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Healthcare Finance, Not Insurance Premiums – Global Issues
KUALA LUMPUR, Malaysia, June 26 (IPS) – A comparative survey on healthcare financing options shows that revenue-funded healthcare is the most cost-effective, efficient and equitable, while all health insurance imposes avoidable additional costs .
Jomo Kwame SundaramPrivate health insurance Rejecting the private health insurance option is easy due to the well-known problems in the US. Risk sharing is limited, as private insurance covers only those who can afford it.
The resulting problems of “moral hazard” and “cherry picking” reflect the public’s weak bargaining power vis-à-vis healthcare providers and insurance companies.
Per capita healthcare spending in the US is the highest, in part due to the additional costs of private health insurance. The share of US national income spent on healthcare has increased to 18%!
These avoidable insurance management costs are quite high, averaging almost 4% more. Consequently, upward pressures on costs remain intense.
However, despite spending so much, it only ranks 40th in terms of average life expectancy worldwide. Its other health indicators also leave a lot to be desired.
Thus, greater spending does not necessarily improve health outcomes, and spending more on insurance does not improve health.
Revenue financing
Thus, the main options for financing health care are social health insurance (SHI) and revenue financing, which allows risk sharing for entire national populations.
After analyzing extensive evidence, Adam Wagstaff of the World Bank concluded that revenue financing is much more cost-effective, efficient and less expensive than insurance options.
Germany, the only major OECD country heavily dependent on the SHI, is second only to the US in per capita healthcare expenditure, largely due to insurance administration costs.
With insurance premium revenues increasingly inadequate, the government finances the widening funding gap. Instead of being a healthcare financing option for the future, it should be recognized as an atavism, even for highly unionized Germany.
Social health insurance
Proponents of SHI insist it is necessary due to inadequate fiscal means. But budget deficits imply a lack of political will. SHI’s claims of raising more money are wildly exaggerated.
SHI premiums are effectively fixed or pro-rata taxes, making the overall tax incidence more regressive. SHI funding is inadequate everywhere and is under increasing pressure due to aging societies.
Most governments say they are committed to inclusion and equitable access, but the SHI would undermine stated national commitments to the WHO’s “health care for all” and the UN SDGs’ “universal health care.”
In addition to betraying these commitments, SHI cannot guarantee the necessary financing or financial sustainability. Any realistic government should recognize that SHI will be politically unpopular.
The costs and dangers of SHI, including the perverse incentives involved, are rarely recognized. Employers minimized their SHI responsibilities by providing employment contracts. Instead of employing workers directly, they hire indirectly, using various contract labor agreements.
Priorities?
The typical emphasis on curative health services has also worsened health outcomes by neglecting vital public health programs. By emphasizing curative services, many causes of health problems do not receive enough attention.
Many preventive and public health problems remain neglected and underfunded. Most governments need to spend more on prevention, especially to address largely preventable noncommunicable diseases (NCDs).
The world needs much better financing for health. Several complementary reforms are also needed. Instead, poorly planned and poorly sequenced reforms have been the norm in recent decades.
The resulting ‘non-system’ provides poor, weak and ineffective incentives for the provision of public and preventive healthcare. Meanwhile, potentially profitable segments were privatized or outsourced, often to incompetent political cronies.
The UK’s NHS capitation system has successfully transformed incentives for doctors. Instead of prioritising patient payments, UK doctors are incentivised to ensure the wellbeing of the people in their care.
Recognize market failures
Former UK Conservative Party adviser and “non-interventionist market economist”, Professor Geoffrey Williams, rejects “any intervention… in almost all areas of economic activity, but not in health, because health is essentially where markets fail.
“That’s why we use healthcare more often than any other example when we teach about market failures, particularly insurance market failures. We know that healthcare markets fail, and that we can’t find market solutions to these market failures as we could for other forms of market failure.
“We know that government fiscal financing is the only real way to provide universal health care.” Neither universal health care nor health for all can be achieved without adequate revenue financing, even if termed insurance.
Improve healthcare
Malaysia has low infant and maternal mortality rates and has improved life expectancy thanks to simple, low-cost reforms introduced from the 1960s, especially the training of rural midwives to help mothers and babies.
Reducing this mortality is responsible for more than four-fifths of the increase in life expectancy in Malaysia over the decades. Now, much more must be done to improve the nutrition of babies and mothers during the “first thousand days”, from conception to two years of age.
A “hybrid system” would not work, as it would only provide some public funding to resolve glaring “market failures”. Targeting would be worse, costly and involving inclusion and exclusion errors.
With political will, revenue financing is sustainable despite rising costs. We should renew our commitment to public health, not as it has become, but as it should be.
UN Office of the IPS
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© Inter Press Service (2024) — All rights reservedOriginal source: Inter Press Service
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