Indirect taxes are paid to the government or other public agency via a third party (retailer or supplier). Taxes on business transactions, profits and incomes are all of lesser importance. Consequently, the activities of the health sector may have spill-over effects on the economy as a whole. Current levels of household expenditure partly result from the existing pattern of government health care provision, and the limited access to free/cheap government health care (particularly in rural areas). They can be regressive if, as is often the case, taxes are levied on items such as beer, cigarettes, recreational events, or foodstuffs; but they can be progressive if they are imposed on luxury products purchased primarily by the more affluent sections of society. In all OECD countries, the various schemes that pay for the. Utilization of, and payment for, health services is, moreover, likely to depend heavily on the perception of their relevance to a specific health need and the extent to which they provide a service that people value. 1) General Taxes account for 75% of the majority of financing and the other percentage is 2) 25% Employer based and from monthly premiums as cited … By mobilizing under-utilized national and local resources (e.g. Private insurance is not subject to the political allocation process and may channel extra funds into the health sector. Approaches to Improved Financing of Health Activities. The typical net yield from lotteries is between 10-30% of gross receipts. Current primary health care initiatives in developing countries stress the importance of national self-reliance and community participation in health care delivery. The total financial contribution to social insurance schemes is (in theory) determined actuarially on the basis of the incidence of illness, the conditions of eligibility for benefit, and the value of those benefits. Within the health sector the first priority must be to improve efficiency, making better use of available resources and enhancing the standing of the sector nationwide. This includes income tax, payroll tax (including mandatory social health insurance contributions) and corporate or profit tax. It is also important to recognize that health financing problems are not simply health sector problems, but often reflect economy-wide difficulties. In the area of Health Financing, WHO provides evidence-based policy and technical support to Member States to improve health system financing in terms of policy development, allocation and tracking of funds, social and financial risk protection, equity in financing … A clear advantage of this source of finance is that a tax is visibly assigned to priority funding of certain activities or programmes. Use of traditional healers, for example, may reflect a belief in the relevance of their treatments for certain diseases rather than a general willingness to pay for any type of health care. Yet their impact on the cost of provision and their encouragement of inappropriate service provision contribute to the inefficiency of resource use. Overall, it is argued that social insurance reinforces the maldistribution of resources between rural and urban areas in developing countries. The extent to which these payments represent a real ability and willingness to pay for health care is, however, unclear. Second, the price (or 'premium') charged for private health insurance is not based on the pooled risks of a large population, but on personal risk characteristics and the likelihood of illness in the individual or group covered. Included in this category are any payments a consumer may make directly to health care providers such as fees for services, or prices paid for goods and supplies. Sources of health care financing. In Nigeria, the health sector is financed through different sources and mechanisms. In developing countries high inflation rates (affecting the real rate of interest on loans) and lack of confidence in the government's abilities to honour eventual redemption of the bond may make it difficult to use deficit financing as a source of support for health systems. personnel). It may be mitigated by the introduction of an exemption mechanism for the poor, although such a mechanism may itself reduce the demand for health care made by low-income groups because they may not wish to be identified as 'poor'. In 1998, expenditures on personal health care services totaled $1 trillion with 19.6 percent paid directly by patients (out-of-pocket payments) and 80 percent paid by third parties (Health Care Financing Administration, http://www.hcfa.gov/stats/nheoact/tables). Although in some instances it can make a substantial contribution, community finance is unlikely to generate sufficient resources by itself to meet country health needs, and should be seen as complementary to, rather than as a substitute for, other sources of finance. Thus the role of charitable and voluntary contributions is decreasing, although it may still be important in times of emergency or disaster and can be a useful supplement to other forms of health finance. There have been calls for 'alternative financing' in order to address these problems. This discrepancy reflects the nature of insurance coverage. The problem with such taxes is that they are often difficult to administer, may be politically unpopular, and are also often unpopular with tax administrators because they limit their freedom of action. By relieving the pressure on ministries of health to devote resources to urban health services, it may even, indirectly, make more resources available to those in rural areas. Governments may in some instances also contribute to the schemes. Governments have in many instances an increasingly favourable attitude to the development of social insurance. Schemes may be profit or non-profit making, and may be organized for individuals or groups, the latter often benefiting from lower premiums (resulting from lower per capita administration costs as well as a degree of risk-sharing). Often administered by quasi-public bodies under national or local government regulation, these typically non-profit schemes rarely constitute an important component of overall health sector finance. Public sources of funding include those which are compulsory and pre-paid; meaning paid before the need for care is identified or care is accessed. The problems of the health sector that are discussed in Chapter 11 have fuelled the debate about how health care is financed. Deficit finance may also be raised from abroad in the form of bilateral or multilateral aid loans, typically given for a project life of between three and five years, and thereby constituting only a short-term source of support. It is easiest to cover those in regular employment, who may be as little as 5 to 15% of the population in developing countries; and there are often marked inequalities in the quantity and quality of services available to those covered by insurance relative to those who are not. Examples include paying for services from a chiropractor not on the approved provider list of your health plan and co-payments. Identifying the effect of financing mechanisms on consumer behaviour requires an understanding of its determinants. Benefits are seldom extended to families as employers are primarily concerned with maintaining the productivity of the workforce. General lax revenue is used in almost every country of the world to finance certain components of health care and, in developing countries, it is often the most important source of financing. They certainly require national strategies to address them, even where additional resources are to be recruited by actions within the health sector. The integration of the insurance and provider functions provides an incentive for cost containment, in contrast to a third-party payment system where providers and consumers agree on the quantity of care to be supplied and a third party (the insurance