OVERVIEW

In Chapter 1, we discussed when governments should intervene and how values influence these judgments. Government interventions should correct market failures that cause health outcomes to be lower than they otherwise could be, cross-subsidize the poor's access to medical care, and correct health insurance market failures. In Chapter 3 we described a set of health interventions that governments can and should make available to improve the health of the population. These interventions can be prioritized, not only in terms of their costeffectiveness, but also in terms of how well they meet the requirements for government intervention. We also noted that governments have resource constraints, which means they cannot fully subsidize all programs and activities they want to. At the end of Chapter 3, we talked about some ways that governments can work within their resource constraints to improve health outcomes by delivering care more efficiently through higher quality and by using traditional medical practices.

In this chapter, we examine how governments can achieve their objectives in the health sector by how they finance and allocate public expenditures. Public expenditures are defined as the cost of services and subsidies purchased by, and sometimes delivered through, the public sector. How these expenditures are financed is a critical element of successful health policies because financing determines the budget available for public activities. It also has implications for how expenditures are allocated.