A Perspective on Bahamian Social Security

by Larry Smith

With all the fussing and fighting about government's proposed national health scheme, we thought a four-dimensional view might be useful.

Our existing social security system was created in 1974, when earlier welfare measures like workman's compensation and old age pensions were pulled together under a new scheme called National Insurance.

Similar programmes had been introduced by Jamaica in 1966, Barbados in 1967, Guyana in 1969 and Trinidad in 1971. And they trace back to the post-war social consensus in Britain, when politicians from all parties in "the mother country" began building a cradle to grave welfare state.

The centrepiece of the British consensus in the late 1940s was a state-run system of social security funded by payroll taxes, together with a national health service funded by general taxes.

Currently, the British NHS spends about $200 billion a year, and ended 2005 a billion dollars in the red. Although it retains wide support, successive governments have tried to inject more choice and competition in an effort to improve patient care and efficiency.

In fact, more and more medical services are being outsourced to the growing private health sector in Britain.

Like the Bahamas, former British territories in the Caribbean relied on general tax revenues to pay for their public health systems. But spiralling costs and rising demand led to a search for new ways of funding.

In 1997 Jamaica rejected a government proposal for a social health insurance scheme like the one we are introducing, opting instead for a more limited National Health Fund which was set up in 2003.

This fund supports health education, subsidises prescription drugs and helps finance primary care infrastructure. It is funded by an excise tax on tobacco, a 1 per cent payroll deduction, and a contribution from the public treasury. Stanley Lalta, the consultant who has been working on our national health plan, was an economist in the Jamaican planning process, so he is helping to implement here what his own country wouldn't agree to.

Meanwhile, Trinidad is in the midst of a major reform of its public health sector that involves decentralisation of medical services and a conversion of the Ministry of Health into a planning and regulatory agency. A pilot national health insurance scheme is also being phased in. Poverty-stricken Guyana cannot afford a national health insurance scheme, and Barbados offers public healthcare along the lines we are familiar with here, but funded by income taxes.

That's how things shape up regionally. Now let's take a look at the local context.

First, there is no question that many desirable social advances were made after the Progressive Liberal Party came to power in 1967, and credit should be given where it is due.

Until the mid-20th century the Bahamas was a backward and insecure society. According to historians Michael Craton and Gail Saunders, most Bahamians were "economically hopeless", lacking adequate social services and education, and subject to a "white creole agro-commercial oligarchy reinforced by racial prejudices." Most readers should be able to translate that.

Of course, there were mitigating factors. Our tiny, scattered population in a relatively remote location on the fringe of the British Empire had few resources upon which to draw. And the country did not take off economically until well after the Second World War when air travel, tourism and offshore finance began to play a role. Political and social advances soon followed.

Prodded by the International Labour Organisation, the Bahamian government decided on a national insurance scheme in 1970. A tripartite committee was appointed to make recommendations, and legislation was passed in 1972.

The benefits included sick pay, maternity leave, disability payments and pensions. Unemployment benefits and health coverage were deferred until the scheme could be "consolidated on a firm foundation."

As with any big change, there was opposition to National Insurance from employers, unions and politicians. Some critics were opposed to taking money out of people's pay packets, others didn't trust the government to manage the programme, and still others were concerned about the lack of information and consultation. Sound familiar?

When the Bill was presented to parliament, the opposition Free National Movement wanted to send it to committee for further consideration: "This Bill has far-reaching ramifications," said FNM parliamentarian Dr Elwood Donaldson, "and if the government and opposition could sit down together we could decide how to deal with it."

Opposition leader Cecil Wallace-Whitfield complained that the Bill did not present the costs of the scheme and although the FNM had no quarrel in principle, the details should have been available for informed decision-making. As is the case today, the all-important detailed regulations that govern the system were nowhere in sight when the National Insurance Bill was being debated.

"If anyone is stalling it is the government because they are not yet ready to implement a national insurance scheme," he added. "What you have chosen to do is to keep absolutely secret what your intentions are."

And he was right. It took another two years before National Insurance was implemented - in 1974 - at a time when the Bahamas was reeling from the effects of a global economic recession sparked by the 1973 Arab oil embargo. The embargo had a pronounced effect on travel and employment, and produced years of hyper inflation. Conditions that may be difficult to recall today.

FNM spokesman Arthur Foulkes said NIB had come at the worst possible time: "workers can't stand the deductions and many businesses will not be able to absorb them in a depressed economy without cutbacks."

But the government obviously considered a big social entitlement programme to be politically advantageous. And National Insurance was introduced relatively painlessly, with little impact on the private insurance sector, as some had been suggesting. The government focused on the potential impact of the NIB fund in terms of the accumulation of capital, which led to further criticism that also proved correct.

In 1974, the FNM charged that income from NIB would be available to "squander and waste...because the government is broke and they are looking for the money to bail them out. Make no mistake, this national insurance is as sure a method of taxation as any other."

