The World Health Report members of a pool, as discussed later in the chapter. Individual out-of-pocket financing does not allow the risk to be shared in that way. In other words, as already proposed by The world health report 1999 (14), there has to be prepayment for effective access to high-cost personal care. The level of prepayment is mainly determined by the predominant revenue collection mechanism in the system. General taxation allows for maximum separation between con tributions and utilization, while out-of-pocket payment represents no separation. Why then is the latter so generally used, particularly in developing countries?(15) The answer is that separation of contributions from utilization requires the agencies onsible for collection to have very strong institutional and organizational capacity. These attributes are lacking developing countries. Thus, although the highest possible level of prepayment is desirable, it is usually very difficult to attain in low income settings where institutions are weak. Relying on prepaid arrangements, particularly general taxa- tion, is institutionally very demanding. General taxation, as the main source of health fi nancing, demands an excellent tax or contribution collecting capacity. This is usually associated with a largely formal economy, whereas in developing countries the informal sector is often predominant. While general taxation on average accounts for more than 40% of GDP in OECD countries, it accounts for less than 20% in low income countries. All other prepayment mechanisms, including social security contributions and volun- tary insurance premiums, are easier to collect, as the benefit of participating is linked to actual contributions. In most cases, participation in social insurance schemes is restricted to formal sector workers who contribute through salary deductions at the workplace. This makes it easier for the social security organization to identify them, collect contributions and possibly exclude them from benefits if no contribution is made. Similarly, identification and collection is easier for voluntary health insurance and community pooling arrange ments. Nevertheless, such prepayment still requires large organizational and institutional capacity compared to out-of-pocket financing In developing countries, therefore, the objective is to create the conditions for revenue collecting mechanisms that will increasingly allow for separation of contributions from utilization In low income countries, where there are usually high levels of out-of-pocket expenditure on health and where organizational and institutional capacity are too weak to make it viable to rely mainly on general taxation to finance health, this means promoting job-based contribution systems where possible, and facilitating the creation of community ased prepayment schemes. Evidence shows (16, 17), however, that although the latter are an improvement over out-of-pocket financing, they are difficult to sustain and ments to improve the targeting of public subsidies in health. In middle income countries, with more formal economies, strategies to increase prepayment as well as pooling arrange bution systems, as well as increasing the share of public financing, particularly for the poor. Although prepayment is a cornerstone of fair health system financing, some direct con tribution at the moment of utilization may be required in low income countries or settings to increase revenues where prepayment capacity is inadequate. It can also be required in the form of co-payment for specific interventions with a view to reducing demand. Such an approach should only be used where there is clear evidence of unjustified over-utilization of the specific intervention as a result of prepayment schemes (moral hazard). The use of Co-payment has the effect of rationing the use of a specific intervention but does not have the effect of rationalizing its demand by consumers. When confronted with co-payments,98 The World Health Report 2000 members of a pool, as discussed later in the chapter. Individual out-of-pocket financing does not allow the risk to be shared in that way. In other words, as already proposed by The world health report 1999 (14), there has to be prepayment for effective access to high-cost personal care. The level of prepayment is mainly determined by the predominant revenue collection mechanism in the system. General taxation allows for maximum separation between con￾tributions and utilization, while out-of-pocket payment represents no separation. Why then is the latter so generally used, particularly in developing countries? (15). The answer is that separation of contributions from utilization requires the agencies responsible for collection to have very strong institutional and organizational capacity. These attributes are lacking in many developing countries. Thus, although the highest possible level of prepayment is desirable, it is usually very difficult to attain in low income settings where institutions are weak. Relying on prepaid arrangements, particularly general taxa￾tion, is institutionally very demanding. General taxation, as the main source of health fi￾nancing, demands an excellent tax or contribution collecting capacity. This is usually associated with a largely formal economy, whereas in developing countries the informal sector is often predominant. While general taxation on average accounts for more than 40% of GDP in OECD countries, it accounts for less than 20% in low income countries. All other prepayment mechanisms, including social security contributions and volun￾tary insurance premiums, are easier to collect, as the benefit of participating is linked to actual contributions. In most cases, participation in social insurance schemes is restricted to formal sector workers who contribute through salary deductions at the workplace. This makes it easier for the social security organization to identify them, collect contributions and possibly exclude them from benefits if no contribution is made. Similarly, identification and collection is easier for voluntary health insurance and community pooling arrange￾ments. Nevertheless, such prepayment still requires large organizational and institutional capacity compared to out-of-pocket financing. In developing countries, therefore, the objective is to create the conditions for revenue collecting mechanisms that will increasingly allow for separation of contributions from utilization. In low income countries, where there are usually high levels of out-of-pocket expenditure on health and where organizational and institutional capacity are too weak to make it viable to rely mainly on general taxation to finance health, this means promoting job-based contribution systems where possible, and facilitating the creation of community or provider-based prepayment schemes. Evidence shows (16, 17), however, that although the latter are an improvement over out-of-pocket financing, they are difficult to sustain and should be considered only as a transition towards higher levels of pooling or as instru￾ments to improve the targeting of public subsidies in health. In middle income countries, with more formal economies, strategies to increase prepayment as well as pooling arrange￾ments include strengthening and expanding mandatory salary-based or risk-based contri￾bution systems, as well as increasing the share of public financing, particularly for the poor. Although prepayment is a cornerstone of fair health system financing, some direct con￾tribution at the moment of utilization may be required in low income countries or settings to increase revenues where prepayment capacity is inadequate. It can also be required in the form of co-payment for specific interventions with a view to reducing demand. Such an approach should only be used where there is clear evidence of unjustified over-utilization of the specific intervention as a result of prepayment schemes (moral hazard). The use of co-payment has the effect of rationing the use of a specific intervention but does not have the effect of rationalizing its demand by consumers. When confronted with co-payments