Individuals or groups of the population obtain healthcare through a variety of financing arrangements. Government financing schemes – on a national or sub-national basis or for specific population groups – entitle individuals to healthcare based on residency and form the principal mechanism to cover healthcare costs in close to half of OECD countries. The other main method of financing is some form of compulsory health insurance (managed through public or private entities). Direct spending by households (out-of-pocket spending) can constitute a significant part of overall health expenditure. Finally, voluntary health insurance, in its various forms, can also play an important funding role in some countries.
Compulsory or automatic coverage, through government schemes or health insurance, forms the bulk of healthcare financing in OECD countries. Taken together, three‑quarters of all healthcare spending in 2023 was covered through these types of mandatory financing schemes (Figure 7.9). Central, regional or local government schemes in Sweden, Norway, Iceland, Denmark and the United Kingdom accounted for 80% or more of national health spending. In France, Germany, Luxembourg and Japan, more than three‑quarters of spending was covered through a type of compulsory health insurance scheme. In the United States, federal and state programmes covered around 28% of total health spending in 2023, while another 55% of expenditure was classified under compulsory insurance schemes, covering a mix of public arrangements and private health insurance considered compulsory under the Affordable Care Act.
Out-of-pocket payments financed just under one‑fifth of all health spending in 2023 in OECD countries, with this share broadly increasing as GDP decreases. Households had to bear more than one‑third of all healthcare costs directly in Mexico, Chile, Latvia and Greece. In partner country India, nearly half of all health spending is made out-of-pocket. By contrast, in France and Luxembourg, out-of-pocket spending accounted for less than 10% of total health expenditure. Voluntary health insurance only covered 5% of all healthcare costs across the OECD but financed more than one‑tenth of all total health budget in Slovenia, Canada, Ireland, Israel, although Slovenia abolished complementary voluntary health insurance in 2024 (OECD/European Observatory on Health Systems and Policies, forthcoming[1]). In accession/partner countries Brazil (27%) and South Africa (45%), voluntary health insurance accounted for much larger shares of total health expenditure.
The spending trajectory of the various financing schemes has seen some important changes with the onset of the COVID‑19 pandemic and the cost-of-living and energy crises (Figure 7.10). In the years preceding the COVID‑19 pandemic (2017‑2019), per capita spending by government schemes and compulsory health insurance grew annually by between 3‑4%. This was outpaced by growth of voluntary health insurance spending (5.6% per year) but much stronger than growth of out-of-pocket payments (1.3%).
The pandemic led to a substantial acceleration in spending by government schemes. During 2019‑2021, government spending increased by 26% per year on average across OECD countries, as significant resources were mobilised to track the virus, expand health system capacity, provide subsidies to health providers and eventually roll out vaccination campaigns. By contrast, spending growth of compulsory health insurance schemes remained largely unchanged compared to the pre‑pandemic period, while spending by voluntary health insurance stagnated. In many countries, non-urgent elective surgery and dental treatment (two popular areas for voluntary insurance coverage) were postponed during peak waves of COVID‑19 infections.
The most recent period (2021‑2023) saw the phasing out of additional COVID‑19 spending across OECD countries, resulting in a substantial drop in government financing (‑11% per year). Moreover, the war in Ukraine, the energy crisis and a high inflationary environment led governments to reconsider their post-pandemic priorities. In contrast, spending by voluntary health insurance rebounded, growing by over 5% per year as demand for elective and privately financed services resumed. On the other hand, out-of-pocket spending stagnated.
