Funding health care: current options and future direction

Anna Dixon

Research Officer

Funding health care: themes

Public sources of revenue – taxation and social health insurance

Private sources of revenue – user charges and private health insurance

Health and social care – complementary?

Proportion of tax and SHI as % THE in western Europe

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Percentage of total health expenditure from taxationPer

cen

tag

e o

f to

tal

hea

lth

exp

end

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rom

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hea

lth

in

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FIN

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GRE

IRL

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NOREP

Contribution of taxation to social health insurance fund incomeAustria:

– farmers fund - 23%– overall 0.5%

Belgium: 35-40%France: about 60%Germany:

– farmers fund - 52%– overall <1%

Luxembourg: up to 40%Netherlands: 25%

How fair is social health insurance?

Upper income ceiling

Lower income threshold

Earnings

% c

ontr

ibut

ion

Top income tax rate

Lower income tax rate

How fair is tax?

Middle income tax rate

Income

% c

ontr

ibut

ion

Changes to social health insurance Universal coverage Wider revenue base Greater government control Choice and competition

Extension of coverage, Germany

1883 – 10% pop covered 1901 – white collar from transport and

commercial 1914 – domestic servants, agricultural

and forestry 1972 – farmers

Insurance Competition

Netherlands (1987) Germany (1996) Switzerland (1911) Belgium (1945)

Out-of-pocket payments as % of total health expenditure

Country OOP % THE

Year 1998 unless stated

Netherlands 5.9 Luxembourg 7.4 1997 France 10.3 U.K. 10.8 Germany 11.9 1997 Ireland 12.3 1995 Iceland 15.2 1999 Denmark 16.6 Austria 18.3 Finland 19.8 Switzerland 29.9 Portugal 44.6 1995

OECD Health Data 2000

Differing impacts of user charges

The availability of supplementary insurance Reducing ‘necessary’ and ‘unnecessary’

utilisation Impact on prevention Concerns for health - Impact on health status Health as a public good and caring

externalities

Voluntary health insurance is…

“health insurance that is taken up and paid for at the discretion of individuals or employers on behalf of individuals. VHI can be offered by public or quasi public bodies and by for profit and not for profit private organisations”

– Mossialos and Thomson 2001

European experience

Substitutive– Alternative to public insurance; main form of

insurance cover for individual Supplementary

– may increase subscriber choice of provider and improve (speed of) access

Complementary– full or partial coverage for services that are

excluded or not fully covered by the statutory health system

Expenditure projections for England, 1996 to 2031

148%222%

84%154%

249%

0% 50% 100% 150% 200% 250% 300%

Growth

Unit costs rise 1% faster paProp'n single people living with others halvesAge-specific dependency decreases 1% paAge-specific dependency grows 1% paBase case

Wittenberg et al, Health Statistics Quarterly, winter 2001

1.8% of GDP

‘Those in employment have a duty to ensure, through contributions or taxes, that older people have a decent standard of living’

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Denmark France Spain UK EC12

Agree strongly Agree slightly Disagree Don't know

Where next?

Sustainability of public finance Culture of solidarity

– Interpersonal– Intergenerational

Rationing EU regulation

Further information

a.dixon@lse.ac.uk

Or look up publications via www.observatory.dk www.lse.ac.uk/Depts/lsehsc