Chapter 5

Healthcare Systems
 Healthcare Systems-Financial Structure

• Financial structure of healthcare systems and

the share reserved for healthcare expenses
are regarded by countries as very important
indicators of economic development.

Healthcare expenses are, therefore, among

most important agenda items for healthcare
policy makers. Finance of healthcare services is
still a heated debate item in both public and
private sector.
 Healthcare Systems-Financial Structure

• Negative economic conditions, fiscal deficits

and pressures imposed by international credit
institutions all lead to mobilization of private
sources for public expenditures and market‐
based financing model in healthcare sector.

All states aim equal access to quality and

efficient healthcare services at service delivery
phase, irrespective of the method adopted.
 Healthcare Systems-Financial Structure
• Healthcare services should be quality and accessible by all citizens
in order to realize the “right of healthy life”. Healthcare services
should be, therefore, efficiently and effectively financed.

 We will address and analyze methods used in financing Turkish

healthcare services and to compare thereof with financial
structures of U.S., U.K., France, Germany and Cuba, which represent
distinctive healthcare finance models worldwide. We will add to the
extent the class size permits, examples from Fareast Asia; China and
Japan.

 In this end, active applications in Turkey are reviewed by addressing

pros and cons of Turkish healthcare finance model in comparison
with other systems.
 Healthcare Systems-Financial Structure
• Principal aim of health services is to provide affordable
healthcare services at quality level acceptable to receiver
whenever required.
• Financing models of healthcare services vary from one country
to other,
• Variations are also observed in payment methods, organization
type and rules for access to service, even if same financing
method is used.
• Scientific and technological advancements accelerated
evolution of medicine, resulting with increased quality of
healthcare services.
 Yet, recent increase in incidence of chronic and degenerative
disease secondary to improved living conditions is
accompanied by costs which are hardly met.
 Healthcare Systems-Financial Structure
• While fight against contagious disease is usually an important
source of finance in developing countries, financing cost of managing
elder population with chronic disease, which requires costly
treatments, is recently gaining an important share from the budget.
 
• Scientific and technological dependence of developing countries to
developed countries emerges necessity to address new health
organization models.
 
• Financing problems take the lead in troubles experienced in
healthcare sector. This problem applies both developed and
developing countries, but economic implications may vary in each
country.
 
 Healthcare Systems-Financial Structure
• Two principal methods in financing of healthcare services:
1. Direct financing method: implies healthcare receivers pay
the service fee out of the pocket. Services produced by public
and private sector are purchased and paid by the consumer.
2. Indirect financing method, a third party payer takes place
between service provider and receiver. Healthcare system is
financed by:
 
 healthcare system,
 uniform taxes,
 special taxes,
 consumer contributions,
 donations.
 Healthcare System Financing Methods
• Many divergent dynamics should be taken into
consideration when healthcare system financing
model of a country is determined.
• Always remember:
 there is no unique model, which delivers perfect
outcomes for society and financing system,
 each model is accompanied by unique advantages
and disadvantages,
 a model, generating substantially good outcomes in a
country, may not produce same outcomes in another
country totally due to factors originating from this
second country.
 Healthcare System Financing Methods
• In principal, there are three principal healthcare financing
models:

1. Beveridge Model,
2. Bismarck Model and
3. Private health insurance.

Those models vary substantially in terms of:

 source of finance,
 decision‐making mechanisms and
 organization of service providers.
 
Healthcare System Financing Methods
 Healthcare System Financing Methods
1. Beveridge Model:
• Emerged in the U.K. following Second World War,
• It is generally identified with National Health Service (NHS) of the
UK.
• Today, this model is used by Denmark, Finland, Ireland, Spain,
Sweden, Italy, Norway, Portugal and Greece.
• Principally character: financing healthcare services with taxes.
• government controls healthcare system financing through the
budget;
• all citizens have free‐of‐charge access to healthcare services,
physicians are paid a salary or a fee per patient in return for services;
• organizations use budgets which are determined by central
administrative body.
 Healthcare System Financing Methods
2. Bismarck Model: first introduced by Bismarck in Germany in
1883 and it is put into force in many countries over time.
• it is currently used by many developed and developing countries,
including Austria, Belgium, France and the Netherlands.
• It is the most commonly used healthcare financing method due
to World Bank’s healthcare reform on health policies especially
after ’90s.
• This social security based model is funded by premium incomes.
Healthcare supply covers both public and private sectors.
• The principle of this system is covering all citizens under
mandatory health insurance, which is funded by semi‐direct
personal premium payments.
• Germany, France and Belgium are examples of those states.
 
