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Objective – Tanzania, Mexico, and the United States are at vastly different points on the economic development scale. Yet, their health systems can be classified as “developing”: they do not live up to their potential, considering the resources available to them. The three, representing many others, share a common structural deficiency: a segregated health care system that cannot achieve its basic goals, the optimal health of its people, and their possible satisfaction with the system. Segregation follows and signifies first and foremost the lack of financial integration in the system that prevents it from serving its goals through the objectives of equity, cost containment and sustainability, efficient production of care and health, and choice.

Method – The chapter contrasts the nature of the developing health care system with the common goals, objectives, and principles of the Emerging Paradigm (EP) in developed, integrated – yet decentralized –systems. In this context, the developing health care system is defined by its structural deficiencies, and reform proposals are outlined.

Findings – In spite of the vast differences amongst the three countries, their health care systems share strikingly similar features. At least 50% of their total funding sources are private. The systems comprise exclusive vertically integrated, yet segregated, “silos” that handle all systemic functions. These reflect and promote wide variations in health insurance coverage and levels of benefits – substantial portions of their populations are without adequate coverage altogether; a considerable lack of income protection from medical spending; an inability to formalize and follow a coherent health policy; a lack of financial discipline that threatens sustainability and overall efficiency; inefficient production of care and health; and an dissatisfied population. These features are often promoted by the state, using tax money, and donors.

Policy implications – The situation can be rectified by (a) “centralizing” – at any level of development and resource availability – health system finance around a set package of core medical benefits that is made available to the entire population and (b) “decentralizing” consumption and provision of care. The first serves equity and cost containment and sustainability. The second supports efficiency and client satisfaction.

Originality/value of chapter – The chapter views commonly discussed problems of the health care system – a lack of insurance coverage and income protection – as symptoms of a large problem: health system segregation.

The first section of this volume is concerned with the changing context for health financing in developing and transitional countries. Two chapters address contemporary issues. The first, by Cristina Gutiérrez-Delgado and Veronica Guajardo-Barrón, describes the challenges created by the “double burden” of disease in low- and middle-income countries created by the coexistence of the persistent burden of communicable disease with emerging problems of chronic and non-communicable illness. Drawing on the Mexican experience of expanding needs for anti-retroviral therapy, renal replacement therapy, and screening and prevention of cervical cancers, they present new evidence about the burden placed by these conditions on public health budgets. They also show the potential value of adopting a risk factor approach to economic evaluation of chronic disease management, presenting estimates of the financial burden imposed by four diseases strongly associated with overweight and obesity. They conclude that strengthened stewardship functions, including generating data about disease burdens and expenditure, and greater use of explicit priority setting processes, are needed to help resolve the tensions between equity and efficiency.

Objective – To present the challenges arising from the double burden of disease in developing countries, focusing on the case of Mexico, and to propose a strategy for addressing these challenges.

Methodology/approach – Mortality and morbidity data are presented for selected countries and groups of diseases. Specific examples of the pressures faced by the public health services in Mexico to provide and finance treatment for communicable and non-communicable diseases are used to illustrate the extent of the challenges in the context of a country with limited resources.

Findings – Public health systems in developing countries face strong pressure to provide and finance treatment for both communicable and non-communicable diseases, inevitably producing competition among diseases and conditions and requiring trade-offs between equity and efficiency goals.

Implications for policy – In developing countries, addressing the challenges presented by the double burden of disease requires a multidisciplinary approach to develop and strengthen the policymaking process. This involves the use of analytical tools applied to each stage of the planning cycle, in particular the use of an explicit priority setting process together with monitoring and assessment to strengthen decision making under limited resources.

Objective – This chapter assesses health equity achievements of the Thai health system before and after the introduction of the universal coverage (UC) policy. It examines five dimensions of equity: equity in financial contributions, the incidence of catastrophic health expenditure, the degree of impoverishment as a result of household out-of-pocket payments for health, equity in health service use and the incidence of public subsidies for health.

