Financing Private Sector Service Delivery

Private Financing of Health Services

51% of health expenditure in Sub-Saharan Africa is privately funded, as is 80% of health expenditure in South Asia and 65% in East Asia. Almost all of this is out of pocket spending in the form of direct payments to traditional healers, drugstores, doctors, nurses, or hospitals. In Latin America, South Africa, and a few other middle-income countries, private corporate insurance and social health insurance play a significant role in assuring financial access to care. In many countries, however, social health insurance payments and subsidized corporate insurance are only paid to government owned and operated facilities assuring inefficiencies and lack of competition in provision.

There are three functions of health financing:

Resource mobilization can occur through taxation, mandatory or voluntary corporate contributions, household or out-of-pocket payments, and donor financing.

Resource pooling occurs through insurance - social or private. This is most useful when the pooling is at a large enough scale to provide risk pooling at the same time.

Purchasing or services and commodities is the final goal of financing, and the efficiency and openness of this component, and its ability to direct financing to providers that patients wish to see, has important implications for overall effectiveness of a financing system.

In the pages below we examine mobilization of resources from governments and donors, finance and risk pooling through insurance, and purchasing in the examples of OBA and contracting. Public-Private-Partnerships (PPPs) incorporate aspects of both mobilization and purchasing.