Health financing for universal coverage

What are public sources of funding?

Public sources of funding include those which are compulsory and pre-paid; meaning paid before the need for care is identified or care is accessed. These are often taxes.

A compulsory source means the government requires some or all people to make the payment, whether they use the health service or not.

Some important distinctions are as follows:

  • Direct taxes are those paid by households and companies to the government or other public agencies. This includes income tax, payroll tax (including mandatory social health insurance contributions) and corporate or profit tax.
  • Indirect taxes are paid to the government or other public agency via a third party (retailer or supplier). The tax is based on what a household or company spends and includes value-added tax, sales tax, excise tax on alcohol and tobacco and import duties.
  • Non-tax revenues are from state-owned companies, including natural resource revenues such as oil and gas.
  • Financing from external (foreign) sources is considered ‘public’ when the funds flow through recipient governments.

Public sources of funding can be managed by private entities, such as private insurers managing a public insurance scheme. This happens in the Netherlands and India currently, and in Georgia prior to 2013.

Private financing plays a role in all health systems. It includes corporate-funded health services, individual contributions to commercial or community-based health insurance schemes and out-of-pocket spending.

However evidence shows that public sources of funding, above all other sources, drive improvements in the health system and make progress towards universal health coverage (UHC).