technical standards is not yet clear and understood and applied in
different ways. For imported drugs, especially specific and brand-name drugs, are yet
unapplied with the method of maximum wholesale surplus widely aboard. Domestic
products with raw materials mainly from abroad (90%) are not actively controlled
with drug prices. The difference of original brand-name drug prices in the country
compared with international reference prices remains at high levels. The survey results
on bidding drug prices in public hospitals of Vietnam Social Insurance show that with
the same drug, same active ingredients and same manufacturer and distributor, each
hospital has its own price. Compared with the winning price, the difference is about
20-50%, even higher with some drugs 14 . After joining the Trans-Pacific Strategic
Economic Partnership Agreement, drug prices, especially brand-name drugs are
11
Ministry of Health (2014), Summary of medical work in 2013 and key tasks in 2014
12
Vietnam Drug Administration, Dispatch No. 755/QLD-KHTC dated July 22, 2014 regarding feedback on the
draft Overview report on health sector in 2014 in the field of pharmaceutical & cosmetics.
13
Vietnam Drug Administration, Dispatch No. 755/QLD-KHTC dated July 22, 2014 regarding feedback on the
draft Overview report on health sector in 2014 in the field of pharmaceutical & cosmetics.
14
Ministry of Health, International partnership group. Overview report on health sector in 2013: Towards the
entire health care coverage, page 125, Ha Noi, 2014
26
expected to double in the next 5 years and there is up to 58% of the drugs possibly
beyond payment rates of people [140]. This will seriously affect access to medicines
of people in the coming period. On the other hand, the domestic pharmaceutical
industry only accounts for less than 1% of GDP. Domestic drugs meet only less than
50% of the value of used drugs while 90% of raw materials must be imported, so drug
sources and prices are not yet actively controlled.
The price of medical services paid by health insurance based on the Service
price list by the Ministry of Health or approved by the provincial People's Councils
has sizable disparity between provinces. The fluctuating price level between provinces
is quite large from 56.4% to 91% over the maximum price bracket issued by the
Ministry of Health. Many local hospitals have proposed higher rates than those of
central provinces/cities. Some central hospitals apply higher utility costs, and waste
disposal costs than other local hospitals15.
e. Provider Payment methods

