29 January 2015

Competition and choice can transform healthcare in developing countries


This week, the World Health Organization (WHO) meets in Geneva to discuss its agenda for the year ahead.  In addition to pressing topics such as Ebola, officials will discus the Sustainable Development Goals – the replacement for the UN’s Millennium Development Goals, due to expire this year.

There is increasing consensus that developing countries should commit to “Universal Health Coverage” – that is, reforming health systems so that everyone can access care without suffering crippling financial costs.

While the majority of people in developed countries take for granted that a hospital stay will not result in a catastrophic bill, people in developing countries are less fortunate. 150 million people each year in these countries suffer financial catastrophe as a result of having to pay for healthcare, forcing people to choose between healthcare and housing, education, and even food.

Achieving Universal Health Coverage globally is therefore a noble ambition that could transform more lives than any of the anti-poverty schemes yet promoted by the UN.

Sadly, the signs are that the WHO’s campaign will end up over-promising and under-delivering, just like WHO’s past populist battle cries such as the 1980’s “Health for all by the year 2000”.

This is because many of today’s proponents of Universal Health Coverage tend to conflate it with Universal Health Insurance, in which all citizens subscribe to a single government-controlled insurance fund, topped up with tax revenues. Such funds exist from the Philippines to Belize, and is the dominant model among countries moving towards Universal Health Coverage.

Universal Health Insurance is seen by many ideological groups as a magic bullet to address the woes of the healthcare system, by ensuring equality of access for all people, regardless of wealth, while mobilising extra money for hospitals and doctors.

If only it were this easy. Free healthcare is certainly politically alluring, but too many countries are jumping on this bandwagon without first undertaking difficult but vital reform of health infrastructure. Giving people free access to care is useless if hospitals are decaying, quality is low, and doctors and nurses are too few.

This is the unfortunate reality in most developing countries, a situation compounded by poor governance. It is well known, for instance, that many doctors in China’s public hospitals in China routinely require illegal payments from patients.

Capacity problems are exacerbated if a seemingly “free” national health program unleashes a tidal wave of new demand without accompanying health sector reform.  This is what happened in Indonesia in 2014 when it implemented its new national health insurance scheme without looking at the supply side.

That is not to say that Universal Health Coverage is an impossible dream for developing countries.  But instead of thinking the task ends with instituting politically popular but unrealistic Universal Health Insurance, governments need to think carefully about how limited public sector resources can best be deployed.

One answer would be for governments to increase their spending on public health measures, such as improving sanitation and vaccination. This would be of enormous benefit to the poorest, who suffer a disproportionate burden of preventable infectious diseases.

Governments should also focus limited resources on supplying essential services to the poor, instead of trying to offer everything for free to everyone.

The private and non-profit sectors have an important role, but sadly many proponents of Universal Health Insurance tend to downplay their importance. In Africa, nearly 50 percent of patients currently use private or non-state providers, as do three quarters of the poorest children in Asia.

Instead of trying to duplicate their services in a misguided pursuit of social equality, governments should ensure the private sector serves the interests of the poor, through effective collaboration and partnership. Without its continued participation, Universal Health Coverage is the stuff of fantasy.

Although until recently having transitioned from a developing to a developed country status, Singapore achieved and maintained Universal Health Coverage through its public-private financing mix of medical savings with targeted tax-based subsidies and catastrophic health insurance. Later this year, it will expand and can sustain its Medishield Life insurance with premiums to be paid from Medisave accounts.

This combination of personal saving, cost-sharing and social protection for the poor makes it possible to cover everyone while promoting competition and innovation in the health sector, keeping a lid on costs and insulating future generations from ever-growing welfare liabilities as Singapore’s population rapidly ages.

The risk is without such competition and public-private sector involvement, the drive towards Universal Health Coverage will achieve little other than create new government insurance bureaucracies that cost a lot but achieve little. By contrast, reform-minded countries like Singapore show that it can be achieved if governments are prepared to be bold.

Profesor Kai Hong Phua is a professor of health and social policy at the Lee Kuan Yew School of Public Policy, Singapore.