And that is exactly what happened. In 1990, opposition leader Hubert Ingraham (who had been in charge of national insurance before he was fired from the cabinet in 1984 for speaking out against corruption) told parliament that the government had borrowed all the National Insurance pension fund and was dipping into the medical benefits fund, without proper authority.

At the time, NIB chairman Kendall Nottage (who was found by the 1984 Commission of Inquiry to have fronted for a mafia figure "whether he realised it or not") was touting the fact that the National Insurance fund totalled almost half a billion dollars.

Turns out that, on the basis of a simple "letter of comfort" from the prime minister, NIB had given $6 million to Bahamasair, a state entity that has been effectively bankrupt since inception. And more than $200 million was disbursed to other state corporations on secret terms that never come before parliament. Readers will have to make their own call as to whether this could be considered prudent investing.

That brings us more or less up to date. In the mid-1990s NIB outgo actually exceeded income for a time. And in 2001, reserves of $1.1 billion were said to be significantly less than "the present value of total benefits earned by contributors", according to actuarial studies. The experts projected a deficit of $3.4 billion over the next 60 years, with the fund going bankrupt as early as 2034.

"Under all reasonable scenarios," the actuaries said, "depletion of reserves is expected within 35 years unless reforms are made (and) the contribution rate in the future will have to be much higher than the present average combined rate of 8.4% if NIB is to meet its commitments to future pensioners." Critics are making similar projections for national health insurance today.

Other recommendations to save NIB included raising the insurable wage ceiling annually, restricting terms, improving investment decisions, cutting administrative costs, increasing compliance,and raising the retirement age. In 2005, NIB income was $136 million with outgo of $117.6 million and reserves of $1.3 billion. Administrative costs were over 20 per cent, mostly going to the 436 employees.

The Social Security Reform Commission reiterated these and other suggestions in its report to Cabinet in 2005. But the government decided to focus on introducing another major entitlement programme before its first term in office comes to a close around the middle of next year. This will be an even more costly scheme that carries a lot of teeth since it will radically change the way our healthcare system operates.

Although the commission on national health insurance solicited information from a variety of sources over its two-year term, critics say there has been a decided lack of "genuine consultation" and point to a number of disasters waiting to happen as a result. This is something which the government now says it wants to correct - after passing the NHI Bill in parliament and condemning all who have expressed concerns on this vital issue.

What is clear is that no consultant or government has the magic bullet that can produce a perfect and reasonably sustainable health system. We should be learning the lessons of other countries and sectors, building on the best ideas and avoiding the worst. Making healthcare work will require transparency and the full co-operation of government, private industry and consumers.

Comments

[EB Christen]

Excellent article! Can we now request that all the parties to the debate are handed this article and made to read, reflect and reconsider? It would be refreshing if this whole enterprise was carried out with reason rather than emotive outbursts - on both sides. The government should stop selling pie in the sky and the wealthy need to believe in more than just themselves if this country is ever going to really improve its standards - be they healthcare, education etc. Working together, the government and the private sector could achieve a lot, but transparency and accountability are an absolute precondition. Happy holidays.

[Chris Armaly]

I am completely disappointed in the media coverage over NHI. While I appreciate your article and it was well written it was several weeks/months too late. I am appalled that this ridiculous act actually passed and it shows these idiots in power do not have a clue. I hate to sound so aggressive. However, I lived with socialized medicine in Canada for 10 years so I know what I'm talking about.

I had a problem with excruciating pain in the late 1980's while in Canada. Guess how long it took to get an appointment just to try and sort it out (much less an appointment for treatment)? Eight freaking months. Myself and a couple of friends were bobsledding in Montreal when one of us hit the guard rail. He ended up breaking his back and couldn't move. When we finally got to the hospital he was put on a stretcher in the hallway for hours. I finally asked what was going on?

The response…we have no orderlies to move the patient to x-ray etc. Budget cuts, blah, blah, blah. I volunteered and carried him around for two days in the hospital until someone finally came.

Had another friend whose leg was amputated. Guess how long for a prosthesis? That's right folks, one year. The only reason he got one earlier was the fact that he had to volunteer as a human guinea pig to test new prosthesis. Once a month we had to drive east of Montreal to get "refitted" for another leg. As he started to get familiar with the leg then it had to be changed. If he refused, then it was back to the 1 year waiting list.

The aforementioned are just a few examples of what socialized medicine does. It is quite simple: when you offer something to everyone for next to nothing there is one thing that always happens…the quality goes down.

The abuses in the system especially in this corrupt country will cause the government to take 20% of your salary in a few years. The Bahamian public think this scheme is going to affect the rich. What a joke, the rich will still be able to afford proper health care, while the poor and middle class will get sub par health care at best as we will not be able to afford a decent health plan. Get ready for the long waits sheeple (that's right sheeple), you people have no idea what you're in for.

Doctors who aren't in bed with some minister on a kick-back scheme will be leaving this country by the dozens. We will end up with third world physicians and during an emergency your chances will be 50/50 at best. Canada has finally learned its lesson and is moving towards a more private system, although it will take several years to get back to normal.

