1. Overview of changes in the Iranian tariff setting over the last half a century
We present our findings using four inter-related aspects of policy as subsections (context, process, content, and actors/stakeholders), following the 'policy triangle' model[34].
1.1. Context
Before the national tariff system was created in 1972, budgetary payments were the only mechanism of paying to public hospitals and other public health services providers (Table2). In 1972, following an extensive review of tariffs and prices in other countries with health insurance systems (i.e., Belgium, France, and the US), a first list of the tariffs was published and introduced into practice [39]. These tariffs remained unchanged for a decade until the first handbook of medical tariffs or 'relative value units' (called the 'California Handbook') was published in the US. In 1982, Iran adopted these tariffs by introducing a similar disease coding system, adjusting the relative value units, and applying the Rial coefficient (the K-factor), which would be revised annually based on the cost of living index to provide the actual and rational costs of medical services. However, 'due to confusion with the new disease coding system, the full-scale implementation of a tariff-based reimbursement system was delayed by three years, and most hospitals and physician practices continued to apply 'old-style' tariffs instead' [Doc 29, Majlis Report]. In 1985, the establishment of the MoHME invoked additional revision of tariffs for physician visits and hospital bed-day. In 1990, the health care tariffs were increased two-fold (compared to 1986 in relative terms) and remained unchanged for five years. In 1995, the Universal Medical Services Insurance (UMSI) Act declared that medical tariffs should be based on actual costs and be revised annually. After this Act, tariffs became the cornerstone in regulating the health care services market, financial autonomy of hospitals, and setting insurance premiums per capita [39].
Table 2: Key milestones in the establishment of the national tariff payment system (1972-1995)
Period
|
Milestone
|
Provider reimbursement
|
Controlled by
|
<1972
|
1956: IMC created
|
Public: a line-item budget
|
Ministry of Work and Social Services
|
1972-1981
|
1972: first list of the tariffs
|
Public: a line item budget + tariffs-based reimbursement// Private: not clear
|
Ministry of Work and Social Services; SSO
|
1982-1985
|
1982: K-tariffs
|
idem + partially implemented new same tariffs for Private and public
|
Ministry of Work and Social Services; SSO
|
1985-1990
|
1985: MoHME created
|
idem + Introduced additional methods of reimbursement: K-tariffs + FFS + salary +capitation + bonus
|
MoHME
|
1990-1994
|
1990: UMSI Act introduced
|
idem, but the tariff is the primary method of reimbursement and shifts towards evidence-based tariff setting
|
MoHME, IMC
|
1995
|
1995: UMIO created
|
idem, tariffs are now revised annually based on total costs that are included. Return on invested capital and depreciation
|
MoHME
|
Note: IMC - Iran Medical Council; SSO - Social Security Organization; MoHME - Ministry of Health and Medical Organization; FFS - Fee For Service; UMSI - Universal Medical Services Insurance; UMIO - Universal Medical Insurance Organization
1.2. Process
Since 1995, the annual revision of the medical tariffs follows an established formalised process. First, a technical assessment of the annual costs is conducted independently by the MoHME and the insurance organisations, and occasionally by the IMC. The MoHME consults with other governmental agencies as well, such as Parliament Health Commission, Vice-presidency for Strategic Planning and Supervision of the MoHME, the Ministry of Cooperatives, Labour and Social Welfare (MCLSW), and special councils. Next, several technical meetings take place with representatives from the MoHME and insurance organisations to deliberate and agree on the tariffs incremental increase. Finally, agreed tariffs are presented to the HCHI for approval. Once approved by the HCHI and the Council of Ministers, tariffs are ready for implementation.
In theory, these steps should be completed before the start of a new fiscal year. In practice, however, this never happens [40]. In the last few years, the agreement was achieved as late as the second quarter of a new fiscal year. The tariff setting process is frequently halted by the private sector, large public hospitals, and medical universities that are usually lobbying for higher tariffs. 'Overall, despite occasional conflicts over health care services pricing, the private sector still works in close cooperation with agencies determining national medical tariffs' [Former senior policy officer]. At the same time, insurance companies impede the final agreement as well, since it allows to delay implementation and reimbursement using new higher tariffs.
