Healthcare Financing

Health financing is a core function of health systems that can enable progress towards
universal health coverage by improving effective service coverage and financial
protection. Today, millions of people do not access services due to the cost. Many
others receive poor quality of services even when they pay out-of-pocket. Carefully
designed and implemented health financing policies can help to address these issues.
For example, contracting and payment arrangements can incentivize care coordination
and improved quality of care; sufficient and timely disbursement of funds to providers
can help to ensure adequate staffing and medicines to treat patients.

WHO’s approach to health financing focuses on core functions:

● revenue raising (sources of funds, including government budgets, compulsory or

voluntary prepaid insurance schemes, direct out-of-pocket payments by users,
and external aid)

● pooling of funds (the accumulation of prepaid funds on behalf of some or all of

the population)

● purchasing of services (the payment or allocation of resources to health service

providers)

In addition, all countries have policies on which services the population is entitled to,
even if not explicitly stated by government; by extension those services not covered, are
usually paid for by patients (sometimes called co-payments).

Long-term perspective on government healthcare spending

Nowadays healthcare is commonly considered a ‘merit good’ – a commodity which is

judged that an individual or society should have on the basis of need rather than ability
and willingness to pay. However, just a few generations ago the situation was very
different. In fact, during the Middle Ages health was considered a matter of destiny
across most of Western Europe; it was only afterwards, under the influence of
Mercantilism and the Enlightenment, that this view started changing and public
authorities increased their ambitions concerning the promotion of public health.

To show this development, a long-run dataset has been produced with estimates of
government expenditure on healthcare as a percent of gross domestic product (GDP)
for a selection of high-income countries, going back to 1880.
As the data show, in 1880 government health spending was below 1% of GDP in all
countries; but this started changing quickly in the first half of the 20th century and by
1970 government spending on healthcare was above 2% of GDP in all these countries.

Year
Range 1880-1900 1910-1930 1960-1970 1971-1980 1981-1990 1991-2000 2001-2010 2011-2019
Country public_health_expenditure_pc_gdp (AVG.)
Australia 0 0.46 2.19 3.4096 4.08 4.72 5.54 6.03
Canada 0 0.01 3.065 4.89 5.8 6.2 6.58 7.48
India 0 0 0 0 0 0.9 0.8 0.91
United
Kingdom 0.19 0.51 3.15 4.11 4.45 5.04 6.92 8.1
New
Zealand 0.35 0.97 3.66 4.59 4.98 5.57 6.76 7.38

Statistics : Average calculations of a long run data-set from OECD

Findings -
1. After analyzing the data for following countries - UK, Canada, New Zealand,
Australia and India, it is found that, for UK, Canada, NZ, Australia - there has
been static to normal growth in fundings by government towards healthcare for
the citizens between an era of 1880 to late 1930s, whereas for the same
countries healthcare expenditures have steadily increased as a share of gross
domestic product from 1940s to 2020.
2. If we refer to the above graph, government in India started contributing towards
healthcare quite late i.e. in early 2020s. Compared to other 4 countries India has
been categorized as late enhancement in investment policies.
3. Indian government came up with an implementation of healthcare fundings really
late because of Fund Allocation, Delay in Diagnosis of Illnesses, No Support for
Medical Research etc. Health insurance was present before 2000 but in limited
form.
4. After independence, primary health care given importance and seen
considerable improvement. Health insurance history in India began with an
Employee's state insurance scheme (ESIS) in 1948. It introduced as an umbrella
of social security for blue-collar workers of the organized sector.
5. In 1954, a program for central government health schemes (CGHS), was also
introduced. It was a contributory health scheme to provide comprehensive
healthcare services, especially to the central government employees and their
families.
6. In 1986, General Insurance Corporation (GIC) to standardized the terms and
conditions of health insurance launched India's first Mediclaim policy.
7. However, in 1991, after the new economic policy and liberalization process
introduced by the Government of India, privatization of the insurance sector
taken place. The Insurance Regulatory and Development Authority (IRDA) bill
passed in the Indian parliament. In the health insurance evolution, it sets as a
milestone.

Growth of health expenditure with discovery of new

treatments
Having introduced universal access to healthcare in 1948 through the National Health
Service, the United Kingdom is a particularly interesting instance to study in detail.11
The visualization shows that the costs of this universal-access system grew more in the
first decade of the 21st century, than they did in the first two decades immediately after
its inception.
 NHS Expenditure %GDP 1950-2012 (Office of Health
Year Economics (2012))
1950 3.5
1951 3.56
1961 3.36
1971 3.86
1981 4.88
1991 5.02
1992 5.4
1993 5.72
1994 5.59
1995 5.69
1996 5.63
1997 5.49
1998 5.45
1999 5.46
 2000 5.66
2001 5.91
2002 6.26
2003 6.88
2004 7.12
2005 7.37
2006 7.7
2007 7.75
2008 8
2009 8.47
2010 9.1
2011 8.86
2012 8.76
Data Source : OECD; Our World in Data

Research question that I would like to consider in this area-

The COVID-19 pandemic is a catastrophe that took an enormous toll on humanity
disrupting lives and livelihoods. The scale and severity of COVID-19 is unprecedented.
WHO is working with partners and countries toward a coordinated public health
response driven by real-time, reliable and actionable data.

During the pandemic, majority of deaths were due to insufficient resources and low
emergency access to health facilities. The question that should be raised here is why is
healthcare financing actually low in India as compared to other countries? If we observe
the statistics that is calculated above under Government health expenditure as GDP
share, India has an average calculation of 0.91 for 2019 whereas for other countries it
has always been on a higher side. Although the statistics says that till 1990, India had
no Government health expenditure as GDP, but if we refer to the findings, Indian
government followed certain schemes for limited people like government employees
and later in 1986 - Mediclaim policies were introduced i.e. there were always some
traces of healthcare fundings in India even before 1990, in some or the other form. The
ask is, why were these investments were limited for a long time? If these fundings were
not limited, the continuous expenditure by government towards health on large scale
could have contributed to the growth of healthcare institutions and facilities that could
have helped in pandemic like COVID-19.