On a final note, and this is where I am particularly disappointed in the media. A few weeks ago a government minister went on a tirade about NHI. "From the cradle to the grave …" On and on and on. Finally he shouted "now all our women can get pregnant and don't have to worry about a thing, they will be taken care of." I feel out of my chair and couldn't believe he said it. He then said it again.

Finally a few of the MP's put their head down and murmured as if to say shut up you idiot don't say that in public. He then caught himself and in an attempt to correct himself stated…" What I mean is all the women who want to get pregnant will not have to worry and will be covered." What an idiotic, moronic thing to say. We have too many kids out of wedlock now, and this "leader" gets up in Parliament and in as many words tell all the women of the Bahamas to get pregnant. Women are now encouraged to have child after child out of wedlock and I'm supposed to pay for it! All the government in this country promotes is entitlement thinking. Never to go and do something for yourself. And I don't just mean this government, the previous administration was just as bad.

How the media didn't cover that rant is beyond me and I am starting to realize all media outlets in this country are paper pushers for government.

I could go on and on, but I'm sure you've had an earful. Once again, I enjoyed your article and look forward to it every week.

[nicob]

Larry, thanks for the perspective.

This is an issue that should have been debated, as EB Christen said, using reason and not emotion. Of course, the problem is far greater than we imagine, mainly because the real cost of excellent health care anywhere in the world is far more expensive than any reasonable person can afford. The result seems to be one of two things: either the ordinary person has to suffer sub-standard universal health care (as in Canada), or has to pay huge sums to get good health care. The real for me questions are these: what does it really cost to deliver good health care? How do we define what good health care is? Should a state be obliged to provide anything more than that? And who is benefitting from the global health care industry anyway, and why does good health actually have to cost so doggone much?

I speak, by the way, as someone who, whatever my class and economic situation, is unable, because of my family's history, to obtain reasonable health care anywhere I turn. We talk plenty about the unsustainability of universal health care insurance, and the arguments are compelling. But we don't talk very much about the health care insurance companies that offer reasonable health insurance only to the healthy who don't neeed it, and to refuse to insure those of us who are judged to be greater risks? What allows them to choose to drop the elderly from their insurance coverage, or to refuse to insure people with pre-existing conditions? Doesn't the argument about the squandering of their income apply to them equally? Can private insurers pay everything they have undertake to cover?

Don't get me wrong. I understand the economics of it all. What I don't understand is the morality behind it. Health (like liberty and humanity) should not be a commodity to be financed like any other. Who regulates the insurers?

[larry smith]

Let's break the problem into components:

The uninsured and indigent currently have access to public healthcare provided by the government at a cost of some $200m a year.

The other half of the country, including many low wage earners, have access to private group insurance.

However, as you say, private insurance is not portable, does not cover pre-existing conditions and often excludes retirees.

And public healthcare cannot finance each and every procedure for all who need it, as well as all the infrastructure to support universal care.

So there are gaps that need to be filled in both the public and private systems. And more money has to be raised from somewhere to do that.

The first thing that comes to my mind is: why does the government need to be in the business of owning and operating hospitals and clinics?

They could be sold off for the private sector to operate under the planning and regulatory supervision of the Ministry of Health. And those that are not saleable could be subsidised (like mailboats).

Second, I would not be averse to paying a payroll tax or health levy to guarantee retirement coverage, portability of coverage, coverage of pre-existing conditions and catastrophic coverage.

Third, it is clear that the NHI proposal cannot cover everything and payments for care will be set at the level now charged by the public health system.

So there will still be a need for extra money to pay for a superior level of care or for services not covered by NHI.

It would seem to me (and this is what is happening in other Caricom countries), that the best approach in our inefficient and grabblelacious little country would be a phased one.

A programme that takes care of the gaps in the existing system and that takes advantage of the energy and creativity of the private sector to do the government's job for them.

A walk through the public wards at PMH is all it will take to convince you that the government cannot do the job themselves.

[drew Roberts]

"Of course, the problem is far greater than we imagine, mainly because the real cost of excellent health care anywhere in the world is far more expensive than any reasonable person can afford."

I often think this is because of at least these two things:

1. We often want the wrong things from insurance in general.

I think we should generally buy insurance to cover the things we cannot afford to pay for, not to cover our yearly expenses. There is something in our makeup that feels this is somehow wrong though. Somehow we feel that if we buy insurance for a year and don't claim that year, we have wasted our money.

We need to re-think this.

2. We focus on the wrong things when it comes to health.

I will leave this for furhter discussion.

I do have some questions when it comes to national health care though.

If we are to be taxed to pay for other peoples medical expenses, how long will we be free? If you are living in such a way as to increase the chances of having increased medical costs, will the rest of the population demand that the government step in to control you?

Two thoughts here:

Mandatory government supervised excercise and eating programs for the overwieght?

Forbidding all dangerous sports and thrill seeking and motorcycles, etc?

all the best,

drew