2 different incomes pay different shares of their income in health care payments and cases where households at the same income pay different amounts for health care. The index is also sensitive to the overall average share of income spent on health care. Section V outlines an alternative approach developed in the income redistribution literature and used in the health economics literature in the late 1 990s. This approach explicitly approaches the fairness of health financing in terms of its impact on the distribution of income, and allows one to show the separate redistributive effects of the average proportion of income spent on health care, the progressivity or regressiveness of the payment structure, the horizontal inequities in the financing system, and the extent of reranking generated by it (well-off households becoming poor, and vice versa). The paper ends in section VI with an empirical illustration of this method using data on out-of-pocket payments from Vietnam for two years-1993 and 1998. Though this is intended simply as an illustration of the two approaches, the analysis is of some interest from a policy perspective. A recent assessment of the Vietnamese health sector [2] highlighted Vietnam's heavy reliance on out-of-pocket payments to finance health care-81% of health spending in Vietnam was financed privately in 1997, and this was almost entirely paid out-of-pocket. The assessment also highlighted, however, two important changes over the course of the 1990s: rising user fees (even at supposedly free commune health centers), offset-at least in part-by reductions in the cost of medicines.

# **II. Health Care Payments and Ability to Pay**

WHO calls its index an index of fairness of financial contribution (FFC). The index aims to capture empirically the financial protection issue highlighted in chapter _5_ of the WHR. This is evidently only one aspect of fa&rness in health financing, since the way a country finances its health care-and in particular the balance it strikes between pre-payments and out-of-pocket payments-has implications not just for how people pay for health care (the focus of the FFC index) but also for whc uses health services, how often and how much. The FFC index does not capture-and _does not purport to capture-how_ fair a financing system is in terms of its impact on the distribution of access to and utilization of health services. The limited objective of the FFC index-and the alternative suggested below-needs to be borne in mind.

## _LINKING PAYMENTS TOABILITY TO PAY-WHY?_

The WHR argues that a key dimension of performance in a health care system is how fairly it protects households financially. Underlying the FFC index is one particular interpretation of the term "fairness in financial protection", namely that _households ought to be required to pay for health care in line with their ability-to-pay_ (ATP). There appears, in fact, to be widespread support amongst policymakers and the public at large for the principle of linking health care payments to ability to pay [3]. There has, however, been relatively little discussion of the rationale underlying this. As Culyer [4] notes, one obvious, reason that might be advanced in support of the principle is that policymakers are concerned that payments for health care affect people's ability to seek health care when ill. This concern stems from a more fundamental concern of policymakers with the distribution of health service utilization and ultimately with the distribution of health itself. But this simply provides a rationale for de-linking payments and utilization-it does not provide a rationale for linking payments to ATP [5]. A flat-rate tax, for