Sources of revenue

Principal sources of health financing are: out-of-pocket-payment, social and private insurance, and taxation. In the poorest countries foreign grants and borrowing are also important sources of funding. Out-of-pocket payments were, and still are in most developing countries, the principal source of revenue for health services. Health services are costly and their use is unpredictable, generating a demand for insurance.

Moral hazard, adverse selection and other sources of market failure create challenges in establishing an efficient insurance market with universal coverage. For these reasons, and to improve accessibility of services, the governments will tend either to finance health services directly from taxation, or to regulate insurers closely.