Bahamian healthcare costliest in world

First Published: 2006-08-25

On January 31st 2004 the Blue Ribbon Commission on National Health Insurance (the "BRC") delivered its proposed plan to the Prime Minister. The initial implementation of this plan may begin shortly.

In this connection the Nassau Institute commissioned Mr. Nadeem Esmail, Director of Health System Performance Studies, Fraser Institute of Canada, to analyze the BRC plan. This is appropriate since Canada has had a universal access, publicly funded healthcare system for 45 years; and the Fraser Institute is a leading independent authority analyzing the effectiveness of such systems.

Mr. Esmail's final report was released by the Institute on the Internet (See nassauinstitute.com) and shortly will be formally presented to the Prime Minister.

It is authoritative and merits his attention.

Costly care.

For starters, the Prime Minister should recognize that Bahamian healthcare is one of the costliest in the world.

To get a perspective on healthcare spending, one looks at such spending as a share of total spending with the Gross National Product of the country used as "total spending." This is the method employed by the BRC and is shown above in the line titled "Unadjusted". The Bahamas spends 6.9% of its GNP on healthcare versus 13.8% for the U.S.

But that comparison is not valid…those two numbers do not tell the whole story because the populations differ in their average age. The BRC shows how the Bahamian population has aged and is expected to age for the years 1970 through 2060. Today the Bahamas has a young population.

But with time it will become an older population; and it will spend more on healthcare. Such expenditures are closely related to age…ones healthcare spending rises as one ages.

Therefore, if one compares healthcare expenditures between countries, one should put them on the same basis; one should age-adjust them as is done on line two in the table.

• On an "age-adjusted" basis the expenditures of both the Bahamas and the U.S. are 14.9% of GDP. Both share the title of "Biggest Spender" and

• Bahamian spending is 32% greater than Canada and 54% greater than the U.K. Both have universal access, publicly funded national healthcare systems and…significantly…both have funding and "patient access to care" problems.

A high health cost nation.

To readers of the BRC report this is not a surprise since the BRC itself repeatedly notes the present "inefficiencies."

• "The cost of services in the public health care sector is higher than it should be and is related to inefficiencies in the health care institutions.

• "The NIB recently completed a number of studies on its operational efficiency and effectiveness; [they] show that the NIB is overstaffed by approximately 25% and that it needs to significantly improve its management processes.

• "The NIB is currently operating with approximately 17% administrative overheads.

• A NHI system will not be feasible with that high an administrative burden. The cost of administering should be less than 10% of the income to the system. The 1984 Working Party's analyses of the NHI system suggested that administrative costs should not exceed 9% in the private sector and 5% in the public sector."

A high operating cost nation.

Readers of the IMF Consultations with the Bahamian Government may remember the 2003 report that noted the loss of market share to other Caribbean destinations.

The IMF cited "a private sector study" that estimated that operating costs are 20 and 185 percent higher, respectively, in the Bahamas compared to similar hotels in the Caribbean and North America, while gross operating profits are between one half and one third lower." That "private sector study" was the April 2003 report of the Tourism Task Force on Trade Liberalization.

This suggests that many of the cost problems that are experienced by the healthcare industry also affect the tourism industry.

Conclusions.

The bottom line is that both the specific and differing cost problems of the public healthcare and the private tourism industries suggest the country should –

• Not embark on the National Healthcare Plan until it has demonstrated concrete achievement in eliminating the inefficiencies enumerated in the BRC report.

• Evaluate the impact of the Plan on tourism.

• Evaluate the numerous suggestions proposed by Nadeem Esmail to lower the cost of the BRC proposal.

Quite frankly, this is what any experienced and prudent businessman would suggest.

The Nassau Institute

Help support The Nassau Institute