Economic Dimensions of Financing Healthcare

Establishment of adequate healthcare services, accessible/affordable to all sections of the society, is an important function of the state. The magnitude of its need, characterised in terms of population size and the budgetary requirements, is determined by the state of development of an economy. Low income countries are typically characterised by large population size, majority of them living in rural areas and dependent on low productive agricultural activities. Such economies experience greater fiscal stress to find the resources required for the establishment of suitable healthcare services. With economic development, the growth rate of the population would decline and transfer of labour from low productive agriculture to more productive industry and service sectors would take place. This will result in a rise in the per capita income of the people. Higher levels of educational attainment, accompanying higher levels of economic growth, would result in increasing labour force participation rate. Health coverage linked to employment contracts, or by contributions to community/voluntary health service schemes/programmes, would become feasible with development.

In other words, associated with the state of development of an economy, the methods that can be adopted to raise the required resources would become diverse and flexible. Higher public spending required in conditions of lower economic development paves way to services which can be established by pooling resources in ways suitable to the socio-economic level of different sections in the country. The suitability of a method to a given context bears an important relation to the institutional structures in place in an economy. What are the principles that govern the economic considerations of creating an efficient healthcare system in a given context? How does the state of development attained by a country determine the model that it can adopt in respect of healthcare financing? What are the commonly adopted methods for raising the resources? What theoretical frameworks are available for contracting an effective public-private co-existing role in this respect? What is the significance of external developmental assistance in contributing to the attainment of millennium development goals in the health sector? What are the issues that arise in the context of ‘aid effectiveness and absorption’ in view of the socio-political considerations that normally underlie the providing of developmental assistance to healthcare? These are some of the important issues which the present unit deals with.