Public spending on health care: how are different criteria related?

At least nine different criteria are relevant for decisions about public spending for health care. These include economic efficiency criteria (public goods, externalities, catastrophic cost, and cost-effectiveness), ethical reasons (poverty, horizontal and vertical equity, and the rule of rescue), and political considerations (especially demands by the populace). Sometimes one criterion should be examined before another one is considered; that is, they are hierarchically related. Sometimes two criteria will not be compatible but will conflict, forcing difficult choices--particularly between efficiency and equity. Properly thought-out choices of which health care interventions to finance with public funds therefore depend not only on looking at all these criteria, but also on treating them in the appropriate sequence and taking account of their possible inconsistencies. Public funds should finance public and semi-public goods that are cost-effective and for which demand is inadequate; cost-effective interventions that preferentially benefit the poor; and catastrophically costly care, when contributory insurance will not work or there are good reasons to finance insurance publicly.