Financing Health Protection: Financing Sources

Globally, private health expenditure is nearly as high as public health expenditure

Depending on the financing mechanism chosen, health expenditure derives from different sources, particularly:

  • general government revenues
  • income-related contributions to social and national health insurance
  • risk-based premiums to private insurances

While private out-of-pocket payments (OOP) are not considered as a fair health financing mechanism given its regressive impact on income, it is used in many countries and OOP occur nearly everywhere, however, the level varies significantly from less than 10 per cent of total health expenditure in high income countries to more than 90 per cent in the poorest countries of the world.

Government revenues are used to fund national health services e.g. in the United Kingdom. Taxes are also used to finance other health-related government programmes, such as maternity vouchers in Kenya or conditional cash transfers in Nicaragua.

In most social or national health insurance schemes, government revenues are used to pay for the contributions of people without ability-to-pay such as the poor, unemployed, elderly etc. This approach is gaining momentum in Africa, Asia, and Latin America and reflects the move towards a human rights based approach to health. Subsidized schemes may be separate from a country's health insurance system such as the government sponsored programme Seguro Popular in Mexico or integrated into a national social health insurance scheme, as is the case in Chile.

Income-related contributions to social health insurance schemes from those formally employed are another major financing source. Many countries rely on mixed financing mechanisms using both government revenues and contribution payments to generate funds for health protection. Risk-based premiums to private insurance funds often exist for those who can afford it.

Globally, public expenditure on health protection as a share of GDP more or less equals private health expenditure. In Africa, private expenditure exceeds public expenditure and amounts to nearly 3 per cent of GDP. More than 40 per cent of the global burden of health expenditure is borne by private households in the form of OPP, which due to their regressive nature are the most inequitable source of health financing.

Figure 1: Sources of health-care financing, by region, 2011 (percentage of GDP)

Source: ILO 2014 (WSPR)
 

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