Not only are health expenditures rising but also have significant repercussions to individuals and households in poorer population quintiles. Many Ugandans are becoming poor and trapped into poverty due to healthcare spending. In terms of numbers, Zikusooka et al (2014) in an impoverishment indicator assessment estimate that about 1.5 million Ugandans are pushed below the poverty line due to healthcare payments.
Like many countries in the world, Uganda aspires to attain UHC. This aspiration is underlined in key health policy documents and overarching planning framework, reflected in the emphasis on health services access for all, which is in line with global vision enshrined in the post Millennium Development Goal agenda. While the country aspires to achieve universal coverage, inadequate health financing remains a huge challenge that the health system is grappling with. Thus the mechanism for health financing to deliver UHC is a critical issue that needs to be addressed to ensure the country’s transition to UHC.

Among others, OOPs are one of the models of financing healthcare – it is sometimes referred to as “cash and carry”. It involves charging fees by health service providers and direct payment by patients for the services rendered to them at the point of health service delivery, primarily experienced at private health facilities or private wings of public health facilities. This model manifests through payment for health services not covered by any insurance, services not entirely covered under health insurance benefit package, and services fully financed through pooled revenue but requires additional payment (Addae-Korankye, 2013).

Those who uphold the idea of “cash and carry” approach in health financing claim that OOPs raise supplementary revenue for the healthcare system (Addae-Korankye, 2013), and contend that it is a mechanism that works in scenarios where government has inadequate resources to fund the healthcare system. However, the ability of this form of financing to deliver UHC is undoubtedly questionable due to a myriad of shortcomings. Van et al (1993) point out that the mechanism is not suitable in achieving a functioning universal healthcare system. In his critique of the approach, Addae-Korankye (2013) maintains that it encourages inequality in healthcare services utilization. It also reduces solidarity between healthy and unhealthy individuals, as affluent people no longer subsidize for poor people who cannot afford healthcare.

There is growing consensus that “cash and carry” is regressive in nature, exacerbating inequity in finance due to the disproportionate burdens it inflicts on the poor or most vulnerable section of the population (World Health Organization - WHO and Save the Children, 2013). It is therefore asserted by WHO and Save the Children  that health financing through “cash and carry” is unjust and unnecessary, and drastic reduction of  (or scrapping) such payments is what commonly characterizes health systems that have been successful in attaining UHC. Uganda’s case is not any different, because private health financing (mainly through OOPs) is the least progressive compared to other financing mechanisms (Zikusooka et al, 2014). This implies that through OOPs, richer households do not pay for healthcare in such a way that their payments significantly represent a larger fraction of their incomes than for the poor.

For any country, high OOPs as a share of total health expenditure translates to higher incidence of catastrophic health expenditures, thus impoverishment due to healthcare spending. WHO estimates that for the incidence of financial catastrophe and impoverishment arising from “cash and carry” to be considered negligible, direct OOPs should have a limit between 15 to 20 percent of total health expenditure. But in Uganda, OOPs on health as percent of total health expenditure is more than double the WHO limit, at almost 50 percent, indicating that many Ugandans encounter high incidence of catastrophic health expenditure and impoverishment. Consequently, from the welfare lens, the effect of OOPs on households is devastating. Indeed in Uganda, about 20 percent of households incur catastrophic health expenditure due to OOPs, and for the poor people, even small amounts of OOPs may be catastrophic (Zikusooka et al, 2014). OOPs aggravate impoverishment, in that when they are considered (in addition to other household consumption expenditure), the fraction of the population that is impoverished increases.

In addition to the above, OOPs also hinder access to healthcare given the high costs associated with them especially for inpatient care, which ultimately hampers progress towards UHC. It is estimated by WHO and Save the Children (2013) that most referral cases (e.g. 70 percent in China) refuse to go to the referral hospitals due to financial hardships and majority (54 percent) of inpatients discharge themselves prematurely due to soaring costs. In most situations, OOPs make wealthy individuals to access quality health services at well-resourced private health facilities (PFPs or PNFPs) while the poor are forced to get low quality health services in poorly-resourced government health facilities.

Therefore, OOPs in health financing are not favourable to achieving UHC since healthcare user fees at points of delivery impoverishes people and excludes the poor and most vulnerable section of the population from accessing the services they desperately need. To accelerate progress towards UHC, health system reforms should be capable of protecting the population from impoverishment that come through healthcare expenditures.

The writer is a researcher, economic policy research centre.

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