7 Questions the Blue Ribbon Commission on NHI should consider

First Published: 2006-02-11

The Nassau Institute has consulted with Mr. Nadeem Esmail of the Fraser Institute who has reviewed the Blue Ribbon Commission's report and recommendations for National Health Insurance for The Bahamas.

Mr. Esmail as a health economist is familiar with various systems in many countries. He has drawn our attention to important questions that must be considered before introducing NHI to The Bahamas.

SUSTAINABILITY

All indications are that health expenditures in large, developed nations are growing significantly faster than their overall economies. Most of these nations are struggling with the affordability of health care in general, and the affordability of newer technologies in particular.

QUESTION # 1: Why then should we believe that a NHI program would be sustainable in the Bahamas?

General Affordability Considerations

– The average growth rate of total health expenditures in OECD nations (excluding Turkey) between 1995 and 2003, adjusted for inflation, was 4.5%1

– The average growth rate in health expenditures per capita for these nations, over the same time period and adjusted for inflation, was 4.0%1

– These large, well diversified, and fully developed nations' economies grew at an average rate of 3.1% after accounting for inflation (2.9% per capita).1

– By contrast, the Bahamas economy, which is a small economy based largely on financial services and tourism, experienced an average growth rate (inflation-adjusted) of just 2.9%, and actually contracted by 2.0% in 2001.2

– More alarmingly, the average growth rate of real GDP between 1995 and 2002 per capita was just 1.1% (the contraction in 2001 was 3.5% per capita).2

Dealing with the cost of new technology (diagnostic, surgical, and pharmaceutical).

– New technologies can be remarkably expensive but can and do provide better health outcomes and more comfortable treatment for patients. All of the developed nations of the world are struggling with the implementation of newer technologies in their universal health programs:

– The UK has implemented the NICE program, which sets treatment guidelines that can restrict access to newer drugs and other services.

– Canada has traditionally underinvested in high-tech diagnostic and surgical services, and has a drawn out formulary listing process that restricts access to new pharmaceuticals

– Some nations and the Canadian Province of British Columbia (3) have opted for reference drug models, where only the lowest cost drug in a broadly defined therapeutic class (which can include drugs for a number of different conditions) is funded publicly. This automatically restricts access to newer and more expensive pharmaceuticals for those who cannot afford to pay for them.

QUESTION #2: How will the Bahamas NHI program RATION access to expensive new medical technologies

Dealing with an ageing population

– While an NHI program may appear to be affordable in the short term for a relatively young nation, over the longer term, according to the Blue Ribbon Commission's report, the Bahamas population will age and the proportion of individuals over age 65 will increase. This will have the effect of increasing the cost of health care services for the total population, not just in primary care settings but also in secondary and tertiary care settings as those over age 65 require more services to maintain their health than those below age 65.

QUESTION #3: How will the NHI program deal with this inevitable cost increase?

A new income-rated premium?

– A new mandatory premium for health care, which increases with income, will have an impact that is not dissimilar from a new tax on economic activity.4

QUESTION #4: What is the economic cost of this new premium?

A reduction in economic growth that will result from the introduction of a new mandatory premium will make health care less affordable in the long run.

IMMIGRATION

– An NHI program that provides free health coverage for low-income residents might attract more low-income immigrants, or ill immigrants who require expensive treatment, from nations where NHI programs are non-existent or very limited in scope. This could have financial implications for the NHI program as well as other implications for the economy as a whole (there are both costs and benefits to immigration).

QUESTION #5: Have these inevitabilities been considered, and what is the plan to deal with such attraction of individuals from other nations?

– Allowing illegal immigrants free emergency care, proposed on page 18 of the report, might result in foreigners in need of high cost services coming to the Bahamas illegally for treatment in the emergency room.

QUESTION #6: How will these costs be handled by the Bahamas government? Also, how will illegal immigrants be charged for non-emergency services delivered through the emergency room?

PAYING FOR HOSPITAL CARE

– The Blue Ribbon Commission report recommends funding care providers through capitation payments on an annual basis. However, this can lead to over-registering and under servicing of patients. Such under servicing could mean long waiting times for medically necessary services, lack of access to primary care clinics outside of business hours, and a lack of investment in infrastructure/high tech medicines.

QUESTION #7: Why does the Blue Ribbon Commission feel it necessary to go to a capitation funding model when output-based remuneration models have proven themselves superior?

1 OECD Health Data, 2005 (CD-ROM)

2 World Bank. World Development Indicators, 2005 (CD-ROM)

3 British Columbia's Reference Drug Program (RDP) uses five therapeutic classes: nitrates (for angina); ACE inhibitors (for heart-related conditions); some calcium channel blockers (CCBs, also for heart-related conditions); histamine-2 receptor antagonists (H2RAs, used to treat certain stomach-related complaints, such as heartburn); and non-steroidal anti-inflammatory drugs (NSAIDs) for arthritis (Graham, 2002).

4 For a general overview of how taxes impact incentives see Clemens, Jason, and Niels Veldhuis (2005), Submission to The Saskatchewan Business Tax Review Committee.

Click this link for more information on Mr. Esmail.

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