The payment method serves as the connection between health financing and
health service providing, the key task is to control the cost and quality of service by
creating appropriate incentives16. Payment for medical services is seen as one in five
important tools in health policy management in health system reforms aiming at
improving the efficiency and fairness 17 . The Law on health insurance No.
25/2008/QH-12 and now the amended and supplemented Law on Health Insurance
No. 46/2014/QH-13 has stipulated three payments of health care services in Vietnam
including Capitation, fee-for-service, and by related diagnosis groups (DRG).
However, so far the fee-for-service payment method is still applied mainly at
health facilities (accounting for over 60% of health facilities providing insured
services). The basic drawback of this method is to encourage the facilities to provide
many services to maximize revenues and profits in the context of the changing
financial mechanism today in Vietnam, which includes the hospital autonomy and
private investment in public hospitals to share benefits. The fee-for-service payment
method motivates health facilities to provide excessive services, which makes HI
agencies unable to control costs and balance revenues and expenditures 18 , 19 . The
health insurance fund deficit took place continuously from 2005 to 2009 with the
deficit increasing from 138 billion VND in 2005 to approximately 2,500 billion VND
in 2009 20 . On the other hand, the fee-for-service method is accompanied by the
15
Ministry of Health, International partnership group. Overview report on health sector in 2013: Towards the
entire health care coverage, page 125, Ha Noi, 2014
16
World Health Organization (2000). The World Health Report 2000 - Health system: Improving performance.
17
Mars J.Robert, William Hsiao, Peter Berman, Michael R.Reich (2008). Getting helath reform right: A guide
to improving performance and equality, Oxford University Press
18
Howard Barnum, Joseph Kutzin, Helen Saxenia (?). Incentives and provider payment methods
19
World Health Organization (2007). Provider payments and cost-contaiment: Lessons from OECD countries,
Technical brief for policy makers, No 2
20
Nghiem Tran Dung (2010). " Looking back a year to implement the Law on Health Insurance," Report
presented at the First Conference of Health Economics, 7-8/12/2010, Ha Noi.
27
workload and large administrative cost to be paid by health facilities as well as health
insurance agencies.
Although the capitation method is widely practiced throughout the country, the
capitation design in Vietnam has many shortcomings. The level of pooling is low
because up to 63 capitation funds limit risk-sharing between health facilities with
allocated capitation funds and among provinces. The base rate calculated is not really
based on health risks and the cost of current health services based on history costs of
previous years. The adjustment coefficients have not included other factors such as
age, gender, geographic region, disease patterns, technical levels and hospital grades.
Besides, there are difficulties and problems related to the implementation process,
such as: lack of effective mechanisms to monitor and supervise the quality of health
services and pocket payment of insured patients; inspection work is still done in the
same way for fee-for-service payments; exchange of information between the parties
lacks transparency21…
The piloting of the capitation payment method in 4 provinces: Bac Ninh, Ninh
Binh, Hue, Khanh Hoa faces many obstacles in implementation relating to the delayed
allocation of capitation funds, inconsistent settlement of surplus and deficit, obstacles
in the determination of adjustment coefficients, poor information technology systems
in most provinces not meeting the calculation of the base rate as well as control of the
transparency of costs.
The DRG and result-based payment methods are still being piloted.
f. Copayment
The policy on co-payments continues to be improved, enabling the insured
people to access healthcare services in a more convenient way, and limiting the risk of
health care costs due to disasters when making co-payments. The Health Insurance
Law Act 2008 regulates the application of health care copayment under different
levels of 0%, 5% and 20%. The Law amends and supplements some articles of the
Health Insurance Law 2014 and removes provisions of copayment for the poor, ethnic
minorities, social protection, family members of those who contributed to the
revolution, the people living in areas with special difficulties, the island communes,
island districts; reduces co-payments from 20% down 5% for some relatives of those
who had war contribution, who belong to poverty threshold households. To
encourage people to participate in health insurance, those insured from 5 consecutive
years or more, or owning a co-payment more than 6 month-basic salary will be paid
100% of medical care costs (except in self-cure visit).
The content of co-payment is also changed according to policy on allowing
patients to visit any health facility at district and commune level within a province
Currently, the Health Insurance Law regulates not to cover the cases bypassing to
higher level when using outpatient services but to increase payment rates for inpatient
21
Institute of Health Strategy and Policy (2013)." Draft report on evaluation of 3 year implementation of the
Law on Health Insurance.
28
cases for central and provincial level of 40% and 60% of inpatient treatment costs
within the scope of health insurance. Since 2016, at each stage, the insured people are
entitled to healthcare at health facilities without being considered as self-referrals as
follows:
From January 1, 2016 insured patients have been allowed to visit any health facility at
district and commune level within a province for inpatient and outpatient services.
Particularly the people from poor households and ethnic minorities living in
disadvantaged areas, especially the island district, island commune are allowed to visit
any health facility throughout commune, district, province and central levels all over
the country.
From January 1, 2021 any referrals within a province are allowed for inpatient
services and the level of HI payment at the provincial level will be raised to 100%.
In addition, the co-payment rate of 0% is applied to some groups with special
privileges such as revolutionary activists prior to January 1, 1945; revolutionary
activists from January 1, 1945 to August 1945; the Vietnamese Heroic Mothers;
invalids, sick soldiers with declined working capacity of 81% or more; invalids of
type B, beneficiaries of policies for war invalids of type B, sick soldiers in wound
treatment, recurrent diseases, and children under 6.
3.3. The impact of financial mechanism on protection of financial targets of

fairness and efficiency
3.3.1. Financial protection
One of the most important objectives of the financial mechanism is financial
protection for people, so that the people, households must pay medical expenses
beyond their ability, or even fall into the poverty trap by paying huge medical costs.
The level of financial protection has improved in recent years, but the
sustainability is not explicitly guaranteed. To measure the level of protection of health
financing, two commonly used indicators are the proportion of households facing
health care costs due to disasters and getting poor due to health costs. The results of
data analysis from Survey on household living standards over the years 2004-2012
show that this index tends to decrease quite well (Figure 8). However, the
sustainability is not seen in improvement of this indicator due to increased and
decreased volatility between years. The proportion of households facing disaster
expenditure on healths fell sharply in 2010 compared with previous years, however,
compared with 2010, the proportion of households facing health care costs due to
disasters in 2012 increased slightly to 4.2% (Figure 8).
29
6
5
4
3
2
1
0
2002 2004 2006 2008 2010 2012
Catasốindicator
Chỉ Cata Poverty indicator
Chỉ số nghèo hóa
FIGURE 9: RATE OF HOUSEHOLDS FACING CATASTROPHIC HEALTHCARE COSTS

AND IMPOVERISHMENT DUE TO HEALTH COSTS IN 2004-2012
Source: Hoang Van Minh, Nguyen Thi Kim Phuong
The limited degree of financial protection is related to a number of reasons:

