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Viewpoint (August 2003)

Author: Anna Dixon, Research Associate, European Observatory on Health Care Systems and Lecturer in European Health Policy currently on secondment to the Department of Health, London.

During the 1970s, a combination of economic recession following the 1974 oil crisis and the growing burden of unemployment eroded the view that increased welfare spending was sustainable. In fact welfare spending in the largest OECD (Organisation for Economic Co-operation and Development) countries levelled off.    

However, health care expenditure has continued to rise in real terms. This has intensified the pressures on public sources of revenue for health care. In response countries have pursued a number of strategies: deficit financing, cuts in other areas of public expenditure, shifts to private sources of revenue for health and increased efficiency within the health sector. In addition to concerns about cost containment and efficiency, most countries in Europe value equity: both in terms of the financing of health care and in ensuring access to care based on need and not on ability to pay. The mix of public and private sources of revenue has implications for both equity and efficiency which need to be weighed carefully by policymakers.

Most countries in Europe fund the majority of health care from public sources of finance: either taxation or social insurance contributions. Except for the Netherlands and Greece, over 70% of total expenditure on health in the EU Member states is from public sources. Taxation is the predominant source of revenue in Denmark, Finland, Ireland, Italy, Norway, Portugal, Spain, Sweden and the United Kingdom. Social health insurance contributions are the predominant source in France, Germany, the Netherlands and Luxembourg.  Belgium and Greece have about equal proportions funded from taxation and social health insurance.

Private health insurance plays a significant role in Germany and the Netherlands where for part of the population it is the main insurance cover. However, in most other countries it is supplementary to public health systems, either covering services that are excluded from public cover or providing faster access, or greater choice. In the majority of industrialised countries private health insurance accounts for less than 15% of total health expenditure. Indeed in Finland, Norway, Denmark, Spain and Italy it accounts for less than 5% of total health expenditure.

Direct payments by patients and copayments for health services increased during the 1990s but were met with strong public resistance. It seems likely that governments will continue to play an important role in the funding of health care. They will need to find ways of balancing economic and political concerns with cost containment and equity. 

Anna Dixon  

Further Reading

  • Kutzin, J. (2001). "A descriptive framework for country-level analysis of health care financing arrangements." Health Policy 56(3): 171-203.
  • World Health Organization (2000). The World Health Report 2000: Health systems: improving performance. Geneva, World Health Organization.
  • Dixon, A. (2002). "Are Medical Savings Accounts a Viable Option for Funding Health Care?" Croatian Medical Journal 43(4): 384-392.
  • van de Ven, W. P., K. Beck, et al. (2003). "Risk adjustment and risk selection on the sickness fund insurance market in five European countries." Health Policy 65(1): 75-98. 


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