Further research

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compulsory by the firm to prevent low risk or high income employees opting out. In some countries (for instance the united states and Australia) there are examples of the imposition of community rating on private insurers; that is, within a given geographical area, premiums are not permitted to vary according to health risk or occupation. Premiums are often paid at least in part by employers, health insurance being considered a fringe benefit, though labour legislation making it compulsory for employers to provide their workers with some form of medical care is increasingly being introduced in developing countries.

SELF ASSESSMENT EXERCISE

Discuss various sources of health care financing.

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the supply of health care are worsened by the increased need for health care brought about by the recession itself through the links between poverty and ill health.

(iii) Rising Expectation: The rising expectation of health care consumers especially the middle classes, to receive high-technology medical care similar to that available in the industrialized world is high.

(iv) Concerns about equity: Governments committed to the principles of primary health care have a major responsibility to improve levels and depths of coverage. The concerns for equity may influence the choice and system of health care financing. To extend basic health care at a time when there is such strong middle class pressure may only be available by providing substantial additional resources to the health sector.

(v) Disease-pattern changes: Disease-pattern change may result due to changes in average income levels or due to changes in social development. Thus, as standards of living rise and morbidity patterns change, these changes are likely to have an effect on health care financing. In addition to shifts in disease patterns, the advances of medical technology have led to the possibility of treatment for health problems previously accepted as untreatable.

This again places further pressures on health-care providers.

(vi) Efficiency: Given the limited resources available for health in developing countries, it is essential to taste and use resources as efficiently as possible.

(vii) Displacement effects: Rather than generating additional resources for the health sector, new or expanded financing mechanisms may merely displace funding from other sources.

Displacement is not necessarily an undesirable consequence if the new or expanded source of finance is more efficient or more equitable than the one it partially displaces. Examples of displacement effects include foreign assistance which may displace government support for health care; counter-funding often a precondition for foreign assistance, which may divert funds away from existing priority projects; health insurance schemes, which may in some instances displace earth than additional to the total of resources being allocated to health care (e.g. displacing direct payments); charitable contributions which may be withdrawn when other sources are developed; and government allocations which may be reduced when other sources of finance (such as user fees) are developed.

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(viii) Wider effects of the health sector: Health sectors may account for a sizeable share of national resources and are often major employers. Consequently, the activities of the health sector may have spill-over effects on the economy as a whole. These include external effects on costs (e.g. inflation through the repercussions of high increases in stag pay);

foreign exchange problems through heavy foreign borrowing for development projects or for payments for imports such as pharmaceutical or equipment opportunity costs such as the attraction of scarce manpower into the health sector at the expense of other professions, and disincentives to investment and employment (e.g. as a result of financing health services through high taxes on certain economic activities, enterprises or sectors). These external effects may also be positive as in the case or improved productivity resulting from reduced death and disability in the work force.

In selecting a system of financing health care some criteria should be used. The first three criteria outlined below are general, while the last two have particular importance within the context of primary health care:

a) Viability and ease of using the system: This implies bureaucracy and cost simplicity, social acceptability ad technical feasibility

b) Revenue generating ability: Net revenue minus earning ability = Revenue minus operating costs. The administration of user-changes for example, may include the costs of billing, accounting and the safe storage and collection of funds. Even where additional staff is not employed and existing staff are used, it implies an opportunity cost to the health service in terms of alternative activities which the staff could have been engaged in had they not been involved in the revenue generating scheme.

c) Effects on service provision: Systems of financing, for example which involve three parties – the patient, the provider and an insurance company – may lead to over-provision of certain services.

d) Effects on equity: That is equal access to care for those in equal need.

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e) Participation in decision-making: This is a concept that stresses community participation which creates an opportunity for a direct relationship between the consumer and the provider; an example of a financing system suitable of such participation is user charges.

SELF ASSESSMENT EXERCISE

1. What are the factors that influence the choice of a financing system?

2. Show how demographic conditions can affect the choice of health care financing systems.

3. Explain the difference between public and private goods.