Tax-Based Health Financing and Social Health Insurance Group 1 Fergal Horgan, Iona Crumley, Sithu Htin Aung, Khashau Eleburuike, Rebecca Altman, Lotta Göller

1. Social Health Insurance

Definition : A mechanism for raising and pooling funds to finance health services… working people and their employers, as well as the self-employed, pay contributions that cover a package of services available to the insurees and their dependents… designed to protect individuals in the event of a decline in income owing to unemployment, retirement, or illness. In most cases they are obliged to make these contributions by law. WHO Technical Brief for Policy Makers, Thinking of Introducing Social Health Insurance? WHO Health Financing Glossary

Description  Originated in Germany in 1883 under Von Bismark – 88% coverage (2000) Implemented “successfully” in western Europe In sub-saharan Africa, Ghana is the only country that has implemented the system. Other countries like South Africa and Uganda have tried to implement it but with little success  27 countries have now implemented SHI  Towards universal health coverage

How it works?  Risk pooling is the accumulation and management of revenues in order to limit individuals’ payments for health care, so that they no longer bear their risk alone.  The larger the degree of risk pooling in a health financing system, the less people will have to bear the financial consequences of their own health risks, and the more they are likely to have access to the care they need.

Who Pays  Workers  Self employed  Employers  Government Provider  State regulated contractor  Public system  Private

Strengths  Lower costs :risk pool  More transparent  Equity  Centralized database of patients’ medical history  Focus on health (more autonomous independent on national budget)

Weaknesses  Administrative challenge requires capacities and infrastructure that may be in short supply  Cultural problems : mostly in low income countries in convincing people to contribute  Limited enthusiasm for solidarity and mutual support  Reduced service: long wait times for non-emergency cases  Non formal workers- “Grey Economy”  Limited choice in treatment  It discourages employers from hiring employees

2. Tax Based Health Financing

Description Health financing system in which government revenues are the predominant source for health care expenditure and access to publicly-financed services is, at least formally, open to all citizens Who pays? Tax and non tax revenues organized by government. Who provides? Highly regulated work force in public and private facilities.

Background Two ways this system began: 1.built on a foundation provided by the earlier development of social or private health insurance (high income countries) 2.evolved from health services administered directly by colonial regimes (countries that were colonized or heavily influenced by Britain, e.g. Malaysia, African countries, Carribbean)

Strengths Avoids adverse selection and risk selection – problems that are common to voluntary insurance markets Effectively pools risk across contributing population “The gold standard” for efficiency, effectiveness and equity via more centralized coordination Purchasing power Universal coverage – promotes equity Independent from the employment market Enables comprehensive national public health activities

Weaknesses Inefficiencies that emerge from serving multiple objectives Political pressures to serve privileged groups Management of public services Less competition between financers and providers Limits individual responsibility for one’s own health

Examples OECD – UK, New Zealand, Australia, Canada, Ireland, Finland, Denmark, Greece, Iceland, Italy, Norway, Portugal, Spain, Sweden Colonized or heavily influenced by Britain – Malaysia, Singapore, Hong Kong, and many countries in Africa and the Caribbean Brazil

Questions for Further Discussion How should governments determine allocation of taxes to health care? Income tax or consumption tax – which is more progressive? How can a government keep up with the demands of citizens?

3. Key Differences between Social Health Insurance and Tax Based Health Financing

1.The fundamental difference is that SHI systems raise revenues largely from earnings related contributions levied largely on formal sector workers while tax financed systems draw their revenues from taxes and non tax government revenues. 2.Tax Based is theoretically less expensive and more efficient to implement and run 3.SHI have more transparency of allocation of contributions and are less subject to political interference 4.Tax Based are more broad focused on population. SHI are more focused on individuals.

References Savedoff, William. ”Tax-Based Financing for Health Systems: Options and Experiences”, World Health Organization, Wagstaff, Adam. ”Social Health Insurance versus Tax-Financed Health Systems – Evidence from the OECD”, Policy Research Working Paper 4821, World Bank, 2009.

WHO Technical Brief for Policy Makers, Thinking of Introducing Social Health Insurance? WHO Health Financing Glossary WHO: advantages and disadvantages of social health insurance Social Health Insurance : A guide book for planning Balanced politics universal heat Successful and failure in social health insurance in Sub- Saharan Africa: what lessons can be learnt? By A.M. Spreeuwers and Geert-Jan Dinant