In many countries, the health system’s financing strategy creates an imbalance that favors more expensive hospital care over PHC.2 This Improvement Strategies module focuses on financing mechanisms that can be leveraged to increase equitable access to quality primary health care, while also promoting efficiency. The NHS is funded mainly through public financing. Moreover, the out-of-pocket expenditure cannot be considered as a reliable source of funding to build a resilient service delivery systems. Proponents argue that such a charge would deter overuse of GP services by those who do not have a genuine health need and would raise additional money for the NHS. Secondly financing incidence analysis will be used to evaluate the distribution of the current health care financing burden between socio- 2014. mandated health financing mechanisms. Discussion paper no 4World Health Organization website. Federal Ministry of Labour and Social Affairs (2016). However, there is no evidence that one funding model or particular mix of funding mechanisms is inherently superior to others. So after seeing how much revenue this has brought into the state budget and helped people who use it medically, I really see it as a no nonsense way to help fund the NHS. London: The King’s Fund. A basic characteristic of health care systems in all developed countries is that the majority of payments for medical services flows through third parties. Social security at a glance 2016. The way that health care is funded varies between different countries. Health care financing mechanisms and reforms evolve in many different contexts, and understanding the initial conditions in which they are being implemented or would be implemented is a useful starting point for assessing the reasons for pursuing them, the likely implications for the shape and pace of the mechanisms, and their potential sustainability in similar or different contexts. London: HM Treasury. This is based on literature review, analyses of secondary data and key informant interviews. Health financing refers to how financial resources are used to ensure that the health system can adequately cover the collective health needs of every person. of sustainable financing mechanisms for the health system as a whole. Health systems in transition, vol 15, no 1. The budgetary provision for the MOH has continued to increase—from 2.8% of the national budget in 1970 to 6.4% in 2004. Health financing is fundamental to the ability of health systems to maintain and improve human welfare. Mossialos E, Dixon A, Figueras J, Kutzin J (eds.) User charges also had adverse impacts on health in some cases, particularly among the poorest, sickest people (Newhouse 1993).,,,,,,,,,,,,,,,,,, how they are levied: direct taxes are levied on individuals, households and companies by the government (eg, Income Tax, Corporation Tax), whereas indirect taxes are applied on the manufacture or sale of goods and services (eg, Value Added Tax, import/export taxes), who is raising them: taxes raised by central government may be used to finance national spending on health care; taxes raised by local government may be used for spending on health care in a specific region or local area. 1 It is a foundational component that impacts the entire health system’s performance, including the delivery and accessibility of primary health care. This is based on literature review, analyses of secondary data and key informant interviews. No country (the UK included) relies on a single source of funding for health care. Paris: OECD publishing. One of the most important studies on the impact of charging – the RAND Health Insurance Experiment in the 1970s – found that user charges reduced demand across all types of health care irrespective of whether the service was more or less effective. Hypothecated taxes can be classed as ‘hard’ or ‘soft’ (also known as strong and weak). Canadian Institute for Health Information website. In Sweden, for example, public funding for health care comes from both central and local taxation. A t… Available at: (accessed on 28 February 2017). There would also be administrative costs of collecting the charge and verifying exemptions. Available at: (accessed on 8 March 2017). London: Office of Health Economis. Ensuring equity and universal access based on clinical need is a principal objective of SHI systems, and a major benefit is that payment is not related to risk. June 2017. We have seen no difference in crime, some would assert that the crime rate has gone down. the associated proposals for legislative change. The Cost-Effectiveness of Primary Care Services in Developing Countries: A review of the literature. Kaiser Family Foundation website. World Health Organization. Selected domains that might be most directly affected include: No health financing strategy works in all cases and all systems; they must respond to the specific context and structure of a country’s health system. Furthermore, an estimated 30% of the population has no access to health care for financial reasons, and 21% is kept from seeking by geographic barriers (1). Canadian Institute for Health Information (2016). Macpherson N (2016). New York: Oxford University Press Inc. Wagstaff A (2010). In Germany, for instance, people who earn over a certain amount can choose to purchase private health insurance instead of social health insurance. How much does India spend on health care financing vis-à-vis other countries? The revenue stre Revenue contribution and collection . 2009, Friedberg M, Hussey P, Schneider E.  