revenue?

countries to some US$380 billion annually (Stenberg et al. 2019). These are averages and estimates: each country must identify its own locally relevant PHC policies, define a locally appropriate benefits package, and assess the costs and budgetary implications of its delivery. For the large majority of countries, a strong case can be made that these investments would pay large dividends—by improving population health (OECD 2020a), advancing economic inclusion, and improving countries’ competitiveness.

The source of PHC resources has important implications for whether investment needs will be met. Universal coverage of high quality, comprehensive PHC first requires mobilizing adequate revenues for health overall through prepaid, pooled financing that eliminates out-of-pocket expenditures. Allocations from within the pot of pooled health resources must then adequately prioritize PHC. General government revenue is increasingly seen as the best mechanism for financing PHC, given the changing nature of work, the persistent informality in LMICs, and the public-good character of population-based public health services. Evidence also shows that financing through general government revenues facilitates access to health services and improves financial protection for the population (Jowett and Kutzin 2015; World Bank 2016). Additionally, many LMICs are still building health system foundations for quality PHC, including basic infrastructure (for example, running water and sanitation), human resources, and reliable supply chains for health products (Cotlear et al. 2015). Such fixed-cost investments cannot be readily financed through recurrent health insurance premiums or user fees. Box 4.4 lays out the case for PHC financing through general government revenue in detail.

BOX 4.4 WHY FINANCE PHC THROUGH GENERAL GOVERNMENT REVENUE?

General government revenue is increasingly seen as the best mechanism for financing universal health care (UCH)—and primary health care (PHC), specifically—for several reasons: + Changing nature of work: Demographic shifts and structural changes in employment are challenging the sustainability of employment-based resource mobilization models for the health sector, including labor taxes, employer-provided health insurance, and social health insurance (SHI). Particularly important shifts include population aging (and relatively fewer working-age adults relative to retirees), shrinking labor needs in some industries due to technological

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BOX 4.4 (continued)

transformation (such as automation), and the recent rise of the gig economy (World Bank 2019a; World Bank 2019b). Roughly two-thirds of the countries with SHI now use government budget transfers, often on top of traditional employment-based resource mobilization, to at least partially finance their health systems (WHO 2019b). For example, Estonia and France, which once relied predominantly on labor taxes to finance their health systems, now use general government revenues to supplement SHI premiums (Habicht et al. 2018). + Labor informality: In low- and middle-income countries (LMICs), preexisting high levels of labor informality further complicate efforts to expand health coverage through employment-linked solutions. Some countries have extended SHI to the informal economy by offering the option to join SHI schemes voluntarily, for example, in Thailand through the earlier Voluntary Health Insurance Scheme (Tangcharoensathien et al. 2019), or through community-based health insurance.

However, countries have been unable to achieve high levels of coverage without substantial government subsidies and compulsory enrollment, for example, in

Rwanda (Ridde et al. 2018). High labor taxes to finance the health sector may even exacerbate the informality by creating an additional incentive to pay employees

“off-book.” Hungary, for example, used government financing to reduce employer payroll taxes and thereby reduce the incentive for informality (World Bank 2019b). + Reducing financial barriers: Suggestive evidence shows that removing user fees for primary health care in low-income countries (LICs) and LMICs results in higher utilization of services and better financial protection (Lagarde and

Palmer 2008; Lagarde and Palmer 2011); some studies also suggest a link to better health outcomes (Qin et al. 2018). However, policies to remove user fees are only effective when backed by adequate levels of pooled financing from the government budget (WHO 2016). + Financial crises: During financial crises, high unemployment can result in health coverage losses and reduce the system’s ability to mobilize and pool resources (Yazbeck et al. 2020). In Greece, the 2008 financial crisis resulted in extensive insurance coverage losses due to unemployment; the government subsequently passed legislation to guarantee all Greek citizens the right to primary health care (World Bank 2019a). Cumulative income shocks at the individual level can also limit the ability of families to pay out-of-pocket during a financial crisis, creating significant revenue losses for PHC facilities in systems reliant on out-of-pocket payments. + Population-based common goods: Public goods, including the public health and outbreak preparedness functions of PHC, are best financed through general government revenues (supplemented by development financing) to prevent fragmentation and adhere to international standards (Sparkes, Kutzin, and Earle 2019; Yazbeck and Soucat 2019).