How health systems are funded is crucial to ensuring that people are able to obtain the medical treatments and services they need. But financing also needs to promote efficiency, equity and sustainability within the health system. This page showcases some of the European Observatory's work on this topic.

Health systems rely on adequate resources in order to supply the range of medical services and treatments that populations need. Most countries have a mix of compulsory and voluntary systems of financing for their health systems. But, regardless of whether they are funded mainly through general revenues (taxes) or through insurance, health systems must compete with other areas of government investment and spending. Heath systems also operate within resource constraints and need to utilize their resources efficiently to purchase and deliver care effectively and in a sustainable manner. 

Robust financing is especially relevant because health systems need to meet challenges, such as changes or shocks that impact on their capacity to supply services. Example of this are the global economic crisis of 2008 – which saw a reduction in the resources available for health care in most countries – and continually rising costs related to technological innovations. Other notable challenges are the growing demand for health services prompted by demographic changes and ageing populations,  as well public health threats such as the Covid-19 pandemic.   

So, when considering funding arrangements for health systems, we look at questions such as:  

• how much do countries spend on health care?  
• what are the different sources of revenue for health and what are their advantages and disadvantages?  
• what is the role played by voluntary health insurance (VHI)?  
• how is health spending distributed across different service areas such as primary care and hospital care?  
• how sustainable is a country’s health financing system? 
• how are health revenues used to purchase health services and pay providers?

The affordability of health care

Apart from thinking about what health services can be provided, it is essential to consider who is eligible to access them. Making sure that individuals and communities receive the health services they need, without suffering financial hardship, depends on the level of population coverage. For example, is there universal health coverage, or are there gaps which means that certain groups are excluded?  Relatedly, what proportion of health expenditures are covered from public sources and how much is paid by households privately either through user charges or other out-of-pocket (OOP) payments? These payments have a bearing on how we can ensure social protection for health. More often than not, the poorest parts of the population face the highest health risks and need more health services. Thus, health systems that reduce their reliance on direct, OOP payments lower the financial barriers to access for users and reduce the potentially impoverishing impact of health payments.  

Evidence-informed policy

The Observatory has published a range of studies and reports on the subject of paying for health care. Topics covered include: 

• funding options;
• social health insurance;
• voluntary health insurance;
• implementing financing reform in countries in transition; 
• the impact of the economic crisis on health systems; 
• coverage and access;  
• strategic purchasing; 
• diagnostic-related groups; and  
• paying for performance.

The Observatory also conducts knowledge-transfer activities (such as Policy Dialogues) and other evidence exchanges on health system financing issues with country health ministries, policy-makers and other stakeholders.