Risk Pooling in Health Care Finance

Pooling is the health system function whereby collected health revenues are transferred to purchasing organisations. Pooling ensures that the risk related to financing health interventions is borne by all the members of the pool and not by each contributor individually. Its main purpose is to share the financial risk associated with health interventions for which there is uncertain need. The purpose of the report is to (i) identify modalities of pooling particularly relevant to developing countries; (ii) assess the impact of various ways of pooling on health system performance; (iii) provide guidelines to design functional pooling arrangements in a variety of health systems context; and (iv) present best practice. Risk pooling is required because of the large uncertainty in the magnitude and timing of an individual's health care expenditure needs (section 2). It implies three redistributive functions: from the rich to the poor, from the healthy to the sick, and from the productive to the unproductive stage of the life cycle. The arguments in favour of risk pooling in health care reflect equity and efficiency considerations. The equity arguments reflect the view society does not feel that it is fair that individuals should assume all the risk associated with their health care expenditure needs. The efficiency arguments arise because pooling can lead to major improvements in population health, can increase productivity, and reduces uncertainty associated with health care expenditure. There are four classes of approach to risk pooling (section 3): • no risk pool, under which all expenditure liability lies with the individual; • unitary risk pool, under which all expenditure liability is transferred to a single national pool; • fragmented risk pools, under which a series of independent risk pools (such as local governments or employer-based pools) are set up; • integrated risk pools, under which fragmented risk pools are compensated for the variations in risk to which they are exposed. The report argues that the unitary risk pool is an ideal, but that numerous practical difficulties in making it operational. Instead, it is likely that most health systems will use a system of fragmented pools, and that methods of integration are therefore required. The report offers some guidance on implementation (section 4). Numerous choices must in principle be made, including: • the institutional basis for risk pools (geography, employment sector, employment status, and so on); • the criteria for membership of a risk pool; • the size of …