Primary Care: A critical review of the evidence on quality and costs of health care. Across the UK, private health insurance policies are held by 10.6 per cent of the population. Tax-funded models typically seek to pool risk across large populations and make health services available on a universal basis. In Italy, out-of-pocket spending accounted for 18 per cent of total health spending in 2013 – comprising spending on services not covered by the public system and co-payments for some services, including pharmaceuticals, specialist visits and some diagnostic testing (Mossialos et al 2016). Available at: (accessed on 7 March 2017). Hypothecated taxes– sometimes also called ‘earmarked taxes’ – are taxes that are assigned to a specific purpose. Cambridge, Mass: Harvard University Press. As social health insurance is often based on employment, countries operating this model have to find ways (including general taxation and other sources such as statutory pension funds) to provide cover for those not in employment. There are also two major publicly funded health insurance programmes: the federally administered Medicare programme, which covers older and some disabled people, and the state-run Medicaid programme, which provides cover to those on low incomes (Wanless 2001; Robertson et al 2014). Arguments that the privately insured are ‘paying twice’ and are making less use of public services can lead to advocacy for tax relief for PHI (see box). Therefore, to understand how the maternal health system is financed, this review aims to examine the mechanisms for funding, pooling and purchasing maternal health care and the influence these financing mechanisms have on the delivery of maternal health … London: Chatham House Centre on Global Health Security Working Group Papers, Working Group on Financing, Paper 4; 2013. 2009 October; 99(10): 1780–1791, Özaltın A, Cashin C editor. Watson SI, Sohota H, Taylor C, et al. Richard Murray and Siva Anandaciva discuss how lessons from the recent history of NHS finances can help the system plan for the future. Provider payment systems refer to mechanisms for purchasing comprehensive primary health care services from a variety health care service providers. Collection mechanism of health care resources 10 General taxation 11 Health insurance plans 11 Allocation mechanism of health care resources 11 ... institutionalized the current tax-based health care financing system in 1948 and 1966 respectively. In Norway – where co-payments are used for GP and specialist visits, physiotherapy visits, prescription drugs and some diagnostics – annual caps for out-of-pocket expenditure are set nationally. Instead, financial coverage improvement strategies promote prepayment (separating payments for health care from the need for health care), risk pooling (spreading the costs of health care over a large population group), and equity in financing (ensuring that financial contributions to the health system are based on a person’s ability to pay). ‘NHS England using technology to beat cost of missed appointments’. In the United States, health care is technologically advanced but expensive. Private healthcare is where the capital is raised through the patients using the health services. Newhouse JP (1993). Lessons from the RAND health insurance experiment. We do not consider how social care is funded; in England, health and social care are funded separately, while the definition of social care varies between countries, making comparisons difficult. Financing involves three aspects, namely revenue collection, risk pooling, and purchasing. Hawe E, Cockcroft L (2013). The Commonwealth Fund website. [cited—3 July 2019]. In New Zealand, co-payments are required for most GP services and some nursing services provided in GP clinics. financing mechanisms, key categories of health care providers and user groups (Work Package 1). Canada’s health care providers, 2000 to 2009: a reference guide [online]. The NHS is mainly funded from general taxation and National Insurance contributions. Beveridge systems, where public financing and health care delivery are handled within one tax-financed structure, such as the National Health Service (NHS) in the UK and in some Nordic states. We also cover user charges. Whatever the expertise of the authors, it clearly does not cover the monetary system - which is, admittedly, byzantine and clouded in obfuscation. 13881 March 2008 JEL No. Since then, there has been intense debate over the two generic types of systems, with the discussion centered on access, quality and cost. How much does India spend on health care financing vis-à-vis other countries? Designing and implementing health care provider payment systems: how-to manuals. Out-of-pocket payments, user fees, and catastrophic expenditures. Health financing refers to how financial resources are used to ensure that the health system can adequately cover the collective health needs of every person.1  It is a foundational component that impacts the entire health system’s performance, including the delivery and accessibility of primary health care. One of the few states at present where Cannabis is legal. Kaiser Family Foundation (2013). However, Sir Nicholas Macpherson, formerly permanent secretary to the Treasury, has recently suggested that a specific tax rise (with National Insurance Contributions being the ‘strongest candidate’) may be appropriate as a means of creating additional funding for the NHS (Macpherson 2016). people may be prepared to pay more tax if they can see where it is being