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Health financing system

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A good health financing system raises adequate funds for health, in ways that ensure people can use needed services and are protected from financial catastrophe or impoverishment associated with having to pay for them.[1] Health financing systems that achieve universal coverage in this way also encourage the provision and use of an effective and efficient mix of personal and non-personal services.

Three interrelated functions are involved in order to achieve this:

  • the collection of revenues from households, companies or external agencies;
  • the pooling of prepaid revenues in ways that allow risks to be shared – including decisions on benefit coverage and entitlement; and purchasing;
  • the process by which interventions are selected and services are paid for or providers are paid.

The interaction between all three functions determines the effectiveness, efficiency and equity of health financing systems.

Health system inputs: from financial resources to health interventions

Like all aspects of health system strengthening, changes in health financing must be tailored to the history, institutions and traditions of each country. Most systems involve a mix of public and private financing and public and private provision, and there is no one template for action. However, important principles to guide any country’s approach to financing include:

  • raising additional funds where health needs are high, revenues insufficient and where accountability mechanisms can ensure transparent and effective use of resources;
  • reducing reliance on out-of-pocket payments where they are high, by moving towards prepayment systems involving pooling of financial risks across population groups (taxation and the various forms of health insurance are all forms of prepayment);
  • taking additional steps, where needed, to improve social protection by ensuring the poor and other vulnerable groups have access to needed services, and that paying for care does not result in financial catastrophe;
  • improving efficiency of resource use by focusing on the appropriate mix of activities and interventions to fund and inputs to purchase;
  • aligning provider payment methods with organizational arrangements for service providers and other incentives for efficient service provision and use, including contracting;
  • strengthening financial and other relationships with the private sector and addressing fragmentation of financing arrangements for different types of services;
  • promoting transparency and accountability in health financing systems;
  • improving generation of information on the health financing system and its policy use.

This section of the health system profile is structured as follows:


Analytical summary

The budget for the Ministry of Health and Social services (MoHSS) as the provider of public health services is established within the annual government budget and Medium-Term Expenditure Framework (MTEF). The budgeting process in the Ministry involves all levels at national, regional and district, to ensure that the budget allocations match priorities at the specific levels. Planning and budgeting are done in separate entities in the MoHSS and need to be brought together.

The Ministry of Finance (MoF) has introduced an integrated financial management system (IFMS), which has the potential to de-concentrate access to this system but, unexpectedly, it has made it more cumbersome for the regions to access funds as the system is not yet established in the regions. Funds Distribution Certificate (FDC) holders (regions and directorates at central MoHSS) control their budget allocations and are the key actors involved in planning and budgeting. Accountability, financial and programme, still leaves much to be desired and needs to be streamlined with routine procedures in place. (MoHSS, July 2010)

Namibia is close to meeting its goal for per capita spending on health, which was 14.3 percent in 2008/09, just short of the 15% target set by the 2001 Abuja Declaration and higher than all other countries in the region. Total health expenditure (THE) as a percentage of gross domestic product (GDP) was 6.8 percent for 2008/09. (MoHSS, December 2010)

The public sector controlled 68.1 percent of THE in 2008/09. The private sector, including households, followed at 22.3 percent. Donors and international NGOs controlled less than 10 percent in the same year. Provision of public health programmes increased by six-fold over the period 2001/2002 – 2006/07. The HIV/AIDS subaccount reveals that HIV/AIDS expenditure accounted for nearly one-third of Namibia’s total health expenditure for 2007/08 and 2008/09. (MoHSS, December 2010)

Public health programmes have become increasingly focused on prevention and control of communicable diseases while investment in maternal and child health (MCH) and family planning (FP) programmes and noncommunicable diseases (NCDs) has decreased significantly (MoHSS, 2008). Spending on the reproductive health subaccount is severely underfunded at just 10.3% of total health expenditures in 2008/09 (WCO, 2011). According to the 2010 NHA data series, approximately 50% of the health total health budget is awarded to MoHSS public and mission hospitals, health centres and clinics.

