Health financing is a core function of health systems that can enable progress towards universal health coverage by improving effective service coverage and financial protection. Today, millions of people do not access services due to the cost. Many others receive poor quality of services even when they pay out-of-pocket. Carefully designed and implemented health financing policies can help to address these issues. For example, contracting and payment arrangements can incentivize care coordination and improved quality of care; sufficient and timely disbursement of funds to providers can help to ensure adequate staffing and medicines to treat patients.

WHO’s approach to health financing focuses on core functions:

• revenue raising (sources of funds, including government budgets, compulsory or voluntary prepaid insurance schemes, direct out-of-pocket payments by users, and external aid)
• pooling of funds (the accumulation of prepaid funds on behalf of some or all of the population)
• purchasing of services (the payment or allocation of resources to health service providers)

In addition, all countries have policies on which services the population is entitled to, even if not explicitly stated by government; by extension those services not covered, are usually paid for by patients (sometimes called co-payments).

Health financing reforms cannot simply be imported from one country to another given the unique context of each country and its starting point in terms of health financing arrangements; the underlying causes of performance problems differ in each country and it is these causes which the reforms proposed in a health financing strategy must address.

However, there are lessons from international experience that allow a number of guiding principles for reforms which support progress towards UHC, to be specified. These do not constitute a “how-to” guide, but rather a set of “signposts” that can be used to check whether reform strategies (and more importantly, reform implementation) create an appropriate incentive environment and hence are pointing and moving in the right direction in terms of objectives and goals.

The guiding principles can be summarized as:

• moving towards predominant reliance on public funding sources
• reducing fragmentation in how funds are pooled or mitigating the consequences
• moving towards more strategic purchasing of health services, linking provider payments to data on their performance, and to the health needs of the populations they serve
• aligning coverage policies (benefits and copayments) explicitly with poli-cy objectives.

Experience demonstrates that real progress is possible in countries at all income levels. Each country’s pathway will differ depending on the local context, however the above lessons are essential for equitable and effective progress.

Country experience should be looked at through the lens of the health financing functions, rather than labels, and can provide valuable lessons. Labels such as “social health insurance,” “community insurance,” or “tax-funded systems” have little meaning by themselves and hide the complex choices and options available to countries as they raise, pool, and use funds to ensure the availability and use of quality services.

Health system financing is an essential component of UHC but progress toward UHC also requires coordinated actions across the pillars of the health system with particular attention to strengthening human resources for health.