Health Financing Mechanisms

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Financing Fundamentals - Money Matters Medically

  • Health Financing: Managing funds for health; involves mobilization, accumulation, & allocation of money.
  • Key Functions (WHO):
    • Revenue Collection (RC): Gathering funds (taxes, insurance, fees).
    • Risk Pooling (RP): Spreading financial risks across groups.
    • Purchasing/Provision (PP): Allocating resources to buy/provide services. 📌 Mnemonic: Rich People Pay (RC, RP, PP).
  • Goals: Universal Health Coverage (UHC), equity, efficiency, quality, financial protection. Health Financing System Functions Diagram

⭐ The three main functions of health financing are revenue collection, pooling of funds, and purchasing of services.

Revenue Streams - Show Me The Money!

  • Public Sector:
    • General Taxation: Mainstay (Central, State, Local).
    • Earmarked Taxes: Specific levies (e.g., health cess).
    • Social Health Insurance: Mandatory contributions (ESIS, CGHS).
  • Private Sector:
    • Out-of-Pocket Payments (OOPS): Dominant source.
    • Private Voluntary Health Insurance.
    • User Fees: Point-of-service charges.
    • NGOs/Charities & CSR.
  • External Sources:
    • International Aid: Bilateral & Multilateral (World Bank, WHO).

⭐ Out-of-Pocket Expenditure (OOPE) is the largest component of India's Total Health Expenditure (THE), often >50%.

Financing Blueprints - Pooling & Paying Puzzles

  • Risk Pooling: Spreads financial risk of illness. Larger, diverse pools = stable.
    • Sources: Taxation, Social Health Insurance (SHI), Private Health Insurance (PHI), Community-Based Health Insurance (CBHI).
  • Major Health Financing Models:
    ModelFunding Source(s)DeliveryCoverage GoalExample(s)
    BeveridgeGeneral TaxationPublicUniversalUK, Cuba
    BismarckPayroll ContributionsMix Public/PrivateEmployment-basedGermany, France
    NHITax/SHI PremiumsMix Public/PrivateUniversalCanada, S.Korea
    Out-of-PocketDirect Patient PaymentsMostly PrivateAbility-to-payParts of India
  • Provider Payment Methods:
    • Fee-for-Service (FFS): Per service.
    • Capitation: Per person.
    • Case-based (DRGs): Per episode.
    • Global Budgets: For facilities. Four Basic Health Care System Models

⭐ Ayushman Bharat PM-JAY, world's largest health assurance scheme, targets >10 crore vulnerable families (approx. 50 crore people) for cashless secondary/tertiary care via strategic purchasing.

India's Health Finance - Schemes & Scenes

  • Key Sources: Central & State Govts, households (Out-Of-Pocket Expenditure - OOPE), private sector, external aid.
  • Dominant Feature: High OOPE (approx. 47% of Total Health Expenditure - THE).
  • Govt. Health Expenditure (GHE): ~1.35% of GDP (Target: 2.5% by 2025 - National Health Policy 2017).
  • Major Schemes:
    • Ayushman Bharat (AB PM-JAY): World's largest health assurance scheme; covers secondary & tertiary care for >10 crore poor families.
    • National Health Mission (NHM): NRHM + NUHM; strengthens rural & urban health infrastructure.
    • Rashtriya Swasthya Bima Yojana (RSBY): Precursor to PM-JAY, smart card based.

Health spending per capita by income level and source

Fact: India's public health expenditure as a percentage of GDP is lower than the global average and many developing countries, highlighting the need for increased government investment in health.

  • Challenges: Low public spending, high OOPE, regional disparities, inefficient resource allocation, regulation of private sector.
  • Recent Trends: ↑ focus on Universal Health Coverage (UHC), ↑ health insurance coverage, digital health initiatives (Ayushman Bharat Digital Mission).

High‑Yield Points - ⚡ Biggest Takeaways

  • Taxation (General Revenue): Primary source for India's public health funding.
  • Out-of-Pocket Expenditure (OOPE): Remains critically high, leading to catastrophic spending.
  • Ayushman Bharat PM-JAY: Government scheme for cashless care to vulnerable families, aims to ↓ OOPE.
  • Social Health Insurance (ESIS, CGHS): Mainly covers the organized sector.
  • Community-Based Health Insurance (CBHI): Targets informal sector, limited coverage.
  • National Health Accounts (NHA): Tracks health expenditure flows; latest NHA 2019-20.

Practice Questions: Health Financing Mechanisms

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In implementation of a health programme, best thing to do is -

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Flashcards: Health Financing Mechanisms

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The _____ analysis provides information on how much input is needed to produce a unit amount of output.

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The _____ analysis provides information on how much input is needed to produce a unit amount of output.

input-output

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