Types Of Healthcare Systems Around The World

One of the biggest differences between countries are the types of healthcare systems they use. Whether you are an expat or digital nomad, you’re thinking of moving abroad, or you’re travelling for work or vacation, it’s important to know what types of healthcare systems you’ll encounter and how they could impact you.

This is particularly important if you’ve just moved to a new country – the last thing you want is to find yourself facing an unexpected medical bill!

In this guide, we’ll go over the major types of healthcare systems around the world, and where you can expect to find them.

Why do countries use different healthcare systems?

The type of healthcare system a country uses is based on a combination of historical, cultural, economic and political factors. Healthcare systems are often linked to the economic development of a country, and may also reflect key turning points in that nation’s history.

The first nationalised healthcare system – known as the Sickness Insurance Law, or Bismarck model – came about in Germany in 1883. This law specified that employers must provide health insurance for their low-wage employees, with contributions drawn from co-operative sick funds.

Other countries soon followed – Soviet Russia introduced the first fully-state funded healthcare system in 1920, while New Zealand created the first universal health system in the period 1938–41.

The Second World War created an urgent need for countries to pool resources for the benefits of their citizens, leading to the creation of the National Health Service (NHS) in the UK in 1948. Spearheaded by Sir William Beveridge, this system has since become known as the Beveridge model, and was quickly adopted by other European countries including Sweden, Iceland, Norway, Denmark and Finland.

Throughout the 20th century, many more countries started to adopt centralised, state-funded and universal healthcare systems as their economic resources allowed. The most recent country to introduce universal healthcare was Israel in 1995.

Quality of healthcare can vary significantly between countries

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Egalitarian or individualist?

The type of healthcare system a country chooses is often seen as both a cause of, and a reflection of that country’s major political philosophy.

For instance, European countries tend to be more egalitarian, with the government seen as having a social responsibility for protecting citizens and reducing inequality. Therefore, many European countries have healthcare systems that are either subsidised or free at the point-of-care, funded by contributions from taxpayers.

However, in countries such as the United States, people tend to focus more on the free market, placing responsibility on individuals to provide for themselves. This means that the state remains separate from the healthcare system, and citizens tend to pay for their healthcare out-of-pocket, usually with the help of private health insurance policies.

Today, the most significant factor deciding a country’s choice of healthcare system is financial. Running a state-funded healthcare system is very expensive – the UK, for instance, spends over £280 billion per year maintaining its NHS. Where countries cannot afford to pay the bill for state-funded healthcare, they often look for alternative models or delegate responsibility to the private sector.

As the cost of healthcare rises globally, some countries are facing a tough choice between continuing to run their state-funded system or giving more leeway to the private sector. In the UK, where the quality of state-funded healthcare is struggling to keep up, as many as 22% of people are now choosing private healthcare. In the future, we may start to see new models of healthcare systems arise to meet the changing needs of countries.

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Types of healthcare systems

There are four main types of healthcare systems around the world. These are:

The Bismarck model
The Beveridge model
National health insurance (single-payer model)
Fee-for-service (out-of-pocket model)

Let’s explore each of these models in more detail.

The Bismarck model

The Bismarck model is named after Otto von Bismarck, the 19th-century German chancellor who initiated its implementation, and was the first model for social health insurance.

Responsibility for healthcare is shared through all levels of society, from government to private enterprise to individuals

Localisation of funds creates complexity, reduces accessibility and makes exchange of information more difficult

Universal healthcare given free at the point-of-care

Allows patients the freedom to choose a preferred healthcare provider, thus stimulating competition

The Bismarck model is characterised by a decentralised approach. While the policy is guided by federal law, the system is run by a mix of private and public not-for-profit funds, with minimal government interference.

Funding comes directly from employer and employee contributions. Some businesses even create their own private funds for their employees. These funds act as a form of health insurance, with money passed from the fund to the healthcare provider at the point-of-care.

The Bismarck model is widely praised for its emphasis on social solidarity and equality. Individuals contribute to the system based on their ability to pay, with the richest in society providing more in order to support the less well-off.

