Health financing models

NHS Systems
Systems financed through general revenues, covering whole
population, care provided through public providers

Strengths Weaknesses

– Pools risks for whole – Unstable funding due to

population
– Relies on many different
revenue sources
– Single centralized
governance system has
the potential for
administrative efficiency
and cost control
nuances of annual budget
process
– Often disproportionately
benefits the rich
– Potentially inefficient due to
lack of incentives and
effective public sector
management
 Social Health Insurance
Systems with publicly mandated coverage for designated groups,
financed through payroll contributions, semi-autonomous
administration, care provided through own, public, or private facilities
Weaknesses
Strengths
• Poor are often excluded unless
• As a ‘benefit’ tax, there may subsidized by government
be more ‘willingness to pay’
• Payroll contributions can reduce
• Removes financing from competitiveness and lead to
annual general government higher unemployment;
appropriations process earmarking removes flexibility
• Generally provides covered • Can be complex and expensive to
population with access to a manage, which is particularly
broad package of services 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
Community-Based Health Insurance
Not-for-profit prepayment plans for health care, with
community control and voluntary membership, care
generally provided through NGO or private facilities

Strengths Weaknesses

• Membership is voluntary • Heterogeneous in terms of

• Promotes pre-payment 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
 Voluntary Health Insurance
Financed through private voluntary contributions to for- and
non-profit insurance organizations, care provided in private
and public facilities
Strengths Weaknesses

• Associated with high

• 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
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
 User Fees
Fees for publicly provided services
Strengths
– 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
Weaknesses
– 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
 Major Health Financing Models
Revenue Groups Pooling Care
Source Covered Organization Provision
Model
National Health General Entire Central Public providers
Service revenues population government

Social Health Payroll taxes Specific Semi- Own, public, or

Insurance groups autonomous private facilities
organizations
Community- Private Contributing Non-profit plans NGOs or private
based Health voluntary members facilities
Insurance contributions
Voluntary Health Private Contributing For- and non- Private and
Insurance voluntary members profit insurance public facilities
contributions organizations
Out-of-Pocket Individual None Public and
Payments payments to private facilities
(including public providers (public facilities)
user fees)