In Sri Lanka, 50% of total financing for health comes from government, funded mainly by general revenue taxation. The remaining 50% is mostly accounted for by out-of-pocket payments by households. Applying the WHO methodology, the Fairness in Financing score as defined by WHO is estimated to be 0.941 for Sri Lanka. The estimate is based on analysis of the Census and Statistics Department’s Household Income and Expenditure Survey 1995/96, a nationally representative household consumption survey, in which responses were obtained from 19,753 households. National health accounts data are derived from Sri Lanka’s official National Health Accounts, which are compiled in accordance with the OECD System of Health Accounts. The analysis deviates from the WHO methodology for sake of methodological improvement, by using a larger number of scaling factors than proposed in the original method. The estimate is shown to be robust to the assumptions made during analysis. Simulation of alternative financing scenarios shows that the Fairness in Financing score would be improved substantially by greater reliance on general revenue financing of health care, and that alternative funding scenarios explored would be associated with worse scores. However, even with complete reliance on tax financing, the score would not reach 1.0, because of lack of substantial progressivity in the tax system. Increasing the progressivity of the tax system would be necessary for further improvement. The Fairness in Financing approach is not without problems. Its normative basis has certain deficiencies, and may not be consistent with the social objectives that Sri Lanka has pursued historically. It may also not address dimensions of equity that are of concern to policy–makers in Sri Lanka.
Table of Contents:
• Description of Health Financing System
• Discussion Bibliography