Furthermore, unlike the Beveridge model, the Bismarck model allows for greater personal freedom by giving individuals the right to choose their own healthcare providers from the private and public sectors. This helps to foster competition between healthcare providers, leading to faster developments, improved efficiency and higher innovation. Individuals may also supplement their coverage with private health insurance, if they would like to enjoy a higher standard of healthcare.

Since funds have a vested interest in minimising their costs, the Bismarck model has been linked to improved efficiency in preventive care and early intervention.

Many countries use the Bismarck model, or a variation of the model. These include:

Germany
Netherlands
Czech Republic
Slovakia

France
Japan
Austria
Brazil

Belgium
Switzerland
Hungary
Mexico

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The Beveridge model

The Beveridge model is named after British social reformer Sir William Beveridge. This model is also known as the universal healthcare model, and it is characterised by a single, state-funded and state-organised healthcare system. It is in this regard that it differs from the Bismarck model: it is centralised under the state, rather than decentralised to individual entities.

All healthcare delivered free at the point-of-care

Lack of competition stifles innovation and investment, ultimately leading to long waiting lists and declining quality

Universal coverage extends to all levels of society

Organisation is centralised, making quality of healthcare a key political issue

Being a centralised system means that, in countries with the Beveridge model, healthcare becomes a key political issue. This is a major advantage, as it means the government must be held to account for the way they run the health service, and voters will often choose or lose political parties based on their attitudes towards healthcare.

Funding for state healthcare in the Beveridge system comes directly from taxation. This is usually levied in the form of income tax, or a separate contribution sometimes known as National Insurance. Because this tax is linked to income, it can either exist as a flat percentage rate or be scaled according to an individual’s earnings. In either case, it is often expected that the wealthier people in society will contribute more – this, again, can become a political issue.

With the Beveridge model, all healthcare organised by the state is delivered free at the point-of-care. This means that even those individuals who are not earning through employment can still partake in the state healthcare system.

This is both an advantage and a disadvantage of the system. While the Beveridge model creates a safety net for those at the lower end of society and allows funds to be spread equally across a state, it also stifles competition, leading to shortfalls in efficiency and opening the door to suppliers taking advantage through price-gouging. The Beveridge model can sometimes lead to longer waiting times, lower-quality care and a lack of investment in staff.

Moreover, the Beveridge model is sometimes accused of being easy to exploit, for instance, by allowing medical tourists to take advantage of free or heavily-subsidised healthcare.

Still, many countries use the Beveridge model to great effect, and these include:

United Kingdom
Sweden
Denmark
Ireland
Portugal

Spain
Norway
Cyprus
Latvia
Hong Kong

Italy
New Zealand
Finland
Malta
Cuba

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National health insurance (or ‘single-payer model’)

National health insurance starts off fairly similar to the Beveridge model. It is a centralised, government-organised healthcare system that offers universal coverage. It’s funded by government taxation, with the government drawing a ‘national insurance’ through either income tax or a supplementary tax.

Universal healthcare for all citizens paid for by a national health insurance adjusted for income

Wealthier people may end up paying significantly more into the system

Full accountability, as the government represents the single-payer

Lack of flexibility in the market deters capital investment

Here’s where it starts to differ, though. The government now acts as the ‘single payer’, delivering these funds to a mixture of both private and public healthcare organisations. Citizens can then enjoy free healthcare at the point-of-care, while also having the choice of which healthcare provider they would like to use.

Thus, national health insurance combines the best bits of the Beveridge model (free at the point-of-care, universal coverage, funds collected through taxation) with the best bits of the Bismarck model (allows for patient choice, encourages competition between healthcare providers). Many countries that use either the Bismarck or Beveridge model will also incorporate elements of the single-payer model too.

Furthermore, since the government is the single payer, national health insurance creates a buyer’s market – healthcare companies must adjust their services to the demands of their sole client, while also competing to offer the best prices.

