All that is needed for external financing of health care is a budget. Tax-financed health care systems are financed from general revenue, mainly taxes and public debt. The revenue (absolute amount or percentage) for health care systems stems from earmarked taxation or from a budget financed by the global ‘household.’

The health budget within the global public ‘household’ is transferred to regions on the basis of political decisions. These regions, e.g. in the UK, are using the received money to finance the provision respectively to the providers of services according to certain rules, fee and time schedules. Finally, the providers use the money to purchase the services for the patients including equipment and labor (salaries and wages).

In payroll tax-financed health care systems the revenue stems mainly from the contributions which are collected from the employers and employees. The tax base consists of mainly wages and salaries. The money is paid according to the payroll-tax rate, e.g. 14 %, depending on the different insurances. The contribution rate depends on the economic situation of a country, because the tax base fluctuates. Thus the difference in fiscal sustainability between the payroll tax-financed system and the purely tax-financed system depends on both economic and political factors.

Risk-oriented premiums, for example in Germany and Spain, are rare. Many of these systems are capital-funded and not on a pay-as-you-go basis. Risk oriented insurances depend mainly on age, sex and health status etc.

The last part of external financing of health care refers to private payments, respective of consumption. The major examples are co-payments for drugs, i.e. over the counter products and services. It is the second health care market, with individual out of pocket expenditures for wellness, healthy food and such.

External financing of health care and internal purchasing of health services lead to many different segments. Paying the providers occurs:

  1. in hospitals, e.g. diagnosis related groups;
  2. at the office-based doctor;
  3. at the dentists;
  4. in pharmacies;
  5. for remedies, such as physiotherapy;
  6. for eyeglasses and hearing aids;
  7. for accident rescue;
  8. for patient transport;
  9. in nursing homes;
  10. in rehabilitation facilities;
  11. out-patient treatment in medical and nursing care.

In total, a question may arise as to whether the many internal financing systems seem easier to clarify than the external system with its complexity. In between external and internal financing, we need fiscal agents, or funds, on the basis of which the money will be distributed to providers. For this purpose, institutions or agents are required, to collect the money and to allocate it according to a given legal framework to those who provide the health services. These processes between financing and purchasing health care are highly complex and are handled differently amongst the European nations.

How many fiscal agents and budgets are necessary for a sustainable system? Should hospital financing, health expenditures, long term nursing, rehabilitation centers and pension funds be in one hand? Do we need more competition as a prerequisite for better health care?

Perhaps network-budgeting with more cooperation between the providers is the answer. A newly founded management company in a certain legal framework develops the network for more coordination between the different sectors and services. Financing and purchasing health care will be increasingly in one hand. Thus, network budgeting is no longer a dream but (at least) a direction and a new approach for further projects, in the center of which are the patients with their needs.

To summarize, the options and solutions for financing and purchasing healthcare are:

  • external financing: tax-financed budget for health care;
  • internal financing: paying the providers (from earmarked payroll tax-financed, premium-financed, co-payments or private consumption);
  • fiscal agents in between external and internal financing;
  • network budgeting, as a solution for the future.