by Larry Smith
If our new Health Minister is anything to go by, it’s clear the government has decided to take advantage of an upbeat economy to bet the next election on a massive expansion of social services.
“National health insurance is so important that it shouldn't be delayed any longer," Dr Bernard Nottage told the Chamber of Commerce last week, trying to appear large and in charge.
Acknowledging that this would require legislation, he said that would be accomplished within three months: "The final consultation process is going to be intense because we're on a short timeframe.”
The aim is to set up a system of mandatory social insurance as proposed by the government’s Blue Ribbon Commission on healthcare. This calls for a new payroll tax, and will add enormously to our inefficient public sector.
There may be a genuine concern driving this debate, but the obvious political motives should not be allowed to defeat good advice. The goal should be to ensure that whatever system is put in place makes sense, and is not wasteful, foolish or impractical.
A draft research report commissioned by the Nassau Institute earlier this year goes a long way towards meeting this goal. While not opposing the scheme in principal, the report says many of the government’s proposals are “ill-advised” and would create a substandard system that would be unsustainable.
This report was produced by Nadeem Esmail, an expert on health systems performance studies at the Fraser Institute in Canada. Esmail has published extensively on this subject, and his articles have appeared in newspapers across Canada. We obtained a pre-release copy of his 60-page analysis. The final report will be pubished later this month.
After an extensive review of comparative studies on health systems and insurance markets around the world, Esmail concluded that the economic costs of the government’s proposals would be significant. He urged policymakers to consider the evidence on how best to structure a national health programme.
“The Bahamas is not the first nation to consider a national health insurance programme,” he said, “so it should not needlessly suffer the ills endured by so many flawed attempts that came before it. Also, an evidence-based approach to healthcare policy is vital if The Bahamas wishes to ensure that the final set of policies introduced is the best option available.”
Most developed nations have policies in place that seek to ensure full access to healthcare services as needed, regardless of the ability of citizens to pay. However, some countries manage to deliver on this promise much more efficiently than others.
And Esmail makes the interesting point that studies by the World Health Organisation and others show little or no correlation between healthcare spending and population health. There is, however, evidence that better sanitation, safe water supplies, immunisation and screening services and other preventive care do have an impact on public health.
“Government should focus on simply ensuring universal access and the availability of healthcare, “the draft report said. “Beyond this, government should be concerned only with ensuring that those who cannot afford to pay for medical services have access to them when they require care and, perhaps, requiring their citizens to purchase (public or private) health insurance. There is no obvious reason to suppose that a government monopoly will be the most efficient provider of health insurance or producer of health services for the poor.”
The Bahamas already commits a relatively large share of national income to healthcare. This year’s Ministry of Health budget alone is $205 million, providing public healthcare that is virtually free. But the quality of treatment is below what might reasonably be expected, Esmail said.
“The important question to ask then is: will the Blue Ribbon Commission’s proposal for health reform and the introduction of NHI improve the quality of health services without increasing cost or adversely affecting income growth?”
Reviewing the Commission’s recommendations, Esmail cautioned against a government monopoly of health insurance and argued that there was no economic rationale for the badly run National Insurance Board to administer NHI over a competitive private contractor:
“Private provision of health insurance and services within an NHI structure is the model employed in Switzerland...(and) other functions within the healthcare programme in the Bahamas could well benefit from privatization, or at least private contracting within a publicly defined structure.”
The Commission proposed a system of comprehensive benefits for all residents - complete medical and dental care, drugs and supplies, rehabilitation, eye exams and emergency transportation in both public and private settings. This is at least as generous as health programmes in developed nations and likely to result in excessive demand for “free” services.
To reduce this demand, increase efficiency and contain costs, Esmail advocated the use of co-insurance, co-payments and deductibles: “If required to bear a portion of costs, individuals will curb their consumption of medical care, and medical services of lesser value will eventually be eliminated. A second advantage is that these payments can reduce the financing burden of NHI because they redirect healthcare financing from payers to users.”
He said a cost sharing scheme was “far superior to centrally planned restrictions on service use (read rationing) because they leave the decision over which service is best to those best placed to make the decision – the doctor and the patient being treated.”
The Commission proposed an income-rated premium for salaried workers, and a flat rate contribution that would vary by occupational class for the non-salaried sector. The contribution for salaried workers, but not their dependants, would be shared 50/50 with employers.
