July 31, 2012 10:06 pm

Public insurance: Prospect raised of a safety net for billions of people

The vicious political and constitutional battle over President Barack Obama’s healthcare reform would make it appear that extending government-backed medical insurance is a radical and innovative policy.

But the US approach is in line with a trend in which even some of the most populated and undeveloped countries in the world are experimenting with ways to replace out-of-pocket spending with public insurance.

This trend has huge global implications: raising the prospect of a healthcare safety net for billions of people in middle-income countries, making it easier to tackle public health difficulties, and opening markets for pharmaceutical and healthcare providers.

“There’s a push to expand access to basic healthcare, in many countries, including countries that will make a huge difference ... [such as] China and India,” says Amanda Glassman, director of global health policy at the Center for Global Development, the Washington-based think-tank.

Paying for healthcare out of the pockets of each patient, the traditional model, is good for neither patients’ health or their wallets, experts say. “It can make your spending very volatile, it can impoverish you,” says Ms Glassman. Now, she says, governments are realising “it’s better to pay up front”.

Efforts to introduce or reform national insurance programmes, however, have not been easy for many countries. Most are experimenting with a mix of policies, says Maureen Lewis, former chief economist of the World Bank’s Human Development Network, which looks at policies on education, health and other such matters.

“A lot of countries that have gone to insurance have really done a patchwork of things because it’s so difficult,” she says. “Healthcare is very grounded in societal preferences, and I think that one size doesn’t fit all.”

She says there is no longer a clear difference between so-called social health insurance, where payroll taxes finance insurers that contract out to healthcare providers, and national health systems that are financed by general revenue.

“Most health systems are difficult now to categorise,” she say. “It’s a very heterogeneous place out there.”

Much of the world has moved to some form of the model, popular in Europe, of relying on a payroll tax to finance care while implementing a system to help those who fall outside that system, says Charles Griffin, senior adviser for Europe and central Asia at the World Bank.

“Most of the middle income countries are moving in the same direction, which is to have a mix of payroll tax-financed insurance for those who work, and some kind of general tax subsidy within the insurance system for those who aren’t working,” he says.

Colombia, another example, has a system of “managed competition” in which the government pays and regulates an insurance company that in turn contracts healthcare providers for the care of the poor, says Ms Glassman.

Providing adequate coverage to every citizen will be “challenging, long, and risky”, according to the World Bank’s 2011 Health Insurance Handbook.

The authors say that while many poor and middle income countries are introducing private and public health insurance plans, they must be “carefully designed to be pro-poor”, otherwise only middle and upper income residents will receive healthcare. “There is no gold standard when it comes to the design of a health insurance system,” the authors write.

Another trend, Ms Glassman says, is towards a separation between those who pay for care and those that provide it. Many countries have followed the lead of Britain’s National Health Service in doing so, she says.

“There’s something similar that’s occurring in most other countries, this kind of separation of functions between financing and provision.”

Many lower income countries have failed to implement insurance programmes that benefit the whole population, instead focusing on patients who are easiest to reach, such as those living in urban areas.

“And you forget about the rest, which is not so great from a health status standpoint,” Ms Glassman says.

In Brazil, funding is a public responsibility with both state and federal sources. However, most rich Brazilians opt for private insurance because it ensures more dependable care. “They end up with a patchwork of other ways to finance these non-profit hospitals,” Ms Lewis says. While Brazil and other countries with similar systems still have the capability to reform, she says, “it makes it very complicated and it ends up not being a streamlined structured system.”

Ms Lewis says healthcare schemes often fail because planners “haven’t thought of what the implications are for behaviour”.

If insurance reform is conducted without the proper payment structures in place, for example, doctors and hospitals might have an incentive to increase their own incomes by keeping patients longer than necessary.

“The only thing ... that we seem to have some universal agreement on, at least in the industrialised countries, is that [insurance] is a better way to pay hospitals than on a fee for service basis.”

Another problem is that politicians – not healthcare experts – craft healthcare reforms to meet their political needs. Or it is done by finance ministries that worry more about where the money is going than whether people get adequate treatment.

“In emerging economies, there’s definitely a move afoot to expand care to everyone and to expand to everyone the services that are already available,” Ms Glassman says. “The problems is it’s usually done without attention to the affordability or cost-effectiveness of the interventions that they’d like to finance: it’s usually political.”

Despite pressure on these politicians to provide “universal” healthcare for their citizens, Ms Lewis says, the concept is hard to define. While an entire population might technically be covered under a national health insurance scheme, reality might not meet expectations.

“It’s not clear what universal coverage means. Technically the [Mexican government] says everybody has coverage, and then there are a lot of people ... who are going into the private sector.”

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