The aim of this website is to share expertise and experience on health care systems with policy makers, managers of health services, health care providers and health system researchers. The website is a product of a network Switching International Health Policies and Systems (SWHIPS).The articles are publisher versions or author versions, depending on the archiving policies of the publishers. Of all articles, the copyright remains with the editor or author, respectively. Contact us: healthsystems@itg.be.

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Financing

Financing involves the acquisition, the pooling and the allocation of financial resources, in such a way that it contributes to goals and outcomes. In essence, health financing needs to ensure access to needed services while protecting people against the more severe financial consequences of paying for care (World Health Organisation 2008b). Important values and principles at stake are equity, efficiency, accountability and sustainability.

The Commission on Macroeconomics and Health estimates the cost of a core package of activities at around US$40 per person per year, although analysis of HS performance show that a number of countries are able to perform well with less means (Riley 2008). National Health Accounts describe sources and allocation of funds at country level. Mechanisms of funding health care are tax-revenue, insurance premiums, user fees or grants. Sources of funding can be public (national government, bilateral or multilateral donors) or private (households, for-profit or non-profit organisations, employers). The 2001 Abuja Declaration set a target of 15% of overall government expenditure to be allocated to health. For many LICs it is less than 4% at the moment. Pooling of funds means that prepaid money is distributed in such a way that it allows risks to be shared. Both tax-systems and insurance mechanisms are pooling systems. The third function of health financing is to allocate resources to other elements in the health system. This function is sometimes referred to as ‘strategic purchasing’. It includes decisions of which health care services are funded and how to steer the delivery of these services.

Since health financing always involves rationing, the decisions on priority-setting and allocation of resources have great implications, especially when the total amount of resources is small (Palmer et al. 2004; Roberts et al. 2004a). There is thus a very important link between governance and financing. The organisation of financing greatly influences the (financial) access to services. For instance, abolishing user fees in the public sector can contribute to increased access, if mechanisms to ensure enough resources and to organise other factors of access are in place (Meessen et al. 2009). Regardless of this process, the role of market mechanisms, both formal and informal, has been increasing in many countries. The government has an important role to correct market failures in the HS and to redistribute resources among the population so that access to health care is available to all, according to their needs (social justice).

The way in which different health services are financed and how providers are paid influences directly what type of services are being delivered in which way. The main mechanisms for payment are either input-based (estimations based on history, on standards, on population needs, etc) or output-based (estimation based on production, on targets, etc) and many mixes of input or output mechanisms exist in practice. Traditionally, the allocation to public health facilities has been calculated on the historically and population-based estimation of inputs needed. In the private market, the default mechanism is a fee for service mechanism, creating strong incentives to maximise the provision of these services. The boundaries between sectors and mechanisms of payment have become more blurred. There is increasing attention for measuring the performance and outputs of health care facilities and other organisations in HSs. Experiments with performance-based financing lead to a partial shift to output-based financing (Meessen et al. 2007).

Assessment methods. Various indicators can be used to assess resource mobilisation, pooling and funding of health care (World Health Organisation 2008b). We mention total health expenditure and government health expenditure as indicators for respectively the overall availability of funds and the government’s commitment. Whether these are sufficient should be related to the estimates of finances necessary to ensure access to a package of services which is determined by the country itself, but could also be benchmarked with other countries with similar levels of GDP per head. The ratio of household out-of-pocket payment for health to total health expenditures indicates the direct cost of health for households. In countries with widespread health insurance, coverage (specifically poor/vulnerable groups) and packages of care that are covered need to be assessed. Other indicators give information on allocation of resources (e.g. expenditures on wages, on priority problems, by level of government) or on the capacity of financial management. The most widely used tool to monitor funding and spending in HSs are national health accounts (World Health Organisation 2010).

Our perspectives

The thinking on how health care should be financed in order to contribute to HS has evolved over time. There have been longstanding global debates about Bismarck and Beveridge systems, about contracting and the role of the private sector, about user fees and about the role of international donors. In this paper we highlight the important issues according to us, acknowledging the different opinions which exist on many of those.  
The prime responsibility for revenue collection is at national level, because this is linked with government accountability to the population. There is, however, a strong plea for global social responsibility and a longstanding commitment of the international community to contribute to the health financing of the basic package for those countries that are too poor to collect this amount themselves (Ooms et al. 2009). This plea has implications for the way one looks at sustainable financing.

Funding mechanisms should ensure access to needed services and provide financial protection to citizens. This means that health services should be affordable, payment not being an obstacle. For many poor people this means that health services should be ‘free at the point of delivery’. This implies a preference for prepayment and pooling, by taxation, health insurance or a combination. Mechanisms to raise funds should contribute to equity and thus usually involve progressive collection mechanisms. These principles make user-fees the least desirable options, since they are regressive, limit access to care and provide no financial risk protection. If user fees exist, there should be arrangements for the protection of the poor. We believe that in most contexts, the delivery of health care in publicly oriented health care organisations is crucial to ensure access. Allocation of funds should steer the organisation of care and the behaviour of providers towards this public orientation. Whichever combination of mechanisms is chosen to pay health service organisations or individual providers, we take the following principles to be paramount: payment mechanisms should contribute to social justice, to continuity of care for patients but also to a responsible use of health services, minimise administration cost, optimise sustainability of the system and allow for mechanisms of control.