 The medical network is incompetent to supply primary healthcare services,
health care services for common diseases, especially non-communicable
diseases, people have to use such services at higher levels with higher costs
(accommodation costs, transportation costs and higher amounts payable at
higher levels).
 Drug prices and prices of medical supplies are not managed well. Some studies
show that the prices of some drugs, mostly brand-name drugs in Vietnam are
higher than the international reference price.
 Improper use of medications results in waste in treatment and increased
copayments paid to the insured and increased hospital bills of people without
health insurance.
 Constantly increasing health service costs: The average rate of increase in
health care costs of health insurance in the period of 2006-2011 period was
19.4% for outpatient care and 13.3% for inpatient care. The cause of the
increase in costs includes motivation to increase personal income of health
workers and profits of the investors 22 in the context where the payment method
according to service charges was primarily used.
22
Based on the applicable mechanism, individual income of health care officials is proportional to revenues
from hospital fee and HI. This leads to the motivation of increasing service indications aimed at revenue
increase. In addition, the individual and organizational use of medical equipment purchased using investment in
public hospitals for profit purposes within the socialization policy scope also causes excessive indications of
health care services
30
3.3.2. Equity in access to health care services

Among the achievements of Vietnam in ensuring equity in access to health care
services, the successful implementation of support policies for all the poor, people at
the poverty threshold and other disadvantaged people with HI along with free
provision of preventive medicine services for all people is a significant one.
Recent survey results, however, showed that there are discrepancies in access
to health care services among income groups and socio-economic regions.
Results from the data analysis of Household Living Standards Survey showed a
significant difference in the rate of people using inpatient and outpatient health care
services among living standard groups. The rate of people using outpatient services
increases proportionally to the living standard groups while the rate of people using
inpatient services is inversely proportional to the living standard groups (Table 1).
Table 1: Rate of people using health care services by 5 living standard groups
Rate of people using Rate of people using
Living standard outpatient services for past inpatient services for past
groups 12 months 12 months
Group 1 31.0 8.3
Group 2 34.8 7.7
Group 3 36.4 7.6
Group 4 37.0 6.6
Group 5 40.6 6.4
Source: Household Living Standards Survey 2012
The difference in the rate of people using health care services is also shown in
comparison of socio-economic regions. The lowest rate comes from the Northern
mountainous midland region, and the highest one comes from the Mekong delta
region (Figure 9).
60
50
40
30
20
10
0
ĐB
Redsông Northern
Trung Bắc
North Tây Đông Mê kông
Hồng moutainous
River du, miền trung bộ nguyên
Central Central nam bộ Mekong
Southeas
Delta midland
núi phá Coast Highland t Region Delta
region Region s Region
Bắc
31
FIGURE 10: RATE OF PEOPLE USING HEALTH CARE SERVICES

FOR PAST 12 MONTHS BY 6 SOCIO-ECONOMIC REGIONS
Source: Household Living Standards Survey 2012
The analysis’ results also showed there are differences in financial protection
levels among population groups and between urban & rural groups. Among
disadvantaged subject groups, the rate of households having available costs for health
catastrophe and the rate of households which become poor because of costs for health
catastrophe are higher than those of other groups. The rate of households bearing costs
for health catastrophe in rural area is 4.8%, being half as much again as that of those
in urban area (2.8%). Among 5 living standard groups, this rate is inversely
proportional to the living standard (Figure 10).
0
Nhóm11
Group Nhóm
Group 2 2 Group
Nhóm 3
3 Group 4Nhóm 4 5
Group Nhóm 5
FIGURE 11: RATE OF HOUSEHOLDS BEARING COSTS FOR

HEALTH CATASTROPHE BY 5 LIVING STANDARD GROUPS, 2012
Source: Hoang Van Minh, Nguyen Thi Kim Phuong
Comparison of subject groups with HI showed clear difference in HI use levels

(Figure 11. The group with voluntary HI has frequency of using health care services
two times higher than the common frequency.
32
005
004
005
004
003
004
003
003 002 002
002 002
001
002
001 001
001
000
CommonNhóm
Chung Group11 Group
Nhóm22Group
Nhóm3 Group
3 Nhóm4 Group
4 Nhóm5 Group 6
5 Nhóm 6
FIGURE 12: AVERAGE TURNS OF USING HEALTH CARE

SERVICES (CARDS/YEAR) BY 6 GROUPS (2014)
Source: Vietnam Social Security, May 2015
Inequity of health care service usage is also indirectly shown in the difference of
average local state budget expenditure per capita among provinces. Two provinces
with the highest expenditure are Ho Chi Minh City and Ha Giang Province. Socio-
economic conditions in these two provinces are completely contrast to each other, one
with the top average income level and one with the lowest income level in the country.
This result shows clearly the regulation role of the State budget. Despite a province
with the lowest average income level, Ha Giang gets great support from the State
budget, leading to the expenditure on health as high as that of the city with the top
average income level. (figure 12).
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
-
Ha GiangHà
Hà Giang Hanoi
NộiThanh Hoa DakĐắc
Thanh LakLắc HCMHCM Cần Thơ
Can Tho
Hóa
Ave. health expenditure in Ave. health expenditure in
Chi y tế BQ 2011
2011
Chi2012
y tế BQ 2012
FIGURE 13: LOCAL BUDGET EXPENDITURE PER CAPITAL IN CERTAIN

