Chapter 1.1 discusses the use of taxes and social health insurance contributions. A key objective of health financing is to redistribute financial resources from the healthy to the sick and from the well-off to the poor. This can be best achieved through compulsory prepayment mechanisms like taxes and social contributions. Key learning includes that

• A high reliance on public revenue raising instruments (taxes and/or social health insurance) is essential to progress towards universal health coverage.

• Large informal economies and poor governance can make collecting public revenues difficult.

• Health financing systems have to be able to adapt to

• – Offset challenges to the revenue base such as economic decline, low levels of economic development or a preponderance of informal employment or economic activity and

• – Meet increasing health care demands which grow with rising expectations and population.

• The traditional distinction between health systems that rely on general taxation (Beveridge or NHS systems) and social insurance contributions (Bismarck or SHI systems) has blurred with time.

• Health systems increasingly rely on a diverse mix of revenue raising instruments to finance health care.

• There is a growing focus on de-linking employment from entitlement to services in historically SHI-based systems and on emphasizing general taxation as a preferred source of revenues.

The financing of health care could be viewed as a demonstration of the value society places on health. This chapter explores Malaysia’s financial commitment towards providing access to health care and protection from catastrophic health expenditure during 60 years of evolution of the health system. The analysis includes trends of total health expenditure as a proportion of gross national product and trends in financing from various sources that reflect the dichotomy between the public and private sectors, the related mechanisms for financing health care services and the impact on service delivery. Notable is that high out-of-pocket expenditure was not associated with catastrophic household financial health expenditure. The author notes the role of pooled tax funds in providing relatively affordable health care in the public sector. The growing private sector together with the rising health expenditure due to demographic, epidemiologic and technological changes brings into focus changes that will be needed to sustain the social efficiency of the system.