“The real concern here,” Esmail said, “is the impact the NHI premium might have on the economy as a whole...These costs will ultimately lead to workers finding themselves without work as the government takes a larger share of the economy to finance the NHI programme. The main source for NHI premium funding by firms is likely to be lower wages for employees.
“A premium levied on the employer will ultimately be paid by the employees through lower take-home wages. Thus, it makes most sense to simply require that individuals fund the entire premium themselves. This will also have the added benefit of greater cost recognition by the insured population...Unless the value of an employee rises post-NHI implementation, the NHI premium must ultimately be factored in to total income through a reduction in other forms of income.”
The question of the future affordability of NHI (especially as the Bahamian population ages) was considered vital by Esmail since health spending in developed nations is growing faster than their overall economies. For example, the average inflation-adjusted growth rate of total health expenditures per capita in OECD nations (excluding Turkey) between 1995 and 2003 was 4 per cent.
And the introduction of public insurance in other countries has been shown to increase the use of healthcare services: “This suggests that the impact of NHI cannot be assessed using current cost and intensity figures because (they) will expand significantly. The future cost of NHI is likely to far exceed estimates compiled by the Commission, thus elevating concerns about its impact on the Bahamian economy.”
Arguing against the Commission’s proposal to fund NHI services through capitation payments to doctors and providers, Esmail pointed to large differences in economic incentives and the efficiency of provision that result from different payment schemes.
Salaries allow direct control of costs but promote under-production as doctors have no incentive to produce beyond a minimal standard. Capitation payments based on the number of patients registered to a given practice can lead to over-registering and under-servicing, as well as adverse selection of better risks to reduce expenses. Fee-for-service payment is linked solely to output and, according a recent OECD study, produces fewer waiting lines for services.
The Commission’s proposal that the NHI contract with providers creates a block grant system for hospitals based on a per capita allocation: “Block grants disconnect funding from the provision of services to patients. Incentives to provide a higher or superior quality of care to patients are virtually absent. There is also no incentive to function efficiently,” Esmail said.
“Opting for a payment scheme based on the number and type of patients actually treated would create powerful incentives to deliver a greater quantity and quality of services without leading to dramatic cost increases. This method of funding, best considered a prospective fee-for-service, is most commonly known as the diagnostic-related group payment system, (which pays) a fee for each individual treated based on the expected costs of treating the diagnosis at the time of admission.”
Concluding that the Commission’s proposals were unlikely to be sustainable in the long run and that the economic costs would be significant, Esmail offered recommendations to ameliorate the impact. Topping the list was the privatisation of hospitals and services, together with the outsourcing of other government health sector activities via a competitive bidding process.
“The ultimate goals of any reform should include a system in which the population’s health is improved, people have access to medical services when they need them, consumers control their own healthcare decisions, and there is accountability (by both providers and consumers) for the use of healthcare services.
“The literature generally indicates that there are distinct efficiency advantages in relying on private providers/hospitals vis-à-vis publicly owned providers/hospitals. Further, private healthcare providers, because of their incentives to increase efficiency and provide a higher level of care in order to attract more patients, will end up enhancing care for all patients, including the very poor.”
Taking the accreditation of facilities and caregivers away from the Ministry of Health would be a vital step to avoid serious conflicts of interest, Esmail said. Independent certification would provide the quality signal desired by healthcare consumers, while constraining the possibility of harmful political intervention.
“It is far wiser to simply require that practitioners and/or facilities maintain certification with any of several licensing bodies in Canada, the United States, or Europe; or independent quality-certification organizations that also practice in these regions.”
And he said that national health insurance should be provided by both public and private insurance companies within a competitive marketplace. The purchase of insurance should be mandatory, and those unable to afford it should be given vouchers. Ideally, NHI providers should be able to offer a multitude of insurance options and not be regulated to the extent that consumer choice is needlessly restricted.
“A system of competitive social insurers has a number of benefits over a single government insurer model where premiums are levied in a manner which mirrors an income tax,” he said. “Principally, this system is less likely to suffer from politically-motivated intervention and is more accountable to citizens than one directly managed by government.”
Of course, if you believe that government-operated enterprises are more efficient, more effective, more affordable and more accountable, you can ignore these recommendations and we will all end up with yet another ball and chain around our necks run by bureaucrats and politicos who don’t give a damn.
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