**3. Financing for UHC**

Financing UHC using traditional health insurance concept of CHI poses significant problems. The double information asymmetry of health care need and health insurance contract create market failure to ensure everyone is covered to meet his/her health care needs. The unique characteristics of health care needs and the long-term externality of having healthy lives as the main requirement for individual economic productivity push all governments to ensure health services are available for everyone regardless of individual income or social status. The COVID-19 Pandemic has demonstrated how strong the health sector affected the World economy which declined by 3.4 percent in 2020 [15]. The COVID-19 pandemic emphasizes the importance of UHC as a set of the 3.8 Goal of SDGs. The UHC can only be achieved if there is sufficient public health financing.

There are three possible public financing for health that allow UHC with different efficiency levels. The first automatic covering all people is the tax funded or NHS model; the second one is the mature SHI model; and the third one is a combination of the two. Often SHI model is complemented with tax funded subsidies for the lowincome people. The administration of funds of the SHI model varies widely across the countries with dominant SHI model. Currently, no country with CHI model could fully achieve UHC. There are differences in funding UHC based on health financing mechanisms as shown in the following **Table 1**.

The main problem of CHI is the voluntary nature of participation. People are shortsighted and health risks cannot be predicted by individual. Therefore, there is unlikely that an individual will purchase CHI or private health insurance coverage. But when someone suffers from a chronic condition, then that person will demand CHI creating adverse or anti selection. The insurer that aims for profit making certainly will undertake rigorous underwriting to ensure no adverse selection. The insurer may inherently design a benefit package, terms, and conditions for prospects to minimize adverse selection. Certainly, people suffering from a chronic condition elderly and those who have congenital health problems will not be able to purchase health insurance. In addition, because the premiums (prices) are set based on health risks of individuals or small groups, higher risks of individuals or small groups must

*The Advantage of Single-Payer National Insurance DOI: http://dx.doi.org/10.5772/intechopen.105692*


#### **Table 1.**

*Comparison between CHI, SHI, and NHS model.*

pay higher premiums. This certainly excludes low-income people from having health insurance coverage. Commercial health insurance charge loading fees is significantly high, depending on the size of the group insured that can vary up to 34% of the total premiums paid [16]. Therefore, CHI model fails to achieve UHC.

Because of the market failure of CHI and health care market, the option to cover everyone is by public financing. Public financing is based on mandatory contribution and based on the proportion of income or wealth. There are only two funding mechanisms of publicly funded health care, which are the SHI model and the NHS model.

The SHI model could apply for certain group of employed population. For example, before the implementation of NHI in Indonesia, the civil servants were covered by Askes—the SHI scheme for government employees and the private employees were covered by another SHI scheme called Jamsostek. Another example is Thailand, private employees are covered under Social Security Scheme administered by the Ministry of Labor, and the informal sector is covered by a tax fund administered by the National Health Security Office Taiwan [17]. The Philippines, South Korea, and Indonesia used to have several SHI schemes before they were integrated into a single national SHI called NHI. The level of contribution for the NHI model is normally uniform, a portion of salary for all employees. In Indonesia, current contribution is 5% of monthly income, shared by employees (1%) and employers 4%. In Germany, with multiple sickness funds, current contribution levels at around 14.6%, shared 50: 50 by employers and employees [18].

The United Kingdom initiated the NHI model in 1911 and then started the NHS in 1948 administered by the state. The NHS model is normally funded by progressive income taxes, which often exceed 50% of monthly income for the high tier of income. Low and middle-income countries often have problems in collecting and enforcing high progressive income tax. The maximum level of income taxes in European Countries that implement NHS varies from 43% in Italy to 56.95% in Finland [19]. Certainly, many low- and middle-income countries (LMICs) could afford this model. But, still some LMICs such as Sri Lanka apply the NHS model even though the income tax level has been relatively low at 18%.

As an option to cover health care needs, many LMICs could start SHI model based on employment. The SHI was first introduced in Germany, called statutory health insurance, by Otto von Bismarck the chancellor of liberal party in 1883 [20]. However, at that time, Von Bismarck mandated contributions to pay income loss of a laborer who was suffering from serious sickness and unable to work for income. At that time most labor forces were based on daily paid work. Now, the SHI covers health care costs, which vary from limited hospitalization to comprehensive medical and family benefit. In Germany, since the SHI concept was introduced, there are multiple funds called sickness funds but in decreasing number [21]. In many countries, most SHI started to mandate large-size employers such as civil servants and private employers with more than 100 employees to contribute a portion of incomes to cover defined health care benefits. South Korea [22], Indonesia [7], Taiwan [23], and the Philippines [24], for example, started to mandate public and formal sector employees, years before mandating the informal sector to contribute to the single-payer NHI.
