Healthcare System Financing - World Health Systems Facts

“Different health financing arrangements tend to coexist in a country’s HFS [Health Financing System]. The three major health financing arrangements contributing to THE [Total Health Expenditure] are government financing, social health insurance (SHI) and OOP [Out of Pocket Payments]. These financing arrangements account for 89% of THE on average across all countries, all years (2000–2017); the remainder is largely voluntary health insurance, which includes community-based health insurance. Details regarding data sources is in Appendix 2, while detail about health financing arrangements are presented in Appendix 3 (Wagstaff, 2009b).

“Government financing is universal in that it provides healthcare coverage to the population automatically based on residency or citizenship status, without requiring a direct contribution. Health services are pre-paid, usually by general taxation, and there is usually a common pool for all residents/citizens. Predominantly government-financed countries, whose public health systems are often referred to as “national health service”, are for example, UK, Italy, Spain, Australia, Canada, and Cuba. Publicly funded health insurance schemes that are entirely non-contributory (e.g., Thailand Universal Coverage Scheme (Sumriddetchkajorn et al., 2019), or India Ayushman Bharat Pradhan Mantri Jan Aarogya Yojana) are also considered government financing. Due to data limitations, non-contributory government financing arrangements that show features typical of health insurance schemes (e.g., provider and payer split, health insurance premiums or budgets paid by the government) cannot be separated from other non-contributory government financing arrangements. SHI-financing is also pre-paid, but it differentiates itself from government financing by being contributory: a contribution has to be paid for a person/household to be able to receive healthcare coverage. Traditionally, the contribution is a deduction from the person’s payroll. Individuals or households that do not contribute are not covered. In recent ‘extended’ forms, population groups that are usually identified as unable or ineligible for payroll or premium contributions are covered through government subsidies out of general tax revenues. In either of these cases, there may be different pools in the same country. Examples of SHI-predominant countries are for example, Germany, France, Austria, Japan, Poland, and Turkey. Both government financing and SHI financing are heterogeneous and implementation differs by country. OOP financing is generally characterized by private citizens buying or paying for health services when needed, without any pre-payment or risk pooling. Some government financing- and SHI-predominant HFSs may have OOP co-payments made by citizens/members: these fees are included in OOP expenditures. OOP-predominant countries are for example, Armenia, Bangladesh, Mali, Ecuador, Liberia and India.”

Source: Gabani, J., Mazumdar, S., & Suhrcke, M. (2023). The effect of health financing systems on health system outcomes: A cross-country panel analysis. Health Economics, 32(3), 574–619. doi.org/10.1002/hec.4635

“We note several patterns. First, there is a very high negative correlation (−0.692) between the total progressivity score and weight of OOPs [Out of Pocket Payments] on total healthcare financing. The higher the weight of OOPs, the lower the total progressivity score. All countries with high negative progressivity scores have a high share of OOPs in their healthcare financing. Latvia has a progressivity index of −2.72 with an OOP share 35 %. Bulgaria −2.56 with an OOP share 38 % and Hungary –2.55 with an OOP share 35 %. Because the overall design of OOPs is regressive, the share of OOPs in given countries plays here an important role.

“Second, and in contrast, there is no correlation (−0.031) between the Social Security Contributions and the total progressivity scores. The explanation here is less straightforward. The SSC have on the average the highest weight on healthcare financing (38 %) and simultaneously they are largely proportional (with average score −0.24). Out of the 29 analyzed countries, in 16 the SSC was proportional (scored 0). Thus, the high share of SSC is “neutralized” by its proportionality and the SSC usually “contributes” to the overall progressivity score. Nevertheless, when the SSC is designed in a regressive manner, it then contributes highly to overall regressivity due to its high weight. In Western Europe, note Germany, with an SSC share 73 % (and regressive design −2) and the Netherlands’ 61 % share with regressive design (−2). From Eastern Europe, note Romania with a 68 % share and Bulgaria with 51 % share (both countries with regressive design – 1). At the same time, in France the combination of high share of SSC (80 %) with its progressive design (+2) leads to the overall first place among the analyzed 29 countries.

“Third, there is a positive correlation (+ 0.399) between the total progressivity score and income taxes. Income taxes have the most progressive design, but only a few countries use them as the main financing channel. In Denmark, the share of IT is 60 %, and after that, Italy with 48 % and Canada with 44 %. Denmark ranks third in the overall progressivity score. The example of Denmark and France shows that when the dominant health care financing channel is highly progressive, it can contribute substantially to the overall progressivity index. And conversely, where Bulgaria, Hungary and Latvia have their dominant financing channel highly regressive. In Bulgaria it is the SSC, in Hungary the VAT, and in Latvia the OOPs.”

Source: Võrk A, Pažitný P, Waitzberg R, et al. The progressivity of health care revenue financing in 29 countries: A comparison. Health Policy. 2025;159:105381. doi:10.1016/j.healthpol.2025.105381

“Only 6 of the 29 countries had an overall score that was progressive (positive). These countries –France, Finland, Denmark, Ireland, Belgium, and Canada –all were countries with relatively high GDPs per capita [13]. To some extent, a similar pattern can be seen in examining the three least progressive countries (Latvia, Hungary, and Bulgaria), all of which were considerably poorer. Note, however, that two very wealthy countries, Switzerland and Germany, were the fourth and fifth most regressive countries, skewing the above pattern. Switzerland’s score is mainly explained by very regressive private score due to the magnitude of OOP spending, while Germany’s public score was among the top two most regressive countries, due mainly to its cap on social insurance contributions and its parallel private insurance system available largely to wealthier individuals.

“The overall pattern, however, is that wealthier countries had more progressive scores, which is borne out by a 0.40 Pearson correlation coefficient between GDP per capita and each country’s respective score. There is even a slightly higher correlation (0.46) between the scores and each country’s Gini coefficient, showing that countries with more progressive healthcare revenue collection systems tended to have lower income inequality.

“The progressivity of healthcare financing also shows a significant contrast between public and private sources (Fig. 1). Public sources are progressive in several countries, with France showing the highest progressivity at a score of 1.63, indicating a strong redistribution effect that favours lower-income groups. Conversely, countries like Hungary and Romania have regressive public healthcare financing, where the burden falls more on lower-income individuals. Private financing, which includes voluntary health insurance and out-of-pocket payments, is regressive across all countries [It is least regressive in Czechia due to moderate regressivity (−2.3) of OOP spending combined with a low weight on OOP (14 %).]. This regressive nature implies that private healthcare payments disproportionately affect low-income groups, worsening inequality. Countries such as Latvia and Bulgaria show extremely regressive private healthcare financing, with scores of −1.55 and −1.65, respectively. In Latvia, the high share of OOP in revenues and the relatively limited support mechanisms for people with lower income make the revenues strongly regressive, which is reflected in the scores. Countries with high progressivity in public funding tend to rely less on private sources, potentially offering more equitable healthcare access.”

World Health Systems Facts is a project of the Real Reporting Foundation. We provide reliable statistics and other data from authoritative sources regarding health systems and policies in the US and sixteen other OECD member nations.

Page last updated September 23, 2025 by Doug McVay, Editor.