Five reasons to press the brakes on the proposed NHI scheme

Fri, May 8th 2015, 12:47 AM

After decades of discussions, research, studies, proposal and reports, the government of The Bahamas has indicated that it intends to introduce National Health Insurance (NHI) effective January 1, 2016. In this regard and prior to the recent announcement, Sanigest Internacional was engaged to conduct a study and present a proposal for implementation of this significant initiative.

The issue of universal access to healthcare has over the years evolved into the sphere of fundamental human rights with organizations such as the United Nations (UN), the World Health Organization (WHO) and Pan American Health Organization (PAHO) leading the charge. The topic of universal health coverage is not only complicated but it is too important to be taken lightly.

If The Bahamas is to take this journey to universal health coverage this must be done with proper planning, consultation and prudence in order to prevent a social and economic disaster of catastrophic proportions. The journey to universal access to healthcare must begin with healthcare reform and tackling the containment of healthcare costs, infrastructural development and the broadening of coverage.

In light of the foregoing and recognizing the magnitude of such a historic initiative, there are five main reasons why the NHI scheme as proposed by the government is not only flawed but is a bad idea.

1. The time frame is unrealistic and impractical

A look at the national health systems of other nations will show that the implementation took place over an extended period of time and not imposed upon any country in one fell swoop. It is also apparent that these countries continue to review and tweak their health systems, coverage details and frameworks in order to keep them viable and questionably sustainable. The government of The Bahamas seems to have taken the view that such a major initiative and extraordinary task can be achieved in a matter of months. This is simply mindboggling when we consider the implementation time frame of more advanced and much richer nations that have implemented such a program.

Will the strengthening of the public healthcare system be completed before January 1, 2016? This is bearing in mind that the government does not have the best record in the execution and completion of projects as demonstrated in the case of the new Critical Care Block at Princess Margaret Hospital, which is not fully operational and remains a topic in the news. In addition to quality healthcare facilities, will we have the requisite number of health professionals to address the expected increase in demand come January 1, 2016?

It is no secret that the government feels constrained to move ahead with the unrealistic date of January 1, 2016 for political reasons. However, the issue of universal health coverage is bigger than politics and politicians on all sides of the political divide should not play games with the health and lives of the Bahamian people (note the government's actions regarding the Rubis issue) in order to stroke their own egos or enhance their perceived legacy. No individual's personal ambition or edification is worth the life or health of a Bahamian citizen or legal resident. The government should let common sense prevail, proceed with caution and work properly with stakeholders to implement a reasonable time within a sensible and achievable time frame to avoid disaster. The proposal to implement in 2016 is a bad idea!

2. The cost is prohibitive

According to media reports, the Sanigest report estimates that NHI would cost between $362 million on the low end and $633 million on the high end. However, the Bahamas Insurance Association (BIA), using actual claims data from its private health insurers, has projected a cost between $895 million and $965 million with serious caveats that could push that figure well over $1 billion.

The disturbing fact is that while Sanigest's estimates are based on a number of assumptions, the data from the insurers are real figures in an environment of controlled cost, certain limitations or exclusions and cost sharing. This suggests that the $965 million estimate is quite conservative and will be grossly inadequate in an uncontrolled environment managed by the government. In short, the price tab for NHI can be expected to exceed $1 billion, which is over $300 million more than the highest estimate provided by Sanigest. It should be noted that private health insurers do not normally assume all the risk for their health insurance contracts; rather they manage their risks by having retention limits and purchasing reinsurance. There is no mention or reference to reinsurance in the government's proposal which suggests that the government will assume 100 percent of risks and will have to pay the full amount for all claims.

To put the projected cost of NHI in context, value-added tax (VAT) at 7.5 percent is expected to generate an extra $300 million annually for the Bahamas government. It follows therefore that if the government decides to fund NHI via VAT, an additional VAT at a minimum of 22.5 percent will have to be imposed on the populace to earn the requisite revenue. When added to the existing VAT rate, which we have been advised has been earmarked to reduce the deficit and national debt, the VAT rate would be an astonishing 30 percent. Regardless of how NHI is funded or financed, The Bahamas is on course to being one of the most taxed jurisdictions in the world.

It is stated in the Sanigest report and by government that the implementation of a NHI will reduce medical costs but there is no proof of that and we believe this will only lead to increased costs. The government is presently constrained by a number of union contracts to provide a certain level of medical benefits to the likes of the police, the defense force, teachers, nurses, parliamentarians, the governor general and other public service persons. The government will be unable to reduce the medical benefits that these groups enjoy. So even if they wish to implement a minimum basket of benefits universally they will still be obligated to provide the additional benefits (top-ups) to these groups.

