International Public Policy Analysis by George M. Guess & Thomas Husted

Author:George M. Guess & Thomas Husted [Guess, George M. & Husted, Thomas]
Language: eng
Format: epub
Tags: Public Policy, Public Affairs & Administration, Political Science, Political Process, Economic Policy, General
ISBN: 9781315561585
Google: CUOwswEACAAJ
Publisher: Taylor & Francis Group
Published: 2016-07-15T10:17:18+00:00

How Does Government Finance Health Care?

There are several problems that need to be addressed when considering the provision of health care in a country. The primary objective of many government health care systems in the OECD as well as other countries is to provide universal coverage across all citizens. This universality is most easily achieved through central government intervention, either through a governmental system of direct public healthcare provision or through the creation of private sector provision (e.g. coordinated with medical insurance plans) combined with government mandates requiring all citizens to participate. Universal coverage has benefits beyond it being socially responsible—health care being an important “right” of a country’s citizens along with food and housing. Universal coverage allows for health care providers to spread the risk. Healthy people will be low-end users of health care and will ultimately subsidize the high-end, more sick users of health care expenditures. This should help keep the government’s health care expenditures under control and strengthen the overall health market.

The financing structure of the health care system is a critical aspect of the broadening health care coverage. Health care in most countries is financed through a combination of government programs via taxes and direct private expenditures. This type of mixed financing can limit the ability to achieve universality, which requires a system where the benefits are independent of the financial contribution, meaning the contributions are by “ability to pay.” A greater reliance on “ability to pay” requires a larger (perhaps 100 percent) contribution from the government. Private expenditures are represented by private health insurance, any payments for government provided health care, and for non-insured health care. The shares of public and private expenditures in health care vary considerably across developed countries. The U.S. has by far the greatest private health insurance percentage and the smallest public percentage (even after the Affordable Care Act or “Obamacare”). Other OECD countries also have significant private insurance markets—e.g. Australia, France, and Germany—but far smaller than in the U.S. One of the ways private insurance is used is as a supplement to existing government programs. These combinations are found in several OECD countries, with a major example being the various private plans associated with the U.S. Medicare program. The programs may also provide coverage for pharmaceuticals or for charges, such as co-payments, not otherwise covered by the government’s health care plan. A large variation is present across non-OECD countries as well. With some exemptions, countries in Southeast Asia, Africa, and Latin America rely heavily on private health care coverage for their citizens. Titelman et al. (2014) note the most basic problem is the lack of fiscal resources available to generate tax revenues and the large informal and largely untaxed sectors found in many of these countries. Nevertheless, considerable progress toward universality has been made in several Latin American countries, such as Brazil and Cuba, to improve their health care systems. However, new tax policy and administration institutions will need to be developed that will not create incentives to evade taxes and to reduce the size of large informal labor markets.

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