For a new service to be added to the tariffs list, which is a prerequisite for it to being included in the insurance benefit package, it should first be approved by the HCHI. Such requests are usually initiated by hospitals or physicians. However, according to the participants, given the lack of corresponding medical tariffs that could act as a proxy for a new tariff, setting a tariff value for a new service is challenging. 'Coupled with significant delays due to negotiations between major stakeholders, lobbying efforts, insurers' limited fiscal space for adding new services to the tariffs list, new services are rarely included in the insurance benefit packages' [Faculty member]. To overcome this obstacle, some of the speciality groups and hospitals set their tariffs via routes that sometimes do not involve the HCHI.
1.3. Content
The tariffs are determined for hospital treatments and diagnostic services, medical inpatient care, laboratory and imaging services, and paraclinical services. These tariffs are split into three groups: outpatient doctor's visits, FFS based on the 'K rate' of services, and hospital beds. The tariffs are also determined for some of the ambulatory care services, although by using a less sophisticated approach. Public provider tariffs are set at a lower rate as they are often being received monthly as a salary and rely on public sector infrastructure and staff to provide care.
- Dynamics of changes in medical tariffs during 1972-2017
From 1972 until 1992, the ratio between private and public tariffs remained fairly stable as both sectors had similar medical tariffs and insurance coverage. Medical tariffs were further split into public and private subgroups for laboratory, hoteling, and radiotherapy services in 1992, and for ambulatory (outpatient) physician visit subgroups in 2000 and inpatient services in 2003. Because of these splits, the gap between the public- and private-sector tariffs became more prominent (Figures 2 and 3). Since 1995, by approving MSIA in Iran, tariffs were set to be revised annually, and there was an attempt to align them with the annual inflation rate [21]. Although the inconsistency between the inflation rate and medical tariffs remained to be a challenging issue in the country. In 2003, the IMC was allowed to set tariffs for private sector [41], contributing further towards increasing private/public tariffs ratio (particularly for internal medicine, anaesthesia and surgery services, up to 10 times more than public tariffs). 'The continuing imbalance resulted in dissatisfaction among different medical specialities and sometimes resulted in reducing the quality of health services or other outcomes in the health system, such as induced demand or overuse, the prevalence of informal payment, lack of transparency in the revenues and effect on the tax system and the country's economic cycle, causing some health care providers avoiding signing a contract with insurance organisations' [Former advisor to the minister of health].
In 2014, MoHME implemented the Health Transformation Plan. The relative values were revised, and tariffs for public sector services were increased up to 2.2 times. After the reform, insurance organizations claimed that they could not reimburse all health care service to providers regularly [42]. 'Therefore, it can be concluded that along with the increase in the costs of medical services, an attempt has been made to subsidize insurance companies to fulfil their commitments, mainly those companies whose revenues do not depend on the salary of the insured' [Oct 2016, Gazette No. 326].
Overall, during the last half a century, tariffs for private health care services were consistently higher than those in the public sector (Figure 2). However, the gap in tariffs fluctuated and was not consistent. Tariffs increased for all types of services to match the inflation rate (Figure 3). In both public and private sectors, medical services costs had higher annual growth than inflation (except para-clinical services in both public and private sectors) [43]. For public services, the most substantial increase in tariffs was observed for hotel services in hospitals per diem and the lowest for clinical laboratory services (Figure 3). For private services, the most substantial increase was for the relative unit-based services and the lowest for clinical laboratory services.
1.4. Actors and stakeholders
The HCHI acts as a policy-making platform that facilitates the discussions and decisions surrounding key tariff-related issues, including insurance coverage, rate of insurance premium per capita and coinsurance, medical services costs, medical prices and supervision [25, 44]. However, its work is not without criticism. 'One of the major criticism regarding the HCHI is that individual council members, namely physicians, may have direct or indirect conflicts of interest and may affect the decisions made by the Council' [National policymaker]. The MoHME, HCHI, MCLSW, IMC, and the four basic health insurance organizations are the main actors in determining the tariffs. Most of these actors are governmental organizations.
