**1. Introduction**

Leaders of the world have committed to achieve universal health coverage (UHC) goal number 3.8 of the sustained development goals (SDGs) by 2030. This means that people of any country should have access to at least essential health services regardless of their income or social groups within a country. Two indicators are used in monitoring the UHC covering indicator 3.81 of service coverage and indicator 3.8.2 of catastrophic health spending [1, 2]. Service coverage ensures that everyone should have essential health services when she/he needs them and catastrophic health spending ensures that no one goes bankrupt when paying for health care to meet his/her need. Recent monitoring by three global organizations, the World Health Organization, the World Bank, and the OECD have demonstrated the progress of the incidence of catastrophic health spending with two thresholds percentage of 10% and 25% of the total household incomes or expenditures [3]. Catastrophic health spending (CHS) is an important measure of out-of-pocket (OOP) expenditure by household members that should not exceed 10% of income [4]. Above that, the household may become

impoverished. The indicator 3.8.2 is essential to protect people from being poor due to the consumption of health care when ill health or accident occurs.

Market mechanism in health care means that everyone must purchase health care out of his/her pocket and the health care providers set prices above the production costs to get profit and develop the business. Because of the uncertain needs for health care, ability to pay at the prices set by the sellers (health care providers) market mechanism tend to impoverish people. The WHO reported that 996 million people in the world (13.2%) spend more than 10% of their budget on OOP health care consumption [5]. Health economic literatures have long acknowledged that health care is not normal goods because of its unique characteristics. For the normal goods or services, market mechanism leads a fair competition and to adequate supplies the people could purchase, lower prices and higher quality of products. One of the requirements of perfectly competitive market is the information symmetry between the purchasers and the sellers.

There are three main distinct characteristics of health care needs that make fully competitive market mechanism of health care does not function well [6]. The first characteristic is *uncertainty* of health care needs in terms of time in the future, location, amount of money, and amount of health care consumed. Health care consumption may be affordable if the ill-health is mild, but it can be devastating to an individual's wealth or income if someone is suffering from severe illness such as heart attack, stroke, or cancer. In an insurance theory, an uncertain future event with large financial risks can be transferred to an insurer as in insurance mechanism by paying premium or contribution [7, 8]. The amount of premium is an average expected amount of money, which relatively small amount and affordable, to cover financial risks of an insured population. For example, in a simplified commercial health insurance scheme, an insurer may sell single benefit of renal transplant with the average cost of \$100,000 and the probability of occurrence of renal failure that required renal transplant in that community is one per 10,000 population. The pure or net premium (no loading factor to cover administrative, marketing, and profits) will be \$10 (\$100,000 multiple with 1/10,000 probability). By paying \$10 premium, a person will be insured to afford a renal transplant, once s/he suffers from a renal failure.

There are two main types of health insurance based on the mandatory or voluntary transfer of risks. The mandatory insurance scheme is called social health insurance, which is normally used in national health insurance (NHI), while the voluntary joining health insurance is called commercial health insurance. Another way of managing risk of uncertainty in health care is to cover all health care needs by the state budget like in the National Health Service (NHS) scheme in the United Kingdom [9].

Health insurance can be differentiated according to the financing function of the health system. There are systems mainly financed by taxes while others are mainly financed by social health insurance (SHI). Both income tax and SHI contribution are compulsory in the world. Both SHI and income tax are taken proportionally from income or salaries. To top up those mandatory contributions, in many countries, there are markets for private (voluntary) health insurance, except in few countries such as the United States where private health insurance is the main source of health care financing for working population. However, for the elderly population with high health risks, the US health care system uses mandatory of a kind of SHI (the Medicare Program) [9, 10].

