Health Insurance In The Bahamas - Report / Part II

In our last News Bulletin we started to examine the report commissioned by The Nassau Institute, "Health Insurance In The Bahamas" prepared by Nadeem Esmail, Director, Health System Performance Studies, The Fraser Institute of Canada.

We reported the shocking fact revealed by the report that health care in The Bahamas is currently more costly than any of the world's most developed nations except for the United States. The report also revealed the frightening fact that although our health care costs are very high; our quality of health care is very poor as can be seen by a comparison of preventable deaths in select developed countries. The Bahamas has a mortality rate that is 70% higher than the average mortality in those other countries.

The report of the Blue Ribbon Commission (BRC) on National Health Insurance (NHI) was not ignorant of these facts. As reported in our News Bulletin of the 24th of July, 2006, the Blue Ribbon Commission report stated, "The current cost of providing health care services in the public sector must be reduced before a NHI system can be successfully implemented. The principle reasons for the high cost of services are a lack of systematic resource allocation and low productivity and efficiency. Improvements must be made in these areas to ensure the feasibility of a NHI system."

Government's apparent headlong rush to implement NHI without laying the proper foundation by making the improvements that "must" be made "to ensure the feasibility" of the system is like the man who builds his house upon the sand.

In continuing to examine the "Health Insurance In The Bahamas" report, it is stated by Mr. Esmail that the verbatim implementation of the BRC's NHI system would produce a substandard health care system whose cost would far exceed what is necessary.

The level of benefits proposed by the BRC is as generous as programs in developed countries which raise concerns, such as how the access to new and expensive medical technologies will be handled. The world's most developed nations are struggling with the implementation of newer technologies in their health care programs because of the price tag associated with these technologies. The BRC's proposals to control or limit the introduction of new medical technologies, which provide better health outcomes and more comfortable treatment for patients, does not deal with the matter in an optimal manner.

Another concern is the BRC's proposal to contain costs by employing gatekeepers who would control access to specialist treatment. The requirement that primary care physicians must first see the patient in order to make a referral to a specialist in theory reduces the use of high cost specialists, however in practice this requirement has been found to be strongly correlated with the existence of waiting lists in European countries.

A further concern is the BRC recommendation that access to high technology services be available only on referral per defined criteria. This means that those who decide who can and cannot receive high tech medical services is not necessarily the patient needing the treatment or the physician who would otherwise prescribe the treatment.

As for the proposed funding of NHI based on income rated premiums, the report states that the impact to The Bahamas will be similar to a new tax on economic activity. The concern was also raised on the affordability of NHI in the long term as the Bahamian population ages. This will have the effect of increasing costs because of the well known relationship of higher health care costs for older populations. These economic concerns must be contrasted with the fact that The Bahamas is a small economy with little diversity and is therefore more susceptible to external economic shocks than most other nations.

Nadeem Esmail's report states that the ultimate goal of any health care reform should include the formation of a system in which the populations health is improved, people have access to medical services when they need them, consumers control their own health care decisions, and there is accountability by both providers and consumers for the (supply and) use of health care services. The report makes several recommendations to ensure cost effectiveness and quality in a Bahamian National Health Insurance program.

     Privatization of Hospitals, Clinics and Other Health Care Activities/Services
Mr. Esmail recommends that hospitals, clinics and other health care activities and services be privatized. When we look at the high cost and low quality of the essential services of electricity, telecommunications, and water & sewerage currently provided by government most Bahamians would quickly agree with this recommendation.

His report asserts that there is a substantial quantity of literature on the relationship between private verses public ownership for both medical institutions and businesses in general that shows distinct efficiency advantages in private ownership. In addition, private health care providers have the incentive to increase efficiency and provide a higher level of care in order to attract more patients, which ends up enhancing care for all patients, including the very poor. Evidence from the United Kingdom has shown that the lower socio-economic classes benefited the most from private sector involvement in hospital care provision. However, the report does warn that the privatization of hospitals, primary care facilities, and other services cannot be done without the introduction of competition, otherwise the incentives to improve both cost performance and quality will be lost.

     Other Government Health Activities Subject to Competitive Bidding
The report recommends that other government activities related to the health sector should be subjected to a competitive bidding process where private sector and public sector bidders are treated equally. The benefits of outsourcing government activities have been well documented in academic studies. In general the outsourcing of activities reduces cost of services and results in either the same or higher level of quality. It was noted that competitive bidding can improve the efficiency of service whether the provider chosen through a fair and unbiased process is publicly or privately owned. The key to improving service is the involvement of the private sector in a competitive process.

     Accreditation/Certification Should be Handled by a Private Third Party
The report recommends that accreditation/certification of facilities and caregivers should be handled by a private third party. The BRC's recommendation that the Ministry of Health accredit all health care providers would create a serious conflict of interest as the Ministry would ultimately be managing NHI by purchasing and providing health care through those it is regulating and accrediting. With power over all aspects of the health care system, this one Ministry would be able to restrict entry, control pricing and types of goods and services offered thereby limiting the freedom of choice and quality of care available to patients and their physicians.

The certification of practitioners and facilities should be maintained by independent third parties which could be any of several licensing bodies in Canada, the United States, Europe, or independent quality certification organizations that practice in these regions. Certification by an independent, reputable and preferably offshore third party would provide the quality signal desired by the BRC and likely by many Bahamians, while a lack of local oversight over the certification process would ensure that harmful political intervention would be constrained.

     Hospital Care Should be Funded Fee-For-Service or a Case Payment System
The report recommends that hospital and facility care should be funded using a prospective fee-for-service or case payment system. Budgetary allocation systems and capitation payments allow governments to exercise control over hospital expenditures, however such methods result in fewer services at a lower standard of care because they disconnect funding from the provision of services to patients. A prospective fee-for-service payment system would create powerful incentives to deliver a greater quantity and quality of services without leading to dramatic cost increases.

This method of funding is one in which the service provider is paid a fee for each individual treated, based on the expected costs of treating the diagnosis of the patient at the time of admission. It creates incentives for hospitals to treat more patients and to provide the types of services that patients desire. It also facilitates the introduction of competition into the hospital sector because the cost of performing procedures is clearly identified.

The final installment of our examination of the report "Health Insurance In The Bahamas" prepared by Nadeem Esmail of the Fraser Institute will be included in our next News Bulletin. Download the full report that contains a lot more detail at BECon's website or the Nassau Institute's website, www.nassauinstitute.org.

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