The design of basic and supplementary health care fi nancing schemes: Implications for effi ciency and affordability

Since 1960 the medical care expenditures have more than doubled worldwide as a share of GDP (Kotlikoff and Hagist, 2005; Cutler, 2002). OECD countries have experienced an average annual increase in per capita health care costs of 3.5 percent during the period 1990-2001, outpacing the average annual economic growth during the same period by about 50 percent.1 The major driving forces behind the continuing rise in health care costs are medical technology,2 health care services price-infl ation,3 and the aging of the population.4 Policymakers have expressed the view that continued increases in health care spending may be “unsustainable”, particularly in light of government budget defi cits.5 For decades, governments have been seeking suitable solutions to fi nance the rising health care costs, given the increasingly constrained collective resources. Suitable refers to the maintenance of affordable and universal access to basic health care services, the containment of aggregate spending and the improvement of technical, allocative and dynamic effi ciency of health care delivery (Schut, 1995). In the attempt to fi nd a balance between affordability and effi ciency goals, a great variety of mixes of different sources of health care fi nancing have emerged across countries combining out-of-pocket spending, supplementary health insurance, and collective funding (tax-based fi nancing or social health insurance). Throughout this thesis, the term affordability indicates the extent to which a socially acceptable level of insurance coverage is affordable for everybody.6 Depending on the context, the terms cross-subsidisation or solidarity may be used instead of affordability. By effi ciency, we refer to dynamic effi ciency, which is defi ned as qualityimproving and cost-reducing innovations in the organisation and delivery of care.

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