While financing schemes purchase healthcare on behalf of individuals and the population, the revenues to fund this expenditure can originate from different sources. Most funding for government schemes comes from general government revenues (such as taxation), which are channelled through the budget process. However, governments might also contribute to social health insurance by covering the contributions of specific population groups or providing general budget support to insurance funds. Individuals may purchase private health insurance, but part of their premium may be paid by the employer, or it may be subsidised by the government. Individuals also finance care directly, using household income to pay for services in their entirety or as part of a cost-sharing arrangement. Other health financing schemes (such as non-profit or enterprise schemes) can receive donations or generate income from investments or other commercial operations. Finally, revenues can also come from non-domestic sources.
Public funding can be defined as the sum of government transfers and all social contributions. In 2023, public sources financed on average 72% of healthcare spending in OECD countries (Figure 7.11). Where government financing schemes are the principal financing mechanism, as in Norway and Sweden, government transfers fund 85% or more of healthcare expenditure. In other countries such as Costa Rica, Poland and Germany, the majority of public funding refers to social insurance contributions – payable by employers and employees – which financed close to two‑thirds of all healthcare spending in 2023. In some countries, a disconnect between public funding on the one hand and government and compulsory insurance spending on the other hand can be observed. While government and compulsory spending accounted for 83% of all health spending in the United States and 68% in Switzerland, the corresponding shares of public funding were only 54% and 33%. This discrepancy is due to the important role of compulsory private insurance which is not part of public expenditure in these countries.
Governments fund a range of public services, and healthcare is competing for resources with many other sectors including education, defence, and housing. The level of public funding on health is determined by factors such as the type of health system in place, the demographic of the population, shifting budget priorities, and economic conditions. Health spending accounted for an average of 15.1% of total government expenditure across OECD countries in 2023, an increase of 1 percentage points (p.p.) compared to 2013 (Figure 7.12). During the initial phase of the pandemic, many OECD countries were able to increase the public resources available to healthcare substantially. As a result, the share of government expenditure dedicated to health increased, peaking at 15.6% in 2021. However, 2022 saw new economic and geopolitical challenges. Russia’s war on Ukraine disrupted global energy markets and fuelled inflationary pressures, while many countries dealt with growing fiscal deficits. These constraints limited their ability to expand or even maintain healthcare spending, with the share of government expenditure dedicated to health declining in 2022 and 2023 on average across OECD countries.
Many OECD countries have a system of compulsory health insurance – either social health insurance or through private coverage – but there is substantial diversity in the composition of revenues for these types of schemes (Figure 7.13). The importance of government transfers as a source of revenue can vary significantly. On average, around two‑thirds of financing is based on social contributions (or premiums) – primarily split between employees and employers – but around a quarter comes from government transfers, either on behalf of certain groups (such as those of low incomes or unemployed people) or as general support. Government transfers fund two‑thirds of the social health insurance system in Chile, and over 50% of all their revenues in Hungary and Israel. Meanwhile, in Slovenia, Poland and Costa Rica, the role of government transfers in funding compulsory insurance schemes is marginal, with social insurance contributions representing at least 90% of all revenues of these schemes.
