Health care payments also sometimes displace expenditure for other basic necessities of life (e.g. Low-income groups tend to delay use of health services until illness is severe, presumably in part to avoid payment, but such delay generally only increases the necessary expenditure. In 1998, expenditures on personal health care services totaled $1 trillion with 19.6 percent paid directly by patients (out-of-pocket payments) and 80 percent paid by third parties (Health Care Financing Administration, http://www.hcfa.gov/stats/nheoact/tables). Included in this category are any payments a consumer may make directly to health care providers such as fees for services, or prices paid for goods and supplies. High- income countries spend nearly 10% of gross domestic product on health care, with 62% of the total financed by government authorities. The question âwho gains?â must, therefore, be asked in assessing the equity impact of health systems. Private health insurance differs from social insurance in two main ways. This results from factors such as the low political priority frequently given to the health sector in national budget decisions; the instability of government finance in countries heavily dependent upon taxes on imports and exports; the frequent use of public expenditure as a tool of macro-economic policy; and frequent disparities between budgeted funds and their actual availability or disbursement. Included in this category are any … 1.3 Demand/utilization and consumer behaviour. Largely supported by the incomes of the poor and thereby constituting a form of regressive taxation, they typically have low net yields because of the payment of prizes and high administrative costs. Identifying the effect of financing mechanisms on consumer behaviour requires an understanding of its determinants. Despite broad access to health facilities, there is potential for improving utilization of services and high-quality interventions. Methods of financing affect the supply or provision of services. These include external effects on costs (e.g. The remaining funds flow primarily from consumers as out-of … Even where only the lime price of health care (resulting from travel and waiting times) has been considered, the evidence supports this finding; and other factors, such as poor access to facilities, is also recognized to undermine utilization. Consequently, a framework for explaining the impact of the scheme within the context of Nigeria was … General lax revenue is used in almost every country of the world to finance certain components of health care and, in developing countries, it is often the most important source of financing. By relieving the pressure on ministries of health to devote resources to urban health services, it may even, indirectly, make more resources available to those in rural areas. More positively, social insurance can be the means of channelling extra funds into organized health services. However evidence shows that public sources of funding, above all other sources, drive improvements in the health system and make progress towards universal health coverage (UHC). In fact, 60% of the total health care dollar comes directly or … The difference in the proportionate contribution from these stated sources determine the extent to which such health sector will go in achieving successful health care financing … as a result of financing health services through high taxes on certain economic activities, enterprises or sectors). Finally, the net yield of any source is a reflection of efficiency. In conclusion, employment contributions as a source of health financing are … The main problems of social insurance are related to issues of equity. hospitals and water and sewerage systems). Clearly planners must assess these other influences, as well as monetary prices, in order to evaluate the effects on utilization of financing mechanisms such as user fees. Household income is ultimately the source of most health care finance, but direct expenditure constitutes a specific category of financing that should be considered separately. Although this may seem small in proportion to the national commitments of rich countries, for low-income countries at the receiving end of the transfers, these resources are substantial; in Sub-Saharan … donor-pooled health fund. Tax systems can be progressive, falling more heavily on the rich than the poor and, therefore, equitable; but they may also be regressive, falling more heavily on the poor than the rich, and inequitable. The administrative difficulties of implementing a fee system (e.g. who collects the fees? Given the limited resources available for health in developing countries, it is essential to raise and use resources as efficiently as possible. Direct household expenditure is not independent of other sources of finance. One standard against which to assess the answer might be that only those who benefit from/use health care (i.e. personnel). For example, taxes on the sale of particular products may be earmarked for health services at either national or local level. It is easiest to cover those in regular employment, who may be as little as 5 to 15% of the population in developing countries; and there are often marked inequalities in the quantity and quality of services available to those covered by insurance relative to those who are not. Some financing mechanisms may encourage undesirable practices such as the inappropriate utilization of services. CDC Procurement and Grants Office . Private financing plays a role in all health systems. Developing countries are assumed to have regressive financing systems because they tend to rely on indirect taxation, but in practice their tax systems may be progressive because the poorest sections of society fall outside the formal economy and indirect taxes may be levied primarily on luxury items consumed predominantly by the wealthier population groups. Individuals or groups contract with a particular HMO to cover all their health care needs (either in the HMO's own facilities or in facilities under contract to the HMO) in return for an annual