spent, especially given the strong public support for health care. 13881 March 2008 JEL No. Usually mandatory, individuals (and in some cases, their employers) make regular savings into funds which they then use to pay for care when they or their family members need it. It is also often argued that private health insurance reduces the burden on public finances by taking some people out of the state system. London: Institute for Fiscal Studies. The problems of the health sector that are discussed in Chapter 11 have fuelled the debate about how health care is financed. Innovative financing refers to a range of non-traditional mechanisms to raise additional funds for development aid through "innovative" projects such as micro-contributions, taxes, public-private partnerships and market-based financial transactions.. As of the beginning of 2010, most of the existing innovative financing mechanisms were allocated for the health care sector in developing countries. However, financing is much more than simply generating funds. The relative contribution from each of these sources of finance – general taxation, National Insurance and user charges – has fluctuated over the years (see Commission on the Future of Health and Social Care in England 2014b). July 2011. The health care market, however, is quite different. Available at: (accessed on 28 February 2017). Health care costs were about $3.6 trillion dollars in 2018 ( 1 ). At this point many people gave up their insurance, but analysis by the Institute for Fiscal Studies found that the cost of the increase in demand on the NHS was ‘substantially lower’ than the cost to government of the subsidy (Emmerson et al 2001). 2010. Gottret P, Schieber G (2006). financing mechanisms contribute to achieving improved health outcomes, financial risk protection and consumer responsiveness. Health Care Financing, Efficiency, and Equity Sherry A. Glied NBER Working Paper No. However, as well as deterring overuse, the RAND Health Insurance Experiment found that charging also deters appropriate use, particularly among low-income groups and those with the greatest health needs. Available at: (accessed on 28 February 2017). With the NHS under huge financial pressure, questions are being raised about the sustainability of its funding model. 2 Main mechanisms of health care financing 3 Government funding 3 Health insurance 3 Mandatory health insurance 3 Voluntary health insurance 3 Out-of-pocket payments 4 3 Assessing financing mechanisms 5 Feasibility 5 Equity 5 Efficiency 6 Sustainability 6 4 Key functions of health care financing 7 Revenue collection 8 Sources of funds 9 The NHS is funded mainly through general taxation supplemented by National Insurance contributions. McKee M (2013). Individuals (or employers on their behalf) take out health care insurance policies from private organisations. NHS England website. While the NHS is generally described as being ‘free at the point of use’, patients have been required to contribute towards the cost of some services (eg, prescriptions and dental treatment) since 1951. As spending on health care tends to rise over time, health services can consume an increasing proportion of public spending. A PHC-oriented health financing system will impact all downstream components of the PHCPI conceptual framework—inputs, service delivery, outputs, and outcomes. Buckingham, Philadelphia: Open University Press. In the United States, health care is technologically advanced but expensive. OHE guide to UK health and health care statistics. Washington, DC: Joint Learning Network for Universal Health Coverage. In classic social insurance models, members (normally employees) contribute a proportion of their salary, with the level of contribution related to income rather than risk of illness. Health care costs can be catastrophically expensive for people with severe or long-term illness, so very few countries rely solely on user charges to cover health care costs, instead developing alternative financing models that allow risks and costs to be pooled across large groups of people. Health Economics, vol 19, no 5, pp 503-17. There have been some reviews related to health financing and health promotion in Thailand (Adulyanon, 2012; Evans et al., 2012); however, they only focus on one fund or on curative care. In 1995, Taiwan established the current social health insurance system. Am J Public Health. The benefits package may vary between insurers, enabling people to choose according to their means, needs and preferences. Washington, DC: World Bank. If it were made legal in the UK and all the taxation and additional revenue was directed at The NHS, it could only help. ‘Canada: health system review’. General taxes are an efficient way of raising money, with low administration costs relative to the amount of money they raise. In this module, Financial Coverage refers to strategies that promote financial protection, or ensuring that people are able to access quality health services when needed without risk of impoverishment or financial catastrophe. Paris V, Devaux M, Wei L (2010). Capital financing has varying effects on hospitals and health systems, and much of that has to do with the size of the organization. Those earning above €57,600 per year can opt out of the social health insurance system and purchase private insurance instead (Federal Ministry of Labour and Social Affairs 2016). The difference is crucial. Health-care financing is one of the core components of health systems. The social care and health systems of nine countries. However, user