Health Insurance In The Bahamas - Report / Part III

The last two BECon News Bulletins were Parts I and II of our examination of 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. This News Bulletin completes our examination of the report with Part III continuing with the remaining recommendations made in the report to ensure cost effectiveness and quality in a Bahamian National Health Insurance (NHI) program.

     Physician Care Should be Funded Fee-For-Service
The report recommends that physician care outside of hospitals should be funded fee-for-service. The best remuneration systems are those that are output based. Physicians receiving salaries and capitation payments, unless well supervised, will tend towards less output because their pay is not dependent on the quality or quantity of services provided. Fee-for-service payment schemes, or some mixed payment scheme that has a significant output-based component, are clearly the superior choice for remuneration in terms of the quantity, and possibly the quality, of care provided. Opting for a payment scheme that is not based principally on fee-for-service serves to reduce the cost-effectiveness of the NHI program. Costs would either rise to maintain services, or service provision would fall to maintain cost.

     Patients to Share in Cost of NHI Funded Services They Consume
The report recommends that patients must be required to share in the cost of NHI funded services they consume through either co-payments or deductibles. Low income populations should be exempt from this requirement. When individuals do not face any direct charges for health care at the point of service, they have no incentive to restrain their use of health care. Such a situation can produce excessive demand for care and result in wasted resources, to the extent that the costs of producing these services exceed what individuals would be willing to pay for them. Co-insurance, deductibles, and co-payments can increase efficiency in the health delivery sector and reduce costs, and can reduce the burden on those funding the NHI program because they redirect health care financing from payers to users. Since cost sharing can have an adverse effect on the health of the poor and the sick poor, these and certain other groups should be exempted from such a program.

     NHI Should be Provided by Both Public and Private Insurance Companies
The report recommends that NHI should be provided by both public and private insurance companies in a competitive marketplace. Bahamians should be required to purchase insurance by law, while those who cannot afford insurance should be given vouchers to purchase insurance from the provider of their choice. NHI insurance providers should also be permitted to offer a multitude of insurance options and not be regulated to the extent that consumer sovereignty or insurance plan flexibility is needlessly restricted.

A system of competitive social insurers has a number of benefits over a single government insurer model where premiums are levied in a manner which mirrors an income tax. Principally, this system is less likely to suffer from politically motivated intervention and is more accountable to citizens than a system directly managed by government, as independent bodies collect the insurance payments and disperse the funds for health services. Some tax financing may still be required however to provide coverage for the poor, the unemployed, and possibly the elderly. Additionally, the freedom to choose among insurers generates efficiencies in the health care system as a result of competition and the possibility of varying cost-sharing schemes and benefits that allow lower insurance costs for those willing to pay more out of pocket.

Although the Blue Ribbon Commission (BRC) recommended that the National Insurance Board (NIB) administer the NHI plan, it noted that NIB was overstaffed by 25% and its administrative overheads were 17%, while the cost of administering the NHI system should be less than 10%. The BRC concluded that NHI would not be feasible with that high an administrative burden and stated that NIB needed to improve its management processes, and that this improvement should be done prior to implementation of NHI.

Since the publication of the BRC's report in January of 2004, the administrative costs of NIB have increased to a high of 23% for the 2004/2005 fiscal year, and although it came down to 20% for the 2005/2006 fiscal year, this amount is still higher than the 17% cost reported by the BRC and is double the cost needed to be "feasible" according to their report.

Mr. Esmail reported that a vast literature and body of evidence exists showing that governments and government business enterprises (such as NIB) tend to be inefficient service providers compared to market equivalents. He also reported that private provision of health insurance and services within a National Health Insurance structure is not unheard of as this is the model employed in Switzerland.

     A Private Health Care Sector Must Continue to Exist
The report recommends that a private parallel health care sector must continue to exist and should be subject to a bare minimum of regulation. A parallel private health care sector gives individuals effective choice in the health care they receive. Without effective choice, health care delivery becomes a common, uncontested standard, leaving patients in a situation where they cannot protest for better quality by choosing to purchase health services from a different provider. It also allows individuals to seek care that the NHI program is either unable or unwilling to provide.

Private health insurance provides citizens with quick access to care when needed in return for a regular premium payment prior to the onset of a condition. Insurance also allows those who might prefer to do so, to pay an anticipated and fixed premium over time for access to private care, rather than pay the higher and less predictable cost for private care when they wish to receive it (even if they can afford to do so). Thus, private health insurance creates opportunities for those in lower income groups and allows people to tailor their expenditures to their own preferences.

Restrictions on or regulation of private health care and private health insurance are not benign. Regulation of services and prices can dampen the incentives for innovation and the introduction of greater choice through differentiated product offerings. Such regulation can also drive up the costs of health care services as competition stagnates and the incentive to decrease prices as a result of efficiency and innovation is virtually eliminated by a government determined rate. A private health sector, when introduced alongside a universal insurance scheme or even when acting as the sole provider of health services, must be allowed the flexibility to compete over the price and quality of services freely through the introduction of more innovative and effective forms of treatment and insurance cover.

     Conclusion
The Nassau Institute has done a great service to The Bahamas and its people by commissioning the report, "Health Insurance In The Bahamas", authored by an expert on National Health Insurance systems, Nadeem Esmail, Director of Health System Performance Studies and Manager of the Alberta Policy Research Centre at the Fraser Institute of Canada.

Mr. Esmail's report contains a wealth of information not covered in this three part examination, such as Insurance and Adverse Selection, Supplier-Induced Demand, and a section on The Developed World's Most Successful Health Care Models. All Bahamians are invited to download and read the complete report from the websites of the Bahamas Employers Confederation or The Nassau Institute.

Wanted - Feedback on National Health Insurance

Your feedback is important to us. The Bahamas Employers Confederation now has a National Health Insurance Feedback Page on its website where you can make comments, ask questions, express concerns or make suggestions on the government's proposed National Health Insurance plan for The Bahamas.

The only required field on the webform is the 'Name' field, but if you want to send your feedback anonymously merely type your name as "Anonymous", or simply "Anon". Providing your email address is optional, however if you decide not to supply your email address we will not be able to contact you.

The Bahamas Employers Confederation respects your privacy and will protect it. BECon will not use any information submitted as feedback on the proposed National Health Insurance plan in such a way that the source of the information might become known without the express permission of the person supplying the information.

Note: BECon's feedback page has been removed as the The National Coalition For Health Care Reform has its own website.

Previous Bulletin  ||  2006 & 2007 Index  ||  Next Bulletin

Home  ||  About  ||  Newsletters  ||  Documents  ||  Links  ||  Contact  ||  Site Map