Health Financing: The Foundation of a Strong Health System

Health Financing: The Foundation of a Strong Health System

Millions of people around the world die each year from preventable diseases because they cannot access affordable health care. Developing countries often struggle with insufficient resources and they face numerous challenges trying to strengthen weak health systems. A strong health system working well at all levels, from the household to the community to health facilities to national authorities, can provide effective services to improve the health of the people they serve.

Health financing is the critical foundation for strengthening health systems and ultimately for achieving health impact. Health financing is the starting point – money is the fuel to start and keep a strong health system running. Health financing includes generating funds, distributing those funds, ensuring effective and efficiency use of funds, and protecting the poor from the financial hardship of accessing health services. Without financial resources and proper management of these resources, health workers, health facilities, and medicines would not exist. In difficult economic times, generating those resources seems an insurmountable task. Yet some countries are showing how it can be done.

Late last year at the First Symposium on Health Systems Research in Montreux, Switzerland, we hosted a discussion, cosponsored by the Rockefeller Foundation and Results for Development Institute, with three health leaders to discuss financing and other aspects of health systems and how some countries successfully moved toward universal health coverage. In Colombia, it turned out the judiciary played a huge role in health reform when it included the right to health in the 1991 Constitution coupled with a general reform of the system of social security in health to provide quality-centered competition among service providers. In Thailand, 99% health coverage was achieved through the use of multiple and varied insurance schemes that were financed by progressive general taxation (paying for health solely through general tax revenues and eliminating co-pays) and community-based health insurance instead of fee for service. And in Ghana, a special levy replacing out of pocket fees at point of service and increasing the number of providers at the local level led to 60 % coverage in 5 years.

Performance-based financing (PBF) is one innovative approach that helps alleviate financial burdens on health systems. PBF is an approach to structuring the flow of resources to pay for results rather than simply paying for processes or reimbursing activity costs.  In a health setting, health providers are paid for the health results they achieve – for example the number of quality immunizations they provide. PBF is a powerful means of increasing the quantity and quality of health services by providing incentives to suppliers to improve performance. As many countries are working towards achieving the Millennium Development Goals, PBF can increase the use and quality of health care services, stabilize or decrease costs of these services, help use limited resources effectively, and improve staff motivation and morale.

For more than a decade, MSH has helped governments and private organizations design, implement, and support health performance-based financing programs, so health systems focus on investing in results rather than the process of delivering care. In 2008, through PBF grants with 23 community-based organizations in South Africa, MSH, with the support of the American people through USAID, helped more than 19,000 orphans and vulnerable children receive vital health services and support.

Another important aspect of health financing is costing – ensuring that the allocation and use of resources is effective and efficient. If health managers and planners are able to properly estimate the costs of individual services and packages of services in health care facilities, they are better equipped to provide effective health services. MSH helps Ministries of Health analyze their costing structures and ensure that they are staffing and using resources properly. In the mid ‘90s MSH developed, with support from USAID, CORE Plus, a tool that helps health managers and planners do this costing analysis at the primary care facility level.

Community-based health insurance models are becoming more popular in developing countries where insurance is needed and clients are expected to pay out-of-pocket fees. Community groups get together and collect contributions to pay small premiums on a regular basis for health care benefits from the government or private providers. When members get sick, costs to them are much lower or nothing at all because they have this insurance. Community-based health insurance is helping fill an important gap in health financing and helps ensure clients and communities invest in their own health.

When innovative solutions are applied to health financing challenges the health system as a whole becomes stronger. If resources are properly managed and efficiently used, there is more money available to save lives and have a greater health impact.

Jonathan D. Quick, MD, MPH is President and Chief Executive Officer of MSH. Dr. Quick has worked in international health since 1978, he is a family physician and public health management specialist.