Thursday, April 26, 2012

The moral case for health insurance for all

However, voluntary insurance has proven challenging: Healthy individuals opting out of buying insurance reduce the funds available while exclusion of pre-existing conditions by insurers prevents a substantial proportion of society from receiving complete coverage.
Hence, national health insurance covering the entire population through government fiat is increasingly called for throughout the world. Most developed countries already have some form of national health insurance and/or coverage. Even in the United States, Obamacare mandates that all Americans must possess health insurance, and insurers must offer plans even to those with pre-existing medical conditions.
National health insurance is not an economic decision. Cost-effectiveness analyses and actuarial models can inform decisions on coverage extent and funding needs, but these tools cannot decide for us.
Health insurance is more than just financial protection. This myopic view - that health insurance is only about paying medical bills when you're sick - is unhelpful and unenlightened as health insurance should also encourage healthy behaviour such as disease screening and in national insurance systems, promote equity and social solidarity.
Insurers can maximise profits through charging higher premiums, lowering payouts or excluding high-risk individuals. But there is a better and socially responsible way, and that is through improving the health of the insured population.
If members are healthy, they consume less health-care services and the insurer's spending is hence reduced. Kaiser Permanente, an American integrated health plan and provider with more than 8.9 million members, is renowned the world over for its success in health promotion, including achieving high rates of preventive health adoption such as breast cancer screening and other regular health checks. Such an enlightened approach has healthy financials too: US$1.6 billion (S$2 billion) net income on operating revenues of US$47.9 billion in 2010.
Another important positive effect of health insurance is that it promotes social cohesion.
This is an important element often underestimated or overlooked. Political commentators have openly mused that inequality is the biggest challenge facing modern society whether in America, China or Singapore. And few things are more offensive to people's sense of equity and social justice than the notion that a society should condone the notion that wealth buys health, or that the poor should be condemned to a life of illness without treatment.
Former British health minister and architect of the National Health Service Aneurin Bevan famously proclaimed that 'no society can legitimately call itself civilised if a sick person is denied medical aid because of lack of means'.
Given the objectives of health insurance beyond financial protection, a national health insurance where every citizen is covered is not only desirable but necessary. To encourage preventive health measures such as regular screening, economies of scale and heavy upfront investments are needed. Only governments have the muscle to achieve this, and importantly, the financial incentive to do so.
Citizens largely remain citizens all their lives, but the insured flit from insurer to insurer, especially those who rely on employer-based insurance. Insurers have no interest in measures that need to be paid for today with benefits reaped decades away, potentially by other insurers.
To ensure every citizen is covered and optimise the risk pool actuarially, universal insurance has to be mandated.
Healthy citizens cannot be allowed to opt out, enrolling only when ill; this 'adverse selection' destroys the economics of risk pooling. Likewise, insurers cannot cherry-pick and leave the sickly to struggle alone. The market fails for both insurers and insured, resulting in the socially fracturing world of haves and have-nots.
Would private insurers care much about societal cohesion? Unlikely. Even NTUC Income in Singapore, a social enterprise from the labour movement, finds it hard to insure for pre-existing medical conditions unless every other insurer does likewise.
The direction then is clear. If countries hope to achieve truly national health-care coverage for all citizens, national health insurance is needed.
What about Singapore? MediShield has been incorrectly described as a national insurance scheme; it is not. MediShield is a catastrophic insurance scheme; it does nothing for preventive health care and is hardly national given the explicit exclusion of so many vulnerable Singaporeans: those with congenital illnesses, those with 'severe pre-existing diseases' and those over 85 years old.
Government subsidies in public hospitals are actually more effective than MediShield as currently designed, to provide more universal coverage. Needy Singaporeans enjoy much greater health-care security by virtue of the government-funded subsidies to hospitals compared to many other countries in the region.
But two challenges arise. Firstly, co-payment, an integral part of Singapore's financing philosophy, hits low-wage earners harder as health-care expenses will constitute a proportionately larger share of disposable income. Secondly, there is no cap on the individual's share, unlike in some other countries where the government assumes the responsibility of financial underwriting.
National health insurance is not an economic decision. Cost-effectiveness analyses and actuarial models can inform decisions on coverage extent and funding needs, but these tools cannot decide for us.
National health insurance (and the consequent endpoint of national health-care coverage) is at its core a moral decision, defining what sort of society we are and want to be.
The writer is CEO, Fortis Hospital Singapore.