UHC: Is Kenya making any progress? /FILE
Both offered visions of protection from the cruelty of illness, promising solidarity, security, and the comfort of knowing that health care would not bankrupt households. Yet only one of these models seems at home in the bustling, informally employed economies of today’s low- and middle-income countries (LMICs), where labour markets operate more like jazz improvisation than the regimented orchestras of 19th-century Europe.
The Bismarck model, built on the sturdy legs of industrialisation, assumes a world of payroll slips, compliant employers, and tidy contributions to sickness funds. It thrives where the labour force clocks in daily, taxes are collected at the source, and administrative machinery hums with near-military efficiency. Its logic, anchored in formal employment and contributory social insurance, made sense in the factories and offices of Prussia and later Western Europe.
But in LMICs, where the informal economy accounts for 70–90% of employment, this architecture wobbles like a steel bridge resting on wet clay. When workers are self-employed, unregistered, itinerant, or paid in cash, the very foundation of “mandatory social insurance contributions from a formally employed base” disintegrates. The results are predictable: a narrow, underfunded risk pool that insures the healthiest formal-sector workers while leaving out those who most need protection.
Health economists can recite what happens next as though reading from a textbook: moral hazard, adverse selection, and negative externalities crowd the stage. Once insured, the small cohort of formal workers tends to overuse services, ‘classic moral hazard because the marginal cost to them is low. At the same time, informal workers who do enrol tend to be the already sick or high-risk individuals, creating ‘adverse selection’ that drives up costs and destabilises the insurance pool.
Underfunded facilities, dependent on insufficient reimbursements from thin insurance funds, are forced to ration care, cut corners, or introduce informal fees. This deterioration spills over to the entire health system as ‘externalities’, hurting both insured and uninsured patients. What was meant to be a machine of solidarity begins to resemble a monument to inequity, with the poor effectively subsidising the inefficiencies created by structural mismatch.
Contrast this with Beveridge’s quietly elegant simplicity, healthcare financed from general taxation, available to all irrespective of employment status or income. It is less dependent on administrative exactitude and payroll compliance and more on political will, fiscal discipline, and an ethos that treats health as a public good rather than an employment benefit.
Within Beveridge systems, the entire population becomes the risk pool, allowing broader redistribution, mitigating adverse selection, and reducing fragmentation across schemes. It is no coincidence that many LMICs with successful Universal Health Coverage (UHC) stories have turned to Beveridge-style financing as their foundation.
Thailand’s universal coverage scheme provides one of the clearest examples. Financed primarily through taxation and delivered largely through an extensive public network, Thailand achieved near-universal coverage within a decade, not through high national income but through strategic purchasing, capitation-based provider payment reforms, and political commitment. The country’s experience demonstrates that even with high informal employment, a well-designed tax-funded system can deliver equity, financial protection, and improved health outcomes.
Sri Lanka offers another compelling narrative. Despite its modest GDP, the country has maintained a longstanding tradition of tax-funded, free public healthcare. Its public delivery system is efficient, geographically accessible, and widely trusted; it ensures that even rural and low-income communities receive care without financial hardship. These achievements are not economic miracles; they are reflections of governance, social contracts, and sustained prioritisation of health within national policy agendas.
But the Beveridge model is not immune to challenges. Dependence on public financing exposes systems to the mood swings of political cycles, fiscal austerity, and competing budgetary demands. Chronic underinvestment can strain facilities, demotivate health workers, and compromise quality. Bureaucratic inertia can slow innovation. Yet these are management problems, not structural flaws. In contrast to the Bismarck model, whose difficulties in LMICs stem from fundamental incompatibility, Beveridge’s weaknesses can be addressed through governance reforms, improved public financial management, and strengthened health system stewardship.
This brings us to the pragmatic synthesis that many health financing frameworks advocate. For LMICs, a hybrid architecture may offer the most realistic and politically feasible pathway toward UHC. Under such a model, core services, particularly preventive, primary, and essential care, are financed through taxation in Beveridge fashion, ensuring broad coverage and equity.
Meanwhile, Bismarckian insurance can be layered on top for higher-income or formal-sector workers who can contribute without destabilising the system. This dual architecture aligns with global best practice, harmonises with health economics principles, and respects the social and economic realities of LMICs.
Bismarck may have unified Germany with “blood and iron,” but in today’s developing economies, health systems need something softer, ‘taxes, trust, and tenacity. Beveridge’s teapot, though less dramatic than Prussian armour, keeps more cups full and warms more households. The Iron Chancellor built a system for an industrial economy, and Beveridge built one for a nation. LMICs must build for their people, not for European ghosts of centuries past.
In the end, the moral of the story is clear: universal
health coverage is not achieved by imitating Europe’s 19th-century
institutional order but by crafting financing models that reflect today’s
demographic, economic, and political realities. For LMICs, it’s not about
choosing between Iron and Tea, it’s about brewing a blend strong enough to
serve everyone.
The Author is a Health Leadership Scholar at the University of Oxford’s Saïd Business School & the Nuffield Department of Primary Care Health Sciences.
