Financing Mechanisms: The Nuts and Bolts of Financing

There are several financing mechanisms available to policy makers. A government can finance the general provision of health care through general tax revenues. Tax revenues could also be earmarked for specific purposes or population groups. A recent article, The Other Crisis: The Economics and Financing of Maternal, Newborn and Child Health in Asia suggested that taxes on tobacco could be earmarked to provide MNCH services. Social health insurance involves collecting contributions from workers, the self-employed, enterprises, and the government. These contributions are pooled to spread the risk of having to use health care services. The contribution to social health insurance is often based on ability-to-pay, which means that there is subsidization of the poor by the rich, of the unemployed by the employed, and of the sick by the healthy.

General tax revenues and social health insurance refer to pre-paid financing of health care. User fees are a different kind of financing mechanism, and involve the user of health services paying a fee at the point of use of the services. A substantial body of research suggests that user fees are an inefficient and inequitable financing mechanism and often form a serious barrier to access to needed health care, particularly for mothers and their children. A recent article - Women and Children First: An Appropriate First Step Towards Universal Coverage - in the Health Financing Series in the WHO Bulletin presents several arguments for why removing user fees for health services for women and children should be a priority in any health financing reform. Ample evidence suggests that removing user fees can have a significant impact on access to, and utilization of, RMNCH services. For examples, since user fees were removed in Burundi in 2006, child outpatient visits have trebled and deliveries in health facilities have increased by almost 150%.

Several financing mechanisms are designed with the intention to stimulate demand for, and improve the quality of, health services. These mechanisms, such as Conditional Cash Transfers and vouchers, are often covered under the umbrella term results-based financing (or sometimes performance-based financing). A useful definition of results-based financing is "a cash payment or non-monetary transfer made to a national or sub-national government, manager, provider, payer or consumer of health services after predefined results have been attained and verified. Payment is conditional on measurable actions being undertaken."

Conditional Cash Transfers involves paying cash to families (usually the mother) conditional upon performing actions such as keeping their children in school, getting vaccinations, attending growth monitoring sessions, etc. A recent impact evaluation of Janani Suraksha Yojana, a CCT program that aims to improve maternal health, suggests that it greatly increased the proportion of pregnant women delivering in a health facility.

A voucher entitles the bearer to choose care from any contracted health center. Healthcare providers must meet high quality standards to join and then compete to diagnose and treat patients in exchange for the voucher. The vouchers’ cost to the patient is heavily subsidized; in some programs it is free. Voucher programs have been launched in the Indian state of Gujarat, Kenya, Nicaragua, and Uganda.