Yves here. Jomo’s article summarizes new research that further supports the idea that introducing health care insurance increases costs without improving outcomes. And aside, it can worsen patient outcomes by denying and delaying care, as well as wasting the time of doctors, who should be treating patients, in billing management. Please share this post with the skeptics who haven’t gotten the memo about the huge weight medical insurance is starting to create.
By Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development. Originally published on Jomo’s website
Comparative studies on health care financing options show income-funded health care as the most cost-effective, efficient, and equitable option, while all health insurance imposes additional avoidable costs.
Private Health Insurance
Declining the option of private health insurance is easy because of the known problems in the US. Pooling of risk is limited as private insurance only covers those who can afford it.
The effect of ‘moral hazard’ and ‘cherry picking’ reflects the weak capacity of the public to negotiate with healthcare providers and insurance companies.
US health care costs per capita are high, in part due to the cost of private health insurance. The share of US government spending on health care has risen to 18%!
Such avoidable insurance handling costs are very high, averaging around 4% more. Therefore, upward cost pressures remain intense.
However, despite spending so much money, it only reaches 40 in the world’s average life expectancy. Some of its health indicators also leave a lot to be desired.
Thus, spending more money does not improve health outcomes, and spending more money on insurance does not improve health either.
Net worth
Therefore, the main choice of health care financing is public health insurance (SHI) and income financing, which allows pooling of risks for all people of the country.
After reviewing extensive evidence, Adam Wagstaff of the World Bank found interest financing to be more cost-effective, efficient, and cost-effective than insurance options.
Germany, the only major OECD country that relies heavily on SHI, is second only to the US in health spending per capita, largely due to the cost of administering insurance.
As insurance premiums grow insufficient, the government finances an ever-widening fiscal deficit. Rather than being an option for future health financing, it should be recognized as an atavism, even in the most united Germany.
Social Health Insurance
Advocates of SHI insist that it is necessary due to inadequate financial means. But a budget deficit means a lack of political will. SHI’s claims of raising more money are wildly exaggerated.
SHI premiums are low or standard taxes, making the tax incidence very low. SHI funding is inadequate everywhere and under increasing pressure due to aging populations.
Many governments claim to be committed to inclusion and equitable access, but SHI would undermine national commitments declared on WHO’s ‘health for all’ and the UN’s ‘SDGs’ of ‘universal health’.
Without betraying these commitments, SHI cannot guarantee the necessary funding or financial sustainability. Any realistic government must realize that SHI will not be politically attractive.
The costs and risks of SHI, including the inappropriate motivations involved, are rarely acknowledged. Employers have reduced their SHI liabilities by contracting employees. Rather than hiring workers directly, they hire indirectly, using various contract labor schemes.
What’s important?
The general emphasis of health services on treatment has worsened health outcomes while neglecting important public health programs. With the emphasis on medical resources, many causes of illness do not receive enough attention.
Many prevention and public health issues remain under-recognized and under-funded. Most governments need to spend more on prevention, especially addressing preventable non-communicable diseases (NCDs).
The world needs better health care financing. Various corresponding changes are required. Instead, haphazard, poorly thought-out reforms have been the norm in recent decades.
The ‘non-program’ effect provides negative, weak and ineffective incentives for public health provision and prevention. Meanwhile, potentially profitable parts have been privatized or outsourced, often to political cronies who can’t work.
The UK NHS capitation system has successfully changed doctors’ incentives. Instead of putting patients’ fees first, UK doctors are motivated to ensure the welfare of those under their care.
Beware of Market Failure
Former UK Conservative Party adviser and “non-interventionist market economist” Professor Geoffrey Williams rejects “any [government] intervention … in almost all economic sectors, but not in health, because health is a place where markets fail.
“That’s why we use health more often than any other example when we teach about market failures, especially insurance market failures. We know that the health market fails and we cannot find market solutions to those market failures as we can to other types of market failures.
“We know that federal tax funding is the only real way to provide universal health care.” No universal health care or health for all can be achieved without adequate income support, even if it is called insurance.
Improving Health Care
Malaysia has low infant and maternal mortality rates and improved life expectancy thanks to simple, cost-effective reforms introduced since the 1960s, particularly training rural midwives to help mothers and babies.
Such reductions in mortality are responsible for more than four-fifths of Malaysia’s increase in life expectancy over the decades. Now, more needs to be done to improve the nutrition of children and mothers for the ‘first thousand days’ from conception to two years.
A ‘mixed plan’ will not work, as it will only provide some public funding to deal with major ‘market failures’. Targeting can be very bad, both expensive and involving both input and output errors.
With political will, the financing of profits is sustained despite rising costs. We must renew our commitment to public health care, not as it has been, but as it should be.
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