Sustainable financing of healthcare

This year has seen careful discussion and comprehensive research with regard to this very significant issue.

There is a general consensus among socio-economic analysts that to achieve universal health coverage a country needs a healthcare system that provides equitable access to high quality health care requiring sustainable financing over the long term. Consequently, it is being reiterated that publicly provided health care should be on the basis of need- a citizen’s entitlement for all- regardless of individual available means. This approach has been supported because of evolving inequities related to this sector.

It may be noted that the recent past has seen healthcare trending towards a two-tier system – a perceived higher quality private sector, and lower quality public services facilities. One typical consequence is medical doctors, especially specialists, leaving public service for much more lucrative private practice. This is happening also here in Bangladesh, India, Thailand, Malaysia and Singapore. This has had its own consequence. This indirect ‘brain drain’ has led to longer waiting times and complaints of deteriorating public service quality, as more people with means are now turning towards private sector facilities.

As costs in private hospitals are high and increasing, this causes those who can afford private health insurance to turn to it to hedge their bets. This is slowly creating a different format for health insurance potential as has been seen particularly in India- evidenced through advertisement in both their electronic as well as their print media. This evolving scenario will not be good for the different tiers of the population. If these trends are not checked, the gap between private and public health sectors in terms of charges and quality will grow, increasing polarization in terms of access to quality health care between haves and have-nots.

This situation raises the question of taking health care financing more seriously. We have to remember that financing arrangements are key to developing an equitable healthcare system that is financially sustainable in the long run. Consequently, for equitable access, health financing should be based on social solidarity through cross-subsidization, with the healthy financing the ill, and the rich subsidizing the poor. Such a format will then assist in better providing healthcare. This will also assist in containing spiraling costs of required medicines and necessary access to pathological testing and evaluations by limiting investigations and treatments.

We need to at this point also turn carefully towards the paradigm of private health insurance. We need in this context to remember that there are certain difficulties related to voluntary private health insurance (PHI) schemes. Many consider this dimension as not being financially viable in the long term- as individuals with lower health risks are less likely to buy insurance from a scheme which they see as primarily benefiting others less healthy.  It is, as such, suggested that voluntary schemes also need government support. Public expenditure is needed to insure the poor, especially those with prior health conditions. Achieving Universal Health Care might require costly public subsidization of such arrangements but these need to be done for equitable reasons.

Such a measure will then, in all probability, create greater degree of understanding and flexibility within companies offering PHI.  This will also be useful in terms of premium for the risk-rated- meaning individuals with pre-existing conditions and higher risks – such as the elderly, or those with family histories of illness. They might not then face un-affordably high premiums or be denied coverage.

In this context many health analysts have noted that voluntary PHI schemes charge high premiums while fee-for-service payments escalate costs which inevitably raise premiums. In this regard they have drawn attention to the US which spends the most on health in the world, but with surprisingly modest health outcomes to show for it.

At this juncture one needs to carefully study also the various parameters of social health insurance (SHI) which is usually mandatory to cover the entire population. In this regard, medical experts have mentioned that such a step would be facilitated through collection of an additional ‘payroll tax’ from the public. This will have to be structured carefully so that it does not end in creating more problems (through lowering income) than answers. This will also require, as evidenced in Germany, strong and accountable bureaucratic administrative controls. It may also be added that Germany and some other European countries with successful SHI have been moving to greater revenue funding of healthcare as formal employment and unionization decline with changing labour arrangements.

There is however another existing problem within the SHI dimensions. It is difficult to collect premiums from the self-employed or the casual and informal workers who do not have regular payrolls. It needs to be understood that universal coverage will be difficult to achieve without including them.  However, one also needs to remember that inherited revenue-based healthcare financing is basically sound and should not be replaced due to other healthcare system problems.

In most societies, revenue-sourced healthcare financing can be retained, reinforced and improved by:  (a) increasing government health care allocations, (b) reducing ‘leakages’ by eliminating waste, corruption, ‘cronyism’, etc., (c) promoting ‘developmental governance’ and competitive bidding, and (d)  raising government revenue, especially from more progressive taxation, on wealth and on activities worsening health risks through tobacco consumption.

We need to understand that revenue-financing also has another positive denotation. It will help to avoid many administrative costs incurred by PHI and SHI. There will be less need for a system which requires more staff to register, track and pay SHI contributors and beneficiaries. This has led many economic analysts to observe that compared to PHI, SHI might be difficult to achieve for countries with weak or non-existent public healthcare systems. Some, in this regard have also mentioned that “moving from revenue-financing to SHI would be a step backwards in terms of both equity and cost-effectiveness”.

There is however another side to this dimension. As SHI effectively imposes a payroll tax, it might discourage employers from hiring employees with ‘proper’ labour contracts. Hence, SHI, it has been estimated, from experience of some European countries might have actually reduced formal contracts by 8-10 per cent and total employment by 5-6 per cent in these rich countries.

It needs to be also observed that the National Health Service system in the United Kingdom and in Canada has demonstrated that progressive tax-funded public health systems are sometimes more equitable, cost effective and beneficial than SHI. This has been found to be so in the case of  breast or cervical cancer screening.

However one aspect is now generally agreed to during this time of the pandemic that there is dire need pertaining to the improvement or development of a revenue-funded healthcare system, with additional resources deployed to expand and enhance primary health care, and better service conditions for medical personnel.

Strengthening public healthcare services can do much, not only to improve staff work conditions, but also morale and pride in their activities as frontline workers.

The writer, a former ambassador, is an analyst specialized in foreign affairs, right to information and good governance.