PROVINCES FOR HEALTH CARE SERVICES, 2011-2012
33
(Source: National Health Accounts 1998-2012)
Hence, it can be said that the applicable mechanism with the support of State
budget and HI has decreased financial barriers against the access to health care
services for people, especially vulnerable ones. However, the equity of such access to
health care services and financial protection is still limited.
3.3.3. Effectiveness
Considering result indexes of health care services, Vietnam health system
operates quite effectively. Based on comparison of average expenditure on health per
capita of Vietnam (about 95 USD/person in 2011) with health indexes, the
performance of Vietnam health system is relatively positive compared with many
other countries in the world in general.
However, there are many difficulties and restrictions on performance of
existing resources usage by Vietnam health system related to allocation and technical
aspects. Most of reasons for this status mentioned in the WHO’s report are existing in
the Vietnam health system. Main reasons are listed below:
 Imbalance of expenditure on health between prevention and treatment, or
primary health care and specialist care. Expenditure on health is focused on
treatment, while prevention or primary health care has not received sufficient
funds. The expenditure for treatment accounts for 72% of total expenditure on
health of the whole society. Turns of health care service usage with HI at the
communal level account for 30% of total turns, but the HI expenditure for this
level just accounts for less than 10%.
 Competence of health facilities does not meet needs for primary health care
and ordinary health care services. Preventive medicine and non-communicable
disease control programs have not been deployed widely in health facilities.
Therefore, most of people come to higher-level hospitals for health care
services or treatment of normal diseases and bear higher costs;
 Drug administration is still unsafe and unreasonable with low rate of
prescription on essential and generic drugs23 and high rate of prescription on
antibiotics;
 There are still many difficulties in price management for drugs and health
supplies. The price of certain proprietary drugs in Vietnam is even higher than
the international reference price.
 Payment method is mainly based on service fees; the payment method based on
rating currently applied in health care facilities is the same as the one based on
service fees in nature.
23
In accordance with a study result, the rate of generic drugs prescribed in studied hospitals is 28%, much lower
than the estimated common rate of the world (80%). The rate of essential drugs prescribed is 40.8% (while this
rate in most of other countries in the world is above 80% according to statistics by WHO).
34
 Unexpected impacts of some health policies such as hospital self-control,

socialization, etc. stimulate increase in revenues through excessive indication
of health services.
The health sector has deployed some remedies for the above-mentioned problems
as follows:
 Implementing policies on investment and enforcement for health facility
network for the past time, particularly investments from Government’s bonds
in building, renovating, and upgrading district’s and inter-district’s general
hospitals24.
 Managing drug price in accordance with drug procurement regulations as
specified in Circular No. 01/2012/TT-BYT-BTC and relevant documents,
showing positive results in reducing drug costs using HI25 .
4. Challenges and priorities of Vietnam health financing system

In addition to recent outstanding achievements of Vietnam health financing
system, e.g. reaching the rate of 75% of the people using HI in which all of the poor
and other disadvantaged subjects are supported with State budget for buying HI;
ensuring all the people are provided with preventive medicine services using State’s
budget; out-of-pocket costs for health care services tend to decrease, etc. Vietnam
health financing system has still faced main challenges as follows:
4.1. Challenges from the perspective of health financing functions

4.1.1. Financial sourcing: Financial sources for the health sector are not really
sustainable
 Financial sources for the health sector are not really sustainable with the OOP
ratio of approximately 50% of total expenditure on health while the compliance
with HI engagement of regular and irregular labor sectors is not so good, and
the allocation of State budget for health sector is hard to be increased in the
next 5 years; In particular:
 Taxes and other revenues of the State: The ratio of State’s budget expenditure
for health sector compared with total State’s budget expenditure has not
increased for recent years, and the level of increase is lower than the GDP
growth level. As shown in any scenarios about macro economy26, the State’s
budget will be very limited in the coming time. Therefore, the ability to
24
The fund raised from government bonds for the period 2008-2015 is19,220.3 billion dongs in which the
amount of about 2,693 billion dongs is allocated for investment and upgrade of health facilities by localities.
25
In many localities, the bid-winning drug price has been decreased by 20-30% compared with the planned
price of bid packages.
26
Macro-economic forecast
35
increase budget for health sector is restricted. However, the amount granted
directly to health care facilities from State’s budget will be excessive due to
changes in health service price structure. Accordingly, salary will be taken into
the health service price structure and paid from HI or OOP funds.
 HI revenue from labors in enterprises is restricted due to low compliance (with
the rate of coverage of 50%). Meanwhile, irregular labor sector has a low rate
of using HI, mainly because of low and unstable income.
 ODA funds will be decreased without any preferential lending level as Vietnam
has become a lower middle income country.
4.1.2. Fund collection and allocation

