Health System Financing

Health financing, one of the key building blocks of health systems, involves three interrelated functions—revenue mobilization, pooling funds, and purchasing health services. This chapter develops four key principles for high performance health financing across the three functions: (1) The predominant form of revenues for health should come from obligatory prepaid funds, not out-of-pocket health payments; (2) risk sharing works better when pools are large and health risk profiles diverse; (3) purchasing requires specifying a core set of health services guaranteed to all beneficiaries from pooled funds; (4) purchasing should use payment methods that ensure the universal availability of guaranteed services with quality, at the lowest possible cost. Additional principles will likely emerge in the future as health financing adapts to emerging and new threats: threats that increase the need to spend on health systems or that reduce country capacities to raise revenues.