The current paper deals with health care finance with special reference to publicly financed health insurance which has a potential to achieve universal health insurance in the developing nations or resource poor countries. The situation of health expenditure is skewed heavily towards out-of-pocket (OOP) expenditure being borne by the households. The OOP is as high as 70 percent in some developing nations making the health care finance highly regressive due to high level of poverty in these countries where the poor households bear a much higher proportion of the expenditure to family income (Berman, P. A., 1998). There is a need for the government to step in and provide security against the catastrophic health care expenditure and reduce the OOP health expenditure to the resource poor families. Health Insurance is considered to be one of the efficient health care financing mechanisms. However, across the globe, conventional health insurance market is grappling with different kinds of market failures due to information asymmetry leading to different moral hazards, adverse selection, providers’ induced demand, cream skimming etc. Due to such market failures, different mechanisms are designed by the insurers in pricing of insurance products and build other terms and conditions, which reduce the potential of health insurance to provide universal health insurance coverage to all particularly to the vulnerable sections of the society. The higher economic classes get the coverage of health care services but the most severely affected are the families from lower economic strata who neither have the purchasing power to procure the health care services from the market nor have any financial security against catastrophic health care expenditures. This leads to huge amount of welfare loss in the society. This makes it imperative for the government to intervene primarily to make the health insurance market efficient and equitable and also to complete the market by providing depth and breadth of services particularly for the lower economic class and also to promote merit goods. Publicly financed health insurance to a great extent tries to overcome market failures arising from information asymmetry in the health care market by making the health insurance program mandatory for all and also through regulations. Different models of publicly financed health insurance are being implemented as wealth transfer programs such as social health insurance or tax based finance health insurance. The Publicly financed health insurance programs particularly the tax based health insurance removes most of the inefficiencies of the health insurance market and brings a lot of value particularly for the lower economic strata. Hence, it has the potential to make the health insurance market more effective and complete from both equity and efficiency perspectives.
|Journal||European Academic Research|