 Allocations from State’s budget: The State’s budget is allocated from the
central government per capita; however, the budget allocated for health sector
in localities is mainly based on input (by patient bed, regulated norms)
 Allocations from HI funds: The HI funds are managed and collected centrally,
but there are no principles for allocating, sharing risks for HI funds in a clear
manner. There are also no principles for allocating, using centralized funds for
fee-based services with high effectiveness.
 The usage of HI in each province, city under the central government is mostly
fixed via the historical expenditure data and 90% of HI revenues in such
province, city (Fund for health care services in accordance with Decree No.
105/2014/ND-CP).
4.1.3. Fund usage/Purchase of health care services

 Benefit package (including drugs, health care services and supplies has not
been determined based on cost effectiveness. There are many challenges on
usage of generic drugs, management of essential drugs and proprietary drugs,
management of bidding in the relationship of drug price and quality, as well as
removal of services and proprietary drugs with low cost effectiveness.
 The payment method is mostly based on service fee in the context the whole
system of health care service supply, including public and private sectors,
intends to maximize revenues from service fees.
 The price tool has not been used strategically to adjust service quantity and
quality, e.g. to encourage supply of more services with high cost effectiveness;
decrease intensive services with low cost effectiveness; to encourage enhanced
quality of services provided at health facilities.
4.2. Challenges from the perspective of financial system impacts

4.2.1. Financial protection
 Out-of-pocket costs are still high, approximately 50% of total expenditure on
36
health
 Rate of households with costs for health catastrophe and becoming poor due to
expenditure on health is still high;
4.2.2. Equity in access

 The subjects with higher income and living in urban area have more access and
usage of health care services than those with low income and living in areas
with underdeveloped socio-economic conditions
 Health indicators (<5 infant mortality rate; maternal mortality ratio;
malnutrition rate, etc.) are high in mountainous areas where ethnic minorities
live.
4.3. Challenges from the perspective of health financing system

Analysis of current situation of Vietnam health financing system showed major
challenges in terms of equity, sustainability and effectiveness as follows:
4.3.1. Equity in population coverage (regarding HI coverage, rate of service

access and usage)
 For health care services: there is still 30% of the population without HI and
having to make direct payment for health care services
 The ability to access and use health care services is uneven among
geographical areas and population groups.
 Health facilities charge other costs to make revenue in addition to HI revenue
and copayments for patients with HI, creating barriers to many low-income
households.
4.3.2. Sustainability
 Health financing sources are limited and used ineffectively because service
supply system is ineffective (due to interruptions, limited primary health care
services, especially limited competence of non-communicable disease/chronic
disease prevention and control), and ii) the usage of funds for purchasing health
services has not met strategic principles (e.g. choice of services based on
evidence, effectiveness, price management, lack of QA system to choose
service providers; payment method is mostly based on service fee).
4.3.3. Performance
 There is no effective mechanism/means to control over supply or unnecessary
supply of services and drugs;
 Overloaded hospitals; provision of ordinary health care services by high-level
hospitals, wasting household resources (for further distance, longer waiting
time, higher price) and HI funds.
37
5. Strategic vision and objectives for Vietnam health financing system

for the period 2016-2025
The health financing strategy for Vietnam over 2016-2025 is based on the
following principles:
• Health financing is one of the basic building blocks of the health system,
playing a significant role in the sustainable development of the health system
towards equity and effectiveness;
• The health system has to be based on the public finance, including the State
budget and health insurance, which has to account for an increasingly high
proportion in the total health expenditures;
• Financial management has to be performed through law, ensuring the
consistency, transparency, order, discipline, and modernity.
The vision and objectives of the health financing system of Vietnam for the
period 2016-2025 need to be identified in association with the principles set out by the
Party and the State on “performing social improvement and equity; ensuring social
welfare”27 towards universal health coverage as follows:
5.1. Vision
To develop a health financing system which is sustainable, equitable and
effective towards the health care coverage for the whole people so that all the people
have the chance to access and use quality health services when needed without paying
high health care costs, or becoming poor due to health care costs.
5.2. Strategic objectives for health financing system for the period 2016-2025
To realize the vision for the Vietnam health financing system, and based on
analyses of current situations and major challenges, major strategic objectives for
Vietnam health financing system for the period 2016 – 2025 will include the
following:
1. To increase the HI coverage in a sustainable manner toward universal health
coverage.
2. To ensure access to and use of quality health services in an equitable and
effective manner, especially primary health care services
3. To strengthen people’s financial protection
The health financing system needs to achieve the following targets:
 The rate of participation in HI reaches at least 85%-90% in 2025, which covers
all the poor, the near poor, the elderly (>70), and other vulnerable groups.
 Having policies and mechanisms for payment for primary health care services,
especially prevention of NCDs at grassroots level.
27
Dự thảo văn kiện Đại hội Đảng 12I về Phương hướng, giải pháp và nhiệm vụ phát triển kinh tế xã hội 5 năm
2016-2020
38
 Increasing the proportion of public expenditures in the total health