payment. Critics of social insurance also argue that it undermines both public and private health care by competing with these sectors for limited supplies of real medical resources (e.g. sugar and coffee plantations in Latin America, tea and rubber estates in Asia and cocoa farms and mines in Africa). As a result, premiums are likely to vary for different individuals or groups. Although tax ratios tend to increase in line with development, this depends in large part on a country's political will to increase the tax burden. Government services may charge user fees (often nominal) for certain services. Not everything that may have a positive impact on health can be afforded and health plans must be based on a realistic view of resource availability. Raising resources: it is clearly important that any mechanism raises adequate resources - channelling sufficient new funds into the health system to support existing or expanded services, and having the potential to raise additional revenue to meet the growing needs of health programmes. Public health authorities are more likely to experiment with the use of paramedical personnel, especially in outlying rural areas, and private providers are more likely to favour the use of professionals. In the past few years there has been increasing interest in some developing countries (especially in Latin America) in health maintenance organizations (HMO), an innovative pattern of health insurance and health care organization developed in the USA. Finally, the potential yield from user fees is unclear. For example, there must be national agreement that extra finance will be retained for use within the sector (rather than being matched by budget cuts or transferred to other sectors) and that resources can be re-allocated within the sector to meet priority health needs, in order to justify alternative financing strategies. Beneficiaries (workers and their dependents) may have to pay a user fee (termed copayment) in addition to their wage deduction. It may be mitigated by the introduction of an exemption mechanism for the poor, although such a mechanism may itself reduce the demand for health care made by low-income groups because they may not wish to be identified as 'poor'. Examples include paying for services from a chiropractor not on the approved provider list of your health plan and co-payments. For example, they may encourage surgical intervention in labour where it is not medically required. It is also seen as a diversion for governments lacking the political will to generate new sources of revenue, or to re-allocate existing ones. Four aspects of the overall efficiency with which financing mechanisms raise and use finance should be considered. displacing direct payments); charitable contributions which may be withdrawn when other sources are developed; and government allocations which may be reduced when other sources of finance (such as user fees) are developed. This happens in the Netherlands and India currently, and in Georgia prior to 2013. Thus the role of charitable and voluntary contributions is decreasing, although it may still be important in times of emergency or disaster and can be a useful supplement to other forms of health finance. They certainly require national strategies to address them, even where additional resources are to be recruited by actions within the health sector. Although not a major source of health sector finance in most countries, they may constitute an important source of finance for specific projects or programmes. The problems with this source of finance are often indirect. Second, the price (or 'premium') charged for private health insurance is not based on the pooled risks of a large population, but on personal risk characteristics and the likelihood of illness in the individual or group covered. Even with insurance coverage, there is often a requirement for some degree of copayment, which tends to increase the amount that would otherwise have been spent on health. agriculture). inflation through the repercussions of high increases in staff pay); foreign exchange problems through heavy foreign borrowing for development projects or for payments for imports such as pharmaceuticals or equipment; opportunity costs such as the attraction of scarce manpower into the health sector at the expense of other professions; and disincentives to investment and employment (e.g. HIgHlIgHTS oF HEalTH carE FInancIng rEForM coMPonEnTS In 1998, the Ethiopian government developed and endorsed a health financing strategy (see strategy goals in Box 1) that directs resources for the health sector to be mobilized from different sources and permits government to provide health services through its health … Until recently, comparatively little was known about the extent or the characteristics of direct household expenditure on health care, but a range of recent studies have shown that this form of financing is far more common and considerably more important than was hitherto thought. Third parties paid for 97 percent of hospital care but only 55 percent for drugs and other services. In many countries the larger employers act as an organizing body for health insurance, and may pay part of the premium as a fringe benefit. However, this standard is likely to penalize those who are least able to pay and most likely to be sick (low-income groups). Often administered by quasi-public bodies under national or local government regulation, these typically non-profit schemes rarely constitute an important component of overall health sector finance. We study the differential impacts of public and private sources of health spending on health outcomes using a triple difference approach. Thus the agency doing the deficit financing must be endowed with the authority to impose additional taxes or fees, or be given a claim on general tax revenue in order to service the debt. Charitable contributions have played an important role in health service provision in the past, and in some African countries are still a major source of health care finance, channelled through religious agencies. Consequently some governments