Health Financing Models - Overview
National Health Service
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| Description |
Key Features
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Systems financed through general revenues, covering whole population, care provided through public providers
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Revenue Source
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General revenues
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Groups Covered
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Entire population
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Pooling Organization
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Central government
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Care Provision
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Public providers
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Strengths
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Weaknesses |
- Pools risks for whole population
- Relies on many different revenue sources
- Single centralized governance system has the potential for administrative efficiency and cost control
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- Unstable funding due to nuances of annual budget process
- Often disproportionately benefits the rich
- Potentially inefficient due to lack of incentives and effective public sector management
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| Case Examples |
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Social Health Insurance
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| Description |
Key Features
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Systems with publicly mandated coverage for designated groups, financed through payroll contributions, semi-autonomous administration, care provided through own, public, or private facilities
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Revenue Source
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Payroll taxes
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Groups Covered
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Specific groups
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Pooling Organization
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Semi-autonomous organizations
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Care Provision
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Own, Public or private providers
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Strengths
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Weaknesses |
- As a ‘benefit’ tax, there may be more ‘willingness to pay’
- Removes financing from annual general government appropriations process
- Generally provides covered population with access to a broad package of services
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- Poor are often excluded unless subsidized by government
- Payroll contributions can reduce competitiveness and lead to higher unemployment; earmarking removes flexibility
- Can be complex and expensive to manage, which is particularly problematic for LICs and some MICs
- Can lead to cost escalation unless effective contracting mechanisms are in place
- Often provides poor coverage for preventive services and chronic conditions
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| Case Examples |
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Community-based Health Insurance
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| Description |
Key Features
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Not-for-profit prepayment plans for health care, with community control and voluntary membership, care generally provided through NGO or private facilities
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Revenue Source
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Private voluntary contributions
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Groups Covered
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Contributing members
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Pooling Organization
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Non-profit plans
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Care Provision
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NGOs or private facilities
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Strengths
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Weaknesses |
- Membership is voluntary
- Promotes pre-payment
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- Heterogeneous in terms of populations covered, regulation, and benefits provided
- Providing access and financial protection are limited due to the small size of most schemes
- The financial sustainability of most schemes is questionable
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| Case Examples |
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Voluntary Health Insurance
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| Description |
Key Features
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Financed through private voluntary contributions to for- and non-profit insurance organizations, care provided in private and public facilities |
Revenue Source
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Private voluntary contributions
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Groups Covered
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Contributing members
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Pooling Organization
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For-and non-profit insurance organizations
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Care Provision
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Public and private providers
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Strengths
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Weaknesses |
- May increase financial protection and access to health services for those able to pay
- When an “active purchasing” function is present it may also encourage better quality and cost-efficiency of health care providers
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- Associated with high administrative costs
- May be inequitable without public intervention either to subsidize premiums or regulate insurance content and price
- Has the potential to divert resources and support from mandated health financing mechanisms
- Applicability in LICs and MICs requires well developed financial markets and strong regulatory capacity
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| Case Examples |
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Out-of-Pocket Payments (including public user fees)
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| Description |
Key Features
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Fees for publicly provided services
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Revenue Source
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Individual payment to providers
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Groups Covered
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-
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Pooling Organization
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-
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Care Provision
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Public and private providers
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Strengths
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Weaknesses |
- Promote more efficient consumption patterns by reducing spurious demand and encouraging the use of cost-effective health services
- Encourage patients to exert their right to obtain good quality services and make health workers more accountable to patients
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- Do not curtail spurious demand because in poor countries there is a lack, not an excess, of demand
- Fail to promote cost-effective demand patterns because the government health system fails to make cost-effective services available to users
- Hurt access by the poor, and thus harm equity, because appropriate waivers and exemption systems are seldom implemented; where they are, the poor get discriminated against with lower quality treatment
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| Case Examples |
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Resources
Gargasson and Salome. The Role of Innovative Financing Mechanisms for Health. World Health Report 2010. Background Paper, 12. PDF
The article uses Taskforce Working Group 2's definition of innovative financing mechanisms as "non-traditional application of ODA, joint public-private mechanisms, and flows that either support fundraising by tapping new resources or delivery financial solutions to development problems on the ground" (Taskforce Working Group 2, 2009). The authors note the main role of such mechanisms is "to fill the existing financial gap," estimated to be around US$36-45 billion, to achieve MDGs. The mechanisms used by the Global Fund, the GAVI Alliance and UNITAID are deemed to have been successful examples that have resulted in significant expansion of their activities.
Community-based health insurance in low income countries: A systematic review of the evidence. Health Policy Plan. (2004) 19 (5):249-270. http:\\doi: 10.1093/heapol/czh031 PDF
ABSTRACT: Health policy makers are faced with competing alternatives, and for systems of health care financing. The choice of financing method should mobilize resources for health care and provide financial protection. This review systematically assesses the evidence of the extent to which community-based health insurance is a viable option for low-income countries in mobilizing resources and providing financial protection. The review contributes to the literature on health financing by extending and qualifying existing knowledge. Overall, the evidence base is limited in scope and questionable in quality. There is strong evidence that community-based health insurance provides some financial protection by reducing out-of-pocket spending. There is evidence of moderate strength that such schemes improve cost-recovery. There is weak or no evidence that schemes have an effect on the quality of care or the efficiency with which care is produced. In absolute terms, the effects are small and schemes serve only a limited section of the population. The main policy implication of the review is that these types of community financing arrangements are, at best, complementary to other more effective systems of health financing. To improve reliability and validity of the evidence base, analysts should agree on a more coherent set of outcome indicators and a more consistent assessment of these indicators. Policy makers need to be better informed as to both the costs and the benefits of implementing various financing options. The current evidence base on community-based health insurance is mute on this point.
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