Only 4% of the budget is directed to Primary Health Care (PHC) programmes despite the Government’s commitment to the national PHC strategy. However, this low expenditure is an underestimation, as hospitals and health centres also undertake PHC activity. The high expenditure at private facilities necessitates the full engagement of this sector in policy formulation and the development of a private-public partnership framework. (MoHSS, December 2010)

The majority of THE goes to outpatient and inpatient care (54.2%), while public health programmes account for 14.8% and the remainder is fairly evenly distributed between pharmaceuticals from retail pharmacists, health administration and other expenditures. (MoHSS, December 2010)

17% of the N$3.4 billion health budget for 2011/12, was allocated for health infrastructure to upgrade health facilities such as infection control in wards for TB, improvement of maternity facilities so that emergency obstetric care can be provided for, and to ensure an overall conducive environment in the provision of health service delivery at facilities. (MoHSS, December 2010)

Since 2001 the MoHSS has been considering the implementation of a needs-based resource allocation formula, since allocations to date have tended to deprive areas with the most needs. (MoHSS, 2008) Actual expenditure in health has historically been greater than allocation. It is therefore imperative that health managers do more with the available resources by improving efficiency within programmes and services, including innovation.

Namibia’s healthcare system is a mix of public and private financing. The public system provides services to the majority of the population and is predominantly funded through general taxation while the private health care system, which provides either comprehensive or partial health care coverage, is funded largely through employee and employer contributions. (MoHSS, 2008)

Public funds were the largest financier of curative care – inpatient and outpatient – while donors were the largest financier of public health programmes. Public resources continue to be the major source of funds for the health sector, contributing more than half of expenditures in almost every year since 2001/02. However, the share of health expenditure financed by government revenues has been on the decline. The household share has also been on the decline.

The share of health expenditure that is financed by private companies has remained relatively stable, ranging between 9 and 14 percent. Donors increased their contribution, from 3.8% of THE in 2001/02 to 21.7% in 2008/09. (MoHSS, December 2010) Health is now the leading priority area for donors, accounting for 79% of all donor disbursements in Namibia. (WHO, 2010)

Namibia is highly dependent on development partner funds for priority programmes with 51% of HIV/AIDS (and a lesser extent to TB and malaria) being financed by external donor expenditures, from GFATM and PEPFAR in particular. Moreover, nearly half of partner funds are routed through public sector agents and do not feature in the state budget. All development partners increased their allocation of funds to domestic NGOs in 2008/09, compared to 2007/08. (MoHSS, December 2010) However, at a meeting convened by the USAID in February 2011, many donors supporting the Government expressed their institutions’ intention to scale down funding. (WHO Namibia, 2011)

The level of out-of-pocket (OOP) spending in Namibia, at 6% of THE, is comparable to more developed economies; however, this rate of OOP may still be a financial burden, as more than half of the population lives on less than US$2 per day (UNDP, 2009; MoHSS, December 2010).

Although Namibia is an upper middle‐income country, the socioeconomic inequalities are significant. Policies that remove financial barriers to access to health care exist but need to be strengthened. Exemption for the payment of user fees is provided for certain services, such as notifiable diseases, preventive and promotive services and for vulnerable groups such as children under five and pregnant women. However, the implementation is problematic as the mechanisms for waiver are cumbersome and may deter patients in need of care.

The revenue collected in the MoHSS comes mainly from the sale of services (76%) in government hospitals to private patients and providers. The private sector contribution is 25% and has been relatively stable over the past 7 years. There is an insurance scheme providing health insurance for public sector employees. Private insurance companies provide health insurance policies for private sector employees. Faith based organisations receive grants from MOHSS for provision of health services according to agreed contractual arrangements. (MoHSS, July 2010)

In the hospitals there is no proper billing system in place. The fees charged to patients are collected by the health facilities on behalf of the Ministry of Finance and are banked on a daily, weekly and monthly basis to the receiver of revenue account.

The main priorities as set out in the HSSR 2008, MoHSS Strategic Plan 2009-2013, National Health Policy Framework 2010-2020 and Namibia Health and HIV/AIDS Resource Tracking 2007/08 & 2008/09 are: sustainability through exploration of alternative health financing mechanisms and the consideration of costs for policy changes; equitable and efficient resource allocation; improved access to health services; rationalised and streamlined planning and budgeting; better financial management; and the inclusion of partner contributions in the state budget.

Organization of health financing

Health expenditures patterns, trends and funding flows

Funding sources

Pooling of funds

Institutional arrangements and purchaser provider relations

Payment mechanisms

Priorities and ways forward


Endnotes: References, sources, methods, abbreviations, etc.

  1. Everybody’s business. Strengthening health systems to improve health outcomes. WHO’s framework for action (pdf 843.33kb). Geneva, World Health Organization, 2007