First of all, PBF contributes to the Universal Health Coverage aim and the universal access to education. PBF may be the most effective approach to achieve UHC and the Sustainable Development Goals 2015-2030. PBF subsidizes the vulnerable to have access to care but also stimulates those capable of paying to contribute financially for improving quality care or education.
Direct cost-recovery should continue for those who can afford and do not wish to insure themselves. In most low and middle-income countries out-of-pocket-expenditure corresponds to between 50% and 80% of total health expenditure. Direct cost-recovery remains important in most countries to:
(1) Generate sufficient health facility revenues to assure quality services. We estimate that in Low and Middle Income Countries (LMICs) providing a quality health package at the primary level costs around USD 7-10 per person per year and at the hospital level at least USD 20 per person per year;
(2) Prevent informal fee payments. This is a particular risk when governments impose free health care below the economic market price equilibrium and without a robust reimbursement system.
(3) Stabilise provider revenues in particular because external government and partner funding is often irregular. To assure the sustainability of health facilities it is prudent if they internally generate through fee paying and insurance reimbursements between 40 and 60% of their revenues.
Yet, direct payments also create problems for financial access for patients. The PBF approach has the following equity instruments:
- Provide big subsidies for those activities with public good characteristics such as health promotion and positive externalities such as for family planning, immunization and tuberculosis. These subsidies should be high enough so that the service is free for the patient.
- Provide smaller subsidies for curative activities such as OPD consultations, deliveries, in patient care at a modest proportion of the total cost. This pushes service prices downward and provides a market signal for both public and private providers;
- Provincial, regional or district bonuses reduce geographic inequalities;
- Specific health facility- or school bonuses reduce intra-district inequalities and;
- Target the individual vulnerable with much higher subsidies in such a manner that the services become free-of-charge or nominal. Yet, the proportion of patients that can be exempted must be limited by a ceiling to prevent cost overruns and moral hazard.
- Target those affected by humanitarian or natural emergencies by temporarily increasing the subsidies for the facilities so that they can exempt larger groups of the population from fee-paying.
Stand-alone voluntary insurance schemes have proven to be less effective for equity. Yet, insurance initiatives can co-exist with PBF schemes for those who can afford to pay a premium. These can be individuals or groups of people such as civil servants or company employees. So the main objective of such insurance health-financing components would be financial risk sharing for the non-poor.
Large-scale obligatory insurance systems are theoretically a good solution for equity, but may not be realistic for the time being in most developing countries in particular when there is a large informal sector. Yet, the obligatory insurance scheme in Rwanda has a good reputation but this scheme since 2005 is built together with the national performance-based financing system and the government is able to impose premium payments to its citizens.