Based on power and interest, we identified four main groups of stakeholders among eleven main actors (Table 3). Group 1 (high power and highly interested people) includes MoHME, IMC and basic health insurance organizations. They have more power and interest in defining tariffs than most. The MoHME, as the main actor in tariffs setting, should try to fully engage with other actors and make the most considerable effort to satisfy them. Group 2 (high power and less interested people) includes MCLSW, Parliament Health Commission and the Vice-Presidency for Strategic Planning and Supervision of the MoHME. MoHME should make enough effort to keep them satisfied, but not exhaust and bore them with the messages. Group 3 (low power and highly interested people) includes special councils and public/private hospitals. MoHME should try to adequately inform and engage them in discussion not to overlook any issues. Group 4 (low power, less interested people) includes 17 supplementary insurance funds and smaller stakeholders whose activity can be monitored but without priority and excessive communication.
Table 3: Role of stakeholders in the policy process of setting medical tariffs
|
|
Actor
|
Role in setting medical tariffs
|
Activity Level
|
Activity Area
|
Position
|
Power
|
Influence
|
Agenda setting
|
Formulation
|
Implementation
|
Monitoring & evaluation
|
Group N
|
Governance side
|
Parliament Health Commission
|
Approving macro policies such as five-year development plan and approving the basic health insurance yearly budgets for policy implementation.
|
National
|
Governmental
|
-
|
High
|
-
|
+
|
+
|
+
|
+
|
2
|
Planning and budgetary organization
|
Approving proposed medical tariff revision and proposing to government, approving budget proposed by insurance organization, MoHME, and MCLSW.
|
National
|
Governmental
|
+
|
High
|
Moderate
|
++
|
+
|
+
|
+
|
2
|
MoHME
|
Proposing policy of relative value revision and providing its implementation infrastructure.
|
National
|
Governmental
|
+++
|
Very high
|
High
|
+++
|
+++
|
+++
|
++
|
1
|
MCLSW
|
Head of Insurance High Council and responsible for holding meetings and making related decisions.
|
National
|
Governmental
|
+
|
High
|
High
|
++
|
++
|
++
|
+
|
2
|
Medical Council organization
|
Member of Insurance High Council, attendance in the meeting.
|
National
|
Non- Governmental
|
+++
|
Very high
|
Very high
|
+++
|
+++
|
+++
|
+
|
3
|
Supply Side (Health care Providers)
|
Private hospitals and clinics/para clinic
|
Health care provider and implementing and executing new tariff book.
|
Regional/local
|
Private
|
++
|
Moderate
|
Very high
|
+
|
+
|
++
|
+
|
3
|
Public hospitals and clinics/ para clinic
|
Health care provider and implementing and executing new tariff book.
|
Regional/local
|
Governmental
|
++
|
Moderate
|
Very high
|
+
|
+
|
++
|
+
|
3
|
Special Councils
|
Health care provider and implementing and executing new tariff book.
|
National/provincial
|
Governmental
|
+++
|
Moderate
|
High
|
+++
|
+++
|
++
|
+
|
3
|
Demand Side (Health care purchasers or health caregiver)
|
Basic Insurance organizations
|
Member of Insurance High Council, attendance in meetings and executer of tariff book.
|
National/provincial
|
Governmental
|
+
|
Very high
|
---
|
++
|
++
|
++
|
++
|
1
|
Private/ supplementary insurance organizations
|
Member of the secretariat of Insurance High Council, attending in meeting and executer of tariffs.
|
National/provincial
|
Governmental
|
-
|
Moderate
|
--
|
+
|
+
|
++
|
+
|
4
|
People/insured people
|
Health care givers and paying health care expenditures.
|
Regional/local
|
-
|
-
|
Low
|
---
|
--
|
-
|
-
|
+
|
4
|
Note: MoHME - Ministry of Health& Medical Education; MCLSW - Ministry of Cooperatives, Labor, and Social Welfare; + - implies the participation role of the related organization in various stages of medical tariff setting from very strong (+++) to less strong (+).
