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Bismarck Meets Beveridge on the Silk Road: Coordinating Funding Sources to Create a Universal Health Financing System in Kyrgyzstan

Kutzin, Joseph; Ibraimova, Ainura; Jakab, Melitta; O'Dougherty, Sheila


July 1, 2009

Options for health financing reform are often portrayed as a choice between general taxation (known as the Beveridge model) and social health insurance (known as the Bismarck model). Ten years of health financing reform in Kyrgyzstan, since the introduction of its compulsory health insurance fund in 1997, provide an excellent example of why it is wrong to reduce health financing policy to a choice between the Beveridge and Bismarck models. Rather than fragment the system according to the insurance status of the population, as many other low- and middle-income countries have done, the Kyrgyz reforms were guided by the objective of having a single system for the entire population. Key features include the role and gradual development of the compulsory health insurance fund as the single purchaser of health-care services for the entire population using output-based payment methods, the complete restructuring of pooling arrangements from the former decentralized budgetary structure to a single national pool, and the establishment of an explicit benefit package. Central to the process was the transformation of the role of general budget revenues - the main source of public funding for health - from directly subsidizing the supply of services to subsidizing the purchase of services on behalf of the entire population by redirecting them into the health insurance fund. Through their approach to health financing policy, and pooling in particular, the Kyrgyz health reformers demonstrated that different sources of funds can be used in an explicitly complementary manner to enable the creation of a unified, universal system.
United Kingdom & Europe