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CHAPTER 7 HEALTH FINANCING MODULE

7.1 Overview 7.1.1 Chapter Outline This chapter presents the health financing module of the assessment tool. Section 7.1 defines health financing and its key components and describes the process of resource flows in a health system. Section 7.2 provides guidelines on preparing a profile of health financing for the country of interest, including instructions on how to customize the profile for country-specific aspects of the financing process. Section 7.3 presents the indicator-based part of the assessment. Section 7.4 provides guidance on how to synthesize your findings and presents suggestions for possible solutions to the most common problems in health system financing. 7.1.2 What Is Health Financing? The World Health Organization (WHO) defines health financing as the “function of a health system concerned with the mobilization, accumulation and allocation of money to cover the health needs of the people, individually and collectively, in the health system.” It states that the “purpose of health financing is to make funding available, as well as to set the right financial incentives to providers, to ensure that all individuals have access to effective public health and personal health care” (WHO 2000). The rest of this section draws from PHR (1999) and Mossialos and Dixon (2002). Health financing has three key functions Tip! (illustrated in Figure 7.1 and defined Definitions of health financing terms can be below): revenue collection, pooling of found in the following glossaries— resources, and purchasing of services. Revenue collection is concerned with the • World Bank Health Systems sources of revenue for health care, the Development—Glossary (World Bank type of payment (or contribution 2006) mechanism), and the agents that collect these revenues. All funds for health care, excluding donor contributions, are collected in one way or another from the general population or certain subgroups. Collection mechanisms include taxation, social insurance contributions, private insurance premiums, and out-of-pocket payments. Collection agents (which in most cases also pool resources and purchase health care services from providers) could be government or independent public agencies (such as a Social Security agency), private insurance funds, or health care providers. • European Observatory's Health Systems and Policies (2006) Glossary

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Health Systems Assessment Approach: A How-To Manual

Notes: Figure 7.1 presents the most common flows of health system resources; some countries may have other options of health system financing. “Other Government Agencies” can include the Ministry of Education and Ministry of Defense.

Figure 7.1 Health Financing Flowchart

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Chapter 7. Health Financing Module

Pooling of resources, the second main aspect of health financing, is the accumulation and management of funds from individuals or households (pool members) in a way that insures individual contributors against the risk of having to pay the full cost of care out-of-pocket in the event of illness. Tax-based health financing and health insurance both involve pooling. Note that fee-for-service user payments do not involve the pooling of resources. Some fees, however, may be set to “cross-subsidize” certain services or groups by charging more than the cost of production for a service or a group to allow less than the cost to be charged for another service or to another group. Purchasing of health services is done by public or private agencies that spend money either to provide services directly or to purchase services for their beneficiaries. In many cases, the purchaser of health services is also the agent that pools the financial resources. Purchasers of health services are typically the Ministry of Health (MOH), Social Security agencies, district health boards, insurance organizations, and individuals or household (who pay out of pocket at time of using care). Purchasing can be...
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