What are the advantages of tax-based systems?
• National Health Services have the advantage of creating very large risk pools by spreading the risk across the entire population of a country, regardless of health status or income level. They are thus able to avoid the problem of adverse selection, i.e. the tendency for lower risk individuals to abstain from joining insurance schemes and for higher risk individuals to join. • NHS systems create legal entitlements to health services that are usually based on people’s needs and not the ability to pay. • While most developing countries face considerable problems enforcing and collecting taxes, the administration of tax financed systems is usually less complex than that of alternative financing mechanisms. • Debates over the performance of National Health Services have triggered innovations like the introduction of market mechanisms, creating incentives for providers, changing allocation formulas, decentralizing responsibilities, separating purchasing from provision and experimenting wi
