Health System - Financial Resources

Financial Resources

There are generally five primary methods of funding health systems:

1. general taxation to the state, county or municipality
2. social health insurance
3. voluntary or private health insurance
4. out-of-pocket payments
5. donations to charities

Most countries' systems feature a mix of all five models. One study based on data from the OECD concluded that all types of health care finance "are compatible with" an efficient health system. The study also found no relationship between financing and cost control.

The term health insurance is generally used to describe a form of insurance that pays for medical expenses. It is sometimes used more broadly to include insurance covering disability or long-term nursing or custodial care needs. It may be provided through a social insurance program, or from private insurance companies. It may be obtained on a group basis (e.g., by a firm to cover its employees) or purchased by individual consumers. In each case premiums or taxes protect the insured from high or unexpected health care expenses.

By estimating the overall cost of health care expenses, a routine finance structure (such as a monthly premium or annual tax) can be developed, ensuring that money is available to pay for the health care benefits specified in the insurance agreement. The benefit is typically administered by a government agency, a non-profit health fund or a corporation operating seeking to make a profit.

Many forms of commercial health insurance control their costs by restricting the benefits that are paid by through deductibles, co-payments, coinsurance, policy exclusions, and total coverage limits and will severely restrict or refuse coverage of pre-existing conditions. Many government schemes also have co-payment schemes but exclusions are rare because of political pressure. The larger insurance schemes may also negotiate fees with providers.

Many forms of social insurance schemes control their costs by using the bargaining power of their community they represent to control costs in the health care delivery system. For example by negotiating drug prices directly with pharmaceutical companies, or negotiating standard fees with the medical profession. Social schemes sometimes feature contributions related to earnings as part of a scheme to deliver universal health care, which may or may not also involve the use of commercial and non-commercial insurers. Essentially the more wealthy pay proportionately more into the scheme to cover the needs of the relatively poor who therefore contribute proportionately less. There are usually caps on the contributions of the wealthy and minimum payments that must be made by the insured (often in the form of a minimum contribution, similar to a deductible in commercial insurance models).

In addition to these traditional health care financing methods, some lower income countries and development partners are also implementing non-traditional or innovative financing mechanisms for scaling up delivery and sustainability of health care, such as micro-contributions, public-private partnerships, and market-based financial transaction taxes. For example, as of June 2011, UNITAID had collected more than one billion dollars from 29 member countries, including several from Africa, through an air ticket solidarity levy to expand access to care and treatment for HIV/AIDS, tuberculosis and malaria in 94 countries.