Around the world, health care expenditures have gone from 3 percent of the world’s GDP in 1948 to almost 8 percent in 1997. In some countries, such as the US, this figure is higher than that. Because of the increase in healthcare costs, societies and governments around the world are looking toward creating financial arrangements for care that does not deny anyone access to health.
Health financing exists in order to make healthcare funding available and to give incentives to healthcare providers and the public to keep costs low. A good health system exists to make sure that those who are unable to pay for their care can receive care through money donated from other sources.
The three main healthcare functions as they relate to financing include the collection of revenue, the pooling of resources and the purchase of interventions. The idea is to protect the patients financially in ways that are fair to everyone. Many health systems have aspects of the above three roles all tied up in one system. Increasingly, however, there is an increased trend toward providing a separation between financing healthcare and providing healthcare.
In the collection of revenue, the health system gets money from patients, donors, companies and organizations. The systems can tax the people, can mandate social health organizations, and can get money from the government and other resources. Unfortunately, statistics tell us that in 60 percent of the poorest countries, more people must pay out of pocket when compared to richer countries that are subsidized more by their government or employers.
The concept of pooling involves accumulating and managing the money that comes in so that the risk of having to pay out of pocket for expenses is spread across a population. This is essentially what insurance is all about. When people have to pay for their healthcare out of pocket, no pooling is happening.
Developing countries rely a great deal on donor sources. In countries like Bangladesh, Ecuador and Tanzania large sum of money is donated by private organizations and public nonprofit organizations. Other larger countries in Africa and South Central America do not fare as well but still have at least 20 percent of their funds coming from outside donations. The aid often comes as different projects that are set up around a certain health issue, such as malaria or HIV disease. This sometimes leads to a duplication of effort and holes in other areas of health. Fortunately, donor groups and governments are steering away from project work and are trying to develop long term development that is implemented within existing local health systems.
Purchasing is the process where funds are pooled and paid to providers in order to have them deliver healthcare services. Incentives schemes are becoming a big part of the purchasing of healthcare in this day and age.
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