Reducing and eventually eliminating public subsidies to relatively affluent groups. The main methods are: (1) Charging full-cost fees to insured persons who use government hospitals and clinics for services not included in the national essential clinical package; (2) Cutting tax deductions for insurance contributions; and (3) Eliminating public subsidies to social insurance, particularly in countries where social insurance covers only a fraction of the population, such as disproportionately benefit the middle classes in parts of Latin America.
Subsidies in the form of tax relief for contributions to private health insurance are equal to nearly a fifth of total government spending for health in South Africa. In Latin America, subsidies to the social insurance systems are widespread and include tax relief, direct transfers to cover the operating deficits of social security health funds, and matching government funds for employee payroll contributions.
Zimbabwe has sharply limited tax deductions for health care and insurance, raised fees and intensified efforts to collect fees from privately insured patients. Government hospitals have learned that they can often identify insured patients by offering them extra nonmedical amenities, such as private hospital rooms, and can then target them for aggressive cost recovery if they accept.
Requiring self-coverage of health costs and eliminating subsidies for the wealthy frees resources for health services for the poor. Eliminating subsidies also imposes more financial discipline on the social insurance agencies, which are often allowed to run deficits that are later covered by transfers from other social security programmes or from the general government budget – as was the case in Venezuela in 1990 when the fund ran a deficit equivalent to 37% of its health expenditures.