Taxation and SHI Flashcards
Dimensions of Coverage
3 Dimensions
- Who is covered (population)
- What is covered (services)
- What proportion of cost is covered (Level of care is covered)
Efficency
How can you orgaince health services and resources to maximize health improvements and reduce costs
Efficency is the reduction of waste in the system, and improvment of access to necessary service
Equity
Maximazing the fairness in the distribution of services and resources across groups
Vertical Equity (Progressive, Regressive and Proportionate)
Progressive: Poor pay less than rich
Regresive: poor are paying higher proportion of income compared to rich
Proportionate: pay a proportion of their income
Horizontal Equity
treating equals equal (those with the same waelth and health, they should contribute equally and reciveing equally)
General Tax
General taxation draws from a broader tax base to finance healthcare through government allocation. This tax revenue is raised through both direct (income taxes) and indirect (VAT) taxes.
In the United Kingdom, the National Health Services (NHS) is funded primarily by taxation, which means the money is collected by various forms of taxes and a portion is allocated to the NHS. (Evans 2000)
Broader pool base
Less costly to administer
Very Political driven
Less transperant
Less willingness to pay when rised
Social Health Insurance (SHI)
SHI is defined as a mandatory contribution from employees or employers, often tied to a proportion of their income, to a dedicated healthcare fund. These funds are independent quasi-public bodies that act as the system’s managing bodies and payers.
A great example of this is Germany, where a large proportion of its population (88%) is mandatorily insured with an SHI. Germany also gives the employed population with income above a threshold the option to choose between statutory and private health insurance. (Busse 2000)
Dedicated to health sector
Promotes competition - choice of insurer
More transperant, less political
High cost in adminiatration costs
Risk selction and inequalities posible
Impact on labout costs and impact on investments
shrinking revenue base - raising uneployments, growing informal economy and agining population
General tax vs SHI - Revenue Generation
Revenue generation in healthcare funding refers to the system’s ability to secure adequate funding to meet healthcare demands. SHI systems can struggle when healthcare costs rise rapidly, particularly in countries with ageing populations requiring more care. Japan, with its SHI system, faces this very challenge due to its demographics. General taxation offers greater flexibility through adjustments to tax rates or brackets. The Netherlands, which combines SHI with general taxation, utilizes this adaptability to ensure adequate healthcare funding.
General tax vs SHI - Transperency
Although SHI and general taxation models are similar, they differ systematically in practice. First, the separated structures for collecting and managing funds tend to result in greater transparency. However, the organizational autonomy of social health insurance funds also requires adequate systems of accountability. Second, access to care depends on contributions to the fund, which gives the patient the status of a customer. The relationship between insurers and members is therefore more contractual, and thus, the benefits to which the contributors are entitled tend to be more explicitly defined. Third, revenue is determined by contributions and not by political preferences, SHI is thus less politized.
General tax vs SHI - Equity
Equity in healthcare funding ensures that everyone has access to necessary care regardless of income. SHI often promotes equity by linking contributions to income, meaning higher earners contribute more. Many European SHI systems exemplify this principle. However, some SHI systems might have contribution tiers where healthier, higher-earning individuals pay more into the system. While this can promote equity, it could also incentivize these individuals to seek private insurance with lower premiums, essentially “skimming” themselves out of the SHI pool, like in countries like Germany and Chile. However, general taxation can be regressive if relying heavily on consumption taxes that disproportionately impact low-income earners. Canada’s healthcare system, funded mainly through general taxation, demonstrates this potential drawback. However, progressive income taxes, which are higher for wealthier individuals, can mitigate this issue, as seen in Canada’s system.
General tax vs SHI - Efficency
Efficiency in healthcare funding refers to the use of the resources available to maximise health. SHI is defined as a mandatory contribution from employees or employers, often tied to a proportion of their income, to a dedicated healthcare fund. These funds are independent quasi-public bodies that act as the system’s managing bodies and payers. Therefore, it can be argued that competition increases better quality, therefore making the system more efficient. A great example of this is Germany, where a large proportion of its population (88%) is mandatorily insured with an SHI. Germany also gives the employed population with income above a threshold the option to choose between statutory and private health insurance. (Busse 2000) Meaning they have a larger group of options to choose from in terms of insurers, which results in insurers and providers competing to get better quality and service. On the other hand, minimizing costs may be a way to have a more efficient health system, but when it comes to SHI systems, this is not necessarily the case. When talking about administrative costs, the complexity of bureaucracies dedicated to collecting contributions can lead to administrative overhead, an increase in administrative costs was seen in Germany after the introduction of competition within their SHI system (1995) from 5.24% to 5.76% relative to overall expenditure (Mossialos, 2010). Additionally, SHI contributions often tie funding to wages, limiting flexibility during unexpected cost increases.
On the other hand, general taxation draws from a broader tax base to finance healthcare through government allocation. This tax revenue is raised through both direct (income taxes) and indirect (VAT) taxes. In the United Kingdom, the National Health Services (NHS) is funded primarily by taxation, which means the money is collected by various forms of taxes and a portion is allocated to the NHS. (Evans 2000) In contrast to SHI, general taxation leverages existing tax collection infrastructure, potentially seen in the UK’s NHS. It also allows for greater flexibility in raising funds through adjustments to tax rates or brackets, but it may be met by high public resistance. General taxation may be more efficient in utilizing existing infrastructure and adapting to changing needs, but it faces potential hidden costs and political pressures. Ultimately, the efficiency of each system depends heavily on its specific implementation and context.
