3.2 Sources of revenue and financial flows
Public expenditure is the primary source of funding for health in the United
Kingdom. The rest of the funding for health care comes mostly from a
combination of private medical insurance and out-of-pocket payments in the
form of co-payments and direct payments. In 2013 out-of-pocket payments
comprised 9.3% of total health expenditure while private medical insurance
made up 2.8%, with less than 5% coming from other forms of private
expenditure (WHO Global Health Expenditure Database, 2015).
Public funds come mostly from taxes, with a small amount from National
Insurance Contributions (NICs). Collecting funds via general taxation means
that the cost of collection is low, but so is the degree of transparency in how
individual payments are linked to individual benefits (Boyle, 2011).
Private medical insurance or voluntary health insurance (VHI) can be
purchased by individuals or by employers for their employees. Private medical
insurance is usually used to finance services not offered by the NHS or to
access NHS-covered services more quickly. Co-payments are costs shared with
the NHS, and can include dental care and, in England, outpatient prescription
charges. Direct payments can include private treatment, social care, general
ophthalmic services and over-the-counter medicines. (See Sections 3.4 and 3.5
for more information.)