Health Financing Mechanisms

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.

⭐ 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:

  Model	Funding Source(s)	Delivery	Coverage Goal	Example(s)
  Beveridge	General Taxation	Public	Universal	UK, Cuba
  Bismarck	Payroll Contributions	Mix Public/Private	Employment-based	Germany, France
  NHI	Tax/SHI Premiums	Mix Public/Private	Universal	Canada, S.Korea
  Out-of-Pocket	Direct Patient Payments	Mostly Private	Ability-to-pay	Parts of India

• Provider Payment Methods:
  • Fee-for-Service (FFS): Per service.
  • Capitation: Per person.
  • Case-based (DRGs): Per episode.
  • Global Budgets: For facilities.

⭐ 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.

⭐ 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.