expenditures: the proportion of health public expenditures in GDP is expected
to reach 4.5% of GDP in 2025.
 Gradually reducing OOP expenditures for health, ensuring the proportion of
OOP expenditures does not exceed 30% of the total health expenditures in
2025;
 Reducing the rate of family households having to pay catastrophic health costs.
The rate of family households having to pay catastrophic health costs does not
exceed 2% in 2025.
5.3. Strategic solutions

Solutions to achieving the strategic objectives are arranged into 3 groups in
correspondence with 3 following functions of the health financing system:
– Revenue collection
– Pooling
– Purchasing
5.3.1. Mobilizing financial sources from HI and the State Budget

Solutions to mobilizing financial sources for health care need to ensure sustainability
and financial equity (each individual’s contribution based on their financial capacity,
i.e. high-income people contribute more than low-income people, and people with no
income receive support from the State Budget). Financial mobilization in this context
does not refer to capital contributions from the private sector as for-profit business.
a. Ensuring HI revenues from the formal sector: Developing and executing
monitoring tools effectively, and appropriately settling violations to ensure
compliance upon participation in HI in the formal sector.
b. Renovating HI coverage by family household: Performing HI coverage by
family household in both the formal sector and informal sector, and family
households in the formal sector have to include dependants.
c. Adequately utilizing the State budget to support disadvantaged population
groups and those incapable of paying for HI premiums, including the poor, the
near poor, and the elderly not yet entitled to pensions. Support from the State
budget increases due to:
 A surplus of the State Budget when the support of 100% of the HI
premiums provided to dependants of employees in the formal sector is
reduced and shifted to employees in the informal sector.
 A surplus of the State Budget for health in accordance with the roadmap
on accurate and sufficient calculation of health service prices; the State
Budget does not need to pay public health facilities for components
previously excluded from the health service prices.
39
d. Continuing to increase expenditures from the State Budget for health

(According to the National Assembly’s Resolution 48).
e. Creating new revenues for health from excise taxes on tobacco and alcoholic
drinks.
f. Developing long-term care insurance to deal with the populating ageing and
increase long-term care demand.
g. Continuing to mobilize sources from ODA and NGOs for health.
5.3.2. Managing and allocating financial sources, and risk-sharing (pooling)

Managing and allocating financial sources from the State Budget
a. Prioritized allocation of the State Budget for investment expenditures in:
 Health care at grassroots level.
 Hospitals in disadvantaged areas;
 Preventive medicine centers and regional inspection facilities;
 Medical research institutes;
b. Prioritized allocation of the State Budget for recurrent expenditures in:
 Preventive medicine
 Targeted programs;
 Leprosy and mental hospitals, and hospitals in disadvantaged and specially
disadvantaged socio-economic regions.
c. Gradually renovating and transforming the input-based allocation of the State
Budget (budget allocation based on beds for hospitals and based on workforce
for preventive medicine facilities) into result-based and performance-based
allocation.
d. Renovating and transforming reception of aid from ODA and NGOs through
programs and projects into budget support for pro-active management of
necessary activities. ODA will be preferentially used to invest in infrastructure
and equipment.
Managing and allocating financial sources from HI
a. Tackling the “adverse subsidy” situation, limiting the risk-sharing of the HI
fund upon allocation of the health fund for localities based on HI revenues of
each locality.
b. Gradually eradicating the method of calculating the HI fund and ceiling based
on historical costs.
c. Expanding the coverage of the HI fund to:
 Outpatient services at commune level
 Primary health care services (community- and home-based health care)
40
 Preventive medicine services for individuals (counselling services for

