A four-pillar health care framework showing the role of public and private sector in providing health care for the different segments of the population and their respective coverage.

The paper focuses in particular on the financing of  health care system for the retired population. Unlike a pension system in which benefits to a retired population can be assessed based on a defined-contribution or defined-benefit approach, a health care system could actually be described as an undefined-benefit system.

The paper discusses how different factors affect both systems differently, and how certain features of social security and social protection systems take on different realities in health care and pension.

Finally, and most importantly to our discussion, a health care system has to endure the soaring cost of health care worldwide while providing quality and accessible health services. In fact, those costs will most likely continue to escalate due to many economic and demographic factors, and if left unmitigated will add to the strain put on public and household finances. I will argue that the problem of health care financing should be addressed in all its complexities, with emphasis on health care for the elderly. I will shed light on the issue of financial sustainability in the context of the demographic challenges facing today’s health care systems, and the ability of the different financing systems to cope with these challenges. My analysis will attempt to make the case for setting up a somewhat hybrid health care system that caters for an increasingly ageing population, by building up a reserve that will eventually serve for paying the health benefits of the elderly in the population, while the benefits of the currently active continue to be paid on a pay-as-you-go basis. In other words, a large percentage of the contribution rate of the currently active population for a certain financial year will go to financing benefits required in that same year. The remaining share of the contributions paid will go to building up a technical reserve that will cater to the ageing population, and the increase in the ratio of retirees to workers. This reserve will soften the immediate need for income to cover an increasingly large elderly population and will eventually help achieve level and stable contribution rates.