Setting objectives and identifying gaps and barriers
42 Universal Health Protection
Table 4.1. Pros and cons of key financing mechanisms
Tax-based health protection: National health systems Pros
Cons ● Risks are pooled for the whole population
● Risks of unstable funding and often underfunding due to competing public expenditure
● Potential for administrative efficiency and cost control
● Inefficient due to lack of incentives and effective supervision ● Redistributes high and low risk and high- and low-
income groups in the population covered
Contribution-based social health insurance Pros
Cons ● Generates stable revenues
● Poor are excluded unless subsidized ● Often strong support from the population
● Provides access to a broad package of services ● Complex to manage governance and accountability may be
problematic
● Involvement of social partners ● Can lead to cost escalation unless effective contracting mechanisms
are in place
● Redistributes between high and low risk and high- and low- income groups in the population covered
Premium-based community-based health insurance Pros
Cons ● Can reach out to workers in the informal
economy ● Poor may be excluded unless subsidized
● Can reach the close-to-poor segments of the population
● May be financially vulnerable if not supported by national subsidies ● Coverage usually only extended to a small percentage of the
population
● Strong incentive to adverse selection ● May be associated with lack of professionalism in governance and
administration
Premium-based private health insurance Pros
Cons ● Preferable to out-of-pocket expenditure
● High administrative costs ● Increases financial protection and access
to health services for those able to pay ● Ineffective in reducing cost pressures on public health systems
● Encourages better quality and cost- efficiency ● Inequitable without subsidized premiums or regulated insurance
content and price
● Encourages better quality and cost-efficiency ● Requires administrative and financial infrastructure and capacity
Source: ILO, 2013a.
Universal Health Protection 43
Should a mix of financing mechanisms be sought, synergies might be created to achieve redistributive effects and address disadvantages associated with private expenditure.
Administrative and governance linkages between the various schemes and systems can have the potential to enhance efficiency by sharing of management functions, mutual
registration support, and further coordination regarding the collection of contributionspremiums, auditing and control, contracting of providers and information
processing.
Revenues that have been collected for health protection purposes should not be incorporated into general government budgets, but instead be accumulated as earmarked
contributions in individual funds. This ensures that contributions are used solely for health protection coverage and access to the defined benefits.
Fiscal space and additional funds needed for extending health protection might be created and generated by increasing the efficiency of resource utilization, strengthening
institutional effectiveness and efficiency, or enforcement, among others Key aspect 4.5.
Generally, countries should be in a position to use national resources to finance health protection. However, if national resources are insufficient to implement the basic
guarantees incorporated in social protection floors, countries may seek international cooperation and support complementary to their own efforts.