patients under treatment of NDCs and chronic diseases).
5.3.3. Purchasing
“Strategic purchasing of health services” should be done to improve
effectiveness and equity in using financial sources under the following principles:
 Selecting health services that meet people’s demand for health care based
on evidence on cost-effectiveness;
 Managing health service prices based on sufficient calculation, encouraging
highly cost-effective services;
 Having appropriate payment methods;
 Executing service purchasing contracts in a transparent manner and under
monitoring and evaluation.
Specific solutions are as follows:
a. Developing the health service package based on evidence on cost-
effectiveness, and priority is given to the following:
 Highly cost-effective services and drugs,
 Services of primary health care, prevention and control of NCDs and
chronic diseases in the elderly, provided at grassroots level.
b. Managing prices:
 Following the roadmap on accurate and sufficient calculation of health
service prices.
 Effectively managing prices of drugs and medical supplies. Step by step,
implementing concentrated procurement and price negotiation.
 High pricing to stimulate delivery of highly cost-effective services.
c. Revising payment methods: Developing and applying payment methods that
are relevant with the system of service supply and types of services (capitation,
DRG, fee-for-service), including result-based payment (RBP, P4P).
d. Developing appropriate payment methods and encouraging health care at
grassroots level and primary health care: Encouraging service provision at
grassroots level, NCD prevention services and management of health of the
elderly by applying the law of one price for technical levels.
e. Payments encourage quality: applying higher prices to health facilities
recognized to meet quality standards. Applying standardized treatment
protocols to services in the package.
f. Ensuring and strengthening transparent and timely communication between
HI agencies and service providers upon execution of HI contracts.
g. Having appropriate payment mechanisms and policies for engagement of
private health in provision of primary health care services at grassroots level.
41
h. Encouring models of lending for investment capital without the Government’s

guarantee, investment cooperation, and public-private partnership in health;
however, comprehensive and effective measures (management of prices and
payment methods, quality management, etc.) should be developed and
implemented to reduce unexpected impacts of for-profit service provision.
5.3.4. Some general solutions
The health financing strategy over 2016-2025 needs to be implemented in the
context of systematic renovation of the health service provision system in order to
ensure equitable access to health services and strengthen the effectiveness of health
resources, accompanied by policies aimed at developing an integrated service
provision system based on people-centered primary care; and hospital autonomy
policies providing solutions to reducing unexpected impacts such as service
overprovision.
a. Systematically renovating the service provision system
 Systematically renovating the service provision system in order to develop an
integrated service provision system based on people-centered primary care.
 Promote the “gatekeeping” role of health facilities at grassroots level/ health
facilities where HI card holders register for primary health care (reviewing the
policy on allowing patients to visit any health facility at district and commune
level within a province).
 Completing necessary policies to strengthen autonomy.
 Taking measures to reduce unexpected impacts of hospital financial
autonomy, alleviating the trend of commercialized service provision and
service provision for profit and income of health staff.
b. Strengthening governance capacity
 Completing decision-making mechanism: Establishing a high-level HI
council having the authority to decide on HI-related matters (members of the
council include representatives of related parties, and the council operates on a
collective basis, following the majority rule).
 Improving qualifications and specialized skills of staff and experts in related
authorities in application of information technology, evaluation of health
technology, management of prices and payment methods, etc.
 Training and building capacity of financial staff in creating sources of
revenues and proper and effective use of financial sources.
c. Implementing basic reforms of salary policies for health staff, ensuring they earn
good income in the society.
d. Increasing transparency in health care and payment for health services:
 Applying IT in management of health services and costs (electronic medical
records, monitoring of quanlity, quantity, and prices of health services,
42
monitoring of additional charges in comparison with standardized treatment

protocols),
 Linking IT systems of HI agencies and health facilities.
 Strengthening inspection of equipment and tests;
 Strengthening inspection and monitoring of health costs.
6. Roadmap
43
7. Monitoring and assessment

Some following targets and indicators are used to monitor and assess the
process and results of implementing the health financing strategy for the period 2016-
2020:
Monitoring and Targets, indicators Data source and time

assessment of assessment
contents
Sustainable Rate of people with HI General Statistics Office

social HI Rate of people with HI by subject of Vietnam, Vietnam
coverage groups, especially those in informal Social Security,
sectors with average income Ministry of Health
Rate of the poor and other vulnerable Annually

subjects with HI.
Rate of subjects with HI in
enterprises.
Amount of HI fund support from
excise tax on alcohol, beer and
tobacco.
Innovating forms of HI purchase by
households.
Financial Rate of expenditure at health General Statistics Office

mechanism to facilities; rate of costs for health care of Vietnam, Ministry of
ensure access services at health facilities over the Health, Vietnam Social
and use of basic total health care costs at all levels; Security
health care Rate of inpatients and outpatients
services with with HI at district level over the total
high quality of inpatients and outpatients at all
levels.
Rate of budget allocated and spent
on preventive medicine.
Rate of patients with high blood
pressure, diabetes managed and
monitored at health facilities
Basic health care package developed
and applied.
Appropriate payment method,
encouraging primary health care and
44
non-communicable disease
management.
Implementing payment method
encouraging inspected, recognized,
high-quality health facilities.
Protecting Rate of public expenditure for health General Statistics Office