So costs will certainly not go down. Government will only be transferring (re-allocating) the administration of these already existing benefits and coverage from a private sector insurer to a newly created government insurer. Hence, government will now be getting into the insurance business and displacing private insurers. We are all aware how well the government presently manage other public corporations - badly. Take the example of Bahamasair, the Public Hospitals Authority, ZNS, BEC, Water and Sewerage, the dump; none of these are stellar performers. Government will be assuming 100 percent of all administration costs as well as 100 percent of all the claims costs.

These are costs that the government does not have to bear at this time.

In an environment of sluggish economic growth and high unemployment, the implementation of NHI, as proposed, will be a disaster for The Bahamas. When one considers that the cost of healthcare as a percentage of GDP and government revenue is constantly on the rise, this gives considerable food for thought. As an example, a recent study on national healthcare in Canada suggests that the cost of healthcare insurance for the average Canadian family increased by 53.3 percent between 2004 and 2014. Additionally, in the immediate aftermath of the imposition of VAT, there is no doubt that the proposed NHI scheme is not a bad idea. It is a terrible idea.

3. The public health system is broken

There have been several reports, reviews and audits carried out on the public health system within The Bahamas. The findings of all these reports, and most recently the audit of the Public Hospitals Authority (PHA), confirm what all Bahamians know and experience on a daily basis: the system is broken. The public health system is inefficient, ineffective, lacks accountability and transparency and is laden with wastage, with alleged corruption also being an issue.

It is unfathomable that the government will seek to implement a NHI scheme on top of a system with enormous challenges and flaws. To do so can be likened to adding an additional floor to a building with a compromised and weak foundation. Reports dating back to the 1980s have highlighted the need to revamp the system and address the infrastructural deficiencies within the system. The quality and quantity of service is another major issue within the existing public health system. Not only is there a need for additional medical personnel and significant training of personnel, a paradigm shift and change in work ethic is required before we can have a meaningful discussion on NHI.

4. We should be building and not destroying businesses

The Sanigest report, it has been reported, recognizes the uniqueness of the Bahamian economy and private health insurance coverage among Bahamians. It is estimated that a third of Bahamians have private health insurance coverage while about half of Bahamians are covered under some form of insurance plan. This speaks to the high level of market penetration in The Bahamas when compared to other jurisdictions against which this nation was benchmarked in the drafting of the proposal.

According to media reports, Sanigest noted that the level market penetration in this country "has consequences in terms of expectations, as well as implications for human resources employed in the private health insurance industry". Simply put, if NHI is implemented as proposed there will be a massive loss of jobs within the health insurance sector and some private health insurers will probably have to shut down. One of the consultants engaged by the Bahamas government (we are aware of at least four within the last year) was honest in his comments on the implementation of universal health coverage when he stated that had other jurisdictions (in particular Canada) had the same level of penetration at the time of implementation, the private sector infrastructure, expertise and resources would have been leveraged. He further opined that the system would most likely be different in those jurisdictions.

Insurance companies over the years have not had the best reputation and have not done enough to address the public perception of their operations or practices. Local insurers have also done a less than stellar job to educate the customers on their contractual obligations. However, they play a vital role in the economy by providing financial protection to individuals and companies against losses from accidents, catastrophes and medical conditions. In their absence, the government's social safety net will have to be expanded to the point that the country will become bankrupt. The public treasury will also be inundated with requests from the populace. This is why the government should not implement a scheme that will destroy an entire industry and destabilize the economy.

5. The Bahamas government should not be running any business

This is very much connected to the previous point. The role of the government in any society is to create an environment in which commerce can be conducted uninhibited and private businesses can thrive. The government is responsible for implementing policies, laws and regulations that govern the private sector and protect consumers.

The government of The Bahamas is the largest employer in The Bahamas. While this may appear to be impressive, it is not. The reality is that this statistic speaks volumes about the level of involvement of the government in the economy as a direct employer of labor when compared with the private sector. The private sector should be mainly responsible for creating jobs and not the government; a system that promotes more involvement by the state is detrimental to the long-term economic growth and development of The Bahamas.

NHI as proposed will increase the size of government in The Bahamas while simultaneously shrinking the private sector. As numerous studies and experiences of countries globally have shown, governments are not the best in promoting operational efficiency, quality service and managing administrative cost. Implementing NHI as proposed in the Sanigest report either as a single payer or hybrid multi-payer system with a public insurer is a very bad idea.

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