 Healthcare System Financing Methods
3. Private Insurance Model: United States of America is the
homeland private health insurance and it is among healthcare
financing models, which are not commonly recommended due
to factors written below.
• Private sector is the principal factor for both service supply
and request.
• Healthcare service request is funded by out‐of‐pocket
payments and private insurances.
• The wealthy one will have health coverage.
• Private sector regulates the service supply in this system.
• U.S. and Brazil are examples of states where this system is
adopted.
 Healthcare System Financing Methods
Socialist Type Health System: is characterized by offering
preventive and therapeutic healthcare services free‐of‐charge
to all citizens.
• Private sector plays no role in healthcare service delivery.
• Healthcare service delivery is completely managed by
public authorities.
• U.S.S.R. and Cuba are examples of this system.
 
Same groups emerge in both healthcare system classification
models.
Selection of healthcare financing method in a state reflects
social values and policy aims of that state.
 Tax-based financing
Tax‐based financing= Beveridge Model,
• Implies collecting taxes from citizens and allocating resource
to various sectors from the common resource pool.
• Citizens make contributions to healthcare system through tax
payments.
• No extra fee is paid for use of healthcare services (excluding
contribution fees mandated by the system).
• Tax collection capacity and equity of taxes collected are
critical questions to be answered for this type of financing.
• Economic recession is among critical periods to the tax‐
based financing method. Recession is accompanied by
reduced production, resulting with lower income and new
taxes put into force or increasing taxation rates.
 Out-of-pocket payments
Out‐of‐pocket payment= all direct payments made to private
sector service providers by patients to benefit from
healthcare service.
• For services not covered by social security or if access to
service is challenging due to long waiting periods.
• Although out‐of‐pocket payment is seen in almost all health
systems, it is, alone, not a proper healthcare financing
method, since time, location and actual cost of healthcare
service are unknown.
• Out‐of‐pocket payment should be a financing method,
reserved solely for compulsory cases; be related with
income status of the citizen.
 Private Health Insurance
• Private health insurance= a profit‐oriented financing
method. Private health insurance is used to finance
services not covered by public programs.
• Private health insurance plays 5 different roles
according to WHO:
 Dominant: obligatory for all employed citizens (USA).
 Mandatory: mandated for all citizens in the
Switzerland.
 Substituting: who are partially or completely excluded
from public health insurance programs / are wealthy
enough to get out of the public health insurance
program in the Netherlands, Belgium and Germany.
 Private Health Insurance
 Supplementary: for services not covered or partially
covered by public health insurance programs-
Canada, France and Italy
 Complementary: for extended service provider
spectrum, Finland, Greece and the U.K.

• Private health insurance is among financing

methods which should not be used on large scale
due to many reasons.
 Social Health Insurance
• Social health insurance=Bismarck model, is
developed in Germany.
• Both employee and employer pay a premium,
• Proportional to the income of the person,
• Subject to pre‐determined rules,
• Those premiums are collected in a pool, and
• Healthcare services are used by citizens who
need healthcare, while costs are financed from
the pool.
 Social Health Insurance
Continuous and foreseeable finance is
among most importance advantages
brought by financing healthcare services
with social health insurance.
The most negative aspect of social health
insurance is poor coverage of employees of
agriculture and informal sectors and other
challenges to the cost controlling.
 History of Healthcare in Turkey
• The healthcare system in Turkey has a highly complex structure.
Turkish health service providers are:
The Ministry of Health (MOH),
Universities and
The private sector
 
• MOH was initially established in 1920: foundations of the
current Turkish public health system were built during 1923 and
1946.

• In 1946, the Social Insurance Organization called “Sosyal

Sigortalar Kurumu” or “SSK” was created to provide health
insurance to private sector and blue collar public-sector
employees.
 History of Healthcare in Turkey
• In 1950 Government Employee’s Retirement
Fund (RF) called “Emekli Sandigi” was
established to provide service to white-collar
employees was introduced as a temporary
solution until the adoption of employees
(government employees), military personnel
with retirement and disability pension, local
administration council members,
parliamentary and military school students.
 History of Healthcare in Turkey
• In 1972: Bağ-Kur (the Social Insurance Agency for Merchants,
Artisans and Self-employed) was established.
• In 1992 the Green Card program was introduced.
• By 2003, there were a number of different social security schemes
used by Turkey:

Social Insurance Organisation (SSK),

Government Employees Retirement Fund (Emekli-Sandigi),
Bağ-Kur
Green Card (Yesil Kart).