and many non-governmental agencies are turning to communities for organization, participation and financial support, and communal self-help is increasingly thought of as an important source of financial support for health services in developing countries. Rather than generating additional resources for the health sector, new or expanded financing mechanisms may merely displace funding from other sources. a fund into which a number of donors combine most or all of their funding so that it can be used to support a range of public sector health services, rather than having separate … may cause less revenue to be collected than theoretically is possible. In addition administrative corruption or evasion on the part of those liable to taxation or fees may reduce the actual yield below its hypothetical yield. For example, contributions may be eligible for tax relief, reducing general tax revenues for use elsewhere (although the effects in this instance are likely to be minor). The extent to which these payments represent a real ability and willingness to pay for health care is, however, unclear. The impact of the payment burden may influence the distribution of health service benefits, and so the interaction of the payment method with the demand and supply of health care must also be considered (see below). This includes income tax, payroll tax (including mandatory social health insurance contributions) and corporate or profit tax. Overall, it is argued that social insurance reinforces the maldistribution of resources between rural and urban areas in developing countries. In the area of Health Financing, WHO provides evidence-based policy and technical support to Member States to improve health system financing in terms of policy development, allocation and tracking of funds, social and financial risk protection, equity in financing … 4. how is ability to pay assessed? The main sources of revenue for private health insurance are either compulsory or voluntary prepayments, which typically take the form of regular premium payments as part of an insurance … When autocomplete results are available use up and down arrows to review and enter to select. For example, donors may have different priorities from the recipient nation and may not recognize their most urgent health needs. Public sources of funding include those which are compulsory and pre-paid; meaning paid before the need for care is identified or care is accessed. more equal access to health care or more equal utilization). Problems with employer-financed schemes relate to the quality of care provided, the possible fragmentation of services, difficulties enforcing employer liabilities, and the fact that viability depends upon the performance of the employing agency. The integration of the insurance and provider functions provides an incentive for cost containment, in contrast to a third-party payment system where providers and consumers agree on the quantity of care to be supplied and a third party (the insurance agency) merely reimburses the cost. Report and monitor health financing indicators to achieve targets of National Health Policy 2017, Sustainable Development Goals and Universal Health Coverage. Health Financing Functions . to preventive rather than curative care). The share of out-of-pocket expenditure in total health expenditure needs to be substantially reduced in the 3 Ebola-affected countries as they create a financial burden (in the form of catastrophic and impoverishing expenditure), resulting in people foregoing care. Greece is now a country where the need of re-orientation of health care financing is pressing [25, 27]. the sick or potentially sick) should pay for it - horizontal equity. The general trend, however, is for governments to support or take over mission health services. Current primary health care initiatives in developing countries stress the importance of national self-reliance and community participation in health care delivery. The net yield is usually high, unless bureaucratic overheads are high. First, private health insurance typically does not include pensions for invalidity or old age. Charitable contributions may also take the place of, or reduce, other sources of finance. Some financing sources are biased with respect to the types of expenditure that they favour: favouring curative rather than preventive, or capital rather than recurrent, expenditures. However, it suffers from the problems of low coverage because of its cost and the exclusion of bad risks, of enhancing inequity and promoting the growth of high-technology health care, inappropriate to developing countries. Revenues should come from pre… Unless such projects sell their services or contribute directly to increased output that can be taxed to service the debt, the deficit must be repaid from general tax revenue. Using resources: freedom and flexibility in the management of funds are important, as excessively stringent reporting requirements can increase administrative costs, and restrictions on the allocation of funds between expenditure categories can cause inefficiencies in the delivery of services. Management can be strengthened through staff training and the development of appropriate tools (including incentives), efforts can be made to understand the community's needs in order that health care better meets them, and resources can be allocated more appropriately (e.g. In practice, evaluation should also focus on the socioeconomic status of those who pay for and use health care, as this status underlies both health need and ability to pay. It is also important to recognize that health financing problems are not simply health sector problems, but often reflect economy-wide difficulties. Moreover, the out-of-pocket expenditure cannot be considered as a reliable source of funding to build a resilient service delivery systems. Taxes on business transactions, profits and incomes are all of lesser importance. Uncertainty or cyclical fluctuations in the economy and/or political allocation process can undermine the level of revenue raised. Willingness to pay does not necessarily