The second distinct characteristic of health care is the very high *asymmetric information*. Information symmetry is the key to a fully competitive market mechanism that leads to lower prices and higher quality of products or services. The symmetry

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

of information facilitates a buyer to choose a product or service to be purchased. When a buyer has a lack of information, she/he could ask the details of the product, the benefit of the product, and compare prices with other products or substitutions or bargain the seller for the price. The buyer of a normal product makes his/ her decision to purchase or consume fully or partially according to his/her ability to pay or his/her "perceived needs" with no harm. In health care, this independent and fully informed choice does not happen. In a market mechanism, an ordinary patient is unable to get full information about his/her needs, choices of appropriate health care, the fair price, the benefit, and the adverse effect of a health care she/he will consume. But the doctor (independent or representing a health care provider) knows much more, and at the same time, the doctor is advocating the patient what to consume. This very high asymmetric information between the patient (the buyer) and the doctor (the seller) poses a threat of moral hazard, abuse, and fraudulence act due to financial/profitable interests of the seller. This information asymmetry is the main cause of market failure [10].

What about health insurance market? It has also high information asymmetry. At the individual level, an individual has very little knowledge about the probability of health care needs covered by a health insurance policy, its appropriate premium, and how good is the insurance policy paying health care providers. The main drawback of private or commercial health insurance schemes is how an individual (called a prospect) understands his or her health risks and how much of these risks can be transferred, method of risk calculation to set premium, and how the insurer underwrites the health risks. Therefore, private health insurance is normally sold as group insurance, either as the main health care protection or as a top-up coverage in the NHI or NHS scheme. In commercial health insurance, the purchasing mechanism for individuals follows the "take it or leave it" business model. Both commercial health insurance and health care do not meet the requirement of independent decision to purchase health care or health insurance. Since the nature of transaction of commercial insurance is voluntary and insurers are companies seeking profits, commercial health insurance schemes are always multipayers. Every business entity has a freedom to enter the health insurance market. A health system that depends heavily on commercial health insurance will not achieve effective (cover all people or UHC) and efficient health system (a relative low portion of GDP is spent for health). Designing, marketing, and managing commercial health insurance require multiple professional workers, and the economy of scale will not achieve efficient system. Competition in health insurance market pushes insurers to create unique and competitive plans (health insurance products) leading to only portions of people or groups of people that may purchase. This condition absolutely will not achieve the law of a large number of the main predictable events of insurance principle.

The third distinct characteristic of health care is the *externalities* of health care consumption or products. An externality occurs when a person consumes a good or a service and there are effects created on other people with are not expressed in the price. *Positive externality* occurs, for instance, if a tuberculosis patient consumes medication, people around him/her will benefit for not being contacted by TB. On the other hand, a *negative externality* may occur if someone regularly smokes cigarettes that risk his/her heart or lungs or cause cancer, and other people around him/her who inhale the smoke will be subject to a higher risk of tobacco-related diseases (TRDs). This externality poses unfairness of purchasing health care. It is not fair to pay for treatment of TRDs when someone has never smoked. Therefore, externality becomes the basis for public subsidy or public finance. Since it is difficult to identify who was

causing negative impact of smoking, the application of sin tax [11] for health care is commonly practiced in many countries. Sin tax is a term used in some countries to signify that consumption of certain products such as tobacco or alcohol negatively affects health of the people. To reduce such negative externality of consumption of tobacco or alcohol, a financial disincentive called tax or excise is charged to the consumers. The term "earmarked tax" is used if a portion or whole of the sum of money collected from sin tax is dedicated by law to finance health services.

The combination of the three distinct characteristics of health care generates other unique health care needs called "patient ignorance, patient short-sighted, patient inability to pay, unfair health financing, and provider moral hazard or fraud." In addition, because unmet health care needs could result in severe disability or death, health care consumption is a human right. Therefore, combination of those unique characteristics of health care needs requires collective efforts and public funding. The goal of 3.8 of SDGs, UHC is the global commitment to meet health care needs for everyone. One of the key element of UHC is public financing using insurance mechanisms or tax-funded system.
