Health sector financing

Previous feature: Health aid and infant mortality

Health sector financing is a rapidly evolving policy area, where important progress is occurring alongside inherent tensions. Despite the growth of vertical programmes (see Global initiatives and Priority diseases), there is also increasing recognition of the disadvantages of projects that are of limited duration and often driven by funding agency interests rather than country priorities.

Research has shown that without a conducive financing and policy environment, the benefits of aid may not be sustained. This has led to growing interest and experience in alternative aid mechanisms. One is sector wide approaches (SWAps). SWAps promote greater government ownership and leadership of the health sector and more efficient use of the resources available for health.

Some donors are moving still further towards general or direct budget support. Agreement on a poverty reduction strategy and a related budget framework forms the basis funding that is then allocated and used through the government budget, rather than being earmarked for particular programmes by the donor. At the same time as donors' policies are evolving, so too are national governments' own health sector financing policies.

Both donor and government policy initiatives may involve separating finance from service provision, and attempts to shift the share of the various sources of revenue. Reforms are sometimes introduced in order to move from tax-based financing towards social health insurance, or seeking to reduce the share of out-of-pocket payments within total sector financing.

User fees are an especially controversial form of out-of-pocket payments, with debate surrounding their effects upon access, how the poorest can be exempted from them and whether any viable alternative funding streams may exist. Whatever financing policies are adopted, resource allocation questions will also have to be addressed, and these may become particularly explicit in those countries moving towards greater levels of decentralisation.