National Healthcare Status Report

First Published: 2007-06-22

On August 1, 2006 the Nassau Institute presented to the Bahamian Government an "Analysis" of the Blue Ribbon Commission (BRC) Report on National Health Insurance written by Nadeem Esmail, Director of Health System Performance Studies of the Fraser Institute. Its full text is available by clicking here. The Act was passed by Parliament in November 2006.

The Analysis is being published in Canada by the Fraser Institute; and it is in this connection that the following "peer review" was solicited.

The 64-page "Analysis" by Mr. Nadeem Esmail presents several major policy recommendations –

1. The Bahamian pursuit of universal access health insurance is neither revolutionary nor unique; and it is occurring at a time when there is substantial evidence on how to best structure a healthcare program, evidence gleaned from over 50-years of experience elsewhere.

2. The present Bahamian healthcare system is costly and delivers relatively good access to treatment. But the quality of that treatment is below what might be reasonably expected for the country's level of income, health expenditure, and access to care.

3. The BRC's proposal, if implemented verbatim, would create a substandard health care program whose cost would far exceed what is necessary to deliver a desirable level of quality medical care and access to it.

4. The cost of NHI is likely to be far higher than that shown in the Government's estimate of initial costs; and the program is likely to be unsustainable in the long run. With regard to the latter, the Government provided neither a long-term forecast nor an evaluation of those factors that affect the long-term trend in healthcare costs.

5. The Bahamas would be best served by the privatization of hospitals and other health related activities, and the introduction of patient/government cost sharing for services delivered by the current taxpayer-funded health program.

The greatest value of the Esmail Analysis was and is its authoritative, detailed and documented analysis of the issues that support these policy conclusions.

Reimbursing Physicians.

For instance, one such issue is the "The Capitation Method vs. the Fee-for-service technique for reimbursing physician services."

The BRC "prefers the capitation option in which physicians are regularly paid a stipulated amount per insured person for whom they provide services." The BRC defends its choice based on the direct control of expenditures it provides and the alleged deficiencies of the Fee-for-service alternative. They list the complexity, the required changes in "practice and culture" and the likely "supplier (physician)-induced-demand".

Nadeem Esmail devotes six pages to a discussion of this subject that includes the citation of 23 separate studies. One study concludes that "The literature suggests that demand inducement may occur in the market for surgical services but its extent is less than previously estimated. Little evidence for demand inducement is found in the primary care physician market." Another concludes that when patient must pay "out-of-pocket" for some portion or all of the medical services purchased, it is "harder for physicians to induce demand."

Mr. Esmail concluded that the capitation alternative is "ill-advised"; and the NHI Implementation Project commented that it would examine "other payment systems to find the most appropriate."

Block Grants, Prospective-fee-for-services, etc.

The BRC proposed the Government pay hospitals based on a budgetary allocation or "block grant" system where the amount is based on a per capita allocation. The rationale for the system is that it provides a direct means of controlling costs.

In practice it results, according to the Analysis, in "fewer services and a lower standard of care for patients." He cited the Swedish experience where the county councils that moved to "an out-put reimbursement system" became more efficient than those that did not. The cost savings was estimated at 13 percent. "The Stockholm county council experienced an 8 percent increase in inpatient care, a 50 percent increase in day surgeries, and a 15 percent increase in outpatient visits…an 11 percent increase in activity overall." The Analysis cites similar specific experience in Italy, Denmark and Australia.

The Analysis approached other issues in a similar manner. Two of these were –

* Adverse Selection, the potential negative consequences resulting from "an asymmetry in information where purchasers of insurance…know their own likelihood of needing the insurance and the insurance providers…do not."

* Moral Hazard, the tendency for "insured patients to demand more services than they would in the absence of insurance because the marginal cost of care to them is lower than if they did not have insurance."

The NHI Implementation Project responded in a statement dated September 19, 2006. The NHI Response found the Analysis "to be quite incisive and comprehensive as it blends empirical data, theoretical constructs and policy models in its analysis of the NHI proposals." And…it recognized that this was useful and would cause "a re-examination of some NHI proposals as well as re-enforcement of others."

However, it criticized Mr. Esmail's Analysis for its consistent emphasis on economic efficiency and cost containment and the recommended use of a "minimally-regulated competitive healthcare market." Furthermore, it ascribed to Mr. Esmail the conclusion that "the country (the Bahamas) cannot afford an aging population." This is an unfortunate misstatement of fact.

The principal analytical problem for the NHI Project was its apparent failure to understand or to deal with what is going with healthcare programs everywhere. It states that there is no clear reason why the 55-years of experience of the developed world should "ultimately guide" NHI development. From a public policy point of view this is irresponsible and indefensible especially when the NHI Response does not identify the techniques that would avoid a healthcare financing crisis.

The NHI Act and the NHI Response evidences a clear bias toward the politics and policies of 55-years ago and an unwillingness to deal with the economic realities of today. This can be seen in the introduction of the National Health Insurance Act 2006 to Parliament. The Prime Minister employed the same rhetoric as that used in 1948 by the Labour Government when it introduced the UK's National Health Services Act. There was no recognition that times have changed as is clearly the case with the UK's Health Services.

The NHI Act was enacted in the Bahamian Parliament with the support of both political parties. In the national elections of May 2007 the PLP was voted out of office after serving one 5-year term. Although the FNM declared its intent to implement the NHI Act during the campaign, the initial comments of the new Minister of Health suggest a different tack. Hopefully, the Minister will refer to the Analysis of Mr. Nadeem Esmail as he proceeds.

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