• Insured citizens were allowed to use different facilities and

pharmacies according to their social security service.
• Payment mechanisms across the health insurance funds also
varied.
 Health Transformation Program
• In 2003, the Health Transformation Program (HTP)
covering the period 2003-13 was adopted by the MOH.
• The EU accession process has also provided additional
momentum for the implementation of a more
streamlined healthcare system.
• By October 2008, the harmonization of the benefit
package was completed and finally Universal Health
Insurance gathered all insured citizens (Bag-kur, SSK,
Emekli Sandigi and Green Card holders) under a single
insurance umbrella.
• Later on, family medicine was adopted in some cities,
and the aim of the program is to further generalize its’
implementation across Turkey.
 Health Transformation Program
• The other objectives of the HTP are to:
 Strengthen primary healthcare services;
 Improve the administrative and financial autonomy of health
facilities; suffer from overcapacity and lack of finances,
 Accelerate the accreditation for qualified and effective health
services;
 Support the health system by education and science
institutions;
 Improve the home care policy,
 Improve the quality and increase the number of intensive care
units;
 Decrease maternal and infant mortality rates; and
 Carry out the European Union harmonization/accession
process
 Health Transformation Program
• The other objectives of the HTP are to:
 Strengthen primary healthcare services;
 Improve the administrative and financial autonomy of health
facilities; suffer from overcapacity and lack of finances,
 Accelerate the accreditation for qualified and effective health
services;
 Support the health system by education and science
institutions;
 Improve the home care policy,
 Improve the quality and increase the number of intensive care
units;
 Decrease maternal and infant mortality rates; and
 Carry out the European Union harmonization/accession
process
 Financial Structure of Turkish Healthcare
Services
The financing of healthcare system has three main sources:
1. Government budget funded by taxation revenue,
2. Contributions from employed citizens,
3. and out-of-pocket payments which are made by each individual who
uses the health service.
• Employers must register their employees with the health insurance
fund and then income is automatically covered partly by the
employer and partly deducted from the employees’ salary.
• Dependent family members are covered by the contributions paid
by employed family members.
• Self-employed people must make their own contributions to the
health insurance fund suffer from overcapacity and lack of finances.
 Financial Structure of Turkish Healthcare
Services
There are several types of hospitals throughout Turkey:
• State-funded hospitals, which suffer form over capacity
and lack of finances;
• University Hospitals, which have the highest standard of
care out of all three of hospital types and highly skilled
personal,
• Private hospitals: Although a limited percentage of
Turkish citizens can afford to use private healthcare, it is
affordable in comparison to Western expectations and on
a par with western standards.
 Financial Structure of Turkish Healthcare
Services
• A mixed method is adopted for reimbursement of
healthcare services in Turkey.

• Social Security Administration allocates a global

budget to reimburse healthcare services offered in
hospitals of Ministry of Health subject to conditions
determined every year and the Ministry distributes
the budget among all affiliated hospitals.

• Same is applied for medicine expenses.

 Notes on the Turkish Healthcare Services
• Similar to all developing countries, Turkey is among actors
who are actually establishing a health policy.  
• International institutions and organizations, including but
not limited to WHO, World Bank, OECD, IMF and health
technology companies, and supranational organizations,
such as the EU, have direct or indirect influences on
structure and frame of Turkish health policies.
• Guidance of those organizations advocates minimizing
contributions made by taxes and premiums by maximizing
share of private sector and private insurance business
according to market economy.
 Notes on the Turkish Healthcare Services
• Significant improvements are made in principal health
indicators in last decade in Turkey- still figures are far
behind averages of the EU.
• Turkey should design and put into force all policies to
eliminate inter‐regional differences.
• Turkish health system is largely based on social insurance
principle and it is related with employment, whole
population cannot be covered by health insurance.
 high rate of unregistered employment and high
unemployment rate.
• Turkey should make efforts to catch averages of OECD by
increasing share of health in GNP.