Pandemic Financing: How the World is Funding the COVID-19 Response (Part 2)

What are the considerations in the provider payment mechanism?

How we raise money to pay for health care is an important issue. But equally important are the daunting tasks of organizing health service delivery, and compensating individuals and organizations that provide these services. To meet the increasing demand for health care services, health care workers need enough flexibility on methods of service delivery as well as in compensating for financial losses brought about by changing health care needs.

Service providers, especially those who are paid based on service outputs and volume (i.e. case-based payment or fee-for-service), will likely suffer from severe and sudden revenue losses due to the cancellation of elective and other non-urgent medical services.1,5 Moreover, some providers will be confronted with increased expenditure and costs (e.g. purchase of new equipment and supplies, higher staffing needs, etc.) which cannot be paid from their usual revenue sources.1,5 Thus, health and financing systems should quickly provide additional funds to hospitals and primary care facilities to compensate for both actual and anticipated revenue losses.

For health facilities, such as hospitals, who have been paid retrospectively based on fee-for-service or case-based payments, there is a call for a shift to other modes of provider payment.1 It has been suggested that the problem of maintaining provider revenue to prevent bankruptcy can be averted by front-loading budgets or capitation. In such a way, provider payment that would otherwise come through retrospective reimbursement of insurance claims will be paid in advance by providing a budget upfront based on historical utilization levels.1,5 In the Philippines, for example, Philhealth has released more than P43 billion to accredited hospitals to help them in the pandemic response of the country.16

Primary care, on the one hand, provides an essential foundation for the global response to the COVID-19 pandemic. It serves as a gatekeeper that can reduce the demand for hospital services. The main principles of primary care concerning the current pandemic include: (1) identify and manage potential cases as soon as possible, (2) avert the risk of transmission to contacts and health care workers, (3) maintain delivery of essential health services, (4) enhance existing surveillance, and (5) strengthen risk communication and community management.17

Inevitably, as the number of COVID-19 cases increases, the demand for primary care services will also increase. Therefore, health authorities should recognize the need to take immediate action to support the management of COVID-19 cases at the primary care level. Similar to hospitals, this will entail strategies to increase surge capacity and maintain stocks of personal protective equipment and other essential supplies, among others.17 The success of these strategies will be contingent on the availability of funds to support them. As such, widening the fiscal space for primary care facilities should come hand in hand with improving the health financing system for hospitals. This will ensure timely measures to address the needs of vulnerable groups in communities, and that essential health services are maintained to reduce preventable deaths.

In light of the pandemic, primary care also calls for support in innovations in service delivery. These innovations, such as teleconsultation and outside hospital care, aim to minimize the risk of COVID-19 transmission and maintain the provision of essential health services at the primary care level.5 Financial incentives can support the attainment of these objectives. Some European countries have already introduced or amended provider payment mechanisms to remunerate new forms of service delivery.5

Additional funds may also be needed to incentivize essential staff for their dedication and hard work during the pandemic. Pay-for-performance mechanisms are being revisited to adjust performance targets and ensure quality care is provided and incentives are appropriately given to deserving service providers1. Finally, health professionals who will have reduced income due to postponed or canceled elective procedures should also be compensated. Although some revenue may be derived from the adoption of telemedicine in numerous aspects of primary care, many medical and surgical specialties will have to deal with a significant decline in revenue.

What are the implications to the patient payment system within countries?

Citizens should be able to understand the importance of timely diagnosis and treatment of COVID-19. Concerns about the affordability of health care should not be a factor in health-seeking decisions as it may delay people from seeking treatment or be prevented from obtaining the services they need.5,8 Out-of-pocket payments, user fees, and co-payments at the point of care for essential services have been constant financial barriers to accessing health services, and sometimes push people to financial hardship.2,5 It has been argued that co-payments and user fees for all patients, including for non-COVID-19 health services, should be suspended.2,5

When user fees have to be suspended, it must be communicated clearly to people that services are free at the point of care.2,5 Patient benefits should be clearly defined and included in risk communication strategies and public announcements. However, the mere statement of free services might not be enough, especially in countries where people face other barriers to access (e.g. transportation costs).8

Unemployed or self-employed people, and those working in the informal economy, may not be able to pay their insurance contributions. In turn, this may render them ineligible to access health care particularly in health systems where entitlements are linked to payment contributions. To address this, some countries have already extended benefit entitlements to ensure wider coverage.5 In the long run, however, countries that have suspended co-payments / user fees and expanded insurance coverage will need additional resources to compensate service providers for lost user fee revenues.