2. Major shortfalls and drawbacks brought by the implementation of medical prices and ways forward
- Anarchy in medical tariffs system
'Garbage can' model assumes that policies are shaped and developed in an idiosyncratic way. It suggests that interventions that have been formally abandoned might survive in the system, solutions that have never been adopted may appear as legitimate policy options, and the policy options that were mean to be used in the system may disappear without attention of the decision-makers. The model, however, does not assume that no formal system exists; it rather suggests that these formal systems may behave chaotically alongside the informal arrangements. Such model presents policy-making as an untidy process rather than a neat series of phase [35, 36]. The 'garbage can' perspective can be useful when investigating the role of health system governance over time in setting and implementing tariffs in Iran. Some of the known characteristics of the Iranian health system are: a lack of a distinct stewardship mechanism in the tariff system, continuous disagreements among the stakeholders, lack of a transparent approach for the management of the conflicts of interests, a high turnover of organizational settings and their technical staff, and more importantly a lack of an objective and explicit mechanism for establishing and updating medical tariffs all may have played their role [45, 46]. Until now, the Iranian health system in the policy-making context does not have a unified and specific approach in policy regarding setting tariffs [42]. The existence of multiple organizations for decision-making has caused multiplicity in setting tariffs.
In our study, the 'garbage can' model illustrates that the organization and governance of tariffs setting consists of polymorphous patterns of different philosophies of health governance. According to some participants, '.. even some so high-ranked policymakers were unclear about the main goal of the setting tariffs in Iran' [Senior policymaker]. Ironically, this ambiguity contributed to making tariff-related decisions regardless of implementation outcomes. 'This happened since tariffs increases proposed by the IMC were often not approved by the four basic health insurance funds, while they were readily implemented by the physicians in the private sector' [MoHME senior staff]. Political ideologies might also play a role in forming a 'garbage can' via pushing a topic to fore to demonstrate political dissatisfaction with the policy-making process [47]. While this might have played a role in Iran, especially after a period of presidential and parliamentary elections that resulted in different parties obtaining political power, we did not find clear evidence of such influence. Instead, we found that influential clinicians and clinical groups were pressuring politicians and policymakers to ensure the changes in the medical tariff system did not reduce their peers' potential income. Tariff-based pricing of health services was a good starting point in Iranian health care financing. However, the improper adaptation of the tariffs, manipulating and involving some intentional changes in the relative values of healthcare services, caused moving tariff values away from the actual fiscal values of the health services. During the last years, irrational medical tariffs have caused some health professionals to request informal patients payments or attempt to get high revenues [48, 49]. The dissatisfaction of some stakeholders with tariffs has also produced different viewpoints about continuation or discontinuation of California book values as a reference point for tariff setting.
Analyzing interviews and documents showed that significant differences between medical tariffs in public and private sectors, as well as between intra- and inter-disciplinary tariffs, led to unfavourable outcomes listed below:
- Elite students being propelled toward high-paying medical professions
Imbalance among relative values of tariffs for services of different medical specialities affected the delivery of health services and medical education system. Medical speciality residency programs in Iran select their candidates through an annual national exam, based on multiple-choice questions. Hence, students work hard to get higher marks and enter speciality routes with higher earning potentials. Such a situation resulted in the popularity of certain specialities with higher tariffs. 'Even among medical science graduates, there is a tendency to continue studies in high tariffs medical services or profitable fields, such that health care professionals are warning about the lack of interest in fields such as internal medicine and paediatrics and a greater interest in cardiology, ophthalmology, surgery, and radiology' [Health Researcher].
- Development of the private sector for medical services and undermining of the public sector
With claims about unrealistic health services expenditure and the increased profit margin of medical services provided by the public sector, physicians are becoming more inclined to operate in the private sector: 'Moreover, the demand for less expensive services provided by private-sector institutions has increased, while resources, technologies, and management practices in the public sector have remained stagnant with the growth in demand' [Health insurance staff]. As a result, both patients and employees (physicians and non-physicians) get dissatisfied with the public sector. Legally, physicians are now prevented from simultaneously working in both public and private sectors (dual practice) [50, 51]. Legislators implied that the main reason for the tendency of physicians to leave the public sector or prefer to work in a private sector is the financial incentive, but failed to provide practical solutions to incentivize participation in the public sector [52, 53].
