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Analysis of national healthcare financing schemes around the world provides key insights into
the advantages and challenges of each financing scheme, albeit with consideration for the
local context. Differences in healthcare financing schemes and the wide variances in country
health system profiles reveal that there is no one-size-fits-all system, and each system has its
own merits and limitations which merit further discussion.
Tax-based financing
Tax-based financing refers to a system in which the majority of healthcare expenditure is
financed via public revenues, aside from earmarked payroll taxes (i.e., not social health
insurance based), by local, regional, or national level government agencies; as such,
healthcare services are accessible to all citizens (WHO, 2004). Tax-based systems frequently
directly operate and manage healthcare facilities (The World Bank, 2009). Authorities decide
on what share of general tax revenues is used for healthcare expenditure. Given that
revenues are used by the funding body for the entire population, equity in healthcare can be
more easily achieved through this system.
As the healthcare services are heavily subsidised by government, prices of healthcare
services from the government are generally low. However, due to the large healthcare
demand driven by the low prices as well as government’s response to ration available supply,
long waiting times are common within these systems. Under-provision of services limiting
access to care may also be observed. For the public healthcare facilities owned and
managed by government, how to improve the quality and efficiency of healthcare services
remains a core issue.
Social health insurance
Social health insurance (SHI) schemes are generally characterised by independent or
quasi-independent insurance funds and a reliance on mandatory earmarked payroll
contributions (usually from individual and employers) (The World Bank, 2009). SHI is based
on a principle of solidarity, whereby citizens, employers, and governments pay contributions
into a joint fund. Contributions may be fixed or based on income (Kirch, 2008; Van der Aa et
al., 2019). SHI serves as protection against unexpected costly care associated with illness.
Members of SHI schemes make regular payments to the joint fund. Like tax-based systems,
equity in healthcare is also achievable through SHI with collective pooling and distribution of
funds.
Private health insurance
Private health insurance is typically supplied by for-profit providers, although in some cases
is provided by public and not-for-profit agencies (Myint et al., 2019). Three key players are
actively involved in this system: healthcare consumers (individuals), healthcare providers, and
healthcare insurers. Individuals (or employers on their behalf), after registering as an insurer’s
policy holder, must pay a mandatory monthly or annual contribution to the insurer, and the
insurer reimburses the insured or contracts to provide relevant health services (The King’s
Fund, 2017). When individuals seek private health insurance, they voluntarily enter into direct
contracts with insurance providers and pay risk-related premiums as mandated by the
insurers. Risk-related premiums refers to the cost one pays into the health insurance pool
based on an individual’s risk of needing care. More at-risk consumers, such as older, sicker
individuals, may have to pay higher premiums for their insurance (Mossialos et al, 2002).
Consequently, some governments introduced regulations on private health insurance, e.g.,
community rating which means everyone pays the same premium for the same designated
policy, to improve equality in the insurance coverage. Nevertheless, due to disparities in
structural and financial access to private health insurance, healthcare financing systems that
are mostly private have not been able to provide equitable healthcare to the entire population.
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