Sustainably Financing Universal Health Coverage: What To Cover and How to Pay for It

Jay Chittooran, Research Associate at the Council on Foreign Relations

The global support for universal health coverage (UHC) is wide-ranging. But on top of the potentially troubling role of domestic and global politics that has been previously examined, another large issue in implementing UHC is how to sustainably finance it.

The WHO’s goal in enacting UHC is to ensure that every individual around the world is able to receive quality healthcare without fear of financial catastrophe. But every country is different, and the path for each to reach their health coverage goals has to be homegrown—that is, the steps to achieving UHC have to be tailored to each particular country. But at the same time, it is important that each country’s health system can not make open-ended commitments to cover every health issue. The system has to set priorities, and there also has to be recognition and understanding of ways to effectively spend on UHC. For instance, if high spending was the key to achieving better health outcomes, the United States would have long ago achieved its goals for universal health coverage.

From 2009 to 2012, China significantly increased its spending on health and insurance schemes, but this spending increase did not translate into greater access to affordable healthcare. This occurred because China failed to address other issues, in particular, its ailing public hospital sector. In contrast, after Thailand had implementing its universal health reform in 2000, there was a large increase in public spending, but there was also reform in the provider payment system. Further, this reform showed that a combination of measures could actually improve financial protection within the country. Simply, enacting UHC is not just about spending more money (either aggregate or per capita), but is also about how the healthcare providers are paid.

Provider payment mechanisms (PPM), or the way in which healthcare providers are paid to deliver the covered package of services, are central to financing UHC. While PPM has long been has been an issue in OECD countries—this is a major point of contention here in the United States—it is recently been given more attention in low and middle income countries. There are a number of PPMs, but the three most popular are fee for service, diagnostic-related groups (DRGs), and capitation. The health care provider is paid a fee based on what services the provider rendered in a fee-for-service PPM. For DRGs, fees are charged based on the diagnosis of the medical problem being treated for the purposes of payment. In a capitation structure, providers are pre-paid a certain amount of money for each of their patients, regardless of the amount of care rendered. Each of these systems have  advantages and drawbacks. Fee for service is associated with high healthcare costs. While DRGs have only been used in developed countries, they have been effective in bringing down healthcare costs. For capitation, there is a a high level of coverage, but also because the user is pre-paying, there is a concern about underutilization. PPMs produce a series of incentives that influence the cost, efficiency, distribution of resources, quality, and organizational (or institutional) arrangements. That said, there is no best PPM yet. But a growing consensus is that there are no conceptual differences between richer and poorer countries in terms of the implementation of provider payment, and by doing that, we can accept that all countries can learn from one another best practices.

With better and more sustainable financing of UHC, we can also see improvements in the quality of care. Research has found that when hospitals are exposed to competition, they found ways to improve their quality of care.

Government ministries often squabble over resources. Health ministers want (and often need) more, and finance ministers have pause in yielding any. But the benefits of encouraging the institution of effective health programs can not be overstated. That said, if a country is serious about UHC progress (and achieving the economic gain by instituting UHC), it needs to move toward the smarter use of public resources. By consolidating resources and using a strategic purchasing approach, countries can and will be able to have their cake and eat it too.