reflect ability to pay. Health Economics for Developing Countries: A Survival Kit, Chapter 1: Health Economics and its Contribution to Health Planning, Chapter 2: Economic Development and Health, Chapter 3: Financing Economic and Health Development, Chapter 4: Health Care: the State versus the Market, Chapter 5: Demand, Supply and the Price System, Chapter 6: Concepts of Economic Efficiency, Chapter 8: Outputs, Health and Health Indicators, Chapter 9: The Techniques of Economic Evaluation, Chapter 10: National Accounts and the Health Sector, Chapter 11: Health Sector Finance and Expenditure, Chapter 12: Sources of Finance for the Health Sector, Chapter 13: Budgetary Procedures: Budgetary Reform and Programme Budgeting, Chapter 14: Approaches to Financial Planning: Resource Allocation Planning and the Financial Master Plan. In countries where demand is sufficiently high, commercial insurance companies may be active. Many existing financing policies have paid little attention to the incentives they create or reinforce, or to their ensuing impact upon service providers, households, and government agencies. Public and Quasi-public Sources of Finance. In Nigeria, the health sector is financed through different sources and mechanisms. The demand for health services can be defined in terms of the coincidence in one individual of both the willingness and ability to pay. At the same time, the options for increasing funds can be considered - using appropriate evaluation criteria. The total financial contribution to social insurance schemes is (in theory) determined actuarially on the basis of the incidence of illness, the conditions of eligibility for benefit, and the value of those benefits. of Health is usually available through the Ministry of Finance (MoF), or regional authorities in decentralized systems. In the United … These are often taxes. Governments have in many instances an increasingly favourable attitude to the development of social insurance. Social insurance can finance health care, as well as other needs such as invalidity and old age support, for either the whole population or a part of it. In developed countries the primary focus is on accident prevention and occupational health, and in developing countries also, employers may have a legal obligation to provide first aid or occupational health services (e.g. Direct taxes are those paid by households and companies to the government or other public agencies. Raising the level of direct household expenditure for health care, for example by user fees, will clearly have a negative impact on equity (by influencing both the distribution of the payment burden and the benefits gained). Approaches to Improved Financing of Health Activities. The tax is based on what a household or company spends and includes value-added tax, sales tax, excise tax on alcohol and tobacco and import duties. Schemes may be profit or non-profit making, and may be organized for individuals or groups, the latter often benefiting from lower premiums (resulting from lower per capita administration costs as well as a degree of risk-sharing). These can be related to a set of sociodemographic factors such as age, education, gender and health status; and a set of economic factors such as the monetary (e.g. An alternative standard that is more fair, therefore, is that the distribution of the burden of paying for health care should reflect differences in ability to pay - vertical equity. Shortages result both from inefficiencies in resource use and from absolute deficiencies, and until the first are adequately addressed any additional resources will also be used inefficiently. HEALTHCARE FINANCING COMMITTEE (HCF) The health sector in Kenya relies on several sources of funding: public (government), private firms, households and donors (including faith based organizations and NGOs) as well as health … Use of traditional healers, for example, may reflect a belief in the relevance of their treatments for certain diseases rather than a general willingness to pay for any type of health care. In developing countries general tax revenue is composed largely of duties on imports and exports, and sales taxes. Health care finance in the United States discusses how Americans obtain and pay for their healthcare, ... Medicaid is the largest source of funding for medical and health-related services for people with low income in the United States, providing free health … People may use and buy non-government (e.g. 1.4 Supply/provision and provider behaviour. As risks are pooled, there is an unequal benefit distribution in favour of high-risk (high-need) workers. However, before considering different financing options it is important to identify criteria for their evaluation. While the precise definition of equity that is adopted is often not clear it generally reflects a concern to distribute health care fairly, in recognition of differences in health need. Although in some instances it can make a substantial contribution, community finance is unlikely to generate sufficient resources by itself to meet country health needs, and should be seen as complementary to, rather than as a substitute for, other sources of finance. June 2013 . A compulsory source means the government requires some or all people to make the payment, whether they use the health service or not. Benefits are seldom extended to families as employers are primarily concerned with maintaining the productivity of the workforce. Self-help can take many forms such as labour, local insurance, support for volunteer health workers, and drug cooperatives. In their capacity as employers, governments may either run their own social insurance scheme or contract such schemes to private insurance companies. The first step in evaluating equity, however, must be to define the equity goal of health care and so clarify the nature of the gains sought (e.g. The national Department of … mission, private, traditional) health care partly because they have no cheap or good quality government alternative. Deficit finance may also be raised from abroad in the form of bilateral or multilateral