9 March 2006
Q: Is there a single best system of health insurance?
A: Health insurance is only one way people can get coverage for medical care. Governments that want to make sure all their people have access to health services provide social health protection – a system of affordable insurance or a government-funded programme that allows them to access essential health services without risking impoverishment or severe financial hardship.
Different countries have different approaches to social health protection, but all have one thing in common: a system called a risk pool. A risk pool allows a large group of people to share the risk that they may become ill and need expensive care. That means funds dedicated for health care are collected through pre-payment, and managed in such a way as to ensure that the risk of having to pay for health care is borne by all the members of a pool and not by each contributor individually.
At any given time, healthy people – who need only limited health care – are subsidizing sick people, who must draw more heavily on the available health resources.
A risk pool can be managed two ways:
1. Tax-funded health financing: a government makes use of general tax revenue to finance health care. All people are entitled to services; coverage is therefore universal.
2. Social health insurance: contributions for health care are collected from workers, self-employed people, enterprises and the government. These monies are pooled into a social health insurance fund or funds. Universal coverage can be achieved with this type of financing scheme only if contributions are made on behalf of each member of the population and contributions are individualized based on people's ability to pay. For this reason most social health insurance schemes combine different sources of funds, and the government contributes on behalf of people who cannot afford to pay themselves.
In some countries, part of the population is covered directly through general taxes, while others are required to make contributions to a social health insurance fund or another type of health insurance, which may be private.