Essentials of health economics: part II--Financing health care.

Abstract

The choice of method of financing is one of the basic economic decisions a government has to make concerning the health care sector. It is intriguing, therefore, that different countries have developed quite different systems for raising the finance, paying doctors and other health care professionals, and exerting influence over the amount and direction of health care expenditure. The choice of system cannot be divorced from political ideology, of course, and not surprisingly the USA has a health care system with a large private market element whereas those of Eastern European countries are based largely on State provision. In the United Kingdom the method of financing has been examined by a royal commission and more recently been debated in the medical press after statements by members of the present government. Despite the ideological issues the initial interest of health economists in the UK was in whether a system based on market principles would lead to more efficient delivery of care than that existing in the National Health Service (NHS). There is no simple answer to that question, but the market versus State debate opens up a Pandora's box of issues concerning the nature of the 'commodity' (health care), the role of doctors, patients, and institutions in the delivery of health care, and the performance of health care systems. In short, the financing debate gives some important clues in the search for ways of obtaining better value for money in health care, clues which we shall follow up in later articles in this series.