There is a variety of financing arrangements through which individuals or groups of the population obtain healthcare -in some of these arrangements participation is automatic or compulsory, in others it is at people’s discretion. Government financing schemes, on a national or sub-national basis or for specific population groups, entitle individuals to healthcare based on residency. The other main method of financing is some form of compulsory health insurance (managed through public or private entities). Spending by households (out-of-pocket spending), both on a fully discretionary basis and part of some co-payment arrangement, can constitute a significant part of overall health spending. Finally, voluntary health insurance, in its various forms, can also play an important funding role in some countries.
Coverage through government schemes or compulsory health insurance forms the bulk of healthcare financing across the EU. Taken together, 81% of total health spending in the EU was financed through these schemes in 2022 (Figure 5.5). Central, regional, or local government schemes in Sweden and Denmark covered around 85% of all health spending in these countries. In Luxembourg, Croatia, Germany, France and the Netherlands, compulsory health insurance financed more than three‑quarters of all health spending.
Across EU countries, out-of-pocket payments accounted for 15% of all health spending in 2022 on average. However, households had to finance directly more than 30% of all spending in Lithuania, Latvia, Bulgaria and Greece. The reliance on household financing is even higher in some countries outside of the EU. In North Macedonia, Ukraine and Albania, out-of-pocket payments made up 40‑60% of all health spending. Meanwhile in Croatia, France and Luxembourg, the share of out-of-pocket spending was below 10%. Yet, the share of out-of-pocket spending is not static, and some countries have made notable progress in reducing the direct health financing burden of households in recent years. Cyprus, for example, has made substantial investment to increase public healthcare coverage and consequently the out-of-pocket share dropped from 44% in 2018 to 15% in 2022 (OECD/European Observatory on Health Systems and Policies, 2023[1]). Only in Ireland and Slovenia did voluntary health insurance (VHI) finance slightly more than 10% of health spending, compared to the EU average of 3%.
To pay for healthcare services, financing schemes rely on different types of revenues. In 2022, public sources (which includes government transfers and social insurance contributions) funded 77% of all health spending on average across EU countries. Where government financing schemes are the principal financing mechanism, such as in Sweden and Denmark, government transfers fund 85% or more of healthcare expenditure. In countries such as Croatia, Poland, Slovenia and Germany, the majority of public funding refers to social insurance contributions payable by employers and employees. In some countries with social health insurance, government schemes do not play a big role as purchasers of health services but provide transfers and subsidies to other schemes. For example, in Belgium, Czechia and Hungary, government transfers to social health insurance schemes are an important funding source.
Public budgets finance many different services and healthcare is competing for funds with other sectors such as education, defence, and housing. Health spending accounted for an average of 15% of total government expenditure across the EU in 2022 (Figure 5.6). In Ireland and Germany, the share of public spending dedicated to healthcare was around 20%, while in Hungary and Greece, it was around 10%. Since 2015, these shares have risen in most EU countries, with the share of total government expenditure allocated to health increasing by around 1.5 percentage points on average. Most notably, Cyprus initiated a reform in 2019 to extend healthcare coverage through a new General Health System, leading to a large increase in public spending on health.
While the pandemic exerted major upward pressure on health budgets during 2020, similar pressures were felt in other areas of public spending, so the share of public spending dedicated to health remained unchanged compared to 2019. However, 2021 saw a jump in the share of the budget dedicated to health (increasing by 1 percentage point), only dropping marginally in 2022.