Methodology – The standard methods proposed by O’Donnell, van Doorslaer, and Wagstaff (2008b) were used to measure equity in financial contribution, healthcare utilization and public subsidies, and in assessing the incidence of catastrophic health expenditure and impoverishment. Two major national representative household survey datasets were used: Socio-Economic Surveys and Health and Welfare Surveys.

Findings – General tax was the most progressive source of finance in Thailand. Because this source dominates total financing, the overall outcome was progressive, with the rich contributing a greater share of their income than the poor. The low incidence of catastrophic health expenditure and impoverishment before UC was further reduced after UC. Use of healthcare and the distribution of government subsidies were both pro-poor: in particular, the functioning of primary healthcare (PHC) at the district level serves as a “pro-poor hub” in translating policy into practice and equity outcomes.

Policy implications – The Thai health financing reforms have been accompanied by nationwide extension of PHC coverage, mandatory rural health service by new graduates and systems redesign, especially the introduction of a contracting model and closed-ended provider payment methods. Together, these changes have led to a more equitable and more efficient health system. Institutional capacity to generate evidence and to translate it into policy decisions, effective implementation and comprehensive monitoring and evaluation are essential to successful system-level reforms.

Objective – The South African health system has long been characterised by extreme inequalities in the allocation of financial and human resources. Voluntary private health insurance, delivered through medical schemes, accounts for some 60% of total expenditure but serves only the 14.8% of the population with higher incomes. A plan was articulated in 1994 to move to a National Health Insurance system with risk-adjusted payments to competing health funds, income cross-subsidies and mandatory membership for all those in employment, leading over time to universal coverage. This chapter describes the core institutional mechanism envisaged for a National Health Insurance system, the Risk Equalisation Fund (REF). A key issue that has emerged is the appropriate sequencing of the reforms and the impact on workers of possible trajectories is considered.

Methodology – The design and functioning of the REF is described and the impact on competing health insurance funds is illustrated. Using a reference family earning at different income levels, the impact on workers of various trajectories of reform is demonstrated.

Findings – Risk equalization is a critical institutional component in moving towards a system of social or national health insurance in competitive markets, but the sequence of its implementation needs to be carefully considered. The adverse impact of risk equalization on low-income workers in the absence of income cross-subsidies and mandatory membership is considerable.

Implications for policy – The South African experience of risk equalization is of interest as it attempts to introduce more solidarity into a small but highly competitive private insurance market. The methodology for considering the impact of reforms provides policy-makers and politicians with a clearer understanding of the consequences of reform.

Objective – To understand the role and influence of villagers’ trust for the health insurer on enrollment in a community-based health insurance (CBHI) scheme in Cambodia.

Methodology/approach – This study was conducted in northwest Cambodia where a CBHI scheme operates with the highest enrollment rates in the country. A mixed method approach was employed to gauge how individuals in the community trust the health insurer, and whether this plays a role in their decisions to enroll in CBHI schemes. Focus groups and household surveys were carried out to identify and measure trust levels, and to explore the association between insurer trust and enrollment in CBHI schemes.

Findings – Although villagers generally trusted the health insurance organization, villagers with poor experiences with other organizations in the past were less willing to trust the insurer. Insurer trust represented a combination of interpersonal and impersonal trust. After controlling for demographic factors, health care utilization, and household socio-economic status, insurer trust levels for villagers who newly enrolled (RRR=1.07, p<0.001) and renewed insurance (RRR=1.15, p<0.001) were significantly higher than those who never enrolled in CBHI schemes.

Implications for policy – This study illustrates the relationship between CBHI enrollment and villagers’ trust for the health insurer in a low-income, post-conflict country. It highlights the need for staff of health insurance organizations to place greater emphasis on building trusting interpersonal relationships with villagers. Understanding the nature of trust for the health insurer is essential to improve health insurance enrollment and protect people in poor rural communities against the impact of health-related shocks.