The extent to which these payments represent a real ability and willingness to pay for health care is, however, unclear. 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. As a result, premiums are likely to vary for different individuals or groups. The administrative difficulties of implementing a fee system (e.g. 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. The net resources available for the purposes of health care delivery consist of total revenue minus the administrative and other costs of collection. 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. It includes corporate-funded health services, individual contributions to commercial or community-based health insurance schemes and out-of-pocket spending. 1. 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. Public and Quasi-public Sources of Finance. of Health is usually available through the Ministry of Finance (MoF), or regional authorities in decentralized systems. Health care financing in upper-middle- and high-income countries is generally provided through health insurance schemes (often employment or union based) or governmental financing that is funded by … The equity impact of tax systems is dependent on both the proportional burden of taxation and on the use which is made of the revenue raised. 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. 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 … 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 … as a result of financing health services through high taxes on certain economic activities, enterprises or sectors). 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. However, this standard is likely to penalize those who are least able to pay and most likely to be sick (low-income groups). These are often taxes. In considering the impact on equity of health care financing options it is equally important to ask “who pays?”. 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. Deficit finance may be raised nationally or internationally, through mechanisms such as the issuing of bonds or certificates or long-term low-interest loans. Private services may be more oriented to the preferences and circumstances of households, for instance providing for payment in kind or payment related to ability to pay. 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. personal services, physical facilities, equipment and supplies), and may originate from business enterprises, wealthy families, religious organizations or private individuals. Available evidence on the burden of taxation is inadequate to permit firm conclusions about its incidence to be drawn. These external effects may also be positive as in the case of improved productivity resulting from reduced death and disability in the work force. Private insurance is not subject to the political allocation process and may channel extra funds into the health sector. Indirect taxes are paid to the government or other public agency via a third party (retailer or supplier). The criteria should be based on the overall objectives of health planners and policy-makers and should also reflect concern with the feasibility of implementing new financing mechanisms. 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. 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'. In order to include those workers outside the modern employment sector insurance payments may also be calculated on measures of income or wealth other than wages, such as the value of crops produced. The net yield is usually high, unless bureaucratic overheads are high. For example, donors may have different priorities from the recipient nation and may not recognize their most urgent health needs. If efficiency improvements together with the possibility of additional resources still do not bridge the gap between resource requirements and resource availability, then health sector goals must be reconsidered. 1.3 Demand/utilization and consumer behaviour. 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 … research questions around expenditures and revenues for public health in the U.S., financing of select public health program areas, how health departments maximize the resources they have, and … In Nigeria, the health sector is financed through different sources and mechanisms. It provides extra funds for largely urban, employed workers and leaves the large rural populations and the informally employed urban population even further handicapped than before its introduction. At the same time, the options for increasing funds can be considered - using appropriate evaluation criteria. Benefits are seldom extended to families as employers are primarily concerned with maintaining the productivity of the workforce. 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 … Government expenditures for health that are channelled through non-health 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. 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 … 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. When it is used, deficit financing is typically for specific construction projects (e.g. 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. This happens in the Netherlands and India currently, and in Georgia prior to 2013. The need for these additional sources of funds is driven by rising demand for health care services, escalating costs of care, rapid increases in technology, and a limit on how much can be raised through … Some would argue that health care payments (with taxation) should contribute to a more equal distribution of income. 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). Revenues should come from pre… 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 … 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. 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. 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). General tax revenue is currently not the most reliable source of finance for the health sector in developing countries. In the United … Beneficiaries (workers and their dependents) may have to pay a user fee (termed copayment) in addition to their wage deduction. 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. 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. Government schemes, for example, … Coronavirus disease outbreak (COVID-2019), Coronavirus disease outbreak (COVID-19) », Georgia’s health financing reforms show tangible benefits for the population. Private health insurance differs from social insurance in two main ways. Governments may in some instances also contribute to the schemes. 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. In all OECD countries, the various schemes that pay for the. fees, drug costs and travel costs) and non-monetary (time) costs of seeking care, income levels in relation to the magnitude of the costs of the care, and the degree of access to cash or other accepted forms of payment. food), because there is only limited ability to pay for the range of household needs. 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. 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. 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. Given the reduction in available health … The government funds the majority (57%) of health expenditure (Figure 1); 54% of government spending is from domestic sources. The stability or reliability of financing sources are also important considerations. In some instances employers may directly finance health care for their employees. Charitable or voluntary contributions can take the form of financial support or in-kind donations (e.g. to preventive rather than curative care). 