Developing Next Generation Health Financing Instruments for Households: Drawing on Lessons Learned

Health shocks are the most prominent idiosyncratic shocks and stresses that low-income households face, particularly when they affect primary income earners as health costs are compounded by loss of income. While government and developmental assistance funding for health has increased over the past two decades and is expected to continue increasing into the future, out-of-pocket health expenses are projected to remain high for low-income countries. 

Financial service providers therefore have an opportunity to round out a health financing portfolio. Through experience, supplemented with other research, Grameen Foundation USA offers the following lessons for designing effective health financing products:

1. Understand the types and related amounts of out-of-pocket health expenses.
2. Red tape has to be extremely minimal.
3. Designs have to compete with (and exceed benefits of) borrowing from friends and family and other informal lenders, such as moneylenders.
4. Privacy matters. People value keeping their health matters private.
5. Consider the decision-making power as well as the capacity of women to meet healthcare expenditures.
6. Design for a financial portfolio approach, but be careful with bundling.
7. Timing matters. It is not always the cost, but the timing of a health event or health cost that matters.
8. Demand for and supply of quality health services have to intersect.
9. Health financing products need to provide health care for the family.
10. Consider how health emergencies “compete” with other possible emergencies.