The world has 4 key types of health service – this is how they work

Around the world, healthcare systems are under pressure like never before. Tens of millions of people have tested positive for COVID-19, according to Johns Hopkins University, which is tracking cases globally. Millions more unconfirmed infections are helping to spread the virus, despite lockdown and social distancing measures aimed at controlling infection rates.

Even in developed countries with well-funded healthcare systems, hospitals have been stretched to breaking point. In poorer countries, where access to healthcare can be limited by poverty, a lack of infrastructure and geographical isolation, many families fear being left to fend for themselves when the virus strikes.

Funding healthcare

There are four main types of healthcare system in place around the world (excluding the system in the United States, where there is no single nationwide model and healthcare is paid for through private insurance or provided by the government to some groups). The following infographic summarizes the models outlined in detail below.

The way these systems are funded is what sets them apart, but what they all need now is additional resources to cope with unprecedented demand. The chart below shows recent levels of healthcare spending as a proportion of GDP. Whichever of the four systems is in place, healthcare spending will see a spike as the coronavirus pandemic demands ever more resources.

Four ways of providing healthcare

Let’s take a closer look at the four key types of healthcare systems and how they aim to meet the medical needs of populations. They are known as the Beveridge Model, the Bismarck Model, the National Health Insurance Model, and the Out-of-Pocket Model.

The Beveridge Model

In this system healthcare provision is funded by direct income tax deductions. The majority of hospitals are owned and operated by the government. Most healthcare staff including doctors and nurses are employed by the state. The UK’s National Health Service operates on this model. The model itself takes its name from the economist Sir William Beveridge, who mapped out the introduction of the UK’s welfare state and National Health Service in the years following the end of the Second World War. Spain, Cuba and New Zealand also operate this model of healthcare system.

One of the main advantages of the Beveridge Model is that health services are free at the point of use and are available to every citizen. The government is responsible for funding all health services upfront with money raised from tax deductions. Another advantage, according to the Princeton Public Health Review, is that the single-payer structure in this system keeps costs low as the government is the only purchaser.

But universal access to state-funded medical treatment brings its own pressures. Healthcare systems operating the Beveridge Model are frequently beset by long waiting lists for treatment.

One further challenge now facing governments – especially some in Asia, where ageing populations mean there are less young people to pay tax – is how to pump additional funding into health systems when tax revenues have been significantly reduced as the coronavirus pandemic slows economic activity and raises unemployment to historic levels.

The Bismarck Model

This model is funded by insurance payments made jointly by employers and employees. Patients who pay into these schemes have access to ‘sickness funds’ which are used to pay for health services. France, Germany, Japan and Switzerland operate the Bismarck system.

Most hospitals and health services providers are private institutions although the funds themselves are considered to be public. In this system, the insurers are not allowed to take profits and the price of health services is tightly controlled by law. This allows governments to keep costs down and operate financial controls in a similar way to the Beveridge Model.

The Bismarck Model was not established to provide universal access to healthcare. It offers cover for those employees who are able to pay into the scheme. However, issues arise around providing cover for people who are not in full-time employment or unable to work at all.

And countries with ageing populations – where a high proportion of adults are beyond working age and are more likely to be affected by chronic health conditions – including noncommunicable diseases, are facing funding challenges.

The National Health Insurance Model

This model takes in elements of the Beveridge and Bismarck models, to strike a balance between public and private health provision. Countries including Canada and South Korea operate the NHI Model.

In this system, the government is the single payer for all health services, which reflects the state’s role under the Beveridge Model. Under the NHI Model, funds are raised through a state-operated insurance scheme that every citizen pays into. The insurance programme is not-for-profit and no claim is denied.

The majority of health service providers are privately-owned companies as is the case with the Bismarck Model.

The NHI Model has the advantage of providing access to healthcare for all citizens and the centralized management of the insurance scheme cuts the administration burden for hospital managers who only have to deal with a single funding provider.

However, this system can lead to long waiting lists as the chart below illustrates. According to Canada’s Fraser Institute think tank, the median wait time for medically necessary treatment in Canada was 20.9 weeks in 2019. In some regions, the wait can increase to almost a year.

In addition to the pressures caused by long waiting lists, ageing populations will also bring funding and capacity challenges to countries operating the NHI system.

The Out-of-Pocket Model

This method of access to healthcare is most common in developing countries where no formal state-wide system exists. People in rural areas of India and China as well as parts of Africa and South America source healthcare in this way. Health services are not always available and even when they are, they are beyond the financial means of many people.

So what does “out of pocket” mean in this context? Put simply, anybody requiring medical treatment must pay for it on the spot. There is no universal insurance system and income taxes are not raised to provide access to healthcare for all citizens. The reality of this means the world’s poorest people are frequently denied access to health care.

The numbers are staggering. A 2017 report from the World Health Organization and the World Bank concluded that half the world’s population had no access to essential healthcare. Another 100 million people were being pushed into extreme poverty because of the cost of healthcare.

Meeting global health goals

Each of the models above is facing challenges that will create obstacles to meeting the UN’s Sustainable Development Goals on health. Some of these challenges are at a critical stage already, while others will intensify over time as populations age and technology has an impact on the way we work.

Ensuring every person can live a healthy life and promoting well-being at all ages is the third Sustainable Development Goal.

Exploring new methods of paying for and delivering care could form part of the solution. The World Economic Forum, for example, is working with pharmaceutical multinational Sanofi and professional services firm KPMG to find new ways of achieving better health outcomes with existing resources in the Asia Pacific region.

According to the project: “Helping individuals lead healthier lives calls for new models of financing and delivery systems to reduce disease burden and the rising cost of healthcare.”