Health financing for universal coverage

Key policy messages

A core objective of pooling is to maximize redistributive capacity, which means ensuring money flows to where it is needed. Redistribution typically means that funds flow from healthier to sicker people and from richer to poorer people. Pools which include a large and diverse population are preferable to smaller pools or pools restricted to only certain population groups (for example only poor people, only TB patients, or only public sector employees).

Compulsory participation in a health coverage scheme is a precondition for the creation of pools of greater diversity to facilitate cross-subsidy from the healthy to the sick. If participation is voluntary, healthier individuals are less likely to join and contribute to financing the health system. This, in turn, will undermine the financial stability of the system.

Fragmentation in pooling is an obstacle to universal health coverage. It also contributes to system inefficiency. Fragmentation can take many different forms:

  • Territorially distinct but small insurance funds;
  • Decentralized local government health agencies;
  • Overlapping but uncoordinated population or service mandates between different funding agencies, for example, the Ministry of Health, local governments and health insurance funds;
  • Vertical programmes, often reinforced by external funds.