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. The problems with this source of finance are often indirect. Some financing mechanisms may encourage undesirable practices such as the inappropriate utilization of services. The challenge is to develop new types of local institution that can coordinate and systematically utilize the community resources. The typical net yield from lotteries is between 10-30% of gross receipts. Different financing mechanisms have very different effects on the level and type of service use. Approaches to Improved Financing of Health Activities. 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. In their capacity as employers, governments may either run their own social insurance scheme or contract such schemes to private insurance companies. Non-tax revenues are from state-owned companies, including natural resource revenues such as oil and gas. The demand for health services can be defined in terms of the coincidence in one individual of both the willingness and ability to pay. Four aspects of the overall efficiency with which financing mechanisms raise and use finance should be considered. 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. 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. These include external effects on costs (e.g. Public sector sources and external sources are typically less flexible than private sector sources in this respect. Private financing plays a role in all health systems. Included in this category are any … 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. Health service financing source Health services financed broadly through private expenditure or public expenditure or external aid Public expenditure includes all expenditure on health … how is ability to pay assessed? Uncertainty or cyclical fluctuations in the economy and/or political allocation process can undermine the level of revenue raised. 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. Moreover, the out-of-pocket expenditure cannot be considered as a reliable source of funding to build a resilient service delivery systems. 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. There is a limit to what can be collected in tax revenue and how much can be allocated to the health sector without conflict with wider primary health care objectives. 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. Health sectors may account for a sizeable share of national resources and are often major employers. 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. more equal access to health care or more equal utilization). Despite broad access to health facilities, there is potential for improving utilization of services and high-quality interventions. 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. Yet their impact on the cost of provision and their encouragement of inappropriate service provision contribute to the inefficiency of resource use. They may, for instance, pay for private sector health services, employ medical personnel directly, or provide necessary facilities and equipment. 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. 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 … Public Health Financing CDC Office for State, Tribal, Local and Territorial Support and . 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. 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. Some methods of payment influence consumer behaviour by the incentives given to providers to withhold or provide services; while some may directly stimulate or restrain the utilization of services. It is also important to recognize that health financing problems are not simply health sector problems, but often reflect economy-wide difficulties. Most tax revenues are paid into a national pool and then shared out between different areas of government expenditure. 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 includes income tax, payroll tax (including mandatory social health insurance contributions) and corporate or profit tax. the various major sources of health care financing in Nigeria, its focal point was on the NHIS. 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. Overall, it is argued that social insurance reinforces the maldistribution of resources between rural and urban areas in developing countries. Health Financing Functions . Current levels of household expenditure partly result from the existing pattern of government health care provision, and the limited access to free/cheap government health care (particularly in rural areas). Some governments, however, may 'earmark' a particular tax for a particular purpose. A compulsory source means the … 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. 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. 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. 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. sugar and coffee plantations in Latin America, tea and rubber estates in Asia and cocoa farms and mines in Africa). The remaining funds flow primarily from consumers as out-of … 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. Charitable contributions may also take the place of, or reduce, other sources of finance. The problems of the health sector that are discussed in Chapter 11 have fuelled the debate about how health care is financed. 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. 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. how is abuse of the system restricted?) CDC Procurement and Grants Office . 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. People may use and buy non-government (e.g. 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. (Figures 1 and 2), whereas other private health expenditure declined slightly, from 4% to 3.2%, suggesting only a minor role for private nonprofit and for-profit institutions as financing sources. 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. 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. Willingness to pay does not necessarily reflect ability to pay. allocating or using funds in a … mission, private, traditional) health care partly because they have no cheap or good quality government alternative. Examples of displacement effects include foreign assistance which may displace government support for health care; counter-funding, often a precondition for foreign assistance, which may divert funds away from existing priority projects; health insurance schemes, which may in some instances displace rather than add to the total of resources being allocated to health care (e.g. Oil companies, mining and mineral industries, and large-scale export-centred agricultural enterprises usually provide for the health needs of their workforce. In fact, 60% of the total health care dollar comes directly or … June 2013 . Taxes that make the poor poorer could seriously damage their health status and undermine their productivity; there are also many other fields of socioeconomic development that compete with the health sector for funds and yet give substantial support to primary health care (e.g. 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. the sick or potentially sick) should pay for it - horizontal equity. 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. 1.4 Supply/provision and provider behaviour. 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