3 basic principles for health financing approaches
1. Raise enough revenues to give people protection from catastrophic medical expenses.
2. Manage these revenues equitably (fairly) and efficiently.
3. Ensure payment / purchase of health services is allocatively and technically efficient.
Health financing mechanism 1
General revenue / NHS systems
- People's taxes are an important part of financing health in low, middle and high income countries.
- The government's ability to raise taxes to improve healthcare very much depends on income.
- Taxes also come from profits, sales, imports and natural resources; it's not just up to the people to pay.
- LICs tend to rely on taxes that are easier to collect such as import or export duties. It can be complicated particularly in rural areas to collect taxes paid by individuals.
- General tax revenue is used to support a wide range of government programs. Certain types of services are tax supported (public health, care for the poor, preventative services) because taxes can be redistributive and are raised from a broad base.
General revenue pros and cons
- Cover the whole population and general taxation may be the fairest way to generate funds.
- Resources of health increase over time as the economy grows.
- High degree of politcal accountability.
- State funded systems are relatively easy to manage.
- Health system has to compete with other sectors for funding. Completely reliant on government for funding and also in competition to keep standards up with private.
- Revenues can be unpredictable when sources for tax are effected by economic conditions.
- Taxes can be unfair depending on type of taxes used and how / what level they are collected.
- Weak governance and accountability being able to control general revenues could lead to favouritism and corruption.
Health financing mechanism 2
Social Health Insurance SHI
- One pays a premium for cover of certain services for a particular length of time.
- Social insurance in different to private insurance in three ways:
1. social is compulsory. Anyone who is eleigible has to pay the premium (usually a % of one's wage).
2. Premiums usually represent a social compact: benefits and contributions specified by law.
3. Contributions are earmarked (set apart for this) and segregated form general revenues and expenditures. This means that benefits come with a clear price. If someone wants a service, they have to pay for it.
- SI relies on contributors for funding and so tends to cover workers in the formal sector as they can afford to pay.
- Governments can pay premiums for social insurance beneficiaries > subsidise pensioners, the poor, unemployed, workers in the informal sector, small businesses.
- Can be administered by governments or Non Governmental Associations.
Social Insurance pros and cons
- The social contract increases willingness to pay. Greater transparency and trust that benefits will be delivered.
- Greatest potential for effective risk protection particularly in high income countries.
- Doesn't cover everyone particularly in LICs due to focus on formal sector.
- Requires adequate fiscal capacity (ability to raise revenue) of government and popular acceptance to make it worthwhile.
- Can result in higher real cost of labour due to higher SI premiums: wages need to go up in order account for SI premiums.
- Not a tax but can feel like one. Difficult to collect payments.
Health financing mechanism 3
Private / voluntary health insurance
- Choose to buy insurance from a private, independant, compteting provider.
- Pay a premium reflecting the buyers risks rather than their ability to pay.
- Can be profit making or not-for-profit.
- Can be bought by groups or individuals.
Private / voluntary health insurance pros and cons
- Mobilses resources additional to what the government can provide.
- Since non-payers don't get coverage, problems that might arise with tax-evasion are diminished > not compulsory to pay.
- Choice of own plan empowers people and makes them willing to pay more.
- Should and could provide a range of plans to suit a range of incomes.
- Competitive private insurance is very prone to risk selection (the process of choosing people. The risk is that they may have bg health problems). Able to favour healthier groups of people leaving the sick-prone to find other ways of meeting their needs. > Cheaper because it insures the healthier.
- High rates for those who have low levels of health.
- Groups with highest risks and costs are typically excluded.
- Prone to higher operating costs.
- Complex management requiring high level competence and political integrity that many developing countries don't have.
Health financing mechanism 4
Community financing / Community Based Health Insurance (CBHI)
- Reaches rural and informal sector (often missed out by other insurance schemes).
- Focuses on common and frequent needs related to primary health care.
- Locally based prepayment schemes.
- Integrates financing and delivery of primary care > all done locally.
- Based on community membership with strong involvement of the community > the management of the system.
Community financing / Community Based Health Insur
- Local control > more transparency and accountability.
- local running may be attricative to those who are reluctant to use government run facilities further from their homes.
- Easily combined with other community-based initiatives: microfinance / livlihood programs / local organisations.
- When pre-paid and compulsory, community financing can offer a good degree of risk protection (no gamble as to whether to accept patients or not - they're all in! Less risky as it's only primary level healthcare)
- To be really effective membership should be compulsory.
- Populations are often poor. This low level of income makes it difficult to raise the revenues needed to provide adequate coverage.
- Because of this, the scehemes often need to be supplmented by government funding / tax-based schemes.
- Schemes vulnerable to unexpected high costs and epidemics.
- Depend on local organisation. Needs lots of motivation and incentives to keep it going.
Health financing mechanism 5
Out of Pocket Payments and User Fees
- Paid directly by patients for medical care. Not reimbursed by governments or insurers.
- Co-paymets and deductibles for doctors visits
- prescription medications
- unofficial or informal payemts
- supplies and tests that may not be available locally.
- Does not include transportation.
- Most common in LICs and add up to being larger than government spending on health.
- Tend to decline in number as income rises.
- Provides incentives for immediatehealth worker productivity.
- However, exacerbates informal inequalities between patient and providers > power relationship. They can charge whatever they like. Cost exacerbation.
- More common because they're simple and don't have to worry about insurance payments.
- Official charges for services
- Usually taken by governmental providers.
- The money is most often needed for budgetry resources, incentives for health workers (pay rises, bonuses) or supplies.
- Opponents advocate free provision particularly for women and children. But compensative measures need to be taken if UFs are to be abolished. Need to get funding from somewhere.
Health financing mechanism 6
External financing sources
- Relying on foreign aid but generally nationally generated resources are more important.
- Foreign aid: helpful for developing countries to reach their health goals.
- Donors are required for external financing. They have their own preferences and requirements for what donations should be spent on. Demand evaluations and monitoring which can be a burden on poor countries.
- There is concern that donor preferences may distort national policies.
Development Assistance for Health (DAH)
- Official development assistance and aid from unofficial sources such as NGOs.
- Grown a lot over the last two decade due to increased philanthropic donations.
5.6 billion in 1990
21.8 billion in 2007