charges often form a large part of the way health care is financed in developing countries (Gottret et al 2006). As of 2009, 13 countries apply such a domestic tax on airline tickets. Nigeria is a Lower Middle-Income Country (LMIC) in West Africa [15] with a population that has risen from 123.7 million in 2000 to158.4 million in 2010. By 2015, the proportion of the population with no form of health care cover had fallen to 10 per cent. A person who wants to buy an automobile pays the dealer for the car. Available at: (accessed on 3 March 2017). France also requires co-payments at the point of access that are capped. Hello I am from England originally, brought over to the US as a child. ‘Demand for private medical cover increases as corporates extend schemes’. Here we pull together a range of content around the NHS funding debate. The use of private insurance varies greatly. Big changes in health care financing happen rarely, usually after major events Footnote 6, and are more likely to take place in countries with social cohesion high on their value scale Footnote 7. aims to provide interesting, bite-sized and relevant financial articles. PHC spending includes the budget that a national or subnational government uses to maintain and strengthen PHC. If there are many insurers and people can switch between them, administrative costs can be high (Wanless 2001). Health Care Finance and Expenditure (3)Overwhelmingly, health care financing in Saudi Arabia is provided mainly fromgovernment revenues. This inventory is intended to provide a snapshot of the main features of health management systems across Europe. Broadly speaking, there are five different ways in which private insurance can be used: as the dominant form of cover; as duplicate cover; as complementary cover; as supplementary cover; and as substitutive cover. Recently, the scale of tax relief has been reduced. Learn more in the Improvement Strategies user guide. Health Care Financing, Efficiency, and Equity Sherry A. Glied NBER Working Paper No. Available at: (accessed on 9 March 2017). Competition can in theory also drive down premium prices between competing insurance companies; however, Switzerland and the US, which both use PHI as the primary source of financing, spend more on health than the UK. Health Financing Functions. Health financing revisited: a practitioner’s guide. Medical savings accounts: Singapore’s non-solution to healthcare costs. Available at: (accessed on 10 March 2017). Robertson R, Gregory S, Jabbal J (2014). Benefit and financing incidence analyses are two analytical methods for comprehensively evaluating how well health systems perform on these objectives. London: House of Commons Library. Using data across the OECD, I find that almost all financing choices are compatible with How should the NHS be funded? Sharing experience and learning from others Throughout the model, there are case studies that provide examples of how other countries have implemented reforms and the factors that supported implementation. The rest is financed by . Background paper for the Commission on the Future of Health and Social Care in England. Some countries allow charges for non-clinical services that do not affect health outcomes. Exactly how equitable these models are depends on whether the wider tax system is progressive or regressive (see box). The PHCPI conceptual framework outlines three elements that comprise PHC health financing. Table 1indicates strong economic growth with GDP per capita (US$) rising from $371 in … The average co-payment for a GP consultation ranges from NZD15-45 (around £8-25), although this is capped at NZD17.50 (around £10) per visit for people living in low-income areas (Mossialos et al 2016). Glob Health Res Policy. Various exemptions are in place: for pregnant women (for treatment related to pregnancy), prisoners, people with severe disability or long-term conditions, and those over the age of 65 and under the age of 6 who live in households with a gross income below a nationally defined threshold (Mossialos et al 2016). The 2030 Agenda for Sustainable Development emphasizes the importance of achieving universal health coverage (UHC) in reaching its third goal, to ensure healthy lives and promote well-being for all at all ages (United Nations, 2015). Layard R, Appleby J (2017). This, plus the high costs associated with any transition, means that developed countries rarely make major changes to their established primary way of paying for health care. NHS Sustainability Committee. The amount of money spent per person on health care is higher in the United States than in other countries. There may be a single fund or several funds covering different sectors of the population and these are usually publicly run. We do not pay for the NHS with taxes. Compared to private insurance, SHI is generally considered to be more efficient as it allows pooling of resources and risk across a group of people. Tax revenues are collected to fund health care. London: The King’s Fund. For instance, certain payment approaches may enhance quality or access, but also encourage unnecessary use of curative services. Other funding streams used to supplement it in Singapore include direct subsidies to hospitals, voluntary back-up insurance to cover high health care costs and a government-funded safety net for low-income people (McKee 2013). The King’s Fund website. Subscribe for a weekly round-up of our latest news and content, By Professor Sir Chris Ham - 23 March 2017. 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