In Focus
HEALTHCARE | Staff Reporter, Singapore

APAC urged to rethink healthcare financing system

Amidst ageing population, reliance on income tax and insurance contribution is no longer enough.

Asia Pacific's governments have been urged to rethink how they finance their healthcare system, as the traditional approach of mostly relying on income tax or social health insurance contribution has been found to be inadequate and unsustainable, according to an article published in the World Economic Forum.

The region has been facing pressures that have challenged the delivery and financing models of existing healthcare systems, including an ageing population, the rise of communicable disease, and barriers to achieving Universal Health Coverage (UHC).

Few countries in APAC are also hitting the 15% Tax-to-GDP ratio, the critical threshold set by the IMF to support sustained and inclusive growth, which will make it challenging to maintain the traditional approach to healthcare funding.

Further, the greying population is expected to shrink the available taxable workforce, whilst a large informal economy further limits countries’ ability to raise the requisite financing for their health systems.

"As a result, many APAC governments have difficulty financing their healthcare systems, resulting in high out of pocket healthcare expenditure among citizens and serving as one of the leading causes of poverty," the article stated.

Against this backdrop, APAC's governments were urged to resolve the inefficiencies of existing resource allocation, and then applying a layer of creativity to the core system design.

It noted that healthcare is too often viewed as solely a cost item, leading to myopic investments. "For those countries seeking to capitalize on their demographic dividend period, and especially for those seeking to exit the middle-income trap, the time for more strategic investment decisions is now," the article added.

Investing in cost-effective healthcare services such as preventative solutions was also recommended, urging APAC country leaders to look past the “high” perceived cost and take a long-term approach in order to make savings in the long run.

The article also suggested alternatives, where traditional healthcare models struggle with gaps, such as reinforcing primary care and promoting self-care and digital health tools to free up hospitals and lighten the strain on healthcare professionals.

"Countries in the region can learn from Thailand, which rigorously adopted evidence-based purchasing policies such as Health Technology Assessment to maximize the utilization of funds," the article added.

Beyond resolving inefficiencies, governments were recommended to revisit the core financing models being used. For instance, APAC could adopt a composite healthcare financing system that combines aspects of both taxes and social health insurance, a model which has been implemented in Japan, for example.

"Composite healthcare financing is certainly not a panacea, however. The structural weaknesses in APAC of tax collection and individual contributions must still be addressed, and various financing mechanisms need to be explored," it warned.

Other financing methods that were suggested include debt financing through public and private partnership and crowdfunding.

"Above all, the journey to achieving sustainable healthcare in APAC can only be made possible with collective effort. Greater collaboration across public-sector agencies and among public-private partners is crucial to make the vision work," the report said.

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