  1. World Health Organization. How to purchase health services during a pandemic ? Purchasing priorities to support the. 2020;(April).
  2. World Health Organization. Maintaining essential health services : operational guidance for the COVID-19 context. 2020;(June).
  3. Kurowski C, Evans D, Irwin A, Postolovska I. COVID-19 (coronavirus) and the future of health financing: from resilience to sustainability. Investing in Health. Published 2020. Accessed June 13, 2020.
  4. Development Aid. Financing of pandemic response: where does the money come from?!/news-stream/post/62753/financing-of-pandemic-response-where-does-the-money-come-from. Published 2020. Accessed June 13, 2020.
  5. Thomson S, Habicht T, Evetovits T. Strengthening the health financing response to COVID-19 in Europe. 2020.
  6. Barroy H, Wang D, Pescetto C, Kutzin J. How to budget for COVID-19 response? 2020;(March):1-5.
  7. World Health Organization. Health systems governance and financing & COVID-19. Published 2020. Accessed June 14, 2020.
  8. World Health Organization. Priorities for the Health Financing Response to COVID-19. DOI:10.1596/33738
  9. Glassman A, Datema B, McClelland A. Financing Outbreak Preparedness: Where Are We and What Next? Cent Glob Dev. 2018.
  11. Stone M, Saxena S. Special Series on Fiscal Policies to Respond to COVID-19 Preparing Public Financial Management Systems for Emergency Response Challenges 1.
  12. World Health Organization. Joint External Evaluation of IHR Core Capacities of the Republic of the Philippines. Geneva, Switzerland; 2019. DOI:10.1142/9789812817945_0010
  13. Gupta S, Barroy H. The COVID-19 Crisis and Budgetary Space for Health in Developing Countries. Published 2020. Accessed June 21, 2020.
  14. Barroy H. No calm after the storm: time to retool country PFM systems in the health sector. Published 2020. Accessed June 21, 2020.
  15. Verma A, Raj A. PFM Solutions in India to Combat the COVID-19 Pandemic.
  16. Philippines Health Insurance Corporation. OFFICIAL STATEMENT ON THE ALLEGED UNPAID CLAIMS TO PRIVATE HOSPITALS RAISED IN A RESOLUTION IN CONGRESS. Published 2020. Accessed June 21, 2020.
  17. World Health Organization. Role of Primary Care in the COVID-19 Response.; 2020. Accessed June 21, 2020

Health Economics Series: Provider Payment in the UHC era

The country is considering several options for provider payment reform that will help achieve universal health care. Population-based interventions will be primarily offered by the government. As such, provider payment mechanism for these interventions will include salary and capitation. Philhealth considers primary health care capitation to promote integrated care through the service delivery network; thus, ensuring efficiency resulting to better health outcomes and financial protection. Moreover, funds in provincial and city-wide service networks for both population- and individual-based interventions will be pooled into a special health fund intended for health services. Sources for this fund include grants and subsidies from the national government, income from Philhealth payments, and other financial grants or donations.

For individual-based interventions, several payers are likely to use various payment mechanisms. The country’s social health insurance (SHI) will continue to use case rate payment system and capitation while transitioning to diagnosis related groups (DRG) for contracted networks and apex hospitals. Private companies, such as HMOs and PHIs, will likely continue to offer case rate payment and/or fee for service payment for their customers.

HPS 252 Provider Payment

The diagram sends us a message that various provider payment mechanisms will continue to exist in the country’s health care system. Emphasis is placed, however, on the current movement towards using performance-driven, prospective payments based on DRGs. At the end of it all, “mixing” of provider payment mechanisms can be complementary or compensatory. It is promising how incentives will come into play when these mechanisms align themselves during the implementation of the UHC law.