Fragmentation in health system financing: a major challenge for improving effectiveness, efficiency, equity and...

Health system fragmentation is the division and lack of coordination among major health system functions such as financing, service delivery or governance. It is often claimed that fragmentation significantly affects the efficiency, equity and quality, often leading to inefficiencies and poor performance. However, the fragmentation of health systems, particularly from the structural and financing perspective, is conceptually underexplored. This article focuses on fragmentation of health system financing, a critical driver of health system performance and presents a framework and narrative literature review of the impacts of health system financing fragmentation on health system performance. Health system financing fragmentation is explored across six domains (purchasers, risk pools, eligibility categories, benefit packages, providers and payments) and the impacts of such fragmentation are analysed. Existing evidence, mostly from high-income settings and a few low- and middle-income country (LMIC) case studies, indicates that highly fragmented health system financing can lead to duplication of services, high administrative costs and inequitable access to care. However, empirical evidence is limited, context-specific and rarely from LMICs. Where comparative empirical studies are available, they generally find that health systems with fewer, more coordinated purchasers and risk pools tend to perform better in terms of equity and efficiency. Conversely, case-study evidence and descriptive analyses suggest that systems with multiple, uncoordinated eligibility categories and benefits packages often face challenges in achieving universal health coverage and equitable access to high-quality care. Competition, lack of regulation, complex payment systems and decentralisation have been found to further contribute to health system fragmentation. While economic theory highlights that some level of fragmentation and competition may enhance responsiveness and innovation, the empirical support for these potential benefits is weak and highly context-dependent. Overall, the balance of available evidence suggests that, in most settings, excessive financing fragmentation tends to undermine the health system goals of efficiency and equity.