The Importance of Public Financing in Achieving Universal Health Coverage

By Rob Yates

Virtually all countries are trying to achieve universal health coverage, meaning that their populations use appropriate levels of care without experiencing financial hardship. Governments are likely to come under increasing pressure to accelerate progress towards this goal, especially as the UN General Assembly recognizes the urgency of the topic.

As WHO’s World Health Report demonstrates, health financing issues are critical in determining levels of health coverage – in terms of who is covered, for which services, and to what degree of financial protection. Governments in developing countries  face a major question: Which financing mechanisms will be most effective in achieving universal coverage? In particular, should countries rely more on private mechanisms (including fees at the point of service and private insurance) or public mechanisms (tax financing and social health insurance)?

After decades of debate, a clear consensus is emerging across the world: in fact, public financing mechanisms perform better. Direct patient fees have been shown to be inefficient and grossly inequitable and private insurance mechanisms (both commercial insurance and community insurance) have failed to cover large populations in the informal sector. Only compulsory publicly managed mechanisms have the ability to compel the healthy-wealthy to cross-subsidize the sicker poor. Countries should not look to outlaw private financing, as encouraging the better-off  to finance additional services may help relieve pressure on public budgets. However, as many middle-income countries have shown (notably Thailand, Mexico, Brazil, and China), if governments want to accelerate progress toward universal coverage, they would be advised to concentrate on improving the performance of the public financing mechanisms.