Health financing may determine the resilience of health systems. The current system tends to prioritize high-risk populations. The provision of social health insurance increases labor costs, which hurts competitiveness in monetary unions. Because devaluation is not an option, countries are left with increasing the competitiveness of their economies through purchasing arrangements. However, this approach is not sustainable or universal. It may exacerbate inequalities that already exist in society. It is necessary to develop innovative models of financing health systems in order to meet the challenges and opportunities that arise in this new context.
The three main functions of health financing include risk pooling, revenue collection, and purchasing. While they are often considered separate functions, they all play an important role in financial protection for the health system. Prepayment and risk pooling are two of the most important aspects of health financing, but they are sometimes confused. The former is a form of taxation, while the latter is a type of insurance. While government-funded systems often pool resources and subsidize the poor, they are the most efficient ways to finance health care.
In some countries, the government pools resources into a “health budget” and distributes it to providers. In such countries, out-of-pocket expenses are low, and the cost of collecting user fees often exceeds revenue generated. In other countries, the government funds the bulk of health expenditures. This means that everyone is entitled to the same benefits. In some cases, the government finances health care through various taxes, while private insurers fund the remainder.