aid loans, typically given for a project life of between three and five years, and thereby constituting only a short-term source of support. Charitable or voluntary contributions can take the form of financial support or in-kind donations (e.g. Health insurance benefits, moreover, may have an upper ceiling, with households required to pay directly for their health care requirements in excess of this level. Moreover, such willingness to pay as exists is attached primarily to curative services, and so can only extend the provision of preventive care if it is possible to re-allocate resources within the health sector. Public sector sources and external sources are typically less flexible than private sector sources in this respect. We find that private health spending has on average a higher health-promoting effect than public health … It is conventionally financed by imposing mandatory insurance payments on employed workers as a percentage of their wages, and by imposing a similar or somewhat higher payroll lax on their employers. Learning Objectives Understand and describe Major sources of public health … allocating or using funds in a … Resource shortages in developing country health systems clearly must be addressed, but the introduction of new financing systems is not an appropriate initial response to the problem. HEALTH Financing SYSTEM MODELS ... revenue sources – Single centralized governance system has the potential for administrative efficiency and cost control funding due to nuances of annual budget … 2. the various major sources of health care financing in Nigeria, its focal point was on the NHIS. organisational skills, manpower and cash) and by developing affordable and culturally appropriate delivery systems, it is hoped that basic health care will become universally accessible. However, in order to control the level of utilization of services, individuals are often required to pay for part of the cost of medical care on a direct fee-for-service basis. Public sources of funding include those which are compulsory and pre-paid; meaning paid before the need for care is identified or care is accessed. In addition, competing HMOs enable consumers to choose the one that best suits them and encourages efficient health care provision. They can be regressive if, as is often the case, taxes are levied on items such as beer, cigarettes, recreational events, or foodstuffs; but they can be progressive if they are imposed on luxury products purchased primarily by the more affluent sections of society. A compulsory source means the … raising funds for health; reducing financial barriers to access through prepayment and subsequent pooling of funds in preference to direct out-of-pocket payments; and. This discrepancy reflects the nature of insurance coverage. General tax revenue may be supplemented by deficit financing, that is the decision to borrow and spend funds in the present and repay them over some period of time. Consequently, the activities of the health sector may have spill-over effects on the economy as a whole. health care goods and services rely on a mix of different. Like demand incentives, these supply-side spin-offs of financing policies are often ignored. how is abuse of the system restricted?) Nowhere is employer finance a predominant source of support for health, although employer schemes are often a precursor to national social insurance schemes. Public Health Financing CDC Office for State, Tribal, Local and Territorial Support and . In developing countries high inflation rates (affecting the real rate of interest on loans) and lack of confidence in the government's abilities to honour eventual redemption of the bond may make it difficult to use deficit financing as a source of support for health systems. It is dependent on the level and type of fees, the bureaucratic structure required to implement them, the existence of exemption mechanisms, the impact of fee systems on the demand for care and the rates of collection. They may, for instance, pay for private sector health services, employ medical personnel directly, or provide necessary facilities and equipment. Governments may in some instances also contribute to the schemes. However, low tax ratios (the proportion of national income collected as tax) in these countries mean that it is often insufficient by itself to support health care. Non-tax revenues are from state-owned companies, including natural resource revenues such as oil and gas. Donors may prefer to finance visible evidence of their support such as physical facilities and equipment, and thereby commit the recipient country or organization to the recurrent costs of those facilities in the future. Health service financing source Health services financed broadly through private expenditure or public expenditure or external aid Public expenditure includes all expenditure on health … The problem with such taxes is that they are often difficult to administer, may be politically unpopular, and are also often unpopular with tax administrators because they limit their freedom of action. Coronavirus disease outbreak (COVID-2019), Coronavirus disease outbreak (COVID-19) », Georgiaâs health financing reforms show tangible benefits for the population. Problems with this source of finance employer finance a predominant source of finance are a! ÂWho pays? â must, therefore, willingness to pay a user fee ( termed ). From social insurance are related to issues of equity, curative health care payments ( with taxation ) should for... Competing HMOs enable consumers to choose the one that best suits them and encourages health! Be drawn of any source is a reflection of efficiency likely to underlie their sickness/vulnerability channel extra funds into health! For the health sector their workforce the inappropriate utilization of services than theoretically is.! Africa ) addition, competing HMOs enable consumers to choose the one that best suits them and efficient!, including natural resource revenues such as the inappropriate utilization of services insurance does. 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