Redistribution and the health financing transition

Abstract

Public financing is necessary for realizing universal health coverage (UHC), a policy commitment that emphasizes that everyone should have access to health services they need, of sufficient quality to be effective, and that the use of these services does not expose individuals to financial hardship. As countries undergo their health financing transitions, moving away from external and out-of-pocket (OOP) financing toward domestically-sourced public financing, finding ways to increase public financing in an efficient, equitable, and sustainable manner is front and center in the policy dialogue around UHC. This paper focuses on one aspect of the health financing transition that has generally received less attention: that UHC is also intrinsically about a policy direction that emphasizes at its core redistribution of resources from the well-off to the poor. Differences in the level and organization of public financing for health for a given level of national income also reflect differences in social and political preferences for redistribution and equity across countries. Hence, navigation of a country's health financing transition in ways that accelerates progress towards UHC also implies that public resources are targeted and expended in ways to improve effective service coverage and reduce OOP spending specifically for the poor. To leverage a country's health financing transition for UHC, mechanisms should be introduced for: (i) ensuring that benefit entitlements are explicit and intertemporally commensurate with levels of public financing; (ii) fragmentation in pooling mechanisms is reduced to facilitate cross-subsidization without jeopardizing equity; (iii) levels of OOP and complementary sources of financing are nudged towards the well-off until core levels of public financing are adequate to provide similar levels of coverage for all; and (v) that purchasing of services is done in ways that helps reduce geographic- and income-related inequities in access and supply of quality health services. This implies careful policy choices need to be made, ones that require looking beyond the simplistic dichotomy between OOP and public sources of financing for UHC at the aggregate level to more nuanced and disaggregated assessments of the organization, use, and net fiscal incidence of financing and expenditures.