3. Health financing ......................................................................................... 48 Chapter summary

3. Health financing

Chapter summary

Government tax revenue and private spending are the two main sources of health financing in Sri Lanka, as there is no significant social health insurance. As the major source of taxation is indirect, it is not considered progressive. External financing for health has been historically low, accounting for around 1% of CHE. Government allocations for health services has increased in monetary terms over the years, although it has remained low as a percentage of GDP at around 1.7% during the period 2013 to 2016. In 2016, the domestic general government health expenditure as a percentage of general government expenditure was 9%. Although the government investment is higher than the private share for capital formation, in totality this has remained low over the period 2000–2016 at 0.4% of GDP. While there is clearly a need to increase public spending on health, there is currently a lack of fiscal space to do so.

The household contribution to CHE is significant and is largely from outof-pocket expenditure (OOPE). More than 10% of household expenditure spent on health is deemed catastrophic; the percentage of households thus affected is 6.4%.

Demand driven and voluntary utilization of the private sector is observed among the higher-income groups. Supply-side constraints in the state sector may also be pushing persons, including poorer households, to utilize the private sector. However, as the government is the key provider of inpatient care, there has been no significant increase in private inpatient care utilization.

The government has from time to time initiated insurance schemes such as Agrahara for government employees and Suraksha for children, but these schemes are limited and have flaws, resulting in an increase in the state burden. There is lack of demand for private health insurance coverage as reflected by the small private health insurance market in the country.