A corridor chat I had with a colleague recently compelled me to brush up the (rusty and limited) knowledge I have from the health economics module of my Public Health Masters programme. The discussion was on free trade or market approach in healthcare. While there are some economists who support markets in health system many (mostly health economists) do not. It is widely agreed that healthcare has some (interesting) characteristics due to which the more basic or industrial economic models cannot be used or should be used cautiously. In an ideal free market model, which is an industrial economics model, consumers (largely) decide how much of a particular service (assuming that providers are able to and willing to meet the demand) is to be offered and at what price, to reach the market equilibrium. It is only when the market is in equilibrium that the service providers do not have an incentive to change their price. If there are sufficient customers who are willing to pay a higher price, the providers will raise the price to reach the market equilibrium. With this comes, the issue of equity and equality. Healthcare is a basic human right, which is guaranteed in the Maldives constitution and it is the responsibility of the state to ensure that all citizens receives an equitable and affordable as well as quality healthcare!
We know that the patient population is not homogenous in terms of purchasing power or ability to make out of pocket or private insurance payment for healthcare. One (welcoming) solution is the government’s plan to provide universal coverage by expanding Madhana to all citizens. (Though Madhana is portrayed as a social insurance system, technically speaking, it is not!). From what we have heard so far, universal coverage will also have an element of payroll deduction, in addition to government’s contribution. This is extremely important for the sustainability of a social insurance system. However, a point of concern here is the high unemployment rate and the large informal sector we have in the Maldives. For such a system to work effectively, a large proportion of the population should be working as employees, providing a cross-subsidization by raising contribution from formal labour.
Another solution towards a sustainable and affordable healthcare would be increasing the contribution of private health insurance. However, there are important factors that have limited an effective health insurance market in the Maldives. One is lack of competition (monopoly) in the health insurance market, leading to exploitation of the market power by restricting the output or insurance cover and raising the premium. A very good example we have seen so far is the refusal by the health insurance providers (especially Madhana) to pay for the service fee increase when the government lifted its control on the price cap, forcing individuals to make proportionately larger out of pocket payment. This defeats one major purpose of a health insurance system! While such co-payments is an established mechanism of minimizing moral hazard in established systems and stable healthcare markets, the situation is yet somewhat different in the Maldives. Second important factor is asymmetry of information between service providers and clients leading to provider induced demand and thus a higher expenditure, running out of coverage limits. It is also to be noted that the private health insurance systems will not take the poor and the unemployed. They will also be hesitant to take the elderly, though this subgroup may be taken with a much higher premium!
A high provider induced demand for services, unregulated price and failure to meet supply-demand equilibrium (in terms of access) have the risk of healthcare spending growing faster than what could be met by a profitable and sustainable insurance (social as well as private) system!
In a market model, ability of the service provider to meet the demand is also an important factor that influences the cost. Currently in the Maldives healthcare delivery, we see a demand-supply mismatch. There are several underutilized hospitals and health centers that have been maintained at a very high cost. On the other hand, in some of the high population centers like Male’, Addu, Kulhudhufushi, etc there is access demand, beyond the capacity of the service providers.
In order to meet the demand and provide an affordable (both for the individuals and the nation) healthcare delivery, we need more discussion and debate to come up with the best model (which would be a mix of many existing models) that suits Maldives. Some important factors that need to be kept in mind are:
- Demographic changes: our old age population, who would need much more health spending, is gradually increasing.
- Disease prevalence: NCDs, which are more costly in the long run, are increasing (quite rapidly) in the Maldives.
- Risk factors and lifestyles: multiple high-risk lifestyles are highly prevalent in the Maldives, further increasing the disease burden and cost.
- Economic and social factors: there is significant discrepancy between the rich and poor while the expectations and demand is pretty much the same! Economic instability and issues related to foreign currency (due to the large expat population) will also have a huge impact on cost.
- Political factors: we have been witnessing diminishing health budget, especially to preventive and public health in the Maldives, which would further increase the cost in future.