In a market-based health system, there is no single main source of funding for access to medical services, but several. These include private health insurance, medical subscriptions, direct payments, and charitable donations. In simple terms, these different forms of financing complement each other, creating a decentralized market structure.
Private health insurance works best when it covers rare and expensive cases, like serious illnesses or accidents. This way people only pay a fraction of the costs, mostly through their insurance premiums. Medical subscriptions, on the other hand, provide access to a variety of routine services such as check-ups or visits to specialists. Consumers pay a monthly flat fee instead of paying for each service separately. However, there are cases where a medical service is needed, but the person who needs it does not have insurance or a medical subscription at that moment. In this situation, the consumer can pay for the service directly. However, in market conditions, there is no problem with supply, and prices are kept relatively low thanks to competition and technological development.
In addition, there may be situations where a person (household) cannot take advantage of any of these options. The reasons may vary: high health risk (e.g., pre-existing conditions that prevent insurance coverage), lack of adequate savings, low income, etc. Such cases then require the activation of another (private) form of payment and support, which is charity.
The Market Nature of Charitable Institutions
It should be emphasized that a developing market economy is a fundamental prerequisite for the development of this type of activity. Thanks to capital accumulation and competition, among other things, it is possible to produce ever better-quality goods in ever greater quantities, including medical goods and services. This has several positive implications for the topic under discussion.
First, people who do not need such assistance at a given moment can take appropriate precautions in advance, e.g., by purchasing health insurance and/or a medical subscription, increasing their savings or leading a healthier lifestyle, etc. This is important because such measures will make this section of society better protected and less likely to need assistance in the future. They will therefore not place a significant financial burden on their families or the rest of society.
Second, people who are financially secure in this way can allocate more resources to helping those members of society who need such support to a greater or lesser extent. This can take the form of financial support or other forms of assistance, such as volunteering.
Third, people who provide such support develop appropriate ethical attitudes. The desire to help those in need gives them greater satisfaction than, for example, consuming these resources or spending their free time. What is more, such attitudes, at least to some extent, also spread to the rest of society. The lack of such support may also be criticized by those closest to the person providing it, which, in a positive sense, forces others to engage in similar activities.
Fourth, technological development is constantly expanding the scope and effectiveness of such support. For example, the emergence and development of the internet has made the transfer of necessary funds much faster. As a result, charitable organizations are able to finance treatment for those in need more efficiently and reach an ever-wider group of donors. Even relatively small donations become significant when thousands of people donate.
Fifth, charitable organizations—apart from insurers and very wealthy individuals—generate additional demand for expensive treatment, the purchase of very expensive drugs, etc. In this way, they contribute to the development of research into expensive medical products and services and accelerate the prospect of their mass production in the future. This is also particularly important in covering the costs of treating very rare cases, for which demand is significantly limited.
Sixth, the act of charity itself is not subject to any formal requirements. Here, goodwill is the deciding factor, which greatly facilitates the process of raising funds. Such a system is also more flexible than formalized public systems/programs, where acts of goodwill are replaced by procedures and bureaucratic decisions regarding who can and cannot receive assistance. Furthermore, public systems/programs weaken and partially replace grassroots private initiatives and reduce social awareness.
Seventh, charitable organizations themselves take steps to properly select/verify who should get help first. This helps focus donors’ attention on the most urgent cases and helps determine whether people asking for help really need it.
And eighth, as mentioned at the beginning, the basis for effective aid is the well-being of the rest of society. This can be seen, for example, in the World Giving Index (WGI) report, which examines the level of charity in many countries. Respondents are asked to answer (YES/NO) to three short questions: Helped a stranger, or someone you didn’t know who needed help?; Donated money to a charity?; and Volunteered your time to an organization? The higher the percentage of positive responses, the higher the country’s ranking.
In 2019, a summary report was published containing the results from 2009–2018. The US—the most economically-developed country in the world—came in first place, which should come as no surprise. In addition, a total of seven developed countries were in the top ten. This does not mean that this is the only condition for the development of such attitudes in society, but it undoubtedly makes them easier and more effective.
A Few Additional Points
Some potential supporters may have certain reservations about the activities of the charitable organizations in question. These may concern, for example, the transparency of their activities, the amount of commissions charged for administrative costs, or the salaries of their employees.
However, in such cases, charitable institutions are also subject to market laws and must contend with competition—in this case, from institutions with greater credibility, a broader range of services, a better-articulated and implemented mission, or a more transparent management structure. Furthermore, an unquestionable advantage of such grassroots institutions is the absence of coercion, which cannot be said about public healthcare systems. As with many other goods or services, a lack of satisfaction on the part of donors may result in them withdrawing their support for a given institution, which is why it must also make every effort to attract and retain as many supporters as possible.
Another issue that may be controversial is the level of salaries received by employees of such institutions. Some may argue that they should be relatively low, as this is not a commercial activity. However, the criterion of commercial/non-commercial activity justifying low salaries (or even no salaries at all) is, in fact, a dead end that does not lead to constructive conclusions.
It is worth mentioning here that charitable institutions also need to employ specialists from various fields: IT specialists, marketing and promotion specialists, accountants, etc. Such people have specific skills and are appropriately productive. Thanks to them, such institutions can function efficiently and thus help those in need. They may voluntarily waive higher salaries, but if they do not, they should not be subject to criticism.
Appropriately high salaries reward them for their hard work. And, as mentioned earlier, this allows them to better protect themselves against undesirable events. Also, rising salaries in such institutions send an important market signal and indicate a demand for employees in these institutions. And, if a certain kind of sacrifice and work is expected of them in such institutions, it should not be forgotten that they voluntarily give up jobs and career development in the commercial sector. Their high salaries are just as justified as the earnings of CEOs or managers who contribute to the development of the companies they work for.
What is more, it is only a seemingly paradoxical fact that commercial activity—with its economic calculations and profit orientation—actually drives the development of charitable institutions. It is very easy to imagine their development (or rather lack thereof) in a world without entrepreneurs, money, and competition. Helping those in need would be highly ineffective in such a world. In fact, there is a natural (market) symbiosis between profit-oriented activity and charitable activity.
Conclusion
Charitable institutions and voluntary donations from donors are an important part of the market-based health system. Despite the lack of a centralized structure, more and more institutions of this type are emerging with economic development. This also contributes positively to the development of appropriate ethical attitudes in society and shows that there is a real market alternative to formalized and compulsory public systems, which can also function efficiently alongside commercial solutions.
That is why it is so important to emphasize this type of support, which is the only true form of assistance, as it is not based on coercion. What is more—as it is not enshrined in law—it also motivates those in need to become as independent as possible after receiving assistance — thus, it does not create statutory poverty and promotes the development of interpersonal relationships.