However, this could also be seen as a disadvantage: limited opportunity within a closed system deters new investment, which can lead to a declining rate of efficiency. And, like the Beveridge model, national health insurance opens the door to people trying to take advantage of the system.

National health insurance is robust model that is gaining in worldwide popularity, and is currently used to great effect in these countries:

Canada

Taiwan

South Korea

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Fee-for-service (or ‘out-of-pocket’ model)

The final healthcare model is also the most radically different. The out-of-pocket healthcare system, sometimes known as the fee-for-service model, is entirely decentralised, with zero or next-to-zero government intervention both in terms of funding and delivery.

Encourages competition between suppliers leading to improved services

No price regulation makes healthcare unaffordable to people without the financial means

No incentive for suppliers to focus on preventive treatments

No government accountability leaves patients without recourse

In countries that use the out-of-pocket model, citizens are expected to pay for their own healthcare costs ‘out of pocket’ at the point-of-care, i.e. with their own money.

The chief advantage of the out-of-pocket model is that it facilitates rapid developments in the healthcare sector. Since medical and pharmaceutical providers compete with each other to provide faster, more effective and cheaper products and services, their patients benefit from more flexibility and access to the latest-and-greatest healthcare.

That’s how it works in theory. But in practice, the out-of-pocket model is beset by a wide range of problems.

The first and foremost issue with the out-of-pocket system is price. Specifically, the fact that – without regulation – healthcare costs can spiral to the point that they become completely unaffordable to the average person, except those who invest in comprehensive health insurance. Not only does this entrench inequality by making healthcare a preserve of the very well-off, it can also push people into catastrophic debt if they require treatment for a major illness or injury.

Furthermore, the out-of-pocket system represents a strange paradox, in that the more people become sick, the more the system benefits. The out-of-pocket model therefore has no incentive to focus on preventive care, health education or community health programmes.

Lastly, and in spite of the theory that total autonomy gives healthcare providers incentive to constantly innovate and improve their service, the out-of-pocket system suffers from a lack of accountability. In the absence of government regulation, healthcare providers are free to provide poor levels of service for a high price, with no concern for patient outcomes. In out-of-pocket systems, the only recourse a patient may have to resolve a dispute is to go through the country’s legal system, which can incur considerable expenses.

However, the out-of-pocket system still receives strong support from its advocates, and has been connected to many innovations in the healthcare sector, giving credence to its central philosophy. These are some of the countries that use the out-of-pocket model or some variation of it:

USA
Bangladesh
Indonesia
Cambodia

India
Pakistan
Chad
Burkina Faso

Nigeria
Myanmar
Rwanda
Vietnam

Which healthcare model is the best?

As we’ve seen, each of the four main types of healthcare model comes with its own advantages and disadvantages, and there’s no way to say which is the best model.

It’s important to remember that, while these models can help us to understand the basis of a country’s healthcare system, every nation runs its health service slightly differently. Therefore, these models are not representative of any particular nation’s healthcare system.

When you move abroad to a foreign country, it’s important to read about and try to understand that country’s healthcare system. You will need to learn whether or not you will be entitled to state-funded or state-subsidised healthcare and, if so, how to go about acquiring it. In many countries, you will need to be able to demonstrate that you are both a permanent resident and a taxpayer before you will be entitled to state healthcare.

If you are thinking about moving abroad, you may want to look into international health insurance. This is a special policy designed exclusively for expats that ensures you’ll have access to healthcare around the world, with flexible policies to suit your needs.

There’s a lot to consider when taking out international health insurance

Here’s how to find the best health insurance when living abroad

Choose international health insurance from William Russell

At William Russell, we’ve been insuring expats like you for over 30 years. Our policies are tailor-made for expats and digital nomads living abroad, giving you access to the highest-quality medical care wherever you choose to live.

With our flexible policies and award-winning customer service, you can start your new life abroad with total peace of mind, knowing you’ll always have access to the healthcare you need.

Want to know more about international health insurance?

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What You Need To Know About Different Types Of Healthcare Systems Around The World

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