Effects of healthcare financing policy tools on health system efficiency: Evidence from sub-Saharan Africa

Evidence shows high levels of catastrophic and impoverishing healthcare expenditure among households in sub-Saharan Africa (SSA). The way healthcare is financed has an impact on how well a health system performs its functions and achieves its objectives. This study aims to examine the effect of healthcare financing policy tools on health system efficiency.

The study classifies 46 sub-Saharan African (SSA) countries into four groups of health systems sharing similar healthcare financing strategies. A two-stage and one-stage stochastic frontier analysis (SFA) and Tobit regression techniques were employed to assess the impact of healthcare financing policy variables on health system efficiency. Data from the selected 46 SSA countries from 2000 to 2019 was investigated.

The results revealed that prepayment healthcare financing arrangements, social health insurance, mixed- and external-financing healthcare systems significantly enhance health system efficiency. Reliance on a single source for financing healthcare, particularly private out-of-pocket payment reduces health system efficiency.

For policy-making purposes, health care systems financed through a mix of financing arrangements comprising social health insurance, private, and public funding improve health system efficiency in delivering better health outcomes as opposed to depending on one major source of financing, particularly, private out-of-pocket payments.