Health System: Objectives

Fair financing

Fair financing in health systems means that the risks each household faces due to the costs of the health system are distributed according to their ability to pay rather than to the risk of illness.

A health system in which individuals or households are sometimes forced into poverty through their purchase of needed care, or forced to do without it because of the cost, is unfair.

Paying for health care can be unfair in two ways:

  1. Expose families to large, unexpected expenses
  2. Impose regressive payments (those least able to contribute pay proportionately more than the better-off)

Out-of-pocket payments are generally regressive, but can in principle be neutral or progressive. When this happens, and out-of-pocket expenses are not too large, they need not impoverish anyone or deter the poor from obtaining care.

Families that spend 50% or more of their non-food expenditure on health are likely to be impoverished as a result.

The way health care is financed is perfectly fair if the ratio of total health contribution
to total non-food spending is identical for all households, independently of their income, their health status or their use of the health system.

Clearly the financing would be unfair if poor households spent a larger share than rich
ones, either because they were less protected by prepayment systems and so had to pay relatively more out of pocket, or because the prepayment arrangements were regressive. But to identify fairness with equality means that the system is also regarded as unfair if rich households pay more, as a share of their capacity. Simply by paying the same fraction as poor households, they would be subsidizing those with lower capacity to pay. It is true that well-off households might choose to pay still more, particularly by buying more insurance, but that can be considered equitable only if the extra spending is prepaid and if the choice is entirely voluntary and not determined by the system of taxes or mandatory insurance contributions.

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1 thought on “Health System: Objectives

  1. Pingback: Health Systems Analysis: A brief overview | communitymedicine4all

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