One of the biggest challenges to achieving Universal Health Coverage (UHC) in many low and middle-income countries is in providing coverage for people outside the formal employment sector. For these groups, out-of-pocket (OOP) payments persist as a way of funding services despite being grossly inequitable and contributing towards household poverty.
Approaches to reduce the burden of OOP payments and increase funding for UHC have concentrated on expanding health insurance schemes, especially in sub-Saharan Africa. However, many of these schemes have achieved low population coverage and generated little revenue for health. Some countries have opted to ensure coverage for those outside the formal sector through tax-based financing mechanisms, such as general taxation in Thailand.
The mix of financing approaches that countries use has equity and efficiency implications; however, the relative merits of these approaches vary across settings and there is currently a lack of strong evidence, and therefore consensus, on how best to cover the informal sector.
Providing coverage for the informal sector is an essential step in a country’s path to Universal Health Coverage (UHC); countries that have had success in extending coverage (e.g. Rwanda, Thailand), have strong political support for the concept of UHC, and have focused efforts on reaching the informal sector.
Given its diversity, approaches to mobilising resources from the informal sector will need to take into account local factors including the capacity of specific groups to pay and the availability of organisational structures through which resources can be tapped.
Country profiles on extending health coverage to the informal sector.
Working paper 2: Providing financial protection and funding health service benefits for the informal sector: evidence from sub-Saharan Africa
Topic overview: Expanding health coverage for those outside the formal sector