- Governance power of actors in setting medical prices
Despite annually revised health care tariffs, there is no systematic costing process for health services, and the pricing system is still suffering from a lack of a transparent and balanced structure that can effectively manage conflicts of interest in decision making related to the medical services prices. Some experts believe that it is necessary to change actors' roles in the tariff setting process. 'Unfortunately, during the last years public, non-public, private and semi-private organisations determine tariffs separately for their side and own benefits. They set tariffs based on individual agreements between their organisations and the insurance organisations or based on statutory authorities that sometimes resulted in unilateral increases in tariffs' [MoHME senior officer]. The highest authority in medical price setting (i.e., HCHI) suffers from an inappropriate membership composition. Its membership includes a heterogeneous group including insurance organizations representatives, the MOCLSW, the MoHME and the IMC. It seems that it is a time for the role of the MoHME in the pricing council to be more prominent. 'One of the main critics to the tariff setting system is that in tariffs context, there is no harmony between different decision-makers and groups that have more power have the main role in price setting and get more benefits' [Health insurance officer]. 'People’s expectation from governing actors who set prices and tariffs is to provide health services while upholding social equity, high quality of medical services and rational prices' [Medical Council officer].
Analysis of interviewees and documents showed that the organization and governance of medical tariffs setting consists of polymorphous patterns of different philosophies of health governance. Ironically, this ambiguity contributed to making tariff-related decisions regardless of implementation outcomes; for example, through implementing Health Transformation Plan and approving the medical tariffs systems within the MoHME before even ensuring that the main insurance organizations would support such changes. Another example is the transfer of the power of setting medical tariffs for the private sector to the IMC, which occurred in 2004 as part of the Five Year National Development Plan. Within the five years that this legislation was in power, it marked continuous challenges between the IMC and the insurers, rapid increases in the private sector tariffs, and increases in the share of out-of-pocket expenditure
- Medical information systems and setting tariffs rationally
Despite improvements in the management of medical information systems in the hospitals, they still suffer from structural limitations that prevent detailed assessments of the health services costs. Most of the current information systems are developed based on the current pricing structure; hence, they are inadequate for assessing or modelling alternative approaches to provider payments. 'Determining the actual costs of the health services is an important input for revising and setting medical prices, but the limitations of the records and in the information system has meant that this has remained a challenge in Iran’s health care system' [A physician]. As a result, a provider that brings substantial revenue to the hospital might also produce substantial costs to the hospital because of material or human resources required for them. The latter costs, however, are not well-recorded in the system, and the hospital remains in the dark about the actual costs and benefits of the services. The limitation of the data at the local level reflects the problem at the national level where calculating and updating the relative values remains a challenge as it requires for micro-data to be available, while it is not. It becomes difficult to compare the actual costs of delivering services in different geographical regions or different settings.
- Native model for health services tariff setting
Document analysis showed that, until now, the Iranian health system does not have a national health services tariff setting framework and evidence-based model. This issue should be addressed, as to achieve Universal Health Coverage, it is necessary to determine the actual price of health services based on scientific methods and new models. According to the interviewees determining the actual fiscal value of health services is also necessary to ensure equity in reimbursement of the costs to service providers in contrast to delivery and supply of these services. 'To balance the medical price market, it is necessary to set regulative (normative) tariffs that reflect the actual costs of service delivery and reliability in the development of health care delivery system and use appropriate mechanisms of setting health services tariffs. Medical tariffs in public and private sectors need to be the same in order to increase the competition on increasing the quality of health care ' [Advisor to the minister of health]. Study participants also mentioned that periodic review of health care prices and revising them based on some indicators (e.g., health insurance per capita, inflation rate, and increasing index of the total cost of goods) is very important in setting those prices rationally as well.