finance for sector over GDP. of Vietnam, Ministry of
people; using Rate of out-of-pocket (OOP) Health, Vietnam Social
health financing expenditure over total regular Security
sources expenditure for health sector.
effectively and
equally Rate of households bearing costs for
health catastrophe.
45
Reference
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2. Ministry of Health, Report on 20 Years of Development Cooperation between
Vietnam and Sponsors, 2013
3. Ministry of Health, Hospital Checking Report, 2014
4. Ministry of Health, International partner group. Overall report on health sector for
2013, 2014
5. Department of Health-Health Policy Development and Planning Bureau, Philippines,
2010, Toward Financial Risk Protection: Health Care Financing Strategy of the
Philippines 2010-2010
6. Joseph Kutzin, 2009, Health Financing Policy: A Guide For Decision-Makers, World
Health Organization, 2009,
7. Kenya Health Financing Strategy (2015 - 2030).
8. McIntyre, D and Kutzin J (2014). Guidance On Conducting A Situation Analysis Of
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11. Ministry of Public Health, Afghanistan, 2008, National Strategy On Health Care
Financing And Sustainability, 2008-2013
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13. World Health Organization, 2009, Health Financing Strategy For The Asia Pacific
Region (2010-2015)
14. World Health Organization, 2010, The World Health Report: Health Systems
Financing: The Path To Universal Coverage.
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from OECD countries, Technical brief for policy makers, No 2
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World Health

HEALTH FINANCING STRATEGY OF

Hanoi, March 2016

5.3. Strategic solutions ...................................................................................................................... 39

DRG Diagnosis-related groups

1. Some terms and concepts used in the document

Health insurance The term Health insurance used in this documument is

Commercial HI A form of health insurance policy sold by for-profit

Social HI A form of mandatory HI policy, of which the premium rate

Out-of-pocket Out-of-pocket (OOP) expenses include direct payments of

Private expenses Private expenses for health care include out-of-pocket

exceeding the household’s affordability, exceeding 40% of

Co-payment Co-payment is stipulated as a part of the costs for health

Formal sector Is formal sector of an economy managed by the social

Informal sector An informal sector of an economy where employees do not

“Cream skimming” Insurers (normally for-profit insurers) sell HI for healthy

Pooling of funds Pooling of funds or fund pooling is a function of the

Capitation payment Prepaid payment method quarterly or monthly, made to

General taxes General taxes consist of direct or indirect taxes

2. Health financing system, the objectives and functions of health

Health financing system and the targets of health financing system

The functions of health financing system

3. Current status of health financing system in Vietnam

3.1.2. Basic indicators of expenditure on health

Figure 1 Total expenditure on health compared with gross domestic incomes of

FIGURE 2 EXPENDITURE ON HEALTH PER CAPITA (2008-2012)

- Red North- North- North Cetral Cetral South- Mekong

FIGURE 3 EXPENDITURE ON HEALTH PER CAPITA BY SOCIO-ECONOMIC

(Source: National Health Accounts 2012)

The percentage of financial sources in total expenditure on health

FIGURE 4: STRUCTURE OF FUNDS FOR HEALTH, 2012 (SOURCE: NATIONAL

The percentage of expenditure by areas and activities of health care

There were still inadequacies in the percentage of expenditure on health by

3.2. Health financing system

FIGURE 5: THE ESTIMATED GROWTH RATE OF ESTIMATED STATE BUDGET

0% 20% 40% 60% 80% 100%

Expenditure for NTP

FIGURE 6: STRUCTURE OF STATE BUDGET EXPENDITURE ON HEALTH

contributions of the enterprises producing or importing tobacco. Annually, about 400-

Health Insurance Premiums

FIGURE 7: PERCENTAGE OF TARGET GROUPS SIGNING UP FOR HI PLANS 2011-

Households’ out-of-pocket payments

out-of-pocket expenses of Vietnam remained high at 48.8% in 2012 and showed a

2008 2009 2010 2011 2012

FIGURE 8: PERCENTAGE OF OUT-OF-POCKET EXPENSES IN TOTAL

Aid and loans

Regarding aid, some major issues relating to the effectiveness and

qualifications, health care needs; provision of services exceeding the necessity of

3.2.2. Management of financial sources

State budget management

Risk pooling in health insurance

3.2.3. Allocation and use of health financing (purchasing)

a. Allocation of health budget

The state budget allocation at local level

b. The scope of health insurance benefits and health insurance package

c. Situation of establishment of health insurance benefit package

d. Management of drug prices and medical services

e. Provider Payment methods

3.3. The impact of financial mechanism on protection of financial targets of

FIGURE 9: RATE OF HOUSEHOLDS FACING CATASTROPHIC HEALTHCARE COSTS

The limited degree of financial protection is related to a number of reasons:

3.3.2. Equity in access to health care services

FIGURE 10: RATE OF PEOPLE USING HEALTH CARE SERVICES