Fragmentation in health system financing– a major challenge for improving effectiveness, efficiency, equity, and choice within health systems
File(s)
Accepted version
Author(s)
Hone, Thomas
Type
Journal Article
Abstract
Health system fragmentation is the division and lack of coordination among major health system
functions such as financing, service delivery, or governance. It is often claimed that fragmentation
significantly affects the efficiency, equity and quality, often leading to inefficiencies and poor
performance. However, the fragmentation of health systems, particularly from the structural and
financing perspective, is conceptually under-explored. This article focuses on fragmentation of
health system financing, a critical driver of health system performance, and presents a framework
and narrative literature review of the impacts of health system financing fragmentation on health
system performance. Health system financing fragmentation is explored across six domains
(purchasers, risk pools, eligibility categories, benefit packages, providers and payments) and the
impacts of such fragmentation are analysed.
Existing evidence, mostly from high-income settings and a few low- and middle-income country
(LMIC) case studies, indicates that highly fragmented health system financing can lead to duplication
of services, high administrative costs, and inequitable access to care. However, empirical evidence is
limited, context-specific and rarely from LMICs. Where comparative empirical studies are available,
they generally find that health systems with fewer, more coordinated purchasers and risk pools tend
to perform better in terms of equity and efficiency. Conversely, case-study evidence and descriptive
analyses suggest that systems with multiple, uncoordinated eligibility categories and benefits
packages often face challenges in achieving universal health coverage and equitable access to high
quality care. Competition, lack of regulation, complex payment systems, and decentralisation have
been found to further contribute to health system fragmentation. While economic theory highlights
that some level of fragmentation and competition may enhance responsiveness and innovation, the
empirical support for these potential benefits is weak and highly context-dependent. Overall, the
balance of available evidence suggests that, in most settings, excessive financing fragmentation
tends to undermine the health system goals of efficiency and equity.
functions such as financing, service delivery, or governance. It is often claimed that fragmentation
significantly affects the efficiency, equity and quality, often leading to inefficiencies and poor
performance. However, the fragmentation of health systems, particularly from the structural and
financing perspective, is conceptually under-explored. This article focuses on fragmentation of
health system financing, a critical driver of health system performance, and presents a framework
and narrative literature review of the impacts of health system financing fragmentation on health
system performance. Health system financing fragmentation is explored across six domains
(purchasers, risk pools, eligibility categories, benefit packages, providers and payments) and the
impacts of such fragmentation are analysed.
Existing evidence, mostly from high-income settings and a few low- and middle-income country
(LMIC) case studies, indicates that highly fragmented health system financing can lead to duplication
of services, high administrative costs, and inequitable access to care. However, empirical evidence is
limited, context-specific and rarely from LMICs. Where comparative empirical studies are available,
they generally find that health systems with fewer, more coordinated purchasers and risk pools tend
to perform better in terms of equity and efficiency. Conversely, case-study evidence and descriptive
analyses suggest that systems with multiple, uncoordinated eligibility categories and benefits
packages often face challenges in achieving universal health coverage and equitable access to high
quality care. Competition, lack of regulation, complex payment systems, and decentralisation have
been found to further contribute to health system fragmentation. While economic theory highlights
that some level of fragmentation and competition may enhance responsiveness and innovation, the
empirical support for these potential benefits is weak and highly context-dependent. Overall, the
balance of available evidence suggests that, in most settings, excessive financing fragmentation
tends to undermine the health system goals of efficiency and equity.
Date Acceptance
2026-07-03
Citation
BMJ Public Health
ISSN
2753-4294
Publisher
BMJ Publishing Group
Journal / Book Title
BMJ Public Health
Copyright Statement
Copyright This paper is embargoed until publication. Once published the author’s accepted manuscript will be made available under a CC-BY License in accordance with Imperial’s Research Publications Open Access policy (www.imperial.ac.uk/oa-policy).
License URL
Publication Status
Accepted