agency) merely reimburses the cost. For example, there must be national agreement that extra finance will be retained for use within the sector (rather than being matched by budget cuts or transferred to other sectors) and that resources can be re-allocated within the sector to meet priority health needs, in order to justify alternative financing strategies. HEALTHCARE FINANCING COMMITTEE (HCF) The health sector in Kenya relies on several sources of funding: public (government), private firms, households and donors (including faith based organizations and NGOs) as well as health … Consequently some governments and many non-governmental agencies are turning to communities for organization, participation and financial support, and communal self-help is increasingly thought of as an important source of financial support for health services in developing countries. Deficit finance may be raised nationally or internationally, through mechanisms such as the issuing of bonds or certificates or long-term low-interest loans. Consequently, a framework for explaining the impact of the scheme within the context of Nigeria was … Government expenditures for health that are channelled through non-health Many existing financing policies have paid little attention to the incentives they create or reinforce, or to their ensuing impact upon service providers, households, and government agencies. We study the differential impacts of public and private sources of health spending on health outcomes using a triple difference approach. Rather than generating additional resources for the health sector, new or expanded financing mechanisms may merely displace funding from other sources. Health care finance in the United States discusses how Americans obtain and pay for their healthcare, ... Medicaid is the largest source of funding for medical and health-related services for people with low income in the United States, providing free health … In countries where demand is sufficiently high, commercial insurance companies may be active. Using resources: freedom and flexibility in the management of funds are important, as excessively stringent reporting requirements can increase administrative costs, and restrictions on the allocation of funds between expenditure categories can cause inefficiencies in the delivery of services. Raising resources: it is clearly important that any mechanism raises adequate resources - channelling sufficient new funds into the health system to support existing or expanded services, and having the potential to raise additional revenue to meet the growing needs of health programmes. Charitable or voluntary contributions can take the form of financial support or in-kind donations (e.g. In considering the impact on equity of health care financing options it is equally important to ask âwho pays?â. Uncertainty or cyclical fluctuations in the economy and/or political allocation process can undermine the level of revenue raised. Past reliance on deficit financing in the economy as a whole is now burdening many countries with excessive debt repayment problems. Self-help can take many forms such as labour, local insurance, support for volunteer health workers, and drug cooperatives. However, it is clear that tax revenue is often used inequitably in health systems: health systems are dominated by high-technology urban-based care and so the rural populations (and the urban poor) have inadequate access to any form of care. Their inability to pay not only reflects the largely chance initial allocations of income, but also is likely to underlie their sickness/vulnerability. Direct taxes are those paid by households and companies to the government or other public agencies. Criteria for Assessing Financing Mechanisms. In some instances employers may directly finance health care for their employees. Even with insurance coverage, there is often a requirement for some degree of copayment, which tends to increase the amount that would otherwise have been spent on health. The criteria should be based on the overall objectives of health planners and policy-makers and should also reflect concern with the feasibility of implementing new financing mechanisms. In the past few years there has been increasing interest in some developing countries (especially in Latin America) in health maintenance organizations (HMO), an innovative pattern of health insurance and health care organization developed in the USA. 1. Some methods of payment influence consumer behaviour by the incentives given to providers to withhold or provide services; while some may directly stimulate or restrain the utilization of services. sources of revenues. may cause less revenue to be collected than theoretically is possible. These can be related to a set of sociodemographic factors such as age, education, gender and health status; and a set of economic factors such as the monetary (e.g. Resource shortages in developing country health systems clearly must be addressed, but the introduction of new financing systems is not an appropriate initial response to the problem. For example, contributions may be eligible for tax relief, reducing general tax revenues for use elsewhere (although the effects in this instance are likely to be minor). However, before considering different financing options it is important to identify criteria for their evaluation. Available evidence on the burden of taxation is inadequate to permit firm conclusions about its incidence to be drawn. It is dependent on the level and type of fees, the bureaucratic structure required to implement them, the existence of exemption mechanisms, the impact of fee systems on the demand for care and the rates of collection. Even where only the lime price of health care (resulting from travel and waiting times) has been considered, the evidence supports this finding; and other factors, such as poor access to facilities, is also recognized to undermine utilization. It provides extra funds for largely urban, employed workers and leaves the large rural populations and the informally employed urban population even further handicapped than before its introduction. The government funds the majority (57%) of health expenditure (Figure 1); 54% of government spending is from domestic sources. as a result of financing health services through high taxes on certain economic activities, enterprises or sectors). Some governments, however, may 'earmark' a particular tax for a particular purpose. the various major sources of health care financing in Nigeria, its focal point was on the NHIS. Although not a major source of health sector finance in most countries, they may constitute an important source of finance for specific projects or programmes. The sources may also influence the nature of the production technology and the type of health personnel employed. Household income is ultimately the source of most health care finance, but direct expenditure constitutes a specific category of financing that should be considered separately. Health insurance benefits, moreover, may have an upper ceiling, with households required to pay directly for their health care requirements in excess of this level. The administrative difficulties of implementing a fee system (e.g. of Health is usually available through the Ministry of Finance (MoF), or regional authorities in decentralized systems. Moreover, the out-of-pocket expenditure cannot be considered as a reliable source of funding to build a resilient service delivery systems. Unless such projects sell their services or contribute directly to increased output that can be taxed to service the debt, the deficit must be repaid from general tax revenue. These are often taxes. Private health insurance differs from social insurance in two main ways. The cost of enjoying the use of these funds in the present rather than the future is the interest that needs to be paid on the loan. 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