WHO PAYS FOR HEALTH SYSTEMS? HOW FINANCING WORKS 19, h care expenditures have risen from 3% of world GDP in 1948 7.9%in 97.This dramaticincrease in spending worldwide has prompted societies every where to look for health financing arrangements which ensure that people are not denie access to care because they cannot afford it. Providing such access to all citizens has lor been a comerstone of modern health financing systems in many countries. The main func tion of the health system is to provide health services to the population, and this chapter concentrates on health financing as a key to effective interaction between providers and citizens. It discusses the purpose of health financing, and the links between health financ ing and service delivery, through purchasing. The factors affecting the performance of health financing are also examined The purpose of health financing is to make funding available, as well as to set the right financial incentives for providers, to ensure that all individuals have access to effectiv lic health and personal health care. This means reducing or eliminating the possibility that an individual will be unable to pay for such care, or will be impoverished as a result of trying to do so To ensure that individuals have access to health services three interrelated functions of health system financing are crucial: revenue collection, pooling of resources, and purchas- g of interventions. The main challenges are to put in place the necessary technical, or- ganizational and institutional arrangements so that such interactions will protect people financially the fairest way possible, and to set incentives for providers that will motivate them to increase health and improve the responsiveness of the system. The three functions are often integrated in a single organization, and this is currently the case in many health systems in the world. Although this chapter discusses the three functions separately, it does not imply that an attempt should be made to separate them in different organizations There is, however, an increasing trend to introduce a separation between financing and provision. Revenue collection is the process by which the health system receives money from hous holds and organizations or companies, as well as from donors. Contributions by donors are discussed in Box 5. 1. Health systems have various ways of collecting revenue, such as gen eral taxation, mandated social health insurance contributions (usually salary-related and almost never risk-related), voluntary private health insurance contributions (usually risk elated), out-of-pocket payment and donations. Most high income countries rely heavilyWho Pays for Health Systems? 95 5 WHO PAYS FOR HEALTH SYSTEMS? HOW FINANCING WORKS ealth care expenditures have risen from 3% of world GDP in 1948 to 7.9% in 1997. This dramatic increase in spending worldwide has prompted societies every￾where to look for health financing arrangements which ensure that people are not denied access to care because they cannot afford it. Providing such access to all citizens has long been a cornerstone of modern health financing systems in many countries. The main func￾tion of the health system is to provide health services to the population, and this chapter concentrates on health financing as a key to effective interaction between providers and citizens. It discusses the purpose of health financing, and the links between health financ￾ing and service delivery, through purchasing. The factors affecting the performance of health financing are also examined. The purpose of health financing is to make funding available, as well as to set the right financial incentives for providers, to ensure that all individuals have access to effective pub￾lic health and personal health care. This means reducing or eliminating the possibility that an individual will be unable to pay for such care, or will be impoverished as a result of trying to do so. To ensure that individuals have access to health services, three interrelated functions of health system financing are crucial: revenue collection, pooling of resources, and purchas￾ing of interventions. The main challenges are to put in place the necessary technical, or￾ganizational and institutional arrangements so that such interactions will protect people financially the fairest way possible, and to set incentives for providers that will motivate them to increase health and improve the responsiveness of the system. The three functions are often integrated in a single organization, and this is currently the case in many health systems in the world. Although this chapter discusses the three functions separately, it does not imply that an attempt should be made to separate them in different organizations. There is, however, an increasing trend to introduce a separation between financing and provision. Revenue collection is the process by which the health system receives money from house￾holds and organizations or companies, as well as from donors. Contributions by donors are discussed in Box 5.1. Health systems have various ways of collecting revenue, such as gen￾eral taxation, mandated social health insurance contributions (usually salary-related and almost never risk-related), voluntary private health insurance contributions (usually risk￾related), out-of-pocket payment and donations. Most high income countries rely heavily