How health care is paid for determines who receives it, what is delivered, and who captures the value that the health system produces.
The Financing-Delivery Link
Health financing shapes health delivery in ways that are as consequential as any clinical or infrastructure dimension of the health system. The financing mechanism determines who can access care, what care is delivered, and who captures the value the health system produces. Fee-for-service financing creates incentives to deliver more services rather than better outcomes, to prioritise high-revenue services over high-need ones, and to treat illness rather than prevent it. Insurance-based financing creates incentives to select healthier patients who need less care, to deny coverage for high-cost conditions, and to design plans that capture premium revenue while minimising service delivery.
The Value Capture Problem
In most health financing systems, the largest share of the value that the health system produces is captured by the institutional actors with the most market power — the pharmaceutical companies that price drugs at multiples of their production cost, the specialist physicians whose incomes reflect market power rather than contribution to population health, and the insurance companies whose administrative costs and profits consume a significant fraction of premium revenues supposed to fund care. The patients whose health the system is designed to improve capture whatever value remains after these institutional claims are satisfied.
Health financing is not a technical plumbing problem — it is a governance decision about who the health system is for. The financing mechanisms that systematically direct resources toward institutional interests rather than patient health are making that choice explicitly, whether or not the choice is acknowledged.
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