The basic issues in respect of healthcare financing (Panchmukhi, 1996) are the following

i) How much of the scarce resources of the economy are/should be allotted to this sector?

ii) What are its sources and how much does each provide? In other words, who should bear the cost of provision of these services? If both the individual beneficiaries and the collectivity as a whole have to bear the cost, then how should the costs be shared between the two?

(iii) In the case of public financing of this sector, which level of the government should bear what proportion of the cost?

The first concern in the establishment of the financing system of a country, is to identify the source of the funds that support the health sector. In many countries, the most important source of financing for the health sector is the government, although in recent years other sources have increased in importance to supplement government contributions.

There are four principal sources of finance (WHO, 1993) for the health sector: governments, private sources, health insurance and external sources.

1. Government financing for healthcare includes health expenditure at all levels