Thursday, March 8, 2012

A National Health Insurance (NHI) scheme would only work efficiently if, and only if, there are proper checks and balances in place ...especially to ensure that the pool of money goes in to a segregated fund for health and health alone...

The National Health Insurance debate

CFAL Economic view

We read recently in a local daily that Dr. Perry Gomez, the Progressive Liberal Party (PLP) candidate for North Andros and the Berry Islands said that under a PLP government National Health Insurance (NHI) would be implemented within the first year of coming to office.  While we are in the so-called ‘silly season’ and everyone and their brother are making promises, we would hope that some of the promises would be well reasoned outlining the attended cost and consequences for the wider community; the usual rhetoric is just not acceptable this time around.  We believe that members of the Bahamian electorate are a bit more discerning than most politicians give them credit for.

What is NHI?

The issue of a National Health Insurance was first raised back in August 2002, when then Prime Minister Perry Christie appointed a 15-member Blue Ribbon Commission to review the feasibility of a National Health Insurance Plan.  The committee was also mandated to determine the best way to make affordable healthcare available to all residents.  The appointment of the committee was a step towards the fulfillment of the then government’s promise to ensure that all patients receive the same access to healthcare regardless of their personal wealth or circumstances as outlined in the PLP’s manifesto, ‘Our Plan’.  In 2004, the final report was released.  It was the view of the committee that The Bahamas cannot afford to not have a National Health Insurance (NHI) scheme.  The committee also stated that NHI had to be mandatory and would only work if the government had adequate funding.   We have no difficulty agreeing with those observations but would urge the authorities and the public to take a closer and more objective look at the proposal.

What is National Health Insurance?  National Health Insurance is a form of social health insurance, which uses the principles of fund pooling and risk sharing to provide equity in access to care.  Individuals pay an ‘affordable’ amount on a consistent basis and in return are able to have their healthcare needs provided for, regardless of cost.

It is envisioned that this ‘cradle to the grave’ national healthcare coverage will cover persons who are currently excluded from private insurance plans such as individuals with pre-existing illnesses, newborn babies and those over 65.

The 125-page NHI report outlined the following eight specific recommendations for the Cabinet’s consideration:

1. National Health Insurance should be universal.

2. Legislation should stipulate the health insurance is compulsory for all residents.

3. National Health Insurance should be administered by the National Insurance Board.

4. A comprehensive benefits package should be offered.

5. Contributions should be set at a rate which is affordable for the majority.

6. Public and private providers should be offered the opportunity to join the National Health Insurance system.

7. All provider payment mechanisms should be considered for use with capitation being the preferred option.  (Capitation is a provider payment mechanism in which providers are regularly paid a stipulated amount per person for whom they agree to provide services during a defined period of time.)

8. A percentage of revenues should be set aside for purposes that ensure the stability of National Health Insurance.

The present system in The Bahamas, which employed persons contribute to, is a form of social security.  Our health system includes tax-funded care through government hospitals and clinics, and private care funded by direct user fees or private insurers.  The incentives that exist include pension, invalidity assistance, medical incentives, maternity benefits, some income replacement, temporary and permanent disability benefits, and health coverage for occupational injuries.  Basically, social health insurance currently exists only through the industrial injury component of NIB.

Recently, the present government implemented the National Prescription Drug Plan to assist some Bahamian residents, particularly the elderly and children under the age of 18 years.  It is estimated that the cost of this program is currently running around $5 million; a figure which we expect to only increase in the future.

Healthcare costs are one of the more vexing and challenging issues facing countries today and according to the latest information on the subject, average cost in the last five years increased annually by more than 10 percent.  With rapidly aging populations and the rising costs of modern medical technology, governments everywhere are finding it increasingly difficult to provide the funds required to meet healthcare needs of their respective populations.  Given that position, we would hope that before any decision is made to move forward with universal health coverage, the authorities would prepare a detailed cost analysis to use as a guide.  To do otherwise, we run the risk of committing to something which could surely place The Bahamas on an irreversible path to economic poverty.

Prior to 2008, it was estimated that only 51 percent of Bahamians had private health insurance.  Today, given the challenging global economic environment, the impact on the local economy and increasing levels of unemployment, we estimate that number at around 40 percent based on the increasing payouts by insurance companies.  For some, private insurance has become too expensive; persons in the lower income bracket and those living on the Family Islands are now less likely to have insurance coverage.

There are a number of questions that need answers.  How much will this plan cost?  (Back in 2004 estimates were pegged around $200 million-plus, which we felt were too low at that time).  Who will pay for those who cannot afford to pay?  What will be the impact on the private insurance industry?  What impact will it have on the fiscal deficit?  (This should be of particular relevance to future generations).

Concerns remain

Historically, the Bahamian government has been a principal source of financing environmental and healthcare expenses for citizens of The Bahamas with an annual expenditure of over $267 million in the 2011/2012 budget or nearly 16 percent of total recurrent expenses which computes to almost four percent of the country revised GDP (another story for another day).

It is estimated that the private insurance companies spent nearly $230 million in 2011, which gives us a total healthcare expenditure bill of nearly $435 million or 5.4 percent of the revised GDP.  In the 2004/2005 fiscal budget, the government allocated approximately $187 million for health expenditure.  In 2004/2005 it was estimated that healthcare expenditure stood at approximately $340 million or 7.10 percent of GDP, of which $70 million was spent by the people, $102 million spent through private health insurance, and the rest by the government.  In comparison, in 1985, total public expenditure amounted to approximately $56 million or only 2.70 percent of GDP.

It is our view, based on historical cost data and future projections, that the cost of a national healthcare plan going forward would be in the region of $500 million to $750 million; equivalent to nearly half of our recurrent expenditure and as such, would not leave much room for other important infrastructure projects.

We generally agree with the conclusion of the commission’s report that a social health insurance system for The Bahamas would provide more equity in access to healthcare, more stable funding of public health costs, and fewer ‘free riders’, or people who benefit without contributing.  Setting up such a national healthcare system involves more than just taxing the people but will require legislation and the creation of responsible bodies.

Two critical issues are ensuring compliance and public accountability.  We are also mindful, however, that there are those who have little faith in governments operating such healthcare initiatives due to a propensity for such operations to become instruments of political patronage and the widely shared view that government institutions are relatively poorly managed.  In the last analysis, we believe that the scheme would only work efficiently if, and only if, there are proper checks and balances in place especially to ensure that the pool of money goes in to a segregated fund for health and health alone.

•CFAL is a sister company of The Nassau Guardian under the AF Holdings Ltd. umbrella. CFAL provides investment management, research, brokerage and pension services. For comments, please contact CFAL at:

Mar 07, 2012